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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1998
REGISTRATION NO. 333-43691
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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KEVCO, INC.
(AND CERTAIN SUBSIDIARIES IDENTIFIED IN FOOTNOTE (1) BELOW)
(EXACT NAME OF CO-REGISTRANTS AS SPECIFIED IN THEIR CHARTER)
TEXAS 3429 75-2666013
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
1300 S. UNIVERSITY DR., SUITE 200
FORT WORTH, TX 76107
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
CO-REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
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JERRY E. KIMMEL
KEVCO, INC.
1300 S. UNIVERSITY DR., SUITE 200
FORT WORTH, TX 76107
(817) 332-2758
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPY TO:
RICHARD S. TUCKER
JACKSON WALKER L.L.P.
777 MAIN STREET
SUITE 1800
FORT WORTH, TX 76102-5322
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.
If 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(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. [_]
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(1) The following direct and indirect subsidiaries of Kevco, Inc., each of
which has the I.R.S. Employer Identification Number indicated, is a co-
registrant: Kevco Delaware, Inc. (#75-1456023); Sunbelt Wood Components,
Inc. (#75-2675496); Bowen Supply, Inc. (#58-1145787); Encore Industries,
Inc. (#58-1889577); Shelter Components Corporation (#22-2825183); BPR
Holdings, Inc. (35-1968302); Shelter Components of Indiana, Inc. (#22-
2825585); Design Components, Inc. (#35-1894544); Duo-Form of Michigan,
Inc. (#38-2111623); DCM, Inc. (#62-0636511); Shelter Distribution, L.P.
(#35-1970242).
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THE CO-REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE CO-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 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JANUARY 23, 1998
PROSPECTUS
KEVCO, INC.
OFFER TO EXCHANGE ITS SERIES B 10 3/8% SENIOR
SUBORDINATED NOTES DUE 2007 FOR ANY AND ALL OF ITS
OUTSTANDING SERIES A 10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON MARCH 2,
1998, UNLESS EXTENDED.
Kevco, Inc., a Texas corporation (the "Company"), hereby offers (the
"Exchange Offer"), upon the terms and conditions set forth in this Prospectus
(the "Prospectus") and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), to exchange $1,000 principal amount of its Series B 10 3/8%
Senior Subordinated Notes due 2007 (the "Exchange Notes"), which will have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which this Prospectus is a part, for
each $1,000 principal amount of its outstanding Series A 10 3/8% Senior
Subordinated Notes due 2007 (the "Old Notes"), of which $105,000,000 principal
amount is outstanding. The form and terms of the Exchange Notes are the same as
the form and terms of the Old Notes (which they replace) except that the
Exchange Notes will bear a Series B designation and will have been registered
under the Securities Act and, therefore, will not bear legends restricting
their transfer and will not be entitled to registration rights or other rights
under the Registration Rights Agreement (as defined herein). See "The Exchange
Offer." The Exchange Notes will evidence the same debt as the Old Notes (which
they replace) and will be issued under and be entitled to the benefits of the
Indenture (the "Indenture") dated December 1, 1997 between the Company and the
United States Trust Company of New York, N.A., as Trustee (the "Trustee"),
governing the Old Notes. See "The Exchange Offer" and "Description of the
Notes." The Old Notes, together with the Exchange Notes, are referred to herein
as the "Notes" and holders of the Notes are sometimes referred to as the
"Holders."
Interest on the Notes will be payable semi-annually in arrears on June 1 and
December 1 of each year, commencing June 1, 1998. The Notes will mature on
December 1, 2007. The Notes will be redeemable at the option of the Company, in
whole or in part, at any time on or after December 1, 2002 at the redemption
prices set forth herein, plus accrued and unpaid interest and Liquidated
Damages (as defined herein), if any, to the redemption date. Notwithstanding
the foregoing, on or before December 1, 2000, the Company may redeem at any
time or from time to time up to 35% of the original aggregate principal amount
of the Notes at a redemption price equal to 110.375% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the redemption date, with the net cash proceeds of a Public Equity
Offering (as defined herein); provided, however, that at least 65% of the
original aggregate principal amount of Notes remains outstanding following such
redemption. Upon the occurrence of a Change of Control (as defined herein), the
Company will be required to make an offer to repurchase all or any part of the
Notes at a price equal to 101% of the aggregate principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
of repurchase. See "Description of the Notes."
SEE "RISK FACTORS" ON PAGE 17 FOR A DESCRIPTION OF CERTAIN RISKS TO BE
CONSIDERED BY HOLDERS WHO TENDER THEIR OLD 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 JANUARY , 1998
<PAGE>
The Old Notes are, and the Exchange Notes will be, guaranteed on a senior
subordinated basis by all existing and future Restricted Subsidiaries (as
defined herein) of the Company. The Notes and the Subsidiary Guarantees (as
defined herein) are general, unsecured obligations of the Company and the
Subsidiary Guarantors (as defined herein), respectively. The payment of the
principal of and interest, premium and Liquidated Damages, if any, on the
Notes will be subordinated in right of payment to all Senior Indebtedness (as
defined herein) of the Company and the Subsidiary Guarantors, respectively. As
of September 30, 1997, on a pro forma basis after giving effect to the
Transactions (as defined herein), the Company and its consolidated
subsidiaries had outstanding approximately $98.1 million of outstanding Senior
Indebtedness (including $93.2 million of Senior Indebtedness under the Senior
Credit Facility). The Indenture will prohibit the Company and the Subsidiary
Guarantors from incurring any Indebtedness (as defined herein) that is
subordinated in right of payment to any Senior Indebtedness unless such
Indebtedness is subordinated in right of payment to, or ranks pari passu with,
the Notes or the Subsidiary Guarantees, as applicable. See "Description of the
Notes--Subordination" and "--Certain Covenants--Limitations on Layering
Indebtedness.
The Company will accept for exchange any and all Old Notes validly tendered
and not withdrawn prior to 5:00 p.m., New York time, on March 2, 1998, unless
extended by the Company in its sole discretion (the "Expiration Date").
Tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m. on the
Expiration Date. The Exchange Offer is subject to certain customary
conditions. The Old Notes were sold by the Company on December 1, 1997 to the
Initial Purchaser (as defined herein) in a transaction not registered under
the Securities Act in reliance upon an exemption under the Securities Act. The
Initial Purchaser subsequently placed the Old Notes with qualified
institutional buyers in reliance upon Rule 144A under the Securities Act.
Accordingly, the Old 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 in
order to satisfy the obligations of the Company under the Registration Rights
Agreement entered into by the Company in connection with the offering of the
Old Notes. See "The Exchange Offer."
Based on no-action letters issued by the staff of the Securities and
Exchange Commission (the "Commission") to third parties, the Company believes
the Exchange Notes issued pursuant to the Exchange Offer 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 such holder has no arrangement or understanding with any person to
participate in the distribution of such Exchange Notes. See "The Exchange
Offer--Purpose and Effect of the Exchange Offer" and "The Exchange Offer--
Resale of the Exchange Notes." Each broker-dealer (a "Participating 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
Participating 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
Participating Broker-Dealer as a result of market-making activities or other
trading activities. The Company has agreed that, for a period of one year
after the Expiration Date (or such shorter period during which all such
resales have occurred), it will make this Prospectus available to any
Participating Broker-Dealer for use in connection with any such resale. See
"Plan of Distribution."
Holders of Old Notes not tendered and accepted in the Exchange Offer will
continue to hold such Old Notes and will be entitled to all the rights and
benefits and will be subject to the limitations applicable thereto under the
Indenture and with respect to transfer under the Securities Act. The Company
will pay all the expenses incurred by it incident to the Exchange Offer. See
"The Exchange Offer."
There has not previously been any public market for the Notes. Although the
Initial Purchasers have informed the Company that they currently intend to
make a market in the Exchange Notes, they are not obligated
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to do so, and any such market-making activities with respect to the Exchange
Notes may be discontinued at any time without notice. Accordingly, the Company
does not intend to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and will be subject to the
limitations applicable thereto under the Indenture. Following consummation of
the Exchange Offer, the holders of Old Notes will continue to be subject to
the existing restrictions upon transfer thereof and the Company will have no
further obligation to such holders to provide for registration under the
Securities Act of the Old Notes held by them. To the extent that Old Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Old Notes could be adversely affected. See "Risk Factors--Exchange
Offer Procedures" and "Exchange Offer--Consequences of Failure to Exchange."
The Exchange Notes will be available initially only in book-entry form. The
Company expects that the Exchange Notes issued pursuant to this Exchange Offer
will be issued in the form of one or more Global Notes (as defined herein),
which will be deposited with, or on behalf of, The Depository Trust Company
(the "Depositary") and registered in its name or in the name of Cede & Co.,
its nominee. Beneficial interests in a Global Note representing the Exchange
Notes will be shown on, and transfers thereof will be effected through,
records maintained by the Depositary and its participants. After the initial
issuance of the Global Notes, Exchange Notes in certificated form will be
issued in exchange for a Global Note only on the terms set forth in the
Indenture. See "Description of the Notes--Book Entry, Delivery and Form."
THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER
THEIR OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
This Prospectus, together with the Letter of Transmittal, is being sent to
all registered holders of Old Notes as of January 27, 1998.
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. No dealer-manager is being used in connection
with this Exchange Offer. See "Use of Proceeds" and "Plan of Distribution."
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, holders of the Old Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance
with any provision of any applicable security law.
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AVAILABLE INFORMATION
The Company is subject to the informational 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 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 in Chicago, Illinois (Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60604) and New
York, New York (7 World Trade Center, 13th Floor, New York, New York 10007).
Copies of such material can also be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Additionally, the Commission maintains a web site
(http:www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission including the Company.
This Prospectus, which constitutes part of a Registration Statement filed by
the Company with the Commission under the Securities Act (the "Registration
Statement"), omits certain of the information contained in the Registration
Statement. Reference is made to the Registration Statement and to the exhibits
thereto for further information with respect to the Company and the Exchange
Notes offered hereby. Copies of such Registration Statement are available from
the Commission. Statements contained herein concerning the provisions of
documents filed herewith as exhibits are necessarily summaries of such
documents, and each such statement is qualified in its entirety by reference
to the copy of the applicable document filed with the Commission. Under the
Indenture, the Company shall file with the Trustee annual, quarterly and other
reports within 15 days after it files such reports with the Commission (or
within 15 days after it would have been required to file such reports with the
Commission, in the event the Company is no longer subject to the informational
requirements of the Exchange Act). Annual reports delivered to the Trustee and
the holders of Exchange Notes will contain financial information that has been
examined and reported upon, with an opinion expressed by, an independent
certified public accountant. The Company will also furnish such other reports
as may be required by law.
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SUMMARY
The following summary is qualified in its entirety by reference to and should
be read in conjunction with the more detailed information and financial
statements, including the notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated or the context otherwise requires, all
references in this Prospectus to the Company and its business, operations and
pro forma financial condition and results of operations give effect to the
Shelter Acquisition (as defined herein). As used in this Prospectus, unless
otherwise indicated or the context otherwise requires: (i) "Kevco" refers to
Kevco, Inc. and its subsidiaries prior to giving effect to the Shelter
Acquisition; (ii) "Shelter" refers to Shelter Components Corporation and its
subsidiaries prior to giving effect to the Shelter Acquisition and (iii) the
"Company" refers to the combined entity comprised of Kevco and its consolidated
subsidiaries, including Shelter.
THE COMPANY
The Company believes it is the largest wholesale distributor of building
products to the United States manufactured housing industry. Through its 47
distribution centers, the Company provides national distribution of more than
75,000 items to approximately 530 manufactured housing (79% of 1996 net sales)
and recreational vehicle ("RV") and other manufacturing facilities (21% of 1996
net sales) throughout the United States. In addition to its distribution
activities, the Company manufactures wood products, laminated wallboard and
thermoformed bathtubs and shower enclosures for the manufactured housing
industry. The Company believes that the combination of Kevco and Shelter
results in substantial operating synergies due to their complementary product
lines, overlapping marketing functions and national distribution networks, and
significant economies of scale. During the latest twelve months ended September
30, 1997, the Company's pro forma net sales and EBITDA (as defined) were $855.2
million and $45.7 million, respectively.
The manufactured housing industry has experienced significant growth over the
last several years. Since 1992, the number of manufactured home shipments has
experienced a compound annual growth rate of approximately 14.6%, growing from
210,787 homes shipped in 1992 to 363,411 homes shipped in 1996, which resulted
in approximately $14 billion in retail sales in 1996. As a result of this
growth, manufactured housing has outpaced traditional site-built housing growth
and increased as a percentage of total new single family houses sold, growing
from 25.7% in 1992 to 32.4% in 1996. The Company believes that demand for
manufactured housing has grown and will continue to grow due to: (i) the
increased quality of manufactured homes and the accompanying widespread
consumer acceptance of manufactured homes; (ii) steady employment and economic
growth in key regions; (iii) greater availability of mortgage financing for
manufactured homes; and (iv) continued substantial price advantages of
manufactured homes compared to site-built homes.
Suppliers and customers have been increasingly relying on distributors in an
attempt to focus on their core businesses and improve inventory management.
Larger, national distributors, like the Company, have benefited from trends in:
(i) suppliers and customers reducing the number of distributors they use to
increase operating efficiencies and reduce costs; (ii) suppliers and
manufacturers selecting distributors that are able to serve their needs through
national distribution networks; and (iii) manufacturers requiring distributors
to carry more comprehensive product lines. In addition, the Company believes it
leads the industry in providing value-added services to its customers,
including inventory management, product support and training, and
implementation of cost saving measures, all of which are services the Company
believes its suppliers cannot directly provide manufacturers in a cost-
effective manner.
Since its founding in 1964 by Jerry E. Kimmel, the Company's majority
shareholder, Chairman, Chief Executive Officer and President, the Company has
experienced substantial growth. In addition to positive manufactured housing
industry trends which favor larger distributors, the Company has primarily
grown through: (i) completing eight complementary acquisitions since the
beginning of 1993; (ii) adding distribution and
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manufacturing facilities to serve new markets; and (iii) increasing sales to
existing customers by distributing additional product lines. As a result, the
Company has increased net sales at a compound annual growth rate of 35.4% since
1992, from $254.8 million on a historical combined basis in 1992 to $855.7
million on a pro forma combined basis in 1996. During the same time period,
EBITDA grew at a compound annual growth rate of 42.3% from $12.4 million on a
historical combined basis in 1992 to $51.2 million on a pro forma combined
basis in 1996.
SHELTER ACQUISITION BENEFITS
The Company expects the following strategic and operating benefits as a
result of the Shelter Acquisition:
. INDUSTRY LEADERSHIP. The Company believes that the Shelter Acquisition
improves its competitive position by making it the largest wholesale
distributor of building products to the United States manufactured
housing industry, based on total sales. The Company expects to benefit
from its improved competitive position by: (i) better serving its
customers through its enhanced national distribution network; (ii)
serving as the exclusive distributor for certain of its suppliers that
are seeking to consolidate distributors of their products to the
manufactured housing and RV industries; and (iii) continuing to be a
leader in the consolidation of the industry.
. ACQUISITION OF COMPLEMENTARY PRODUCT LINES. While Shelter and Kevco
served a similar customer base, each company primarily distributed and
manufactured product lines with little overlap. Kevco had significant
market share in plumbing fixtures and supplies and wood products,
including wood trusses and cut lumber. Shelter had significant market
share in electrical products, exterior building products, laminated
wallboards, thermoformed products and hardware.
. SUBSTANTIAL COST REDUCTION OPPORTUNITIES. The Company believes the
Shelter Acquisition affords it substantial opportunities to eliminate
certain administrative and corporate positions and expenses. In
addition, the Company believes that it will be able to reduce selling
expense by consolidating its sales operations as both Kevco and Shelter
maintain active relationships with approximately 90% of all manufactured
housing production facilities. As the largest wholesale distributor in
the industry, the Company believes that it will be able to obtain
economies of scale through its increased purchasing volume. The Company
believes it will be able to increase the volume of purchases by
consolidating its purchases from suppliers where it has overlapping
product lines and by increasing sales from cross-selling its product
lines.
. RATIONALIZATION OF NATIONAL DISTRIBUTION NETWORKS. The Company believes
that it will be able to reduce operating costs by consolidating
distribution facilities and reducing overhead at such facilities.
Substantially all of Kevco's and Shelter's distribution facilities serve
the same geographic regions. On a pro forma combined basis, 45 of the
Company's 47 total distribution facilities serve overlapping markets,
providing the Company significant opportunities to realize distribution
efficiencies over time.
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BUSINESS STRATEGY
The Company's primary objective is to maintain and strengthen its position as
the leading national distributor of building products to the manufactured
housing and RV industries. The Company intends to continue to pursue this
objective through internal growth and opportunistic acquisitions. To achieve
its objective, the Company has adopted a strategy based on the following key
elements:
. PROVIDE SUPERIOR CUSTOMER SERVICE. The Company believes that its
emphasis on customer service differentiates it from other distributors
and fosters long-term relationships with its customers. The Company is
committed to a Total Quality Management program to serve its customers'
needs and to work in partnership with its suppliers and customers to
improve their operations. The Company seeks to be an integral part of
its customers' inventory management activities and manufacturing
process. The Company has received several industry awards in recognition
of its high level of customer service.
. LEVERAGE NATIONAL DISTRIBUTION NETWORK. The Company will continue to use
its national distribution network as a platform for growth and
profitability. The Company believes that its national presence provides
it with a significant competitive advantage due to its ability to
service the nationwide needs of its customers' manufacturing facilities.
The Company believes that its national distribution network has allowed
it to develop close relationships with its product suppliers and to
become the exclusive supplier of certain product lines.
. INCREASE CUSTOMER PENETRATION AND PRODUCT OFFERINGS. The Company
supplies over 90% of all manufactured housing plants in the United
States with one or more product lines. This established customer base
provides the Company with a significant opportunity to supply a greater
portion of its customers' building products needs as the customers seek
to reduce the number of their suppliers. The Company also intends to add
new product lines through internal growth and opportunistic
acquisitions. With its existing national distribution infrastructure,
the Company believes that additional product lines can be offered to
existing customers, thereby increasing net sales without adding
significant costs.
. EXPAND MANUFACTURING CAPABILITIES. The Company intends to expand its
manufacturing capabilities through internal growth and opportunistic
vertical acquisitions. By manufacturing certain of its own products, the
Company believes it can achieve greater profitability from its sales,
while obtaining direct control over product availability and quality.
The Company currently operates five wood products manufacturing
facilities and plans to expand to new markets, including opening new
manufacturing facilities in Arizona and North Carolina by the second
quarter of 1998. Through the Shelter Acquisition, the Company obtained
additional manufacturing platforms, including plastic thermoforming,
injection molding and laminated wallboard operations. The Company
believes that there are significant opportunities to grow its
manufacturing business through additional acquisitions and new
facilities.
. PURSUE OPPORTUNISTIC ACQUISITIONS. The Company intends to selectively
explore the acquisition of other distributors and manufacturers of
building products. The Company seeks to acquire distributors that offer
complementary product lines to extend its existing offerings and realize
significant operating synergies.
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THE TRANSACTIONS/RECENT DEVELOPMENTS
Pursuant to the terms of a definitive merger agreement entered into on
October 21, 1997 (the "Acquisition Agreement"), SCC Acquisition Corp.
("SCCAC"), an Indiana corporation and a wholly owned subsidiary of Kevco,
commenced the Tender Offer pursuant to which it offered to purchase all of the
outstanding shares of Shelter Common Stock. The Tender Offer expired on
December 1, 1997 at which time Kevco accepted for payment all validly tendered
shares of Shelter Common Stock, which represented approximately 95.5% of the
then issued and outstanding shares of Shelter Common Stock. On January 16,
1998, SCCAC was merged (the "Merger") with and into Shelter, with Shelter being
the surviving corporation. As a result of the Merger, Shelter became a wholly
owned subsidiary of Kevco. The consummation of the Tender Offer and the Merger
are collectively referred to herein as the "Shelter Acquisition." The aggregate
consideration paid in the Shelter Acquisition was approximately $138.8 million,
excluding the repayment of Shelter's existing indebtedness and expenses
relating to the Shelter Acquisition and the Old Notes Offering (as defined
herein).
On December 1, 1997, Kevco issued $105,000,000 aggregate principal amount of
Old Notes (the "Old Notes Offering"). The Company used the gross proceeds of
the Old Notes Offering, together with additional borrowings by the Company of
approximately $48.7 million under the Senior Credit Facility and $13.1 million
of then existing available cash held by Shelter, as follows: (i) approximately
$138.8 million was used to purchase all outstanding shares of Shelter Common
Stock and retire outstanding options to acquire shares of common stock held by
employees and directors of Shelter; (ii) approximately $16.7 million was
applied to repay existing indebtedness of Shelter; and (iii) approximately
$11.3 million was applied to pay the fees and expenses incurred in connection
with the Shelter Acquisition, the Old Notes Offering and related transactions
(collectively the "Transactions"). Shelter indebtedness repaid had a final
maturity date of March 31, 2005 and bore a blended interest rate of 9.0%.
On December 12, 1997, the Company acquired the inventory and certain
distribution rights of certain building products distributed by the
Manufactured Housing and Recreational Vehicle division of Shepherd Products
Company for a cash purchase price payable at closing of $5.9 million, with an
additional $2.0 million payable over a five-year period following the
acquisition.
THE OLD NOTES OFFERING
Old Notes................... The Old Notes were sold by the Company on
December 1, 1997 to Donaldson, Lufkin &
Jenrette Securities Corporation and
NationsBanc Montgomery Securities, Inc. (the
"Initial Purchasers") pursuant to a Purchase
Agreement dated November 21, 1997 (the
"Purchase Agreement"). The Initial Purchasers
subsequently resold the Old Notes to
qualified institutional buyers pursuant to
Rule 144A under the Securities Act.
Registration Rights Pursuant to the Purchase Agreement, the
Agreement................... Company and the Initial Purchasers entered
into a Registration Rights Agreement dated
December 1, 1997 (the "Registration Rights
Agreement"), which grants the holders of the
Old Notes certain exchange and registration
rights. The Exchange Offer is intended to
satisfy such exchange rights, which terminate
upon the consummation of the Exchange Offer.
THE EXCHANGE OFFER
Securities Offered.......... $105,000,000 aggregate principal amount of
Series B 10 3/8% Senior Subordinated Notes
due 2007 (the "Exchange Notes").
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The Exchange Offer.......... $1,000 principal amount of the Exchange Notes
in exchange for each $1,000 principal amount
of Old Notes. As of the date hereof,
$105,000,000 aggregate principal amount of
Old Notes are outstanding. The Company will
issue the Exchange Notes to holders on or
promptly after the Expiration Date. The terms
of the Exchange Notes and the Old Notes are
substantially identical.
Based on an interpretation by the staff of
the Commission set forth in no-action letters
issued to third parties unrelated to the
Company, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer
in exchange for Old Notes may be offered for
resale, resold and otherwise transferred by
any holder thereof (other than any such
holder which 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.
Each Participating 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 Participating
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 Participating Broker-Dealer in
connection with resales of Exchange Notes
received in exchange for Old Notes where such
Old Notes were acquired by such Participating
Broker-Dealer as a result of market-making
activities or other trading activities (other
than a resale of an unsold allotment from the
original sale of Old Notes). The Company has
agreed that, for a period of one year after
the Expiration Date (or such shorter period
during which all such resales have occurred),
it will make this Prospectus available to any
Participating Broker-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.
9
<PAGE>
Expiration Date.............
5:00 p.m., New York time, on March 2, 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.
Interest on the Exchange
Notes and the Old Notes..... Each Exchange Note will bear interest from
the most recent date to which interest has
been paid or duly provided for on the Old
Note surrendered in exchange for such
Exchange Note or, if no interest has been
paid or duly provided for on such Old Note,
from December 1, 1997. The Exchange Notes
accrue interest at the rate of 10 3/8% per
annum, payable semiannually in arrears on
June 1 and December 1 of each year,
commencing June 1, 1998.
Holders of Old Notes whose Old Notes are
accepted for exchange will not receive
accrued interest on such Old Notes for any
period from and after the last date to which
interest has been paid or duly provided for
on the Old Notes prior to the original issue
date of the Exchange Notes or, if no such
interest has been paid or duly provided for,
will not receive any accrued interest on such
Old Notes, and will be deemed to have waived,
the right to receive any interest on such Old
Notes accrued from and after the last date to
which interest has been paid or duly provided
for on the Old Notes or, if no such interest
has been paid or duly provided for, from and
after December 1, 1997.
Procedures for Tendering Each holder of Old Notes wishing to accept
Old Notes................... the Exchange Offer must complete, sign and
date the accompanying Letter of Transmittal,
or a facsimile thereof, in accordance with
the instructions contained herein and
therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile,
together with the Old Notes and any other
required documentation to the Exchange Agent
(as defined herein) at the address set forth
in the Letter of Transmittal. By executing
the Letter of Transmittal, 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 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. See "The Exchange Offer--Purpose and
Effect of the Exchange Offer" and "The
Exchange Offer--Procedures for Tendering."
Untendered Old Notes........ Following the consummation of the Exchange
Offer, holders of Old Notes eligible to
participate but who do not tender their Old
Notes will not have any further exchange
rights and such Old Notes will continue to be
subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for
such Old Notes could be adversely affected.
10
<PAGE>
The Old Notes that are not exchanged pursuant
Consequences of Failure to to the Exchange Offer will remain restricted
Exchange.................... securities. Accordingly, such Old Notes may
be resold only (i) to the Company, (ii)
pursuant to Rule 144A or Rule 144 under the
Securities Act, (iii) pursuant to some other
exemption under the Securities Act (and based
on an opinion of counsel if the Company so
requests), (iv) outside the United States to
a foreign person pursuant to the requirements
of Rule 904 under the Securities Act, or (v)
pursuant to an effective registration
statement under the Securities Act. See "The
Exchange Offer--Consequences of Failure to
Exchange."
Shelf Registration If (i) the Exchange Offer is not permitted by
Statement................... applicable law or (ii) if any Holder of Old
Notes shall notify the Company within 20
Business Days following the Expiration Date
that (A) such Holder was prohibited by law or
Commission policy from participating in the
Exchange Offer or (B) such Holder may not
resell the Exchange Notes to the public
without delivering a prospectus and the
Prospectus relating to the Exchange Offer is
not appropriate or available for such resales
by such Holder or (C) such Holder is a
Broker-Dealer and holds Old Notes acquired
directly from the Company or any of its
affiliates, then the Company and the
Guarantors shall: (1) cause to be filed, on
or prior to 45 days after the earlier of (i)
the date on which the Company determines that
the Exchange Offer is not permitted by
applicable law and (ii) the date on which the
Company receives such notice from a Holder, a
shelf registration statement (the "Shelf
Registration Statement"), relating to all Old
Notes, and (2) shall use their respective
reasonable best efforts to cause such Shelf
Registration Statement to become effective on
or prior to 120 days after the date on which
the obligation of the Company and the
Subsidiary Guarantors to file the Shelf
Registration Statement arises.
The Company and the Subsidiary Guarantors
have agreed to use their respective
reasonable best efforts to keep any Shelf
Registration Statement continuously effective
for a maximum of two years (or such shorter
period in which all Old Notes covered by such
Shelf Registration Statement have been sold).
Special Procedures for
Beneficial Owners........... Any beneficial owner whose Old 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 Old Notes,
either make appropriate arrangements to
register ownership of the Old 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. The
11
<PAGE>
Company will keep the Exchange Offer open for
not less than twenty days in order to provide
for the transfer of registered ownership.
Guaranteed Delivery Holders of Old Notes who wish to tender their
Procedures.................. Old Notes and whose Old Notes are not
immediately available or who cannot deliver
their Old Notes, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent (or comply
with the procedures for book-entry transfer)
prior to the Expiration Date must tender
their Old 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 time, on the Expiration
Date.
Acceptance of Old Notes and
Delivery of Exchange Notes The Company will accept for exchange, subject
............................ to the conditions described under "The
Exchange Offer--Conditions," any and all Old
Notes which are properly tendered in the
Exchange Offer prior to 5:00 p.m., New York
time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer
will be delivered promptly 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.............. United States Trust Company of New York, N.A.
THE EXCHANGE NOTES
General..................... The form and terms of the Exchange Notes are
the same as the form and terms of the Old
Notes (which they replace) except that (i)
the Exchange Notes bear a Series B
designation, (ii) the Exchange Notes have
been registered under the Securities Act and,
therefore, will not bear legends restricting
the transfer thereof, and (iii) the holders
of Exchange Notes will not be entitled to
certain rights under the Registration Rights
Agreement, including the provisions providing
for an increase in the interest rate on the
Old 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 Old Notes and will be entitled to
the benefits of the Indenture. See
"Description of the Notes." The Old Notes and
the Exchange Notes are referred to herein
collectively as the "Notes."
$105,000,000 aggregate principal amount of
Series B 10 3/8% Notes due 2007 of the
Company.
Issuer...................... Kevco, Inc.
12
<PAGE>
Maturity Date............... December 1, 2007.
Guarantors.................. The Notes will be guaranteed on a senior
subordinated basis by all existing and future
Restricted Subsidiaries of the Company.
Ranking..................... The Notes and the Subsidiary Guarantees will
be general, unsecured obligations of the
Company and the Subsidiary Guarantors,
respectively. The payment of the principal of
and interest and premium, if any, on the
Exchange Notes will be subordinated in right
of payment to all Senior Indebtedness of the
Company and the Subsidiary Guarantors,
respectively. As of September 30, 1997, on a
pro forma basis after giving effect to the
Transactions, the Company and its
consolidated subsidiaries had outstanding
approximately $98.1 million of outstanding
Senior Indebtedness (including $93.2 million
of Senior Indebtedness under the Senior
Credit Facility). The Indenture will prohibit
the Company and the Subsidiary Guarantors
from incurring any Indebtedness that is
subordinated in right of payment to any
Senior Indebtedness unless such Indebtedness
is subordinated in right of payment to, or
ranks pari passu with, the Notes or the
Subsidiary Guarantees, as applicable. See
"Description of the Notes--Subordination" and
"--Certain Covenants--Limitations on Layering
Indebtedness."
Optional Redemption......... The Notes are redeemable, in whole or in
part, at the option of the Company at any
time on or after December 1, 2002, at the
redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages, if any, thereon to the date of
redemption. In addition, at any time on or
before December 1, 2000, the Company may
redeem up to 35% of the original aggregate
principal amount of the Notes with the net
proceeds of a Public Equity the Old Notes
Offering at a redemption price equal to
110.375% of the principal amount thereof,
plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
date of redemption; provided, however, that
at least 65% of the original aggregate
principal amount of the Notes remains
outstanding following such redemption. See
"Description of the Notes--Optional
Redemption."
Change of Control........... Upon a Change of Control, each holder of the
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 and Liquidated Damages,
if any, thereon to the date of repurchase.
See "Description of the Notes--Certain
Covenants--Repurchase of Notes at the Option
of the Holder Upon a Change of Control."
Certain Covenants........... The Indenture contains certain covenants,
including, but not limited to, covenants
prohibiting or limiting: (i) the incurrence
by the Company and its Restricted
Subsidiaries of additional Indebtedness; (ii)
the payment of dividends or the making of
other restricted
13
<PAGE>
payments by the Company; (iii) the creation
of liens by the Company and its Restricted
Subsidiaries; (iv) the creation or existence
of restrictions on the ability of Restricted
Subsidiaries to pay dividends or make other
payments to the Company; (v) transactions by
the Company and its Restricted Subsidiaries
with affiliates; (vi) certain sales of assets
by the Company and its Restricted
Subsidiaries; (vii) the ability of the
Company and the Restricted Subsidiaries to
engage in certain lines of business; and
(viii) the Company's ability to consolidate
or merge with or into, or transfer all or
substantially all of its assets to, another
person. See "Description of the Notes--
Certain Covenants."
RISK FACTORS
See "Risk Factors" beginning on page 17 for a discussion of certain
information that should be considered by Holders of Old Notes prior to
tendering their Old Notes in the Exchange Offer.
14
<PAGE>
SUMMARY UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following table sets forth summary unaudited pro forma condensed combined
balance sheet data at September 30, 1997 and summary unaudited pro forma
condensed combined statements of income for the year ended December 31, 1996,
the nine month period ended September 30, 1997 and the last twelve months ended
September 30, 1997. The pro forma condensed combined balance sheet data at
September 30, 1997 give effect to the Transactions as if they had occurred on
September 30, 1997. The pro forma condensed combined statements of income for
the fiscal year ended December 31, 1996, the nine month period ended September
30, 1997 and the last twelve months ended September 30, 1997 give effect to the
Pro Forma Transactions (as defined herein) as if they had occurred on January
1, 1996. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Unaudited Pro Forma Financial Data," "Selected Consolidated
Financial Data," and the Consolidated Financial Statements and Notes thereto of
Kevco and Shelter, included elsewhere herein.
<TABLE>
<CAPTION>
LAST TWELVE
MONTHS ENDED NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................ $855,176 $652,091 $855,686
Gross profit..................... 119,616 89,866 122,773
Commission income................ 8,930 6,580 9,359
Selling, general and
administrative expenses......... 91,014 69,077 88,722
Operating income................. 37,532 27,369 43,410
Net income....................... 10,239 7,270 13,164
OTHER DATA:
EBITDA(1)........................ 45,686 33,456 51,243
Depreciation and amortization.... 8,154 6,087 7,833
Cash interest expense(2)......... 18,580 13,935 18,580
EBITDA/cash interest expense..... 2.5x -- --
Total debt/EBITDA................ 4.4x -- --
</TABLE>
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
---------------------
ACTUAL PRO FORMA
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.......................................... $ 35,127 $ 71,413
Total assets............................................. 114,578 315,116
Total debt............................................... 45,849 203,103
Stockholders' equity..................................... 40,397 40,397
</TABLE>
- --------------------
(1) EBITDA for any relevant period presented above is defined as net income
plus interest expense, income taxes, depreciation, amortization, and other
expenses less other income reflected in the determination of net income.
EBITDA should not be construed as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by
operating activities, which are determined in accordance with generally
accepted accounting principles. EBITDA is included because management
believes that certain readers may find it to be a useful tool for analyzing
operating performance, leverage, liquidity, and a company's ability to
service debt. See "Unaudited Pro Forma Condensed Combined Financial Data"
and the Consolidated Financial Statements and the Notes thereto of Kevco
and Shelter included elsewhere in this Prospectus.
(2) Cash interest expense represents total interest expense less amortization
of deferred financing costs, on a pro forma basis giving effect to the
issuance of the Old Notes pursuant to the Old Notes Offering at an interest
rate of 10 3/8%, borrowings under the Senior Credit Facility at a rate of
8.25% and the application of the net proceeds therefrom, as if the
Transactions had occurred on January 1, 1996.
15
<PAGE>
SUMMARY SELECTED FINANCIAL DATA
The summary historical consolidated financial data for and as of the end of
each of the years in the three-year period ended December 31, 1996 set forth
below have been derived from the audited consolidated financial statements of
Kevco and Shelter. The summary historical consolidated financial data set forth
below for and as of the end of the nine-month period ended September 30, 1997
have been derived from the unaudited condensed consolidated financial
statements of Kevco and Shelter. The historical condensed consolidated results
of operations of Kevco and Shelter for the nine months ended September 1997 are
unaudited and are not necessarily indicative of the results of operations of
Kevco and Shelter for the full year. The unaudited historical consolidated
financial data reflects all adjustments (consisting of normal, recurring
adjustments) which are, in the opinion of management of each company, necessary
for a fair summary of such company's financial position, results of operations
and cash flows for and as of the end of the periods presented. The following
data should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations," "Unaudited Pro Forma
Financial Data," "Selected Consolidated Financial Data," and the Consolidated
Financial Statements and Notes thereto of Kevco and Shelter, included elsewhere
herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ---------------------------
HISTORICAL HISTORICAL
PRO FORMA -------------------------- PRO FORMA -----------------
1996(1) 1996 1995 1994 1997(1) 1997(2) 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Kevco
-----
INCOME STATEMENT DATA:
Net sales............... $401,119 $267,344 $182,519 $ 99,279 $289,952 $271,957 $205,048
Gross profit............ 59,646 40,691 26,878 15,923 39,056 36,819 30,993
Operating Income........ 24,282 16,465 8,599 5,048 12,895 12,494 12,503
OTHER DATA:
EBITDA(3)............... 27,700 18,257 9,640 5,447 15,350 14,666 13,821
Depreciation and
amortization........... 3,418 1,792 1,041 399 2,455 2,172 1,318
Capital expenditures.... -- 1,586 2,844 432 -- 2,000 1,086
Shelter
-------
INCOME STATEMENT DATA:
Net Sales............... $454,567 $521,022 $462,323 $333,104 $362,139 $357,879 $397,065
Gross profit............ 63,127 73,321 68,548 51,296 50,810 49,973 57,516
Operating income........ 15,033 15,586 18,844 15,271 11,645 11,237 15,052
OTHER DATA:
EBITDA(3)............... 18,629 18,936 21,741 17,303 14,509 13,691 17,497
Depreciation and
amortization........... 3,596 3,350 2,897 2,032 2,864 2,454 2,445
Capital expenditures.... -- 8,368 2,790 2,136 -- 6,210 6,057
Pro Forma Combined
------------------
EBITDA(4)............... $ 51,243 -- -- -- $ 33,456 -- --
</TABLE>
- --------------------
(1) Reflects the pro forma effect of (i) Kevco's acquisition of Bowen Supply,
Inc. ("Bowen") and Consolidated Forest Products, L.L.C. ("Consolidated
Forest") in February 1997, (ii) for 1996, Shelter's sale of operations and
certain assets of its carpet and yarn manufacturing subsidiary, Danube
Carpet Mills, Inc. ("Danube") on December 31, 1996 and (iii) the
acquisition of net assets and operations of Plastic Solutions, Inc. ("PSI")
in June 1997.
(2) The decline in Shelter's net sales is attributable to the sale of
operations and certain assets of its Danube subsidiary on December 31,
1996.
(3) EBITDA for any relevant period presented above is defined as net income
plus interest expense, income taxes, depreciation, amortization, and other
expenses less other income reflected in the determination of net income.
EBITDA should not be construed as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by
operating activities, which are determined in accordance with generally
accepted accounting principles. EBITDA is included because management
believes that certain readers may find it to be a useful tool for analyzing
operating performance, leverage, liquidity, and a company's ability to
service debt. See "Unaudited Pro Forma Condensed Combined Financial Data"
and the Consolidated Financial Statements and the Notes thereto of Kevco
and Shelter included elsewhere in this Prospectus.
(4) EBITDA for Kevco and Shelter combined, including the estimated cost savings
associated with the Shelter Acquisition. See "Unaudited Pro Forma Condensed
Combined Financial Data."
16
<PAGE>
RISK FACTORS
In addition to the other information contained or incorporated by reference
in this Prospectus, Holders of Old Notes should consider carefully the factors
listed below before tendering their Old Notes in the Exchange Offer.
SUBSTANTIAL LEVERAGE
The Company has a substantial amount of indebtedness. As of September 30,
1997, on a pro forma basis after giving effect to the Transactions, the
Company had approximately $203.1 million of consolidated indebtedness and a
ratio of debt to total capitalization of 83.4%. See "Capitalization."
The degree to which the Company is leveraged could have important
consequences to holders of the Notes, including the following: (i) the
Company's indebtedness, acquisitions, working capital, capital expenditures or
other purposes may be impaired, (ii) funds available to the Company for its
operations and general corporate purposes or for capital expenditures will be
reduced as a result of the dedication of a substantial portion of the
Company's consolidated cash flow from operations to the payment of the
principal and interest on its indebtedness, (iii) the Company may be more
highly leveraged than certain of its competitors, which may place it at a
competitive disadvantage, (iv) the agreements governing the Company's and its
subsidiaries' long-term indebtedness and bank loans contain restrictive
financial and operating covenants, (v) an event of default (not cured or
waived) under financial and operating covenants contained in the Company's or
its subsidiaries' debt instruments, including the Indenture, could occur and
have a material adverse effect on the Company, (vi) certain of the borrowings
under debt agreements of the Company's subsidiaries have floating rates of
interest, which causes the Company and its subsidiaries to be vulnerable to
increases in interest rates and (vii) the Company's substantial degree of
leverage could make it more vulnerable to a downturn in general economic
conditions.
The ability of the Company and its subsidiaries to make principal and
interest payments under long-term indebtedness (including the Notes) and bank
loans will be dependent upon their future performance, which is subject to
financial, economic and other factors affecting the Company and its
subsidiaries, some of which are beyond their control. There can be no
assurance that the current level of operating results of the Company and its
subsidiaries will continue or improve. The Company believes that it will need
to access the capital markets in the future in order to provide the funds
necessary to repay a significant portion of its indebtedness. There can be no
assurance that any such refinancing will be possible or that any additional
financing can be obtained, particularly in view of the Company's anticipated
high levels of debt and the debt incurrence restrictions under its existing
debt agreements, including the Indenture. If no such refinancing or additional
financing were available, the Company and/or its subsidiaries could default on
their respective debt obligations. In such case, virtually all other debt of
the Company and its subsidiaries, including payments to be made under the
Notes, could be immediately due and payable.
SUBORDINATION
The Old Notes are, and the Exchange Notes will be, unsecured and
subordinated in right of payment to all existing and future Senior
Indebtedness of the Company, including all indebtedness under the Senior
Credit Facility. Although the obligations of the Company under the Notes are
guaranteed by the Subsidiary Guarantors, such guarantees are also subordinated
in right of payment to all Senior Indebtedness of the Subsidiary Guarantors.
As of September 30, 1997, on a pro forma basis after giving effect to the
Transactions, the Company and its consolidated subsidiaries had approximately
$98.1 million of outstanding Senior Indebtedness (including $93.2 million of
Senior Indebtedness under the Senior Credit Facility). The Indenture permits
the Company and its Subsidiaries to incur additional indebtedness, including
Senior Indebtedness, subject to certain limitations.
By reason of the subordination of the Notes and Subsidiary Guarantees to all
Senior Indebtedness of the Company and the Subsidiary Guarantors, as
applicable, in the event of a liquidation or dissolution of the Company or a
Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency,
receivership or similar
17
<PAGE>
proceeding relating to the Company or such Subsidiary Guarantor, the holders
of Senior Indebtedness will be entitled to receive payment in full before the
holders of the Notes receive any payment. In addition, the Company and the
Subsidiary Guarantors will not be permitted to make any payment to the holders
of the Notes for specified periods if (i) there occurs a payment default with
respect to any Senior Indebtedness or (ii) there occurs a default with respect
to Senior Indebtedness held by designated persons which permits the holders of
such Senior Indebtedness to accelerate its maturity and such holders notify
the Trustee (as defined herein) of such default. These provisions may have the
effect of reducing the amounts payable to or recoverable by the holders of the
Notes.
The Company currently conducts all of its business through subsidiaries.
Accordingly, the Company is dependent on the cash flow generated by its
subsidiaries for the payment of its obligations, including the Notes. Except
by virtue of the Subsidiary Guarantees, the subsidiaries of the Company have
no obligation to make payments under the Notes. To the extent that a
subsidiary of the Company does not become a Subsidiary Guarantor or the
Subsidiary Guarantee of a Subsidiary Guarantor is not enforceable under
applicable law, the Notes will be structurally subordinated to any
Indebtedness or other obligations of the subsidiaries of the Company.
RESTRICTIVE COVENANTS AND ASSET ENCUMBRANCES
The Senior Credit Facility and the Indenture contain numerous restrictive
covenants which limit the discretion of Company management with respect to
certain business matters. These covenants place significant restrictions on,
among other things, the ability of the Company to incur additional
indebtedness, to create liens or other encumbrances, to pay dividends or make
other restricted payments, to make investments, loans and guarantees and to
sell or otherwise dispose of a substantial portion of assets to, or merge or
consolidate with, another entity. The Senior Credit Facility also contains a
number of financial covenants that require the Company to meet certain
financial ratios and tests and provide that a "change of control" will
constitute an event of default. A failure to comply with the obligations
contained in the Senior Credit Facility or the Indenture, if not cured or
waived, could permit acceleration of the related indebtedness and acceleration
of indebtedness under other instruments that contain cross-acceleration or
cross-default provisions. If the Company were obligated to repay all or a
significant portion of its indebtedness, there can be no assurance that the
Company would have sufficient cash to do so or that the Company could
successfully refinance such indebtedness. Other indebtedness of the Company
that may be incurred in the future may contain financial or other covenants
more restrictive than those applicable to the Senior Credit Facility or the
Notes. In addition, the obligations of the Company under the Senior Credit
Facility are secured by substantially all of the assets of the Company, and
the Indenture permits other Senior Indebtedness of the Company to be secured.
In the case of an event of default under the Senior Credit Facility or such
other secured indebtedness, the lenders thereunder would be entitled to
exercise the remedies available to a secured lender under applicable law. See
"Description of the Notes--Certain Covenants" and "Description of Senior
Credit Facility."
INABILITY TO PURCHASE NOTES UPON A CHANGE OF CONTROL
Upon a Change of Control, the Company will be required to offer to
repurchase all outstanding Notes at 101% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. However, there can be no assurance that sufficient funds will be
available at the time of any Change of Control to make any required
repurchases of Notes tendered. In addition, the Senior Credit Facility
prohibits the Company from making such required repurchases and there can be
no assurance that the Company's debt instruments existing at the time of any
Change of Control will allow the Company to make such required repurchases.
Notwithstanding these provisions, the Company could enter into certain
transactions, including certain recapitalization, that would not constitute a
Change of Control but would increase the amount of debt outstanding at such
time. See "Description of the Notes--Certain Covenants--Repurchase of Notes at
the Option of the Holder Upon a Change of Control."
18
<PAGE>
COMPETITION
The wholesale distribution industry relating to producers of manufactured
homes and RVs is highly competitive, and the barriers to entry are relatively
low. Competition exists in terms of price, product quality and features,
service, warranty terms and distribution facility location. The manufacturing
of roof trusses, laminated wallboard products and thermoformed bathroom
products are also highly competitive businesses. There are numerous companies,
both public and private, that are in direct competition with the Company, and
many of these competitors have been operating longer and have substantially
greater financial and other resources than the Company. A downturn in the
manufactured housing or RV industries could result in increased competition
adversely affecting the Company's results of operations or financial
condition. In addition, there are certain product manufacturers that sell and
distribute their products directly to manufactured home and RV producers.
There can be no assurance that additional manufacturers of products
distributed by the Company will not elect to sell and distribute directly in
the future. No assurance can be given that the Company will be able to compete
effectively in the future.
CYCLICAL NATURE OF THE MANUFACTURED HOUSING AND RV MARKETS
Approximately 79% of the Company's net sales for the year ended December 31,
1996, were to producers of manufactured homes. The manufactured housing market
historically has been cyclical and is influenced by many of the same national
and regional economic and demographic factors that affect the broader housing
market, including consumer confidence, interest rates, availability and terms
of financing, regional population and employment trends, availability and cost
of alternative housing and general economic conditions, including recessions.
The RV market has also historically been cyclical and is also influenced by
factors such as interest rates, availability and terms of financing and
general economic conditions, as well as gasoline prices. The Company may be
adversely affected by these factors.
GROWTH THROUGH ACQUISITIONS
Part of the Company's business strategy is to grow through strategic
acquisitions. There can be no assurance that the Company will be able to
identify attractive or willing acquisition candidates or that it will be able
to successfully integrate the operations of any companies it acquires. In
addition, there can be no assurance that such acquired companies would perform
in accordance with management's expectations or that the Company would not
encounter unanticipated problems or liabilities. Also, if the Company does not
have sufficient cash resources for any acquisition, its growth could be
limited. There can be no assurance that the Company will be able to obtain
adequate financing for any acquisition or that, if available, such financing
will be on terms acceptable to the Company. The Senior Credit Facility
requires the consent of the Company's lenders prior to the consummation of
certain acquisitions. There can be no assurance such consents will be granted
any time they are required or that the Company will be able to successfully
implement its acquisition strategy.
RISKS RELATED TO THE INTEGRATION OF KEVCO AND SHELTER
The Shelter Acquisition involves the integration of two companies that have
previously operated independently. The assimilation of the companies may be
difficult and will require integration and coordination of the Company's
product offerings, management, systems, manufacturing and sales and marketing
efforts. In addition, the process of integrating the operations of Kevco and
Shelter will require substantial attention from management and could cause the
interruption of, or a loss of momentum in, the business activities of the
Company, which could have an adverse effect on the Company's financial
position, results of operations and cash flows. Accordingly, no assurance can
be given that difficulties will not be encountered in integrating the
operations of Kevco and Shelter or that the efficiencies and benefits expected
from such integration will be realized.
DEPENDENCE ON KEY PERSONNEL
The success of the Company is dependent upon the continued services of the
Company's senior management, particularly its Chairman of the Board, President
and Chief Executive Officer, Jerry E. Kimmel.
19
<PAGE>
The loss of the services of Mr. Kimmel could have a material adverse effect on
the Company and its business. In addition, the Company's success and continued
growth will depend upon its ability to attract and retain experienced, quality
management personnel.
IMPORTANCE OF PRINCIPAL CUSTOMERS
The Company's two largest customers, Champion Enterprises, Inc. and
Fleetwood Enterprises, Inc., accounted for approximately 14% and 12%,
respectively, of the Company's combined historical net sales in 1996. Although
the Company has ongoing supply relationships with these customers, it does not
have a formal supply contract with these customers or most of its other
customers. The Company's business could be adversely affected if these
customers, or other major customers, substantially reduced or discontinued
purchases from the Company. Further, the Company can give no assurance that
its sales to its customers will continue at historical levels. See "Business--
Sales and Marketing" and Note 1 to the Consolidated Financial Statements of
Kevco and Shelter.
IMPORTANCE OF KEY SUPPLIERS
There are numerous competing suppliers of most of the products that the
Company purchases; however, if a particular supplier were to unexpectedly
discontinue sales of a product to the Company, the Company could experience
temporary shortages in that product until it obtains a replacement supplier.
Such a temporary shortage could have a negative impact on the Company's
relationships with its customers, which could in turn result in the loss of
one or more customers. The loss of one or more major customers could have a
material adverse effect on the Company and its business. See "Business--
Purchasing and Suppliers."
FLUCTUATIONS IN PRICES OF LUMBER
The Company has experienced significant fluctuations in the cost of lumber
products from primary producers. A variety of factors over which the Company
has no control, including environmental regulations, weather conditions and
natural disasters, impact the market price of lumber products. The Company
anticipates that these fluctuations will continue in the future. The Company's
purchase and resale practices seek to minimize the impact of fluctuations in
lumber prices. The Company prices its wood products on a monthly basis based
on the then-current lumber prices. It charges the raw material cost on a FIFO-
basis to cost of goods as products are sold. Periods of prolonged lumber price
decreases may have a material adverse impact on the Company's inventory value
and profitability.
CONTROL BY PRINCIPAL SHAREHOLDER
As of November 20, 1997, Jerry E. Kimmel, the Chairman of the Board,
President and Chief Executive Officer of the Company, owned approximately
55.1% of the outstanding Common Stock of the Company. As a result, Mr. Kimmel
is able to (i) elect the entire Board of Directors of the Company, (ii)
through his ability to elect directors, exercise control over the business,
officers, policies and management of the Company and (iii) in general,
determine the outcome of any matter submitted to a vote of the shareholders of
the Company, including an amendment to the Articles of Incorporation of the
Company, the authorization of additional shares of the Company's capital stock
or any merger, consolidation or other extraordinary corporate transaction
requiring a vote of the shareholders of the Company. See "Principal
Shareholders."
REGULATION
The Company's suppliers and customers are subject to a variety of federal,
state and local laws and regulations. The National Manufactured Housing
Construction and Safety Standards Act of 1974 and regulations promulgated
thereunder by the U.S. Department of Housing and Urban Development ("HUD")
impose comprehensive national construction standards for manufactured homes
and preempt conflicting state and local regulations. HUD has adopted
regulations that divide the United States into three "Wind Zones" and impose
20
<PAGE>
more stringent construction standards for homes to be sold in areas designated
as Wind Zones II or III. These regulations have resulted in higher
manufacturing and dealer costs. The Company cannot predict if additional
regulations will be adopted or the effect that any such regulations would have
on the Company. To the extent regulations make manufactured housing less
competitive with other housing alternatives, the Company's operations could be
negatively impacted. See "Business--Regulation."
FRAUDULENT CONVEYANCE
The Company believes that the indebtedness represented by the Notes was
incurred for proper purposes and in good faith, and that, based on present
forecasts, asset valuations and other financial information, after the
consummation of the Transactions, the Company will be solvent, will have
sufficient capital for carrying on its business and will be able to pay its
debts as they mature. Notwithstanding the Company's belief, however, if a
court of competent jurisdiction in a suit by an unpaid creditor or a
representative of creditors (such as a trustee in bankruptcy or a debtor-in-
possession) were to find that, at the time of the incurrence of such
indebtedness, the Company was insolvent, was rendered insolvent by reason of
such incurrence, was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, intended to incur, or
believed that it would incur, debts beyond its ability to pay such debts as
they matured, or intended to hinder, delay or defraud its creditors, and that
the indebtedness was incurred for less than reasonably equivalent value, then
such court could, among other things, (i) void all or a portion of the
Company's obligations to the holders of the Notes, the effect of which would
be that the holders of the Notes may not be repaid in full and/or (ii)
subordinate the Company's obligations to the holders of the Notes to other
existing and future indebtedness of the Company to a greater extent than would
otherwise be the case, the effect of which would be to entitle such other
creditors to be paid in full before any payment could be made on the Notes.
The Company's obligations under the Notes are guaranteed, jointly and
severally, on a senior subordinated basis, by each of the Subsidiary
Guarantors. The Company believes that indebtedness represented by the
Guarantees was, and is being, incurred by the Subsidiary Guarantors for proper
purposes and in good faith, and that, based on present forecasts, asset
valuations and other financial information, after the consummation of the
Transactions, each of the Subsidiary Guarantors will be solvent, will have
sufficient capital for carrying on its business and will be able to pay its
debts as they mature. Notwithstanding the Company's belief, however, if a
court of competent jurisdiction in a suit by an unpaid creditor or a
representative of creditors (such as a trustee in bankruptcy or a debtor-in-
possession) were to find that, at the time of the incurrence of such
indebtedness, the Subsidiary Guarantors were insolvent, were rendered
insolvent by reason of such incurrence, were engaged in a business or
transaction for which their remaining assets constituted unreasonably small
capital, intended to incur, or believed that they would incur, debts beyond
their ability to pay such debts as they matured, or intended to hinder, delay
or defraud their creditors, and that the indebtedness was incurred for less
than reasonably equivalent value, then such court could, among other things,
(i) void all or a portion of such Subsidiary Guarantors' obligations to the
holders of the Notes, the effect of which would be that the holders of the
Notes may not be repaid in full and/or (ii) subordinate such Subsidiary
Guarantors' obligations to the holders of the Notes to other existing and
future indebtedness of such Subsidiary Guarantors to a greater extent than
would otherwise be the case, the effect of which would be to entitle such
other creditors to be paid in full before any payment could be made on the
Notes. Among other things, a legal challenge to a guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by the
Subsidiary Guarantors as a result of the issuance by the Company of the Notes.
EXCHANGE OFFER PROCEDURES
Issuance of the Exchange Notes in exchange for the Old Notes pursuant to the
Exchange Offer will be made only after a timely receipt by the Company of such
Old Notes, a properly completed and duly executed Letter of Transmittal and
all other required documents. Therefore, holders of the Old Notes desiring to
tender such Old Notes in exchange for Exchange Notes should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of Old
Notes for
21
<PAGE>
exchange. Old Notes that are not tendered or are tendered but not accepted
will, following the consummation of the Exchange Offer, continue to be subject
to the existing restrictions upon transfer thereof and, upon consummation of
the Exchange Offer, registration rights under the Registration Rights
Agreement generally will terminate. In addition, any holder of Old Notes who
tenders in the Exchange Offer for the purpose of participating in a
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 requirements of the Securities Act in connection with any
resale transactions. Each Participating Broker-Dealer that receives Exchange
Notes for its own account in exchange for Old Notes, where such Old Notes were
acquired by such Participating 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 Notes. See "Plan
of Distribution." To the extent that Old Notes are tendered and accepted in
the Exchange Offer, the trading market for untendered and tendered but
unaccepted Old Notes could be adversely affected. See "The Exchange Offer."
ABSENCE OF PUBLIC MARKET FOR THE NOTES
The Old Notes were issued on December 1, 1997 to qualified institutional
buyers and are eligible for trading in the PORTAL Market, the National
Association of Securities Dealers' screen-based, automated market for trading
of securities eligible for resale under Rule 144A. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the trading market for
the remaining untendered Old Notes could be adversely affected. There is no
existing trading market for the Exchange Notes, and there can be no assurance
regarding the future development of a market for the Exchange Notes, or the
ability of holders of the Exchange Notes to sell their Exchange Notes or the
price at which such holders may be able to sell their Exchange Notes. 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. As a
result, the market price of the Exchange Notes could be adversely affected.
The Company does not intend to apply to list the Old Notes or the Exchange
Notes on any securities exchange or for quotation through the National
Association of Securities Dealers Automated Quotation System. The liquidity
of, and trading market for, the Notes also may be adversely affected by
general declines in the market for similar securities, regardless of the
Company's financial performance or prospects.
22
<PAGE>
THE TRANSACTIONS
On October 28, 1997, SCCAC, a wholly-owned subsidiary of Kevco, commenced
the Tender Offer for all the outstanding shares of Shelter Common Stock at
$17.50 net per share as required under the terms of the Acquisition Agreement,
dated as of October 21, 1997 among Kevco, SCCAC and Shelter. The Tender Offer
expired on December 1, 1997, at which time Kevco accepted for payment all
validly tendered shares of Shelter Common Stock, which represented
approximately 95.5% of the then issued and outstanding shares of Shelter
Common Stock. On January 16, 1998, SCCAC was merged with and into Shelter,
with Shelter being the surviving corporation. As a result of the Merger,
Shelter became a wholly-owned subsidiary of Kevco. The aggregate consideration
paid in the Shelter Acquisition was approximately $138.8 million, excluding
the repayment of Shelter's existing indebtedness and expenses relating to the
Shelter Acquisition and the Old Notes Offering, which is being funded by some
combination of the proceeds of the Old Notes Offering, additional borrowings
under the Senior Credit Facility and then existing available cash held by
Shelter. See "Use of Proceeds".
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. The Exchange Offer is intended to satisfy
certain of the Company's obligations under the Registration Rights Agreement.
The Company used the gross proceeds of the Old Notes Offering of $105.0
million, together with additional borrowings by the Company of approximately
$48.7 million under the Senior Credit Facility and $13.1 million of then
existing available cash held by Shelter, as follows: (i) approximately $138.8
million was used to purchase all outstanding shares of Shelter Common Stock
and retire outstanding options to acquire shares of Shelter Common Stock held
by employees and directors of Shelter; (ii) approximately $16.7 million was
applied to repay existing indebtedness of Shelter; and (iii) approximately
$11.3 million was applied to pay the fees and expenses incurred in connection
with the Transactions. Shelter indebtedness repaid had a final maturity date
of March 31, 2005 and bore a blended interest rate of 9.0%.
23
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Kevco at September 30,
1997, (i) on an actual basis and (ii) on a pro forma basis to give effect to
the Transactions as set forth under "Use of Proceeds." This table should be
read in conjunction with the Consolidated Financial Statements of Kevco and
Shelter and the notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30,
1997
-----------------
ACTUAL PRO FORMA
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Cash....................................................... $ 77 $ 77
======= ========
Total debt:
Capital lease obligations.................................. $ 1,435 $ 1,435
Long-term notes payable.................................... -- 3,500
Senior Credit Facility:
Revolving Credit Facility................................. 14,414 3,168
Term Loan(1).............................................. 30,000 90,000
Old Notes Offering......................................... -- 105,000
------- --------
Total debt............................................... 45,849 203,103
Stockholders' equity....................................... 40,397 40,397
------- --------
Total capitalization..................................... $86,246 $243,500
======= ========
</TABLE>
- ---------------------
(1) The Indenture provides that the Company's borrowing capacity under the
Term Loan of the Senior Credit Facility is reduced by the cash
consideration necessary to purchase the amount of Shelter Common Stock not
acquired under the Tender Offer until such time as Kevco owns 100% of the
Shelter Common Stock.
24
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The unaudited pro forma condensed combined financial data is based on the
consolidated financial statements of Kevco, the consolidated financial
statements of Bowen, the consolidated financial statements of Consolidated
Forest and the consolidated financial statements of Shelter included elsewhere
in this Prospectus. The unaudited pro forma financial data gives effect to:
(i) the effect on weighted average shares and earnings per share of the sale
of 2,415,000 shares of common stock of Kevco and the tax impact of Kevco's
conversion from an S corporation to a C corporation in November 1996
(including an over-allotment option of 315,000 shares exercised in December
1996) ("Public Offering"); (ii) the acquisition by Kevco of Bowen ("Bowen
Acquisition") and Consolidated Forest ("Consolidated Forest Acquisition" and,
collectively with the Bowen Acquisition, the "Kevco Acquisitions"); (iii)
Shelter's sale of the operations and certain assets of its Danube subsidiary
and the acquisition by Shelter of PSI ("PSI Acquisition"); (iv) the Shelter
Acquisition; (v) the Senior Credit Facility and (vi) the Old Notes Offering
(collectively, the "Pro Forma Transactions") as if these transactions had
occurred on January 1, 1996.
The unaudited pro forma condensed combined balance sheet at September 30,
1997 is based on the consolidated financial statements of Kevco adjusted to
give effect to the Transactions as if such transactions had occurred on
September 30, 1997. The unaudited pro forma condensed combined statements of
income for the year ended December 31, 1996, the nine month-period ended
September 30, 1997 and the last twelve months ended September 30, 1997, are
based on the consolidated financial statements of Kevco and adjusted to give
effect to the Pro Forma Transactions as if such transactions had occurred on
January 1, 1996. The acquisition adjustments and offering adjustments are
based upon historical financial information of Kevco, Bowen, Consolidated
Forest, PSI and Shelter and certain assumptions that management of Kevco
believes are reasonable. The Kevco Acquisitions, the PSI Acquisition and the
Shelter Acquisition are accounted for under the purchase method of accounting.
Under this method of accounting, the purchase price has been allocated to the
assets and liabilities acquired based on preliminary estimates of fair value.
The actual fair value is determined as of the consummation of each of the
acquisitions. The pro forma financial data does not necessarily reflect the
results of operations or the financial position of Kevco that actually would
have resulted had the Pro Forma Transactions occurred at the date indicated,
or project the results of operations or financial position of Kevco for any
future date or period.
The unaudited pro forma condensed combined financial data should be read in
conjunction with the consolidated financial statements of Kevco, Bowen,
Consolidated Forest and Shelter and the notes thereto included elsewhere in
this Prospectus.
25
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHELTER
KEVCO SHELTER ACQUISITION PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(1) TOTAL
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.... $ 77 $ 13,139 $(13,139)(2) $ 77
Trade accounts receivable,
net......................... 25,190 33,010 -- 58,200
Inventories.................. 34,988 43,001 -- 77,989
Other current assets......... 1,447 3,327 -- 4,774
-------- -------- -------- --------
Total current assets....... 61,702 92,477 (13,139) 141,040
Property and equipment, net.... 18,563 25,929 -- 44,492
Intangible assets, net......... 33,600 13,126 (13,126)(3) 127,549
88,024 (3)
5,925 (4)
Other assets................... 713 1,322 -- 2,035
-------- -------- -------- --------
Total assets............... $114,578 $132,854 $ 67,684 $315,116
======== ======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current Liabilities:
Trade accounts payable....... $ 22,245 $ 33,079 $ -- $ 55,324
Accrued liabilities.......... 4,050 7,279 -- 11,329
Current portion of long-term
debt........................ 112 3,007 (2,271)(5) 848
Other liabilities 168 1,023 935 (6) 2,126
-------- -------- -------- --------
Total current liabilities.. 26,575 44,388 (1,336) 69,627
Long-term debt, less current
portion....................... 45,737 17,208 (14,444)(7) 202,255
153,754 (7)
Other liabilities.............. 1,869 968 -- 2,837
-------- -------- -------- --------
Total liabilities............ 74,181 62,564 137,974 274,719
Total stockholders' equity... 40,397 70,290 (70,290)(8) 40,397
-------- -------- -------- --------
Total liabilities and
stockholders' equity...... $114,578 $132,854 $ 67,684 $315,116
======== ======== ======== ========
</TABLE>
26
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) The Shelter Acquisition was accounted for using the purchase method of
accounting. The aggregate purchase price was determined as follows:
<TABLE>
<S> <C>
Shares outstanding at September 30, 1997........................ 7,765
Options outstanding at September 30, 1997....................... 376
--------
Total......................................................... 8,141
Purchase price per share........................................ $ 17.50
--------
$142,468
Exercise of options outstanding(a).............................. (3,625)
--------
Purchase price.................................................. $138,843
Acquisition costs(b)............................................ 5,410
--------
Total purchase price.......................................... $144,253
========
</TABLE>
(a) Represents cash to be received by Kevco in settlement of stock options
outstanding as of September 30, 1997 (options outstanding to purchase
376,000 shares of Shelter Common Stock at an average price of $9.64 per
share).
(b) Represents fees and costs directly associated with the Shelter
Acquisition consisting of investment banking, legal and other
professional costs.
(2) Reflects the utilization of existing cash to finance a portion of the
Shelter Acquisition.
(3) Goodwill was adjusted to reflect (i) the elimination of existing goodwill
of Shelter and (ii) the excess of purchase cost over the fair value of net
assets acquired which amount will be amortized on a straight line basis
over an estimated life of 40 years.
(4) Intangibles were adjusted to reflect the capitalization of financing costs
that will be amortized over the life of the Senior Credit Facility and the
Notes.
(5) Current portion of long-term debt was adjusted to reflect the retirement
of a portion of long-term debt of Shelter. See note (7).
(6) The adjustment reflects accrued severance costs related to the involuntary
termination of employees resulting from the Shelter Acquisition.
(7) Long-term debt was adjusted to reflect gross proceeds of $105,000 from the
issuance of the Notes and additional borrowings of $48,754 from the Senior
Credit Facility, net of $14,444 of long-term debt of Shelter that was
retired.
(8) The adjustment reflects the elimination of the stockholders' equity of
Shelter.
27
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
KEVCO SHELTER
PRO PRO THE OLD KEVCO
FORMA FORMA SHELTER NOTES COMBINED
TOTALS TOTALS ACQUISITION OFFERING PRO
(A) (B) ADJUSTMENTS ADJUSTMENTS FORMA
<S> <C> <C> <C> <C> <C>
Net sales............... $384,269 $470,907 $ -- $ -- $855,176
Cost of sales........... 330,583 404,977 -- -- 735,560
-------- -------- -------- -------- --------
Gross profit.......... 53,686 65,930 -- -- 119,616
Commission income....... 6,224 2,706 -- -- 8,930
-------- -------- -------- -------- --------
59,910 68,636 -- -- 128,546
Selling, general and
administrative
expenses............... 41,035 54,356 (5,346)(1) 91,014
(1,232)(2)
2,201 (3)
-------- -------- -------- -------- --------
Operating income...... 18,875 14,280 4,377 -- 37,532
Interest expense........ (4,068) (1,039) -- (18,580)(4) (19,536)
4,862 (4)
(711)(4)
Other income............ 174 447 -- -- 621
-------- -------- -------- -------- --------
Income before income
taxes................ 14,981 13,688 4,377 (14,429) 18,617
Income taxes 5,992 5,267 1,751(5) (4,632)(5) 8,378
-------- -------- -------- -------- --------
Net income............ $ 8,989 $ 8,421 $ 2,626 ($ 9,797) $ 10,239
======== ======== ======== ======== ========
Earnings per share...... $ 1.30 $ 1.48
======== ========
Weighted average shares
outstanding............. 6,916 6,916
======== ========
OTHER DATA:
Operating income...... $ 18,875 $ 14,280 $ 4,377 $ -- $ 37,532
Depreciation and
amortization......... 3,346 3,839 969 -- 8,154
-------- -------- -------- -------- --------
EBITDA (6)............ $ 22,221 $ 18,119 $ 5,346 $ -- $ 45,686
======== ======== ======== ======== ========
</TABLE>
- ---------------------
(A) Includes the pro forma effect of the Public Offering and the Kevco
Acquisitions. See details in "Unaudited Pro Forma Financial Data,"
beginning on page P-1.
(B) Includes the pro forma effect of the sale of the operations and certain
assets of Danube and the PSI Acquisition. See details in "Unaudited Pro
Forma Financial Data," beginning on page P-1.
28
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary
termination of certain employees which are included in the financial
statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees.
Kevco believes that the elimination of duplicate employees will have no
material effect on the other reported amounts within the unaudited pro
forma condensed combined financial statements.
(2) To eliminate the historical amortization of goodwill of Shelter.
(3) Represents the amortization of excess purchase price over fair value of
net assets acquired related to the Shelter Acquisition over a period of 40
years.
(4) Interest expense was adjusted to reflect: (i) $18,580 resulting from the
effective interest rate of the Senior Credit Facility at 8.25% and the
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of
$4,862 to be repaid from the proceeds of the Senior Credit Facility and
(iii) the amortization of financing costs of $711 over the life of the
indebtedness.
(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,
which is the expected effective tax rate of the Company after giving
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of
goodwill resulting from the Shelter Acquisition.
(6) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income reflected
in the determination of net income.
29
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE OLD
KEVCO SHELTER SHELTER NOTES KEVCO
PRO FORMA PRO FORMA ACQUISITION OFFERING COMBINED
TOTALS(A) TOTALS(B) ADJUSTMENTS ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
Net sales............... $289,952 $362,139 $ -- $ -- $652,091
Cost of sales........... 250,896 311,329 -- -- 562,225
-------- -------- ------- -------- --------
Gross profit.......... 39,056 50,810 -- -- 89,866
Commission income....... 4,506 2,074 -- -- 6,580
-------- -------- ------- -------- --------
43,562 52,884 -- -- 96,446
Selling, general and
administrative
expenses............... 30,667 41,239 (3,597)(1) -- 69,077
(883)(2)
1,651 (3)
-------- -------- ------- -------- --------
Operating income...... 12,895 11,645 2,829 -- 27,369
Interest expense........ (2,869) (612) -- (13,935)(4) (14,652)
3,297 (4)
(533)(4)
Other income............ 52 447 -- -- 499
-------- -------- ------- -------- --------
Income before income
taxes................ 10,078 11,480 2,829 (11,171) 13,216
Income taxes............ 4,031 4,422 1,054 (5) (3,561)(5) 5,946
-------- -------- ------- -------- --------
Net income............ $ 6,047 $ 7,058 $ 1,775 $ (7,610) $ 7,270
======== ======== ======= ======== ========
Earnings per share...... $ 0.87 $ 1.05
======== ========
Weighted average
shares outstanding... 6,916 6,916
======== ========
OTHER DATA:
Operating income...... $ 12,895 $ 11,645 $ 2,829 $ -- $ 27,369
Depreciation and
amortization......... 2,455 2,864 768 -- 6,087
-------- -------- ------- -------- --------
EBITDA(6)............. $ 15,350 $ 14,509 $ 3,597 $ -- $ 33,456
======== ======== ======= ======== ========
</TABLE>
- ---------------------
(A) Includes the pro forma effect of the Kevco Acquisitions. See details in
"Unaudited Pro Forma Financial Data," beginning on page P-1.
(B) Includes the pro forma effect of the PSI Acquisition. See details in
"Unaudited Pro Forma Financial Data," beginning on page P-1.
30
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary
termination of certain employees which are included in the financial
statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees.
Kevco believes that the elimination of duplicate employees will have no
material effect on the other reported amounts within the unaudited pro
forma condensed combined financial statements.
(2) To eliminate the historical amortization of goodwill of Shelter.
(3) Represents the amortization of excess purchase price over fair value of
net assets acquired related to the Shelter Acquisition over a period of 40
years.
(4) Interest expense was adjusted to reflect: (i) $13,935 resulting from the
effective interest rate of the Senior Credit Facility at 8.25% and the
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of
$3,297 to be repaid from the proceeds from the Senior Credit Facility and
(iii) the amortization of financing costs of $533 over the life of the
indebtedness.
(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,
which is the expected effective tax rate of the Company after giving
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of
goodwill resulting from the Shelter Acquisition.
(6) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income reflected
in the determination of net income.
31
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE OLD
KEVCO SHELTER SHELTER NOTES KEVCO
PRO FORMA PRO FORMA ACQUISITION OFFERING COMBINED
TOTALS(A) TOTALS(B) ADJUSTMENTS ADJUSTMENTS PRO FORMA
<S> <C> <C> <C> <C> <C>
Net sales............... $401,119 $454,567 $ -- $ -- $855,686
Cost of sales........... 341,473 391,440 -- -- 732,913
-------- -------- ------ ------- --------
Gross profit.......... 59,646 63,127 -- -- 122,773
Commission income....... 6,900 2,459 -- -- 9,359
-------- -------- ------ ------- --------
66,546 65,586 -- -- 132,132
Selling, general and
administrative
expenses............... 42,264 50,553 (4,914)(1) -- 88,722
(1,382)(2)
2,201 (3)
-------- -------- ------ ------- --------
Operating income...... 24,282 15,033 4,095 -- 43,410
Interest expense........ (4,420) (1,994) -- (18,580)(4) (19,536)
6,169 (4)
(711)(4)
Other income............ 61 -- -- -- 61
-------- -------- ------ ------- --------
Income before income
taxes................ 19,923 13,039 4,095 (13,122) 23,935
Income taxes............ 7,969 5,072 1,535(5) (3,805)(5) 10,771
-------- -------- ------ ------- --------
Net income............ $ 11,954 $ 7,967 $2,560 $(9,317) $ 13,164
======== ======== ====== ======= ========
Earnings per share...... $ 1.73 $ 1.90
======== ========
Weighted average shares
outstanding............ 6,911 6,911
======== ========
OTHER DATA:
Operating income...... $ 24,282 $ 15,033 $4,095 $ -- $ 43,410
Depreciation and
amortization......... 3,418 3,596 819 -- 7,833
-------- -------- ------ ------- --------
EBITDA(6)............. $ 27,700 $ 18,629 $4,914 $ -- $ 51,243
======== ======== ====== ======= ========
</TABLE>
- ---------------------
(A) Includes the pro forma effect of the Public Offering and the Kevco
Acquisitions. See details in "Unaudited Pro Forma Financial Data,"
beginning on page P-1.
(B) Includes the pro forma effect of the sale of Danube and the PSI
Acquisition. See details in "Unaudited Pro Forma Financial Data,"
beginning on page P-1.
32
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary
termination of certain employees which are included in the financial
statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees.
Kevco believes that the elimination of duplicate employees will have no
material effect on the other reported amounts within the unaudited pro
forma condensed combined financial statements.
(2) To eliminate the historical amortization of goodwill of Shelter.
(3) Represents the amortization of excess purchase price over fair value of
net assets acquired related to the Shelter Acquisition over a period of 40
years.
(4) Interest expense was adjusted to reflect: (i) $18,580 resulting from the
effective interest rate of the Senior Credit Facility at 8.25% and the
Notes at 10 3/8% (ii) the elimination of interest on existing debt of
$6,169 to be repaid from the proceeds from the Senior Credit Facility and
(iii) the amortization of financing costs of $711 over the life of the
indebtedness.
(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,
which is the expected effective tax rate of the Company after giving
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of
goodwill resulting from the Shelter Acquisition.
(6) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income reflected
in the determination of net income.
33
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF KEVCO
The selected consolidated financial data for the five years ended December
31, 1996 are derived from Kevco's audited consolidated financial statements.
The financial data for the nine months ended September 30, 1996 and 1997 are
derived from Kevco's unaudited consolidated financial statements, which in the
opinion of management reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of results for such
periods. Results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the full year.
In the second quarter of fiscal 1997, Kevco changed the method of accounting
for its inventories from the last-in, first-out method to the first-in, first-
out method. Financial results for all periods presented prior to the change
have been restated to effect the new method of accounting for inventories. The
selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- ------------------
1996 1995 1994 1993 1992 1997 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $267,344 $182,519 $99,279 $80,257 $61,169 $271,957 $205,048
Cost of sales........... 226,653 155,641 83,356 67,884 50,530 235,138 174,055
-------- -------- ------- ------- ------- -------- --------
Gross profit.......... 40,691 26,878 15,923 12,373 10,639 36,819 30,993
Commission income....... 5,497 2,610 1,066 1,274 1,234 4,413 4,100
-------- -------- ------- ------- ------- -------- --------
46,188 29,488 16,989 13,647 11,873 41,232 35,093
Selling, general and
administrative
expenses............... 29,723 20,889 11,941 10,550 9,491 28,738 22,590
-------- -------- ------- ------- ------- -------- --------
Operating income...... 16,465 8,599 5,048 3,097 2,382 12,494 12,503
Other income............ -- -- 800 -- -- -- --
Interest expense, net... (2,058) (1,337) (281) (342) (334) (2,354) (1,626)
-------- -------- ------- ------- ------- -------- --------
Income before income
taxes................ 14,407 7,262 5,567 2,755 2,048 10,140 10,877
Income taxes............ 1,695 45 51 -- -- 4,056 30
-------- -------- ------- ------- ------- -------- --------
Net income............ $ 12,712 $ 7,217 $ 5,516 $ 2,755 $ 2,048 $ 6,084 $ 10,847
======== ======== ======= ======= ======= ======== ========
OTHER DATA:
EBITDA(1)............... $ 18,257 $ 9,640 $ 5,447 $ 3,406 $ 2,645 $ 14,666 $ 13,821
Ratio of earnings to
fixed charges(2)....... 5.1x 3.8x 5.8x 4.0x 3.6x 3.7x 4.9x
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
--------------------------------------------- ------------------
1996 1995 1994 1993 1992 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 24,526 $ 19,744 $ 5,078 $ 4,363 $ 5,640 $ 35,127 $ 17,729
Total assets............ 55,739 55,669 18,067 15,365 12,007 114,578 61,772
Total debt.............. 9,831 31,263 6,385 5,547 1,815 45,849 25,428
Stockholders' equity.... 34,193 9,556 6,094 3,850 6,169 40,397 15,190
</TABLE>
- ---------------------
(1) EBITDA for any relevant period presented above is defined as net income
plus interest expense, income taxes, depreciation, amortization, and other
expenses less other income reflected in the determination of net income.
EBITDA should not be construed as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by
operating activities, which are determined in accordance with generally
accepted accounting principles. EBITDA is included because management
believes that certain readers may find it to be a useful tool for
analyzing operating performance, leverage, liquidity, and a company's
ability to service debt. See Kevco's Consolidated Financial Statements and
the Notes thereto included elsewhere in this Prospectus.
(2) Ratio of earnings to fixed charges is computed by dividing fixed charges
into income before income taxes and minority interests plus fixed charges.
Fixed charges consist of interest expense, amortization of financing costs
and the estimated interest component of rent expense.
34
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF SHELTER
The selected consolidated financial data for the five years ended December
31, 1996 are derived from Shelter's audited consolidated financial statements.
The financial data for the nine months ended September 30, 1996 and 1997 are
derived from Shelter's unaudited consolidated financial statements, which in
the opinion of management reflect all adjustments (consisting of only normal
recurring adjustments) necessary for a fair presentation of results for such
periods. Results for the nine months ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the full year.
The selected consolidated financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1996 1995 1994 1993 1992 1997 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales............... $521,022 $462,323 $333,104 $236,958 $193,627 $357,879 $397,065
Cost of goods sold...... 447,701 393,775 281,808 198,311 161,448 307,906 339,549
-------- -------- -------- -------- -------- -------- --------
Gross profit........... 73,321 68,548 51,296 38,647 32,179 49,973 57,516
Commission income....... 2,459 3,005 3,111 1,851 1,151 2,074 1,827
-------- -------- -------- -------- -------- -------- --------
75,780 71,553 54,407 40,498 33,330 52,047 59,343
Selling, general and
administrative
expenses............... 60,194 52,709 39,136 29,120 25,165 40,810 44,291
-------- -------- -------- -------- -------- -------- --------
Operating income....... 15,586 18,844 15,271 11,378 8,165 11,237 15,052
Other income (expense)
Interest income........ 177 142 38 80 47 755 102
Interest expense....... (1,831) (2,472) (1,035) (696) (1,212) (1,219) (1,398)
Gain on sale of
assets................ 5,919 -- -- -- -- 447 --
-------- -------- -------- -------- -------- -------- --------
Total other income
(expense)............ 4,265 (2,330) (997) (616) (1,165) (17) (1,296)
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes................ 19,851 16,514 14,274 10,762 7,000 11,220 13,756
Income taxes............ 8,153 6,476 5,577 4,200 2,780 4,320 5,365
-------- -------- -------- -------- -------- -------- --------
Net income............ $ 11,698 $ 10,038 $ 8,697 $ 6,562 $ 4,220 $ 6,900 $ 8,391
======== ======== ======== ======== ======== ======== ========
OTHER DATA:
EBITDA(1)............... $18,936 $21,741 $17,303 $ 12,818 $ 9,785 $ 13,691 $ 17,497
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
------------------------------------------------ ------------------
1996 1995 1994 1993 1992 1997 1996
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital......... $ 50,084 $ 41,729 $ 40,776 $ 22,998 $ 21,148 $ 48,089 $ 45,621
Total assets............ 120,910 107,414 87,332 61,917 47,647 132,854 126,321
Total debt.............. 24,543 26,328 23,634 13,442 9,782 20,215 20,651
Stockholders' equity.... 62,780 51,168 38,116 29,729 23,336 70,290 59,598
</TABLE>
- ---------------------
(1) EBITDA for any relevant period presented above is defined as net income
plus interest expense, income taxes, depreciation, amortization, and other
expenses less other income reflected in the determination of net income.
EBITDA should not be construed as a substitute for operating income, as an
indicator of liquidity or as a substitute for net cash provided by
operating activities, which are determined in accordance with generally
accepted accounting principles. EBITDA is included because management
believes that certain readers may find it to be a useful tool for
analyzing operating performance, leverage, liquidity, and a company's
ability to service debt. See Shelter's Consolidated Financial Statements
and the Notes thereto included elsewhere in this Prospectus.
35
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
From 1992 through 1996 Kevco experienced significant growth in earnings.
This growth was the result of internal expansion, including the opening of new
distribution centers, as well as the acquisition of distribution and
manufacturing facilities from Service Supply Systems, Inc. ("Service Supply")
in June 1995, for approximately $17.7 million in cash. In 1997, Kevco has
continued its expansion strategy through the acquisitions of Consolidated
Forest on February 27, 1997 and Bowen on February 28, 1997. The aggregate
purchase price for the Consolidated Forest and Bowen acquisitions was $33.5
million, including $31.0 million in cash. Through the Bowen and Consolidated
Forest acquisitions and the opening of one new distribution facility and one
new manufacturing facility, Kevco has increased the number of its distribution
and manufacturing facilities to 26 and five, respectively, from 21 and three
on December 31, 1996.
Shelter has experienced significant growth in sales and earnings from 1991
through 1996. This growth was the result of internal expansion, including
opening new distribution and manufacturing facilities and adding new product
lines. Shelter has also made several strategic acquisitions over this period
including acquisitions of Design Components, Inc., a wallboard laminating
company, in 1993; acquisitions of two distributors of products to the
manufactured housing and RV industries, TATCO, Inc. in 1994 and BABSCO, Inc.
("BABSCO") in 1995; and the June 1997 acquisition of PSI, a manufacturer of
injection molded plastic components. As a result, Shelter has increased the
number of its distribution and manufacturing facilities to 21 and nine,
respectively. In December 1996, Shelter sold the operations and certain assets
of its Danube subsidiary.
The Company's revenue and earnings growth are affected by changes in the
volume of industry-wide shipments of manufactured housing and RVs as well as
its ability to increase penetration of these markets. From 1992 through 1996,
manufactured housing shipments grew from approximately 211,000 to
approximately 363,400, a compound annual growth rate of 14.6%. Over the same
period, Kevco's sales grew from $61.2 million to $267.3 million, a compound
annual growth rate of 44.6%, and Shelter's sales grew from $193.6 million to
$521.0 million, a compound annual growth rate of 28.1%. The Company strives to
achieve revenue growth in excess of manufactured housing industry shipment
growth. The Company has been able to accomplish this growth by increasing its
product offerings, entering new markets, completing strategic acquisitions and
by developing strong customer relationships through its service-oriented
approach.
Management expects the consolidation of the two companies' operations to
result in substantial cost savings over time. The Company will seek to
capitalize on the significant common geographic presence of Kevco and Shelter
and shared customer relationships to obtain distribution and sales cost
reductions. In addition, the Company will seek to obtain greater utilization
of its existing corporate administrative resources to reduce the combined
overhead expense. The Company intends to eliminate redundant corporate
administrative functions and reduce warehousing and distribution staffs,
resulting in an estimated annual reduction in employee compensation of $5.3
million. The Company also intends to pursue opportunities to achieve greater
benefits over time through (i) the combination of multiple warehouse
facilities in single, larger facilities in certain markets, and (ii) achieving
economies of scale in purchasing materials and supplies as a larger combined
entity. There can be no assurances that the cost savings discussed here or
elsewhere will be realized or that there will not be significant delays in
achieving such cost savings.
The Company recognizes revenues from product sales at the time of shipment
(or the time of product receipt, in the case of direct shipments from
suppliers to customers). In some cases the Company sells on a commission
basis. Commissions are recognized when earned and represent amounts earned in
selling, warehousing and delivering products for certain manufacturers of
building products with which the Company has distribution agreements.
Commission arrangements do not require inventory investments or receivable
financing, and therefore are significantly less expensive to the Company than
traditional sales. To the extent the volume of items warehoused and shipped
under commission arrangements increases faster or slower than the volume of
items related to traditional sales, changes in net sales may not be
representative of actual shipment volume increases or decreases.
36
<PAGE>
RESULTS OF OPERATIONS
KEVCO
The following table sets forth, for the periods indicated, certain
Statements of Income data and that data as a percentage of Kevco's net sales.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEAR ENDED DECEMBER 31, 30,
------------------------------------------------ --------------------------------
1996 1995 1994 1997 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $267,344 100.0% $182,519 100.0% $99,279 100.0% $271,957 100.0% $205,048 100.0%
Cost of sales........... 226,653 84.8 155,641 85.3 83,356 84.0 235,138 86.5 174,055 84.9
-------- ----- -------- ----- ------- ----- -------- ----- -------- -----
Gross profit........... 40,691 15.2 26,878 14.7 15,923 16.0 36,819 13.5 30,993 15.1
Commission income....... 5,497 2.1 2,610 1.4 1,066 1.1 4,413 1.6 4,100 2.0
-------- ----- -------- ----- ------- ----- -------- ----- -------- -----
46,188 17.3 29,488 16.1 16,989 17.1 41,232 15.1 35,093 17.1
Selling, general and
administrative
expenses............... 29,723 11.1 20,889 11.4 11,941 12.0 28,738 10.5 22,590 11.0
-------- ----- -------- ----- ------- ----- -------- ----- -------- -----
Operating income........ 16,465 6.2 8,599 4.7 5,048 5.1 12,494 4.6 12,503 6.1
Other income............ -- 0.0 -- 0.0 800 0.8 -- 0.0 -- 0.0
Interest expense, net... (2,058) (0.8) (1,337) (0.7) (281) (0.3) (2,354) (0.9) (1,626) (0.8)
-------- ----- -------- ----- ------- ----- -------- ----- -------- -----
Income before income
taxes................. $ 14,407 5.4% $ 7,262 4.0% $ 5,567 5.6% $ 10,140 3.7% $ 10,877 5.3%
======== ===== ======== ===== ======= ===== ======== ===== ======== =====
</TABLE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net sales increased by $67.0 million, or 32.7%, to $272.0 million for the
nine month period ended September 30, 1997 from $205.0 million for the
comparable 1996 period. The net sales increase primarily resulted from the
effect of the Kevco Acquisitions in February 1997. However, net sales, without
the effect of the Kevco Acquisitions, decreased from $205.0 million to $196.6
million, a decrease of 4.1%, which is comparable to the reported manufacturing
housing shipment decline of 3.4% from January through August 1997, as compared
to the prior period. Sales to the manufactured housing industry represented
approximately 90% of net sales for the nine months ended September 30, 1997.
Gross profit increased by $5.8 million, or 18.7%, to $36.8 million for the
nine month period ended September 30, 1997 from $31.0 million for the
comparable 1996 period due primarily to the Kevco Acquisitions. Gross profit,
as a percent of net sales, decreased to 13.5% for the nine month period ended
September 30, 1997 from 15.1% for the comparable 1996 period. The decrease in
gross profit, as a percent of net sales, is a result of lower gross margins
associated with the Consolidated Acquisition and lower margin dollars earned
from wood products as a whole due to declining lumber prices throughout the
nine months ended September 30, 1997 (such wood products represent
approximately 38% of net sales). To a lesser extent, gross margins from non-
lumber related business decreased primarily as a result of temporary price
increases of a major product line.
Commission income increased by $0.3 million, or 7.3%, to $4.4 million for
the nine month period ended September 30, 1997 from $4.1 million for the
comparable 1996 period. The increase was primarily attributable to Kevco's
expansion in commission-based distribution arrangements.
Selling, general and administrative expenses increased by $6.1 million, or
27.0%, to $28.7 million for the nine month period ended September 30, 1997
from $22.6 million for the comparable 1996 period. The increase was primarily
due to increased sales volume related to the Kevco Acquisitions. Selling,
general and administrative expenses, as a percent of net sales, decreased to
10.5% for 1997 from 11.0% for the comparable 1996 period. The decrease
reflects Kevco's continued efforts in increasing efficiency.
Net income decreased by $0.6 million, or 9.0%, to $6.1 million for the nine
months ended September 30, 1997 from $6.7 million for the comparable 1996
period on a pro forma basis giving effect to Kevco's conversion from an S
corporation to a C corporation. The decrease in net income is primarily
attributable to lower gross margins as discussed above.
37
<PAGE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
Net sales increased by $84.8 million, or 46.5%, to $267.3 million in 1996
from $182.5 million in 1995. The increase in net sales was primarily
attributable to the inclusion of a full year of sales from the Service Supply
acquisition in 1996 compared to six months of sales from the Service Supply
acquisition in 1995. However, net sales, on a combined basis as if the
acquisition of Service Supply had occurred on January 1, 1995, increased from
$241.8 million in 1995 to $267.3 million in 1996, an increase of 10.5%. The
increase in net sales on such a combined basis primarily resulted from an
increase in the volume and variety of products sold. Management believes the
increase in the volume and variety of products sold was primarily the result
of the establishment of national plumbing products accounts with several
customers, sales of Kevco product lines to existing Service Supply customers
(as well as sales of Service Supply product lines to existing Kevco customers)
and improved customer demand. The increase in net sales, on such a combined
basis, was in excess of the 6.9% increase in reported manufactured home
shipments in 1996 compared to 1995 (approximately 363,400 homes reported
shipped in 1996 compared to approximately 340,000 homes reported shipped in
1995). Sales to the manufactured housing industry represented approximately
90% of Kevco's net sales in 1996.
Gross profit increased by $13.8 million, or 51.3%, to $40.7 million in 1996
from $26.9 million in 1995. This increase in gross profit was primarily
attributable to the inclusion of a full year of gross profit from the Service
Supply acquisition in 1996 compared to six months gross profit from the
Service Supply acquisition in 1995. Gross profit, on a combined basis as if
the acquisition of Service Supply had occurred on January 1, 1995, increased
from $34.0 million in 1995 to $40.6 million in 1996, an increase of 19.4%.
This increase in gross profit on such a combined basis resulted primarily from
an overall increase in the volume of net sales. Actual gross profit, as a
percent of actual net sales, increased to 15.2% in 1996 from 14.7% in 1995.
This increase was primarily the result of improving margins associated with
Service Supply's sales. Gross profit, as a percent of net sales, on a combined
basis as if the acquisition of Service Supply had occurred on January 1, 1995,
increased from 14.1% in 1995 to 15.2% in 1996. Management believes that both
the increase in actual gross profit, as a percent of net sales, and the
increase in gross profit, as a percent of net sales, on a combined basis are a
direct result of Kevco's ability to take advantage of purchasing opportunities
following the acquisition of Service Supply.
Commission income increased by $2.9 million, or 111.5%, to $5.5 million in
1996 from $2.6 million in 1995. Although a portion of the increase resulted
from the inclusion of a full year of commission income from the Service Supply
acquisition in 1996 compared to six months of commission income from the
Service Supply acquisition in 1995, the most significant factor in the
increase was that Kevco entered into commission-based distribution
arrangements with two manufacturers of component products.
Selling, general and administrative expenses increased by $8.8 million, or
42.1%, to $29.7 million in 1996 from $20.9 million in 1995. The increase was
primarily related to the inclusion of a full year of selling, general and
administrative expenses from the Service Supply acquisition in 1996 compared
to six months of selling, general and administrative expenses in 1995 and, to
a lesser extent, the increased expenses related to the overall net sales
increase. Selling, general and administrative expenses, as a percent of net
sales, decreased to 11.1% in 1996 from 11.4% in 1995, reflecting the reduction
of redundant overhead and warehousing costs associated with Service Supply
and, generally, Kevco's ability to increase sales without a proportionate
increase in related operating expenses.
Net income increased by $7.1 million, or 97.3%, to $14.4 million in 1996
from $7.3 million in 1995. The increase was primarily a result of the
inclusion of a full year of gross profit from the Service Supply acquisition
in 1996 compared to six months of gross profit from the Service Supply
acquisition in 1995, and the remainder of the increase was attributable to the
increase in net sales without a proportionate increase in operating expenses.
The increase in net income was net of additional interest expense incurred of
$0.5 million in 1996 related to the term loan associated with the acquisition
of Service Supply, outstanding for a full year period compared to six months
in 1995.
38
<PAGE>
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
Net sales increased by $83.2 million, or 83.8%, to $182.5 million in 1995
from $99.3 million in 1994. The increase in net sales was primarily
attributable to the inclusion of six months of sales from the Service Supply
facilities in 1995. However, net sales, on a combined basis as if the
acquisition of Service Supply had occurred on January 1, 1994, also increased
in 1995 to $241.8 million from $200.2 million in 1994, an increase of 20.8%.
The increase in net sales on such a combined basis primarily resulted from an
increase in the volume and variety of products sold. Management believes the
increase in the volume and variety of products sold was primarily the result
of the establishment of national plumbing products accounts with several
customers, sales of Kevco product lines to existing Service Supply customers
(as well as sales of Service Supply product lines to existing Kevco customers)
and improved customer demand. The increase in net sales, on such a combined
basis, was in excess of the 11.8% increase in reported manufactured home
shipments in 1995 compared to 1994 (approximately 340,000 homes reported
shipped in 1995 compared to approximately 304,000 homes reported shipped in
1994). Sales to the manufactured housing industry represented approximately
85% of Kevco's net sales in 1995.
Gross profit increased by $11.0 million, or 69.2%, to $26.9 million in 1995
from $15.9 million in 1994. This increase in gross profit was primarily
attributable to the inclusion of six months of gross profit from the Service
Supply facilities in 1995. Gross profit, on a combined basis as if the
acquisition of Service Supply had occurred on January 1, 1994, increased in
1995 to $34.0 million from $28.5 million in 1994, an increase of 19.3%. This
increase in gross profit on such a combined basis resulted primarily from an
overall increase in the volume of net sales. Actual gross profit, as a percent
of actual sales, decreased to 14.7% in 1995 from 16.0% in 1994. This decrease
was primarily the result of lower margins associated with Service Supply's
sales. Gross profit, as a percent of sales, on a combined basis as if the
acquisition of Service Supply had occurred on January 1, 1994, decreased to
14.1% in 1995 from 14.3% in 1994, a decrease which management believes was
primarily the result of competition from other suppliers attempting to
increase their market shares.
Commission income increased by $1.5 million, or 136.4%, to $2.6 million in
1995 from $1.1 million in 1994. A significant amount of the increase resulted
from the inclusion of six months of commission income from the Service Supply
facilities in 1995. An additional significant factor in this increase was the
increase in sales volume for which Kevco is compensated on a commission basis.
Selling, general and administrative expenses increased by $9.0 million, or
75.6%, to $20.9 million in 1995 from $11.9 million in 1994. The increase was
primarily related to the inclusion of six months of selling, general and
administrative expenses from the Service Supply facilities in 1995 and, to a
lesser extent, the increased expenses related to the overall net sales
increase. Selling, general and administrative expenses, as a percent of sales,
decreased to 11.4% in 1995 from 12.0% in 1994, reflecting the reduction of
redundant overhead and warehousing costs associated with Service Supply and,
generally, Kevco's ability to increase sales without a proportionate increase
in related operating expenses.
Net income increased by $1.7 million, or 30.4%, to $7.3 million in 1995 from
$5.6 million in 1994. Excluding insurance proceeds of $0.8 million recognized
as income in 1994 related to a former officer's disability, the increase in
net income from 1994 to 1995 would have been 59.1%. The increase was primarily
a result of the inclusion of six months of gross profit from the Service
Supply facilities in 1995, and the remainder of the increase was attributable
to the increase in net sales without a proportionate increase in operating
expenses. Also, the increase in net income was net of additional interest
expense incurred of $0.6 million in 1995 related to the term loan associated
with the acquisition of Service Supply.
RECENT OPERATING RESULTS
The Company believes that Kevco's net sales for the three months ending
December 31, 1997 are likely to be lower than its net sales for the three
months ended December 31, 1996 (on a pro forma basis after giving effect to
the Kevco Acquisitions), primarily as a result of reduced shipments of
manufactured housing units by Kevco's customers. Operating income is expected
to decrease for the three months ending December 31, 1997, as compared to the
three months ended December 31, 1996 (on a pro forma basis after giving effect
to the Kevco
39
<PAGE>
Acquisitions), primarily as a result of reduced margins on sales of wood
products, which as previously discussed, declined in the third quarter of 1997
due to a prolonged decrease in lumber prices during the period. While lumber
prices and wood margins have stabilized and improved slightly in October and
in the first part of November from the three months ended September 30, 1997,
Kevco's wood margins will most likely be below fourth quarter levels of 1996.
Operating income will also likely be reduced from the decline in industry
shipments.
SHELTER
SIGNIFICANT FACTORS
The 1995 and 1996 results include the acquired electrical distribution
operations of BABSCO, acquired on January 1, 1995. Pro forma information
regarding the 1994 results of this acquisition is reflected in Note 9 of the
Notes to Consolidated Financial Statements.
The results for the three years ended December 31, 1996 also include the
operations of Danube, Shelter's wholly-owned carpet manufacturing and yarn
processing subsidiary, the operations and certain assets of which were sold on
December 31, 1996. Historical financial information regarding Danube's results
of operations is reflected in Note 10 of the Notes to Consolidated Financial
Statements.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain
Statements of Income data and that data as a percentage of Shelter's net
sales.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------- --------------------------------
1996 1995 1994 1997 1996
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $521,022 100.0% $462,323 100.0% $333,104 100.0% $357,879 100.0% $397,065 100.0%
Cost of sales........... 447,701 85.9 393,775 85.2 281,808 84.6 307,906 86.0 339,549 85.5
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Gross profit........... 73,321 14.1 68,548 14.8 51,296 15.4 49,973 14.0 57,516 14.5
Commission income....... 2,459 0.5 3,005 0.7 3,111 0.9 2,074 0.5 1,827 0.4
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
75,780 14.6 71,553 15.5 54,407 16.3 52,047 14.5 59,343 14.9
Selling, general and
administrative
expenses............... 60,194 11.6 52,709 11.4 39,136 11.7 40,810 11.4 44,291 11.1
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Operating income........ 15,586 3.0 18,844 4.1 15,271 4.6 11,237 3.1 15,052 3.8
Interest expense, net... (1,654) (0.3) (2,330) (0.5) (997) (0.3) (464) (0.1) (1,296) (0.3)
Gain on sale of assets.. 5,919 1.1 -- -- -- -- 447 0.1 -- --
-------- ----- -------- ----- -------- ----- -------- ----- -------- -----
Income before income
taxes................. $ 19,851 3.8% $ 16,514 3.6% $ 14,274 4.3% $ 11,220 3.1% $ 13,756 3.5%
======== ===== ======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Net sales decreased by $39.2 million, or 9.9%, to $357.9 million for the
nine month period ended September 30, 1997 from $397.1 million for the
comparable 1996 period. On a comparable operations basis (excluding Danube
from 1996) net sales increased by $18.8 million, or 5.5%. Shelter's
distribution sales increased by 7.1% while (comparable operations)
manufacturing sales declined by 2.4%. Shelter increased its market share in
electrical, plumbing and doors distributed during the period to overcome the
3.4% decline in manufactured homes shipped through August 1997 compared to the
same period in 1996.
Gross profit decreased $7.5 million, or 13.0%, to $50.0 million for the nine
month period ended September 30, 1997 from $57.5 million for the comparable
1996 period. Gross profit margin for the nine month period ended September 30,
1997 was 14.0% compared to 14.5% for the first nine months of 1996. Excluding
Danube, gross profit margin was 13.8% for the first nine months of 1996.
Shelter experienced higher gross margin as certain lower manufacturing raw
material costs contributed to the improvements. Shelter has also begun to
realize some of the labor and overhead efficiencies anticipated in recent
investments in new equipment at certain
40
<PAGE>
manufacturing operations. Improvements in manufacturing gross margin were
partially offset by an increase in lower margin distribution sales as a
percentage of total sales.
Operating expenses decreased $3.5 million, or 7.9%, to $40.8 million for the
nine month period ended September 30, 1997 from $44.3 million for the
comparable 1996 period. As a percent of net sales, operating expenses
increased to 11.4% for the nine month period ended September 30, 1997 from
11.1% for the comparable 1996 period. Pro forma operating expenses were 10.8%
of net sales for the first nine months of 1996. The increase in this
percentage reflects higher self-insured medical claims in 1997 as well as the
absorption of fixed administrative overhead costs by the remaining operations
subsequent to the December 1996 sale of Danube's operations and the
amortization of goodwill from the June 1997 purchase of the net assets and
operations of PSI.
Interest income increased $0.7 million to $0.8 million for the nine month
period ended September 30, 1997 from $0.1 million for the comparable 1996
period, due to the income earned on funds available from the December 1996
sale of Danube's operations.
Interest expense decreased by $0.2 million, or 14.3%, to $1.2 million for
the nine month period ended September 30, 1997 from $1.4 million for the
comparable 1996 period, due to the elimination of short-term borrowing
requirements using funds available from the December 1996 sale of Danube's
operations, coupled with scheduled principal reductions in long-term debt.
1997 interest expense includes charges accrued for the $3.5 million notes
issued in connection with the June 1997 purchase of the net assets and
operations of PSI.
Income taxes as a percentage of income before income taxes decreased to
38.5% for the nine month period ended September 30, 1997 from 39.0% for the
comparable 1996 period, due to strategies implemented by Shelter to reduce its
overall state and local tax burdens.
Net income decreased $1.5 million, or 17.9%, to $6.9 million for the nine
month period ended September 30, 1997 from $8.4 million for the comparable
1996 period. As a percent of net sales, net income decreased to 1.9% for the
nine month period ended September 30, 1997 from 2.1% for the comparable 1996
period. Pro forma net income was 1.9% of pro forma net sales for the first
nine months of 1996. The 1997 results include gains on the sale of certain
excess real estate totaling $0.4 million (pre-tax) which had a 0.1% favorable
impact on net income as a percentage of net sales.
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND 1995
Net sales increased by $58.7 million, or 12.7%, to $521.0 million in 1996
from $462.3 million in 1995. Sales to the manufactured housing industry
represented approximately 75% of consolidated net sales in 1996. The
manufactured housing industry recorded a 6.9% increase in homes shipped in
1996 (363,400 homes) compared to 1995 (340,000 homes). With the exception of
carpeting, Shelter improved its market share in all major product categories
during 1996 to account for the total sales increase in excess of increased
industry demand. During the year, Shelter was particularly successful at
improving its market share in electrical products, stemming from the January
1, 1995 acquisition of BABSCO. Shelter's sales also benefitted from new
regional distribution operations added in 1995 in Arizona, Minnesota, and
Pennsylvania, where Shelter has established its presence. Management estimates
that less than 2% of the sales increase during 1996 compared with 1995 was due
to selling price increases.
Gross profit increased by $4.8 million, or 7.0%, to $73.3 million in 1996
from $68.5 million in 1995. Gross profit margin decreased from 14.8% in 1995
to 14.1% in 1996. Of the 0.7% decrease in gross profit margin as a percentage
of net sales, 0.6% relates to Shelter's carpet manufacturing operations and
0.1% is attributed to the remaining operations. During 1996, the finishing
operation of the carpet mill reached production levels in excess of "efficient
capacity" and required a percentage of the finishing to be outsourced at a
cost considerably higher than the internal cost of this process. It was
discovered that the inventory costing system did not adequately recognize
these higher costs and a negative year-end adjustment was necessary, adversely
impacting Shelter's consolidated results for the fourth quarter of 1996.
41
<PAGE>
In addition to the decreased margins from the carpet manufacturing
operations, Shelter experienced a reduction in gross profit margins at its
Design Components laminating operations. This reduction was due to strong
competition in the marketplace combined with increases in the cost of gypsum
during 1996. Shelter's distribution operations experienced a modest decline in
gross margins primarily due to an increase in lower margin "direct ship"
business (for truckload quantities) as a percentage of all distributed product
sales.
Commission income is earned by Shelter's distribution operations from
selling, warehousing and delivery services to certain product manufacturers.
Commission income decreased by $0.5 million, or 16.7%, from $3.0 million in
1995 to $2.5 million in 1996 primarily due to a decrease in the commission
rate received for warehousing and delivery of wood molding products and a
change to a buy-sell arrangement on certain plumbing products.
Selling, general and administrative expenses increased $7.5 million, or
14.2%, to $60.2 million in 1996 from $52.7 million in 1995. As a percent of
net sales, selling, general and administrative expenses increased to 11.6% in
1996 from 11.4% in 1995. Management has begun to implement strategies to
reduce its selling, general, and administrative expenses as a percentage of
net sales including efforts to eliminate duplicate costs as well as reviewing
staffing levels and incentive systems.
Interest expense decreased $0.7 million, or 28.0%, from $2.5 million in 1995
to $1.8 million in 1996, due to strong cash flows during 1996 which resulted
in a reduction in average borrowings outstanding on Shelter's $25 million bank
revolving line of credit during the year. Shelter increased its average
accounts payable balance with certain vendors by negotiating more favorable
payment terms, thus reducing the need for bank borrowings. In addition,
Shelter negotiated lower market-based rates on its bank revolver.
Income taxes increased $1.7 million, or 26.2%, to $8.2 million in 1996 from
$6.5 million in 1995. Income taxes as a percentage of income before income
taxes, increased from 39.2% in 1995 to 41.1% in 1996. The increase in the
effective rate in 1996 is due to the write-off of $800,000 of non-deductible
goodwill in connection with the sale of the carpet and yarn operations.
Net income increased $1.7 million, or 17.0%, to $11.7 million in 1996 from
$10.0 million in 1995. The 1996 results include a $3.2 million (after-tax)
gain on the sale of the carpet manufacturing and yarn processing operations.
Net income for 1996, exclusive of this gain, was 1.6% of net sales. Net
income, as a percent of net sales, exclusive of both the carpet and yarn
operations and the gain on the sale thereof, decreased from 1.9% in 1995 to
1.8% in 1996. The reduction in this percentage, exclusive of the gain on the
sale of the carpet operations, is primarily due to poor performance
experienced in Shelter's carpet manufacturing operations in 1996, and other
factors as discussed above.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
Net sales increased by $129.2 million, or 38.8%, to $462.3 million in 1995
from $333.1 million in 1994. The increase consisted of 18% attributable to the
acquired electrical distribution operations of BABSCO and 21% by the other
operating units of Shelter. The 21% increase in comparable sales compared
favorably with the 12% increase in manufactured homes shipped in 1995 compared
to 1994, which reported 340,000 homes shipped in 1995 compared to 304,000
homes shipped in 1994. Sales to the manufactured housing industry represented
approximately 75% of Shelter's net sales in 1995. Shelter improved its market
share in 1995, particularly in decorative wallboard (produced by Design
Components) and in Shelter's building products distribution operations, as
sales in new territories continued to grow.
Management estimates that less than 3% of the sales increase during 1995
compared with 1994, was due to selling price increases.
Gross profit increased $17.2 million, or 33.5%, to $68.5 million in 1995
from $51.3 million in 1994. Gross profit margin decreased from 15.4% in 1994
to 14.8% in 1995. The reduction of gross profit margin in 1995 reflects the
increased sales of lower margin laminated decorative wallboard and other
building products at a faster growth rate than certain of Shelter's other
products. Also, the increased demand for truckload quantities of product on a
"direct ship" basis had a slightly adverse impact on overall gross margin.
42
<PAGE>
Commission income decreased $0.1 million, or 3.2%, from $3.1 million in 1994
to $3.0 million in 1995 primarily due to a decrease in the commission rate on
certain products distributed by Shelter for unaffiliated manufacturers.
Selling, general and administrative expenses increased $13.6 million, or
34.8%, to $52.7 million in 1995 from $39.1 million in 1994. As a percent of
sales, selling, general and administrative expenses decreased from 11.7% in
1994 to 11.4% in 1995. The reduction in this percentage reflected Shelter's
capacity to increase sales without a proportionate increase in fixed costs.
Interest expense increased $1.5 million, or 150.0%, to $2.5 million in 1995
from $1.0 million in 1994 due to the debt incurred and assumed in connection
with the January 1995 acquisition of the operations and net assets of BABSCO.
The increase also reflected higher prevailing short-term borrowing rates on
working capital debt outstanding during 1995 as compared to short-term
borrowing rates in 1994.
Income taxes as a percentage of income before income taxes were 39% for 1995
and 1994.
Net income increased $1.3 million, or 14.9%, to $10.0 million in 1995 from
$8.7 million in 1994. As a percent of net sales, net income decreased from
2.6% for 1994 to 2.2% for 1995, respectively. The primary cause of the decline
in this percentage was the acquisition of BABSCO in 1995. BABSCO accounted for
13% of 1995 net sales and less than 2% of net income. The addition of these
operations had a 0.3% adverse effect on 1995 net income as a percentage of net
sales. The remaining decline of 0.1% was a result of the decline in gross
margins as a percentage of net sales, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Kevco's growth has been financed through cash flow from
operations, borrowings under its bank credit facilities, proceeds from the
November 1996 initial public offering and the expansion of trade credit. Net
cash provided by operating activities was $12.2 million, $8.4 million and $3.1
million in 1996, 1995 and 1994, respectively. Kevco's capital expenditures
were $1.6 million, $2.8 million and $0.4 million in 1996, 1995 and 1994,
respectively. For the nine months ended September 30, 1997, cash flow from
operations and capital expenditures were $6.2 million and $2.0 million,
respectively. In November 1996, Kevco raised approximately $26.0 million
through its initial public offering, a portion of the proceeds of which were
used to repay all of its then outstanding debt. Kevco is also obligated to
make payments on various capital leases in varying amounts, maturing through
2007. Additionally, Kevco is obligated to make payments under non-compete and
consulting agreements, related to the Service Supply acquisition, in varying
amounts, maturing through 1999. See Notes 4 and 6 to Kevco's Consolidated
Financial Statements.
Shelter has historically funded its growth through cash flow from
operations, borrowings under various credit facilities and the December 1996
sale of the operations and certain assets of its Danube subsidiary. Net cash
provided (used) by operating activities was $15.0 million, $11.9 million and
($6.8) million in 1996, 1995 and 1994, respectively. Shelter's capital
expenditures were $8.4 million, $2.8 million and $2.1 million in 1996, 1995
and 1994, respectively. For the nine months ended September 30, 1997, cash
flow from operations and capital expenditures were $7.4 million and $6.2
million, respectively. In 1996, Shelter generated $16.4 million in proceeds
from the sale of the operations and net assets of Danube (net of expenses paid
in 1996 in connection with the divestiture).
As a result of the Transactions, the Company has a substantial amount of
indebtedness. As of September 30, 1997, after giving pro forma effect to the
Transactions, the Company had consolidated debt of $203.1 million consisting
of: (i) $1.4 million in capital lease obligations; (ii) $3.5 million of long-
term notes payable; (iii) $3.2 million outstanding under the Revolving Credit
Facility; (iv) $90.0 million under the Term Loan Facility; and (v) $105.0
million of the Notes. See "Capitalization" and "The Transactions."
In addition, the Indenture contains certain covenants, including, but not
limited to, covenants prohibiting or limiting: (i) the incurrence by the
Company and its Restricted Subsidiaries (as defined in the Indenture) of
additional Indebtedness (as defined in the Indenture); (ii) the payment of
dividends or the making of other
43
<PAGE>
restricted payments by the Company; (iii) the creation of liens by the Company
and its Restricted Subsidiaries; (iv) the creation or existence of
restrictions on the ability of Restricted Subsidiaries to pay dividends or
make other payments to the Company; (v) transactions by the Company and its
Restricted Subsidiaries with affiliates; (vi) certain sales of assets by the
Company and its Restricted Subsidiaries; (vii) the ability of the Company and
the Restricted Subsidiaries to engage in certain lines of business; and (viii)
the Company's ability to consolidate or merge with or into, or transfer all or
substantially all of its assets to, another person.
The Company's primary capital requirements following completion of the
Transactions are for working capital, capital expenditures and payments of
interest expense. The Company expects combined capital expenditures before any
acquisitions of approximately $9.0 million in 1997 and ranging from $8.5
million to $9.5 million in 1998.
On December 1, 1997, Kevco entered into an amended and restated $125.0
million credit facility (the "Senior Credit Facility"), with NationsBank of
Texas, N.A. as lender and administrative agent and certain other banks
consisting of a $90.0 million term loan and a $35.0 million revolving credit
facility. See "Description of Senior Credit Facility."
The Company intends to increase the number of its manufacturing, and to a
lesser extent, distribution facilities, primarily through acquisitions.
Management believes there are currently a number of acquisition opportunities
in the manufactured housing and RV industries, and from time to time
additional opportunities will arise. On December 12, 1997, the Company
acquired the inventory and certain distribution rights of certain building
products distributed by the Manufactured Housing and Recreational Vehicle
division of Shepherd Products Company for a cash purchase price payable at
closing of $5.9 million, with an additional $2.0 million payable over a five-
year period following the acquisition.
The Company believes that cash flow from operations, plus, if necessary,
additional borrowings under the Senior Credit Facility, will be sufficient to
meet its capital and operating needs and debt service requirements through the
end of 1998.
ASSET MANAGEMENT
The Company actively manages its assets and liabilities. All corporate and
profit center managers participate in an incentive-based compensation plan
that measures the individual's effectiveness in net asset control and return
on net assets employed. Managers are rewarded for receivables collection,
inventory control and profits in relation to these and other net assets
employed.
For Kevco as of December 31, 1996, days sales in average receivables was
approximately 22 days, days sales in average inventory was approximately 33
days and days sales in average payables was approximately 27 days. For Shelter
as of December 31, 1996, days sales in average receivables was approximately
17 days, days sales in average inventory was approximately 37 days and days
sales in average payables was approximately 19 days.
INFLATION
Generally, inflation and changing prices have had a minimal impact on the
Company's operating results, as increases in the sales prices of products have
closely followed increases in materials costs.
SEASONALITY
The business and results of the Company are seasonal. Historically,
manufactured housing shipments have been strongest in the spring and summer
and weaker in the winter as a result of the impact of adverse weather on
retail sales of manufactured homes. Accordingly, the Company usually
experiences higher levels of revenue in the second and third fiscal quarters
and relatively lower levels of revenue in the first and fourth fiscal
quarters.
44
<PAGE>
QUARTERLY RESULTS
The following table represents certain unaudited historical financial
information for the quarters indicated and does not include pro forma
adjustments.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------------------------- --------------------------
1ST 2ND 3RD 4TH 1ST 2ND 3RD
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER
(DOLLARS IN THOUSANDS)
KEVCO
- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Sales............. $ 64,234 $ 71,364 $ 69,449 $ 62,297 $ 72,099 $101,305 $ 98,553
Gross profit.......... 9,488 10,853 10,652 9,698 10,123 13,871 12,825
Operating income...... 3,552 4,521 4,434 3,958 3,721 5,402 3,371
EBITDA................ 4,019 4,957 4,849 4,432 4,301 6,208 4,157
SHELTER
- -------
Net Sales............. $119,796 $137,958 $139,311 $123,957 $106,532 $122,801 $128,546
Gross profit.......... 17,516 19,681 20,319 15,805 15,281 16,889 17,803
Operating income...... 4,182 5,140 5,730 534 2,801 4,201 4,235
EBITDA................ 4,914 5,913 6,670 1,439 3,512 4,987 5,192
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"). SFAS 128 simplifies the standards for computing earnings per share
("EPS") previously found in APB Opinion No. 15, Earnings Per Share
("Opinion 15"), and makes them comparable to international EPS standards. SFAS
128 is effective for financial statements issued for periods ending after
December 15, 1997, including interim periods; earlier application is not
permitted. SFAS 128 requires restatement of all prior-period EPS data
presented. The Company is currently evaluating SFAS 128. However, management
does not believe that it will have a material impact on the consolidated
financial statements of the Company.
In February 1997, The FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS
No. 129"). SFAS No. 129 establishes standards for disclosing information about
an entity's capital structure and applies to all entities. This statement is
effective for financial statements for periods ending after December 15, 1997.
It is not expected that the Company will experience any material revision in
its disclosures when SFAS No. 129 is adopted.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. This statement is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. This
statement has no impact on the financial condition or results of operations of
the Company, but may require changes to the Company's disclosure requirements.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS No. 131"). SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. This statement is effective for fiscal years beginning after
December 15, 1997. This statement has no impact on the financial condition or
results of operations of the Company, but may require changes in the Company's
disclosure requirements.
45
<PAGE>
BUSINESS
THE COMPANY
The Company believes it is the largest wholesale distributor of building
products to the United States manufactured housing industry. Through its 47
distribution centers, the Company provides national distribution of more than
75,000 items to approximately 530 manufactured housing (79% of 1996 net sales)
and recreational vehicle ("RV") and other manufacturing facilities (21% of
1996 net sales) throughout the United States. In addition to its distribution
activities, the Company manufactures wood products, laminated wallboard and
thermoformed bathtubs and shower enclosures for the manufactured housing
industry. The Company believes that the combination of Kevco and Shelter
results in substantial operating synergies due to their complementary product
lines, overlapping marketing functions and national distribution networks, and
significant economies of scale. During the latest twelve months ended
September 30, 1997, the Company's pro forma net sales and EBITDA were $855.2
million and $45.7 million, respectively.
The manufactured housing industry has experienced significant growth over
the last several years. Since 1992, the number of manufactured home shipments
has experienced a compound annual growth rate of approximately 14.6%, growing
from 210,787 homes shipped in 1992 to 363,411 homes shipped in 1996, which
resulted in approximately $14 billion in retail sales in 1996. As a result of
this growth, manufactured housing has outpaced traditional site-built housing
growth, and increased as a percentage of total new single family houses sold,
growing from 25.7% in 1992 to 32.4% in 1996. The Company believes that demand
for manufactured housing has grown and will continue to grow due to: (i) the
increased quality of manufactured homes and the accompanying widespread
consumer acceptance of manufactured homes; (ii) steady employment and economic
growth in key regions; (iii) greater availability of mortgage financing for
manufactured homes; and (iv) continued substantial price advantages of
manufactured homes compared to site-built homes.
Suppliers and customers have been increasingly relying on distributors in an
attempt to focus on their core businesses and improve inventory management.
Larger, national distributors, like the Company, have benefited from trends in
(i) suppliers and customers reducing the number of distributors they use to
increase operating efficiencies and reduce costs; (ii) suppliers and
manufacturers selecting distributors that are able to serve their needs
through national distribution networks; and (iii) manufacturers requiring
distributors to carry more comprehensive product lines. In addition, the
Company believes it leads the industry in providing value-added services to
its customers, including inventory management, product support and training,
and implementation of cost saving measures, all of which are services the
Company believes its suppliers cannot directly provide manufacturers in a
cost-effective manner.
Since its founding in 1964 by Jerry E. Kimmel, the Company's majority
shareholder, Chairman, Chief Executive Officer and President, the Company has
experienced substantial growth. In addition to positive manufactured housing
industry trends which favor larger distributors, the Company has primarily
grown through: (i) completing eight complementary acquisitions since the
beginning of 1993; (ii) adding distribution and manufacturing facilities to
serve new markets; and (iii) increasing sales to existing customers by
distributing additional product lines. As a result, the Company has increased
net sales at a compound annual growth rate of 35.4% since 1992, from $254.8
million on a historical combined basis in 1992 to $855.7 million on a pro
forma combined basis in 1996. During the same time period, EBITDA grew at a
compound annual growth rate of 42.3% from $12.4 million on a historical
combined basis in 1992 to $51.2 million on a pro forma combined basis in 1996.
SHELTER ACQUISITION BENEFITS
The Company expects the following strategic and operating benefits as a
result of the Shelter Acquisition:
. INDUSTRY LEADERSHIP. The Company believes that the Shelter Acquisition
improves its competitive position by making it the largest wholesale
distributor of building products to the United States manufactured
housing industry, based on total sales. The Company expects to benefit
from its
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improved competitive position by: (i) better serving its customers
through its enhanced national distribution network; (ii) serving as the
exclusive distributor for certain of its suppliers that are seeking to
consolidate distributors of their products to the manufactured housing
and RV industries; and (iii) continuing to be a leader in the
consolidation of the industry.
. ACQUISITION OF COMPLEMENTARY PRODUCT LINES. While Shelter and Kevco
served a similar customer base, each company primarily distributed and
manufactured product lines with little overlap. Kevco had significant
market share in plumbing fixtures and supplies and wood products,
including wood trusses and cut lumber. Shelter had significant market
share in electrical products, exterior building products, laminated
wallboards, thermoformed products and hardware.
. SUBSTANTIAL COST REDUCTION OPPORTUNITIES. The Company believes the
Shelter Acquisition affords it substantial opportunities to eliminate
certain administrative and corporate positions and expenses. In
addition, the Company believes that it will be able to reduce selling
expense by consolidating its sales operations as both Kevco and Shelter
maintain active relationships with approximately 90% of all manufactured
housing production facilities. As the largest wholesale distributor in
the industry, the Company believes that it will be able to obtain
economies of scale through its increased purchasing volume. The Company
believes it will be able to increase the volume of purchases by
consolidating its purchases from suppliers where it has overlapping
product lines and by increasing sales from cross-selling its product
lines.
. RATIONALIZATION OF NATIONAL DISTRIBUTION NETWORKS. The Company believes
that it will be able to reduce operating costs by consolidating
distribution facilities and reducing overhead at such facilities.
Substantially all of Kevco's and Shelter's distribution facilities serve
the same geographic regions. On a pro forma combined basis, 45 of the
Company's 47 total distribution facilities serve overlapping markets
providing the Company significant opportunities to realize distribution
efficiencies over time.
BUSINESS STRATEGY
The Company's primary objective is to maintain and strengthen its position
as the leading national distributor of building products to the manufactured
housing and RV industries. The Company intends to continue to pursue this
objective through internal growth and opportunistic acquisitions. To achieve
its objective, the Company has adopted a strategy based on the following key
elements:
. PROVIDE SUPERIOR CUSTOMER SERVICE. The Company believes that its
emphasis on customer service differentiates it from other distributors
and fosters long-term relationships with its customers. The Company is
committed to a Total Quality Management program to serve its customers'
needs and to work in partnership with its suppliers and customers to
improve their operations. The Company seeks to be an integral part of
its customers' inventory management activities and manufacturing
process. The Company has received several industry awards in recognition
of its high level of customer service.
. LEVERAGE NATIONAL DISTRIBUTION NETWORK. The Company will continue to use
its national distribution network as a platform for growth and
profitability. The Company believes that its national presence provides
it with a significant competitive advantage due to its ability to
service the nationwide needs of its customers' manufacturing facilities.
The Company believes that its national distribution network has allowed
it to develop close relationships with its product suppliers and to
become the exclusive supplier of certain product lines.
. INCREASE CUSTOMER PENETRATION AND PRODUCT OFFERINGS. The Company
supplies over 90% of all manufactured housing plants in the United
States with one or more product lines. This established customer base
provides the Company with a significant opportunity to supply a greater
portion of its customers' building products needs as the customers seek
to reduce the number of their suppliers. The Company also intends to add
new product lines through internal growth and opportunistic
acquisitions. With its existing national distribution infrastructure,
the Company believes that additional product lines can be offered to
existing customers, thereby increasing net sales without adding
significant costs.
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. EXPAND MANUFACTURING CAPABILITIES. The Company intends to expand its
manufacturing capabilities through internal growth and opportunistic
vertical acquisitions. By manufacturing certain of its own products, the
Company believes it can achieve greater profitability from its sales,
while obtaining direct control over product availability and quality.
The Company currently operates five wood products manufacturing
facilities and plans to expand to new markets, including opening new
manufacturing facilities in Arizona and North Carolina by the second
quarter of 1998. Through the Shelter Acquisition, the Company obtained
additional manufacturing platforms, including plastic thermoforming,
injection molding and laminated wallboard operations. The Company
believes that there are significant opportunities to grow its
manufacturing business through additional acquisitions and new
facilities.
. PURSUE OPPORTUNISTIC ACQUISITIONS. The Company intends to selectively
explore the acquisition of other distributors and manufacturers of
building products. The Company seeks to acquire distributors, that offer
complementary product lines to extend its existing offerings and realize
significant operating synergies.
GENERAL
On November 6, 1996, Kevco consummated its initial public offering of
2,100,000 shares (and an additional 315,000 shares in connection with the
exercise of the underwriter over-allotment option on December 3, 1996) of the
common stock, par value $.01 per share.
Jerry E. Kimmel, the Company's Chairman of the Board, Chief Executive
Officer and President, has over 35 years of experience in the industry. The
other members of Kevco's senior management have an average of more than 10
years of experience in the industry.
The Company's principal executive offices are located at University Centre
I, 1300 S. University Drive, Suite 200, Fort Worth, Texas 76107. The Company's
telephone number is (817) 332-2758.
RECENT ACQUISITIONS
On February 27, 1997, Kevco consummated the acquisition of substantially all
of the assets, and assumed certain liabilities, of Consolidated Forest (a
manufacturer of wood products for the manufactured housing industry) in
exchange for approximately $13.0 million in cash and two promissory notes in
the aggregate original principal amount of approximately $1.0 million. On
February 28, 1997, Kevco consummated the acquisition of all of the outstanding
stock of Bowen (a wholesale distributor of building products to the
manufactured housing and RV industries) in exchange for approximately $18.0
million in cash and three promissory notes in the aggregate original principal
amount of $2.5 million. On June 27, 1997, Shelter consummated the acquisition
of the net assets of PSI, a manufacturer of injection molded plastic parts,
for approximately $0.9 million in cash and $3.5 million in convertible notes
payable to the sellers. On December 1, 1997, Kevco consummated the acquisition
of approximately 95.5% of the then issued and outstanding shares of Shelter
Common Stock pursuant to the Tender Offer. Kevco acquired the remaining
outstanding shares of Shelter Common Stock by merger on January 16, 1998. On
December 12, 1997, the Company consummated the acquisition of the inventory
and certain distribution rights of certain building products distributed by
the Manufactured Housing and Recreational Vehicle division of Shepherd
Products Company for a cash purchase price payable at closing of $5.9 million,
with an additional $2.0 million payable over a five year period following the
acquisition.
INDUSTRY
For the year ended December 31, 1996, approximately 79% of the Company's net
sales were to producers of manufactured homes. A manufactured home is a
complete single-family residence that is built in a factory and transported to
a site. Manufactured homes offer most of the amenities of, and are generally
built with the same materials as, site-built homes. Unless otherwise noted,
statistics in this Prospectus were obtained from the Manufactured Housing
Institute ("MHI") and Recreational Vehicle Industry Association ("RVIA"). MHI
and RVIA compile data from the U.S. Department of Commerce, Bureau of the
Census, National Conference of States, Building Codes and Standards, and other
industry sources.
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Manufactured housing has historically served as one of the most affordable
alternatives for the home buyer. In 1996, the average cost per square foot was
$25.18 for a single-section manufactured home and $29.56 for a multi-section
manufactured home, as compared to an average cost of $58.66 per square foot
for a site-built home, each excluding land costs. In 1996, reported retail
sales of new manufactured homes totaled approximately $14.0 billion.
Approximately 363,400 manufactured homes were reported as shipped in 1996
(which represents approximately 32.4% of all new single family homes sold in
1996). Reported shipments of new manufactured homes experienced compound
annual growth of approximately 14.6% for the four years ended December 31,
1996.
The Company believes steady employment growth, reduced inventories of
repossessed homes, greater availability of retail financing for the home buyer
and enhanced quality of manufactured homes have contributed to improved
industry conditions. Although the manufactured housing industry has
experienced significant growth over the past five years, the industry is
cyclical and is affected by many of the same factors that influence the
housing industry generally, including inflation, interest rates, availability
of financing, regional economic and demographic conditions and consumer
confidence levels, as well as the affordability and availability of
alternative housing, such as apartments, condominiums and conventional, site-
built homes.
The ten highest volume producers of manufactured homes in 1996 reportedly
accounted for approximately 71% of total manufactured home shipments in that
year. Management believes that only a few distributors are capable of
distributing a broad line of building products to meet the needs of these
manufacturers on a national basis.
For the year ended December 31, 1996, approximately 21% of the Company's net
sales were to producers of RVs and to other industries. RVs are motorized and
non-motorized vehicles that provide comfortable, self-contained living
facilities for short periods of time, but are not generally designed for
permanent living. RV shipments to retailers reportedly totaled approximately
$12.4 billion (at retail) in 1996. Although reported RV shipments declined
approximately 1.8% in 1996, the RV industry has experienced compound annual
growth in reported shipments of approximately 9.7% since 1992. Historically,
demand for RVs has been influenced by a number of factors, including the
availability and terms of financing to dealers and retail purchasers, the
abundance of motor vehicle fuels and fuel prices, as well as general economic
conditions.
The Company believes that the acquisition of Shelter enables the Company:
(i) to better serve its customers by supplying a more expansive product line
as Kevco's and Shelter's products have minimal overlap; (ii) to expand upon
Shelter's customer relationships through the application of Kevco's dedication
to Total Quality Management; (iii) to capitalize through the contacts of the
combined sales force on cross selling opportunities within the combined
product line; (iv) to further its goal of selective vertical integration
through the addition of manufacturing platforms in thermoforming bathtubs,
shower enclosures and tub wall surrounds for manufactured homes and RVs as
well as in laminated wall shelving systems for the retail home improvement
industry and (v) to realize economies of scale through centralized
distribution efficiencies and increased volume of purchases.
SUPPLIER AND CUSTOMER RELATIONSHIPS
The Company acts with its suppliers and customers to provide value-added
services in the distribution of manufactured home and RV building products by
managing inventories, providing product support and training, introducing cost
saving measures and providing a marketing and distribution network with
warehousing capabilities. The Company believes that the specialized product
knowledge and high level of service provided by the Company results in strong
ties between the Company and its customers and suppliers.
. INVENTORY MANAGEMENT. The Company's customers generally attempt to
minimize inventories and maximize the use of their facilities for the
assembly of manufactured homes and RVs. For this reason, the Company
actively manages customers' inventories of products supplied by the
Company. The Company's sales representatives generally visit customers'
plants weekly to count inventories, review production schedules, prepare
purchase orders and schedule deliveries in order to achieve the
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Company's goal of being a just-in-time supplier. In addition, because of
their detailed awareness of existing building codes for manufactured
homes and RVs, the Company's sales representatives are able to assist
customers in planning for, and maintaining product inventories in
accordance with, building code changes.
. PRODUCT SUPPORT AND TRAINING. At their weekly visits, sales
representatives also take the opportunity to resolve product problems
and train customer employees in the proper installation of products. The
Company has found that its willingness and availability to solve product
problems has resulted in its customers first turning to Company
representatives, rather than the Company's suppliers, when they have
problems with or questions about products. This benefits both the
Company's customers and suppliers in that the Company provides customer
support that the supplier might otherwise have to provide in order to
achieve the same level of customer satisfaction, and the Company's
customers receive support from individuals with expertise in serving the
manufactured housing and RV industries. The Company has also found that
its customers benefit from the training given by sales representatives
in the proper installation of products, since the Company's sales
representatives generally have significant expertise in the installation
and service of the products they sell. Sales representatives also take
the opportunity during their weekly visits to promote other Company
products, thus educating customers as to additional products the
customers can purchase from the Company and receive similar product
support.
. COST SAVING MEASURES. The Company's sales force also works with the
Company's customers and suppliers in suggesting and implementing cost
saving measures. The Company actively works to find ways for producers
of manufactured homes or RVs to reduce the number of stock-keeping units
("SKUs") they use in production in order to further reduce their
inventories. In its wood products operations, the Company also builds
steel forms to its customers' specifications to ensure the dimensional
tolerances of the roof trusses it manufactures, as strict adherence to
design specifications translates into reduced manufacturing costs for
the Company's customers.
. MARKETING AND DISTRIBUTION NETWORK. The Company believes that its
suppliers also benefit by utilizing the Company's extensive marketing
and distribution network. The Company also believes that it is generally
not cost effective for its suppliers to provide the same level of
service and delivery responsiveness as the Company to producers of
manufactured homes and RVs.
TOTAL QUALITY MANAGEMENT
The Company is committed to maintaining Total Quality Management throughout
its operations. The key elements of this operating philosophy are: (i) to
increase customer satisfaction by seeking to meet or exceed all customer
requirements and ensuring that all associates are "customer focused," which
the Company believes results in the Company becoming the supplier of choice;
(ii) to create the mindset and awareness within all of its associates that
each is responsible and accountable for the results of the Company's
operations; and (iii) to work with the Company's suppliers and customers to
create an environment where all are working together to improve the value of
the products supplied to the manufactured home or RV consumer. The Company's
executive office and profit centers hold weekly Total Quality Management
meetings attended by all employees. The meetings focus on training and on
reaffirming the Company's mission, quality and value statements in order to
achieve the goal of being the distributor, customer and employer of choice. An
integral part of the entire quality process is creating a culture where
communication can flourish among all internal and external parties, including
associates, customers and suppliers.
PRODUCTS
The Company distributes one of the most comprehensive product lines to the
manufactured housing and RV industries. Kevco is a leading industry
participant in its core manufactured housing/RV plumbing products distribution
business, while Shelter is a market leader in the manufactured housing/RV
electrical products, exterior building products and hardware distribution
segment. Prior to the Shelter Acquisition, Kevco distributed approximately
17,000 SKUs and Shelter distributed approximately 62,000 SKUs. Some of Kevco's
and Shelter's
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SKUs overlap, and the Company intends to rationalize and reduce total SKUs as
Shelter is integrated into the Company's operations.
KEVCO PRODUCT LINES
Plumbing Products. Kevco distributes a wide variety of plumbing fixtures and
supplies including tubs, toilets, faucets, ABS pipe, connectors and fittings.
Kevco supplies substantially everything necessary to carry water into and out
of a manufactured home or RV. For 1996, Kevco's plumbing products represented
18.3% of the Company's combined historical net sales.
Wood Products. At its five manufacturing facilities, Kevco manufactures roof
trusses and lumber cut to customer specifications for use in manufactured
homes. Roof trusses are rectangular or triangular structures that form the
principal roof support for a manufactured home. Kevco also distributes plywood
and mill direct lumber. For 1996, Kevco's wood products represented 8.1% of
the Company's combined historical net sales.
Other Building Products. Kevco distributes other building products,
including insulation, roof shingles, patio doors, aluminum and wood windows,
vinyl siding, fireplaces, kitchen cabinetry, aluminum siding, water heaters
(under an exclusive arrangement with State Industries) and electrical products
(including load-centers, circuit breakers and copper wire). For 1996, Kevco's
other building products represented 11.3% of the Company's combined historical
net sales.
SHELTER PRODUCT LINES
Building Products. Shelter distributes a wide variety of building products,
including vinyl windows, wood moulding, exterior wood and vinyl siding,
visqueen, gypsum board, parquet wood flooring, and windows. For 1996,
Shelter's building products represented 24.2% of the Company's combined
historical net sales.
Hardware, Fasteners, Power Tools and Mill Supplies. Shelter distributes
screws, bolts and nuts of various sizes and dimensions, lock sets, cabinet
door pulls, hinges, door slides and drapery hardware, stationary power tools,
table saws, hoists and related equipment used in the manufactured home and RV
manufacturing cycle, including complete plant set-ups, plastic film, tape,
glue, caulking, chemicals and abrasives. For 1996, Shelter's hardware,
fasteners, power tools and mill supplies represented 8.6% of the Company's
combined historical net sales.
Electrical Components. Shelter distributes electrical components, including
wire, wiring devices, power generators, circuit breakers, panels, air
conditioners, mill supplies and machinery. For 1996, Shelter's electrical
components represented 10.7% of the Company's combined historical net sales.
Plumbing Products. Shelter also distributes drain waste vent systems,
potable water systems and fixtures. For 1996, Shelter's plumbing products
represented 4.7% of the Company's combined historical net sales.
Thermoformed Products. Shelter manufactures and distributes bathtubs, shower
enclosures and tub wall surrounds for the manufactured housing and RV industry
using the thermoforming process. For 1996, Shelter's thermoformed products
represented 6.2% of the Company's combined historical net sales.
Laminated Wallboards. Shelter manufactures and distributes laminated
wallboard products primarily for the manufactured housing and RV industries
and, to a lesser extent, manufactures laminated wall shelving systems for the
retail home improvement industry. For 1996, Shelter's laminated wallboards
represented 7.9% of the Company's combined historical net sales.
SALES AND MARKETING
The Company's marketing programs center on fostering strong customer
relationships and providing superior customer service. The Company believes
its competitive advantage lies in its breadth of product offerings, the
knowledge and expertise of its sales representatives and its just-in-time
delivery capabilities,
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regular calling program, dedication to Total Quality Management and
competitive pricing. To certain producers of manufactured homes and RVs, the
Company is the sole provider of certain core product lines on a national
basis.
Kevco's national accounts are supported by a profit center manager and by
Kevco's management. Each potential customer within a distribution center's
geographic reach is regularly contacted by a sales representative, usually at
the purchasing manager level. Because of the specific nature of the wood
products business, these sales forces generally work independently. Each sales
representative works within an assigned sales territory associated with one of
Kevco's distribution centers or manufacturing facilities and is actively
supported by a manager at such distribution center or facility. Kevco intends
to integrate Shelter's sales force into a similar structure.
As of December 31, 1996, the Company marketed its products through 266 sales
representatives. Sales representatives, consisting of salespersons and sales
managers, are all Company employees and are generally compensated on a salary
and incentive based compensation arrangement. The incentive portion of the
salespersons' compensation is based on a percentage of the profits of the
sales region "profit center" in which that salesperson operates. The incentive
portion of the sales manager's compensation is determined by a variety of
factors, which include the profit center's sales and return as well as a
discretionary element.
The Company maintains active customer relationships with approximately 530
manufactured home production plants and RV production plants in 45 states. The
Company's two largest customers, Champion Enterprises, Inc. and Fleetwood
Enterprises, Inc., accounted for approximately 14% and 12%, respectively, of
the Company's combined historical net sales in 1996. Although the Company has
ongoing supply relationships with these customers, it does not have a formal
supply contract with these customers or most of its other customers. The
Company's business could be adversely affected if these customers, or other
major customers, substantially reduced or discontinued purchases from the
Company. Further, the Company can give no assurance that its sales to such
customers will continue at historical levels. The Company believes that it has
good relationships with its manufactured home and RV customers.
DISTRIBUTION
The Company maintains a national distribution network covering all of the
major locations in which manufactured homes are built. The Company's
facilities are strategically located near its customers' manufacturing plants
in order to provide prompt delivery and responsive customer service. In most
cases, the Company's desired service area is within a 250-mile radius of each
distribution center. As Kevco's 26 and Shelter's 21 distribution facilities
have significant geographical overlap, the Company expects to achieve
synergies through warehouse and management consolidation.
The Company generally uses a decentralized management structure that
emphasizes individual distribution center profit-and-loss responsibility. A
distribution center is typically comprised of warehouse and receiving space,
secure outdoor holding space and office space. Local sales efforts are
coordinated and supported at the distribution centers. The remaining
distribution center activities relate to receiving, storing and delivering
products.
Substantially all of Kevco's distribution centers are equipped with real-
time management information systems. In addition, Shelter is currently
enhancing its own management information system. The Company intends to
evaluate both management information systems with a view of integrating them
into a single, company-wide system. Kevco's system allows the distribution
centers to control and monitor inventory levels, perform invoicing and order
entry, and establish delivery schedules and routes. Corporate management also
uses Kevco's information system to monitor sales, inventory and profitability
by distribution center. By utilizing its computerized inventory management
system, Kevco is able to accurately predict inventory turns and minimize
inventory levels. Each morning, management is supplied with detailed accounts
receivable aging and inventory status reports from each distribution center.
Kevco is currently implementing an improved management information system with
a particular focus on inventory management, which will allow managers to
create
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customized, Microsoft Windows-based reports and to obtain faster access to
detailed inventory data. The Company anticipates that the upgrade will be
completed within the next year.
Kevco's inventories are kept on the perpetual method, with daily physical
counts of at least five items in each warehouse and a complete physical
inventory count performed twice a year. Shelter manages its inventory in a
similar manner, and the Company anticipates integrating Shelter into its
inventory management system. For book and tax purposes, the Company records
purchased inventories under the FIFO method.
In most cases the Company warehouses products before distributing them to
customers. The Company delivers the products it sells either by Company truck
or common carrier. Delivery is a key component of the Company's dedication to
customer service and is a competitive requirement. In some instances,
suppliers will "drop ship" products directly to the Company's customers, with
the Company retaining responsibility for selling, billing and collection.
Also, under certain arrangements, the Company receives fees for warehousing,
delivering, selling or other services without taking title to the products.
The Company records such fees as commission income.
PURCHASING AND SUPPLIERS
Inasmuch as the Company believes it is the largest distributor of building
products to the manufactured housing industry, the Company anticipates that it
will be able to achieve economies of scale in its purchasing. As a
distributor, the Company plays a valued role in linking product manufacturers
with customers and provides the level of customer service and just-in-time
delivery its customers require. The Company's position in the marketplace and
financial condition have enabled it to take advantage of volume discounts,
product promotions and other buying opportunities from suppliers, which allow
the Company to market a wide variety of products to its customers at
attractive prices.
The Company generally sells products from manufacturers on a non-exclusive
basis without geographical restrictions. In certain limited instances, a
supplier will grant the Company the exclusive right to market its products in
the manufactured housing or RV industries. Management believes that its
increased size, its national distribution capability and general industry
trends toward such exclusive relationships will allow the Company to increase
the number of products it distributes on a national and/or exclusive basis.
The Company generally negotiates the price and other purchase terms with its
vendors on a company-wide or regional basis. Payment, discount and volume
purchase programs are negotiated directly by the Company with its major
suppliers, with a significant portion of the Company's purchases made from
suppliers offering these programs. Distribution center managers are
responsible for inventory selection and ordering on terms negotiated
centrally, so that the Company remains responsive to local market demand.
Distribution center managers are also responsible for inventory management.
The Company continuously seeks to expand the variety of products it sells.
While the loss of a major supplier could have a material adverse effect on the
Company's business, the Company believes alternative suppliers for similar
products in each of its product lines are available. In addition, raw material
used by the Company for its manufactured products are generally available from
a number of sources and the loss of any one source would not have a material
adverse effect on the Company. The Company believes its relations with its
suppliers are good.
The Company has established a Supplier Certification Program, in which the
Company identifies the performance level of a supplier to the Company and
benchmarks such performance on a regular basis. Such benchmarking criteria
include minimum order fill rates and other factors.
MANUFACTURING
The Company manufactures wood products, laminated wallboard products,
plastic injection molded products and thermoformed bathtubs, shower enclosures
and tub wall surrounds.
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The Company manufactures wood products for distribution principally to
producers of manufactured homes. The Company's wood products include roof
trusses and lumber cut to customer specifications for structural support
within the manufactured home unit. Each of the Company's roof trusses are
built to meet the customer's specific requirements.
The Company utilizes automated saws to reduce the cutting time needed to
process raw wood, and fabricates steel forms based on customer specifications
in order to ensure the dimensional tolerances of its roof trusses. The quality
and structural strength of roof trusses are monitored closely by manufactured
home producers. Wind zone construction standards require that roof trusses
sold for use in certain regions meet increased strength benchmarks. Roof
trusses that meet exacting specifications can reduce customer installation
costs. The Company believes that its ability to produce roof trusses of
consistent quality that adhere to customer specifications provides a
competitive advantage.
The Company's wood products customers include producers of manufactured
homes as well as contract, "cut-to-order" customers outside of the
manufactured housing industry. Substantially all of the Company's wood product
sales are to manufactured home producers. The Company has roof truss
manufacturing facilities in Spruce Pine, Alabama; Ashburn, Georgia; Waco,
Texas; Haleyville, Alabama; and Baxter, Tennessee. The Company is planning to
open new facilities in Arizona and North Carolina by the end of the second
quarter of 1998.
The Company manufactures laminated wallboard products primarily for the
manufactured housing and RV industries and, to a lesser extent, manufactures
laminated wall shelving systems for the retail home improvement industry.
Decorative paper or vinyl wall coverings are laminated onto 48 x 88 sheets of
gypsum, MDF or lauan and are shipped directly to the customers from one of
Shelter's five manufacturing facilities located in Indiana, Georgia,
Tennessee, and Texas (two plants).
Further, the Company manufactures bathtubs, shower enclosures and tub wall
surrounds for the manufactured housing and RV industry using the thermoforming
process. Thermoforming is the heating of plastic sheet to a softening
temperature and forcing the hot flexible material over a mold by the use of
mechanical and vacuum pressure. Allowed to cool, the plastic retains the shape
and detail of the mold.
The Company has developed such manufacturing operations in furtherance of
its vertical integration strategy. In June 1995, the Company acquired Sunbelt,
which added wood products manufacturing for the manufactured housing and RV
industries to its operations. In February 1997, the Company acquired
Consolidated Forest, which substantially strengthened the Company's position
in this wood products industry. The acquisition of Shelter furthers the
Company's vertical integration strategy through the addition of manufacturing
platforms in laminated wallboard products, plastic injection molded products
and thermoformed bath products. The Company intends to continue to seek
vertical acquisitions on a selective basis as opportunities arise.
WARRANTY AND RETURNS
The Company's customers generally rely on the warranties issued by the
manufacturer of the products sold by the Company. The Company generally
provides a one year limited warranty on the products it sells, which warranty
covers the product and service calls. The Company's warranty on the product
itself is generally not utilized because the product manufacturer provides a
more comprehensive warranty. The Company's warranty expense in 1996 was
negligible. The Company also has an informal, unwritten return policy under
which, for one year following sale, the Company will generally accept the
nonwarranty return of unused products, after inspection by the Company
personnel, for a restocking charge.
In the event a manufactured home experiences a failure of a roof truss
manufactured by the Company, the Company will inspect the home to determine
whether there is a covered defect in the roof truss. If a covered defect is
discovered, the Company generally pays to replace the roof truss and the roof.
The Company has only had one such claim in the past three years. The Company
also maintains a limited warranty on its thermoformed products, which
generally ranges from one to five years, covers defects in materials and
workmanship by repair or replacement of the defective item and excludes labor
and consequential damages.
54
<PAGE>
FACILITIES
The following table sets forth certain information with respect to Kevco's
and Shelter's distribution and manufacturing facilities, which are leased
unless otherwise indicated. Kevco also leases its executive offices of
approximately 12,000 square feet in Fort Worth, Texas. Further, Shelter owns
its executive offices of approximately 19,000 square feet in Elkhart, Indiana.
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION COMPANY SQUARE FEET FUNCTION
<S> <C> <C> <C>
Alabama
Bear Creek*.................................. Kevco 50,000 Distribution
Bear Creek*.................................. Shelter 90,000 Distribution
Haleyville*.................................. Kevco 86,000 Distribution
Haleyville................................... Kevco 146,000 Manufacturing
Haleyville................................... Kevco 44,000 Manufacturing
Phil Campbell................................ Kevco 30,000 Manufacturing
Spruce Pine*................................. Kevco 54,000 Manufacturing
Arizona
Phoenix...................................... Kevco 70,000 Distribution
Phoenix...................................... Shelter 59,000 Distribution
California
Riverside.................................... Shelter 35,000 Distribution
San Bernardino............................... Kevco 42,000 Distribution
Woodland..................................... Kevco 18,000 Distribution
Colorado
Fort Morgan.................................. Kevco 13,000 Distribution
Florida
Lakeland..................................... Shelter 36,000 Distribution
Ocala*....................................... Kevco 50,000 Distribution
Georgia
Americus..................................... Kevco 6,000 Distribution
Ashburn*..................................... Kevco 100,000 Manufacturing
Cordele*..................................... Kevco 60,000 Distribution
Douglas...................................... Kevco 72,000 Distribution
Tifton*...................................... Shelter 22,000 Manufacturing
Valdosta..................................... Shelter 73,000 Distribution
Idaho
Caldwell..................................... Kevco 24,000 Distribution
Indiana
Elkhart...................................... Kevco 61,000 Distribution
Elkhart...................................... Kevco 90,000 Distribution
Elkhart...................................... Kevco 35,000 Distribution
Elkhart...................................... Kevco 57,000 Distribution
Elkhart*..................................... Shelter 94,000 Distribution
Elkhart...................................... Shelter 15,000 Distribution
Elkhart*..................................... Shelter 65,000 Distribution
Elkhart*..................................... Shelter 70,000 Distribution
Elkhart*..................................... Shelter 27,000 Distribution
Elkhart...................................... Shelter 8,000 Distribution
Elkhart*..................................... Shelter 74,000 Manufacturing
Elkhart*..................................... Shelter 20,000 Manufacturing
Plymouth..................................... Shelter 5,000 Distribution
SouthBend.................................... Shelter 43,000 Manufacturing
Warsaw....................................... Shelter 10,000 Distribution
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
LOCATION COMPANY SQUARE FEET FUNCTION
<S> <C> <C> <C>
Kansas
Newton....................................... Kevco 38,000 Distribution
Newton*...................................... Shelter 85,000 Distribution
Michigan
Edwardsburg*................................. Shelter 70,000 Manufacturing
Edwardsburg.................................. Shelter 7,000 Manufacturing
Minnesota
Redwood Falls*............................... Shelter 24,000 Distribution
Worthington.................................. Kevco 15,000 Distribution
New Mexico
Albuquerque.................................. Kevco 16,000 Distribution
Albuquerque.................................. Shelter 15,000 Distribution
North Carolina
Albemarle.................................... Kevco 62,000 Distribution
Concord*..................................... Shelter 65,000 Distribution
Richfield*................................... Kevco 44,000 Distribution
Oregon
Milwaukee.................................... Shelter 38,000 Distribution
Tigard....................................... Kevco 23,000 Distribution
Pennsylvania
Lancaster.................................... Shelter 119,000 Distribution
Leola........................................ Kevco 11,000 Distribution
Leola........................................ Kevco 26,000 Distribution
Tennessee
Baxter....................................... Kevco 55,000 Manufacturing
Cookeville................................... Kevco 30,000 Distribution
Madisonville................................. Shelter 38,000 Manufacturing
Morristown................................... Shelter 42,000 Distribution
Texas
Fort Worth................................... Shelter 110,000 Distribution
Hillsboro*................................... Kevco 48,000 Distribution
Mansfield*................................... Shelter 25,000 Manufacturing
Temple....................................... Shelter 44,000 Manufacturing
Waco......................................... Kevco 90,000 Distribution
Waco......................................... Kevco 135,000 Manufacturing
Waxahachie*.................................. Shelter 192,000 Manufacturing
</TABLE>
- ---------------------
* Company owned facility.
COMPETITION
The Company believes it is the largest distributor of building products to
the manufactured housing industry; however, the building products wholesale
distribution industry is highly competitive. Numerous companies, both public
and private, are in direct competition with the Company and many of those
competitors have longer operating histories and greater financial and other
resources than the Company. The Company believes its prices, wide array of
products and ability to deliver on short notice are competitive.
The Company believes that its business strategy has permitted it to compete
effectively in its marketing areas. While price is an important competitive
factor in the Company's business, the Company believes that its sales are
principally dependent upon its service, technical expertise, reputation and
experience. The Company's principal competitive strengths include (i) quality
assurance, service and installation support, (ii) a wide array of
56
<PAGE>
products and product availability due to the Company's ability to attract
major product manufacturers and (iii) the prompt and reliable delivery of
products to customers.
Certain product manufacturers sell and distribute their products directly to
producers of manufactured homes and RVs. However, the Company believes that,
for most product manufacturers, providing the same level of service and
offering the same delivery responsiveness as the Company is not cost-
effective.
EMPLOYEES
As of December 31, 1997, Kevco employed 899 persons. Kevco is a party to one
collective bargaining agreement, which covered, as of December 31, 1997, 10
employees at one of the Company's facilities in Elkhart, Indiana. Kevco has
not experienced any work stoppages as a result of labor disputes and the
Company considers its employee relations to be good.
As of December 31, 1997, Shelter had 1,208 full-time employees. Shelter has
experienced no work stoppage arising from labor disputes and considers
employee relations to be good. None of Shelter's employees are covered by
collective bargaining agreements, except that effective February 1, 1997,
certain employees at Shelter's plastics operation in Texas are covered by a
two-year collective bargaining agreement.
LITIGATION
The Company is, and may be in the future, party to litigation arising in the
course of its business. While the Company has no reason to believe that any
pending claims are material, there can be no assurance that the Company's
insurance coverage will be adequate to cover all liabilities arising out of
such claims or that any such claims will be covered by the Company's
insurance. Any material claim that is not covered by insurance may have an
adverse effect on the Company's business. Claims against the Company,
regardless of their merit or outcome, may also have an adverse effect on the
Company's reputation and business.
REGULATION
The Company's suppliers and customers are subject to a variety of federal,
state and local laws and regulations. The National Manufactured Housing
Construction and Safety Standards Act of 1974 and regulations promulgated
thereunder by HUD impose comprehensive national construction standards for
manufactured homes and preempt conflicting state and local regulations. HUD
has adopted regulations that divide the United States into three "Wind Zones"
and impose more stringent construction standards for homes to be sold in areas
designated as Wind Zones II or Ill. These regulations have resulted in higher
manufacturing and dealer costs. The Company cannot predict if additional
regulations will be adopted or the effect any such regulations would have on
the Company. To the extent regulations make manufactured housing less
competitive with other housing alternatives, the Company's operations could be
negatively impacted.
The Company's operations are also subject to federal, state and local laws
and regulations relating to the generation, storage, handling, emission,
transportation and discharge of materials into the environment. Governmental
authorities have the power to enforce compliance with their regulations, and
violations may result in the payment of fines, the entry of injunctions or the
imposition of other requirements necessary to achieve compliance. While the
Company does not believe it will be required under existing environmental laws
and enforcement policies to expend amounts which will have a material adverse
effect on its operations or financial condition, the Company is unable to
predict the ultimate cost of compliance with environmental laws and
enforcement policies. From time to time, the Company has taken remedial
actions with respect to environmental conditions at certain of its properties,
and it is likely that the Company will continue to do so from time to time in
the future. In connection with a pending contract to transfer certain Company
properties to a third party, the Company has agreed to oversee any required
remedial actions in connection with the properties to be transferred. The
Company is currently engaged in discussions with the proposed transferee of
such properties, as well as with environmental consultants, to determine the
extent of the required remediation at such properties. Although the Company
does not anticipate that costs incurred in connection with any required
remediation will be material, there can be no assurance that such will be the
case.
57
<PAGE>
MANAGEMENT
The following table sets forth certain information concerning the Company's
directors, certain officers and certain key employees. Inclusion in this list
as an officer or officer nominee is not intended to act as an admission that
such individual is or will become subject to Section 16 under the Exchange
Act.
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
Jerry E. Kimmel......... 60 Chairman of the Board, Chief Executive Officer and President
Clyde A. Reed, Jr. ..... 62 Executive Vice President, Chief Operating Officer and Director
Ellis L. McKinley, 46
Jr. ................... Vice President, Chief Financial Officer, Treasurer and Director
Richard S. Tucker....... 53 Secretary and Director
C. Lee Denham........... 49 President, Sunbelt
Gregory G. Kimmel....... 29 Vice President, Corporate Development and Director
Martin C. Bowen......... 54 Director
Richard Nevins.......... 50 Director
</TABLE>
Jerry E. Kimmel is a founder of the Company and has spent his entire career
in this industry. Mr. Kimmel has served as President of Kevco since 1978 and
has served as Chairman of the Board and Chief Executive Officer of the Company
since 1993. In 1992, Mr. Kimmel was inducted into the MH/RV Hall of Fame.
Mr. Kimmel served as the Chairman of the Board of Governors of the
Manufactured Housing Institute, a leading manufactured housing trade group, in
1983 and 1984, and has served in various other Manufactured Housing Institute
board capacities. Mr. Kimmel's term of office as a director of the Company
will expire in the year 2000.
Clyde A. Reed joined the Company in 1965 and has served as Executive Vice
President since 1986 and Chief Operating Officer since 1991. From 1978 to
1986, Mr. Reed served as Vice President of the Company. Mr. Reed has been a
director of the Company since November 1996. Mr. Reed's term of office as a
director of the Company will expire in 1999.
Ellis L. McKinley, Jr. joined the Company in 1995, has served as Vice
President and Chief Financial Officer since such time and has served as a
director and Treasurer of the Company since November 1996. From 1994 to 1995,
Mr. McKinley was Vice President of Finance, Chief Financial Officer, Secretary
and Treasurer of Renters Choice, Inc. From 1976 until 1994, Mr. McKinley was
employed with Grant Thornton, a public accounting firm in Dallas, Texas, where
he served as an audit partner from 1987 through 1994. Mr. McKinley received
his B.B.A. in Accounting from the University of Texas in 1976. Mr. McKinley's
term of office as a director of the Company will expire in 1999.
Richard S. Tucker has served as a director of the Company since 1976, as an
assistant secretary of the Company since 1988, and as the Secretary of the
Company since November 1996. Since 1995, Mr. Tucker has been a partner in the
law firm of Jackson Walker L.L.P., the Company's outside legal counsel. From
1984 to 1995, Mr. Tucker was a member of the law firm of Simon, Anisman, Doby
& Wilson, a Professional Corporation, located in Fort Worth, Texas. Mr. Tucker
received his B.B.A. in Accounting from the University of Texas in 1966 and his
J.D. from Southern Methodist University School of Law in 1969. Mr. Tucker's
term of office as a director of the Company will expire in the year 2000.
C. Lee Denham has served as President of Kevco's Sunbelt subsidiary since
November 1996 and as Vice President of the Sunbelt division of Kevco from 1995
to November 1996. Mr. Denham was division manager of Sunbelt from 1991 to
1995. From 1981 to 1991, Mr. Denham was President of Sunbelt. From 1970 until
founding Sunbelt in 1981, Mr. Denham was employed by Universal Forest
Products, Inc. Mr. Denham received his B.B.A. in Marketing from the University
of Georgia in 1970.
58
<PAGE>
Gregory G. Kimmel joined the Company in 1994 and has served as Vice
President since January 1996, as Vice President, Corporate Development since
August 1997 and as a director of the Company since May 1997. Mr. Kimmel
received his B.S. in Education from McMurry University in 1994. Gregory G.
Kimmel is the son of Jerry E. Kimmel, the Chairman, President and Chief
Executive Officer of the Company. Mr. Kimmel's term of office as a director of
the Company will expire in the year 2000.
Martin C. Bowen has served as a director of the Company since November 1996.
Mr. Bowen has served as President and Chief Executive Officer of Performing
Arts Fort Worth, Inc. since 1993, Vice President of Fine Line, Inc. since
January 1996 and as a director of Aztec Manufacturing Company since November
1993. From 1989 to 1992 he was Chairman of the Fort Worth Region for Team
Bank. From 1987 to 1989, Mr. Bowen served as Chairman & CEO of Texas American
Bank/Houston. From 1985 to 1987 he served as Executive Vice President of Texas
American Bank/Fort Worth. Mr. Bowen received his B.B.A. in Finance from Texas
A&M University in 1964 and his Bachelor of Foreign Trade degree from the
American Institute of Foreign Trade, Phoenix, Arizona, in 1968. Additionally,
he received his J.D. from Baylor University School of Law in 1973. Mr. Bowen's
term of office as a director of the Company will expire in 1998.
Richard Nevins has served as a director of the Company since November 1996.
Since 1992, Mr. Nevins has served as President of Richard Nevins & Associates,
a financial advisory firm. Mr. Nevins was elected as a director of Fruehauf
Trailer Corporation ("Fruehauf") in 1995 and was elected as Chairman of
Fruehauf's executive committee in August 1996. On October 7, 1996, Fruehauf
filed for relief under Chapter 11 of the Bankruptcy Code of the United States.
Together with the other members of the Fruehauf board who had been elected by
the shareholders, Mr. Nevins resigned his positions with Fruehauf effective
October 9, 1996. During 1996, Mr. Nevins has served as acting Chief Operating
Officer and Chief Restructuring Officer for Sun World International, a
California agricultural firm, following the filing of a petition in bankruptcy
by Sun World International. From 1995 to 1996, Mr. Nevins served as a director
of Ampex Corporation and from 1993 to 1995 he served as a director of The
Actava Group (now Metromedia International Group). From 1990 to 1992 he was a
Managing Director of Smith Barney Harris Upham & Co. Mr. Nevins received his
B.A. in Economics from the University of California, Riverside in 1972 and his
M.B.A. from Stanford Graduate School of Business in 1975. Mr. Nevin's term of
office as a director of the Company will expire in 1998.
59
<PAGE>
MANAGEMENT COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding compensation
paid during each of Kevco's last three fiscal years to Kevco's Chief Executive
Officer and each of Kevco's four other most highly compensated executive
officers, based on salary and bonus earned during 1997.
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION
COMPENSATION AWARDS
------------------ SECURITIES
NAME AND PRINCIPAL FISCAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) OPTIONS/SARS(#) COMPENSATION(5)
<S> <C> <C> <C> <C> <C>
Jerry Kimmel, .......... 1997 $250,000 $174,312(12) -- $13,593(1)
Chairman of the Board, 1996 $366,271 $249,600 -- $17,163(2)
President and Chief 1995 $398,479 $191,530 -- $19,643(3)
Executive Officer
Clyde A. Reed, Jr. ..... 1997 $204,540 $ 33,361(12) -- $12,655(4)
Executive Vice
President 1996 $188,088 $ 96,667 11,750 $29,756(5)
and Chief Operating
Officer 1995 $179,737 $154,007 7,096 $26,440(6)
Ellis L. McKinley,
Jr. ................... 1997 $162,975 $ 11,120(12) -- $ 1,047(7)
Vice President, 1996 $145,980 $ 29,167 14,400 $ 1,057(7)
Chief Financial Officer 1995 $ 54,527 $ 25,000 7,050 --
and Treasurer
C. Lee Denham,.......... 1997 $114,095 $ 42,806(12) -- $ 1,594(8)
President, Sunbelt 1996 $ 95,850 $222,221 9,400 $ 1,434(9)
1995 $ 39,000 $110,000 $ 4,292(10)
M. O'Neal Miller........ 1997 $144,711 -- -- $ 5,000(11)
1996 -- -- -- --
1995 -- -- -- --
</TABLE>
- ---------------------
(1) Consists of $12,546, representing personal use of a Company supplied car
and $1,047, representing the Company's contribution to such individual's
401(k) Plan account.
(2) Consists of $12,546, representing personal use of a Company supplied car,
$3,560, representing payments by the Company for medical insurance
premiums and $1,057, representing the Company's contribution to such
individual's 401(k) Plan account.
(3) Consists of $12,546, representing personal use of a Company supplied car,
$3,866, representing payments by the Company for medical insurance
premiums and $3,051, representing the Company's contribution to such
individual's 401(k) Plan account.
(4) Consists of $3,851, representing personal use of a Company supplied car,
$7,757, representing expense recognized by the Company in 1997 relating
to future payments to be made under a deferred compensation agreement and
$1,047, representing the Company's contribution to such individual's
401(k) Plan account.
(5) Consists of $4,518, representing personal use of a Company supplied car,
$24,181, representing expense recognized by the Company in 1996 relating
to future payments to be made under a deferred compensation agreement and
$1,057, representing the Company's contribution to such individual's
401(k) Plan account.
(6) Consists of $2,491, representing personal use of a Company supplied car,
$20,898, representing expense recognized by the Company in 1995 relating
to future payments to be made under a deferred compensation agreement and
$3,051, representing the Company's contribution to such individual's
401(k) Plan account.
(7) Represents the Company's contribution to such individual's 401(k) Plan
account.
60
<PAGE>
(8) Consists of $547, representing personal use of a Company supplied car and
$1,047, representing the Company's contribution to such individual's
401(k) Plan account.
(9) Consists of $377, representing personal use of a Company supplied car and
$1,057, representing the Company's contribution to such individual's
401(k) Plan account.
(10) Consists of $1,241, representing personal use of a Company supplied car
and $3,051, representing the Company's contribution to such individual's
401(k) Plan account.
(11) Represents personal use of a Company supplied car.
(12) Excludes a portion of such individual's bonus earned in 1997 that is
based on Company year end operating results that have not yet been
computed.
YEAR END OPTION VALUES
The following table presents the information regarding the value of stock
options outstanding at December 31, 1997 held by each of the Named Executive
Officers. No stock options were exercised by the Named Executive Officers in
1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
OPTIONS/SARS AT FY-END(#) AT FY-END($)(1)
-------------------------- -------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C>
Jerry E. Kimmel......... -- -- -- --
Clyde A. Reed, Jr. ..... 18,846(2) -- $139,690 --
C. Lee Denham........... 9,400(3) -- $ 50,102 --
Ellis L. McKinley,
Jr. ................... 16,950(4) 4,500(5) $128,165 $13,500
M. O'Neal Miller........ -- -- -- --
</TABLE>
- ---------------------
(1) The closing price for the Kevco's Common Stock as reported through The
Nasdaq National Market on December 31, 1997, was $16.50. Value is
calculated on the basis of the difference between the option exercise
price and $16.50 multiplied by the number of shares of Common Stock
underlying the option.
(2) Consists of options to acquire 7,096 shares of Common Stock at $5.64 per
share and options to acquire 11,750 shares of Common Stock at $11.17 per
share.
(3) Consists of options to acquire 9,400 shares of Common Stock at $11.17 per
share.
(4) Consists of options to acquire 7,050 shares of Common Stock at $5.64 per
share, options to acquire 9,400 shares of Common Stock at $11.17 per share
and options to acquire 500 shares of Common Stock at $13.50 per share.
(5) Consists of options to acquire shares of Common Stock at $13.50 per share,
vesting 10% on each December 16 up to and including December 16, 2006, the
date the options expire.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive additional
compensation for serving as directors. Each director who is not an employee of
the Company receives a fee of $1,000 for attendance at each Board of Directors
meeting and $500 for attendance at each Board committee meeting (unless held
on the same day as a Board of Directors meeting). All directors of the Company
are reimbursed for out-of-pocket expenses incurred in attending meetings of
the Board of Directors or committees thereof, and for other out-of-pocket
expenses incurred in their capacity as directors of the Company.
EMPLOYMENT AGREEMENTS
Mr. Kimmel has entered into a five year employment agreement with the
Company providing for an annual base salary of $250,000. In addition to base
salary, Mr. Kimmel, through his employment agreement, is eligible for an
annual bonus equal to 2.4% of the Company's income before income taxes for the
year provided that income before income taxes is at least $5.0 million. Such
salary and bonus are subject to increase, but not
61
<PAGE>
decrease, by the Company. Increases in Mr. Kimmel's compensation will be
reviewed annually by the Company's Compensation Committee in a manner so as to
qualify under the performance based compensation provisions of the Internal
Revenue Code. Under the agreement, Mr. Kimmel has agreed to perform services
on behalf of the Company and its subsidiaries in Fort Worth, Texas as he
reasonably determines are necessary to carry out his duties under the
agreement. Mr. Kimmel, his spouse and dependents are, until the death of the
survivor of Mr. Kimmel and his spouse, entitled to participate at the
Company's expense in health programs offered to Company employees generally
or, if insurance coverage is not available, to have their health care costs
reimbursed by the Company. Upon the death of Mr. Kimmel, the Company must
continue to pay his base salary for the remainder of the then existing
agreement term. The agreement can be terminated by the Company only for cause
(as defined in such agreement). The employment agreement, which is guaranteed
by the subsidiaries of the Company, is automatically extended for an
additional year at the end of each year's service.
Effective May 24, 1977, Mr. Reed entered into a retirement agreement with
the Company that generally provides that the Company will pay Mr. Reed or his
beneficiaries $55,000 per year for 10 years if Mr. Reed is employed with the
Company at age 65 or upon death or disability. Such agreement also provides
for a smaller lump sum payment that the Company will make upon Mr. Reed's
termination of employment prior to age 65, death or disability. Such lesser
amount equals approximately $14,000 for each year following the effective date
of the agreement, up to such termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company leases three of its warehouse locations from an affiliated
partnership (K&E Land & Leasing, a Texas general partnership) of which Mr.
Kimmel is a managing partner. The Company also leases computer equipment from
K&E Land & Leasing. These leases (i) expire in November 2003, April 2005,
October 2007 and October 2003, respectively, (ii) provide for total future
(i.e. post 1997) base rent payments of approximately $758,000, $670,000, $2.3
million and $1.3 million, respectively, and (iii) require payments to be made
in equal monthly amounts. As of December 31, 1997, Jerry Kimmel's indirect
interest in such leases was 38.0% and Gregory G. Kimmel's aggregate beneficial
interest in such leases was 4%. As of December 31, 1997, Mr. Kimmel's
immediate family members (including Gregory G. Kimmel's beneficial interest)
owned indirect interests in such leases of 12.0%. Aggregate expenditures by
the Company under such leases in 1997 were approximately $672,000, of which
approximately $255,000 was indirectly attributable to Jerry Kimmel's interests
in such partnership (excluding immediate family members' interests) and of
which approximately $27,000 was indirectly attributable to Gregory G. Kimmel's
beneficial interest. It is anticipated that aggregate expenditures by the
Company under such leases for the remainder of their terms will be
approximately $5.0 million, of which approximately $1.9 million will be
indirectly payable (less partnership expenses) to Jerry Kimmel (excluding
immediate family members' interests) and of which approximately $200,000 will
be indirectly payable (less partnership expenses) to Gregory G. Kimmel. The
Company believes that the amounts it has paid or will pay under such leases
have not been and the Company believes will not be less favorable to the
Company than had the leases been negotiated on an arms-length basis. Two of
the leased warehouses were financed through economic development and
industrial revenue bonds; one series of which was issued by Newton, Kansas in
the original principal amount of $575,000, and with respect to which the
Company is the sub-lessee of the premises and a co-guarantor, and one series
of which was issued by Elkhart, Indiana in the original principal amount of
$400,000, and with respect to which the Company is the lessee of the premises
and had agreed to perform the obligation of the lessor contained in the
mortgage.
62
<PAGE>
Prior to October 26, 1993, Billy T. Everett owned 50% of the then
outstanding common stock of Kevco and served as its Chairman of the Board.
Effective October 26, 1993, Kevco repurchased 13% of Mr. Everett's Common
Stock holdings in exchange for the issuance of a promissory note in the
original principal amount of $747,500 and bearing interest at a floating rate,
which was 6% per annum on the date of the note; such note was retired in 1994.
Also effective October 26, 1993, Mr. Kimmel purchased Mr. Everett's remaining
Common Stock holdings in exchange for approximately $5.0 million cash and, in
order to facilitate such purchase, the Company loaned Mr. Kimmel $5.0 million.
The loan is payable in monthly principal installments of $62,500 plus interest
at 9% per annum as of December 31, 1995 with the final installment due in
November 1997. As of June 30, 1996, $3.1 million remained outstanding under
such loan, and effective as of such date the note evidencing this loan was
distributed to Kevco's shareholders.
Gregory G. Kimmel and James Kimmel, Jerry Kimmel's brother, earned, in the
aggregate, approximately $143,000 and $137,000 in compensation in 1997 and
1996, respectively. Mr. Tucker, Secretary and a director of the Company, is a
partner in Jackson Walker L.L.P., which is the Company's principal outside
legal counsel.
63
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth information with respect to beneficial
ownership of Common Stock as of January 12, 1998 and includes (i) all persons
known to the Company to be the beneficial owner of 5% or more of the Common
Stock, (ii) each director of the Company, (iii) the chief executive officer
and each of the Company's four other most highly compensated executive
officers whose total annual compensation for 1997 based on salary and bonus
earned during 1997 exceeded $100,000 (the "Named Executive Officers"), and
(iv) all the Company directors and executive officers as a group. This table
does not include shares of Common Stock that may be purchased pursuant to
options not exercisable within 60 days of January 12, 1998. All persons listed
have sole voting and investment power with respect to their shares unless
otherwise indicated. As of January 12, 1998, Kevco had 6,828,809 shares of
Common Stock issued and outstanding.
<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER OR AMOUNT AND NATURE
NUMBER OF PERSONS IN GROUP OF BENEFICIAL OWNERSHIP PERCENT OF CLASS
<S> <C> <C>
Jerry E. Kimmel(1)................ 3,744,760(2) 54.8%
Clyde A. Reed, Jr................. 30,014(3) *
Ellis L. McKinley, Jr............. 21,950(4) *
Richard S. Tucker................. 5,500(5) *
Martin C. Bowen................... 3,000(5) *
M. O'Neal Miller.................. 5,100(7) *
Richard Nevins.................... 7,405(5) *
C. Lee Denham..................... 9,400(6) *
Gregory G. Kimmel................. 221,086(9) 3.2%
All directors and executive
officers as a group (8 persons).. 4,043,115(8) 58.6%
</TABLE>
- ---------------------
*Less than 1%
(1) The address of Mr. Kimmel is University Centre I, 1300 S. University
Drive, Suite 200, Fort Worth, Texas 76107.
(2) Excludes 626,386 shares of outstanding Common Stock and 15,299 shares of
Common Stock issuable upon exercise of options beneficially owned by Mr.
Kimmel's adult children and his brother. Mr. Kimmel disclaims beneficial
ownership of such shares.
(3) Includes 18,846 shares of Common Stock subject to presently exercisable
options.
(4) Includes 16,950 shares of Common Stock subject to presently exercisable
options, or options exercisable within 60 days.
(5) Includes 2,500 shares of Common Stock subject to presently exercisable
options.
(6) Consists of 9,400 shares of Common Stock subject to presently exercisable
options.
(7) Includes 2,100 shares of Common Stock beneficially owned by such
individual's spouse.
(8) Includes 65,644 shares of Common Stock subject to presently exercisable
options and excludes 5,100 shares of Common Stock attributable to M.
O'Neal Miller, who is no longer an executive officer of the Company.
(9) Includes 12,949 shares of Common Stock subject to presently exercisable
options and excludes 2,406 shares of Common Stock held as custodian for
such individual's children.
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DESCRIPTION OF SENIOR CREDIT FACILITY
General. On December 1, 1997, Kevco entered into an amended and restated
$125 million credit facility with Nations Bank of Texas, N.A., as lender and
administrative agent, and certain other banks, consisting of $90 million in
aggregate principal amount of term loans (the "Term Loan Facility"), which
facility includes a $40 million tranche A term loan subfacility and a $50
million tranche B term loan subfacility and a $35 million revolving credit
facility (the "Revolving Credit Facility"), which facility includes a sublimit
for letters of credit. The Company has used the Term Loan Facility and a
portion of the Revolving Credit Facility to refinance indebtedness of Kevco
Delaware, Inc. to NationsBank of Texas, N.A. and the lenders under an Amended
and Restated Credit Agreement, dated February 27, 1997, as amended, and to
provide a portion of the funds necessary to consummate the Transactions. See
"Use of Proceeds." This information relating to the Senior Credit Facility is
qualified in its entirety by reference to the complete text of the Senior
Credit Facility a copy of which is filed as an exhibit to the Exchange Offer
Registration Statement of which this Prospectus is a part. The following is a
description of the general terms of the Senior Credit Facility.
Security. Indebtedness of the Company under the Senior Credit Facility is
guaranteed by each of Kevco's domestic subsidiaries (direct or indirect),
thereafter acquired, and is secured by: (i) a first priority security interest
in substantially all of the assets and properties (including, without
limitation, accounts receivable, inventory, real property, machinery,
equipment, contracts and contract rights, trademarks, copyrights, patents,
license agreements and general intangibles) of the Company and each of its
domestic subsidiaries (direct or indirect) then existing or thereafter
acquired; (ii) a first priority perfected pledge of all capital stock of each
of Kevco's domestic subsidiaries (direct or indirect) then existing or
thereafter acquired (other than SCCAC and Shelter until the merger of SCCAC
with and into Shelter); and (iii) a first priority perfected pledge of 65% of
the capital stock of foreign subsidiaries of Kevco or any of its domestic
subsidiaries.
Interest. Indebtedness under the Senior Credit Facility bears interest at a
floating rate. Indebtedness under the Term Loan Facility and the Revolving
Credit Facility initially bear interest at a rate based (at the Company's
option) upon (i) LIBOR for one, two, three or six months, plus 2.25% with
respect to the Tranche A Term Loan Facility and the Revolving Credit Facility
or plus 2.75% with respect to the Tranche B Term Loan Facility, or (ii) the
Alternate Base Rate (as defined in the Senior Credit Facility) plus 0.75% with
respect to the Tranche A Term Loan Facility and the Revolving Credit Facility
or plus 1.25% with respect to the Tranche B Term Loan Facility; provided,
however, the interest rates are subject to several quarter point reductions in
the event the Company meets certain performance targets.
Maturity. The Tranche B Term Loan Facility will mature on December 31, 2004.
The Tranche A Term Loan Facility and the Revolving Credit Facility will mature
on December 31, 2003. The Term Loan Facility is subject to repayment according
to quarterly amortization of principal based upon a schedule specified in the
Senior Credit Facility.
Prepayments. The Senior Credit Facility provides for mandatory prepayments
of the Term Loan Facility and the Revolving Credit Facility. Prepayments on
the Term Loan Facility will be applied pro rata to reduce scheduled
amortization payments as provided in the Senior Credit Facility. The mandatory
prepayments defined in the Senior Credit Facility include the lesser of (1) an
amount, if any, which would result in the leverage ratio being 3.5 to 1 after
such pre-payment and (2) each of the following as applicable, (a) 100% of the
net cash proceeds received by the Company or any subsidiary from asset sales
(including the capital stock of any subsidiary) in excess of $500,000 each
fiscal year, subject to de minimis baskets, certain exceptions, and
reinvestment provisions and net of selling expenses and taxes to the extent
such taxes are paid; (b) 75% of Excess Cash Flow pursuant to an annual cash
sweep arrangement; (c) 100% of the net cash proceeds from the issuance of debt
(excluding the Notes and certain other debt proceeds) by the Company, or any
subsidiary; and (d) 50% of the net cash proceeds from the sale or disposition
by the Company or any of its subsidiaries to any Person of any capital stock
of the Company (other than proceeds that are concurrently applied to complete
a permitted Acquisition (as defined therein)). In addition, the Company may
prepay the Senior Credit Facility in whole or in part at any time without
penalty, subject to reimbursement of certain costs of the Lenders.
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Fees. The Company is required to pay to the Lenders in the aggregate a
commitment fee equal to 0.50 per annum on the committed undrawn amount of the
Revolving Credit Facility during the preceding quarter; provided that this fee
may be subject to reduction in the event the Company meets certain performance
targets. The Company also is required to pay to the Lenders participating in
the Revolving Credit Facility letter of credit fees, due quarterly in arrears,
equal to 100% of the applicable margin over LIBOR (being LIBOR for loans under
the Revolving Credit Facility) for standby letters of credit issued under the
Revolving Credit Facility or 50% of the applicable margin over LIBOR (being
LIBOR for loans under the Revolving Credit Facility) for commercial letters of
credit issued under the Revolving Credit Facility, plus a fronting fee payable
to the issuing bank equal to the greater of (a) $250 or (b) the product of
0.125% times the face amount of the letter of credit being issued. Fees to
Lenders participating in letters of credit will be calculated on the aggregate
undrawn portion of each letter of credit for the duration thereof.
Covenants. The Senior Credit Facility requires the Company to meet certain
financial tests, including a minimum fixed charge coverage ratio, maximum
leverage ratio and maintenance of a minimum net worth amount. The Senior
Credit Facility also contains covenants which include, without limitation (i)
delivery of financial statements and other reports; (ii) delivery of
compliance certificates; (iii) notices of default, material litigation and
material governmental and environmental proceedings; (iv) compliance with
laws; (v) payment of taxes; (vi) maintenance of insurance; (vii) limitation on
liens; (viii) limitations on mergers, consolidations and sales of assets; (ix)
limitations on incurrence of debt; (x) limitations on dividends and stock
redemptions and the redemption and/or prepayment of other debt; (xi)
limitations on investments; (xii) ERISA (as defined) matters; (xiii)
limitation on transactions with affiliates; (xiv) limitations on acquisitions;
(xv) limitation on sale and leasebacks; (xvi) limitation on sale or discount
of receivables; and (xvii) limitation on capital expenditures.
Default. The Senior Credit Facility provides for certain customary events of
default, including an event of default upon the occurrence of a change of
control of the Company.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were originally sold by the Company on December 1, 1997 to the
Initial Purchasers pursuant to the Purchase Agreement. The Initial Purchasers
subsequently resold the Old Notes to qualified institutional buyers in
reliance on Rule 144A under the Securities Act. As a condition to the
completion of the Old Notes Offering, the Company entered into the
Registration Rights Agreement with the Initial Purchasers pursuant to which
the Company agreed to use its reasonable best efforts to cause to be filed
with the Commission the Exchange Offer Registration Statement on the
appropriate form under the Securities Act with respect to an offer to exchange
the Old Notes for Exchange Notes. The Exchange Notes will be substantially
identical to the Old Notes, except that the Exchange Notes will bear a Series
B designation and will have been registered under the Securities Act and
therefore will not contain terms with respect to transfer restrictions (other
than those that might be imposed by state securities laws) and will not be
entitled to registration rights or other rights under the Registration Rights
Agreement.
Under existing interpretations of the staff of the Commission, the Exchange
Notes would, in general, be freely tradeable after the Exchange Offer without
further registration under the Securities Act. However, any purchaser of Old
Notes who is an "affiliate" of the Company or intends to participate in the
Exchange Offer for the purpose of distributing the Exchange Notes (i) will not
be able to rely on the interpretations of the staff of the Commission, (ii)
will not be able to tender its Old Notes in the Exchange Offer and (iii) must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any sale or transfer of the Old Notes,
unless such sale or transfer is made pursuant to an exemption from such
requirements.
Each Holder who wishes to exchange such Old Notes for Exchange Notes in the
Exchange Offer will be required to make certain representations, including
representations that (i) it is not an affiliate of the Company, (ii) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the
Exchange Notes and (iii) it is acquiring the Exchange Notes in the ordinary
course of its business. In addition, broker-dealers receiving Exchange Notes
in the Exchange Offer will have a prospectus delivery requirement with respect
to resales of Exchange Notes. The Commission has taken the position that such
broker-dealers may fulfill their prospectus delivery requirements with respect
to the Exchange Notes (other than a resale of an unsold allotment from the
original sale of Old Notes) with the prospectus contained in the Exchange
Offer Registration Statement. Under the Registration Rights Agreement, the
Company is required to allow such broker-dealers to use the prospectus
contained in the Exchange Offer Registration Statement in connection with the
resale of such Exchange Notes for a period of one year after the Expiration
Date (or such shorter period during which all such resales have occurred).
The Registration Rights Agreement provides that if (i) the Exchange Offer is
not permitted by applicable law or (ii) if any Holder of Old Notes shall
notify the Company within 20 Business Days following the Expiration Date that
(A) such Holder was prohibited by law or Commission policy from participating
in the Exchange Offer or (B) such Holder may not resell the Exchange Notes to
the public without delivering a prospectus and the Prospectus relating to the
Exchange Offer is not appropriate or available for such resales by such Holder
or (C) such Holder is a Broker-Dealer and holds Old Notes acquired directly
from the Company or any of its affiliates, then the Company and the Guarantors
shall: (1) cause to be filed, on or prior to 45 days after the earlier of (i)
the date on which the Company determines that the Exchange Offer is not
permitted by applicable law and (ii) the date on which the Company receives
such notice from a Holder, a Shelf Registration Statement, relating to all Old
Notes, and (2) shall use their respective reasonable best efforts to cause
such Shelf Registration Statement to become effective on or prior to 120 days
after the date on which the obligation of the Company and the Subsidiary
Guarantors to file the Shelf Registration Statement arises.
The Company and the Subsidiary Guarantors shall use their respective
reasonable best efforts to keep any Shelf Registration Statement continuously
effective for a maximum of two years (or such shorter period in which all Old
Notes covered by such Shelf Registration Statement have been sold).
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If (i) the Company fails to file any of the registration statements required
by the Registration Rights Agreement on or prior to the date specified for
such filing, (ii) any of such registration statements are not declared
effective by the Commission on or prior to the date specified for such
effectiveness (the "Effectiveness Target Date"), (iii) the Company fails to
consummate the Exchange Offer on or prior to 30 days after the Effectiveness
Target Date with respect to the Exchange Offer Registration Statement (if the
Company is required by the Registration Rights Agreement to complete the
Exchange Offer), or (iv) the Shelf Registration Statement or the Exchange
Offer Registration Statement is declared effective but thereafter ceases to be
effective or usable during the periods specified in the Registration Rights
Agreement (each such event referred to in clauses (i) through (iv) above, a
"Registration Default"), then the Company will be required to pay Liquidated
Damages to each Holder affected by such Registration Default on each interest
payment date. Liquidated Damages shall accrue from and after the date of each
Registration Default, and shall continue to accrue thereafter until such
Registration Default has been cured or waived as set forth in the Registration
Rights Agreement, in an amount equal to, with respect to the first 90-day
period immediately following the occurrence of such Registration Default,
$0.05 per week per $1,000 principal amount of Notes held by such Holder. The
amount of the Liquidated Damages will increase by an additional $0.05 per week
per $1,000 principal amount of Notes with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of Liquidated Damages, if any, of $0.30 per week per $1,000 principal amount
of such Notes. All accrued Liquidated Damages, if any, will be paid by the
Company on each Damages Payment Date (as defined in the Registration Rights
Agreement) to the Global Note Holder by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wife transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. At such time as
all Registration Defaults have been cured, the accrual of Liquidated Damages,
if any, will cease.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified
in its entirety by, all the provisions of the Registration Rights Agreement, a
copy of which is filed as an exhibit to the Exchange Offer Registration
Statement of which this Prospectus is a part.
Following the consummation of the Exchange Offer, Holders of the Old Notes
who were eligible to participate in the Exchange Offer but who did not tender
their Old Notes will not have any further registration rights and such Old
Notes will continue to be subject to certain restrictions on transfer.
Accordingly, the liquidity of the market for such Old Notes could be adversely
affected.
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 Old
Notes validly tendered and not withdrawn prior to 5:00 p.m., New York 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 Old
Notes accepted in the Exchange Offer. Holders may tender some or all of their
Old Notes pursuant to the Exchange Offer. However, Old 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 Old Notes except that (i) the Exchange Notes bear a Series B
designation and a different CUSIP Number from the Old Notes, (ii) the Exchange
Notes have been registered under the Securities Act and hence will not bear
legends restricting the transfer thereof and (iii) the holders of the Exchange
Notes will not be entitled to certain rights under the Registration Rights
Agreement, including the provisions providing for an increase in the interest
rate on the Old Notes in certain circumstances relating to the timing of the
Exchange Offer, all of which rights generally will terminate when the Exchange
Offer is terminated. The Exchange Notes will evidence the same debt as the Old
Notes and will be entitled to the benefits of the Indenture.
As of the date of this Prospectus, $105,000,000 aggregate principal amount
of Old Notes were outstanding. The Company has fixed the close of business on
January 27, 1998 as the record date for the Exchange Offer
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for purposes of determining the persons to whom this Prospectus and the Letter
of Transmittal will be mailed initially.
Holders of Old Notes do not have any appraisal or dissenters rights under
the Texas Business Corporation Act 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 Exchange Act and the rules
and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Old 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 Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, any such unaccepted Old Notes will be returned, without expense, to
the tendering holder thereof as promptly as practicable after the Expiration
Date.
Holders who tender Old 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 Old
Notes pursuant to the Exchange Offer. The Company will pay all changes 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 time, on March 2,
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 oral or written notice and will mail to the
registered holders an announcement thereof, each prior to 9:00 a.m., New York
time, on the next business day after the previously scheduled expiration date.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest from the most recent date to which
interest has been paid or duly provided for on the Old Note surrendered in
exchange for such Exchange Note or, if no interest has been paid or duly
provided for on such Old Note, from December 1, 1997. Interest on the Exchange
Notes is payable semi-annually on each June 1 and December 1, commencing on
June 1, 1998.
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last date to which interest has been paid or duly provided for on the Old
Notes prior to the original issue date of the Exchange Notes or, if no such
interest has been paid or duly provided for, will not receive any accrued
interest on such Old Notes, and will be deemed to have waived, the right to
receive any interest on such Old Notes accrued from and after the last date to
which interest has been paid or duly provided for on the Old Notes or, if no
such interest has been paid or duly provided for, from and after December 1,
1997.
PROCEDURES FOR TENDERING
For a holder of Old Notes to tender Old Notes validly 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 in the Letter of Transmittal prior to
5:00 p.m., New York time, on the Expiration Date. In addition, prior to 5:00
p.m., New York time, on the
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Expiration Date, either (a) certificates for tendered Old Notes must be
received by the Exchange Agent at such address or (b) such Old 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 Depository,
received by the Exchange Agent and forming part of the confirmation of a book-
entry transfer, which states that the Depository has received an express
acknowledgment from the participant in the Depository tendering Old Notes
which are the subject of such book-entry confirmation that such participant
has received and agrees to be bound by the terms of the Letter of Transmittal
and that the Company may enforce such agreement against such participant. In
the case of an Agent's Message relating to guaranteed delivery, the term means
a message transmitted by the Depository and received by the Exchange Agent,
which states that the Depository has received an express acknowledgment from
the participant in the Depository tendering Old Notes that such participant
has received and agrees to be bound by the Notice of Guaranteed Delivery.
By tendering Old Notes pursuant to the procedures set forth above, each
holder will make to the Company the representations set forth above in the
third paragraph under the heading "--Purpose and Effect of the Exchange
Offer."
The tender by a holder and the acceptance thereof by the Company will
constitute an 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 OLD 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 ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE
EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR 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 Old 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
"Instruction to Registered Holder and/or Book-Entry Transfer Facility
Participant from Owner" included with the Letter of Transmittal.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Old Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Registration
Instructions" or "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 by a member firm
of the Medallion System (an "Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old Notes must be endorsed or
accompanied by a properly completed bond power, signed by such registered
holder as such registered holdees name appears on such Old Notes with the
signature thereon guaranteed by an Eligible Institution.
If the Letter of Transmittal or any Old Notes or bond powers are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, offices of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and evidence satisfactory to the
Company of their authority to so act must be submitted with the Letter of
Transmittal.
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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
Old Notes at the book-entry transfer facility, The Depository Trust Company
("DTC", the "Depositary" or 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 Old Notes by
causing such Book-Entry Transfer Facility to transfer such Old Notes into the
Exchange Agent's account with respect to the Old Notes in accordance with the
Book-Entry Transfer Facility's procedures for such transfer. Although delivery
of the Old 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 a book-entry transfer, an Agent's Message in
lieu of the Letter of Transmittal 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 in the Letter of Transmittal 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.
The Exchange Agent and DTC have confirmed that the Exchange Offer is
eligible for the DTC Automated Tender Offer Program ("ATOP"). Accordingly, DTC
participants may electronically transmit their acceptance of the Exchange
Offer by causing DTC to transfer Old Notes to the Exchange Agent in accordance
with DTC's ATOP procedures for transfer. DTC will then send an Agent's Message
to the Exchange Agent.
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 right in its sole
discretion to waive any defects, irregularities or conditions of tender as to
particular Old 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 Old Notes must be
cured within such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Old Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Old Notes will not be deemed to have been made until such defects or
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 cure 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 Old Notes and (i) whose Old Notes are not
immediately available, (ii) who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent or (iii) who
cannot complete the procedures for book-entry transfer, 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 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 Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or facsimile thereof) together with the certificate(s)
representing the Old Notes (or a confirmation of book-entry transfer of
such Old 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
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(c) such properly completed and executed Letter of Transmittal (or
facsimile thereof), as well as the certificates representing all 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 the Book-
Entry Transfer Facility), and all other documents required by the Letter of
Transmittal are received by the Exchange Agent upon five 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 Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York time, on the Expiration Date.
To withdraw a tender of Old 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 in the Letter of Transmittal prior to
5:00 p.m., New York 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 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 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 Old Notes were tendered
(including, any required signature guarantees) or be accompanied by documents
of transfer sufficient to have the Trustee with respect to the Old Notes
register the transfer of such Old Notes into the name of the person
withdrawing the tender and (iv) specify the name in which any such Old 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 Old 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 Old Notes so withdrawn
are validly retendered. Any Old Notes that have been tendered but that are not
accepted for exchange will be returned 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 Old Notes may be
retendered by following one of the procedures described above under
"Procedures for Tendering" at any time prior to the Expiration Date.
EXCHANGE AGENT
United States Trust Company of New York, N.A. (the "Exchange Agent") has
been appointed as 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 Notice of Guaranteed Delivery
should be directed to the Exchange Agent at the address indicated in the
Letter of Transmittal. Delivery to an address other than as set forth in the
Letter of Transmittal will not constitute a valid delivery.
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, 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.
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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 Old
Notes, which is face value, 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. The expenses of the Exchange Offer will be
expensed over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will remain restricted securities. Accordingly, such Old Notes
may be resold only (i) to the Company (upon redemption thereof or otherwise),
(ii) so long as the Old 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 under the
Securities Act in a transaction meeting the requirements of Rule 144A, in
accordance with Rule 144 under the Securities Act, (iii) pursuant to another
exemption from the registration requirements of the Securities Act (and based
upon an opinion of counsel, if the Company so requests), (iv) outside the
United States to a foreign person in a transaction meeting the requirements of
Rule 904 under the Securities Act, or (v) 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
(for example, the letters of the commission to (i) Exxon Capital Holdings
Corporation, available May 13, 1988, (ii) Morgan Stanley & Co., Inc. available
June 5, 1991 and (iii) Shearman & Sterling, available July 2, 1993), the
Company believes that a holder or other person (other than a person that is an
affiliate of the Company within the meaning of Rule 405 under the Securities
Act) who receives Exchange Notes in exchange for Old 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 acquires 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 Participating Broker-
Dealer that receives Exchange Notes for its own account in exchange for Old
Notes, where such Old Notes were acquired by such Participating 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 Notes.
Each holder of Old Notes who wishes to exchange Old Notes for Exchange Notes
in the Exchange Offer will be required to represent that (i) it is not an
affiliate of the Company, (ii) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Exchange Notes and (iii) it is acquiring
the Exchange Notes in its ordinary course of business. Each broker-dealer that
receives Exchange Notes for its own account pursuant to the Exchange Offer
must acknowledge that it acquired the Old Notes for its own account as the
result of market-making activities or other trading activities and must agree
that it will deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by
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delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. Based on the
position taken by the staff of the Division of Corporation Finance of the
Commission in the interpretive letters referred to above, the Company believes
that Participating Broker-Dealers who acquired Old Notes for their own
accounts as a result of market-making activities or other trading activities
may fulfill their prospectus delivery requirements with respect to the
Exchange Notes received upon exchange of such Old Notes (other than Old Notes
which represent an unsold allotment from the original sale of the Old Notes)
with a prospectus meeting the requirements of the Securities Act, which may be
the prospectus prepared for an exchange offer so long as it contains a
description of the plan of distribution with respect to the resale of such
Exchange Notes. Accordingly, this Prospectus, as it may be amended or
supplemented from time to time, may be used by a Participating Broker-Dealer
during the period referred to below in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired by
such Participating Broker-Dealer for its own account as a result of market-
making or such other trading activities. Subject to certain provisions set
forth in the Registration Rights Agreement, the Company has agreed that this
Prospectus, as it may be amended or supplemented from time to time, may be
used by a Participating Broker-Dealer in connection with resales of such
Exchange Notes for a period ending 180 days after the date on which the
Exchange Offer Registration Statement is declared effective. However, a
Participating Broker-Dealer who intends to use this Prospectus in connection
with the resale of Exchange Notes received in exchange for Old Notes pursuant
to the Exchange Offer must notify the Company, or cause the Company to be
notified, on or prior to the Expiration Date, that it is a Participating
Broker-Dealer. Such notice may be given in the space provided for that purpose
in the Letter of Transmittal or may be delivered to the Exchange Agent at one
of the addresses set forth in the Letter of Transmittal. See "Plan of
Distribution." Any Participating Broker-Dealer who is an "affiliate" of the
Company may not rely on such interpretive letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
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DESCRIPTION OF THE NOTES
GENERAL
The Old Notes have been, and the Exchange Notes will be, issued pursuant to
the Indenture between the Company, the Subsidiary Guarantors and United States
Trust Company of New York, as trustee (the "Trustee"). The terms of the Notes
include those stated in the Indenture and those made a part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), as in effect on the Issue Date. The Notes are subject to all
such terms, and the Holders of the Notes are referred to the Indenture and the
Trust Indenture Act for a statement thereof. The following summary of certain
provisions of the Indenture does not purport to be complete and is qualified
in its entirety by reference to the Indenture, including the definitions
therein of certain terms used below. A copy of the Indenture is filed as an
exhibit to the Exchange Offer Registration Statement of which this Prospectus
is a part. The definitions of certain terms used in the following summary are
set forth below under the caption "--Certain Definitions." As used in this
"Description of the Notes" section, the "Company" means Kevco, Inc. and not
any of its Subsidiaries.
The Company's obligations under the Indenture and the Notes are guaranteed
on a senior subordinated basis by all of the Company's existing Restricted
Subsidiaries and, pursuant to the terms of the Indenture, will be jointly and
severally guaranteed by all future Subsidiaries of the Company not designated
as Unrestricted Subsidiaries as described under the caption "--Certain
Covenants--Designation of Restricted and Unrestricted Subsidiaries." See "--
Subsidiary Guarantees." As of the Issue Date, all of the Company's
Subsidiaries were Restricted Subsidiaries. Under certain circumstances, the
Company will be able to designate one or more of its existing or future
Subsidiaries as Unrestricted Subsidiaries. Unrestricted Subsidiaries will not
be subject to many of the restrictive covenants set forth in the Indenture.
The Notes are limited to $105.0 million in aggregate principal amount. The
Notes will mature on December 1, 2007. The Notes will bear interest at the
rate set forth on the front cover of this Prospectus. Interest on the Notes is
payable semi-annually in cash in arrears on June 1 and December 1 in each
year, commencing June 1, 1998, to Holders of record of Notes at the close of
business on the May 15 or November 15 immediately preceding such interest
payment date. Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from the Issue
Date. Interest will be computed on the basis of a 360-day year of twelve 30-
day months. The Old Notes have been, and the Exchange Notes will be, issued in
denominations of $1,000 and integral multiples thereof.
Principal of, premium, if any, interest and Liquidated Damages, if any, on
the Notes will be payable, and the Notes may be presented for registration of
transfer or exchange, at the office of the Paying Agent and Registrar in New
York, New York. Holders of Notes must surrender their Notes to the Paying
Agent to collect principal payments, and the Company may pay principal and
interest by check and may mail checks to a Holder's registered address;
provided that all payments with respect to Notes, the Holders of which have
given wire transfer instructions to the Company, will be required to be made
by wire transfer of immediately available funds to the accounts specified by
the Holders thereof. The Registrar may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
with certain transfers or exchanges. See "--Transfer and Exchange." The
Trustee will initially act as Paying Agent and Registrar. The Company may
change the Paying Agent or Registrar without prior notice to Holders of Notes,
and the Company or any of its Subsidiaries may act as Paying Agent or
Registrar.
SUBORDINATION
The payment of principal of and premium, if any, interest and Liquidated
Damages, if any, on the Notes will be subordinated in right of payment, as set
forth in the Indenture, to the prior payment in full in cash or Cash
Equivalents of all Senior Indebtedness, whether outstanding on the date of the
Indenture or thereafter incurred. The Indenture permits the incurrence of
additional Senior Indebtedness in the future, subject to provisions of the
covenant described below under the caption "--Certain Covenants--Limitation on
Incurrence of Indebtedness."
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Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full in cash or Cash Equivalents of all Obligations due in
respect of such Senior Indebtedness (including interest after the commencement
of any such proceeding at the rate specified in the applicable Senior
Indebtedness) before the Holders of Notes will be entitled to receive any
payment with respect to the Notes, and until all Obligations with respect to
Senior Indebtedness are paid in full in cash or Cash Equivalents, any
distribution to which the Holders of Notes would be entitled shall be made to
the holders of Senior Indebtedness (except that Holders of Notes may receive
Junior Securities and payments made from the trust described under the caption
"--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment of principal of, premium, if any,
interest or Liquidated Damages, if any, on the Notes (except in Junior
Securities or from the trust described under the caption "--Legal Defeasance
and Covenant Defeasance") if (i) a default in the payment of the principal of
or premium, if any, or interest on Designated Senior Indebtedness occurs and
is continuing beyond any applicable period of grace or (ii) any other default
occurs and is continuing with respect to Designated Senior Indebtedness that
permits holders of the Designated Senior Indebtedness as to which such default
relates to accelerate its maturity and the Trustee receives a written notice
(with a copy to the Company) of such other default (a "Payment Blockage
Notice") from the Company or the holders of any Designated Senior
Indebtedness. Payments on the Notes may and shall be resumed (a) in the case
of a payment default, upon the date on which such default is cured or waived
and (b) in case of a nonpayment default, the earlier of the date on which such
nonpayment default is cured or waived or 179 days after the date on which the
applicable Payment Blockage Notice is received by the Trustee, unless the
maturity of any Designated Senior Indebtedness has been accelerated. No new
period of payment blockage may be commenced unless and until (i) 360 days have
elapsed since the date of receipt by the Trustee of the immediately prior
Payment Blockage Notice and (ii) all scheduled payments of principal of,
premium, if any, interest and Liquidated Damages, if any, on the Notes that
have come due have been paid in cash. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice (it being understood that any subsequent action, or any breach of any
covenant for a period commencing after the date of receipt by the Trustee of
such Payment Blockage Notice, that, in either case, would give rise to such a
default pursuant to any provisions under which a default previously existed or
was continuing shall constitute a new default for this purpose).
The Indenture further requires that the Company promptly notify holders of
Senior Indebtedness if payment of the Notes is accelerated because of an Event
of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or dissolution of the Company or in a bankruptcy,
reorganization, insolvency, receivership or similar proceeding relating to the
Company, Holders of Notes may recover less ratably than creditors of the
Company and the Subsidiary Guarantors who are holders of Senior Indebtedness.
On a pro forma basis, after giving effect to the Transactions, the aggregate
principal amount of Senior Indebtedness of the Company on a consolidated basis
outstanding at September 30, 1997 was approximately $98.1 million and, subject
to compliance with certain financial ratios, the Company would have had unused
availability under the Senior Credit Facility of $31.8 million. The Indenture
and the Senior Credit Facility will limit, subject to certain financial tests,
the amount of additional Indebtedness, including Senior Indebtedness, that the
Company and its Restricted Subsidiaries can Incur. See "--Certain Covenants--
Limitation on Incurrence of Indebtedness."
SUBSIDIARY GUARANTEES
The Company's obligations under the Indenture and the Notes are jointly and
severally guaranteed on a senior subordinated basis by all of the Company's
existing Restricted Subsidiaries and all future Subsidiaries (other than
Unrestricted Subsidiaries) of the Company in accordance with the covenant
described below under
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the caption "--Certain Covenants--Future Subsidiary Guarantors" (each such
guaranteeing Subsidiary a "Subsidiary Guarantor" and, collectively, the
"Subsidiary Guarantors"). Each Subsidiary Guarantee will be subordinated to
the prior payment in full in cash or Cash Equivalents of all Senior
Indebtedness of each Subsidiary Guarantor (including such Subsidiary
Guarantor's Obligations under the Senior Credit Facility) to the same extent
that the Notes are subordinated to Senior Indebtedness of the Company. The
obligations of any Subsidiary Guarantor under its Subsidiary Guarantee will be
limited so as not to constitute a fraudulent conveyance under applicable law.
The Indenture provides that, subject to the provisions described in the next
succeeding paragraph, no Subsidiary Guarantor may consolidate or merge with or
into (whether or not such Subsidiary Guarantor is the surviving Person), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another Person unless (i) the Person formed by or surviving
any such consolidation or merger (if other than such Subsidiary Guarantor) or
the Person to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made assumes all the obligations of such
Subsidiary Guarantor under the Subsidiary Guarantee, in form satisfactory to
the Trustee; (ii) immediately after such transaction, no Default or Event of
Default exists; (iii) the Company and its Restricted Subsidiaries would, at
the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable Reference
Period, be permitted to Incur at least $1.00 of additional Indebtedness
pursuant to the Debt Incurrence Ratio test set forth in the first paragraph of
the covenant described under the caption "--Certain Covenants--Limitation on
Incurrence of Indebtedness"; (iv) if required by the Trust Indenture Act, the
Company shall have delivered to the Trustee an Officers' Certificate and an
Opinion of Counsel; and (v) such Subsidiary Guarantor (if such Subsidiary
Guarantor is the surviving Person) shall have delivered a written instrument
in form satisfactory to the Trustee confirming its Subsidiary Guarantee after
giving effect to such consolidation, merger or transfer. Notwithstanding the
foregoing, any Subsidiary Guarantor may merge into, consolidate with or
transfer all or part of its properties or assets to the Company or one or more
Subsidiary Guarantors or one or more Subsidiaries which become Subsidiary
Guarantors concurrently therewith.
The Indenture provides that in the event of a sale, assignment, transfer,
lease, conveyance or other disposition of all of the Equity Interests in, or
all or substantially all of the assets of, a Subsidiary Guarantor to any
Person that is not the Company or any of its Restricted Subsidiaries, whether
by way of merger, consolidation or otherwise, if (i) the Net Proceeds of such
sale or other disposition are applied in accordance with provisions of the
Indenture described under the caption "--Certain Covenants--Limitation on Sale
of Assets and Restricted Subsidiary Stock," (ii) no Default or Event of
Default exists or would exist under the Indenture after giving effect to such
transaction, (iii) all obligations of such Subsidiary Guarantor under any
other Indebtedness of the Company or any of its Restricted Subsidiaries shall
have been terminated (including, without limitation, all Guarantees of any
such Indebtedness), (iv) all Liens on assets of such Subsidiary Guarantor that
secure any other Indebtedness of the Company or any of its Restricted
Subsidiaries shall have been terminated, and (v) all obligations of the
Company and its Restricted Subsidiaries under other Indebtedness of such
Subsidiary Guarantor shall have been terminated (including, without
limitation, all Guarantees of such Indebtedness), then (A) in the case of such
a sale or other disposition, whether by way of merger, consolidation or
otherwise, of all of the Equity Interests in such former Subsidiary Guarantor,
such former Subsidiary Guarantor will be released and relieved of any
obligations under its Subsidiary Guarantee, or (B) in the case of a sale or
other disposition of all or substantially all of the assets of such Subsidiary
Guarantor, the Person acquiring such assets will not be required to assume the
obligations of such Subsidiary Guarantor under its Subsidiary Guarantee.
OPTIONAL REDEMPTION
The Company does not have the right to redeem any Notes prior to December 1,
2002 (other than out of the Net Proceeds of a Public Equity Offering as
described in the next paragraph). The Notes are redeemable for cash at the
option of the Company, in whole or in part, at any time on or after December
1, 2002, upon not less than
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30 days nor more than 60 days notice to each Holder of Notes, at the following
redemption prices (expressed as percentages of the principal amount of the
Notes) if redeemed during the 12-month period commencing December 1, of the
years indicated below (subject to the right of Holders of record on a Record
Date to receive interest due on an Interest Payment Date that is on or prior
to such Redemption Date), in each case together with accrued and unpaid
interest and Liquidated Damages, if any, thereon to the Redemption Date:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2002.............................. 105.188%
2003.............................. 103.458%
2004.............................. 101.729%
2005 and thereafter............... 100.000%
</TABLE>
Until December 1, 2000, if the Company consummates a Public Equity Offering
of Common Stock for cash, up to 35% of the aggregate principal amount of the
Notes originally outstanding may be redeemed at the option of the Company
within 90 days of such Public Equity Offering, upon not less than 30 days nor
more than 60 days notice to each Holder of the Notes to be redeemed, using the
Net Proceeds of such Public Equity Offering, at a redemption price equal to
110.375% of the principal amount of the Notes (subject to the right of Holders
of record on a Record Date to receive interest due on an Interest Payment Date
that is on or prior to such Redemption Date), together with accrued and unpaid
interest and Liquidated Damages, if any, thereon to the Redemption Date;
provided, however, that at least 65% of the aggregate principal amount of the
Notes originally outstanding remain outstanding immediately following such
redemption.
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis, by lot or in such other
manner it deems appropriate and fair. The Notes may be redeemed in part in
multiples of $1,000 only.
Notice of any redemption will be sent, by first class mail, at least 30 days
and not more than 60 days prior to the date fixed for redemption to the Holder
of each Note to be redeemed to such Holder's last address as then shown upon
the registry books of the Registrar. Any notice which relates to a Note to be
redeemed in part only must state the portion of the principal amount equal to
the unredeemed portion thereof and must state that on and after the date of
redemption, upon surrender of such Note, a new Note or Notes in a principal
amount equal to the unredeemed portion thereof will be issued. On and after
the Redemption Date, interest will cease to accrue on the Notes or portions
thereof called for redemption, unless the Company defaults in the payment
thereof.
MANDATORY REDEMPTION
Except as set forth below under the captions "--Escrow of Proceeds; Special
Redemption," "--Certain Covenants--Repurchase of Notes at the Option of the
Holder Upon a Change of Control" and "--Certain Covenants--Limitation on Sale
of Assets and Restricted Subsidiary Stock," the Company is not required to
make any mandatory redemption, repurchase or sinking fund payments with
respect to the Notes.
CERTAIN COVENANTS
REPURCHASE OF NOTES AT THE OPTION OF THE HOLDER UPON A CHANGE OF CONTROL
The Indenture provides that, upon the occurrence of a Change of Control,
each Holder of Notes shall have the right, pursuant to an irrevocable and
unconditional offer by the Company (the "Change of Control Offer"), to require
the Company to repurchase all or any part of such Holder's Notes (provided,
that the principal amount of such Notes must be $1,000 or an integral multiple
thereof) on a date (the "Change of Control Purchase Date") that is no later
than 45 Business Days after the occurrence of such Change of Control, at a
cash price equal to 101% of the principal amount thereof (the "Change of
Control Purchase Price"), together with accrued and unpaid interest and
Liquidated Damages, if any, to the Change of Control Purchase Date. The Change
of Control
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Offer shall be made within 20 Business Days following a Change of Control and
shall remain open for 20 Business Days following its commencement (the "Change
of Control Offer Period"). Upon expiration of the Change of Control Offer
Period, the Company promptly shall purchase all Notes properly tendered in
response to the Change of Control Offer.
The Senior Credit Facility prohibits the Company from purchasing any Notes
and also provides that certain change of control events with respect to the
Company will constitute a default thereunder. Any future credit agreements or
other agreements relating to Senior Indebtedness to which the Company becomes
a party may contain similar restrictions and provisions. The Indenture
provides that in the event a Change of Control occurs at a time when the
Company is prohibited from purchasing Notes, then prior to purchasing the
Notes in a Change of Control Offer, the Company shall either repay in full and
terminate all commitments under all Senior Indebtedness that contains such
prohibitions or obtain the requisite consents, if any, under all agreements
governing such Senior Indebtedness. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain prohibited from
purchasing Notes. In such case, the Company's failure to purchase all Notes
validly tendered and not withdrawn under such Change of Control would
constitute an Event of Default under the Indenture which may, in turn,
constitute a default under the Senior Credit Facility. In such circumstances,
the subordination provisions in the Indenture would likely restrict payments
to the Holders of Notes. See "Risk Factors--Inability to Purchase Notes Upon a
Change of Control."
As used herein, a "Change of Control" means the occurrence of any of the
following: (i) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger of consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act), except to the Existing Majority Stockholder,
(ii) the adoption of a plan relating to the liquidation or dissolution of the
Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), other than the Existing Majority Stockholder,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act, except that a person shall be deemed to have
"beneficial ownership" of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition), directly or indirectly, of
more than 50% of the Voting Stock of the Company (measured by voting power
rather than number of shares) or (iv) during any period of 24 consecutive
months after the Issue Date, individuals who at the beginning of any such 24-
month 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 a majority of the directors 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) cease for any reason to constitute a
majority of the Board of Directors of the Company then in office.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest and Liquidated Damages, if any) of all Notes so tendered and (iii)
deliver to the Trustee Notes so accepted together with an Officers'
Certificate listing the Notes or portions thereof being purchased by the
Company. The Paying Agent promptly will pay the Holders of Notes so accepted
an amount equal to the Change of Control Purchase Price (together with accrued
and unpaid interest and Liquidated Damages, if any), and the Trustee promptly
will authenticate and deliver to such Holders a new Note equal in principal
amount to any unpurchased portion of the Note surrendered. Any Notes not so
accepted will be delivered promptly by the Company to the Holder thereof. The
Company publicly will announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Purchase Date.
The phrase "all or substantially all" of the assets of the Company will
likely be interpreted under applicable state law and will be dependent upon
particular facts and circumstances. As a result, there may be a degree of
uncertainty in ascertaining whether a sale or transfer of "all or
substantially all" of the assets of the Company
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<PAGE>
has occurred. In addition, the Company's ability to pay the Change of Control
Purchase Price is, and may in the future be, limited by the terms of the
Senior Credit Facility or other agreements relating to Indebtedness that
constitute Senior Indebtedness. The occurrence of certain of the events that
would constitute a Change of Control would also constitute a default under the
Senior Credit Facility. Moreover, the exercise by the Holders of their right
to require the Company to repurchase the Notes could cause a default under
Indebtedness constituting Senior Indebtedness, even if the Change of Control
itself does not, due to the financial effect of such repurchase on the
Company. Also, the Company's ability to pay cash to Holders of Notes upon a
Change of Control may be limited by the Company's then existing financial
resources. No assurances can be given that the Company will be able to acquire
Notes tendered upon the occurrence of a Change of Control.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes pursuant to a Change of Control Offer. To the extent that
the provisions of any securities laws or regulations conflict with the "Change
of Control" provisions of the Indenture, the Company shall comply with the
applicable securities laws and regulations and shall not be deemed to have
breached its obligations under the "Change of Control" provisions of the
Indenture by virtue thereof.
LIMITATION ON INCURRENCE OF INDEBTEDNESS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(including Acquired Indebtedness), except for Permitted Indebtedness;
provided, however, that the Company and its Restricted Subsidiaries may Incur
Indebtedness (including Acquired Indebtedness) if, at the time of Incurrence
of such Indebtedness, after giving pro forma effect to such Incurrence as of
such date and to the use of proceeds therefrom (including the application or
the use of the net proceeds therefrom to repay Indebtedness or make any
Restricted Payment) (i) no Default or Event of Default shall have occurred and
be continuing at the time of, or would occur after giving effect on a pro
forma basis to, such Incurrence of Indebtedness and (ii) on the date of such
Incurrence (the "Incurrence Date"), the Consolidated Coverage Ratio of the
Company for the Reference Period immediately preceding the Incurrence Date,
after giving effect on a pro forma basis to such Incurrence of Indebtedness
and, to the extent set forth in the definition of Consolidated Coverage Ratio,
the use of proceeds thereof, would exceed 2.25 to 1 if such date is on or
prior to the date which is the second anniversary of the Issue Date, or 2.50
to 1 for any date thereafter (the "Debt Incurrence Ratio").
"Permitted Indebtedness" means any and all of the following:
(i) (A) Indebtedness of the Company and its Restricted Subsidiaries
pursuant to the Senior Credit Facility (including all Guarantees thereof)
up to an amount at any time Incurred equal to the greater of (1) $35
million, less the aggregate amount of all Net Proceeds of Asset Sales
applied to permanently repay any such Indebtedness or, in the case of any
such revolving Indebtedness, permanently reduce the commitments therefor
pursuant to the covenant under the caption "--Certain Covenants--Limitation
on Sale of Assets and Restricted Subsidiary Stock" and (2) 75% of Eligible
Receivables and (B) Indebtedness of the Company and its Restricted
Subsidiaries pursuant to the Senior Credit Facility (including all
Guarantees thereof) in an aggregate amount not to exceed $90 million
(which, in the event that and for so long as less than 100% but more than
50% (on a fully diluted basis) of the Shelter Common Stock is acquired in
the Tender Offer, shall be reduced by an amount equal to the cash
consideration necessary to purchase the amount of Shelter Common Stock not
so acquired until such Shelter Common Stock is so acquired or until the
merger is consummated with Kevco owning 100% of Shelter), less the
aggregate amount of all repayments thereof;
(ii) Indebtedness represented by the Notes, the Indenture and the
Subsidiary Guarantees;
(iii) intercompany Indebtedness between or among the Company and any of
its Restricted Subsidiaries; provided that (A) if the Company is an obligor
on such Indebtedness, such Indebtedness is expressly subordinate to the
payment in full of all Obligations with respect to the Notes and (B) any
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subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary of the Company, or any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary of the Company, shall be deemed to constitute a new
Incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be;
(iv) Permitted Refinancing Indebtedness Incurred in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace,
defease or refund, (A) Indebtedness (other than Permitted Indebtedness)
that was Incurred in compliance with the Indenture, (B) Indebtedness
referred to in clauses (i) or (ii) of the definition of the term "Permitted
Indebtedness," or (C) Existing Indebtedness (other than Existing
Indebtedness, if any, related to the Indebtedness refinanced by the Senior
Credit Facility);
(v) Indebtedness of a Restricted Subsidiary of the Company constituting a
Guarantee of Indebtedness of the Company or a Restricted Subsidiary which
Indebtedness was Incurred pursuant to this definition or the Debt
Incurrence Ratio test set forth in the first paragraph of the covenant
described under the caption "--Certain Covenants--Limitation on Incurrence
of Indebtedness;"
(vi) the Incurrence by the Company or any Restricted Subsidiary of
Hedging Obligations of the following types: (A) Interest Rate Hedges with
respect to any Indebtedness of such Person that is permitted by the terms
of the Indenture to be outstanding, the notional principal amount of which
does not exceed the principal amount of the Indebtedness to which such
Interest Rate Hedge relates, and (B) Currency Hedges that do not increase
the outstanding loss potential or liabilities other than as a result of
fluctuations in foreign currency exchange rates;
(vii) the Incurrence by the Company or any Restricted Subsidiary, if no
Default or Event of Default shall have occurred and be continuing, of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate principal amount at any time outstanding
not to exceed $25 million (which amount may, but need not, be incurred
under the Senior Credit Facility); and
(viii) Existing Indebtedness.
Indebtedness of any Person which is outstanding at the time such Person
becomes a Restricted Subsidiary of the Company (including upon designation of
any Unrestricted Subsidiary or other Person as a Restricted Subsidiary) or is
merged with or into or consolidated with the Company or a Restricted
Subsidiary of the Company shall be deemed to have been Incurred at the time
such Person becomes such a Restricted Subsidiary of the Company or is merged
with or into or consolidated with the Company or a Restricted Subsidiary, as
applicable.
LIMITATION ON RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any Restricted Subsidiary's Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation) other
than dividends or distributions (a) paid or payable in Equity Interests (other
than Disqualified Stock) of the Company or (b) paid or payable to the Company
or any Wholly Owned Restricted Subsidiary of the Company; (ii) purchase,
redeem or otherwise acquire or retire for value any Equity Interests of the
Company or any direct or indirect parent of the Company or other Affiliate of
the Company or any Restricted Subsidiary of the Company (other than any such
Equity Interests owned by the Company or any Wholly Owned Restricted
Subsidiary of the Company); (iii) make any principal payment on, or purchase,
redeem, defease or otherwise acquire or retire for value prior to the
scheduled maturity, scheduled repayment or scheduled sinking fund payment, any
Subordinated Indebtedness (except, if no Default or Event of Default is
continuing or would result therefrom, any such payment, purchase, redemption,
defeasance or other acquisition or retirement for value made (a) out of Excess
Proceeds available for general corporate purposes if (1) such payment or other
action is required by the indenture or other agreement or instrument pursuant
to which such Subordinated Indebtedness was issued and (2) the Company has
purchased all Notes properly tendered pursuant to an Asset Sale Offer required
under the caption "--Certain Covenants--Limitation on Sale of Assets
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and Restricted Subsidiary Stock" or (b) upon the occurrence of a Change of
Control if (1) such payment or other action is required by the indenture or
other agreement or instrument pursuant to which such Subordinated Indebtedness
was issued and (2) the Company has purchased all Notes properly tendered
pursuant to the Change of Control Offer resulting from such Change of
Control); or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable Reference Period, have been permitted to
Incur at least $1.00 of additional Indebtedness pursuant to the Debt
Incurrence Ratio test set forth in the first paragraph of the covenant
described under the caption "--Certain Covenants--Limitation on Incurrence
Indebtedness"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made by the Company and its
Restricted Subsidiaries after the Issue Date shall not exceed, at the date
of determination, the sum of (1) 50% of aggregate Consolidated Net Income
of the Company from the beginning of the first fiscal quarter commencing
after the Issue Date to the end of the Company's most recently ended fiscal
quarter for which financial statements are available at the time of such
Restricted Payment (or, if such aggregate Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus (2) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
after the Issue Date of Equity Interests of the Company or of Disqualified
Stock or debt securities of the Company that have been converted into such
Equity Interests (other than Equity Interests (or Disqualified Stock or
convertible debt securities) sold to a Subsidiary of the Company and other
than Disqualified Stock or debt securities that have been converted into
Disqualified Stock), plus (3) the aggregate net cash proceeds received by
the Company as capital contributions to the Company (other than from a
Subsidiary of the Company) after the Issue Date, plus (4) the amount equal
to the net reduction in Restricted Investments made after the Issue Date
resulting from a sale or liquidation of a Restricted Investment for cash,
to the extent such amount is not included in the Consolidated Net Income of
the Company, not to exceed the lesser of (A) the Net Proceeds from such
sale or liquidation to the extent received by the Company or any Restricted
Subsidiary, and (B) the initial amount of such Restricted Investment, plus
(5) in the event an Unrestricted Subsidiary is redesignated as a Restricted
Subsidiary, an amount equal to the net reduction in Restricted Investments
made in Unrestricted Subsidiaries, not to exceed the lesser of (A) the Fair
Market Value of such Unrestricted Subsidiary, and (B) the amount of
Restricted Investments which were made in such Unrestricted Subsidiary.
The foregoing provisions do not prohibit the following Restricted Payments:
(i) the payment of any dividend or other distribution within 60 days after the
date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of the Indenture; (ii) the redemption,
repurchase, retirement or other acquisition of any Equity Interests of the
Company (other than Disqualified Stock) in exchange for, or out of the
proceeds of, the substantially concurrent sale (other than to a Subsidiary of
the Company) of other Equity Interests of the Company (other than Disqualified
Stock); provided that the amount of any such net cash proceeds that are
utilized for any such redemption, repurchase, retirement or other acquisition
shall be excluded from clause (c) of the preceding paragraph (both for
purposes of determining the aggregate amount of Restricted Payments made and
for purposes of determining the aggregate amount of Restricted Payments
permitted); (iii) the payment, purchase, redemption, defeasance or other
acquisition or retirement for value of Subordinated Indebtedness with the net
cash proceeds from a substantially concurrent Incurrence of Permitted
Refinancing Indebtedness or the substantially concurrent sale (in each case
other than to a Subsidiary of the Company) of Equity Interests of the Company
(other than Disqualified Stock); provided that the amount of any such net cash
proceeds that are utilized for any such payment, purchase, redemption,
defeasance or other acquisition or retirement shall be excluded from clause
(c) of the preceding paragraph (both for purposes of determining the aggregate
amount of Restricted Payments made and for purposes of determining the
aggregate amount of
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Restricted Payments permitted); (iv) so long as no Default or Event of Default
is continuing, the repurchase of Equity Interests of the Company from former
employees of the Company or any Restricted Subsidiary thereof (or the estates,
heirs or legatees of such former employees) for consideration which does not
exceed $500,000 in the aggregate in any fiscal year; (v) any Restricted
Investment made with the net cash proceeds from a substantially concurrent
sale (other than to a Subsidiary of the Company) of Equity Interests of the
Company (other than Disqualified Stock) and (vi) so long as no Default or
Event of Default is continuing, any Restricted Investment which, together with
all other Restricted Investments outstanding made pursuant to this clause (vi)
does not exceed $5 million. Except to the extent specifically noted above,
Restricted Payments made pursuant to this paragraph shall be included in
calculating the amount of Restricted Payments made after the Issue Date.
The amount of all Restricted Payments not made in cash shall be the Fair
Market Value (which, if it exceeds $1 million, shall be determined by, and set
forth in, a resolution of the Board of Directors of the Company and described
in an Officers' Certificate delivered to the Trustee) on the date of the
Restricted Payment of the asset(s) proposed to be transferred by the Company
or any Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. Not later than the date of making any Restricted Payment, the Company
shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payments were permitted and setting forth the basis upon which the
calculations required by the covenant described under the caption "--Certain
Covenants-- Limitation on Restricted Payments" were computed, which
calculations may be based upon the Company's latest available financial
statements.
LIMITATION ON DIVIDENDS AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, assume or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary to (i)
(a) pay dividends or make any other distributions to the Company or any of its
Restricted Subsidiaries on its Capital Stock or with respect to any other
interest or participation in, or measured by, its profits or (b) pay any
Indebtedness owed to the Company or any of its Restricted Subsidiaries, (ii)
make loans or advances to the Company or any of its Restricted Subsidiaries,
(iii) transfer any of its properties to the Company or any of its Restricted
Subsidiaries, (iv) grant any Liens in favor of the Holders of the Notes and
the Trustee or (v) guarantee the Notes or any renewals or refinancings
thereof, except for such encumbrances or restrictions existing under or by
reason of (A) Existing Indebtedness, (B) the Senior Credit Facility, (C)
applicable law, (D) any instrument governing Indebtedness or Capital Stock of
a Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was Incurred in connection with or in contemplation of such acquisition),
which encumbrance or restriction is not applicable to any Person, or the
properties of any Person, other than the Person, or the property of the
Person, so acquired, provided that in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be Incurred, (E)
customary non-assignment provisions in leases, licenses, sales agreements or
other contracts (but excluding contracts related to the extension of credit)
entered into in the ordinary course of business and consistent with past
practices, (F) restrictions imposed pursuant to a binding agreement for the
sale or disposition of all or substantially all of the Equity Interests or
assets of any Restricted Subsidiary, provided such restrictions apply solely
to the Equity Interests or assets being sold, (G) restrictions imposed by
Permitted Liens on the transfer of the assets that are subject to such Liens,
(H) Permitted Refinancing Indebtedness Incurred to refinance Existing
Indebtedness or Indebtedness of the type described in clause (D) above,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive, as a whole, than
those contained in the agreements governing the Indebtedness being refinanced,
and (I) the terms of Purchase Money Indebtedness, but only to the extent such
Purchase Money Indebtedness encumbers or restricts the property acquired with
such Purchase Money Indebtedness.
LIMITATIONS ON LAYERING INDEBTEDNESS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, Incur any Indebtedness
(other than the Notes) that is subordinate in right of payment to
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any other Indebtedness of the Company or a Restricted Subsidiary unless, by
its terms, such Indebtedness is subordinate in right of payment to, or ranks
pari passu with, the Notes or the Subsidiary Guarantees, as applicable.
LIMITATION ON LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, affirm,
assume or suffer to exist any Liens of any kind, other than Liens securing
Senior Indebtedness and Permitted Liens, against or upon any assets or
property now owned or hereafter acquired or any income or profits therefrom or
assign or convey any right to receive income therefrom, unless (i) in the case
of Liens securing Subordinated Indebtedness, the Notes are secured by a valid,
perfected Lien on such assets, property or proceeds that is senior in priority
to such Liens, (ii) in the case of Liens securing obligations subordinate to a
Subsidiary Guarantee, such Subsidiary Guarantee is secured by a valid,
perfected Lien on such assets, property or proceeds that is senior in priority
to such Liens, and (iii) in all other cases, the Notes (and, if such Lien
secures obligations of a Restricted Subsidiary, a Subsidiary Guarantee of such
Restricted Subsidiary) are equally and ratably secured.
LIMITATION ON SALE OF ASSETS AND RESTRICTED SUBSIDIARY STOCK
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, engage in an Asset Sale, unless (i) the
Company or such Restricted Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to the Fair Market
Value (which, if it exceeds $1 million, shall be determined by, and set forth
in, a resolution of the Board of Directors of the Company and described in an
Officers' Certificate of the Company delivered to the Trustee) of the assets
(including, if appropriate, Equity Interests) disposed of or issued, as
appropriate, and (ii) at least 75% of the consideration therefor received by
the Company or such Restricted Subsidiary is in the form of cash or Cash
Equivalents; provided, that the 75% limitation referred to above shall not
apply to any Asset Sale in which the cash portion of the consideration
received therefor, determined in accordance with the following sentence, is
equal to or greater than what the after-tax net proceeds would have been had
such transaction complied with the aforementioned 75% limitation. For purposes
of this covenant (and not for purposes of any other provision of the
Indenture), the term "cash" shall be deemed to include (a) any notes or other
obligations received by the Company or such Restricted Subsidiary as
consideration as part of such Asset Sale that are immediately converted by the
Company or such Restricted Subsidiary into actual cash or Cash Equivalents (to
the extent of the actual cash or Cash Equivalents so received), and (b) any
liabilities of the Company or such Restricted Subsidiary (as shown on the most
recent balance sheet of the Company or such Restricted Subsidiary) that (1)
are assumed by the transferee of the assets which are the subject of such
Asset Sale as consideration therefor in a transaction the result of which is
that the Company and all of its Subsidiaries are released from all liability
for such assumed liability, (2) are not by their terms subordinated in right
of payment to the Notes, (3) are not owed to the Company or any Subsidiary of
the Company, and (4) constitute short-term liabilities (as determined in
accordance with GAAP).
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply, directly or indirectly, such Net Proceeds (a) to repay
permanently Senior Indebtedness of the Company or Senior Indebtedness of the
Restricted Subsidiaries, or (b) to the making of a capital expenditure or the
acquisition of other long-term assets, in each case, in a Related Business.
Pending the final application of any such Net Proceeds, the Company or the
Restricted Subsidiaries, as the case may be, may temporarily reduce
Indebtedness under the Senior Credit Facility or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indenture. Any Net
Proceeds from Asset Sales that are not applied or invested as provided in the
first sentence of this paragraph will be deemed to constitute "Excess
Proceeds." When the aggregate amount of Excess Proceeds exceeds $10 million,
the Company shall make an offer to all Holders of Notes (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes that may be
purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof, plus accrued and unpaid
interest and Liquidated Damages, if any, to the date of purchase, in
accordance with the procedures set forth in the Indenture. If the aggregate
principal amount of Notes tendered by Holders thereof is less than the amount
of
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Excess Proceeds, the Company may use any remaining Excess Proceeds for general
corporate purposes. Upon completion of such offer to purchase, the amount of
Excess Proceeds shall be reset at zero.
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, transfer, convey, sell, lease or otherwise
dispose of any Capital Stock of any Restricted Subsidiary to any Person (other
than the Company or a Wholly Owned Restricted Subsidiary of the Company),
unless (i) such transfer, conveyance, sale, lease or other disposition is of
all of the Capital Stock of such Restricted Subsidiary owned by the Company
and its Restricted Subsidiaries or is otherwise permitted under the covenant
described under the caption "--Certain Covenants--Limitations on Issuance,
Sale and Ownership of Capital Stock of Restricted Subsidiaries" and (ii) such
transaction is conducted in accordance with the covenant described in the
preceding two paragraphs.
The Company will comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of Notes using Excess Proceeds.
LIMITATION ON ISSUANCE, SALE AND OWNERSHIP OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to (i) sell, assign, transfer, convey or otherwise
dispose of, any Equity Interests of any Restricted Subsidiary, other than to
the Company or a Wholly Owned Restricted Subsidiary, (ii) permit any
Restricted Subsidiary to issue any Equity Interests (including, without
limitation, pursuant to any merger, consolidation, recapitalization or similar
transaction) other than to the Company or a Wholly Owned Restricted Subsidiary
or (iii) permit any Person other than the Company or a Wholly Owned Restricted
Subsidiary to own any Equity Interests of any Restricted Subsidiary, except
that (A) the Company or a Restricted Subsidiary may consummate a sale to a
Person of all of the Equity Interests of a Restricted Subsidiary if such sale
is made by the Company or a Restricted Subsidiary in compliance with the
covenant described under the caption "--Certain Covenants--Limitation on Sale
of Assets and Restricted Subsidiary Stock," (B) the Company may issue, and
permit the subsequent ownership by directors of, directors' qualifying shares,
(C) in the event that the Company acquires less than 100% (on a fully diluted
basis) of the Shelter Shares, the remaining Shelter Shares may be owned by
other Persons until such shares are acquired by the Company or a Wholly Owned
Restricted Subsidiary of the Company or until the merger of Shelter with the
Company or a Wholly Owned Restricted Subsidiary of the Company is consummated,
and (D) the Company may permit the Persons (other than the Company and its
Restricted Subsidiaries) who own Equity Interests in Encore Industries, Inc.
to continue to own the number of shares of such Equity Interests owned by such
other Persons as of the Issue Date.
LIMITATION ON TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate of the Company (other than the Company or a Restricted
Subsidiary), in one transaction or a series of transactions (each of the
foregoing an "Affiliate Transaction"), unless (i) such Affiliate Transaction
is on terms that are no less favorable to the Company or the relevant
Restricted Subsidiary than those that would have been obtained in a comparable
transaction with an unrelated Person and (ii) the Company delivers to the
Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions after the Issue Date involving aggregate consideration
in excess of $1 million, a resolution described in an Officers' Certificate,
certifying that such Affiliate Transaction complies with clause (i) above and
such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors of the Company and (b) with
respect to any Affiliate Transaction or series of related Affiliate
Transactions after the Issue Date involving aggregate consideration in excess
of $5 million, an opinion as to the fairness to the Company of such Affiliate
Transaction from a financial point of view issued by an independent nationally
recognized investment banking firm or appraisal firm experienced in the
appraisal or
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similar review of similar types of transactions; provided that the following
types of transactions shall not constitute Affiliate Transactions: (1) any
transaction with an officer or director of the Company or any Restricted
Subsidiary in connection with such individual's compensation (including
directors' fees), employee benefits, severance arrangements or indemnification
(to the extent consistent with applicable law and the charter and bylaws of
the Company or such Restricted Subsidiary), in each case entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of
business, (2) transactions between or among the Company and Restricted
Subsidiaries, (3) Restricted Payments that are permitted by the provisions of
the covenant described under the caption "--Certain Covenants--Limitation on
Restricted Payments"; (4) sales of Capital Stock of the Company made at
prevailing market rates; (5) transactions or agreements existing as of the
Issue Date, including those described under the caption "Management
Compensation--Compensation Committee Interlocks and Insider Participation" and
"Management Compensation--Certain Transactions"; and (6) loans to officers,
directors and employees of the Company and Restricted Subsidiaries made in the
ordinary course of business and in furtherance of the Company's business in an
aggregate amount not to exceed $1 million at any one time outstanding.
SALE AND LEASEBACK TRANSACTIONS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
provided that the Company and any Restricted Subsidiary may enter into a sale
and leaseback transaction if (a) the Company or such Restricted Subsidiary
could have (i) Incurred Indebtedness in an amount equal to the Attributable
Debt relating to such sale and leaseback transaction pursuant to the Debt
Incurrence Ratio test set forth in the first paragraph of the covenant
described under the caption "--Certain Covenants--Limitation on Incurrence of
Indebtedness" and (ii) incurred a Lien to secure such Indebtedness pursuant to
the covenant described under the caption "--Certain Covenants--Limitation on
Liens," (b) the gross cash proceeds of such sale and leaseback transaction are
at least equal to the Fair Market Value (as determined in good faith by the
Board of Directors and set forth in an Officers' Certificate delivered to the
Trustee) of the property that is the subject of such sale and leaseback
transaction and (c) the transfer of assets in such sale and leaseback
transaction is permitted by, and the proceeds of such sale and leaseback
transaction are applied in compliance with, the covenant described under the
caption "--Certain Covenants--Limitation on Sales of Assets and Restricted
Subsidiary Stock."
LIMITATION ON MERGER, SALE OR CONSOLIDATION
The Indenture provides that the Company may not consolidate or merge with or
into (whether or not the Company is the surviving entity), or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of
its properties or assets in one or more related transactions to, another
Person, unless (i) the Company is the surviving entity, or the Person formed
by or surviving any such consolidation or merger (if other than the Company)
or to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made is a corporation organized or existing under
the laws of the United States, any state thereof or the District of Columbia;
(ii) the Person formed by or surviving any such consolidation or merger (if
other than the Company) or the Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Notes and the Indenture pursuant
to a supplemental indenture in a form reasonably satisfactory to the Trustee;
(iii) immediately after giving effect to such transaction, no Default or Event
of Default exists or would exist; (iv) except in the case of a merger of the
Company with or into a Wholly Owned Restricted Subsidiary of the Company, the
Company or the Person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, assignment, transfer,
lease, conveyance or other disposition shall have been made (A) will (treating
any Indebtedness not previously an obligation of the Company or any of its
Restricted Subsidiaries as a result of such transaction as having been
Incurred at the time of such transaction) have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated
Net Worth of the Company immediately preceding the transaction and (B) will,
at the time of such transaction and after giving pro forma effect thereto as
if such transaction had occurred at the beginning of the applicable Reference
Period, be
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permitted to Incur at least $1.00 of additional Indebtedness pursuant to the
Debt Incurrence Ratio test set forth in the first paragraph of the covenant
described under the caption "--Certain Covenants--Limitation on Incurrence of
Indebtedness"; and (v) 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 the Indenture. For purposes of the foregoing, the transfer (by
lease, assignment, sale or otherwise, in a single transaction or series of
transactions) of all or substantially all of the properties or assets of one
or more of the Restricted Subsidiaries of the Company, the Capital Stock of
which constitutes all or substantially all of the properties and assets of the
Company, shall be deemed to be the transfer of all or substantially all of the
properties and assets of the Company. For restrictions on mergers,
consolidations and disposition of assets involving Restricted Subsidiaries,
see provisions under the caption "--Subsidiary Guarantees."
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors of the Company may designate any Restricted
Subsidiary to be an Unrestricted Subsidiary if (i) such designation would not
cause a Default or Event of Default, (ii) at the time of and after giving
effect to such designation, the Company could incur $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio test set forth in the first
paragraph of the covenant under the caption "--Certain Covenants-- Limitation
on Incurrence of Indebtedness," and (iii) each of the other requirements of
the definition of the term "Unrestricted Subsidiary" are satisfied. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash)
in the Subsidiary so designated will be deemed to be Restricted Payments at
the time of such designation and will reduce the amount available for
Restricted Payments under clause (c) of the first paragraph of the covenant
under the caption "--Certain Covenants--Limitation on Restricted Payments."
All such outstanding Investments will be deemed to constitute Restricted
Payments in an amount equal to the greater of (i) the net book value of such
Investments at the time of such designation and (ii) the Fair Market Value of
such Investments at the time of such designation. Such designation will only
be permitted if such Restricted Payment would be permitted at such time and if
such Restricted Subsidiary otherwise meets the definition of an Unrestricted
Subsidiary. Upon being so designated as an Unrestricted Subsidiary, any
Subsidiary Guarantee that was previously executed by such Unrestricted
Subsidiary shall be deemed terminated.
LIMITATION ON LINES OF BUSINESS
The Indenture provides that neither the Company nor any of its Restricted
Subsidiaries shall directly or indirectly engage in any line or lines of
business activity other than a Related Business.
PAYMENTS FOR CONSENT
The Indenture provides that the Company will not and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, pay or cause to be
paid any consideration, whether by way of interest, fee or otherwise, to any
Holder of any Notes for or as an inducement or any consent, waiver or
amendment of any of the terms or provisions of the Indenture or the Notes or
the Subsidiary Guarantees, unless such consideration is offered to be paid or
agreed to be paid to all Holders of the Notes that consent, waive or agree to
amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
FUTURE SUBSIDIARY GUARANTORS
The Indenture provides that all Subsidiaries (other than Unrestricted
Subsidiaries) will, jointly and severally, Guarantee irrevocably and
unconditionally the payment of all principal of, premium, if any, interest and
Liquidated Damages on the Notes on a senior subordinated basis, and requires
the Company to cause any Person that becomes a Subsidiary (other than an
Unrestricted Subsidiary), including any Subsidiary that was previously an
Unrestricted Subsidiary and which becomes a Restricted Subsidiary, after the
Issue Date to execute and deliver to the Trustee a supplemental indenture
pursuant to which such Restricted Subsidiary will Guarantee the payment of
principal of, premium, if any, interest and Liquidated Damages on the Notes.
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LIMITATION ON STATUS AS INVESTMENT COMPANY
The Indenture prohibits the Company and its Restricted Subsidiaries from
being required to register as an "investment company" (as that term is defined
in the Investment Company Act of 1940, as amended), or from otherwise becoming
subject to regulation under the Investment Company Act.
REPORTS
The Indenture provides that whether or not the Company is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall deliver to the Trustee and, to each Holder and to prospective purchasers
of Notes identified to the Company by an Initial Purchaser, within 15 days
after it is or would have been (if it were subject to such reporting
obligations) required to file such with the Commission, annual and quarterly
financial statements substantially equivalent to financial statements that
would have been included in reports filed with the Commission, if the Company
were subject to the requirements of Section 13 or 15(d) of the Exchange Act,
including, with respect to annual information only, a report thereon by the
Company's certified independent public accountants as such would be required
in such reports to the Commission, and, in each case, together with a
management's discussion and analysis of financial condition and results of
operations which would be so required and, unless the Commission will not
accept such reports, file with the Commission the annual, quarterly and other
reports which it is or (if it were subject to such reporting obligations),
would have been required to file with the Commission.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by
the subordination provisions of the Indenture), (ii) default in payment when
due of the principal of or premium, if any, on the Notes (whether or not
prohibited by the subordination provisions of the Indenture), (iii) failure by
the Company to comply with the provisions described under the captions "--
Certain Covenants--Repurchase of Notes at the Option of the Holder Upon a
Change of Control," "--Certain Covenants--Limitation on Sales of Assets and
Restricted Subsidiary Stock," or "--Certain Covenants--Limitation on Merger,
Sale or Consolidation," (iv) failure by the Company for 30 days after written
notice from the Trustee or Holders of 25% in principal amount of the then
outstanding Notes to comply with any other covenant or agreement (except as
provided in clause (i), (ii) and (iii) above) in the Indenture or the Notes,
(v) except as permitted by the Indenture, any Subsidiary Guarantee shall be
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Subsidiary Guarantor, or
any Person acting on behalf of any Subsidiary Guarantor, shall deny or
disaffirm its obligations under its Subsidiary Guarantee, (vi) default under
any mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any Indebtedness of the Company or any
of its Restricted Subsidiaries (or the payment of which is Guaranteed by the
Company or any of its Restricted Subsidiaries) whether such Indebtedness or
Guarantee now exists, or is created after the Issue Date, which default (a) is
caused by a failure to pay principal when due at final stated maturity (a
"Payment Default"), or (b) results in the acceleration of such Indebtedness
prior to its express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any other such
Indebtedness under which there has been a Payment Default or the maturity of
which has been so accelerated, aggregates $10 million or more, (vii) failure
by the Company or any of its Restricted Subsidiaries to pay final judgments
aggregating in excess of $10 million, which judgments are not paid, discharged
or stayed for a period of 60 days and are not covered by insurance and (viii)
certain events of bankruptcy, insolvency or reorganization in respect of the
Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing (other than an Event of
Default specified in clause (viii) above), then either the Trustee or the
Holders of at least 25% in principal amount of the then outstanding Notes by
notice in writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice") may declare all outstanding Notes to be due and
payable, and the same (i) shall become immediately due and payable,
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or (ii) if there are any amounts outstanding under the Senior Credit Facility,
shall become immediately due and payable upon the first to occur of an
acceleration under the Senior Credit Facility or five Business Days after
receipt by the Company and the representative of the holders of the
Indebtedness under the Senior Credit Facility of such Acceleration Notice, but
only if such Event of Default is then continuing. Notwithstanding the
foregoing, in the case of an Event of Default specified in clause (viii)
above, all outstanding Notes will be immediately due and payable without
declaration or other action or notice on the part of the Trustee or the
Holders of the Notes. Holders of the Notes may not enforce the Indenture or
the Notes, except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Notes may direct the Trustee in its exercise of any trust or power. In the
event of a declaration of acceleration of the Notes because an Event of
Default has occurred and is continuing as a result of the acceleration of any
Indebtedness described in clause (vi) of the preceding paragraph, the
declaration of acceleration of the Notes shall be automatically annulled if
the holders of any Indebtedness described in clause (vi) have rescinded the
declaration of acceleration in respect of such Indebtedness within 30 days of
the date of such declaration and the Trustee has received written notice of
such rescission and if (a) the annulment of the acceleration of the Notes
would not conflict with any judgment or decree of a court of competent
jurisdiction, and (b) all existing Events of Default, except nonpayment of
principal, premium, if any, or interest or Liquidated Damages on the Notes
that became due solely because of the acceleration of the Notes, have been
cured or waived. The Trustee may withhold from the Holders of the Notes notice
of any continuing Default or Event of Default (except a Default or Event of
Default relating to the payment of principal or interest) if it determines
that withholding notice is in their interest.
In the case of any Event of Default occurring by reason of any willful
action (or inaction) taken (or not taken) by or on behalf of the Company with
the intention of avoiding payment of the premium that the Company would have
had to pay if the Company then had elected to redeem the Notes pursuant to the
optional redemption provisions of the Indenture, an equivalent premium shall
also become and be immediately due and payable to the extent permitted by law
upon the acceleration of the Notes. If an Event of Default occurs prior to
December 1, 2002, by reason of any willful action (or inaction) taken (or not
taken) by or on behalf of the Company with the intention of avoiding the
prohibition on redemption of the Notes prior to December 1, 2002, then the
premium specified in the Indenture shall also become immediately due and
payable to the extent permitted by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of
the Notes waive any existing Default or Event of Default and its consequences
under the Indenture except a continuing Default or Event of Default in the
payment of the principal of, premium, if any, interest or Liquidated Damages,
if any, on such Notes which may only be waived with the consent of each Holder
of the Notes affected.
Upon any payment or distribution of assets of the Company and its
Subsidiaries in a total or partial liquidation, dissolution, reorganization or
similar proceeding, including a Default under clause (viii) above, there may
not be sufficient assets remaining to satisfy the claims of any Holders of
Notes given the contractual subordination of the Notes and the Subsidiary
Guarantees to Senior Indebtedness of the Company and the Restricted
Subsidiaries, respectively. See "Risk Factors--Subordination."
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time,
elect to have its obligations and the obligations of the Subsidiary Guarantors
discharged with respect to the outstanding Notes ("Legal Defeasance"). Such
Legal Defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented, and the Indenture shall cease
to be of further effect as to all outstanding Notes and Subsidiary Guarantees,
except as to (i) rights of Holders to receive payments in respect of the
principal
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of, premium, if any, interest and Liquidated Damages on such Notes when such
payments are due from the trust funds; (ii) the Company's obligations with
respect to such Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes, and the maintenance of an
office or agency for payment and money for security payments held in trust;
(iii) the rights, powers, trust, duties, and immunities of the Trustee, and
the Company's obligations in connection therewith; and (iv) the Legal
Defeasance provisions of the Indenture. In addition, the Company may, at its
option and at any time, elect to have the obligations of the Company and the
Subsidiary Guarantors released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, guarantees, bankruptcy,
receivership, rehabilitation and insolvency events) described under "Events of
Default" will no longer constitute an Event of Default with respect to the
Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders of the Notes, U.S. legal tender, Government Securities or a
combination thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such Notes on the stated date
for payment thereof or on the redemption date of such principal or installment
of principal of, premium, if any, or interest on such Notes, and the Holders
of Notes must have a valid, perfected, exclusive security interest in such
trust; (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by the Internal Revenue Service, a ruling or (B)
since the date of the 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 Holders of such Notes will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to such Trustee confirming
that the Holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance shall not result in a breach or violation of, or
constitute a default under the 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; (vi) the Company shall
have delivered to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders
of such Notes over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the
Company or others; and (vii) the Company shall have delivered to the Trustee
an Officers' Certificate and an opinion of counsel, each stating that the
conditions precedent provided for in, in the case of the officers'
certificate, (i) through (vi) and, in the case of the opinion of counsel,
clauses (i) (with respect to the validity and perfection of the security
interest), (ii), (iii) and (v) of this paragraph have been complied with.
If the funds deposited with the Trustee to effect Legal Defeasance or
Covenant Defeasance are insufficient to pay the principal of, premium, if any,
interest and Liquidated Damages on the Notes when due, then the obligations of
the Company and the Subsidiary Guarantors under the Indenture will be revived
and no such defeasance will be deemed to have occurred.
TRANSFER AND EXCHANGE
Holders of Notes may transfer or exchange their Notes in accordance with the
Indenture, but the Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents, and to
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pay any taxes and fees required by law or permitted by the Indenture, in
connection with any such transfer or exchange. Neither the Company nor the
Registrar is required to issue, register the transfer of, or exchange (i) any
Note selected for redemption or tendered pursuant to an Offer, or (ii) any
Note during the period between (a) the date the Trustee receives notice of a
redemption from the Company and the date the Notes to be redeemed are selected
by the Trustee or (b) a record date and the next succeeding interest payment
date. The registered Holder of a Note will be treated as its owner for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Subject to certain exceptions, the Indenture may be amended or supplemented
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding under such Indenture, and any existing Default or
Event of Default (other than a payment default) or compliance with any
provision may be waived with the consent of the Holders of a majority in
principal amount of the Notes then outstanding under the Indenture. Without
the consent of any Holder of Notes, the Company, the Subsidiary Guarantors and
the Trustee may amend or supplement the Indenture or the Notes to, among other
things, cure any ambiguity, defect or inconsistency, to provide for
uncertificated Notes in addition to or in place of certificated Notes, to
provide for the assumption by a successor corporation of the Company's
obligations to the Holders of Notes in accordance with the covenant described
under the caption "--Certain Covenants--Limitation on Merger, Sale or
Consolidation," to add further Subsidiary Guarantees with respect to the
Notes, to release Subsidiary Guarantors when permitted by the Indenture, to
secure the Notes, to add to the covenants of the Company and any Restricted
Subsidiary of the Company for the benefit of the Holders of the Notes or to
surrender any right or power conferred upon the Company or any Restricted
Subsidiary of the Company, to comply with the Trust Indenture Act, or to make
any change that does not materially adversely affect the legal rights of any
Holder of Notes.
Without the consent of each Holder of Notes affected, the Company may not
(i) reduce the principal amount of Notes whose Holders must consent to an
amendment to the Indenture or a waiver under the Indenture; (ii) reduce the
rate of or change the interest payment time of the Notes, or alter the
provisions with respect to the redemption of the Notes (other than the
provisions relating to the covenants described above under the captions "--
Certain Covenants--Repurchase of Notes at the Option of the Holder Upon a
Change of Control" and "--Certain Covenants--Limitation on Sales of Assets and
Restricted Subsidiary Stock"); (iii) reduce the principal of or change the
fixed maturity of the Notes; (iv) make the Notes payable in money other than
as stated in the Notes; (v) make any change in the provisions concerning
waiver of Defaults or Events of Default by Holders of the Notes, or rights of
Holders of the Notes to receive payment of principal or interest; (vi) waive
any Default or Event of Default in the payment of principal of, premium, if
any, or unpaid interest on, and Liquidated Damages, if any, with respect to
the Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the Notes and waiver of
the payment default that resulted from such acceleration); (vii) make any
change to the subordination provisions of the Indenture and the Notes in a
manner that materially adversely affects the legal rights of any Holder of the
Notes; (viii) waive a redemption or repurchase payment with respect to any
Note (other than a payment required by one of the covenants described above
under the captions "--Certain Covenants--Repurchase of Notes at the Option of
the Holder Upon a Change of Control" and "--Certain Covenants--Limitations on
Sales of Assets and Restricted Subsidiary Stock"); (ix) make any change in the
foregoing amendment and waiver provisions; or (x) except as provided under the
caption "--Legal Defeasance and Covenant Defeasance" or in accordance with the
terms of any Subsidiary Guarantee, release a Subsidiary Guarantor from its
obligations under its Subsidiary Guarantee or make any change in a Subsidiary
Guarantee that would adversely affect the Holders of the Notes.
Notwithstanding the foregoing, any amendment or waiver to the covenants
described above under the captions "--Certain Covenants--Repurchase of Notes
at the Option of the Holder Upon a Change of Control" and "--Certain
Covenants--Limitation on Sales of Assets and Restricted Subsidiary Stock,"
will require the consent of the Holders of at least two-thirds in aggregate
principal amount of the Notes then outstanding if such amendment would
adversely affect the rights of Holders of Notes.
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The subordination provisions contained in the Indenture are for the benefit
of the holders from time to time of Senior Indebtedness and may not be
rescinded, canceled, amended or modified in any way other than any amendment
or modification that would not adversely affect the rights of any holder of
Senior Indebtedness or any amendment or modification that is consented to by
each holder of Senior Indebtedness that would be adversely affected thereby.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of the Company, the
Subsidiary Guarantors or any successor entity shall have any personal
liability in respect of the obligations of the Company or the Subsidiary
Guarantors under the Indenture or the Notes by reason of his or its status as
such stockholder, employee, officer or director, except to the extent such
Person is the Company or a Subsidiary Guarantor.
CERTAIN DEFINITIONS
"Acquired Indebtedness" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Restricted Subsidiary of such specified
Person, including, without limitation, Indebtedness Incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Restricted Subsidiary of such specified Person and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such
specified Person.
"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 purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled
by" and "under common control with"), as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise;
provided that Beneficial Ownership of 10% or more of the voting securities of
a Person shall be deemed to be control.
"Asset Sale" means (a) the direct or indirect sale, lease, license,
conveyance, transfer or other disposition of any assets or rights (including,
without limitation, by way of a sale and leaseback or similar arrangement, by
merger or consolidation) by the Company or a Restricted Subsidiary (a
"disposition"), in one transaction or a series of transactions; provided that
the disposition of all or substantially all of the assets of the Company and
its Restricted Subsidiaries taken as a whole will be governed by the
provisions of the Indenture described under the caption "--Repurchase of Notes
at the Option of the Holder Upon a Change of Control" and/or the provisions
described under the caption "--Certain Covenants--Limitation on Merger, Sale
or Consolidation" and not by the provisions of the covenant described under
the caption "--Certain Covenants--Limitation on Sales of Assets and Restricted
Subsidiary Stock," and (b) the issuance or disposition by the Company or any
of its Restricted Subsidiaries of Equity Interests of the Company's Restricted
Subsidiaries. Notwithstanding the foregoing, none of the following will be
deemed an Asset Sale: (i) a disposition of assets by the Company to a
Restricted Subsidiary or by a Restricted Subsidiary to the Company or to a
Restricted Subsidiary; (ii) an issuance of Equity Interests by a Restricted
Subsidiary to the Company or to a Restricted Subsidiary; (iii) a Restricted
Payment that is permitted by the covenant described under the caption "--
Certain Covenants--Limitation on Restricted Payments;" (iv) dispositions of
$250,000 or less; (v) dispositions of assets or rights in the ordinary course
of business consistent with past practices; (vi) a disposition of assets on or
before the second anniversary of the Issue Date which meets the requirements
of the first paragraph of the covenant described under the caption "--Certain
Covenants--Limitation on Sale of Assets and Restricted Subsidiary Stock" the
proceeds of which are used for Shelter Transition Expenditures on or before
the second anniversary of the Issue Date; (vii) the grant in the ordinary
course of business of any non-exclusive license of intellectual property
rights; (viii) any liquidation of any Cash Equivalent; (ix) any disposition of
defaulted receivables for collection; and (x) the grant of any Lien securing
Indebtedness (or any foreclosure thereon) to the extent that such Lien is
granted in compliance with the covenant set forth under the caption "--Certain
Covenants--Limitation on Liens."
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"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value (discounted at the rate of
interest implicit in such transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in such sale and leaseback transaction (including any
period for which such lease has been extended or may, at the option of the
lessor, be extended).
"Average Life" means, as of the date of determination, with respect to any
security or instrument, the quotient obtained by dividing (i) the sum of the
products (a) of the number of years from the date of determination to the date
or dates of each successive scheduled principal (or redemption) payment of
such security or instrument and (b) the amount of each such respective
principal (or redemption) payment by (ii) the sum of all such principal (or
redemption) payments.
"Beneficial Owner" or "beneficial owner" (including, with correlative
meanings, the terms "Beneficial Ownership" and "Beneficially Owns") for
purposes of the definition of Change of Control has the meaning attributed to
it in Rules 13d-3 and 13d-5 under the Exchange Act (as in effect on the Issue
Date), whether or not applicable, except that a "person" (as such term is used
in Sections 13(d)(3) of the Exchange Act) 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.
"Board of Directors" means, with respect to any Person, the board of
directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the
power of the board of directors of such Person.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in New York, New York are
authorized or obligated by law or executive order to close.
"Capitalized Lease Obligation" means, as to any Person, the obligations of
such Person under a lease that are required to be classified and accounted for
as capital lease obligations under GAAP and, for purposes of this definition,
the amount of such obligations at any date shall be the capitalized amount of
such obligations at such date, determined in accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership, partnership interests
(whether general or limited) and (iv) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) Government Securities having maturities of not
more than twelve months from the date of acquisition, (ii) certificates of
deposit and eurodollar time deposits with maturities of twelve months or less
from the date of acquisition, bankers' acceptances with maturities not
exceeding six months and overnight bank deposits, in each case with any member
bank of the U.S. Federal Reserve System having capital and surplus in excess
of $500 million, (iii) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clause (i)
above entered into with any financial institution meeting the qualifications
specified in clause (ii) above, and (iv) commercial paper having the rating of
at least P-1 from Moody's Investors Service, Inc. ("Moody's"), or any
successor to its rating business, or at least A-1 from Standard & Poor's
Ratings Group ("S&P"), or any successor to its rating business, and in each
case maturing within 180 days after the date of acquisition.
"Consolidated Coverage Ratio" of any Person on any date of determination
(the "Transaction Date") means the ratio, on a pro forma basis, of (a) the
aggregate amount of Consolidated EBITDA of such Person attributable to
continuing operations and businesses (exclusive of amounts attributable to
operations and businesses discontinued or disposed of) for the Reference
Period to (b) the aggregate Consolidated Fixed Charges
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of such Person (exclusive of amounts attributable to operations and businesses
discontinued or disposed of, but only to the extent that the obligations
giving rise to such Consolidated Fixed Charges would no longer be obligations
contributing to such Person's Consolidated Fixed Charges subsequent to the
Transaction Date) during the Reference Period; provided, that for purposes of
such calculation, (i) acquisitions which occurred during the Reference Period
or subsequent to the Reference Period and on or prior to the Transaction Date
shall be assumed to have occurred on the first day of the Reference Period,
(ii) transactions giving rise to the need to calculate the Consolidated
Coverage Ratio shall be assumed to have occurred on the first day of the
Reference Period, (iii) the Incurrence of any Indebtedness or issuance of any
Disqualified Stock during the Reference Period or subsequent to the Reference
Period and on or prior to the Transaction Date (and the application of the
proceeds therefrom to the extent used to refinance or retire other
Indebtedness) shall be assumed to have occurred on the first day of such
Reference Period, and (iv) the Consolidated Fixed Charges of such Person
attributable to interest on any Indebtedness or dividends on any Disqualified
Stock bearing a floating interest (or dividend) rate shall be computed on a
pro forma basis as if the average rate in effect from the beginning of the
Reference Period to the Transaction Date had been the applicable rate for the
entire period, unless such Person or any of its Subsidiaries is a party to a
Hedging Obligation (which by its terms will remain in effect for the 12-month
period immediately following the Transaction Date) that has the effect of
fixing the interest rate on the date of computation, in which case such rate
(whether higher or lower) shall be used.
"Consolidated EBITDA" means, with respect to any Person, for any period, the
Consolidated Net Income of such Person for such period adjusted to add thereto
(to the extent deducted in determining Consolidated Net Income), without
duplication, the sum of (i) consolidated income tax expense, (ii) consolidated
depreciation and amortization expense, and other non-cash charges required to
be reflected as expenses for such period on the books and records of such
Person and (iii) Consolidated Fixed Charges, less the amount of all cash
payments made by such Person or any of its Restricted Subsidiaries during such
period to the extent such payments relate to non-cash charges that were added
back in determining Consolidated EBITDA for such period or any prior period.
"Consolidated Fixed Charges" means, with respect to any Person for any
period, the sum of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and
original issue discount, non cash interest payments, the interest component of
any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, interest payments in respect of Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net
payments (if any) pursuant to Hedging Obligations), (ii) the consolidated
interest expense of such Person and its Restricted Subsidiaries that was
capitalized during such period, in each case, on a consolidated basis and in
accordance with GAAP, and (iii) the product of (A) the aggregate amount of
dividends paid (to the extent not accrued in a prior period) or accrued on
Disqualified Stock of the Company and its Restricted Subsidiaries or preferred
stock of the Company's Restricted Subsidiaries, to the extent such
Disqualified Stock or preferred stock is owned by Persons other than the
Company and its Restricted Subsidiaries and (B) a fraction, the numerator of
which is one and the denominator of which is one minus the then current
combined federal, state, local and foreign statutory tax rate of such Person,
expressed as a decimal.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
provided that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the specified Person as to which Consolidated
Net Income is being calculated, (ii) the Net Income of any Restricted
Subsidiary shall be excluded to the extent that the declaration or payment of
dividends or similar distributions by such Restricted Subsidiary of such Net
Income would not be permitted at the date of determination directly or
indirectly, pursuant to the terms of its charter and
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by-laws and all agreements, instruments, judgments, decrees, orders, statutes,
rules or governmental regulations applicable to such Restricted Subsidiary or
its stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded, (iv) the cumulative effect of a change in accounting
principles shall be excluded, (v) income or loss attributable to discounted
operations shall be excluded, and (vi) any gain (but not loss) realized upon
the sale or other disposition of any property, plant or equipment of the
Company or its Restricted Subsidiaries (including pursuant to any sale and
leaseback transaction) which is not sold or otherwise disposed of in the
ordinary course of business and any gain (but not loss) realized upon the sale
or other disposition of any Capital Stock of any Person shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common equity holders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred equity (other than Disqualified Stock)
that by its terms is not entitled to the payment of dividends or other
distributions, unless such dividends or other distributions may be declared
and paid only out of net earnings in respect of the year of such declaration
and payment, but only to the extent of any cash received by such Person upon
issuance of such preferred equity, less (x) all write-ups (other than write-
ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Restricted Subsidiary of such
Person, (y) all investments as of such date in Persons that are not Restricted
Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Default" means any event or condition the occurrence of which is, or with
the lapse of time or the giving of notice or both would be, an Event of
Default.
"Designated Senior Indebtedness" means, (i) any Indebtedness outstanding
under the Senior Credit Facility and (ii) any other Senior Indebtedness
permitted under the Indenture the principal amount of which is $25 million or
more and that has been designated by the Company as "Designated Senior
Indebtedness."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
date that is 91 days after the date on which the Notes mature.
"Eligible Receivables" means the trade receivables of the Company and its
Restricted Subsidiaries less the allowance for doubtful accounts, each of the
foregoing determined in accordance with GAAP.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Existing Indebtedness" means Indebtedness of the Company and its Restricted
Subsidiaries in existence on the Issue Date after giving pro forma effect to
the Transactions.
"Existing Majority Stockholder" means (i) Jerry E. Kimmel; (ii) his
beneficiaries, estates, spouse and lineal descendants, legal representatives
of any of the foregoing and the trustee of any bona fide trust of which any of
the foregoing are the sole beneficiaries or grantors and (iii) all Affiliates
controlled by Jerry E. Kimmel (provided that, for purposes of this clause
(iii) only, the proviso set forth in the definition of the term "Affiliate"
shall be deemed modified to provide that Beneficial Ownership of 50% or more
of the voting securities of a Person shall constitute, and shall be necessary
to constitute, control).
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be obtained in an arm's-length transaction between an
informed and willing seller under no compulsion to sell and an informed
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and willing buyer under no compulsion to buy; provided that if such value
exceeds $1 million, such determination shall be made in good faith by the
Board of Directors of the Company.
"GAAP" means United States generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession in the United States as in effect on the Issue Date.
"Government Securities" means direct obligations of, or obligations fully
guaranteed by, or participations in pools consisting solely of obligations of
or obligations guaranteed by, the United States of America for the payment of
which guarantee or obligations the full faith and credit of the United States
of America is pledged.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, letters of credit and
reimbursement agreements in respect thereof), of all or any part of any
Indebtedness.
"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under (i) interest or currency exchange rate swap agreements,
interest or currency exchange rate cap agreements and interest or currency
exchange rate collar agreements and (ii) other agreements or arrangements, in
any case, designed to protect such Person against fluctuations in interest or
currency exchange rates (as appropriate, "Interest Rate Hedges" and "Currency
Hedges").
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring"
shall have meanings correlative to the foregoing); provided, however, that a
change in GAAP that results in an obligation of such Person that exists at
such time, and is not theretofore classified as Indebtedness, becoming
Indebtedness shall not be deemed an Incurrence of such Indebtedness.
"Indebtedness" means, with respect to any Person, (a) any liability of such
Person, whether or not contingent (i) for borrowed money, or under any
reimbursement obligation relating to a letter of credit, bankers' acceptance
or note purchase facility; (ii) evidenced by a bond, note, debenture or
similar instrument (including a purchase money obligation); (iii) for the
payment of money relating to a Capital Lease Obligation; (iv) for or pursuant
to Disqualified Stock; (v) for or pursuant to preferred stock of any
Restricted Subsidiary of the Company (other than preferred stock held by the
Company or any of its Restricted Subsidiaries); (vi) representing the balance
deferred and unpaid of the purchase price of any property or services (except
any such balance that constitutes a trade payable or accrued liability in the
ordinary course of business that is not overdue by more than 90 days or is
being contested in good faith by appropriate proceedings promptly instituted
and diligently conducted); or (vii) under or in respect of Hedging
Obligations; (b) any liability of others described in the preceding clause (a)
that such Person has guaranteed, that is recourse to such Person or that is
otherwise its legal liability, or the payment of which is secured by (or for
which the holder of such liability has an existing right to be secured by) any
Lien upon property owned by such Person, even though such Person has not
assumed or become liable for the payment of such liability; and (c) any
amendment, supplement, modification, deferral, renewal, extension or refunding
of any liability of the types referred to in clauses (a) and (b) above. The
amount of any non-interest bearing or other discount Indebtedness shall be
deemed to be the principal amount thereof that would be shown on the balance
sheet of the issuer dated such date prepared in accordance with GAAP, but such
Indebtedness shall be deemed to have been Incurred only on the date of the
original issuance thereof.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations (but
excluding endorsements of negotiable instruments for collection in the
ordinary course of
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business)), advances or capital contributions (excluding commission, travel
and similar advances to directors, officers and employees made in the ordinary
course of business), purchases or other acquisitions (for consideration) of
Indebtedness, Equity Interest or other securities, together with all items
that are or would be classified as investments on a balance sheet prepared in
accordance with GAAP.
"Initial Purchasers" means Donaldson, Lufkin & Jenrette Securities
Corporation and NationsBanc Montgomery Securities, Inc.
"Issue Date" means the date of first issuance of the Notes under the
Indenture.
"Junior Securities" of any Person means securities (including Capital Stock
but excluding Disqualified Stock) issued by such Person to a Holder on account
of the Notes that (a) has an Average Life and maturity or mandatory redemption
obligation, if any, longer than, or occurring after the final maturity date
of, all Designated Senior Indebtedness of such Person, (b) by their terms or
by law are subordinated to Senior Indebtedness of such Person outstanding on
the date of issuance of such Junior Securities at least to the same extent as
the Notes and (c) are not secured by any assets or property of the Company or
any of its Subsidiaries. As used herein, "Designated Senior Indebtedness of
such Person outstanding on the date of issuance of such Junior Securities"
shall include securities issued in connection with a reorganization pursuant
to the bankruptcy laws of any jurisdiction to Persons which held "Designated
Senior Indebtedness" in such reorganization proceeding.
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, and any lease in the
nature thereof).
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP.
"Net Proceeds" means, with respect to any Asset Sale, the aggregate amount
of cash proceeds (including any cash received by way of deferred payment
pursuant to a note receivable issued in connection with such Asset Sale, other
than the portion of such deferred payment constituting interest, and including
any amounts received as disbursements or withdrawals from any escrow or
similar account established in connection with any such Asset Sale, but, in
either case, only as and when so received) received by the Company or any of
its Restricted Subsidiaries in respect of such Asset Sale, net of: (i) the
cash expenses of such Asset Sale (including, without limitation, the payment
of principal of, and premium, if any, and interest on, Indebtedness required
to be paid as a result of such Asset Sale (other than the Notes) and legal,
accounting, management and advisory and investment banking fees and sales
commissions), (ii) taxes paid or payable as a result thereof, (iii) any
portion of cash proceeds that the Company determines in good faith should be
reserved for post-closing adjustments, it being understood and agreed that on
the day that all such post-closing adjustments have been determined, the
amount (if any) by which the reserved amount in respect of such Asset Sale
exceeds the actual post-closing adjustments payable by the Company or any of
its Restricted Subsidiaries shall constitute Net Proceeds on such date, (iv)
any relocation expenses and pension, severance and shutdown costs incurred as
a result thereof and (v) any cash amounts actually set aside by the Company or
any Restricted Subsidiary as a reserve in accordance with GAAP against any
retained liabilities associated with the asset disposed of in such
transaction, including, without limitation, pension and other post-employment
benefit liabilities and liabilities related to environmental matters or
against any indemnification obligations associated with such transaction.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on
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such other Indebtedness or cause the payment thereof to be accelerated or
payable prior to its stated maturity and (iii) as to which the lenders have
expressly waived any recourse which they may have, in law, equity or
otherwise, whether based on misrepresentations, control, ownership or
otherwise, to the Company or any of its Restricted Subsidiaries, including,
without limitation, a waiver of the benefits of the provisions of Section
1111(b) of the U.S. Bankruptcy Code (Title 11, United States Code), as
amended.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Permitted Investments" means (i) any Investment in the Company or in a
Restricted Subsidiary of the Company; (ii) any Investment in Cash Equivalents;
(iii) any Investment by the Company or any of its Restricted Subsidiaries in a
Person engaged in a Related Business if, as a result of such Investment, (A)
such Person becomes a Restricted Subsidiary of the Company or (B) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary of the Company; (iv) Investments the payment for which
consists exclusively of Equity Interests (excluding Disqualified Stock) of the
Company; (v) Investments in shares of money market mutual or similar funds
having assets in excess of $500 million; and (vi) Investments in negotiable
instruments held for collection in the ordinary course of business and lease,
utility and similar deposits.
"Permitted Lien" means (i) Liens securing Permitted Indebtedness Incurred
pursuant to clause (i) of the definition of such term; (ii) Liens in favor of
the Company and/or its Restricted Subsidiaries; (iii) Liens on property of a
Person existing at the time such Person is merged into or consolidated with
the Company or any of its Restricted Subsidiaries, provided that such Liens
were in existence prior to the contemplation of such merger or consolidation
and do not extend to any assets other than those of the Person merged into or
consolidated with the Company or any such Restricted Subsidiary; (iv) Liens
securing any Acquired Indebtedness and which exist at the time of acquisition
thereof by the Company or any of its Restricted Subsidiaries, provided that
such Liens were in existence prior to the contemplation of such acquisition;
(v) Liens arising under the Indenture in favor of the Trustee; (vi) Liens
existing on the date of the Indenture; (vii) Liens arising by reason of (1)
any judgment, decree or order of any court not constituting an Event of
Default; (2) taxes not yet delinquent or which are being contested in good
faith by appropriate proceedings which suspend the collection thereof,
promptly instituted and diligently conducted, and for which adequate reserves
have been established to the extent required by GAAP; (3) security for payment
of workers' compensation or other insurance; (4) good faith deposits in
connection with tenders, leases and contracts (other than contracts for the
payment of money), bids, licenses, performance or similar bonds and other
obligations of a like nature, in the ordinary course of business; (5) zoning
restrictions, easements, licenses, reservations, provisions, covenants,
conditions, waivers, restrictions on the use of property or minor
irregularities of title (and with respect to leasehold interests, mortgages,
obligations, Liens and other encumbrances incurred, created, assumed or
permitted to exist and arising by, through or under a landlord or owner of the
leased property, with or without consent of the lessees), none of which
materially impairs the use of any parcel of property material to the operation
of the business of the Company or any Restricted Subsidiary or the value of
such property for the purpose of such business; (6) deposits to secure public
or statutory obligations or in lieu of surety or appeal bonds; (7) surveys,
exceptions, title defects, encumbrances, easements, reservations of, or rights
of others for, rights of way, sewers, electric lines, telegraph or telephone
lines and other similar purposes or zoning or other restrictions as to the use
of real property not interfering with the ordinary conduct of the business of
the Company or any of its Restricted Subsidiaries; or (8) operation of law or
statute and incurred in the ordinary course of business, including without
limitation, those in favor of mechanics, materialmen, suppliers, laborers or
employees, and, if securing sums of money, for sums which are not yet
delinquent or are being contested in good faith by appropriate proceedings
which suspend the collection thereof, promptly instituted and diligently
conducted, and for which adequate reserves have been established to the extent
required by GAAP; (viii) Liens resulting from the deposit of funds in trust
for the purpose of decreasing or defeasing Indebtedness of the Company and its
Restricted Subsidiaries so long as such deposit of funds and such decreasing
or defeasing of Indebtedness are permitted under the caption "--Limitation on
Restricted Payments" covenant; and (ix) any extension, renewal or replacement
(or successive extensions, renewals or replacements),
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in whole or in part, of any Lien referred to in the foregoing clauses (iii),
(iv) and (vi) above; provided that the principal amount of the Indebtedness
secured thereby shall not exceed the principal amount of Indebtedness secured
thereby immediately prior to the time of such extension, renewal or
replacement, and that such extension, renewal or replacement Lien shall be
limited to all or a part of the property that secured the Lien so extended,
renewed or replaced (plus improvements on such property).
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used by such Person to extend, refinance, renew,
replace, defease or refund other Indebtedness of such Person ("Old
Indebtedness"); provided that: (i) the principal amount (or accreted value, if
applicable) of such Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the Old Indebtedness
plus any premium or penalty payable thereon and any reasonable expenses
incurred in connection therewith; (ii) such Permitted Refinancing Indebtedness
has a final maturity date equal to or later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Old Indebtedness; (iii) if the Old
Indebtedness is subordinated in right of payment to the Notes, such Permitted
Refinancing Indebtedness is subordinated in right of payment to the Notes on
terms at least as favorable to the Holders as those contained in the
documentation governing the Old Indebtedness; (iv) such Permitted Refinancing
Indebtedness is on terms that are no more restrictive, as a whole, than those
governing such Old Indebtedness; and (v) such Permitted Refinancing
Indebtedness is Incurred only by the Company or the Restricted Subsidiary that
is the obligor on the Old Indebtedness.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Public Equity Offering" means an underwritten offering of Equity Interests
(other than Disqualified Stock) of the Company for cash pursuant to 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
(including in the case of a Capitalized Lease Obligation, the lease) of any
real or personal tangible property acquired after the Issue Date which, in the
reasonable good faith judgment of the Board of Directors of the Company, is
directly related to a Related Business of the Company and which is Incurred
within 180 days of such acquisition and is secured only by the assets so
financed.
"Reference Period" with regard to any Person means the four full fiscal
quarters for which financial statements are available at the time of
determination (or such lesser period during which such Person has been in
existence) ended immediately preceding any date upon which any such
determination is to be made pursuant to the terms of the Notes or the
Indenture.
"Related Business" means the business conducted by the Company and its
Restricted Subsidiaries as of the Issue Date and any and all businesses that
in the good faith judgment of the Board of Directors of the Company are
materially related businesses.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" means any direct or indirect Subsidiary of the
Company that is not an Unrestricted Subsidiary.
"Senior Credit Facility" means the credit agreement entered into on the
Issue Date among the Company, the guarantors named therein, and NationsBank of
Texas, N.A. as agent and lender, and the other lenders party thereto, or any
refinancing or increases thereof made in accordance with the covenant
described under the caption "--Certain Covenants -- Limitation on Incurrence
of Indebtedness."
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"Senior Indebtedness" means, with respect to any Person, (i) all
Indebtedness of such Person outstanding under the Senior Credit Facility and
all Hedging Obligations with respect thereto, (ii) any other Indebtedness of
such Person permitted to be issued under the Indenture, provided, however,
that Senior Indebtedness shall not include any Indebtedness which by the terms
of the instrument creating or evidencing the same is on parity with or is
subordinated or junior in right of payment in any respect to any other
Indebtedness of such Person or its Restricted Subsidiaries or Affiliates and
(iii) all Obligations with respect to the foregoing. Notwithstanding anything
to the contrary in the foregoing, Senior Indebtedness will not include (i) any
liability for Federal, state, local, foreign or other taxes, (ii) any
Indebtedness of any such Person to any of its Subsidiaries or other
Affiliates, (iii) any accounts payable or trade liabilities arising in the
ordinary course of business (including Guarantees thereof or instruments
evidencing such liabilities), (iv) any Indebtedness that is incurred in
violation of the Indenture, (v) Indebtedness of the Person to any shareholder
of the Person, (vi) Indebtedness to, or guaranteed by the Person or any of its
Subsidiaries for the benefit of, any director, officer or employee of the
Person or any Subsidiary of the Person (including, without limitation, amounts
owed for compensation), (vii) Capital Stock of such Person and Indebtedness
represented by Disqualified Stock, (viii) Indebtedness which, when incurred
and without respect to any election under Section 1111(b) of Title 11, United
States Code, is without recourse to such Person and (ix) any Indebtedness or
obligation which is subordinated in right of payment to any other Indebtedness
or obligation of such Person. "Senior Indebtedness," when used with respect to
a Subsidiary Guarantor, shall have a meaning substantially identical to that
applied to the Indebtedness of the Person or its Subsidiaries.
"Shelter Transition Expenditures" means costs and expenses incurred by the
Company and its Restricted Subsidiaries to facilitate the consolidation of the
distribution and manufacturing businesses of the Company and the Restricted
Subsidiaries with Shelter.
"Stated Maturity" means December 1, 2007.
"Subordinated Indebtedness" means Indebtedness of the Company (or a
Restricted Subsidiary) that is expressly subordinated in right of payment to
the Notes (or a Subsidiary Guarantee, as appropriate).
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total
voting power of shares of Capital Stock 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 such Person or one or more of the other Subsidiaries of such
Person (or a combination thereof) and (ii) any partnership (a) the sole
general partner or the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partner of which are such
Person or of one or more Subsidiaries of such Person (or any combination
thereof). Unless indicated to the contrary, "Subsidiary" refers to a direct or
indirect Subsidiary of the Company.
"Unrestricted Subsidiary" means any Subsidiary that is designated by the
Board of Directors of the Company as an Unrestricted Subsidiary pursuant to a
resolution of the Board of Directors of the Company, but only to the extent
that such Subsidiary and each of the Subsidiaries of such Subsidiary (i) has
no Indebtedness at the time of designation, and does not thereafter Incur any
Indebtedness, other than Non-Recourse Debt, (ii) does not own any Equity
Interests of, or own or hold any Lien on, any property of the Company or any
Restricted Subsidiary of the Company (other than any Subsidiary of the
Subsidiary to be so designated), (iii) is not party to any material agreement,
contract, rearrangement or understanding with the Company or any of its
Restricted Subsidiaries unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company, (iv) is a Person with respect
to which neither the Company nor any of its Restricted Subsidiaries has any
direct or indirect obligation (a) to subscribe for additional Equity Interests
or (b) to maintain or preserve such Person's financial condition or to cause
such Person to achieve any specified levels of operating results, (v) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries and (vi) has
at least one director on its board
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of directors that is not a director or executive officer of the Company or any
of its Restricted Subsidiaries and has at least one executive officer that is
not a director or executive officer of the Company or any of its Restricted
Subsidiaries. Any such designation by the Board of Directors of the Company
shall be evidenced to the Trustee by filing with the Trustee a certified copy
of the resolution of the Board of Directors of the Company giving effect to
such designation and an Officers' Certificate certifying that (i) such
designation complied with the foregoing conditions, (ii) such designation was
permitted by the covenant described under the caption "--Certain Covenants--
Limitation on Restricted Payments," (iii) immediately after giving effect to
such designation, the Company could Incur at least $1.00 of additional
Indebtedness pursuant to the Debt Incurrence Ratio test set forth in the first
paragraph of the covenant described under the caption "--Certain Covenants--
Limitation on Incurrence of Indebtedness" and (iv) no Default or Event of
Default would be in existence immediately following such designation. If, at
any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness,
Liens or agreements of such Subsidiary shall be deemed to be Incurred or
created by a Restricted Subsidiary of the Company as of such date (and, if
such Indebtedness, Liens or agreements are not permitted to be Incurred or
created as of such date under the covenants of the Indenture, the Company
shall be in default of such covenants). The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary, provided that such designation shall be deemed to be an Incurrence
of Indebtedness and a creation of Liens and agreements by a Restricted
Subsidiary of the Company of any outstanding Indebtedness, Liens or agreements
of such Unrestricted Subsidiary and such designation shall only be permitted
if (i) such Indebtedness, Liens and agreements are permitted under the
covenants of the Indenture, and (ii) no Default or Event of Default would be
in existence immediately following such designation.
"Voting Stock" means any class or classes of Capital Stock of any Person
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect the board of directors (or Persons performing
similar functions) of such Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) the sum of products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by (b) the number of
years (calculated to the nearest one-twelfth) that will elapse between such
date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
"Wholly Owned Subsidiary" means a Subsidiary all the Equity Interests of
which are owned by the Company or one or more Wholly Owned Subsidiaries of the
Company, other than directors' qualifying shares or an immaterial amount of
shares to the extent required to be owned by other Persons pursuant to
applicable law.
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth in the next paragraph, the Exchange Notes will initially
be issued in the form of one or more Global Notes (the "Global Notes"). The
Global Notes will be deposited on the date of the closing of the Exchange
Offer (the "Closing Date") with, or on behalf of, the Depositary and
registered in the name of Cede & Co., as nominee for the Depositary (such
nominee being referred to herein as the "Global Note Holder").
Exchange Notes that are issued as described below under "--Certificated
Securities" will be issued in registered form (the "Certificated Securities").
Upon the transfer of Certificated Securities, such Certificated Securities
may, unless the Global Notes have previously been exchanged for Certificated
Securities, be exchanged for an interest in a Global Note representing the
principal amount of Exchange Notes being transferred.
The Depositary has advised the Company that the Depositary is a limited-
purpose trust company which was created to hold securities for its
participating organizations (collectively, the "Participants" or the
"Depositary's
101
<PAGE>
Participants") and to facilitate the clearance and settlement of transactions
in such securities between Participants through electronic book-entry changes
in accounts of its Participants. The Depositary's Participants include
securities brokers and dealers (including the Initial Purchasers), banks and
trust companies, clearing corporations and certain other organizations. Access
to the Depositary's system is also available to other entities such as banks,
brokers, dealers and trust companies (collectively, the "Indirect
Participants" or the "Depositary's Indirect Participants") that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Notes, the Depositary will credit
the accounts of Participants with portions of the principal amount of the
Global Notes and (ii) ownership of the Notes evidenced by the Global Notes
will be shown on, and the transfer of ownership thereof will be effected only
through, records maintained by the Depositary (with respect to the interests
of the Depositary's Participants), the Depositary's Participants and the
Depositary's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer Exchange Notes evidenced by the Global Notes will be limited to such
extent.
So long as the Global Note Holder is the registered owner of any Exchange
Notes, the Global Note Holder will be considered the sole owner or holder of
such Exchange Notes outstanding under the Indenture. Beneficial owners of
Exchange Notes evidenced by the Global Note will not be considered the owners
or holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. The ability of a person having a beneficial interest in Exchange
Notes represented by a Global Note to pledge such interest to persons or
entities that do not participate in the Depositary's system or to otherwise
take actions in respect of such interest, may be affected by the lack of a
physical certificate evidencing such interest.
Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to or payments made on
account of Exchange Notes by the Depositary, or for maintaining, supervising
or reviewing any records of the Depositary relating to such Exchange Notes.
Payments in respect of the principal of, premium, if any, interest and
Liquidated Damages, if any, on any Exchange Notes registered in the name of a
Global Note Holder on the applicable record date will be payable by the
Trustee to or at the direction of such Global Note Holder in its capacity as
the registered holder under the Indenture. Under the terms of the Indenture,
the Company and the Trustee may treat the persons in whose names the Exchange
Notes, including the Global Notes, are registered as the owners thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Exchange Notes (including principal, premium, if any, interest and
Liquidated Damages, if any).
The Company believes, however, that it is currently the policy of the
Depositary to immediately credit the accounts of the relevant Participants
with such payment, in amounts proportionate to their respective holdings in
principal amount of beneficial interests in the relevant security as shown on
the records of the Depositary. Payments by the Depositary's Participants and
the Depositary's Indirect Participants to the beneficial owners of Exchange
Notes will be governed by standing instructions and customary practice and
will be the responsibility of the Depositary's Participants or the
Depositary's Indirect Participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial interest in a
Global Note may, upon request to the Company or the Trustee, exchange such
beneficial interest for Exchange Notes in the form of Definitive Notes (as
defined in the Indenture). Upon any such issuance, the Trustee is required to
register such Exchange Notes in the name of, and cause the same to be
delivered to, such person or persons. In addition, if (i) the
102
<PAGE>
Company notifies the Trustee in writing that the Depositary is no longer
willing or able to act as a depositary and the Company is unable to appoint a
qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of
Exchange Notes in the form of Definitive Notes under the Indenture, then, upon
surrender by the relevant Global Note Holder of its Global Note, Exchange
Notes in such form will be issued to each person that the Depositary
identifies as the beneficial owner of the related Exchange Notes.
Neither the Company nor the Trustee shall be liable for any delay by the
Depositary in identifying the beneficial owners of the related Exchange Notes
and each such person may conclusively rely on, and shall be protected in
relying on, instructions from the Depositary for all purposes (including with
respect to the registration and delivery, and the respective principal
amounts, of the Exchange Notes to be issued).
103
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain United States federal income tax
considerations to holders of the Exchange Notes who are subject to U.S. net
income tax with respect to the Exchange Notes ("U.S. persons") and who will
hold the Exchange Notes as capital assets. There can be no assurance that the
U.S. Internal Revenue Service (the "IRS") will take a similar view of the
purchase, ownership or disposition of the Exchange Notes. This summary is
based upon the Internal Revenue Code of 1986, as amended, and regulations,
rulings and judicial decisions now in effect, all of which are subject to
change. It does not include any discussion of the tax laws of any state, local
or foreign governments or any estate or gift tax considerations that may be
applicable to the Exchange Notes or holders thereof; nor does it discuss all
aspects of U.S. federal income taxation that may be relevant to a particular
investor under his particular circumstances or to investors subject to special
treatment under the U.S. federal income tax laws (for example, dealers in
securities or currencies, S corporations, life insurance companies, tax-exempt
organizations, taxpayers subject to the alternative minimum tax and non-U.S.
persons) and also does not discuss Exchange Notes held as a hedge against
currency risks or as part of a straddle with other investments or as part of a
"synthetic security" or other integrated investment (including a "conversion
transaction") comprising an Exchange Note and one or more other investments,
or situations in which the functional currency of the holders is not the U.S.
dollar.
Holders of Old Notes contemplating acceptance of the Exchange Offer should
consult their tax advisors with respect to their particular circumstances and
with respect to the effects of state, local or foreign tax laws to which they
may be subject.
EXCHANGE OF NOTES
The exchange of Old Notes for Exchange Notes should not be a taxable event
to holders for United States federal income tax purposes. The exchange of Old
Notes for the Exchange Notes pursuant to the Exchange Offer should not be
treated as an "exchange" for United States federal income tax purposes,
because the Exchange Notes should not be considered to differ materially in
kind or extent from the Old Notes. Accordingly, the Exchange Notes should have
the same issue price as the Old Notes, and a holder should have the same
adjusted basis and holding period in the Exchange Notes as it had in the Old
Notes immediately before the exchange.
INTEREST ON EXCHANGE NOTES
A holder of an Exchange Note will be required to report as ordinary interest
income for U.S. federal income tax purposes interest earned on an Exchange
Note in accordance with the holder's method of tax accounting.
DISPOSITION OF EXCHANGE NOTES
A holder's tax basis for an Exchange Note generally will be the holder's
purchase price for the Old Note. Upon the sale, exchange, redemption,
retirement or other disposition of an Exchange Note, a holder will recognize
gain or loss equal to the difference (if any) between the amount realized and
the holder's tax basis in the Exchange Note. Such gain or loss should be long-
term capital gain or loss if the Exchange Note has been held for more than
eighteen months, mid-term capital gain or loss if the Exchange Note has been
held for more than one year but not more than eighteen months and otherwise
should be short-term capital gain or loss (with certain exceptions to the
characterization as capital gain if the Exchange Note was acquired at a market
discount).
BACKUP WITHHOLDING
A holder of an Exchange Note may be subject to backup withholding at the
rate of 31% with respect to interest paid on the Exchange Note and proceeds
from the sale, exchange, redemption or retirement of the Exchange Note, unless
such holder (a) is a corporation or comes within certain other exempt
categories and, when required, demonstrates that fact or (b) provides a
correct taxpayer identification number, certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. A holder of an Exchange Note who does not
provide the Company with his correct taxpayer identification number may be
subject to penalties imposed by the IRS.
104
<PAGE>
A holder of an Exchange Note who is not a U.S. person will generally be
exempt from backup withholding and information reporting requirements, but may
be required to comply with certification and identification procedures in
order to obtain an exemption from backup withholding and information
reporting.
Any amount paid as backup withholding will be creditable against the
holder's U.S. federal income tax liability.
PLAN OF DISTRIBUTION
Each Participating Broker-Dealer that receives Exchange Notes for its own
account in connection with 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 Participating Broker-Dealers during the period referred to below in
connection with resales of Exchange Notes received in exchange for Old Notes
where such Old Notes were acquired by such Participating Broker-Dealers for
their own accounts as a result of market-making activities or other trading
activities (other than a resale of an unsold allotment from the original sale
of Old Notes). The Company has agreed that this Prospectus, as it may be
amended or supplemented from time to time, may be used by a Participating
Broker-Dealer in connection with resales of such Exchange Notes for a period
ending one year after the Expiration Date (or such shorter period during which
all such resales have occurred). However, a Participating Broker-Dealer who
intends to use this Prospectus in connection with the resale of Exchange Notes
received in exchange for Old Notes pursuant to the Exchange Offer must notify
the Company, or cause the Company to be notified, on or prior to the
Expiration Date, that it is a Participating Broker-Dealer. Such notice may be
given in the space provided for that purpose in the Letter of Transmittal or
may be delivered to the Exchange Agent at one of the addresses set forth in
the Letter of Transmittal. See "The Exchange Offer--Resales of Exchange
Notes."
The Company will not receive any proceeds from the issuance of the Exchange
Notes offered hereby. Exchange Notes received by Participating Broker-Dealers
for their own accounts in connection with 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 and/or the purchasers
of any such Exchange Notes. Any Participating Broker-Dealer that resells
Exchange Notes that were received by it for its own account in connection with
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 commissions 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 Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period ending 180 days from the date on which the Exchange Offer
Registration Statement is declared effective, the Company will promptly send
additional copies of this Prospectus and any amendment or supplement to this
Prospectus to any Participating Broker-Dealer that requests such documents in
the Letter of Transmittal.
LEGAL MATTERS
The validity of the Notes and the Subsidiary Guarantees will be passed upon
for the Company by Jackson Walker, L.L.P., Dallas, Texas. Richard S. Tucker, a
partner in Jackson Walker L.L.P., is Secretary and a director of the Company.
105
<PAGE>
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1995, of Kevco,
Inc. and the related consolidated statements of income, stockholders' equity
and cash flows for each of the two years in the period ended December 31,
1996, included in this Prospectus have been included herein in reliance on the
report, which includes an explanatory paragraph regarding a change in
accounting method, of Coopers & Lybrand L.L.P., independent accountants, given
on the authority of that firm as experts in accounting and auditing.
The statements of income, stockholders' equity and cash flows of Kevco, Inc.
for the year ended December 31, 1994, included in this Prospectus have been
included herein in reliance on the report of Rylander, Clay & Opitz, L.L.P.,
independent auditors, given on the authority of that firm as experts in
accounting and auditing.
The consolidated financial statements of Shelter Components Corporation as
of December 31, 1996 and 1995 and for the two years then ended included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
The consolidated statements of income, shareholders' equity and cash flows
of Shelter Components Corporation and Subsidiaries for the year ended December
31, 1994, included in this Prospectus have been included herein in reliance on
the report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
The consolidated balance sheets as of December 31, 1996 and 1995 of Bowen
Supply, Inc. and Subsidiary and the related consolidated statements of income,
stockholders' equity and cash flows for the years then ended, included in this
Prospectus have been included herein in reliance on the report of Dougherty,
McKinnon & Luby, independent auditors, given on the authority of that firm as
experts in accounting and auditing.
The balance sheets as of September 29, 1996 and October 1, 1995 of
Consolidated Forest Products, L.L.C. and the related statements of income and
retained earnings and cash flows for the year ended September 29, 1996 and the
period December 1, 1994 to October 1, 1995, included in this Prospectus have
been included herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given on the authority of that firm as experts in
accounting and auditing.
The consolidated statements of income and cash flows of Service Supply
Systems, Inc. and Subsidiary for the year ended December 31, 1994, included in
this Prospectus have been included herein in reliance on the report of Rumsey
& Huckaby, P.C., independent auditors, given on the authority of that firm as
experts in accounting and auditing.
106
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
KEVCO, INC.
Report of Independent Accountants........................................ F-3
Independent Auditor's Report............................................. F-4
Consolidated Financial Statements as of December 31, 1996 and 1995 and
for the three years in the period ended December 31, 1996
Consolidated Balance Sheets............................................ F-5
Consolidated Statements of Income...................................... F-6
Consolidated Statements of Stockholders' Equity........................ F-7
Consolidated Statements of Cash Flows.................................. F-8
Notes to Consolidated Financial Statements............................. F-10
Consolidated Financial Statements as of September 30, 1997 and December
31, 1996 and for the nine month periods ended September 30, 1997 and
1996
Consolidated Balance Sheets (unaudited)................................ F-20
Consolidated Statements of Income (unaudited).......................... F-21
Consolidated Statements of Cash Flows (unaudited)...................... F-22
Notes to Consolidated Financial Statements (unaudited)................. F-23
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
Report of Independent Accountants........................................ F-28
Report of Independent Accountants........................................ F-29
Consolidated Financial Statements as of December 31, 1996 and 1995 and
for the three years in the period ended December 31, 1996
Consolidated Balance Sheets............................................ F-30
Consolidated Statements of Income...................................... F-31
Consolidated Statements of Shareholders' Equity........................ F-32
Consolidated Statements of Cash Flows.................................. F-33
Notes to Consolidated Financial Statements............................. F-34
Consolidated Financial Statements as of September 30, 1997 and December
31, 1996 and for the nine month periods ended September 30, 1997 and
1996
Consolidated Balance Sheets (unaudited)................................ F-42
Consolidated Statements of Income (Unaudited).......................... F-43
Consolidated Statements of Cash Flows (Unaudited)...................... F-44
Notes to Consolidated Financial Statements (Unaudited)................. F-45
BOWEN SUPPLY, INC., AND SUBSIDIARY
Independent Auditor's Report............................................. F-47
Consolidated Financial Statements as of December 31, 1996 and 1995 and
for the two years in the period ended December 31, 1996
Consolidated Balance Sheets............................................ F-48
Consolidated Statements of Stockholders' Equity........................ F-49
Consolidated Statements of Income...................................... F-50
Consolidated Statements of Cash Flows.................................. F-51
Notes to Consolidated Financial Statements............................. F-52
</TABLE>
F-1
<PAGE>
<TABLE>
<S> <C>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
Report of Independent Accountants........................................ F-58
Consolidated Financial Statements as of September 29, 1996 and October 1,
1995 and for the year ended September 29, 1996 and the period December
2, 1994 to October 1, 1995
Balance Sheets......................................................... F-59
Statements of Income and Retained Earnings............................. F-60
Statements of Cash Flows............................................... F-61
Notes to Financial Statements.......................................... F-62
SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY
Independent Auditor's Report............................................. F-68
Consolidated Financial Statements for the year ended December 31, 1994
Consolidated Statement of Income....................................... F-69
Consolidated Statement of Cash Flows................................... F-70
Notes to Consolidated Financial Statements............................. F-71
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors
Kevco, Inc.
Fort Worth, Texas
We have audited the accompanying consolidated balance sheets of Kevco, Inc.
as of December 31, 1996 and 1995, and the related consolidated statements of
income, stockholders' equity, and cash flows for each of the two years in the
period ended December 31, 1996. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Kevco, Inc.
as of December 31, 1996 and 1995, and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1996, in conformity with generally accepted accounting
principles.
As discussed in Note 13 to the consolidated financial statements, Kevco,
Inc. retroactively changed its method of accounting for inventory from the
last-in, first-out method to the first-in, first-out method and the
consolidated financial statements for all years presented have been restated
accordingly.
We also audited the adjustments described in Note 13 that were applied to
restate the 1994 financial statements. In our opinion, such adjustments are
appropriate and have been properly applied.
/s/ Coopers & Lybrand L.L.P.
Fort Worth, Texas
February 21, 1997, except for
Note 13 as to which the date
is June 30, 1997
F-3
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Board of Directors
Kevco, Inc.
Fort Worth, Texas
We have audited the accompanying statements of income, stockholders' equity
and cash flows of Kevco, Inc. (an S-Corporation) for the year ended December
31, 1994. 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 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 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Kevco,
Inc. for the year ended December 31, 1994, in conformity with generally
accepted accounting principles.
/s/ Rylander, Clay & Opitz, L.L.P.
Fort Worth, Texas
March 24, 1995
F-4
<PAGE>
KEVCO, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 2,078 $ 977
Trade receivables (less allowance for doubtful accounts of
$100 and $160 in 1996 and 1995, respectively).............. 9,458 14,769
Inventories................................................. 23,722 19,201
Prepaid expenses and other.................................. 338 343
------- -------
Total current assets...................................... 35,596 35,290
Property and equipment, net................................... 10,208 9,758
Intangible assets, net........................................ 9,495 10,162
Other assets.................................................. 440 459
------- -------
Total assets.............................................. $55,739 $55,669
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable...................................... $ 6,666 $11,258
Accrued liabilities......................................... 3,107 3,231
Income taxes payable........................................ 762 --
Current portion of long-term debt........................... 367 1,057
Current deferred income taxes............................... 168 --
------- -------
Total current liabilities................................. 11,070 15,546
Long-term debt, less current portion.......................... 9,464 30,206
Deferred compensation obligation.............................. 383 361
Deferred income taxes......................................... 629 --
------- -------
Total liabilities......................................... $21,546 $46,113
------- -------
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock, $.01 par value; 100,000 shares authorized;
6,809 and 4,700 shares issued in 1996 and 1995,
respectively............................................... 68 47
Additional paid-in capital.................................. 32,854 3,034
Loan to stockholder......................................... -- (3,437)
Retained earnings........................................... 1,271 10,660
Treasury stock, 306 shares at cost.......................... -- (748)
------- -------
Total stockholders' equity................................ $34,193 $ 9,556
------- -------
Total liabilities and stockholders' equity................ $55,739 $55,669
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
KEVCO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
<S> <C> <C> <C>
Net sales.......................................... $267,344 $182,519 $99,279
Cost of sales...................................... 226,653 155,641 83,356
-------- -------- -------
Gross profit..................................... 40,691 26,878 15,923
Commission income.................................. 5,497 2,610 1,066
-------- -------- -------
46,188 29,488 16,989
Selling, general and administrative expenses....... 29,723 20,889 11,941
-------- -------- -------
Operating income................................. 16,465 8,599 5,048
Interest income.................................... 151 355 346
Interest expense................................... (2,209) (1,692) (627)
Other income....................................... -- -- 800
-------- -------- -------
Income before income tax provision............... 14,407 7,262 5,567
Income tax provision............................... 1,695 45 51
-------- -------- -------
Net income....................................... $ 12,712 $ 7,217 $ 5,516
======== ======== =======
Pro forma information (unaudited) (Note 1):
Historical income before income taxes............ $ 14,407 $ 7,262 $ 5,567
Income tax expense adjustments................... 5,475 2,832 2,171
-------- -------- -------
Pro forma net income............................. $ 8,932 $ 4,430 $ 3,396
======== ======== =======
Pro forma earnings per share..................... $ 1.61 $ 0.90 $ 0.69
======== ======== =======
Weighted average shares outstanding.............. 5,531 4,946 4,946
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
KEVCO, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
TREASURY
COMMON STOCK STOCK ADDITIONAL
-------------- ------------- PAID-IN LOAN TO RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDER EARNINGS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 4,700 $47 306 $(748) $ 2,837 $(4,937) $ 6,651 $ 3,850
Net income............ -- -- -- -- -- -- 5,516 5,516
Distribution to
stockholders......... -- -- -- -- -- -- (4,022) (4,022)
Collections from
stockholder.......... -- -- -- -- -- 750 -- 750
----- --- ---- ----- ------- ------- -------- --------
Balance at December 31,
1994................... 4,700 47 306 (748) 2,837 (4,187) 8,145 6,094
Net income............ -- -- -- -- -- -- 7,217 7,217
Distribution to
stockholders......... -- -- -- -- -- -- (4,702) (4,702)
Collections from
stockholder.......... -- -- -- -- -- 750 -- 750
Contributed capital... -- -- -- -- 197 -- -- 197
----- --- ---- ----- ------- ------- -------- --------
Balance at December 31,
1995................... 4,700 47 306 (748) 3,034 (3,437) 10,660 9,556
Net income............ -- -- -- -- -- -- 12,712 12,712
Distribution to
stockholders......... -- -- -- -- -- -- (14,407) (14,407)
Collections from
stockholder.......... -- -- -- -- -- 375 -- 375
Distribution of loan
to stockholders...... -- -- -- -- -- 3,062 (3,062) --
Contributed capital... -- -- -- -- 86 -- -- 86
Retirement of treasury
stock................ (306) (3) (306) 748 (745) -- -- --
Contribution of S
corporation retained
earnings with change
to C corporation
status............... -- -- -- -- 4,632 -- (4,632) --
Issuance of stock..... 2,415 24 -- -- 25,847 -- -- 25,871
----- --- ---- ----- ------- ------- -------- --------
Balance at December 31,
1996................... 6,809 $68 -- $ -- $32,854 $ -- $ 1,271 $ 34,193
===== === ==== ===== ======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
KEVCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income..................................... $ 12,712 $ 7,217 $ 5,516
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization................ 1,792 1,041 399
Gain on sale of assets....................... (10) (16) (11)
Deferred compensation obligation............. 22 28 (7)
Deferred income taxes........................ 797 -- --
Changes in assets and liabilities, net of effects
from purchase of Service Supply Systems, Inc.:
Trade receivables, net......................... 5,311 (2,014) (835)
Inventories.................................... (4,521) (1,363) (1,604)
Prepaid expenses and other..................... 5 71 (9)
Trade accounts payable......................... (4,592) 3,650 (591)
Accrued liabilties............................. (124) (166) 218
Income taxes payable........................... 762 -- --
-------- -------- -------
Net cash provided by operating activities.... 12,154 8,448 3,076
-------- -------- -------
Cash flows from investing activities:
Purchase of equipment.......................... (1,586) (2,844) (432)
Proceeds from sale of assets................... 21 594 11
Decrease in other assets....................... 19 180 (47)
Purchase of Service Supply Systems, Inc., net
of cash acquired.............................. -- (17,449) --
Loan origination fees.......................... -- (913) --
-------- -------- -------
Net cash used by investing activities........ (1,546) (20,432) (468)
-------- -------- -------
Cash flows from financing activities:
Net proceeds from initial public offering...... 25,871 -- --
(Payment) proceeds from line of credit......... (6,500) (4,587) 2,400
Payments of long-term debt..................... (14,932) (1,900) (1,578)
Proceeds from long-term debt................... -- 30,700 --
Payment of acquired debt....................... -- (8,124) --
Distributions paid............................. (14,407) (4,702) (4,022)
Capital contributions.......................... 86 197 --
Collections on loan to stockholder............. 375 750 750
-------- -------- -------
Net cash (used) provided by financing
activities.................................. (9,507) 12,334 (2,450)
-------- -------- -------
Net increase in cash and cash equivalents........ 1,101 350 158
Beginning cash and cash equivalents.............. 977 627 469
-------- -------- -------
Ending cash and cash equivalents................. $ 2,078 $ 977 $ 627
======== ======== =======
Supplemental cash flow information:
Cash paid during the period for:
Interest..................................... $ 2,162 $ 1,471 $ 604
======== ======== =======
Income taxes................................. $ 456 $ 45 $ 51
======== ======== =======
</TABLE>
F-8
<PAGE>
KEVCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS--(CONTINUED)
(IN THOUSANDS)
Supplemental schedule of noncash investing and financing activities:
The Company distributed the loan to stockholder of $3,062 to the Company's
stockholders effective June 30, 1996.
During 1995, the Company purchased all of the capital stock of Service
Supply Systems, Inc. for $17,700. In conjunction with the acquisition,
liabilities were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired........................................ $32,400
Cash paid for the capital stock...................................... 17,700
-------
Liabilities assumed................................................ $14,700
=======
</TABLE>
Of the $14,700 in liabilities assumed, $8,100 was immediately paid off with
the proceeds from long-term debt.
Noncompete obligations of $544 were incurred when the Company purchased
Service Supply Systems, Inc. and entered into two noncompete agreements which
are being amortized over the life of the agreements.
The accompanying notes are an integral part of the consolidated financial
statements.
F-9
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
DESCRIPTION OF OPERATIONS
Kevco, Inc. manufactures and distributes products and materials for use by
the manufactured housing and recreational vehicle industries.
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Kevco, Inc. and its wholly-owned subsidiaries (the "Company"). All significant
intercompany transactions and accounts have been eliminated.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, deposits with banks and all highly liquid investments with original
maturities of three months or less. The carrying value of cash and cash
equivalents approximates fair value as of December 31, 1996 and 1995.
INVENTORIES
Inventories are stated at the lower of cost or market. Inventories purchased
for resale and manufacturing inventories are valued using the first-in, first-
out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are carried at cost less accumulated depreciation.
Additions to and major improvements of property and equipment are capitalized.
Maintenance and repair costs are expensed as incurred. When assets are retired
or otherwise disposed of, their costs and related accumulated depreciation are
removed from the accounts and any resulting gains or losses are included in
the operations for the period.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings.................................................. 40 years
Furniture and equipment.................................... 5 to 10 years
Transportation equipment................................... 4 to 10 years
Leasehold improvements..................................... 10 years
</TABLE>
INTANGIBLE ASSETS
Intangible assets are comprised of noncompete agreements, loan origination
fees and goodwill. Noncompete agreements are amortized on a straight-line
basis over the terms of the related agreements (24 to 30 months). Loan
origination fees associated with the acquisition of the Company's term debt
and revolving credit facility have been capitalized and are being amortized on
a straight-line basis over five years. The excess of acquisition cost of
acquired businesses over the fair value of net assets acquired ("goodwill") is
amortized, using the straight-line method, over 40 years. The Company reviews
goodwill to assess recoverability periodically. At each balance sheet date,
management assesses whether there has been a permanent impairment in the value
of goodwill by considering factors such as expected future operating income,
current operating results, and other economic factors. Management believes no
impairment has occurred.
F-10
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DEFERRED COMPENSATION OBLIGATION
The Company has entered into deferred compensation agreements with certain
employees, whereby payments will be made upon death or retirement for a ten
year period and such liability has been recorded at the present value of the
anticipated future payments.
REVENUE RECOGNITION
Revenue from product sales is recognized at the time of shipment or the time
of receipt in the case of direct shipments from vendors to customers.
Commissions are recognized as earned.
INCOME TAXES
Income taxes are provided based on earnings reported for tax return purposes
in addition to a provision for deferred income taxes in accordance with SFAS
No. 109, Accounting for Income Taxes. The provision for income taxes includes
deferred taxes determined by the change in the deferred tax liability (or
asset) which is computed based on the differences between the financial
statement and income tax bases of assets and liabilities, all of which are
measured by applying enacted tax laws and rates. Deferred tax expense is the
result of changes in the deferred tax liability or asset.
INTEREST RATE HEDGE
The Company entered into an interest rate hedge agreement in conjunction
with its primary credit facility to alter interest rate exposure on both the
revolver and the term debt. Amounts expected to be paid or received on the
interest rate hedge are recognized as adjustments to interest expense. Any
gain or loss from the termination of this hedge agreement will be recognized
at that time.
CONCENTRATION OF CREDIT RISK
The Company's sales are primarily to the manufactured housing and
recreational vehicle industries across a wide geographical area and generally
require no advance payment from customers. The Company had sales to two
customers representing approximately 16% and 14% of net sales in 1996.
The Company estimates future credit losses based on continual evaluation of
customers' financial condition, historical loss experience and current
economic conditions. The estimated future credit losses are expensed through
an allowance for doubtful accounts and actual credit losses are charged to the
allowance when incurred.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses in the reporting
periods. Actual results could differ from those estimates.
STOCK SPLIT
On August 29, 1996, the Company effected a .47-for-1 reverse stock split of
its common stock. All share and per share amounts included in the accompanying
financial statements and notes have been restated to reflect the stock split.
F-11
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED PRO FORMA NET INCOME
Pro forma net income represents the results of operations adjusted to
reflect a provision for income tax on historical income before income taxes,
which gives effect to the change in the Company's income tax status to a C
corporation prior to the consummation of the Company's initial public
offering. The difference between the pro forma income tax rates utilized and
the federal statutory rate of 35% relates primarily to state income taxes (5%,
less effect of federal tax benefit).
UNAUDITED PRO FORMA EARNINGS PER SHARE
Historical net income per common share is not presented because it is not
indicative of the ongoing entity. Pro forma earnings per share have been
computed by dividing pro forma net income by the weighted average number of
shares of common stock outstanding during the period. Pro forma earnings per
share data has been presented to reflect the effect of the assumed issuance of
that number of shares of common stock that would generate sufficient cash to
pay an S corporation distribution in an amount equal to previously taxed but
undistributed earnings.
2. ACQUISITION:
The Company purchased all of the capital stock of Service Supply Systems,
Inc. ("Service Supply") on June 30, 1995 for approximately $17,700,000 and at
that date merged Service Supply with and into the Company. The acquisition was
accounted for as a purchase and, accordingly, the operating results of Service
Supply have been included in the operating results of the Company since June
30, 1995. The acquisition cost in excess of the fair value of net assets of
Service Supply of $7,087,000 has been accounted for as goodwill and will be
amortized over its useful life of 40 years.
3. INVENTORIES:
Inventories are comprised of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
<S> <C> <C>
Raw materials.............................................. $ 4,385 $ 2,314
Work-in-process............................................ 332 303
Finished goods............................................. 1,324 828
Goods held for resale...................................... 17,681 15,756
------- -------
$23,722 $19,201
======= =======
4. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following (in thousands):
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
<S> <C> <C>
Land....................................................... $ 242 $ 242
Buildings.................................................. 5,195 4,774
Furniture and equipment.................................... 6,181 5,213
Transportation equipment................................... 3,277 3,232
Leasehold improvements..................................... 564 503
------- -------
15,459 13,964
Less accumulated depreciation.............................. (5,251) (4,206)
------- -------
Property and equipment, net.............................. $10,208 $ 9,758
======= =======
</TABLE>
F-12
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Property and equipment under capital leases consists of buildings of
$2,231,000 and furniture and equipment of $640,000 for the years ended
December 31, 1996 and 1995, and accumulated depreciation of $1,982,000 and
$1,846,000 for the years ended December 31, 1996 and 1995, respectively.
5. INTANGIBLE ASSETS:
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
<S> <C> <C>
Goodwill................................................... $ 9,113 $ 9,113
Loan origination fees...................................... 913 913
Noncompete agreements...................................... 544 544
------- -------
10,570 10,570
Less accumulated amortization.............................. (1,075) (408)
------- -------
Intangible assets, net................................... $ 9,495 $10,162
======= =======
</TABLE>
6. LONG-TERM DEBT:
Long-term debt consists or the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Revolving credit facility payable to a bank, due June 30,
1998, with interest payable monthly. Interest is paid at
the bank's prime rate or LIBOR rates based on pricing
options elected by the Company plus a margin determined
by operating statistics of the Company (8.25% and 7.93%
at December 31, 1996 and 1995, respectively),
$11,611 net of an outstanding letter of credit in the
amount of $389, was available under the credit facility
at December 31, 1996.................................... $8,000 $14,500
Term debt payable to a bank with interest payable monthly
and quarterly principal payments of $625 commencing on
October 1, 1996 until maturity at June 30, 2001.
Interest is paid at LIBOR rates based on pricing options
selected by the Company plus a margin determined by
operating statistics of the Company (7.54% at
December 31, 1995)...................................... -- 14,500
Capital lease obligations to a related party,
collateralized by equipment, maturing through 2007, with
interest rates from 13.9% to 26.8%...................... 1,548 1,681
Obligations payable under noncompete and consulting
agreements, due in 24 to 48 months with payments ranging
from $3,000 to $10,833 per month, maturing through 1999,
interest imputed at 8.50%............................... 283 582
------ -------
Totals................................................... 9,831 31,263
Less current portion..................................... (367) (1,057)
------ -------
$9,464 $30,206
====== =======
</TABLE>
The term debt and revolving credit facility are collateralized by
substantially all of the assets of the Company and its subsidiaries, including
a pledge of all outstanding capital stock of such subsidiaries. The related
credit agreement contains certain restrictions and conditions which include
cash flow requirements, limitations on acquisitions of property and equipment,
and restrictions on distributions to stockholders.
F-13
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following are scheduled maturities of debt (in thousands):
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
<S> <C>
1997............................................................. $ 367
1998............................................................. 8,131
1999............................................................. 127
2000............................................................. 114
2001............................................................. 111
Thereafter........................................................ 981
------
$9,831
======
</TABLE>
In addition, in order to reduce interest rate risk on the credit facility,
the Company has entered into an interest rate hedge agreement in the notional
amount of $15.0 million, whereby the Company will receive interest payments
should LIBOR increase above 9.00% and, conversely, will make interest payments
should LIBOR decrease below 5.25%, the effect of which limits the Company's
interest expense within the range of 9.00% to 5.25% LIBOR on $15.0 million of
debt. Management intends to hold the interest rate hedge until maturity on
August 28, 1998. The Company has incurred no gain or loss related to this
interest rate hedge for the year ended December 31, 1996. The fair value of
the interest rate hedge agreement is not considered to be material.
The fair value of long-term debt was $10.6 and $32.0 million as of December
31, 1996 and 1995, respectively. The fair value of the Company's long-term
debt was calculated by discounting future cash flows using an estimated fair
market value interest rate.
In February 1997, the Company and its lender amended the credit agreement in
order to fund the acquisitions discussed in Note 13. The term debt was
increased to $30.0 million and the revolving credit facility increased to
$35.0 million, each maturing in 2001. The term debt will be payable $0 in
1997; $2 million in 1998; $8 million in 1999; $10 million in 2000; and $10
million in 2001. The interest rate structure, restrictions and conditions are
similar to the credit agreement prior to amendment.
7. INCOME TAXES:
Prior to November 6, 1996, the Company was treated for federal and state
income tax purposes as an S corporation under Subchapter S of the Internal
Revenue Code. As a result, the Company's earnings for such period were taxed
at the stockholder level. Effective November 6, 1996, the Company terminated
its S corporation status and restructured to create an operating company with
a subsidiary. From November 6, 1996, the Company's earnings have been taxed as
a C corporation and provisions for income taxes have been reflected in the
consolidated financial statements. The Company recorded a nonrecurring net
deferred tax provision of approximately $353,000 associated with the
recognition of a related deferred tax liability due to the termination of the
Company's S corporation status.
F-14
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The provision for income taxes for the years ended December 31, 1996, 1995
and 1994 consists of the following (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1996 1995 1994
<S> <C> <C> <C>
Federal:
Current................................................... $ 559 $-- $--
Deferred.................................................. 692 -- --
State:
Current................................................... 339 45 51
Deferred.................................................. 105 -- --
------ ---- ----
$1,695 $ 45 $ 51
====== ==== ====
</TABLE>
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes related primarily to differences between the treatment of certain items
for financial statement purposes and the treatment of those items for
corporation tax purposes. The deferred tax assets and liabilities represent
the future tax return consequences of those differences, which will either be
taxable or deductible when the assets and liabilities are recovered or
settled.
Significant components of the Company's deferred tax assets and liabilities
at December 31, 1996 were as follows (in thousands):
<TABLE>
<S> <C>
Deferred tax assets:
Accrued liabilities.............................................. $ 214
Allowance for doubtful accounts.................................. 40
Inventory capitalization......................................... 196
Deferred compensation............................................ 153
Capital leases................................................... 264
Noncompete agreements............................................ 127
Inventory reserve................................................ 217
-------
Total gross deferred tax assets................................ 1,211
-------
Deferred tax liabilities:
Depreciation..................................................... (1,173)
IRC Section 481 inventory adjustment............................. (835)
-------
Total gross deferred tax liabilities........................... (2,008)
-------
Net deferred tax liabilities................................. $ (797)
=======
Current deferred income tax liability.............................. $ (168)
Noncurrent deferred income tax liability........................... (629)
-------
Net deferred tax liabilities................................. $ (797)
=======
</TABLE>
F-15
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The differences between the consolidated provision for income taxes and
income taxes computed using income before income taxes and the U.S. federal
income tax rate for the years ended December 31, 1996, 1995 and 1994 are as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1995 1994
<S> <C> <C> <C>
Amount computed using statutory rate (35%)...... $ 5,042 $ 2,542 $ 1,948
Increase (decrease) in taxes resulting from:
Recognition of deferred tax liability in
connection with S corporation termination.... 353 -- --
Tax effect of change in method of valuing
inventory.................................... 388
State income taxes............................ 225 45 51
Tax effect of income not subject to federal
tax due to corporation S status.............. (4,329) (2,542) (1,948)
Other, net.................................... 16 -- --
------- ------- -------
$ 1,695 $ 45 $ 51
======= ======= =======
</TABLE>
8. COMMITMENTS AND CONTINGENCIES:
LEASES
The Company leases various equipment and buildings under capital and
noncancelable operating leases with an initial term in excess of one year. As
of December 31, 1996, future minimum rental payments required under these
capital and operating leases are summarized as follows (in thousands):
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1997.................................................... $ 432 $2,175
1998.................................................... 363 1,926
1999.................................................... 340 1,375
2000.................................................... 340 995
2001.................................................... 304 759
Thereafter.............................................. 1,573 690
------- ------
Total................................................... 3,352 $7,920
======
Less amount representing interest....................... (1,804)
-------
Present value of minimum lease payments................. $ 1,548
=======
</TABLE>
Rental expense for operating leases was $3,839,000, $2,640,000 and
$1,574,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with its majority
stockholder for a five-year term renewable annually and has entered into a
consulting agreement with a former stockholder through October 1998.
LITIGATION
There are claims and pending actions incident to the business operations of
the Company. Management does not expect resolution of these matters to have a
material adverse effect on the Company's financial position or future results
of operations or cash flows.
F-16
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. RETIREMENT PLAN:
The Company has a defined contribution retirement plan which covers
substantially all full-time employees and is qualified under Section 401(k) of
the Internal Revenue Code. Under the plan, employees may voluntarily
contribute a percentage of their compensation to the plan and the Company may
make discretionary contributions. The Company's contributions to the plan for
the years ended December 31, 1996, 1995 and 1994 were $100,000, $225,000 and
$150,000, respectively.
10. RELATED PARTY TRANSACTIONS:
The Company leases certain buildings and data processing equipment under
capital leases from partnerships partially owned by the majority stockholder
of the Company. Two of the leased warehouses were financed through economic
development and industrial revenue bonds; one series of which was issued by
Newton, Kansas in the original principal amount of $575,000, and with respect
to which, the Company is the sub-lessee of the premises and a co-guarantor,
and one series of which was issued by Elkhart, Indiana in the original
principal amount of $400,000, and with respect to which, the Company is the
lessee of the premises and has agreed to perform the obligations of the lessor
contained in the mortgage. Lease payments for the facilities and equipment
were approximately $672,000 in each of the years ended 1996, 1995 and 1994.
The Company loaned its majority stockholder $5.0 million in 1993, payable in
monthly principal installments of $62,500 plus interest at 9% at December 31,
1995, due November 1997. The Company distributed the loan to stockholder to
the Company's stockholders effective June 30, 1996.
11. OTHER INCOME:
The Company received $800,000 in 1994 from a disability insurance policy on
a former stockholder who was determined disabled and used the proceeds to
retire a note payable to the former stockholder.
12. STOCK-BASED COMPENSATION PLANS:
The Company sponsors the Kevco, Inc. 1995 Stock Option Plan and the Kevco,
Inc. 1996 Stock Option Plan (the "Plans"), which are stock-based incentive
compensation plans. The Company applies APB Opinion 25 and related standards
in accounting for the Plans. In 1995, the FASB issued FASB Statement No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"). Adoption of the cost
recognition provisions of SFAS 123 is optional and the Company has decided not
to elect these provisions of SFAS 123. However, disclosures as if the Company
adopted the cost recognition provisions of SFAS 123 in 1995 are required by
SFAS 123 and are presented below.
Under the Plans, the Company is authorized to issue up to 702,735 shares of
common stock pursuant to "Awards" granted in the form of incentive stock
options (intended to qualify under Section 422 of the Internal Revenue Code of
1986, as amended) and nonqualified stock options. Awards may be granted to
selected employees and directors of the Company. During 1995 and 1996, the
Company granted only nonqualified stock options under the Plans.
NONQUALIFIED STOCK OPTIONS
The Plans provide that the exercise price of any stock option will be
determined by the Board of Directors on the date of grant. The stock options
granted in 1995 or 1996 vest over periods of 10 years and 7 years,
respectively. All options vested in November 1996, at the time of the initial
public offering. In accordance with APB 25, the Company has not recognized any
compensation cost for these stock options granted during 1995 and 1996.
F-17
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A summary of the status of the Company's stock options as of December 31,
1995 and 1996, and the changes during the year ended on those dates is
presented below:
<TABLE>
<CAPTION>
NONQUALIFIED STOCK OPTIONS
---------------------------------------
1996 1995
------------------- -------------------
NUMBER OF WEIGHTED NUMBER OF WEIGHTED
SHARES OF AVERAGE SHARES OF AVERAGE
UNDERLYING EXERCISE UNDERLYING EXERCISE
OPTIONS PRICES OPTIONS PRICES
<S> <C> <C> <C> <C>
Outstanding at beginning of year...... 47,854 $ 5.64 -- N/A
Granted............................... 393,450 $11.17 47,854 $5.64
Exercised............................. -- N/A -- N/A
Forfeited............................. 26,108 $10.42 -- N/A
Expired............................... -- N/A -- N/A
Outstanding at end of year............ 415,196 $10.58 47,854 $5.64
Exercisable at end of year............ 415,196 $10.58 -- N/A
Weighted-average fair value of options
granted during the year.............. $ 1.84 -- $ 1.39 --
</TABLE>
The fair value of each stock option granted is estimated on the date of
grant using the minimum value method of option pricing with the following
weighted-average assumptions for grants in 1995 and 1996, respectively:
dividend yield of zero percent for both years; risk-free interest rates are
different for each grant and range from 5.77% to 6.19%; and the expected lives
of 5 and 3.5 years, respectively, for the 1995 and 1996 options. In
determining the "minimum value," SFAS 123 does not require the volatility of
the Company's common stock underlying the options to be calculated or
considered because the Company was not publicly-traded when the options were
granted.
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------ ------------------------
NUMBER NUMBER
OUTSTANDING WEIGHTED WEIGHTED EXERCISABLE WEIGHTED
AT AVERAGE AVERAGE AT AVERAGE
EXERCISE DECEMBER 31, REMAINING EXERCISE DECEMBER 31, EXERCISE
PRICES 1996 LIFE PRICE 1996 PRICE
-------- ------------ --------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$ 5.64 44,306 7.85 $ 5.64 44,306 $ 5.64
11.17 370,890 5.66 11.17 370,890 11.17
------- ---- ------ ------- ------
415,196 5.90 $10.58 415,196 $10.58
======= ==== ====== ======= ======
</TABLE>
NET INCOME AND NET INCOME PER COMMON SHARE
Had the compensation cost for the Company's stock-based compensation plans
been determined consistent with SFAS 123, the Company's net income and net
income per common share for 1995 and 1996 would approximate the pro forma
amounts below (in thousands):
<TABLE>
<CAPTION>
SFAS 123 PRO SFAS 123 PRO
AS REPORTED FORMA AS REPORTED FORMA
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1996 1995 1995
<S> <C> <C> <C> <C>
SFAS 123 charge........... -- $ 711 -- $ 34
Pro forma net income...... $8,932 $8,491 $4,430 $4,409
Pro forma net income per
common share............. $ 1.61 $ 1.54 $ .90 $ 0.89
</TABLE>
F-18
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The effects of applying SFAS 123 in this pro forma disclosure are not
indicative of future amounts. SFAS 123 does not apply to awards prior to 1995,
and the Company anticipates making awards in the future under its stock-based
compensation plans.
13. CHANGE IN ACCOUNTING PRINCIPLE:
During the second quarter of 1997, the Company adopted the FIFO method to
value inventories for which the LIFO method has previously been utilized for
determining cost. The FIFO method will better measure the current value of
such inventories, provide a more appropriate matching of revenues and
expenses, and conform all inventories of the Company to the same accounting
method. Additionally, the change will enhance the comparability of the
Company's financial statements by changing to the predominant method utilized
in its industry.
As required by generally accepted accounting principles, the Company applied
this change retroactively, which resulted in a decrease in net income of
approximately $276,000 for the year ended December 31, 1996 and an increase in
net income of approximately $236,000 and $269,000 for the years ended December
31, 1995 and 1994, respectively. The cumulative effect of this restatement on
retained earnings at January 1, 1994 was an increase of $313,000. Pro forma
net income (see Note 1) increased approximately $69,000, $144,000 and $164,000
for the years ended December 31, 1996, 1995 and 1994, respectively and pro
forma earnings per share (see Note 1) increased by $0.01, $0.03, and $0.04 for
the years ended December 31, 1996, 1995, and 1994, respectively, as a result
of applying the change retroactively.
14. SUBSEQUENT EVENTS:
In February 1997, the Company acquired certain assets and liabilities of
Consolidated Forest Products, L.L.C. for approximately $13,870,000.
Consolidated Forest Products, L.L.C. is a privately held manufacturer of wood
products based in Haleyville, Alabama.
In February 1997, the Company acquired the common stock of Bowen Supply,
Inc. for approximately $19,500,000. Bowen Supply, Inc. is a privately held
distributor of building products to the manufactured housing and recreational
vehicle industries based in Americus, Georgia.
The Company will account for these transactions under the purchase method.
F-19
<PAGE>
KEVCO, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.......................... $ 77 $ 2,078
Trade accounts receivable, less allowance for
doubtful accounts of $132
and $100 in 1997 and 1996, respectively........... 25,190 9,458
Inventories........................................ 34,988 23,722
Prepaid expenses and other current assets.......... 1,447 338
-------- -------
Total current assets.............................. 61,702 35,596
Property and equipment, net......................... 18,563 10,208
Intangible assets, net.............................. 33,600 9,495
Other assets........................................ 713 440
-------- -------
Total assets...................................... $114,578 $55,739
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Trade accounts payable............................. $ 22,245 $ 6,666
Accrued liabilities................................ 4,050 3,107
Income taxes payable............................... 118 762
Current portion of long-term debt.................. 112 367
Current deferred income taxes...................... 50 168
-------- -------
Total current liabilities......................... 26,575 11,070
Long-term debt, less current portion................ 45,737 9,464
Deferred income taxes............................... 629 629
Deferred compensation obligation.................... 1,240 383
-------- -------
Total liabilities................................. 74,181 21,546
-------- -------
Stockholders' equity:
Common stock, $.01 par value; 100,000 shares autho-
rized; 6,825 shares issued and outstanding........ 68 68
Additional paid-in capital......................... 32,974 32,854
Retained earnings.................................. 7,355 1,271
-------- -------
Total stockholders' equity........................ 40,397 34,193
-------- -------
Total liabilities and stockholders' equity........ $114,578 $55,739
======== =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-20
<PAGE>
KEVCO, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------
1997 1996
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales............................................. $271,957 $205,048
Cost of sales......................................... 235,138 174,055
-------- --------
Gross profit......................................... 36,819 30,993
Commission income..................................... 4,413 4,100
-------- --------
41,232 35,093
Selling, general and administrative expenses.......... 28,738 22,590
-------- --------
Operating income..................................... 12,494 12,503
Interest expense...................................... 2,354 1,626
-------- --------
Income before income taxes........................... 10,140 10,877
Income taxes.......................................... 4,056 30
-------- --------
Net income........................................... $ 6,084 $ 10,847
======== ========
Earnings per share.................................... $ 0.88
========
Weighted average shares outstanding................... 6,916
========
Pro forma information (Note 5)
Historical income before income taxes................ $ 10,877
Income tax expense adjustments....................... 4,133
--------
Pro forma net income................................. $ 6,744
========
Pro forma earnings per share......................... $ 1.32
========
Weighted average shares outstanding.................. 5,098
========
</TABLE>
See accompanying notes to consolidated financial statements.
F-21
<PAGE>
KEVCO, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER
30
----------------
1997 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Cash flows form operating activities:
Net income.................................................. $ 6,084 $10,847
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization.............................. 2,172 1,318
Gain on sale of assets..................................... (3) (4)
Deferred compensation obligation........................... 375 24
Changes in assets and liabilities.......................... (2,390) (474)
------- -------
Net cash provided by operating activities.................. 6,238 11,711
Cash flows from investing activities:
Purchase of Consolidated.................................... (13,420) --
Purchase of Bowen........................................... (19,115) --
Purchase of equipment....................................... (2,000) (1,086)
Proceeds from sale of assets................................ 806 4
Increase in other assets.................................... (509) (314)
------- -------
Net cash used by investing activities...................... (34,238) (1,396)
Cash flows from financing activities:
Proceeds (payments) on line of credit, net.................. 4,600 (5,500)
Proceeds from long-term debt................................ 30,000 --
Distributions paid.......................................... -- (5,915)
Payments of long-term debt.................................. (8,721) (99)
Capital contributions....................................... -- 86
Collections on loan to stockholder.......................... -- 375
Stock options exercised..................................... 120 --
------- -------
Net cash provided (used) by financing activities........... 25,999 (11,053)
------- -------
Net decrease in cash and cash equivalents.................... (2,001) (738)
Beginning cash and cash equivalents.......................... 2,078 977
------- -------
Ending cash and cash equivalents............................. $ 77 $ 239
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
F-22
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ACCOUNTING POLICIES AND BASIS OF PRESENTATION
The Annual Report on Form 10-K for the year ended December 31, 1996, for
Kevco, Inc. includes a summary of significant accounting policies and should
be read in conjunction with this Form 10-Q. Prior to the effective date of the
initial public offering (see Note 3), Kevco, Inc. restructured and created an
operating company subsidiary with a subsidiary. As a result, the financial
statements are referred to as consolidated financial statements. The
accompanying consolidated financial statements of Kevco, Inc. and its wholly-
owned subsidiaries (the "Company") have been prepared pursuant to the rules
and regulations of the Securities and Exchange Commission ("SEC").
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles ("GAAP") for complete financial
statements. All significant intercompany transactions and accounts have been
eliminated.
In the opinion of management, the consolidated financial statements contain
all adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair statement of the balance sheets as of September 30, 1997
and December 31, 1996, the statements of income for the nine-month period
ended September 30, 1997 and 1996 and the statements of cash flows for the
nine-month period ended September 30, 1997 and 1996. The results of operations
for the nine-month period ended September 30, 1997 are not necessarily
indicative of the results of operations for the entire fiscal year ending
December 31, 1997.
On August 29, 1996, the Company effected a 0.47-for-1 reverse stock split of
its common stock and retired its treasury shares. All share and per share
amounts included in the accompanying financial statements and footnotes have
been restated to reflect the reverse stock split.
2. ACQUISITIONS
On February 27, 1997, the Company acquired substantially all of the assets,
and assumed certain liabilities, of Consolidated Forest Products, L.L.C.
("Consolidated") (the "Consolidated Acquisition") for approximately $14.0
million. The acquisition was accounted for as a purchase and, accordingly, the
operating results of Consolidated have been included in the operating results
of the Company since February 27, 1997. The acquisition cost in excess of the
fair value of net assets of Consolidated of approximately $9.6 million has
been accounted for as goodwill and will be amortized over its estimated useful
life of 40 years.
On February 28, 1997, the Company purchased all of the capital stock of
Bowen Supply, Inc. ("Bowen") (the "Bowen Acquisition") for approximately $19.5
million. The acquisition was accounted for as a purchase and, accordingly, the
operating results of Bowen have been included in the operating results of the
Company since February 28, 1997. The acquisition cost in excess of the fair
value of net assets of Bowen of approximately $14.9 million has been accounted
for as goodwill and will be amortized over its estimated useful life of 40
years.
The following pro forma financial information combines the historical
results of the Company as if the Consolidated Acquisition, the Bowen
Acquisition and the initial public offering had occurred as of the beginning
of each period presented:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
-----------------
1997 1996
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Net sales............................................... $294,253 $305,379
Net income.............................................. $ 6,467 $ 10,001
Earnings per share...................................... $ 0.93 $ 1.45
</TABLE>
F-23
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
3. INITIAL PUBLIC OFFERING
In November 1996, the Company completed an initial public offering of
2,415,000 shares of the Company's common stock (including an over-allotment
option of 315,000 shares exercised in December 1996) for $12.00 per share,
netting proceeds to the Company after underwriting discounts and expenses of
approximately $26.0 million. Proceeds to the Company were used to repay all of
the outstanding balance of the Company's $20.0 million revolving credit
facility of $9.0 million and a permanent reduction of all of the outstanding
balance of the Company's term loan of $13.9 million. Proceeds were also used
to make an S corporation distribution of approximately $3.7 million
representing previously taxed but undistributed earnings through June 30, 1996
(see Note 7 and 8).
4. INVENTORIES
Inventories are comprised of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Raw materials........................................ $ 7,922 $ 4,385
Work-in process...................................... 636 332
Finished goods....................................... 1,938 1,324
Goods held for resale................................ 24,492 17,681
------- -------
$34,988 $23,722
======= =======
</TABLE>
During the second quarter of 1997, the Company adopted the FIFO method to
value inventories for which the LIFO method had previously been utilized for
determining cost. The FIFO method will better measure the current value of
such inventories, provide a more appropriate matching of revenues and
expenses, and conform all inventories of the Company to the same accounting
method. Additionally, the change will enhance the comparability of the
Company's financial statements by changing to the predominant method utilized
in its industry.
The Company applied this change retroactively, which resulted in an increase
in retained earnings of approximately $542,000 and $818,000 at January 1, 1997
and 1996, respectively. There was no material impact on net income or earnings
per share for the three and nine months ended September 30, 1996.
5. PRO FORMA INFORMATION
Pro forma net income for 1996 represents the results of operations adjusted
to reflect a provision for income taxes on historical income before income
taxes, which gives effect to the change in the Company's income tax status to
a C corporation concurrently with the consummation of the Company's initial
public offering. The difference between the pro forma income tax rates
utilized and the federal statutory rate of 34% relates primarily to state
income taxes.
Pro forma earnings per share for 1996 has been computed by dividing pro
forma net income by the weighted average number of shares of common stock
outstanding during the period.
In accordance with a regulation of the Securities and Exchange Commission,
pro forma earnings per share data for 1996 have been presented to reflect the
effect of the assumed issuance of that number of shares of common stock that
would generate sufficient cash to pay an S corporation distribution in an
amount equal to previously taxed but undistributed earnings.
Historical earnings per share for 1996 is not presented because it is not
indicative of the ongoing entity.
F-24
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
6. INCOME TAXES
Prior to November 6, 1996, the Company's stockholders had elected to be
taxed under the provisions of Subchapter S of the Internal Revenue Code. As a
result, there was no provision for federal income taxes in the historical
financial statements for the nine-month period ended September 30, 1996, as
such taxes were the responsibility of the individual stockholders. Effective
November 6, 1996, the Company converted to a C corporation and became subject
to federal income taxes on an ongoing basis.
7. STOCKHOLDERS' EQUITY
In conjunction with its initial public offering, the Company terminated its
S corporation status and distributed to its stockholders approximately $3.7
million, representing previously taxed but undistributed earnings at June 30,
1996. On December 31, 1996, the Company repaid notes in the approximate
aggregate amount of $5.2 million that were issued immediately prior to the
consummation of the offering, which notes were the final S corporation
distribution and represented earnings from July 1, 1996 to the consummation of
the offering.
8. CREDIT AGREEMENT
In February 1997, the Company and its lender amended the credit agreement in
order to fund the Consolidated Acquisition and the Bowen Acquisition (see Note
2). The term debt was increased to $30.0 million and the revolving credit
facility was increased to $35.0 million, each maturing in 2001. The Company's
term debt and revolver are collateralized by inventory, accounts receivable
and property and equipment and the common stock of the Company's subsidiaries
(see Note 1). The related credit agreement contains certain restrictions and
conditions that include cash flow and various financial ratio requirements,
and limitations on incurrence on debt or liens, acquisitions of property and
equipment, distributions to shareholders and certain events constituting a
Change of Control (as defined in such agreement).
9. RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS
128"). SFAS 128 simplifies the standards for computing earnings per share
("EPS") previously found in APB Opinion No. 15, Earnings Per Share
("Opinion 15"), and makes them comparable to international EPS standards. SFAS
128 replaces the presentation of primary EPS with a presentation of basic EPS.
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Diluted EPS is computed
similarly to fully diluted EPS pursuant to Opinion 15. SFAS 128 also requires
dual presentation of basic and diluted EPS on the face of the income statement
for entities with complex capital structures and a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. SFAS 128 is effective for
financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. SFAS 128
requires restatement of all prior-period EPS data presented. The Company is
currently evaluating SFAS 128. However, management does not believe that it
will have a material impact on the consolidated financial statements of the
Company.
F-25
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
In February 1997, The FASB issued Statement of Financial Accounting
Standards No. 129, "Disclosure of Information about Capital Structure" ("SFAS
No. 129"). SFAS No. 129 establishes standards for disclosing information about
an entity's capital structure and applies to all entities. This statement
continues the previous requirements to disclose certain information about an
entity's capital structure found in APB Opinions No. 10, Omnibus Opinion -
1966, and No. 15, Earnings per Share, and FASB Statement No. 47, Disclosure of
Long-Term Obligations, for entities that were subject to the requirements of
those standards. This statement supersedes specific disclosure requirements of
Opinions 10 and 15 and Statement 47 and consolidates them in this statement
for ease of retrieval and for greater visibility to non-public entities. This
statement is effective for financial statements for periods ending after
December 15, 1997. It is not expected that the Company will experience any
material revision in its disclosures when SFAS No. 129 is adopted.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130
establishes standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of general
purpose financial statements. SFAS No. 130 requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. It does not require a
specific format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the period in
that financial statement. This statement is effective for fiscal years
beginning after December 15, 1997. Reclassification of financial statements
for earlier periods provided for comparative purposes is required. This
statement has no impact on the financial condition or results of operations of
the Company, but may require changes to the Company's disclosure requirements.
In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of an Enterprise and Related Information"
("SFAS No. 131"). SFAS No. 131 establishes standards for the way that public
business enterprises report information about operating segments in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. SFAS No. 131 also establishes standards for related disclosures
about products and services, geographic areas, and major customers. This
statement supersedes FASB Statement No. 14, Financial Reporting for Segments
of a Business Enterprise, but retains the requirement to report information
about major customers. It amends FASB Statement No. 94, Consolidation of All
Majority-Owned Subsidiaries, to remove the special disclosure requirements for
previously unconsolidated subsidiaries. This statement is effective for fiscal
years beginning after December 15, 1997. In the initial year of application,
comparative information for earlier years is to be restated. This statement
need not be applied to interim financial statements in the initial year of
application, but comparative information for interim periods in the initial
year of application is to be reported in financial statements for interim
periods in the second year of application. This statement has no impact on the
financial condition or results of operations of the Company, but may require
changes in the Company's disclosure requirements.
10. SUBSEQUENT EVENT
On October 21, 1997, Kevco signed a definitive merger agreement with Shelter
Components Corporation ("Shelter") for Kevco to acquire all the outstanding
shares of Shelter. Pursuant to the agreement, Kevco will pay $17.50 per share
for each share of common stock of Shelter which currently has approximately
7.8 million shares of common stock outstanding. The transaction will be a cash
tender offer followed by a cash merger to acquire any shares not previously
tendered. As a result of the transaction, Shelter will become a wholly-owned
subsidiary of Kevco.
F-26
<PAGE>
KEVCO, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
In connection with the acquisition of Shelter, Kevco has entered into an
arrangement to amend its credit agreement with a bank at closing of the
acquisition to allow for aggregate senior borrowings of up to $125 million.
The aggregate amount will be comprised of a revolving credit facility of $35
million and a term loan facility of up to $90 million. The revolving credit
facility will mature six years from date of closing and assuming a term loan
facility of $90 million, the term loan scheduled repayments will be $0.5
million in 1998, $5.5 million in 1999, $8.0 million in 2000, $8.0 million in
2001, $10.5 million in 2002, $10.5 million in 2003 and $47.0 million in 2004.
Borrowings under the revolving credit facility require monthly, bi-monthly or
quarterly interest payments (depending on whether interest accrues based on
the prime rate or LIBOR) calculated as a blend of the bank's prime rate and
LIBOR based on pricing options selected by the Company plus a margin
determined by operating statistics of the Company. Borrowings under the term
loan facility require monthly, bi-monthly or quarterly interest payments
(depending on whether interest accrues based on the prime rate or LIBOR) based
on a blend of the bank's prime rate and LIBOR based on pricing options
selected by the Company plus a margin determined by operating statistics of
the Company. The term loan and revolving credit facility is collateralized by
substantially all of the assets of the Company and its subsidiaries as well as
the capital stock of such subsidiaries. The related credit agreement contains
certain restrictions and conditions that include cash flow and various
financial ratio requirements, and limitations on incurrence of debt or liens,
acquisitions of property and equipment, distributions to stockholders and
certain events constituting a Change of Control (as defined in the agreement).
In addition to the funds available under the amended credit facility, the
Company issued 10 3/8% senior subordinated notes in the aggregate principal
amount of $105 million under the indenture dated as of December 1, 1997, as
supplemented, (the "Indenture"), to complete the acquisition of the
outstanding shares of Shelter. The Indenture contains certain covenants,
including, but not limited to, covenants prohibiting or limiting: (i) the
incurrence by the Company and its Restricted Subsidiaries (as defined in the
Indenture) of additional Indebtedness (as defined in the Indenture); (ii) the
payment of dividends or the making of other restricted payments by the
Company; (iii) the creation of liens by the Company and its Restricted
Subsidiaries; (iv) the creation or existence of restrictions on the ability of
Restricted Subsidiaries to pay dividends or make other payments to the
Company; (v) transactions by the Company and its Restricted Subsidiaries with
affiliates; (vi) certain sales of assets by the Company and its Restricted
Subsidiaries; (vii) the ability of the Company and the Restricted Subsidiaries
to engage in certain lines of business; and (viii) the Company's ability to
consolidate or merge with or into, or transfer all or substantially all of its
assets to, another person.
Separate financial statements of the Company's subsidiaries are not included
because (a) all of the Company's direct and indirect subsidiaries have
guaranteed the Company's obligations under the Indenture, among the Company,
such subsidiaries (in such capacity, the "Guarantors"), and the United States
Trust Company of New York, N.A., as trustee, (b) the Guarantors have fully and
unconditionally guaranteed the 10 3/8% senior subordinated notes issued under
the Indenture on a joint and several basis, (c) the Company is a holding
company with no independent assets or operations other than its investments in
the Guarantors and (d) the separate financial statements and other disclosures
concerning the Guarantors are not presented because management has determined
that they would not be material.
F-27
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Shelter Components Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Shelter
Components Corporation and its subsidiaries at December 31, 1996 and 1995, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
Indianapolis, Indiana
February 18, 1997
F-28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of
Shelter Components Corporation:
We have audited the accompanying consolidated statements of income,
shareholders' equity and cash flows of Shelter Components Corporation and
subsidiaries for the year ended December 31, 1994. These financial statements
are the responsibility of the Corporation's management. Our responsibility is
to express an opinion on these 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 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, and the consolidated results of operations and cash
flows of Shelter Components Corporation and subsidiaries for the year ended
December 31, 1994, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
South Bend, Indiana
February 7, 1995
F-29
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents.................................. $ 21,096 $ 24
Trade receivables, less allowance for doubtful receivables,
1996 and 1995--$500....................................... 22,827 25,452
Inventories................................................ 41,475 50,049
Deferred income taxes...................................... 2,128 1,412
Prepaid expenses and other................................. 595 457
Real estate held for sale.................................. 2,576 --
-------- --------
Total current assets..................................... 90,697 77,394
Property, plant and equipment, net........................... 19,381 17,587
Cost in excess of net assets acquired, net of accumulated am-
ortization, 1996--$1,482 and 1995--$1,125................... 10,312 11,554
Other assets................................................. 520 879
-------- --------
Total assets............................................. $120,910 $107,414
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt............................................ $ 6,000 $ 4,723
Current maturities of long-term debt....................... 1,904 2,009
Accounts payable, trade.................................... 23,067 23,159
Income taxes payable....................................... 2,381 43
Accrued liabilities:
Salaries and wages........................................ 2,142 2,015
Accrued expenses related to sale of business.............. 1,703 --
Other..................................................... 3,416 3,716
-------- --------
Total current liabilities................................ 40,613 35,665
-------- --------
Long-term debt............................................... 16,639 19,596
-------- --------
Deferred income taxes........................................ 745 944
-------- --------
Other deferred liabilities................................... 133 41
-------- --------
Commitments (Note 8)
Shareholders' equity
Preferred stock, $.01 par value; authorized and unissued
1,000,000 shares
Common stock, $.01 par value; authorized 10,000,000 shares,
issued 1996--7,680,623 shares and 1995--6,098,969 shares.. 76 61
Additional paid-in capital................................. 11,914 11,613
Retained earnings.......................................... 50,827 39,545
-------- --------
62,817 51,219
Less, Treasury stock, at cost, 1996--24,482 shares and
1995--26,767 shares..................................... 37 51
-------- --------
Total shareholders' equity............................. 62,780 51,168
-------- --------
Total liabilities and shareholders' equity............. $120,910 $107,414
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-30
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net sales....................................... $521,022 $462,323 $333,104
Cost of sales................................... 447,701 393,775 281,808
-------- -------- --------
Gross profit.................................. 73,321 68,548 51,296
Commission income............................... 2,459 3,005 3,111
-------- -------- --------
75,780 71,553 54,407
Selling, general and administrative expenses.... 60,194 52,709 39,136
-------- -------- --------
Operating income.............................. 15,586 18,844 15,271
Gain on sale of carpet business................. (5,919) -- --
Interest income................................. (177) (142) (38)
Interest expense................................ 1,831 2,472 1,035
-------- -------- --------
Income before income taxes.................... 19,851 16,514 14,274
Income taxes.................................... 8,153 6,476 5,577
-------- -------- --------
Net income.................................... $ 11,698 $ 10,038 $ 8,697
======== ======== ========
Net income per share............................ $ 1.51 $ 1.31 $ 1.19
======== ======== ========
Weighted average common and common equivalent
shares outstanding............................. 7,738 7,680 7,300
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-31
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN RETAINED TREASURY
STOCK CAPITAL EARNINGS STOCK TOTAL
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1994........ $ 58 $ 8,395 $21,522 $(246) $29,729
Exercise of stock options....... -- 4 -- 38 42
Cash dividends ($.05 per
share)......................... -- -- (346) -- (346)
Cash paid in lieu of fractional
shares......................... -- -- (6) -- (6)
Net income...................... -- -- 8,697 -- 8,697
---- ------- ------- ----- -------
Balance at December 31, 1994...... 58 8,399 29,867 (208) 38,116
Exercise of stock options....... -- 171 -- 157 328
Cash dividends ($.05 per
share)......................... -- -- (360) -- (360)
Issuance of common shares in
connection with a business
acquisition (Note 9)........... 3 2,923 -- -- 2,926
Tax benefit from early sale of
stock acquired with options.... -- 120 -- -- 120
Net income...................... -- -- 10,038 -- 10,038
---- ------- ------- ----- -------
Balance at December 31, 1995...... 61 11,613 39,545 (51) 51,168
Exercise of stock options....... -- 246 -- 14 260
Cash dividends ($.05 per
share)......................... -- -- (413) -- (413)
Cash paid in lieu of fractional
shares......................... -- -- (3) -- (3)
Five-for-four stock split....... 15 (15) -- -- --
Tax benefit from early sale of
stock acquired with options.... -- 70 -- -- 70
Net income...................... -- -- 11,698 -- 11,698
---- ------- ------- ----- -------
Balance at December 31, 1996...... $ 76 $11,914 $50,827 $ (37) $62,780
==== ======= ======= ===== =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-32
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................... $ 11,698 $ 10,038 $ 8,697
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation.................................. 2,337 1,930 1,508
Amortization.................................. 1,013 967 524
Loss (gain) on sales of property, plant and
equipment.................................... 29 11 (53)
Deferred income taxes......................... (915) (38) (130)
Gain on sale of carpet business............... (5,919) -- --
Changes in certain assets and liabilities,
excluding effects from acquisitions and
dispositions:
Trade receivables............................. 2,760 (1,346) (6,327)
Inventories................................... (738) 1,481 (17,484)
Prepaid expenses and other.................... (138) (154) 167
Accounts payable, trade....................... 2,687 (1,159) 6,479
Other current liabilities..................... 2,174 172 (183)
-------- --------- --------
Net cash provided by (used in) operating
activities................................. 14,988 11,902 (6,802)
-------- --------- --------
Cash flows from investing activities:
Proceeds from sales of property, plant and
equipment.................................... 61 51 120
Acquisitions of property, plant and
equipment.................................... (8,368) (2,790) (2,136)
Acquisitions of businesses, net of cash
acquired..................................... (145) (732) (732)
Proceeds from sale of carpet business, net of
$1,921 costs and expenses paid............... 16,367 -- --
Other, net.................................... 110 180 132
-------- --------- --------
Net cash provided by (used in) investing
activities................................. 8,025 (3,291) (2,616)
-------- --------- --------
Cash flows from financing activities:
Proceeds from issuance of debt................ 83,837 171,697 100,382
Repayment of debt............................. (85,622) (180,271) (90,652)
Proceeds from exercise of stock options....... 260 328 42
Cash dividends paid........................... (413) (360) (346)
Other, net.................................... (3) -- (6)
-------- --------- --------
Net cash (used in) provided by financing
activities................................. (1,941) (8,606) 9,420
-------- --------- --------
Increase in cash............................ 21,072 5 2
Cash, beginning of year......................... 24 19 17
-------- --------- --------
Cash, end of year............................... $ 21,096 $ 24 $ 19
======== ========= ========
Supplemental disclosures of cash flow
information:
Cash paid during the year for:
Interest.................................... $ 1,894 $ 2,516 $ 979
Income taxes................................ 6,660 6,894 5,940
Non-cash investing and financing activities:
Reclassification of short-term borrowings to
reflect debt refinancing..................... -- -- 8,000
Obligations assumed in business acquisitions.. -- 9,438 897
Short-term debt issued in business
acquisition.................................. -- 1,500 --
Long-term debt issued in business
acquisition.................................. -- 5,522 --
Common stock issued in business acquisition... -- 2,926 --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-33
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of Business--Shelter Components Corporation and subsidiaries
(individually and collectively referred to as the "Corporation") manufacture
and distribute products and materials primarily for use by the Manufactured
Housing, Modular Housing and Recreational Vehicle industries.
SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation--The consolidated financial statements include
the accounts of the Corporation and its wholly-owned subsidiaries. All
intercompany balances and transactions have been eliminated.
Inventories--Inventories are stated at the lower of cost or market, with
cost determined by the first-in, first-out method.
Property, Plant and Equipment--Property, plant and equipment are carried at
cost less accumulated depreciation. Depreciation is computed primarily by the
straightline method over the estimated useful lives of the assets. Upon sale
or retirement of property, plant and equipment, the asset cost and related
accumulated depreciation are removed from the accounts and any resulting gain
or loss is included in income.
Intangibles--Non-compete agreements are amortized on a straight-line basis
over the terms of the related agreements (3 to 5 years). The excess of
acquisition cost of acquired businesses over the fair value of net assets
acquired ("goodwill") is amortized, using the straight-line method, over
periods ranging from 10 to 40 years. The Corporation periodically reviews the
carrying value of goodwill to assess that recoverability and impairments are
recognized in operating results when a permanent diminution in value has
occurred.
Income Taxes--Deferred income taxes are determined using the liability
method in accordance with Statement of Financial Accounting Standards (SFAS)
No. 109 "Accounting for Income Taxes".
Use of Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
Fair Value of Financial Instruments--The fair value of all financial
instruments where the face value differs from the fair value are estimated
based upon quoted amounts or the use of current rates available for similar
financial instruments. If fair value accounting had been used at December 31,
1996 and 1995, instead of the historic basis of accounting used in the
financial statements, long-term debt would exceed the reported level by
approximately $1.5 million in each year.
Product Warranty Expense--Provisions are made currently for the estimated
future costs that will be incurred under product warranties presently in
force.
Revenue Recognition and Concentration of Credit Risk--Revenue from product
sales is recognized at the time of shipment and commissions are recognized as
earned on an accrual basis. Although the Corporation has a concentration of
credit risk in the Manufactured Housing and Recreational Vehicle industries,
there is no geographical concentration of credit risk. Sales to one customer
were approximately 11%, 12% and 10% of the Corporation's consolidated net
sales in 1996, 1995 and 1994, respectively. Two of the Corporation's customers
merged during 1996 resulting in combined sales approximating 13% of the 1996
consolidated net sales. The Corporation performs an ongoing credit evaluation
of its customers' financial condition, and credit is extended to customers on
an unsecured basis. Future credit losses are provided for currently through
the allowance for doubtful receivables. Actual credit losses are charged to
the allowance when incurred. The amounts provided for
F-34
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
such losses are determined based on the Corporation's historical loss
experience considering current economic conditions.
Earnings Per Common Share--Primary and fully diluted earnings per common
share computations are based on the weighted average number of shares of
common stock and the dilutive effect of common stock equivalents (see Note 6)
outstanding during each year, adjusted for all stock splits declared during
the periods presented.
NOTE 2: INVENTORIES
Inventories consist of the following components:
<TABLE>
<CAPTION>
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Raw materials................................................ $ 5,466 $ 8,272
Work-in-process.............................................. 382 4,986
Finished goods............................................... 814 6,866
Goods held for resale........................................ 34,813 29,925
------- -------
Total...................................................... $41,475 $50,049
======= =======
</TABLE>
NOTE 3: PROPERTY, PLANT AND EQUIPMENT
The cost and accumulated depreciation are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Land........................................................ $ 1,984 $ 1,435
Buildings................................................... 12,915 10,569
Leasehold improvements...................................... 278 1,217
Machinery and equipment..................................... 6,276 9,739
Office equipment............................................ 2,584 2,569
Transportation equipment.................................... 2,206 2,184
------- -------
26,243 27,713
Less, Accumulated depreciation.............................. 6,862 10,126
------- -------
Property, plant and equipment, net.......................... $19,381 $17,587
======= =======
</TABLE>
NOTE 4: DEBT
The Corporation has a $25 million, unsecured, revolving bank line of credit
(the "Revolver"). The Revolver requires monthly interest payments based on
market interest rates (6.47% at December 31, 1996) and an annual commitment
fee of 1/8% based on the unused portion of the Revolver. Outstanding
borrowings under the Revolver at December 31, 1996 were $6 million which were
repaid in January 1997. There were no outstanding borrowings under the
revolving line of credit at December 31, 1995.
F-35
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1995
(IN THOUSANDS)
<S> <C> <C>
9.24% senior notes.......................................... $15,000 $15,000
6.4% senior notes........................................... 1,500 3,000
Term loan, payable in monthly installments including
interest at 6.75% with a final maturity of February 1999,
collateralized by a real estate mortgage................... 1,279 1,420
Unsecured note, payable in quarterly installments of $50
including interest imputed at 9.24% with a final maturity
of January 2000............................................ 556 697
Other....................................................... 208 1,488
------- -------
Total long-term debt...................................... 18,543 21,605
Less, Current maturities.................................... 1,904 2,009
------- -------
Long-term debt, net of current maturities................. $16,639 $19,596
======= =======
</TABLE>
In February 1995, the Corporation issued $15 million, 9.24%, unsecured
senior notes under a note agreement where interest is payable quarterly and
principal is payable in eight annual installments of $1,875,000 commencing
March 1998.
The unsecured $1.5 million, 6.4% senior note outstanding at December 31,
1996 was paid in full on February 15, 1997.
Aggregate annual maturities of long-term debt for each of the next five
years ending December 31 are as follows: 1997-$1,904,000; 1998-$2,285,000;
1999-$3,055,000; 2000-$1,924,000 and 2001-$1,875,000.
The revolver and senior note agreements contain, among other provisions,
certain covenants including: maintenance of minimum net worth and certain
financial ratios; limitations on indebtedness, liens and leases; and
limitations on the payment of cash dividends. Under the senior note agreements
and revolver, retained earnings of $39.2 million at December 31, 1996 is
restricted, as to cash dividends and purchases or redemptions of shares of
common stock.
NOTE 5: RETIREMENT PLAN
The Corporation has a defined contribution plan which covers substantially
all fulltime employees of the Corporation and is qualified under Section
401(k) of the Internal Revenue Code. Under the plan, employees may voluntarily
contribute a percentage of their compensation and the plan allows the
Corporation to make discretionary matching contributions. Retirement plan
expense, including administrative expenses, aggregated $271,000; $259,000 and
$198,000 for the years ended December 31, 1996, 1995 and 1994, respectively.
NOTE 6: SHAREHOLDERS' EQUITY
The Corporation is authorized to issue 1,000,000 shares of special
(preferred) shares (par value $.01), of which none have been issued. The
special shares have no voting rights or powers, except the Corporation's Board
of Directors is vested with authority to determine and state the designations
and relative preferences, limitations, voting rights, if any, and other rights
of the special shares.
On May 30, 1996, the Board of Directors declared a five-for-four stock split
of the Corporation's common stock, paid on July 8, 1996 to shareholders of
record on June 24, 1996. On February 8, 1994, the Board of Directors declared
a three-for-two stock split of the Corporation's common stock, paid on March
8, 1994 to shareholders of record on February 22, 1994. All historical share
and per share data has been restated for all periods presented herein to
reflect these stock splits.
F-36
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
During 1996, the Board of Directors approved the Shelter Components Employee
Stock Purchase Plan which allows all full-time employees to purchase shares of
the Corporation's common stock through payroll deduction at market prices. As
of December 31, 1996, 4,422 shares of common stock had been purchased by
employees participating in the plan. The Corporation pays the expenses of
administering the plan.
The Corporation has a stock incentive plan authorizing the grant of
incentive stock options and nonqualified stock options to purchase up to
937,500 shares of the Corporation's common stock. Under the plan, the
incentive stock option price may not be less than the fair market value of the
Corporation's common stock at the date of grant. Generally, the options become
exercisable over staggered periods and expire five years from the date of
grant.
The transactions for shares under options for each of the three years in the
period ended December 31, 1996 were as follows:
<TABLE>
<CAPTION>
SHARES
UNDER PER SHARE
OPTION OPTION PRICE
<S> <C> <C>
Outstanding, January 1, 1994.......................... 322,144 $1.54-$6.94
Exercised........................................... (24,884) 1.54- 2.02
--------
Outstanding, December 31, 1994........................ 297,260 1.54- 6.94
Exercised........................................... (104,235) 1.54- 6.94
Granted............................................. 241,250 9.20
--------
Outstanding, December 31, 1995........................ 434,275 1.54- 9.20
Exercised........................................... (65,823) 1.54- 9.20
Cancelled........................................... (19,687) 6.94- 9.20
--------
Outstanding, December 31, 1996........................ 348,765 6.94- 9.20
========
Exercisable, December 31, 1996........................ 136,401 $6.94-$9.20
========
</TABLE>
As of December 31, 1996, 331,095 shares were reserved for the granting of
future stock options under this plan, compared with 106,330 shares at December
31, 1995.
In 1996, the Board of Directors implemented a non-qualified stock option
plan for the purpose of granting stock options to the Corporation's non-
employee directors. The plan provides for annual grants of 2,500 options to
each non-employee director at the fair market value of the Corporation's
common stock at the date of the grant. The options are immediately exercisable
upon grant. In May 1996, a total of 20,000 options were granted to the non-
employee directors of the Corporation at an exercise price of $10.90 per
share, all of which were outstanding and exercisable at December 31, 1996. As
of December 31, 1996, 180,000 shares were reserved for the granting of future
stock options to non-employee directors under this plan.
F-37
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Corporation has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123). The Corporation applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its plan.
Accordingly, no compensation cost has been recognized for its fixed stock
option plan. Had compensation cost for the 1995 grant been determined based on
the fair value method as defined in SFAS No. 123, the Corporation's net income
and income per share would have been reduced to the proforma amounts indicated
below.
<TABLE>
<CAPTION>
1996 1995
----------------- -----------------
REPORTED PROFORMA REPORTED PROFORMA
<S> <C> <C> <C> <C>
Net income............................... $11,698 $11,548 $10,038 $9,888
Net income per share..................... 1.51 1.49 1.31 1.29
</TABLE>
The fair value of the option grant is estimated on the date of grant with
the following assumptions: expected volatility 32%; risk-free interest rate of
6.04%; and expected life of 3 years.
NOTE 7: INCOME TAXES
Income taxes consist of the following:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current............................................ $7,724 $5,414 $4,728
Deferred........................................... (784) (33) (110)
------ ------ ------
6,940 5,381 4,618
------ ------ ------
State:
Current............................................ 1,344 1,100 979
Deferred........................................... (131) (5) (20)
------ ------ ------
1,213 1,095 959
------ ------ ------
Total.............................................. $8,153 $6,476 $5,577
====== ====== ======
</TABLE>
The components of the net deferred tax asset and the net deferred tax
liability as of December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
(IN THOUSANDS)
<S> <C> <C>
Current deferred tax asset:
Allowance for doubtful receivables...................... $ 196 $ 196
Inventories............................................. 895 601
Accrued liabilities and other........................... 1,037 615
------- -------
Deferred tax asset.................................... $ 2,128 $ 1,412
======= =======
Noncurrent deferred tax asset (liability):
Depreciation............................................ $ (643) $ (743)
Acquired companies...................................... (210) (214)
Other................................................... 108 13
------- -------
Deferred tax liability................................ $ (745) $ (944)
======= =======
</TABLE>
F-38
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a reconciliation of income taxes computed at the statutory
federal income tax rate to the reported provision:
<TABLE>
<CAPTION>
1996 1995 1994
(IN THOUSANDS)
<S> <C> <C> <C>
Computed income taxes at federal statutory rate...... $6,948 $5,782 $4,996
State income taxes, net of federal benefit........... 789 711 630
Writedown of non-deductible goodwill................. 280 -- --
Other................................................ 136 (17) (49)
------ ------ ------
Total.............................................. $8,153 $6,476 $5,577
====== ====== ======
</TABLE>
NOTE 8: COMMITMENTS, CONTINGENCIES AND RELATED PARTIES
LEASE COMMITMENTS
The Corporation leases certain facilities under noncancellable agreements
which expire at various dates through September 2000. The lease agreements
require the Corporation to pay property taxes, utilities, insurance, and
repairs and maintenance on the properties. In addition, certain of the
building leases are with entities which are principally owned by certain
directors and officers of the Corporation. During 1996, the Corporation
exercised its option to purchase certain real estate totalling $3.6 million
from ELJO Investments, a partnership principally owned by certain directors
and officers of the Corporation. The aggregate purchase price was below the
fair market value of the properties at the date of purchase. During 1996, the
Corporation also purchased a facility from Stults Realty, Inc. which is owned
by Mr. Stults, the Corporation's President pursuant to a provision in the
January 1995 agreement to purchase the assets of BABSCO, Inc. The purchase
price was approximately $600,000, which reflected the fair market value of the
property.
The Corporation also leases certain transportation, manufacturing,
distribution and office equipment under lease agreements with expiring terms
through May 2004. The transportation leases require weekly rentals plus
additional amounts based upon actual mileage.
The above described leases are accounted for as operating leases. Total
rental expense in the consolidated statements of income for the years ended
December 31, 1996, 1995 and 1994 aggregated $3,759,000, $3,474,000 and
$2,901,000 respectively, including payments to related parties of $266,000 in
1996, $711,000 in 1995, and $531,000 in 1994. Future minimum annual lease
payments under these operating leases, excluding mileage payments that may be
required under transportation vehicle leases, are as follows:
<TABLE>
<CAPTION>
YEAR (IN THOUSANDS)
<S> <C>
1997...................... $2,053
1998...................... 1,724
1999...................... 1,254
2000...................... 711
2001...................... 219
Thereafter................ 168
------
$6,129
======
</TABLE>
SELF INSURANCE
The Corporation is self-insured for certain employee health benefits
($100,000 per individual with an annual aggregate of approximately $1.4
million) and workers' compensation ($500,000 per occurrence with an annual
F-39
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
aggregate of approximately $1.1 million). The Corporation accrues for the
estimated losses occurring from both asserted and unasserted claims. The
estimate of the liability for unasserted claims arising from incurred but not
reported claims is based on an analysis of historical claims data.
OTHER RELATED PARTY TRANSACTIONS
The Corporation made purchases from an electrical wire products supplier in
which the Corporation's President has a 16% ownership interest. Total
purchases for 1996 and 1995 were approximately $3 million per year. The
Corporation believes the purchases were at a price and terms which approximate
general market prices and terms for similar products.
OTHER
Certain claims are pending against the Corporation with respect to matters
arising out of the ordinary conduct of the business. In the opinion of
management, based upon presently available information, either adequate
provision for anticipated costs has been made by insurance, accruals or
otherwise, or the ultimate anticipated costs resulting will not materially
affect the Corporation's consolidated financial position or results of
operations.
During 1996, the Corporation committed to the expansion of its corporate
offices. At December 31, 1996, the outstanding contractual obligation amounted
to $1.1 million.
NOTE 9: BUSINESS ACQUISITIONS
The following acquisitions have been accounted for using the purchase method
of accounting, with the operating results of the acquired businesses being
included in the Corporation's consolidated financial statements from the date
of acquisition.
In January 1995, the Corporation acquired the business operations and
operating assets of BABSCO, Inc. ("BABSCO"), located in Elkhart, Indiana, and
having additional operations in Plymouth and Warsaw, Indiana and Mt. Joy,
Pennsylvania. BABSCO is a wholesale distributor of a full line of electrical
products to the Recreational Vehicle, Manufactured Housing and Modular Housing
industries, and to electrical contractors in the Northern Indiana and Southern
Michigan region. The total purchase price was $18.2 million, consisting of
three promissory notes totalling $7.0 million, 336,323 restricted shares of
common stock with a market value of $2.9 million, and $8.3 million of assumed
liabilities as of the closing date. The promissory notes included a $1.5
million demand note, an $800,000 note payable in quarterly installments over
five years and a $4.7 million note paid in January 1996. The $7.5 million
excess of the purchase price over the fair value of acquired assets
("goodwill") is being amortized over a 20-year period.
The following represents unaudited proforma financial information as if the
acquisition of BABSCO had occurred at the beginning of 1994 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
1994
<S> <C>
Net sales....................... $380,022
Net income...................... 9,400
Net income per common share..... 1.23
</TABLE>
On May 2, 1994 the Corporation acquired the business operations and
operating assets of TATCO, Inc. ("TATCO") located in Lancaster, Pennsylvania.
TATCO is a wholesale distributor of building and component products to the
Manufactured and Modular Housing industries. The purchase price, including
liabilities assumed
F-40
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
and amounts due under non-compete, employment, and earnout agreements totalled
$2.1 million. The $700,000 excess of the purchase price over the fair value of
acquired assets ("goodwill") is being amortized over a ten-year period.
Proforma financial information had TATCO been acquired as of the beginning of
1994 has not been presented as it is not materially different from historical
results of the Corporation.
NOTE 10: DISPOSAL OF CARPET BUSINESS
On December 31, 1996, the Corporation sold the carpet manufacturing and yarn
processing operations and certain assets and transferred certain liabilities
of its wholly-owned subsidiary, Danube Carpet Mills, Inc., for $18.3 million
in cash. The transaction resulted in a pre-tax gain of $5.9 million which
amounts to a net gain of $.41 per share after income taxes. The gain is net of
$4.5 million of expenses incurred in connection with the sale of the business,
including an $800,000 non-deductible charge for goodwill related to the carpet
and yarn operations. Condensed income statement information and a listing of
the assets and liabilities retained at December 31, 1996 relating to these
operations after eliminating intercompany transactions and allocations are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1996 1995 1994
<S> <C> <C> <C>
Sales.............................................. $74,851 $68,210 $64,573
Cost of sales...................................... 63,403 55,385 52,228
------- ------- -------
Gross profit..................................... 11,448 12,825 12,345
Selling, general and administrative expenses....... 10,547 8,709 7,658
Interest expense................................... 4 3 15
Gain on sale of business........................... (5,919) -- --
------- ------- -------
Income before income taxes......................... $ 6,816 $ 4,113 $ 4,672
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
<S> <C>
Accounts receivable........................................ $3,594
Receivable due from buyer.................................. 135
Real estate held for sale to buyer......................... 1,648
Accounts payable and accrued expenses...................... (2,444)
Income taxes payable....................................... (2,963)
------
Net liabilities retained in excess of assets............. $ (30)
======
</TABLE>
F-41
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
A S S E T S
CURRENT ASSETS
Cash.......................................................... $ 13,139 $ 21,096
Trade receivables, net........................................ 33,010 22,827
Inventories................................................... 43,001 41,475
Deferred income taxes......................................... 2,128 2,128
Prepaid expenses and other.................................... 440 595
Real estate held for sale..................................... 759 2,576
-------- --------
Total current assets........................................ 92,477 90,697
PROPERTY, PLANT AND EQUIPMENT, NET.............................. 25,929 19,381
COST IN EXCESS OF NET ASSETS ACQUIRED, net of accumulated
amortization................................................... 13,126 10,312
OTHER ASSETS.................................................... 1,322 520
-------- --------
Total assets................................................ $132,854 $120,910
======== ========
L I A B I L I T I E S A N D S H A R E H O L D E R S' E Q U I T Y
CURRENT LIABILITIES
Short-term debt............................................... $ -- $ 6,000
Current maturities of long-term debt.......................... 3,007 1,904
Accounts payable, trade....................................... 33,079 23,067
Accrued expenses and income taxes payable..................... 8,302 9,642
-------- --------
Total current liabilities................................... 44,388 40,613
-------- --------
LONG-TERM DEBT.................................................. 17,208 16,639
-------- --------
DEFERRED INCOME TAXES........................................... 745 745
-------- --------
OTHER DEFERRED LIABILITIES...................................... 223 133
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value............................... -- --
Common stock, $.01 par value.................................. 77 76
Additional paid-in capital.................................... 12,759 11,914
Retained earnings............................................. 57,491 50,827
-------- --------
70,327 62,817
Less, Treasury stock.......................................... 37 37
-------- --------
Total shareholders' equity.................................. 70,290 62,780
-------- --------
Total liabilities and shareholders' equity.................. $132,854 $120,910
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-42
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1996
-------- --------
<S> <C> <C>
Net sales................................................. $357,879 $397,065
Cost of sales............................................. 307,906 339,549
-------- --------
Gross profit............................................ 49,973 57,516
Commission income......................................... 2,074 1,827
-------- --------
52,047 59,343
Operating expenses........................................ 40,810 44,291
-------- --------
Operating income........................................ 11,237 15,052
Gains on sales of real estate............................. 447 --
Interest income........................................... 755 102
Interest expense.......................................... (1,219) (1,398)
-------- --------
Income before income taxes.............................. 11,220 13,756
Income taxes.............................................. 4,320 5,365
-------- --------
Net income.............................................. $ 6,900 $ 8,391
======== ========
Earnings per common and common equivalent share........... $ .89 $ 1.08
======== ========
Weighted average common and common equivalent shares
outstanding.............................................. 7,797 7,749
======== ========
Cash dividends per share.................................. $ .03 $ .02
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-43
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1997 1996
-------- --------
<S> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES................... $ 7,419 $ 11,693
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property, plant and equipment............. (6,210) (6,057)
Acquisition of business, net of cash acquired............. (866) --
Proceeds from sale of property, plant and equipment....... 1,822 --
Other, net................................................ (1,056) 8
-------- --------
Net cash used in investing activities................... (6,310) (6,049)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt............................ 4,658 73,146
Repayment of debt......................................... (14,412) (78,823)
Other, net................................................ 688 34
-------- --------
Net cash used in financing activities................... (9,066) (5,643)
-------- --------
Increase (decrease) in cash............................. (7,957) 1
Cash, beginning of period................................... 21,096 24
-------- --------
Cash, end of period......................................... $ 13,139 $ 25
======== ========
SUPPLEMENTAL INFORMATION:
Non cash investing and financing activities:
Acquisition of a business:
Obligations assumed..................................... $ 2,372 --
Long-term debt issued................................... 3,500 --
-------- --------
$ 5,872 $ --
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-44
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
NOTE A--BASIS OF PRESENTATION
The financial statements have been prepared from the unaudited financial
records of the Corporation. In the opinion of management, the financial
statements include all adjustments consisting only of normal recurring
adjustments, necessary for a fair statement of the results of operations and
financial position for the interim periods. The results of operations for the
nine months ended September 30, 1997 are not necessarily indicative of the
results to be expected for the full year ending December 31, 1997.
The Consolidated Balance Sheet at December 31, 1996 has been derived from
the Audited Consolidated Financial Statements at that date, but does not
include all disclosures required by generally accepted accounting principles.
The Consolidated Statements of Income and Cash Flows for the nine months
ended September 30, 1996 include the results of operations and cash flows of
Danube Carpet Mills, Inc. ("Danube"), the business operations and certain
assets of which were sold on December 31, 1996. (See also Note E.)
NOTE B--INVENTORIES
Inventories at September 30, 1997 and December 31, 1996 consisted of the
following components (in thousands):
<TABLE>
<CAPTION>
9/30/97 12/31/96
------- --------
<S> <C> <C>
Raw materials............................................. $ 7,557 $ 5,466
Work in process........................................... 566 382
Finished goods............................................ 797 814
Goods held for resale..................................... 34,081 34,813
------- -------
$43,001 $41,475
======= =======
</TABLE>
NOTE C--DEBT
In January 1997, the Corporation repaid the $6 million revolving line of
credit balance using funds available from the December 31, 1996 sale of
Danube's operations. There were no outstanding borrowings under the $25
million bank revolver at September 30, 1997.
In February 1997, the Corporation paid the final $1.5 million principal
installment on a 6.4% institutional investor note.
In June 1997, the Corporation issued convertible 7% notes payable totaling
$3.5 million in connection with the acquisition of the operations and net
assets of Plastic Solutions, Inc. ("PSI") (See Note D). Principal and interest
payments are due annually with final installments due February 2001. The notes
also provide an option for the noteholders to elect to receive payments in
cash or in shares of the Corporation's common stock or a combination thereof
at each payment date. The conversion price is $13.50 per share.
NOTE D--BUSINESS ACQUISITION
On June 27, 1997, the Corporation acquired the net assets and operations of
Plastic Solutions, Inc. ("PSI"), a South Bend, Indiana manufacturer of
injection molded plastic parts with annual sales of approximately $9 million.
The total purchase price of $6.7 million consisted of cash of approximately
$.9 million, $3.5 million in convertible long-term notes payable to the
sellers, and $2.3 million of liabilities assumed. The purchase
F-45
<PAGE>
SHELTER COMPONENTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)--(CONTINUED)
SEPTEMBER 30, 1997
agreement also provides for additional consideration payable to the sellers
contingent upon the future results of PSI through the year 2000. The excess of
the purchase price over the fair value of the acquired assets ("goodwill") was
approximately $3.2 million.
The results of operations for all periods presented would not have been
materially different than reported if PSI had been acquired on January 1,
1996.
NOTE E--DISPOSAL OF CARPET BUSINESS
On December 31, 1996, the Corporation sold the operations and certain assets
of its carpet and yarn manufacturing subsidiary, Danube Carpet Mills, Inc. The
following reflects Danube's 1996 results of operations for the nine month
period ended September 30, 1996:
<TABLE>
<CAPTION>
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C>
Net sales............................................ $ 57,945
============
Net income........................................... $ 2,073
============
Net income per share................................. $ .27
============
</TABLE>
NOTE F--SUBSEQUENT EVENTS--SALE OF REAL ESTATE
On October 3, 1997, the Corporation sold the remaining real estate held in
connection with the December 1996 sale of the operations and net assets of
Danube Carpet Mills, Inc. The proceeds from the sale were $1.7 million and
resulted in a net after-tax gain of approximately $.4 million or $.05 per
share to be recorded in the fourth quarter of 1997.
NOTE G--SUBSEQUENT EVENTS--MERGER AGREEMENT
On October 21, 1997, the Corporation signed a definitive merger agreement
with Kevco, Inc. for Kevco to acquire all the outstanding shares of the
Corporation at $17.50 per share through a cash tender offer. As a result of
the transaction, and if the tender offer is successful, the Corporation will
become a wholly-owned subsidiary of Kevco.
The transaction has been recommended by the Board of Directors of each
company. The cash tender offer is subject to Kevco receiving at least a
majority of the outstanding shares of Shelter (on a fully-diluted basis) as
well as the receipt of the required regulatory approvals and completion of
anticipated financing, and is expected to be completed on or before December
31, 1997. On October 28, 1997, the Corporation filed its
Solicitation/Recommendation Statement on Schedule 14D-9 relative to the cash
tender offer by Kevco.
Kevco, headquartered in Fort Worth, Texas, is a leading wholesale
distributor and manufacturer of building products to the manufactured housing
and recreational vehicle industries and reported net sales of $267 million and
pro forma net income of $8.9 million, or $1.60 per share for the year ended
December 31, 1996.
F-46
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors Bowen Supply, Inc. Americus, Georgia
We have audited the consolidated balance sheets of Bowen Supply, Inc., and
Subsidiary as of December 31, 1996 and 1995, and the related consolidated
statements of income, stockholders' equity and cash flows for the years then
ended. 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 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 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 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 Bowen Supply, Inc., and Subsidiary as of December 31, 1996 and 1995, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.
/s/ Dougherty McKinnon & Luby
Columbus, Georgia
February 14, 1997, except
for Note K which is
February 28, 1997
F-47
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
1996 1995
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................. $ 39,195 $ 112,131
Trade accounts receivable--Note D...................... 2,283,195 1,783,262
Other receivables...................................... 151,840 97,835
Inventories--Notes C and D............................. 4,040,910 3,699,942
Deferred taxes--Note I................................. 142,537 65,649
Other current assets................................... 616,479 274,891
----------- ----------
TOTAL CURRENT ASSETS................................... 7,274,156 6,033,710
OTHER ASSETS
Goodwill, net of accumulated amortization of $540,504
and $518,081 for 1996 and 1995, respectively.......... 356,442 378,865
Cash surrender value of life insurance--Notes G and H.. 352,210 356,793
Rental property, net of allowances for depreciation of
$291,294 and $265,144 for 1996 and 1995,
respectively.......................................... 435,704 460,430
Deferred taxes, net--Note I............................ 0 20,231
Other.................................................. 5,450 13,029
----------- ----------
1,149,806 1,229,348
PROPERTY AND EQUIPMENT--Notes D, E and F
Land and land improvements............................. 333,863 92,120
Buildings and improvements............................. 1,732,608 580,154
Leasehold improvements................................. 51,431 42,295
Machinery and equipment................................ 1,249,703 598,753
Furniture and fixtures................................. 580,627 431,779
Construction in progress............................... 0 155,345
----------- ----------
3,948,232 1,900,446
Less allowances for depreciation....................... 1,010,218 777,767
----------- ----------
2,938,014 1,122,679
----------- ----------
$11,361,976 $8,385,737
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable to bank--Note D........................... $ 855,866 $1,857,090
Note payable to stockholder............................ 700,000 0
Trade accounts payable................................. 1,565,624 974,882
Other accrued expenses--Note H......................... 278,732 82,994
Income taxes payable................................... 125,840 153,494
Current portion of long-term debt and capitalized lease
obligations........................................... 289,163 90,672
----------- ----------
TOTAL CURRENT LIABILITIES.............................. 3,815,225 3,159,132
LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS, less
portion classified as a current liability--
Notes D and E.......................................... 1,802,421 516,733
NOTE PAYABLE TO STOCKHOLDER--Note F..................... 0 700,000
DEFERRED COMPENSATION--Note G........................... 196,039 212,272
MINORITY INTEREST....................................... 6,640 12,122
STOCKHOLDERS' EQUITY--Note J
Common Stock, par value $.10 per share; authorized
3,000,000 shares...................................... 75,000 75,000
Additional paid-in capital............................. 1,420,000 1,420,000
Retained earnings...................................... 4,806,881 3,050,708
----------- ----------
6,301,881 4,545,708
Less Treasury Stock, at cost........................... 760,230 760,230
----------- ----------
5,541,651 3,785,478
----------- ----------
COMMITMENTS--NOTE E
$11,361,976 $8,385,737
=========== ==========
</TABLE>
See notes to consolidated financial statements
F-48
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
--------------- PAID-IN RETAINED -----------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Year ended December 31,
1995
Balances at January 1,
1995.................. 750,000 $75,000 $1,420,000 $1,861,924 125,000 $(760,230) $2,596,694
Net income for the
year.................. 0 0 0 1,188,784 0 0 1,188,784
------- ------- ---------- ---------- ------- --------- ----------
Balances at December
31, 1995............. 750,000 75,000 1,420,000 3,050,708 125,000 (760,230) 3,785,478
Year ended December 31,
1996
Net income for the
year.................. 0 0 0 1,756,173 0 0 1,756,173
------- ------- ---------- ---------- ------- --------- ----------
Balances at December
31, 1996............. 750,000 $75,000 $1,420,000 $4,806,881 125,000 $(760,230) $5,541,651
======= ======= ========== ========== ======= ========= ==========
</TABLE>
- ---------------------
( ) denotes deduction
See notes to consolidated financial statements
F-49
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1996 1995
<S> <C> <C>
OPERATING REVENUES AND COSTS
Net sales........................................... $41,301,322 $30,296,011
Less cost of goods sold--Note C..................... 33,269,930 24,026,234
----------- -----------
GROSS PROFIT...................................... 8,031,392 6,269,777
OTHER OPERATING REVENUES.............................. 1,403,328 918,595
----------- -----------
9,434,720 7,188,372
OPERATING EXPENSES--Note H
Selling, warehouse and delivery..................... 4,424,647 3,616,386
General and administrative.......................... 1,755,821 1,406,924
----------- -----------
6,180,468 5,023,310
----------- -----------
INCOME FROM OPERATIONS............................ 3,254,252 2,165,062
NONOPERATING REVENUES AND EXPENSES
Rental income, net--Note E.......................... 1,475 14,801
Gain on sale of assets.............................. 14,100 94,419
Interest income..................................... 5,069 6,218
Minority interest (deduction)....................... (518) 4,891
Interest expense (deduction)--Note H................ (369,143) (333,386)
----------- -----------
(349,017) (213,057)
----------- -----------
INCOME BEFORE INCOME TAXES........................ 2,905,235 1,952,005
INCOME TAX EXPENSE--Note I............................ 1,149,062 763,221
----------- -----------
NET INCOME........................................ $ 1,756,173 $ 1,188,784
=========== ===========
</TABLE>
See notes to consolidated financial statements
F-50
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31
--------------------------
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers...................... $ 42,165,191 $ 30,933,192
Cash paid to suppliers and employees.............. (39,066,689) (29,940,882)
Income taxes paid................................. (1,233,371) (953,110)
Interest received................................. 5,069 6,218
Interest paid..................................... (362,618) (347,754)
------------ ------------
NET CASH PROVIDED FROM (USED IN) OPERATING
ACTIVITIES..................................... 1,507,582 (302,336)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property and equipment and
rental property.................................. 27,801 144,110
Purchases of property and equipment............... (1,429,218) (130,644)
Proceeds from cash surrender value of life
insurance........................................ 67,532 0
Purchase of minority interest in subsidiary....... (6,000) 0
Increase in cash surrender value of life
insurance........................................ (62,949) (50,567)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES........... (1,402,834) (37,101)
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (payments) on revolving credit
agreement........................................ (1,001,224) 387,678
Additional borrowings under long-term debt and
capitalized lease obligations.................... 1,024,216 0
Principal payments on long-term debt and
capitalized lease obligations.................... (200,676) (92,598)
------------ ------------
NET CASH PROVIDED FROM (USED IN) FINANCING
ACTIVITIES..................................... (177,684) 295,080
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS....... 72,936 44,357
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR..... 112,131 156,488
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR........ $ 39,195 $ 112,131
============ ============
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
FROM (USED IN) OPERATING ACTIVITIES
Net income........................................ $ 1,756,173 $ 1,188,784
Adjustments to reconcile net income to net cash
provided from (used in) operating activities:
Amortization...................................... 22,448 22,536
Depreciation...................................... 285,547 216,668
Deferred compensation............................. 29,807 32,133
Deferred income taxes............................. (56,657) (3,200)
Gain on sale of assets............................ (14,100) (94,419)
Minority interest in net income (loss) of
consolidated subsidiary.......................... 518 (4,891)
Changes in account balances:
Receivables...................................... (540,934) (296,215)
Inventories...................................... (340,968) (789,616)
Other current assets............................. (341,588) (170,243)
Other assets..................................... (5,450) 0
Trade accounts payable........................... 590,742 (174,638)
Other accrued expenses........................... 189,213 (28,178)
Income taxes payable............................. (27,654) (186,689)
Accrued interest payable......................... 6,525 (14,368)
Deferred compensation paid....................... (46,040) 0
------------ ------------
NET CASH PROVIDED FROM (USED IN) OPERATING
ACTIVITIES..................................... $ 1,507,582 $ (302,336)
============ ============
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
During 1996 and 1995 the Company acquired certain assets in exchange for
directly related debt totaling $660,639 and $150,000, respectively.
- ---------------------
( ) denotes deduction
See notes to consolidated financial statements
F-51
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The consolidated financial statements include
the accounts and transactions of the Company and its 90% owned (80% owned in
1995) subsidiary, Encore Industries, Inc. All significant intercompany
accounts and transactions have been eliminated in the consolidated financial
statements.
Description of Business: The Company is primarily engaged in the wholesale
distribution of building products to the manufactured housing industry. The
Company operates out of eleven warehouse locations located throughout the
continental United States.
Concentration of Credit Risks: The Company extends unsecured credit to
customers located throughout the continental United States.
The Company maintains its cash in bank deposit accounts at high credit
quality financial institutions. The balances, at times, may exceed federally
insured limits.
The Company had net sales to two customers representing 20% and 12% of net
sales in 1996.
Inventories: Inventories are valued at the lower of cost or market value.
The last-in, first-out (LIFO) method is used to determine the cost of the
Company's inventory.
Property and Equipment and Rental Property: Property and equipment and
rental property are recorded at cost. Major renewals and betterments are
charged to the property accounts while replacements, maintenance and repairs
which do not extend the life of the respective assets are expensed currently.
The Company provides for depreciation of property and equipment and rental
property by charging against operations amounts sufficient to amortize the
cost of properties over their estimated useful lives: buildings 15-40 years;
machinery and equipment 3-10 years; furniture and fixtures 3-8 years.
Depreciation is computed using the straight-line method for financial
reporting purposes and on accelerated methods for income tax purposes.
When properties are disposed of, the related costs and accumulated
depreciation are removed from the respective accounts and any profit or loss
on disposition is credited or charged to operations.
Goodwill: Goodwill represents the excess of purchase price over net tangible
assets acquired. This amount is being amortized on the straight-line method
over a period of 40 years. The Company reviews goodwill to assess
recoverability periodically. At each balance sheet date, management assesses
whether there has been a permanent impairment in the value of goodwill by
considering factors such as expected future operating income, current
operating results and other economic factors. Management believes no
impairment has occurred.
Income Taxes: Income taxes are provided based on earnings reported for tax
return purposes in addition to a provision for deferred income taxes in
accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes. The Company provides for deferred income taxes
(see Note I) arising from the use of different methods of reporting
depreciation expense for financial reporting purposes and income tax purposes
and from differences in the timing of recording deferred compensation expense,
bad debt expense, salary expense and certain inventory costs for financial
reporting purposes and income tax purposes.
Retirement Plan: The Company adopted a Defined Contribution 401(k) Plan
effective January 1, 1996, in which substantially all full-time employees are
eligible to participate. Participating employees can defer up to 15% of
eligible compensation and the Company matches the employee contributions at
the rate of 25% of the first 4% of employee deferral. The Company's matching
contribution amounted to $20,452 for 1996.
F-52
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash and Cash Equivalents: For purposes of the Consolidated Statements of
Cash Flows, the Company considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents.
Revenue Recognition: Revenue from product sales is recognized at the time of
shipment or the time of receipt in the case of direct shipments from vendors
to customers. Commissions are recognized as earned.
Financial Instruments: The carrying amount reported in the consolidated
balance sheets for cash and cash equivalents, accounts receivable, and
accounts payable approximates fair value because of the immediate or short-
term maturity of these financial instruments. The carrying amounts reported
for the revolving line of credit and long-term debt approximate fair value
because the underlying instruments are either at variable interest rates which
reprice frequently or at stated rates of interest which approximate market.
NOTE B--ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of 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.
NOTE C--INVENTORIES
Inventory cost is determined using the last-in, first-out (LIFO) method of
inventory accounting. The Company utilizes this method because it believes
this method results in a better matching of revenues and expenses. If the
Company had used the first-in, first-out (FIFO) method of inventory
accounting, inventories would have been $196,188 and $216,123 higher than
reported at December 31, 1996 and 1995, respectively.
NOTE D--NOTE PAYABLE AND LONG-TERM DEBT
The Company has a line of credit agreement under which the Company can
borrow up to $3,500,000. Interest is payable at the LIBOR rate plus two
percent and the line of credit is collateralized by inventories, accounts
receivable, machinery and equipment and furniture and fixtures. This agreement
contains certain covenants restricting the payment of dividends and the
maintenance of minimum debt/worth ratios, debt service coverage ratios and
tangible net worth. The amount borrowed under this agreement was $855,866 at
December 31, 1996 (see Note K). The Company had a similar agreement with
another lender in 1995. The amount borrowed under that agreement was
$1,857,090 at December 31, 1995. The weighted average interest rate for
borrowings under the line of credit was 8.3% and 9.9% during 1996 and 1995,
respectively.
F-53
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1995
<S> <C> <C>
Capitalized lease obligations (see Note E).............. $1,164,115 $ 44,259
9.9% note payable to Small Business Administration, due
in monthly installments of $2,279, including interest,
in 1996 and decreasing to $2,229, including interest,
in 2008; collateralized by a second mortgage on real
estate with a cost of $507,591 (see Note K)............ 179,812 187,715
7.0% notes payable to bank, due in monthly installments
totaling $1,117, including interest, through November,
1996; collateralized by trucks with a cost of $42,500.. 0 10,885
8.0% note payable to bank, due in monthly installments
of $1,594, including interest, through June, 1998, with
balance then due; collateralized by real estate with a
cost of $501,662 (see Note K).......................... 98,099 107,904
7.0% note payable to bank, due in monthly installments
of $3,860, including interest, through June, 1998;
collateralized by real estate with a cost of $507,591
(see Note K)........................................... 67,040 106,642
Construction loan payable to bank; due on February 23,
1996; refinanced with 9.0% note below.................. 0 150,000
9.0% note payable to bank, due in monthly installments
of $1,679, including interest, through March, 2001;
with balance then due; collateralized by a second
mortgage on real estate with a cost of $501,662 (see
Note K)................................................ 161,868 0
8.80% note payable to bank, due in monthly installments
of $5,338, including interest, through September, 2006;
collateralized by real estate with a cost of $531,345
(see Note K)........................................... 420,650 0
---------- --------
2,091,584 607,405
Less current portion.................................... 289,163 90,672
---------- --------
$1,802,421 $516,733
========== ========
</TABLE>
Annual maturities on long-term debt and capitalized lease obligations
outlined above at December 31, 1996, are summarized as follows:
<TABLE>
<S> <C>
1997............................................. $ 289,163
1998............................................. 367,217
1999............................................. 255,092
2000............................................. 211,078
2001............................................. 223,848
Thereafter....................................... 745,186
----------
$2,091,584
==========
</TABLE>
NOTE E--LEASES
The Company has acquired certain assets under capital leases at rates
ranging from 4.90% to 12.46%. The cost and accumulated amortization of assets
under capital leases was $1,456,985 and $102,703, respectively, at December
31, 1996, and $147,095 and $56,528, respectively, at December 31, 1995.
Amortization of these assets is included in depreciation expense in the
accompanying consolidated financial statements.
F-54
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The capitalized lease obligations are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
------------------
1996 1995
<S> <C> <C>
Construction loan to be refinanced by an Industrial
Revenue bond on April 1, 1997; payable in 120 monthly
installments beginning May 1, 1997, with interest
fixed at the prime rate plus 3/8% as of April 1, 1997;
collateralized by real estate and machinery and
equipment costing $727,482 (see below)................ $ 583,800 $ 0
Capitalized lease obligations with interest rates
ranging from 4.90% to 12.46%; monthly payments ranging
from $16,935 in 1997 to $6,267 in 2001, year of final
payment; collateralized by automobiles, trucks and
equipment costing $729,503............................ 580,315 44,259
---------- -------
$1,164,115 $44,259
========== =======
</TABLE>
The construction loan is to be refinanced from the proceeds of an Industrial
Revenue Bond issued by the Douglas-Coffee County Industrial Authority. The
Company will enter into a lease agreement with the Authority whereby the lease
payments pursuant to the lease will equal the debt service requirements of the
Bonds. The Bond issue will be for an amount not to exceed $616,250. Through
December 31, 1996, the Company had incurred $727,482 in costs relating to this
project.
In addition, certain warehouses and automobiles are leased (see Note H)
under noncancelable operating leases with original terms of three to ten years
and renewal options of similar lengths of time. The warehouse leases generally
provide for the payment of taxes and insurance by the lessor and utilities and
minor repairs by the Company. The total rental expense for all operating
leases amounted to $692,173 and $744,283 for 1996 and 1995, respectively.
Future minimum payments, by year and in the aggregate, under the capital
leases and operating leases with initial terms of one year or more consisted
of the following at December 31, 1996:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
<S> <C> <C>
1997.................................................. $ 274,152 $ 415,335
1998.................................................. 289,204 365,284
1999.................................................. 260,062 330,130
2000.................................................. 192,481 312,000
2001.................................................. 98,058 312,000
Thereafter............................................ 465,852 0
---------- ----------
Total minimum lease payments.......................... 1,579,809 $1,734,749
==========
Less amounts representing interest.................... 415,694
----------
Included in Note D.................................... $1,164,115
==========
</TABLE>
In computing the operating lease commitments shown above, it has been
assumed that leases with related parties will be renewed at their expiration
dates at annual rentals in effect at the end of the lease term.
The Company has rental property which it leases to unaffiliated companies
under leases ranging in original terms of one to twelve months. These leases
provide that the Company will pay real estate taxes and insurance on the
leased property.
The Company received rental income totaling $7,987 and $20,635 from these
and other short-term leases in 1996 and 1995, respectively.
F-55
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE F--NOTE PAYABLE TO STOCKHOLDER
Note payable to stockholder consists of a note with interest payable monthly
at 10% through April 1, 1997, with the principal then due. The note is
collateralized by substantially all machinery and equipment and furniture and
fixtures. The note is subordinated to the line of credit described in Note D.
NOTE G--DEFERRED COMPENSATION
The Company has employment contracts with various employees which provide
for the payment of retirement benefits upon retirement at age 65. The
agreements provide for payments to be made to the employees or their legal
representatives over a ten year period commencing with the month following the
employee's retirement.
The Company has recorded a liability which represents the net present value
of benefits vested under these agreements using an interest rate of 8%. This
liability amounted to $196,039 and $212,272 at December 31, 1996 and 1995,
respectively.
The agreements also provide for death benefits to be paid to the employee's
legal representatives in the event of their death prior to retirement in lieu
of the retirement benefits described above. These benefits and the payment
terms thereof are equal to those described above and are funded by life
insurance policies.
NOTE H--RELATED PARTY TRANSACTIONS
Transactions with related parties not disclosed elsewhere are summarized as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------
1996 1995
<S> <C> <C>
Rental expense on automobiles and trucks........... $ 1,082 $ 12,990
Rental expense on warehouses....................... 276,000 276,000
Interest expense on note payable to stockholder.... 70,192 70,000
Equity in split-dollar life insurance policy on
stockholder/officer............................... 86,878 66,979
Advances to majority stockholder (repaid prior to
year end)......................................... 907,613 0
Entertainment expenses paid to majority stockholder
for use of certain assets......................... 11,900 5,100
</TABLE>
The rental expense is paid under operating leases to the Company's majority
stockholder or President (see Note E).
Other accrued expenses in the accompanying consolidated balance sheets
include interest payable on the note payable to stockholder of $5,945 at
December 31, 1996 and 1995.
NOTE I--INCOME TAXES
The net deferred taxes recorded in the accompanying consolidated balance
sheets include the following components:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1996 1995
----------------- ----------------
NON- NON-
CURRENT CURRENT CURRENT CURRENT
<S> <C> <C> <C> <C>
Deferred tax liabilities.............. $ 0 $(77,392) $ 0 $(63,570)
Deferred tax assets................... 142,537 77,392 65,649 83,801
-------- -------- ------- --------
NET DEFERRED TAXES.................. $142,537 $ 0 $65,649 $ 20,231
======== ======== ======= ========
</TABLE>
F-56
<PAGE>
BOWEN SUPPLY, INC., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Income tax expense in the accompanying Consolidated Statements of Income is
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1996 1995
<S> <C> <C>
Federal
Current income tax expense........................ $ 999,017 $ 604,087
Deferred income tax benefit (deduction)........... (44,746) (2,883)
----------- ----------
954,271 601,204
----------- ----------
State
Current income tax expense........................ 206,702 162,334
Deferred income tax benefit (deduction)........... (11,911) (317)
----------- ----------
194,791 162,017
INCOME TAX EXPENSE.............................. $ 1,149,062 $ 763,221
=========== ==========
</TABLE>
A reconciliation of income tax expense in the accompanying Consolidated
Statements of Income to the statutory rate is summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------
1996 1995
<S> <C> <C>
Income tax expense at 34% statutory rate............ $ 987,780 $ 663,681
Add (deduct):
State income taxes, net of federal benefit........ 128,562 106,931
Income tax effect of nondeductible expenses....... 33,124 19,275
Other............................................... (404) (26,666)
----------- ----------
161,282 99,540
----------- ----------
INCOME TAX EXPENSE.............................. $ 1,149,062 $ 763,221
=========== ==========
</TABLE>
NOTE J--STOCK OPTIONS
The Company has a Qualified Stock Option Plan which reserves 50,000 shares
of the Company's $.10 par value Common Stock for granting to key personnel.
The options allow these personnel to purchase the Company's stock at no less
than $5 per share or 100% of the fair market value, whichever is higher, on
the dates the options are granted. At December 31, 1996, no options had been
granted under this plan.
NOTE K--SUBSEQUENT EVENT
The stockholders of the Company executed an agreement on February 28, 1997,
with Kevco, Inc., whereby Kevco, Inc. will acquire all of the outstanding
stock of the Company. All of the Company's long-term debt (including the
revolver described in Note D) is anticipated to be paid in full in conjunction
with this transaction.
F-57
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Consolidated Forest Products, L.L.C.
We have audited the accompanying balance sheets of Consolidated Forest
Products, L.L.C. (the Company) as of September 29, 1996 and October 1, 1995,
and the related statements of income and retained earnings and cash flows for
the year ended September 29, 1996 and the period December 2, 1994 to October
1, 1995. 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 Consolidated Forest
Products, L.L.C. as of September 29, 1996 and October 1, 1995, and the results
of its operations and its cash flows for the year ended September 29, 1996 and
the period December 2, 1994 to October 1, 1995, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Fort Worth, Texas
November 8, 1996, except for Note 9 as
to which the date is February 27, 1997
F-58
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
BALANCE SHEETS
SEPTEMBER 29, 1996 AND OCTOBER 1, 1995
<TABLE>
<CAPTION>
SEPTEMBER 29, OCTOBER 1,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 6,254 $ 6,053
Trade accounts receivable, net of allowance of
doubtful accounts of $73,800 and $150,486 in 1996
and 1995, respectively............................ 3,928,686 3,786,127
Advances to owner and employees.................... 17,546 12,757
Inventory.......................................... 4,496,745 4,022,491
Prepaid expenses and other......................... 287,313 252,259
----------- -----------
Total current assets............................. 8,736,544 8,079,687
Property, plant, and equipment, net................ 4,099,814 4,086,385
Organization and financing cost, net of accumulated
amortization of $353,175 and $152,115 in 1996 and
1995, respectively................................ 282,825 483,885
Goodwill, net of accumulated amortization of
$470,130 and $213,690 in 1996 and 1995,
respectively...................................... 3,376,279 3,632,719
Noncompete agreement, net of accumulated
amortization of $27,500 in 1996................... 122,500 0
----------- -----------
$16,617,962 $16,282,676
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current maturities of long-term debt............... $ 1,798,077 $ 1,586,967
Cash overdraft..................................... 2,552,927 1,718,697
Accounts payable................................... 2,059,859 1,465,965
Accrued liabilities................................ 724,408 652,059
----------- -----------
Total current liabilities........................ 7,135,271 5,423,688
----------- -----------
Long-term debt, less current portion above........... 4,178,829 5,851,307
Borrowings under line of credit...................... 2,956,194 4,253,853
----------- -----------
Total liabilities................................ 14,270,294 15,528,848
----------- -----------
Commitments and contingencies (Note 7)
Members' equity:
Capital contributions.............................. 700,000 700,000
Retained earnings.................................. 1,647,668 53,828
----------- -----------
Total members' equity............................ 2,347,668 753,828
----------- -----------
$16,617,962 $16,282,676
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-59
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 29, 1996 AND THE PERIOD
DECEMBER 2, 1994 TO OCTOBER 1, 1995
<TABLE>
<CAPTION>
DECEMBER 2,
1994 TO
SEPTEMBER 29, OCTOBER 1,
1996 1995
<S> <C> <C>
Net sales............................................ $92,474,171 $62,872,613
Cost of sales........................................ 81,745,729 56,642,646
----------- -----------
Gross profit..................................... 10,728,442 6,229,967
Selling, general, and administrative expenses........ 7,597,871 4,978,089
----------- -----------
Income from operations............................... 3,130,571 1,251,878
----------- -----------
Other income and expense:
Other income....................................... 46,213 2,545
Interest expense................................... (1,229,984) (1,053,477)
----------- -----------
Total other expense, net......................... (1,183,771) (1,050,932)
----------- -----------
Net income....................................... 1,946,800 200,946
Retained earnings, beginning of period............... 53,828 0
Tax dividends paid to members........................ (352,960) (147,118)
----------- -----------
Retained earnings, end of period..................... $ 1,647,668 $ 53,828
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-60
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 29, 1996 AND THE PERIOD
DECEMBER 2, 1994 TO OCTOBER 1, 1995
<TABLE>
<CAPTION>
DECEMBER 2,
1994 TO
SEPTEMBER 29, OCTOBER 1,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income....................................... $ 1,946,800 $ 200,946
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation................................... 576,154 392,999
Amortization................................... 485,000 365,805
Loss (gain) on sale of equipment............... 1,487 (1,548)
Other, net..................................... 0 (235,503)
Changes in:
Accounts receivable, net..................... (142,559) (360,511)
Advances to owner and employees.............. (4,789) (21,052)
Inventory.................................... (474,254) (178,918)
Prepaid expenses and other................... (35,054) (111,770)
Accounts payable............................. 593,894 330,574
Accrued liabilities.......................... 72,349 278,509
----------- ------------
Net cash provided by operating activities.. 3,019,028 659,531
----------- ------------
Cash flows from investing activities:
Cash paid in connection with acquisition of net
assets of business.............................. 0 (11,940,730)
Cash paid for organization costs................. 0 (82,624)
Cash paid for noncompete agreement............... (150,000) 0
Capital expenditures............................. (646,070) (1,395,651)
Proceeds from sale of equipment.................. 55,000 62,814
----------- ------------
Net cash used in investing activities...... (741,070) (13,356,191)
=========== ============
Cash flows from financing activities:
Cash paid for financing costs.................... 0 (153,376)
Net (payments) proceeds on line of credit........ (1,297,659) 4,253,853
Proceeds from long-term debt..................... 150,000 6,780,156
Payments on long-term debt....................... (1,611,368) (1,018,379)
Proceeds from capital contributions.............. 0 2,200,000
Change in cash overdraft......................... 834,230 787,577
Tax dividends paid to members.................... (352,960) (147,118)
----------- ------------
Net cash (used in) provided by financing
activities................................ (2,277,757) 12,702,713
----------- ------------
Net increase in cash and cash equivalents.. 201 6,053
Cash and cash equivalents, beginning of period..... 6,053 0
----------- ------------
Cash and cash equivalents, end of period........... $ 6,254 $ 6,053
=========== ============
Supplemental cash flow information:
Cash paid for interest during the period......... $ 1,256,911 $ 944,070
=========== ============
</TABLE>
As described in Note 1, the note payable to member at October 1, 1995 of
$1,264,497 represented a noncash financing activity.
The accompanying notes are an integral part of these financial statements.
F-61
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
On December 2, 1994, Consolidated Forest Products, L.L.C. (the Company)
purchased the net assets of Consolidated Forest Products, Inc. (Predecessor)
for $7,260,104. The financial information of the Company reflects purchase
accounting in which the purchase price of $7,260,104 is allocated to the
underlying assets and liabilities of the Predecessor based on their respective
estimated fair values. In connection with the acquisition, payments in the
amount of $5,995,607 were made to shareholders of the Predecessor who are also
members of the Company. Amounts paid to these members in excess of Predecessor
basis have been recorded as a reduction of members' equity of $1,500,000. A
note payable to the principal member of the Predecessor was recorded for the
unpaid portion of the purchase price. Goodwill, the excess of the purchase
price over the fair value of the net assets acquired, amounted to
approximately $3,846,000 and is being amortized on a straight-line basis over
15 years.
The acquisition of the net assets of the Predecessor was financed with
contributed capital of $2,200,000 and the following borrowings from Barclays
Business Credit, Inc. (which was subsequently acquired by Fleet Capital
Corporation): a term note payable of $5,500,000 and advances under a
$6,500,000 revolving line of credit facility. Following the acquisition,
certain existing indebtedness of the Predecessor was repaid using financing
proceeds.
The Company is engaged in the business of fabricating and distributing
lumber and plywood, at wholesale, as well as manufacturing wood rafters for
mobile home manufacturers. The Company operates and sells to customers
primarily in the Southeastern United States. During the year ended September
29, 1996 and the period December 2, 1994 to October 1, 1995, sales to seven
customers represented approximately 69% and 62% of total sales, respectively,
and outstanding balances related to these customers represented approximately
59% and 63% of accounts receivable as of September 29, 1996 and October 1,
1995, respectively.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies used by the Company is set
forth below.
CASH AND CASH EQUIVALENTS--The Company considers all highly liquid debt
instruments with an original maturity of three months or less at the time of
purchase to be cash equivalents. Primarily all of the Company's cash and cash
equivalents are held in one major banking institution.
FINANCIAL INSTRUMENTS--The carrying amount reported in the balance sheet for
cash and cash equivalents, accounts receivable, and accounts payable
approximates fair value because of the immediate or short-term maturity of
these financial instruments. The carrying amounts reported for the revolving
line of credit and long-term debt approximate fair value because the
underlying instruments are either at variable interest rates which reprice
frequently or at stated rates of interest which approximate market.
INVENTORY--Inventory is valued at the lower of cost or market. The first-in,
first-out (FIFO) method is used to determine the cost of the Company's
inventory.
INTANGIBLE ASSETS--Intangible assets are stated at cost and are being
amortized on a straight-line basis over lives as follows:
<TABLE>
<CAPTION>
LIFE
<S> <C>
Goodwill.......................................... 15 years
Organization and financing costs.................. 5-7 years
Noncompete agreement.............................. 5 years
</TABLE>
F-62
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company reviews goodwill to assess recoverability periodically. At each
balance sheet date, management assesses whether there has been a permanent
impairment in the value of goodwill by considering factors such as expected
future operating income, current operating results and other economic factors.
Management believes no impairment has occurred.
PROPERTY, PLANT, AND EQUIPMENT--Property, plant, and equipment is stated at
cost and depreciated using the straight-line method over the estimated useful
lives of the assets. Expenditures for repairs and maintenance are charged to
expense as incurred; betterments which materially prolong the lives of the
assets are capitalized. The cost of assets retired or otherwise disposed of
and the related accumulated depreciation are removed from the accounts and the
gain or loss on such disposition is included in income.
LONG-LIVED ASSETS--During the year ended September 29, 1996, the Company
implemented Financial Accounting Standards Board (FASB) Statement No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of. In accordance with FASB 121, the Company will recognize
impairment losses on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be
generated by those assets are less than the asset's carrying amount. If
undiscounted future cash flows are less than the asset's carrying amount, an
impairment loss would be recorded using discounted future cash flows. There
were no such losses recognized at September 29, 1996.
INCOME TAXES--As a limited liability company, the Company is not subject to
income taxes. The liability or benefit is passed on to the members of the
Company. Thus, no provision for income taxes has been provided for in the
accompanying financial statements.
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
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.
3. INVENTORY
Inventory consists of the following at September 29, 1996 and October 1,
1995:
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996 OCTOBER 1, 1995
<S> <C> <C>
Raw materials............................. $3,498,929 $3,299,664
Work-in-process........................... 304,978 187,595
Finished goods............................ 692,838 535,232
---------- ----------
$4,496,745 $4,022,491
========== ==========
</TABLE>
F-63
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. PROPERTY, PLANT, AND EQUIPMENT
Balances of property, plant, and equipment consist of the following at
September 29, 1996 and October 1, 1995:
<TABLE>
<CAPTION>
SEPTEMBER 29, 1996 OCTOBER 1, 1995
<S> <C> <C>
Land...................................... $ 393,822 $ 380,792
Buildings................................. 1,091,329 961,767
Machinery and equipment................... 2,159,840 1,784,971
Furniture and office equipment............ 93,099 80,874
Automotive equipment...................... 1,293,355 1,263,902
---------- ----------
5,031,445 4,472,306
Less accumulated depreciation............. 931,631 385,921
---------- ----------
$4,099,814 $4,086,385
========== ==========
</TABLE>
F-64
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. LONG-TERM DEBT
At September 29, 1996 and October 1, 1995, long-term debt consists of the
following:
<TABLE>
<CAPTION>
SEPTEMBER 29, OCTOBER 1,
1996 1995
<S> <C> <C>
Senior note payable to Fleet Capital Corporation,
variable interest (9.75% and 10.25% at September
29, 1996 and October 1, 1995, respectively)
payable monthly along with $114,583 in principal
until January 6, 1998, at which time remaining
principal balance becomes due.................... $3,145,520 $4,520,520
Senior note payable to Fleet Capital Corporation,
variable interest (9.75% and 10.25% at Sepember
29, 1996 and October 1, 1995, respectively)
payable monthly along with $10,833 in principal
until January 6, 1998, at which time remaining
principal balance becomes due.................... 487,505 617,501
Note payable to member, subordinate to the debt
payable to Fleet Capital Corporation, with
interest payable annually at 8%.................. 1,190,681 1,264,497
Subordinated note payable to member, variable
interest (9.25% and 10% at September 29, 1996 and
October 1, 1995, respectively) payable monthly,
principal due January 6, 1999.................... 450,000 300,000
Subordinated note payable to member, variable
interest (9.25% and 10% at September 29, 1996 and
October 1, 1995, respectively) payable monthly,
principal due January 6, 1999.................... 300,000 300,000
Deferred loan origination fee payable to Fleet
Capital Corporation, due January 6, 1998......... 400,000 400,000
Note payable to AmSouth Bank, payable monthly
including interest at 7 3/4%..................... 0 30,156
Note payable to City of Haleyville Water & Sewer
Department, no interest, principal payable $200
monthly.......................................... 3,200 5,600
---------- ----------
5,976,906 7,438,274
Less current maturities........................... 1,798,077 1,586,967
---------- ----------
Long-term portion................................. $4,178,829 $5,851,307
========== ==========
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDING SEPTEMBER 29:
<S> <C>
1997......................................... $1,798,077
1998......................................... 2,828,829
1999......................................... 1,050,000
2000......................................... 300,000
----------
$5,976,906
==========
</TABLE>
The Company operates under a revolving line of credit agreement with Fleet
Capital Corporation (the Bank), a commercial bank, which provides borrowings
based upon certain inventory and accounts receivable
F-65
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
levels up to a maximum amount of $7,608,000. Advances bear interest at 1.5% in
excess of the prime rate. The interest rate was 9.75% at September 29, 1996.
At September 29, 1996, the outstanding borrowings under this line of credit
totaled $2,956,194 and the total unused availability under this agreement was
approximately $1,540,000. Total outstanding borrowings under this line of
credit become due January 6, 1998.
The revolving line of credit agreement, as well as the senior notes payable
to the Bank, places certain restrictive covenants upon the Company, such as
maintaining specified equity levels, meeting certain financial ratios, and
achieving certain net income and cash flow levels. At September 29, 1996 and
for the year then ended, the Company was in compliance with or had received
appropriate waivers of these covenants. Substantially all of the assets of the
Company are pledged as collateral for the line-of-credit and long-term debt.
The note payable to member of $1,190,681 at September 29, 1996 represents
the unpaid portion of the purchase price as described in Note 1. Principal
payments on the note are subordinate to the debt owed to the Bank; however,
the Bank did allow payment of the first installment on the note in January of
1996 of approximately $65,000. Further, absent any defaults under the bank
agreements, the Company is allowed to make annual interest payments on this
note as well. During the period ended October 1, 1995, the Company obtained
working capital loans of $300,000 each from two of its members to fund working
capital needs of the Company. An additional $150,000 was borrowed from one of
its members during the year ended September 29, 1996. Each of these loans are
subordinated to the Company's bank debt with only interest payments required
until the January 6, 1999 maturity of the notes.
6. RETIREMENT PLAN
The Company has made available to all eligible employees a defined
contribution retirement plan (the Plan). Employees are eligible to participate
after completing six months of service and attaining the age of eighteen. The
Plan provides that employees may elect to defer up to 15% of compensation, as
defined in the plan agreement. The Company will match 50% of employee
deferrals up to 6% of compensation. The Company made contributions of
approximately $40,500 and $26,000 for the year ended September 29, 1996 and
the period December 2, 1994 to October 1, 1995, respectively.
7. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases office and warehouse space under various operating
leases. The leases generally are for terms of three to five years and do not
contain purchase options. Rent expense was approximately $184,000 and $115,000
for the year ended September 29, 1996 and the period December 2, 1994 to
October 1, 1995, respectively.
The future minimum lease payments required under noncancelable operating
leases with initial or remaining terms of one or more years at September 29,
1996 were approximately as follows:
<TABLE>
<CAPTION>
FISCAL YEARS:
<S> <C>
1997.............................................. $182,000
1998.............................................. 178,500
1999.............................................. 177,000
2000.............................................. 64,500
2001.............................................. 2,250
--------
$604,250
========
</TABLE>
F-66
<PAGE>
CONSOLIDATED FOREST PRODUCTS, L.L.C.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
LITIGATION
There are claims and pending actions incident to the business operations of
the Company. Management does not expect resolution of these matters to have a
material adverse effect on the Company's financial position or future results
of operations or cash flows.
8. RELATED PARTIES
On January 3, 1995, the Company entered into a sales agreement with Caney
Creek, Inc. (Caney Creek), a sales company owned by individuals with a
minority membership position in the Company. Under this agreement, Caney Creek
has exclusive rights to sell products manufactured by the Company to all but
one of the Company's customers. The initial term of this agreement was for the
three-year period ending December 31, 1997. After the initial term, this
agreement shall automatically renew for successive one-year terms unless
otherwise canceled by either party. Upon termination of the sales agreement,
the Company is obligated to pay Caney Creek an amount equal to one-half of the
sales commissions paid to them during the previous twelve-month period in
exchange for a one-year covenant not to compete from Caney Creek and its
employees. This amount will be paid in twelve monthly installments beginning
the month after the agreement is effectively terminated. Sales commissions
paid to Caney Creek totaled approximately $2,886,000 and $2,000,000 for the
year ended September 29, 1996 and the period December 2, 1994 to October 1,
1995, respectively.
9. SUBSEQUENT EVENT
On February 27, 1997, Kevco, Inc., through a wholly-owned subsidiary,
acquired substantially all of the assets and assumed certain liabilities of
the Company pursuant to the terms of a certain asset purchase agreement, dated
as of January 31, 1997.
F-67
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Service Supply Systems, Inc.
We have audited the accompanying consolidated statements of income and cash
flows of Service Supply Systems, Inc. and Subsidiary for the year ended
December 31, 1994. 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 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated results of
operations and cash flows of Service Supply Systems, Inc. and Subsidiary for
the year ended December 31, 1994 in conformity with generally accepted
accounting principles.
/s/ Rumsey & Huckaby, P.C.
Cordele, Georgia
February 28, 1995
F-68
<PAGE>
SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------
<S> <C>
Net sales.......................................................... $100,910
Cost of sales...................................................... 88,029
--------
Gross profit..................................................... 12,881
Commission income.................................................. 1,953
--------
14,834
Selling, general and administrative expenses....................... 11,899
--------
Operating income................................................. 2,935
Other income....................................................... 33
Interest income.................................................... --
Interest expense................................................... (582)
--------
Income before income taxes....................................... 2,386
Provision for income taxes......................................... 871
--------
Net income....................................................... $ 1,515
========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-69
<PAGE>
SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------
<S> <C>
Cash flows from operating activities:
Net income...................................................... $1,515
Adjustments to reconcile net income to net cash used by operat-
ing activities:
Depreciation and amortization................................. 515
Gain on disposal of assets.................................... (33)
Increase in deferred tax asset................................ (266)
Changes in assets and liabilities:
Accounts receivable, net.................................... (2,279)
Inventories................................................. (2,346)
Other receivables........................................... (206)
Prepaid expenses............................................ (250)
Accounts payable............................................ 590
Accrued expenses............................................ 1,239
------
Net cash used by operating activities..................... (1,521)
------
Cash flows from investing activities:
Purchase of property and equipment.............................. (3,850)
Proceeds from sale of assets.................................... 77
Other assets.................................................... (25)
Cash surrender value of insurance policies...................... (34)
------
Net cash used by investing activities..................... (3,832)
------
Cash flows from financing activities:
Proceeds from new borrowings.................................... 8,290
Payments of long-term debt...................................... (3,113)
Dividends paid.................................................. (123)
Collections on loan to stockholders............................. 153
Stock subscriptions receivable.................................. 149
------
Net cash provided by financing activities................. 5,356
------
Net increase in cash and cash equivalents......................... 3
Beginning cash and cash equivalents............................... 25
------
Ending cash and cash equivalents.................................. $ 28
======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-70
<PAGE>
SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Service Supply Systems, Inc. (the "Company") is in the business of
procuring, producing, transporting, storing and wholesaling plumbing and
building parts to the housing industry. It also acts as warehousing and sales
agent for certain manufacturers of housing components. The Company has
operations in Georgia, Florida, Alabama, North Carolina and Texas. The Company
extends credit to its customers in these states during the normal course of
business.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. The Company uses the straight-
line and declining-balance methods to recognize depreciation over the
estimated useful lives of the related assets. Estimated useful lives range
from three to thirty-nine years.
PRINCIPLES OF CONSOLIDATION
The financial statements are a presentation of Service Supply Systems, Inc.
consolidated with its wholly-owned subsidiary, Sunbelt Wood Components, Inc.
All intercompany accounts and transactions are eliminated in consolidation.
INVENTORIES
Inventories are valued at the lower of cost or market. Market is replacement
cost or net realizable value. Inventories purchased for resale are valued
using the last-in, first-out (LIFO) method. Manufactured inventories are
valued using the first-in, first-out (FIFO) method. For the year ended
December 31, 1994, the percentage of inventory valued at LIFO was 79%. The
LIFO reserve at December 31, 1994 was $565,150.
INCOME TAXES
Income taxes are provided on pre-tax earnings reported in the financial
statements. Deferred income taxes have been provided on the future tax effects
of differences between the financial statement and tax values of assets and
liabilities.
EMPLOYEE STOCK OWNERSHIP PLAN (ESOP)
Dividends on shares held by the ESOP are charged to retained earnings.
2. INCOME TAXES
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
1994
<S> <C>
Federal income taxes............................................... $993,793
State income taxes................................................. 142,222
Deferred income taxes on temporary differences..................... (265,015)
--------
Provision for income taxes......................................... $871,000
========
</TABLE>
F-71
<PAGE>
SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation between the taxes due on pre-tax income using the effective
Federal and State tax rates and the provision for income taxes is as follows:
<TABLE>
<S> <C>
Tax at effective rates............................................. $905,000
Permanent differences and other adjusting items.................... (34,000)
--------
$871,000
========
</TABLE>
At December 31, 1994, a deferred tax asset of $300,000 is included in
prepaid expenses. This represents the estimated future tax effects
attributable to temporary differences in tax and financial accounting for
accounts receivable, inventory and accrued liabilities.
3. LEASES AND RELATED PARTIES
The Company leases land, buildings, autos, trucks, trailers and equipment
under operating leases. Rental expense for the year ended December 31, 1994
amounted to $1,136,784.
Some of these leases were paid to partnerships which are comprised of
stockholders and officers of the Company. Rental expenses paid to these
partnerships for the year ended December 31, 1994 amounted to $136,000.
As of December 31, 1994, future minimum lease payments under noncancelable
terms were as follows for the five succeeding years:
<TABLE>
<S> <C>
1995.................................................. $ 866,567
1996.................................................. 808,925
1997.................................................. 795,325
1998.................................................. 739,571
1999.................................................. 319,944
----------
Total............................................... $3,530,332
==========
</TABLE>
4. EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an Employee Stock Ownership Plan covering all of its
employees. It provides for discretionary contributions by the Company as
determined annually by the Board of Directors, up to the maximum amount
permitted under the Internal Revenue Code. The plan is a qualified profit
sharing plan required to invest primarily in Company stock. Contributions are
allocated to participants on a nondiscriminatory formula basis.
The Company contributed $732,286 to the plan in 1994. The plan purchased
6,200 shares of stock in 1994 for $148,800.
The plan owned 234,140 shares at December 31, 1994. These shares were
subject to a repurchase obligation by the Company at $40.00 per share at
December 31, 1994.
5. SUPPLEMENTAL CASH FLOW INFORMATION
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
F-72
<PAGE>
SERVICE SUPPLY SYSTEMS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Cash paid for interest and income taxes for period was as follows:
<TABLE>
<CAPTION>
1994
<S> <C>
Interest.......................................................... $ 582,000
==========
Income Taxes...................................................... $1,615,000
==========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
The Company is party to a shareholders' agreement giving the Company an
option to purchase all or part of the stock proposed for sale by any
shareholder and requiring the Company to purchase all of those shares upon
death of a shareholder. Terminating employees must offer all of their stock
for purchase by the Company. The purchase price is the fair market value as of
the most recent Annual Valuation Date as determined by independent appraisal
required by the Employee Stock Ownership Plan.
F-73
<PAGE>
INDEX TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Kevco, Inc.
Unaudited Pro Forma Condensed Combined Balance Sheet and Notes thereto as
of
September 30, 1997...................................................... P-3
Unaudited Pro Forma Condensed Combined Statement of Income and Notes
thereto
for the Last Twelve Months Ended September 30, 1997..................... P-5
Unaudited Pro Forma Condensed Combined Statement of Income and Notes
thereto
for the Nine Months Ended September 30, 1997............................ P-11
Unaudited Pro Forma Condensed Combined Statement of Income and Notes
thereto
for the Year Ended December 31, 1996.................................... P-17
</TABLE>
P-1
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The unaudited pro forma condensed combined financial data is based on the
consolidated financial statements of Kevco, Inc. ("Kevco"), the consolidated
financial statements of Bowen Supply, Inc. ("Bowen"), the consolidated
financial statements of Consolidated Forest Products, L.L.C. ("Consolidated
Forest") and the consolidated financial statements of Shelter Components
Corporation ("Shelter") included elsewhere in this Prospectus. The unaudited
pro forma financial data gives effect to (i) the effect on weighted average
shares and earnings per share of the sale of 2,415,000 shares of common stock
of Kevco and the tax impact of Kevco's conversion from an S corporation to a C
corporation in November 1996 (including an over-allotment option of 315,000
shares exercised in December 1996) ("Public Offering"), (ii) the acquisition
by Kevco of Bowen ("Bowen Acquisition") and Consolidated Forest ("Consolidated
Forest Acquisition" and, collectively with the Bowen Acquisition, the "Kevco
Acquisitions"), (iii) Shelter's sale of the operations and certain assets of
Danube Carpet Mills, Inc. ("Danube") by Shelter and the acquisition by Shelter
of PSI ("PSI Acquisition"), (iv) the acquisition by Kevco of Shelter ("Shelter
Acquisition"), (v) the Senior Credit Facility and (vi) the Old Notes Offering
(collectively, the "Pro Forma Transactions") as if these transactions had
occurred on January 1, 1996.
The unaudited pro forma condensed combined balance sheet at September 30,
1997 is based on the consolidated financial statements of Kevco adjusted to
give effect to the Shelter Acquisition and the Old Notes Offering as if such
transactions had occurred on September 30, 1997. The unaudited pro forma
condensed combined statements of income for the year ended December 31, 1996,
the nine month-period ended September 30, 1997 and the last twelve months
ended September 30, 1997, are based on the consolidated financial statements
of Kevco and adjusted to give effect to the Pro Forma Transactions as if such
transactions had occurred on January 1, 1996. The acquisition adjustments and
offering adjustments are based upon historical financial information of Kevco,
Bowen, Consolidated Forest, PSI and Shelter and certain assumptions that
management of Kevco believes are reasonable. The Kevco Acquisitions, the PSI
Acquisition and the Shelter Acquisition are accounted for under the purchase
method of accounting. Under this method of accounting, the purchase price has
been allocated to the assets and liabilities acquired based on preliminary
estimates of fair value. The actual fair value is determined as of the
consummation of each of the acquisitions. The unaudited pro forma financial
data does not necessarily reflect the results of operations or the financial
position of Kevco that actually would have resulted had the Pro Forma
Transactions occurred at the date indicated, or project the results of
operations or financial position of Kevco for any future date or period.
The unaudited pro forma condensed combined financial data should be read in
conjunction with the consolidated financial statements of Kevco, Bowen,
Consolidated Forest and Shelter and the notes thereto included elsewhere in
this Prospectus.
P-2
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
SHELTER PRO
KEVCO SHELTER ACQUISITION FORMA
HISTORICAL HISTORICAL ADJUSTMENTS(1) TOTAL
ASSETS ---------- ---------- -------------- --------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash
equivalents.............. $ 77 $ 13,139 $(13,139)(2) $ 77
Trade accounts receivable,
net ..................... 25,190 33,010 -- 58,200
Inventories............... 34,988 43,001 -- 77,989
Other current assets ..... 1,447 3,327 -- 4,774
-------- -------- -------- --------
Total current assets.... 61,702 92,477 (13,139) 141,040
Property and equipment,
net........................ 18,563 25,929 -- 44,492
Intangible assets, net ..... 33,600 13,126 (13,126)(3) 127,549
88,024 (3)
5,925 (4)
Other assets................ 713 1,322 -- 2,035
-------- -------- -------- --------
Total assets............ $114,578 $132,854 $ 67,684 $315,116
======== ======== ======== ========
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C>
Current liabilities:
Trade accounts payable.... $ 22,245 $ 33,079 $ -- $ 55,324
Accrued liabilities....... 4,050 7,279 -- 11,329
Current portion of long-
term debt................ 112 3,007 (2,271)(5) 848
Other liabilities......... 168 1,023 935 (6) 2,126
-------- -------- -------- --------
Total current
liabilities............ 26,575 44,388 (1,336) 69,627
Long-term debt, less current
portion.................... 45,737 17,208 (14,444)(7) 202,255
153,754 (7)
Other liabilities........... 1,869 968 -- 2,837
-------- -------- -------- --------
Total liabilities....... 74,181 62,564 137,974 274,719
Total stockholders'
equity................. 40,397 70,290 (70,290)(8) 40,397
-------- -------- -------- --------
Total liabilities and
stockholders' equity... $114,578 $132,854 $ 67,684 $315,116
======== ======== ======== ========
</TABLE>
P-3
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(1) The Shelter Acquisition was accounted for using the purchase method of
accounting. The aggregate purchase price was determined as follows:
<TABLE>
<S> <C>
Shares outstanding at September 30, 1997................... 7,765
Options outstanding at September 30, 1997.................. 376
---------
Total.................................................... 8,141
Purchase price per share................................... $ 17.50
---------
$ 142,468
Exercise of options outstanding (a)........................ (3,625)
---------
Purchase price............................................. $ 138,843
Acquisition costs (b)...................................... 5,410
---------
Total purchase price..................................... $ 144,253
=========
</TABLE>
(a) Represents cash to be received by Kevco in settlement of stock options
outstanding as of September 30, 1997 (376,000 options outstanding at an
average price of $9.64 per share).
(b) Represents fees and costs directly associated with the Shelter
Acquisition consisting of investment banking, legal and other
professional costs.
(2) Reflects the utilization of existing cash to finance a portion of the
Shelter Acquisition.
(3) Goodwill was adjusted to reflect: (i) the elimination of existing goodwill
of Shelter and (ii) the excess of purchase cost over the fair value of net
assets acquired which amount will be amortized on a straight line basis
over an estimated life of 40 years.
(4) Intangibles were adjusted to reflect the capitalization of financing costs
that will be amortized over the life of the Senior Credit Facility and the
Notes.
(5) Current portion of long-term debt was adjusted to reflect the retirement
of a portion of long-term debt. See note (7).
(6) The adjustment reflects accrued severance costs related to the involuntary
termination of employees resulting from the Shelter Acquisition.
(7) Long-term debt was adjusted to reflect gross proceeds of $105,000 from the
issuance of the Notes and additional borrowings of $48,754 from the Senior
Credit Facility, net of $14,444 of long-term debt of Shelter that was
retired.
(8) The adjustment reflects the elimination of the stockholders' equity of
Shelter.
P-4
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE OLD
KEVCO PRO SHELTER PRO SHELTER NOTES KEVCO
FORMA FORMA ACQUISITION OFFERING COMBINED
TOTALS(A) TOTALS(B) ADJUSTMENTS ADJUSTMENTS PRO FORMA
--------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............... $384,269 $470,907 $ -- $ -- $855,176
Cost of sales........... 330,583 404,977 -- -- 735,560
-------- -------- ------ -------- --------
Gross profit.......... 53,686 65,930 -- -- 119,616
Commission income....... 6,224 2,706 -- -- 8,930
-------- -------- ------ -------- --------
59,910 68,636 -- -- 128,546
Selling, general and ad-
ministrative expenses.. 41,035 54,356 (5,346)(1) 91,014
(1,232)(2)
2,201 (3)
-------- -------- ------ -------- --------
Operating income...... 18,875 14,280 4,377 -- 37,532
Interest expense........ (4,068) (1,039) (18,580)(4) (19,536)
4,862 (4)
(711)(4)
Other income (expense).. 174 447 -- -- 621
-------- -------- ------ -------- --------
Income before income
taxes.................. 14,981 13,688 4,377 (14,429) 18,617
Income taxes............ 5,992 5,267 1,751 (5) (4,632)(5) 8,378
-------- -------- ------ -------- --------
Net income............ $ 8,989 $ 8,421 $2,626 $ (9,797) $ 10,239
======== ======== ====== ======== ========
Earnings per share...... $ 1.30 $ 1.48
======== ========
Weighted average shares
outstanding............ 6,916 6,916
======== ========
Other Data:
Operating income...... $ 18,875 $ 14,280 $4,377 $ -- $ 37,532
Depreciation and
amortization......... 3,346 3,839 969 -- 8,154
-------- -------- ------ -------- --------
EBITDA (6)............ $ 22,221 $ 18,119 $5,346 $ -- $ 45,686
======== ======== ====== ======== ========
</TABLE>
- ---------------------
(A) Includes the pro forma effect of the Public Offering and the Kevco
Acquisitions.
(B) Includes the pro forma effect of the sale of the operations and certain
assets of Danube and the PSI Acquisition.
P-5
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary
termination of certain employees which are included in the financial
statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees.
Kevco believes that the elimination of duplicate employees will have no
material effect on the other reported amounts within the unaudited pro
forma condensed combined financial statements.
(2) To eliminate the historical amortization of goodwill of Shelter.
(3) Represents the amortization of excess purchase price over fair value of
net assets acquired related to the Shelter Acquisition over a period of 40
years.
(4) Interest expense was adjusted to reflect: (i) $18,580 resulting from the
effective interest rate of the Senior Credit Facility at 8.25% and the
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of
$4,862 to be repaid from the proceeds of the Senior Credit Facility and
(iii) the amortization of financing costs of $711 over the life of the
indebtedness.
(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,
which is the expected effective tax rate of the Company after giving
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of
goodwill resulting from the Shelter Acquisition.
(6) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income reflected
in the determination of net income.
P-6
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(A)KEVCO PRO FORMA
<TABLE>
<CAPTION>
PUBLIC CONSOLIDATED KEVCO
KEVCO OFFERING BOWEN SUPPLY FOREST ACQUISITION PRO FORMA
HISTORICAL ADJUSTMENTS HISTORICAL(3) HISTORICAL(4) ADJUSTMENTS TOTALS
---------- ----------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $334,253 $ -- $17,666 $32,350 $ -- $384,269
Cost of sales........... 287,790 -- 13,915 28,960 (82)(5) 330,583
-------- ---- ------- ------- ------ --------
Gross profit.......... 46,463 -- 3,751 3,390 82 53,686
Commission income....... 5,810 -- 414 -- -- 6,224
-------- ---- ------- ------- ------ --------
52,273 -- 4,165 3,390 82 59,910
Selling, general and
administrative
expenses............... 35,870 -- 2,869 2,811 (213)(6) 41,035
(622)(7)
303(8)
17(9)
-------- ---- ------- ------- ------ --------
Operating income...... 16,403 -- 1,296 579 597 18,875
Interest expense........ (2,786) 108 (1) (149) (381) (1,100)(10) (4,068)
254 (11)
(14)(9)
Other income (expense).. -- -- 227 (53) -- 174
-------- ---- ------- ------- ------ --------
Income before income
taxes................. 13,617 108 1,374 145 (263) 14,981
Income taxes............ 5,377 43 (2) 551 -- 21 (12) 5,992
-------- ---- ------- ------- ------ --------
Net income............ $ 8,240 $ 65 $ 823 $ 145 $ (284) $ 8,989
======== ==== ======= ======= ====== ========
Earnings per share...... $ 1.19 $ 1.30
======== ========
Weighted average shares
outstanding............ 6,916 6,916
======== ========
Other Data:
Operating income...... $ 16,403 $ -- $ 1,296 $ 579 $ 597 $ 18,875
Depreciation and
amortization......... 2,641 -- 138 460 107 3,346
-------- ---- ------- ------- ------ --------
EBITDA(13)............ $ 19,044 $ -- $ 1,434 $ 1,039 $ 704 $ 22,221
======== ==== ======= ======= ====== ========
</TABLE>
P-7
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(A) KEVCO PRO FORMA
(1) To reflect a decrease in interest expense for the month ended October 31,
1996, as if debt of $16.9 million, at an average interest rate of 7.65%,
had been repaid on October 1, 1996 from the net proceeds of the Public
Offering consummated on November 1, 1996. Indebtedness repaid reflects the
portion of net proceeds that were available to repay debt after making
final S corporation distributions of $9.1 million in 1996.
(2) To reflect a provision for income taxes at an effective rate of 40%
associated with the Kevco's conversion to a C corporation offset by the
tax effect of the decrease in interest expense referred to in (1).
(3) The Bowen Acquisition was consummated on February 28, 1997. Historical
results represent unaudited results of operations of Bowen for the five
months ended February 28, 1997.
(4) The Consolidated Forest Acquisition was consummated on February 27, 1997.
Historical results represent unaudited results of operations of
Consolidated Forest for the five months ended February 27, 1997.
(5) To reflect the amortization of the fair value adjustment to inventory of
$82 related to the Bowen Acquisition.
(6) To eliminate amortization of historical goodwill of $10 and $203 related
to Bowen and Consolidated Forest, respectively.
(7) To eliminate expense of $196 related to an executive of Bowen who was
retired in connection with the Bowen Acquisition, to eliminate historical
management fees of Consolidated Forest of $69 and to reflect a reduction
in commission expense of $357 resulting from the amendment of a contract
with a third party in connection with the Consolidated Forest Acquisition.
(8) To reflect the amortization of the fair value adjustments to property and
equipment of $25 related to the Consolidated Forest Acquisition, and to
reflect the amortization of loan origination fees of $18 and $18 and
goodwill of $155 and $87 related to the Bowen Acquisition and Consolidated
Forest Acquisition, respectively.
(9) To reflect the amortization and interest expense related to the non-
compete agreements entered into in connection with the Consolidated Forest
Acquisition.
(10) To reflect interest expense on borrowings to fund the Kevco Acquisitions
at an assumed interest rate of 7.6% totalling $648 and $452 related to
the Bowen Acquisition and Consolidated Forest Acquisition, respectively.
(11) To eliminate historical interest expense related to long-term debt not
assumed by Kevco in the Consolidated Forest Acquisition.
(12) Income tax expense was adjusted to reflect an effective tax rate of 40%,
which is the expected effective tax rate of Kevco.
(13) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income
reflected in the determination of net income.
P-8
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
(B)SHELTER PRO FORMA
<TABLE>
<CAPTION>
SHELTER
SHELTER SALE OF PSI ACQUISITION PRO FORMA
HISTORICAL DANUBE(1) HISTORICAL(2) ADJUSTMENTS TOTALS
---------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............... $481,836 $(16,836) $5,907 $ -- $470,907
Cost of sales........... 416,058 (16,022) 5,246 (305)(3) 404,977
-------- -------- ------ ---- --------
Gross profit.......... 65,778 (814) 661 305 65,930
Commission income....... 2,706 -- -- -- 2,706
-------- -------- ------ ---- --------
68,484 (814) 661 305 68,636
Selling, general and
administrative
expenses............... 56,713 (3,000) 576 67 (4) 54,356
-------- -------- ------ ---- --------
Operating income...... 11,771 2,186 85 238 14,280
Interest expense........ (822) 4 (151) (70)(5) (1,039)
Other income (expense).. 6,366 (5,919) -- -- 447
-------- -------- ------ ---- --------
Income before income
taxes................ 17,315 (3,729) (66) 168 13,688
Income taxes............ 7,107 (1,880) -- 40 (6) 5,267
-------- -------- ------ ---- --------
Net income............ $ 10,208 $ (1,849) $ (66) $128 $ 8,421
======== ======== ====== ==== ========
Other Data:
Operating income...... $ 11,771 $ 2,186 $ 85 $238 $ 14,280
Depreciation and
amortization......... 3,359 (140) 327 293 3,839
-------- -------- ------ ---- --------
EBITDA (7)............ $ 15,130 $ 2,046 $ 412 $531 $ 18,119
======== ======== ====== ==== ========
</TABLE>
P-9
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
LAST TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(B) SHELTER PRO FORMA
(1) The operations and certain assets of Danube were sold on December 31,
1996. Historical results represent results of operations related to Danube
for the three months ended December 31, 1996.
(2) The PSI Acquisition was consummated on June 27, 1997. Historical results
represent results of operations of PSI for the nine months ended June 27,
1997.
(3) To: (i) eliminate one-time bonuses given to employees of PSI in connection
with the sale; (ii) reduce compensation expense pursuant to post
acquisition employment agreements and (iii) record additional depreciation
expense for equipment adjusted to fair market value in connection with the
PSI Acquisition.
(4) To: (i) record amortization of goodwill; (ii) reduce compensation expense
for a certain employment agreement and (iii) eliminate non-recurring
charges incurred in connection with the PSI Acquisition.
(5) To reflect interest expense on debt issued, net of interest expense on the
repayment of existing debt in connection with the PSI Acquisition.
(6) Income tax expense was adjusted to reflect Shelter's effective tax rate of
38.5%.
(7) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income reflected
in the determination of net income.
P-10
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE OLD
KEVCO PRO SHELTER SHELTER NOTES KEVCO
FORMA PRO FORMA ACQUISITION OFFERING COMBINED
TOTALS(A) TOTALS(B) ADJUSTMENTS ADJUSTMENTS PRO FORMA
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............... $289,952 $362,139 $ -- $ -- $652,091
Cost of sales........... 250,896 311,329 -- -- 562,225
-------- -------- ------ ------- --------
Gross profit.......... 39,056 50,810 -- -- 89,866
Commission income....... 4,506 2,074 -- -- 6,580
-------- -------- ------ ------- --------
43,562 52,884 -- -- 96,446
Selling, general and
administrative
expenses............... 30,667 41,239 (3,597)(1) -- 69,077
(883)(2)
1,651 (3)
-------- -------- ------ ------- --------
Operating income...... 12,895 11,645 2,829 -- 27,369
Interest expense........ (2,869) (612) (13,935)(4) (14,652)
3,297 (4)
(533)(4)
Other income (expense).. 52 447 -- -- 499
-------- -------- ------ ------- --------
Income before income
taxes.................. 10,078 11,480 2,829 (11,171) 13,216
Income taxes............ 4,031 4,422 1,054 (5) (3,561)(5) 5,946
-------- -------- ------ ------- --------
Net income............ $ 6,047 $ 7,058 $1,775 $(7,610) $ 7,270
======== ======== ====== ======= ========
Earnings per share...... $ 0.87 $ 1.05
======== ========
Weighted average shares
outstanding............ 6,916 6,916
======== ========
Other Data:
Operating income...... $ 12,895 $ 11,645 $2,829 $ -- $ 27,369
Depreciation and
amortization......... 2,455 2,864 768 -- 6,087
-------- -------- ------ ------- --------
EBITDA (6)............ $ 15,350 $ 14,509 $3,597 $ -- $ 33,456
======== ======== ====== ======= ========
</TABLE>
- ---------------------
(A) Includes the pro forma effect of the Kevco Acquisitions.
(B) Includes the pro forma effect of the PSI Acquisition.
P-11
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary
termination of certain employees which are included in the financial
statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees.
Kevco believes that the elimination of duplicate employees will have no
material effect on the other reported amounts within the unaudited pro
forma condensed combined financial statements.
(2) To eliminate the historical amortization of goodwill of Shelter.
(3) Represents the amortization of excess purchase price over fair value of
net assets acquired related to the Shelter Acquisition over a period of 40
years.
(4) Interest expense was adjusted to reflect: (i) $13,935 resulting from the
effective interest rate of the Senior Credit Facility at 8.25% and the
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of
$3,297 to be repaid from the proceeds from the Senior Credit Facility and
(iii) the amortization of financing costs of $533 over the life of the
indebtedness.
(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,
which is the expected effective tax rate of the Company after giving
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of
goodwill resulting from the Shelter Acquisition.
(6) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income reflected
in the determination of net income.
P-12
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(A)KEVCO PRO FORMA
<TABLE>
<CAPTION>
KEVCO
CONSOLIDATED PRO
KEVCO BOWEN SUPPLY FOREST ACQUISITION FORMA
HISTORICAL HISTORICAL(1) HISTORICAL(2) ADJUSTMENTS TOTALS
---------- ------------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
Net sales............... $271,957 $6,710 $11,285 $ -- $289,952
Cost of sales........... 235,138 5,398 10,393 (33)(3) 250,896
-------- ------ ------- ---- --------
Gross profit.......... 36,819 1,312 892 33 39,056
Commission income....... 4,413 93 -- -- 4,506
-------- ------ ------- ---- --------
41,232 1,405 892 33 43,562
Selling, general and ad-
ministrative expenses.. 28,738 1,097 1,038 (85)(4) 30,667
(249)(5)
121 (6)
7 (7)
-------- ------ ------- ---- --------
Operating income...... 12,494 308 (146) 239 12,895
Interest expense, net... (2,354) (51) (120) (440)(8) (2,869)
102 (9)
(6)(7)
Other income (expense).. -- 46 6 -- 52
-------- ------ ------- ---- --------
Income before income
taxes................ 10,140 303 (260) (105) 10,078
Income taxes............ 4,056 123 -- (148)(10) 4,031
-------- ------ ------- ---- --------
Net income............ $ 6,084 $ 180 $ (260) $ 43 $ 6,047
======== ====== ======= ==== ========
Earnings per share...... $ 0.88 $ 0.87
======== ========
Weighted averaged shares
outstanding............ 6,916 6,916
======== ========
Other Data:
Operating income...... $ 12,494 $ 308 $ (146) $239 $ 12,895
Depreciation and
amortization......... 2,172 56 184 43 2,455
-------- ------ ------- ---- --------
EBITDA (11)........... $ 14,666 $ 364 $ 38 $282 $ 15,350
======== ====== ======= ==== ========
</TABLE>
P-13
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(A) KEVCO PRO FORMA
(1) The Bowen Acquisition was consummated on February 28, 1997. Historical
results represent unaudited results of operations of Bowen for the two
months ended February 28, 1997.
(2) The Consolidated Forest Acquisition was consummated on February 27, 1997.
Historical results represent unaudited results of operations of
Consolidated Forest for the two months ended February 27, 1997.
(3)To reflect the amortization of the fair value adjustment to inventory of
$33 related to the Bowen Acquisition.
(4) To eliminate amortization of historical goodwill of $4 and $81 related to
Bowen and Consolidated Forest, respectively.
(5) To eliminate expense of $78 related to an executive of Bowen who was
retired in connection with the Bowen Acquisition, to eliminate historical
management fees of Consolidated Forest of $28 and to reflect a reduction
in commission expense of $143 resulting from the amendment of a contract
with a third party in connection with the Consolidated Forest Acquisition.
(6) To reflect the amortization of the fair value adjustments to property and
equipment of $10 related to the Consolidated Forest Acquisition, and to
reflect the amortization of loan origination fees of $7 and $7 and
goodwill of $62 and $35 related to the Bowen Acquisition and Consolidated
Forest Acquisition, respectively.
(7) To reflect the amortization and interest expense related to the non-
compete agreements entered into in connection with the Consolidated Forest
Acquisition.
(8) To reflect interest expense on borrowings to fund the Kevco Acquisitions
at an assumed interest rate of 7.6% totalling $259 and $181 related to the
Bowen Acquisition and Consolidated Forest Acquisition, respectively.
(9) To eliminate historical interest expense related to long-term debt not
assumed by Kevco in the Consolidated Forest Acquisition.
(10) Income tax expense was adjusted to reflect an effective tax rate of 40%,
which is the expected effective tax rate of Kevco.
(11) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income
reflected in the determination of net income.
P-14
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS)
(B) SHELTER PRO FORMA
<TABLE>
<CAPTION>
SHELTER
SHELTER PSI ACQUISITION PRO FORMA
HISTORICAL HISTORICAL(1) ADJUSTMENTS TOTALS
---------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales..................... $357,879 $4,260 $ -- $362,139
Cost of sales................. 307,906 3,682 (259)(2) 311,329
-------- ------ ----- --------
Gross profit................ 49,973 578 259 50,810
Commission income............. 2,074 -- -- 2,074
-------- ------ ----- --------
52,047 578 259 52,884
Selling, general and
administrative expenses...... 40,810 380 49 (3) 41,239
-------- ------ ----- --------
Operating income............ 11,237 198 210 11,645
Interest expense.............. (464) (113) (35)(4) (612)
Other income (expense)........ 447 -- -- 447
-------- ------ ----- --------
Income before income taxes.. 11,220 85 175 11,480
Income taxes.................. 4,320 -- 102 (5) 4,422
-------- ------ ----- --------
Net income.................. $ 6,900 $ 85 $ 73 $ 7,058
======== ====== ===== ========
Other Data:
Operating income............ $ 11,237 $ 198 $ 210 $ 11,645
Depreciation and
amortization............... 2,454 215 195 2,864
-------- ------ ----- --------
EBITDA (6).................. $ 13,691 $ 413 $ 405 $ 14,509
======== ====== ===== ========
</TABLE>
P-15
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(DOLLARS IN THOUSANDS)
(B) SHELTER PRO FORMA
(1) The PSI Acquisition was consummated on June 27, 1997. Historical results
represent results of operations of PSI for the six months ended June 27,
1997.
(2) To: (i) eliminate one-time bonuses given to employees of PSI in connection
with the sale; (ii) reduce compensation expense pursuant to post
acquisition employment agreements and (iii) record additional depreciation
expense for equipment adjusted to fair market value in connection with the
PSI Acquisition.
(3) To: (i) record amortization of goodwill; (ii) reduce compensation expense
for a certain Employment Agreement and (iii) eliminate non-recurring
charges incurred in connection with the PSI Acquisition.
(4) To reflect interest expense on debt issued, net of interest expense on the
repayment of existing debt in connection with the PSI Acquisition.
(5) Income tax expense was adjusted to reflect Shelter's effective tax rate of
38.5%.
(6) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income reflected
in the determination of net income.
P-16
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THE OLD
KEVCO SHELTER SHELTER NOTES KEVCO
PRO FORMA PRO FORMA ACQUISITION OFFERING COMBINED
TOTALS(A) TOTALS(B) ADJUSTMENTS ADJUSTMENTS PRO FORMA
--------- --------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............... $401,119 $454,567 $ -- $ -- $855,686
Cost of sales........... 341,473 391,440 -- -- 732,913
-------- -------- ------- -------- --------
Gross profit.......... 59,646 63,127 -- -- 122,773
Commission income....... 6,900 2,459 -- -- 9,359
-------- -------- ------- -------- --------
66,546 65,586 -- -- 132,132
Selling, general and
administrative
expenses............... 42,264 50,553 (4,914)(1) -- 88,722
(1,382)(2) --
2,201 (3) --
-------- -------- ------- -------- --------
Operating income...... 24,282 15,033 4,095 -- 43,410
Interest expense........ (4,420) (1,994) -- (18,580)(4) (19,536)
6,169 (4)
(711)(4)
Other income............ 61 -- -- -- 61
-------- -------- ------- -------- --------
Income before income
taxes................ 19,923 13,039 4,095 (13,122) 23,935
Income taxes............ 7,969 5,072 1,535 (5) (3,805)(5) 10,771
-------- -------- ------- -------- --------
Net income............ $ 11,954 $ 7,967 $ 2,560 $ (9,317) $ 13,164
======== ======== ======= ======== ========
Earnings per share...... $ 1.73 $ 1.90
======== ========
Weighted average shares
outstanding............ 6,911 6,911
======== ========
Other Data:
Operating income...... $ 24,282 $ 15,033 $ 4,095 $ -- $ 43,410
Depreciation and
amortization......... 3,418 3,596 819 -- 7,833
-------- -------- ------- -------- --------
EBITDA (6)............ $ 27,700 $ 18,629 $ 4,914 $ -- $ 51,243
======== ======== ======= ======== ========
</TABLE>
- ---------------------
(A) Includes the pro forma effect of the Public Offering and the Kevco
Acquisitions.
(B) Includes the pro forma effect of the sale of Danube and the PSI
Acquisition.
P-17
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(1) Pursuant to EITF 95-3, Kevco has accrued liabilities for the involuntary
termination of certain employees which are included in the financial
statements along with the pro forma effect of the elimination of duplicate
costs. Costs include only direct costs and benefits of these employees.
Kevco believes that the elimination of duplicate employees will have no
material effect on the other reported amounts within the unaudited pro
forma condensed combined financial statements.
(2) To eliminate the historical amortization of goodwill of Shelter.
(3) Represents the amortization of excess purchase price over fair value of
net assets acquired related to the Shelter Acquisition over a period of 40
years.
(4) Interest expense was adjusted to reflect: (i) $18,580 resulting from the
effective interest rate of the Senior Credit Facility at 8.25% and the
Notes at 10 3/8%; (ii) the elimination of interest on existing debt of
$6,169 to be repaid from the proceeds from the Senior Credit Facility and
(iii) the amortization of financing costs of $711 over the life of the
indebtedness.
(5) Income tax expense was adjusted to reflect an effective tax rate of 45%,
which is the expected effective tax rate of the Company after giving
effect to the Shelter Acquisition. The effective rate is higher than the
statutory rate of approximately 40% because of the nondeductibility of
goodwill resulting from the Shelter Acquisition.
(6) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income reflected
in the determination of net income.
P-18
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(A) KEVCO PRO FORMA
<TABLE>
<CAPTION>
PUBLIC BOWEN CONSOLIDATED KEVCO
KEVCO OFFERING SUPPLY FOREST ACQUISITION PRO FORMA
HISTORICAL ADJUSTMENTS HISTORICAL HISTORICAL(3) ADJUSTMENTS TOTALS
---------- ----------- ---------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............... $267,344 $ -- $41,301 $92,474 $ -- $401,119
Cost of sales........... 226,653 -- 33,270 81,746 (196)(4) 341,473
-------- ------- ------- ------- ------- --------
Gross profit.......... 40,691 -- 8,031 10,728 196 59,646
Commission income....... 5,497 -- 1,403 -- -- 6,900
-------- ------- ------- ------- ------- --------
46,188 -- 9,434 10,728 196 66,546
Selling, general and
administrative
expenses............... 29,723 -- 6,180 7,597 (511)(5) 42,264
(1,493)(6)
727 (7)
41 (8)
-------- ------- ------- ------- ------- --------
Operating income...... 16,465 -- 3,254 3,131 1,432 24,282
Interest expense........ (2,058) 1,296 (1) (364) (1,230) (2,641)(9) (4,420)
611 (10)
(34)(8)
Other income (expense).. -- -- 15 46 -- 61
-------- ------- ------- ------- ------- --------
Income before income
taxes................ 14,407 1,296 2,905 1,947 (632) 19,923
Income taxes............ 1,695 4,643 (2) 1,149 -- 482 (11) 7,969
-------- ------- ------- ------- ------- --------
Net income............ $ 12,712 $(3,347) $ 1,756 $ 1,947 $(1,114) $ 11,954
======== ======= ======= ======= ======= ========
Historical income before
income taxes........... $ 14,407
Income tax expense
adjustment(2).......... 5,475
--------
Pro forma net income.... $ 8,932
========
Pro forma earnings per
share.................. $ 1.61 $ 1.73
======== ========
Pro forma weighted
average shares
outstanding............ 5,531 1,380 (13) 6,911
======== ======= ========
Other Data:
Operating income...... $ 16,465 $ -- $ 3,254 $ 3,131 $ 1,432 $ 24,282
Depreciation and
amortization......... 1,792 -- 308 1,061 257 3,418
-------- ------- ------- ------- ------- --------
EBITDA(12)............ $ 18,257 $ -- $ 3,562 $ 4,192 $ 1,689 $ 27,700
======== ======= ======= ======= ======= ========
</TABLE>
P-19
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(A)KEVCO PRO FORMA
(1) To reflect a decrease in interest expense as if debt of $16.9 million, at
an average interest rate of 7.65%, had been repaid on January 1, 1996 from
the net proceeds of the Public Offering. Indebtedness repaid reflects the
portion of net proceeds that were available to repay debt after making
final S corporation distributions of $9.1 million in 1996.
(2) To reflect a provision for income taxes at an effective rate of 40%
associated with the Kevco's conversion to a C corporation offset by the
tax effect of the decrease in interest expense referred to in (1).
(3) For the year ended September 29, 1996, which represents Consolidated
Forest's fiscal year end.
(4) To reflect the amortization of the fair value adjustment to inventory of
$196 related to the Bowen Acquisition.
(5) To eliminate amortization of historical goodwill of $23 and $488 related
to Bowen and Consolidated Forest, respectively.
(6) To eliminate expense of $471 related to an executive of Bowen who was
retired in connection with the Bowen Acquisition, to eliminate historical
management fees of Consolidated Forest of $166 and to reflect a reduction
in commission expense of $856 resulting from the amendment of a contract
with a third party in connection with the Consolidated Forest Acquisition.
(7) To reflect the amortization of the fair value adjustments to property and
equipment of $60 related to the Consolidated Forest Acquisition, and to
reflect the amortization of loan origination fees of $42 and $42 and
goodwill of $372 and $211 related to the Bowen Acquisition and
Consolidated Forest Acquisition, respectively.
(8) To reflect the amortization and interest expense related to the non-
compete agreements entered into in connection with the Consolidated Forest
Acquisition.
(9) To reflect interest expense on borrowings to fund the Kevco Acquisitions
at an assumed interest rate of 7.6% totalling $1,556 and $1,085 related to
the Bowen Acquisition and Consolidated Forest Acquisition, respectively.
(10) To eliminate historical interest expense related to long-term debt not
assumed by the Kevco in the Consolidated Forest Acquisition.
(11) Income tax expense was adjusted to reflect an effective tax rate of 40%,
which is the expected effective tax rate of Kevco.
(12) EBITDA is defined as net income plus interest expense, income taxes,
depreciation, amortization, and other expenses less other income
reflected in the determination of net income.
(13) To reflect the incremental weighted average shares issued in connection
with the Public Offering in November 1996.
P-20
<PAGE>
KEVCO, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
(B) SHELTER PRO FORMA
<TABLE>
<CAPTION>
SHELTER
SHELTER SALE OF PSI ACQUISITION PRO FORMA
HISTORICAL DANUBE(1) ACQUISITION(2) ADJUSTMENTS TOTALS
---------- --------- -------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Net sales............... $521,022 $(74,851) $8,396 $ -- $454,567
Cost of sales........... 447,701 (63,403) 7,180 (38)(3) 391,440
-------- -------- ------ ----- --------
Gross profit.......... 73,321 (11,448) 1,216 38 63,127
Commission income....... 2,459 -- -- -- 2,459
-------- -------- ------ ----- --------
75,780 (11,448) 1,216 38 65,586
Selling, general and
administrative
expenses............... 60,194 (10,547) 673 233 (4) 50,553
-------- -------- ------ ----- --------
Operating income...... 15,586 (901) 543 (195) 15,033
Interest expense........ (1,654) 4 (243) (101)(5) (1,994)
Other income (expense).. 5,919 (5,919) -- -- --
-------- -------- ------ ----- --------
Income before income
taxes................ 19,851 (6,816) 300 (296) 13,039
Income taxes............ 8,153 (3,083) -- 2 (6) 5,072
-------- -------- ------ ----- --------
Net income............ $ 11,698 $ (3,733) $ 300 $(298) $ 7,967
======== ======== ====== ===== ========
Other Data:
Operating income...... $ 15,586 $ (901) $ 543 $(195) $ 15,033
Depreciation and
amortization......... 3,350 (560) 437 369 3,596
-------- -------- ------ ----- --------
EBITDA (7)............ $ 18,936 $ (1,461) $ 980 $ 174 $ 18,629
======== ======== ====== ===== ========
</TABLE>
P-21
<PAGE>
KEVCO, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(B) SHELTER PRO FORMA
(1) The operations and certain assets of Danube were sold on December 31,
1996. Historical results represent results of operations related to Danube
for the year ended December 31, 1996.
(2) The PSI Acquisition was consummated on June 27, 1997. Historical results
represent results of operations of PSI for the year ended December 31,
1996.
(3) To: (i) eliminate non-recurring compensation expense; (ii) reduce
compensation expense pursuant to post acquisition employment agreements
and (iii) record additional depreciation expense for equipment adjusted to
fair market value in connection with the PSI Acquisition.
(4) To: (i) record amortization of goodwill; (ii) reduce compensation expense
for a certain Employment Agreement and (iii) eliminate non-recurring
charges incurred in connection with the PSI Acquisition.
(5) To reflect interest expense on debt issued, net of interest expense on the
repayment of existing debt in connection with the PSI Acquisition.
(6) Income tax expense was adjusted to reflect Shelter's effective tax rate of
39%.
(7) EBITDA is defined as net income plus interest expense, income taxes,
depreciation and amortization, and other expenses less other income
reflected in the determination of net income.
P-22
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTA-
TIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY OR THE INITIAL PURCHASER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE EX-
CHANGE NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SO-
LICITATION OF AN OFFER TO BUY ANY OF THE EXCHANGES NOTES TO ANYONE OR BY ANY-
ONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT WOULD BE UNLAWFUL
TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICA-
TION THAT THERE HAS NOT BEEN A CHANGE IN THE INFORMATION SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------
TABLE OF CONTENTS
------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.................................................... 4
Prospectus Summary....................................................... 5
Risk Factors............................................................. 17
The Transactions......................................................... 23
Use of Proceeds.......................................................... 23
Capitalization........................................................... 24
Unaudited Pro Forma Condensed Combined Financial Data.................... 25
Selected Consolidated Financial Data of Kevco............................ 34
Selected Consolidated Financial Data of Shelter.......................... 35
Management's Discussion and Analysis of Financial Condition and Results
of Operation............................................................ 36
Business................................................................. 46
Management............................................................... 58
Management Compensation.................................................. 60
Principal Shareholders................................................... 64
Description of Senior Credit Facility.................................... 65
The Exchange Offer....................................................... 67
Description of the Notes................................................. 75
Certain United States Federal Income Tax Considerations.................. 104
Plan of Distribution..................................................... 105
Legal Matters............................................................ 105
Experts.................................................................. 106
Index to Financial Statements............................................ F-1
</TABLE>
UNTIL , 1998, (90 DAYS AFTER THE COMMENCEMENT OF THE EXCHANGE OFFER),
ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPEC-
TUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
KEVCO, INC.
[LOGO OF KEVCO, INC. APPEARS HERE]
OFFER TO EXCHANGE
ITS 10 3/8% SENIOR SUBORDINATED
NOTES DUE 2007 (SERIES B)
FOR ANY AND ALL OF OUTSTANDING
10 3/8% SENIOR SUBORDINATED
NOTES
DUE 2007 (SERIES A)
----------------
PROSPECTUS
----------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation provide that, to the fullest extent
permitted by Texas law, directors of the Company will not be liable to the
Company or its shareholders for monetary damages for an act or omission in the
director's capacity as a director. Texas law does not currently authorize the
elimination or limitation of the liability of a director to the extent the
director is found liable for (i) any breach of the director's duty of loyalty
to the Company or its shareholders, (ii) acts or omissions not in good faith
that constitute a breach of duty of the director to the Company or which
involve intentional misconduct or a knowing violation of law, (iii)
transactions from which the director received an improper benefit, whether or
not the benefit resulted from an action taken within the scope of the
director's office or (iv) acts or omissions for which the liability of a
director is expressly provided by an applicable statute. In addition, the
Company's Articles of Incorporation provide that if applicable law is amended
to authorize the further elimination or limitation of the liability of a
director, then the liability of the directors shall be eliminated or limited
to the fullest extent permitted by law, as amended.
The Company's Articles of Incorporation and Bylaws grant mandatory
indemnification and advancement of expenses to directors and officers of the
Company to the fullest extent authorized by Texas law. In general, a Texas
corporation may indemnify a director or officer who was, is or is threatened
to be made a named defendant or respondent in a proceeding by virtue of his
position in the corporation if he 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, in the case of criminal proceedings, had no reasonable cause
to believe his conduct was unlawful. A Texas corporation may indemnify a
director or officer in an action brought by or in the right of the corporation
only if such director or officer was not found liable to the corporation,
unless or only to the extent that a court finds him to be fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
The Company entered into an agreement with each of its shareholders of
record immediately prior to the consummation of the Company's initial public
offering (including Mr. Kimmel) pursuant to which the Company agreed to
distribute to such shareholders an amount equal to earnings of the Company as
provided in the agreement and as finally determined for tax purposes for the
period January 1, 1995 through the date of the consummation of such initial
public offering, to the extent such earnings exceeded the earnings for such
period as theretofore reported by the Company. In addition, the Company agreed
to indemnify such shareholders for any penalties and interest attributable to
any additional income taxes they incurred as a result of being taxed on such
additional earnings, as well as for related costs and expenses incurred.
The Company has procured insurance that purports to insure the Company's
directors and officers against certain liabilities incurred by them in the
discharge of their functions as directors and officers, with certain
exceptions including exceptions for liabilities arising from such directors'
and officers' own malfeasance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 --Merger Agreement, dated June 6, 1995 by and among Kevco, Inc. and
Service Supply Systems, Inc., joined by a wholly-owned subsidiary of
Kevco, Inc.(1)
2.2 --Form of Plan and Agreement of Merger between Kevco Texas, Inc. and
Kevco Delaware, Inc.(1)
2.3 --Form of Bill of Sale and General Assignment from Kevco Delaware,
Inc., as Assignor, to Sunbelt Wood Components, Inc., as Assignee.(1)
2.4 --Form of Assumption Agreement between Kevco Delaware, Inc. and
Sunbelt Wood Components, Inc.(1)
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
2.5 --Asset Purchase Agreement by and among Consolidated Forest Products,
Inc., Consolidated Forest Products, L.L.C. and the members of
Consolidated Forest Products, L.L.C.(2)
2.6 --Stock Purchase Agreement by and among Kevco Delaware, Inc. and the
shareholders of Bowen Supply, Inc.(2)
2.7 --Agreement and Plan of Merger, dated as of October 21, 1997, between
Kevco, Inc., SCC Acquisition Corp., and Shelter Components
Corporation.(6)
3.1 --Articles of Incorporation of Kevco, Inc., as amended.(1)
3.2 --Bylaws of Kevco, Inc.(1)
3.3 --Certificate of Incorporation of Kevco Delaware, Inc.(9)
3.4 --Bylaws of Kevco Delaware, Inc.(9)
3.5 --Certificate of Incorporation of Sunbelt Wood Components, Inc.(9)
3.6 --Bylaws of Sunbelt Wood Components, Inc.(9)
3.7 --Articles of Incorporation of Bowen Supply, Inc. and amendments.(9)
3.8 --Bylaws of Bowen Supply, Inc.(9)
3.9 --Articles of Incorporation of Encore Industries, Inc.(9)
3.10 --Bylaws of Encore Industries, Inc.(9)
3.11 --Certificate of Limited Partnership of Shelter Distribution, L.P.(9)
3.12 --Limited Partnership Agreement of Shelter Distribution, L.P.(9)
3.13 --Articles of Restatement of the Articles of Incorporation of Shelter
Newco, Inc. n/k/a Shelter Components Corporation.(9)
3.14 --Bylaws of Shelter Components Corporation.(9)
3.15 --Articles of Incorporation of BPR Holdings, Inc.(9)
3.16 --Bylaws of BPR Holdings, Inc.(9)
3.17 --Restated Articles of Incorporation of SC Acquisition Corp. n/k/a
Shelter Components of Indiana, Inc. and amendment(9)
3.18 --Bylaws of SC Acquisition Corp. n/k/a Shelter Components of Indiana,
Inc.(9)
3.19 --Articles of Incorporation of MP Acquisition Corp. n/k/a Design
Components, Inc. and amendments(9)
3.20 --Bylaws of Design Components, Inc.(9)
3.21 --Articles of Incorporation of Duo-Form of Michigan, Inc. and
amendments(9)
3.22 --Bylaws of Duo-Form of Michigan, Inc.(9)
3.23 --Restated Charter of Danube Carpet Mills, Inc. n/k/a DCM, Inc. and
amendments.(9)
3.24 --Bylaws of Danube Carpet Mills, Inc. n/k/a DCM, Inc.(9)
4.1 --Form of certificate evidencing ownership of the Common Stock of Kevco,
Inc.(1)
5.1 --Opinion of Jackson Walker L.L.P.(9)
10.1 --Amendment No. 2 to 1995 Stock Option Plan (Amended and Restated 1995
Stock Option Plan of Kevco, Inc.) and Supplementary Letter.(1)
10.2 --1996 Stock Option Plan of Kevco, Inc., as amended, and Supplementary
Letter.(1)
10.3 --Form of Amended and Restated Employment Agreement between Gerald E.
Kimmel and Kevco, Inc., joined therein by Kevco Delaware, Inc. and
Sunbelt Wood Components, Inc.(1)
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.4 --Employment Agreement between C. Lee Denham and Kevco, Inc. dated June
30, 1995.(1)
10.5 --Lease between K & E Land & Leasing and Kevco, Inc. dated December 1,
1977.(1)
10.6 --Amendment No. 1 to Lease, by and between K & E Land & Leasing and
Kevco, Inc. dated March , 1982.(1)
10.7 --Amendment No. 2 to Lease, by and between K & E Land & Leasing and
Kevco, Inc. dated May 30, 1983.(1)
10.8 --Amendment No. 3 to Lease, by and between K & E Land & Leasing and
Kevco, Inc. dated February 1, 1993.(1)
10.9 --Lease dated April 1, 1980 between City of Newton, Kansas and K & E
Land & Leasing.(1)
10.10 --Sublease and Lease Guarantee Agreement dated April 1, 1980 between K &
E Land & Leasing and Kevco, Inc.(1)
10.11 --Amendment No. 1 to Sublease and Lease Guaranty Agreement by and
between K & E Land & Leasing and Kevco, Inc. dated May 30, 1983.(1)
10.12 --Lease Agreement dated October 12, 1987 between 1741 Conant Partnership
& Kevco Inc.(1)
10.13 --Equipment Lease Agreement dated January 1, 1991 between K & E Land &
Leasing and Kevco, Inc.(1)
10.14 --Amendment No. 1 to Equipment Lease Agreement between K & E Land &
Leasing and Kevco, Inc. dated February 12, 1993.(1)
10.15 --Amendment No. 2 to Equipment Lease Agreement between K & E Land &
Leasing and Kevco, Inc. dated October 26, 1993.(1)
10.16 --Amendment No. 3 to Equipment Lease Agreement between K & E Land &
Leasing and Kevco, Inc. dated May 23, 1994.(1)
10.17 --Deferred Compensation Agreement between Kevco, Inc. and Clyde A. Reed,
Jr. dated May 24, 1977.(1)
10.18 --Amendment No. 1 to Deferred Compensation Agreement dated May ,
1980.(1)
10.19 --Amendment No. 2 to Deferred Compensation Agreement dated March 10,
1992.(1)
10.20 --Amended and Restated Health and Accident Plan of Kevco, Inc.(1)
10.21 --Investment and Tax Advice Plan of Kevco, Inc.(1)
10.22 --Credit Agreement among Kevco, Inc., certain Lenders and NationsBank of
Texas, N.A., as Administrative Lender dated June 30, 1995.(1)
10.23 --First Amendment to Credit Agreement, dated as of September 1, 1995,
among Kevco, Inc., the banks listed on the signature pages thereof, and
NationsBank of Texas, N.A.(1)
10.24 --Second Amendment to Credit Agreement, dated as of November 29, 1995,
among Kevco, Inc., the banks listed on the signature pages thereof, and
NationsBank of Texas, N.A.(1)
10.25 --Revolving Credit Note of Kevco, Inc. to NationsBank of Texas, N.A.
dated September 1, 1995 in the amount of $14,285,714.28.(1)
10.26 --Term Loan Note of Kevco, Inc. to NationsBank of Texas, N.A. dated
September 1, 1995 in the amount of $10,714,285.72.(1)
10.27 --Revolving Credit Note of Kevco, Inc. to The Sumitomo Bank, Ltd. dated
February 2, 1996 in the amount of $5,714,285.72.(1)
10.28 --Term Loan Note of Kevco, Inc. to The Sumitomo Bank, Ltd. dated
February 2, 1996 in the amount of $4,285,714.28.(1)
</TABLE>
II-3
<PAGE>
<TABLE>
<C> <S>
10.29 --PaineWebber Standardized 401(K) Profit-Sharing Adoption Agreement (No.
005) (To be used with Basic Plan Document No. 03 Only) for Kevco, Inc.
dated May 24, 1996 and PaineWebber Defined Contribution Plan.(1)
10.30 --Promissory Note of Gerald E. Kimmel to Kevco, Inc. dated October 26,
1993 in the amount of $5,000,000.(1)
10.31 --Amendment No. 4 to Lease dated December 1, 1977 by and between K&E
Land & Leasing and Kevco, Inc. dated October 26, 1993.(1)
10.32 --Assignment and Acceptance dated February 2, 1996 between The Daiwa
Bank, Limited and The Sumitomo Bank, Ltd., Chicago Branch.(1)
10.33 --Form of Tax Indemnification and Distribution Agreement.(1)
10.34 --Form of Promissory Note made by Kevco Texas, Inc. in the amount of
$3,733,000 (the Prior S Corporation Earnings Note).(1)
10.35 --Form of Promissory Note made by Kevco Texas, Inc. (the Future S
Corporation Earnings Note).(1)
10.36 --Form of Assignment of $5,000,000 Note made by Kevco, Inc. (n/k/a Kevco
Delaware, Inc.).(1)
10.37 --Form of Adoption Agreement by Kevco, Inc. and Kevco Texas, Inc. (re:
1995 Stock Option Plan and 1996 Stock Option Plan).(1)
10.38 --Amendment No. 1 dated September 21, 1988, to Lease Agreement by 1741
Conant Partnership as lessor and Kevco, Inc. (n/k/a Kevco Delaware,
Inc.).(1)
10.39 --Letter Agreement dated June 22, 1982, between Kevco, Inc. (n/k/a Kevco
Delaware, Inc.) and K&E Land & Leasing (re: lease rentals).(1)
10.40 --Letter Agreement dated October 1, 1996 by Kevco, Inc., K&E Land &
Leasing, and 1741 Conant Partnership (re: lease rental).(1)
10.41 --Form of Parent Pledge Agreement.(1)
10.42 --Consent and Waiver, dated as of October 21, 1996, by and among
NationsBank of Texas, N.A., The Sumitomo Bank, Ltd. and Kevco Texas,
Inc.(1)
10.43 --Amended and Restated Credit Agreement, dated as of February 27, 1997,
by and among Kevco Delaware, Inc., certain lenders and NationsBank of
Texas, N.A.(5)
10.44 --Amendment No. 2 to 1995 Stock Option Plan (Amended and Restated 1995
Stock Option Plan of Kevco, Inc.) and Supplementary Letter.(4)
10.45 --Senior Commitment Letter dated October 27, 1997 from NationsBank of
Texas, N.A. and NationsBanc Montgomery Securities, Inc.(6)
10.46 --First Amendment to Amended and Restated Credit Agreement dated as of
November 25, 1997 between Kevco Delaware, Inc., certain lenders and
NationsBank of Texas, N.A.(7)
10.47 --Second Amended and Restated Credit Agreement dated December 1, 1997
between Kevco, Inc., certain lenders and NationsBank of Texas,
N.A.(7)(8)
10.48 --Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
NationsBank of Texas, N.A. in the original principal amount of
$11,666,666.66.(7)
10.49 --Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
National City Bank of Kentucky in the original principal amount of
$8,166,666.67.(7)
10.50 --Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
Guaranty Federal Bank, F.S.B. in the original principal amount of
$7,000,000.00.(7)
10.51 --Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
The Sumitomo Bank, Limited in the original principal amount of
$8,166,666.67.(7)
</TABLE>
II-4
<PAGE>
<TABLE>
<C> <S>
10.52 --Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc.
and NationsBank of Texas, N.A. in the original principal amount of
$13,333,333.34.(7)
10.53 --Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc.
and National City Bank Kentucky in the original principal amount of
$9,333,333.33.(7)
10.54 --Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc.
and Guaranty Federal Bank, F.S.B. in the original principal amount of
$8,000,000.00.(7)
10.55 --Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc.
and The Sumitomo Bank, Limited in the original principal amount of
$9,333,333.33.(7)
10.56 --Facility B Term Loan Note dated December 1, 1997 between Kevco, Inc.
and NationsBank of Texas, N.A. in the original principal amount of
$50,000,000.00.(7)
10.57 --Security Agreement dated December 1, 1997 between Kevco, Inc., and
NationsBank of Texas, N.A. as Administrative Agent.(7)
10.58 --Registration Rights Agreement dated December 1, 1997 by and among
Kevco, Inc., as Issuer, the Subsidiaries of Kevco, Inc. identified
therein, as Subsidiary Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation and NationsBanc Montgomery Securities, Inc., as
Initial Purchasers.(3)
10.59 --Indenture dated December 1, 1997 among Kevco, Inc., SCC Acquisition
Corp., Kevco Delaware, Inc., Sunbelt Wood Components, Inc.,
Consolidated Forest Products, Inc., Bowen Supply, Inc. and Encore
Industries, Inc., as Subsidiary Guarantors and United States Trust
Company of New York, as Trustee.(3)
10.60 --Supplemental Indenture between Shelter Components Corporation, a
Subsidiary of Kevco, Inc., and United States Trust Company of New York,
as Trustee.(9)
10.61 --Supplemental Indenture dated as of December 1, 1997 between Shelter
Distribution, L.P., a Subsidiary of Kevco, Inc., and United States
Trust Company of New York, as Trustee.(9)
10.62 --Supplemental Indenture dated as of December 1, 1997 between DCM, Inc.,
a Subsidiary of Kevco, Inc., and United States Trust Company of New
York, as Trustee.(9)
10.63 --Supplemental Indenture dated as of December 1, 1997 between Duo-Form
of Michigan, Inc., a Subsidiary of Kevco, Inc., and United States Trust
Company of New York, as Trustee.(9)
10.64 --Supplemental Indenture dated as of December 1, 1997 between Design
Components, Inc., a Subsidiary of Kevco, Inc., and United States Trust
Company of New York, as Trustee.(9)
10.65 --Supplemental Indenture dated as of December 1, 1997 between Shelter
Components of Indiana, Inc., a Subsidiary of Kevco, Inc., and United
States Trust Company of New York, as Trustee.(9)
10.66 --Supplemental Indenture dated as of December 1, 1997 between BPR
Holdings, Inc., a Subsidiary of Kevco, Inc., and United States Trust
Company of New York, as Trustee.(9)
11.1 --Computation of Earnings per Common Share.(3)
12.1 --Computation of Ratio of Earnings to Fixed Charges.(3)
21.1 --Subsidiaries.(9)
23.1 --Consent of Coopers & Lybrand L.L.P.(9)
23.2 --Consent of Rylander, Clay & Opitz, L.L.P.(9)
23.3 --Consent of Price Waterhouse LLP(9)
23.4 --Consent of Coopers & Lybrand L.L.P.(9)
23.5 --Consent of Dougherty McKinnon & Luby(9)
23.6 --Consent of Coopers & Lybrand L.L.P.(9)
23.7 --Consent of Rumsey & Huckaby, P.C.(9)
</TABLE>
II-5
<PAGE>
<TABLE>
<C> <S>
23.8 --Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1 hereto).
24.1 --Power of Attorney.(3)
25.1 --Statement of Eligibility of Trustee(9)
99.1 --Form of Letter of Transmittal.(9)
99.2 --Form of Instructions to Holder and/or Book-Entry Transfer Facility
Participant.(9)
99.3 --Form of Notice of Guaranteed Delivery.(9)
</TABLE>
- ---------------------
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-11173) and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated February 27, 1997, and incorporated herein by reference.
(3) Previously filed herewith.
(4) Previously filed as an exhibit to the Company's registration statement on
Form S-8 (No. 333-19959), and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q, for the quarter ended March 31, 1997 and incorporated herein by
reference.
(6) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1 filed October 28, 1997, and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1/A, filed December 12, 1997, and incorporated herein by
reference.
(8) Schedules and similar attachments to this exhibit have not been filed
herewith, but the nature of their contents is described in the body of
this exhibit. The Company agrees to furnish a copy of any such omitted
schedules and attachments to the Securities and Exchange Commission upon
request.
(9) Filed herewith.
ITEM 22. UNDERTAKINGS.
Each of the undersigned to co-registrants hereby undertakes:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 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.
(2) 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.
(3) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the registrant pursuant to
the provision described under Item 20 or otherwise, the registrant has 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 for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or 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 Securities Act and will be governed by
the final adjudication of such issue.
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
KEVCO, Inc.
By: /s/ Ellis L. McKinley, Jr.*
----------------------------------
Ellis L. McKinley, Jr.
Vice President and Chief Financial
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board, Chief
/s/ Jerry E. Kimmel* Executive Officer, President and
- ------------------------------------- Director (Principal Executive
JERRY E. KIMMEL Officer)
Executive Vice President, Chief
/s/ Clyde A. Reed, Jr.* Operating Officer and Director
- -------------------------------------
CLYDE A. REED, JR.
Vice President, Chief Financial
/s/ Ellis L. McKinley, Jr.* Officer, Treasurer and Director
- ------------------------------------- (Principal Financial Officer and
ELLIS L. MCKINLEY, JR. Principal Accounting Officer)
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
Vice President, Corporate
/s/ Gregory G. Kimmel* Development and Director
- -------------------------------------
GREGORY G. KIMMEL
Director
/s/ Martin C. Bowen*
- -------------------------------------
MARTIN C. BOWEN
Director
/s/ Richard Nevins*
- -------------------------------------
RICHARD NEVINS
II-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
KEVCO DELAWARE, INC.
By: /s/ Jerry E. Kimmel*
---------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board, President,
/s/ Jerry E. Kimmel* Chief Executive Officer and
- ------------------------------------- Director (Principal Executive
JERRY E. KIMMEL Officer)
Vice President, Treasurer and Chief
/s/ Ellis L. McKinley, Jr.* Financial Officer (Principal
- ------------------------------------- Financial and Accounting Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
SUNBELT WOOD COMPONENTS, INC.
By: /s/ Jerry E. Kimmel*
--------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
BOWEN SUPPLY, INC.
By: /s/ Jerry E. Kimmel*
--------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
ENCORE INDUSTRIES, INC.
By: /s/ Jerry E. Kimmel*
--------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
SHELTER COMPONENTS CORPORATION
By: /s/ Jerry E. Kimmel*
--------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
BPR HOLDINGS, INC.
By: /s/ Jerry E. Kimmel*
---------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
SHELTER COMPONENTS OF INDIANA, INC.
By: /s/ Jerry E. Kimmel*
---------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
DESIGN COMPONENTS, INC.
By: /s/ Jerry E. Kimmel*
--------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-15
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
DUO-FORM OF MICHIGAN, INC.
By: /s/ Jerry E. Kimmel*
--------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-16
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
DCM, INC.
By: /s/ Jerry E. Kimmel*
--------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-17
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE CO-
REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF FORT
WORTH, STATE OF TEXAS, ON JANUARY 23, 1998.
SHELTER DISTRIBUTION, L.P.
By BPR Holdings, Inc. (General
Partner)
By: /s/ Jerry E. Kimmel*
--------------------------------
Chairman and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT AND POWER OF ATTORNEY HAVE BEEN SIGNED BY THE FOLLOWING
PERSONS ON JANUARY 23, 1998 IN THE CAPACITIES INDICATED:
SIGNATURE CAPACITY
Chairman of the Board and Director
/s/ Jerry E. Kimmel* (Principal Executive Officer)
- -------------------------------------
JERRY E. KIMMEL
Vice President and Treasurer
/s/ Ellis L. McKinley, Jr.* (Principal Financial and Accounting
- ------------------------------------- Officer)
ELLIS L. MCKINLEY, JR.
Secretary and Director
/s/ Richard S. Tucker*
- -------------------------------------
RICHARD S. TUCKER
II-18
<PAGE>
SIGNATURE OF ATTORNEY IN FACT
RELATING TO EACH CO-REGISTRANT
*By: /s/ Ellis L. McKinley, Jr.
---------------------------
ELLIS L. MCKINLEY, JR.,
INDIVIDUALLY AND AS
ATTORNEY IN FACT
II-19
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
2.1 --Merger Agreement, dated June 6, 1995 by and among Kevco, Inc. and
Service Supply Systems, Inc., joined by a wholly-owned subsidiary of
Kevco, Inc.(1)
2.2 --Form of Plan and Agreement of Merger between Kevco Texas, Inc. and
Kevco Delaware, Inc.(1)
2.3 --Form of Bill of Sale and General Assignment from Kevco Delaware,
Inc., as Assignor, to Sunbelt Wood Components, Inc., as Assignee.(1)
2.4 --Form of Assumption Agreement between Kevco Delaware, Inc. and
Sunbelt Wood Components, Inc.(1)
2.5 --Asset Purchase Agreement by and among Consolidated Forest Products,
Inc., Consolidated Forest Products, L.L.C. and the members of
Consolidated Forest Products, L.L.C.(2)
2.6 --Stock Purchase Agreement by and among Kevco Delaware, Inc. and the
shareholders of Bowen Supply, Inc.(2)
2.7 --Agreement and Plan of Merger, dated as of October 21, 1997, between
Kevco, Inc., SCC Acquisition Corp., and Shelter Components
Corporation.(6)
3.1 --Articles of Incorporation of Kevco, Inc., as amended.(1)
3.2 --Bylaws of Kevco, Inc.(1)
3.3 --Certificate of Incorporation of Kevco Delaware, Inc.(9)
3.4 --Bylaws of Kevco Delaware, Inc.(9)
3.5 --Certificate of Incorporation of Sunbelt Wood Components, Inc.(9)
3.6 --Bylaws of Sunbelt Wood Components, Inc.(9)
3.7 --Articles of Incorporation of Bowen Supply, Inc. and amendments.(9)
3.8 --Bylaws of Bowen Supply, Inc.(9)
3.9 --Articles of Incorporation of Encore Industries, Inc.(9)
3.10 --Bylaws of Encore Industries, Inc.(9)
3.11 --Certificate of Limited Partnership of Shelter Distribution, L.P.(9)
3.12 --Limited Partnership Agreement of Shelter Distribution, L.P.(9)
3.13 --Article of Restatement of the Articles of Incorporation of Shelter
Newco, Inc. n/k/a Shelter Components Corporation.(9)
3.14 --Bylaws of Shelter Components Corporation.(9)
3.15 --Articles of Incorporation of BPR Holdings, Inc.(9)
3.16 --Bylaws of BPR Holdings, Inc.(9)
3.17 --Restated Articles of Incorporation of SC Acquisition Corp. n/k/a
Shelter Components of Indiana, Inc. and amendment(9)
3.18 --Bylaws of SC Acquisition Corp. n/k/a Shelter Components of Indiana,
Inc.(9)
3.19 --Articles of Incorporation of MP Acquisition Corp. n/k/a Design
Components, Inc. and amendments(9)
3.20 --Bylaws of Design Components, Inc.(9)
3.21 --Articles of Incorporation of Duo-Form of Michigan, Inc. and
amendments(9)
3.22 --Bylaws of Duo-Form of Michigan, Inc.(9)
3.23 --Restated Charter of Danube Carpet Mills, Inc. n/k/a DCM, Inc. and
amendments.(9)
3.24 --Bylaws of Danube Carpet Mills, Inc. n/k/a DCM, Inc.(9)
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.1 --Form of certificate evidencing ownership of the Common Stock of
Kevco, Inc.(1)
5.1 --Opinion of Jackson Walker L.L.P.(9)
10.1 --Amendment No. 2 to 1995 Stock Option Plan (Amended and Restated 1995
Stock Option Plan of Kevco, Inc.) and Supplementary Letter.(1)
10.2 --1996 Stock Option Plan of Kevco, Inc., as amended, and Supplementary
Letter.(1)
10.3 --Form of Amended and Restated Employment Agreement between Gerald E.
Kimmel and Kevco, Inc., joined therein by Kevco Delaware, Inc. and
Sunbelt Wood Components, Inc.(1)
10.4 --Employment Agreement between C. Lee Denham and Kevco, Inc. dated
June 30, 1995.(1)
10.5 --Lease between K & E Land & Leasing and Kevco, Inc. dated December 1,
1977.(1)
10.6 --Amendment No. 1 to Lease, by and between K & E Land & Leasing and
Kevco, Inc. dated March , 1982.(1)
10.7 --Amendment No. 2 to Lease, by and between K & E Land & Leasing and
Kevco, Inc. dated May 30, 1983.(1)
10.8 --Amendment No. 3 to Lease, by and between K & E Land & Leasing and
Kevco, Inc. dated February 1, 1993.(1)
10.9 --Lease dated April 1, 1980 between City of Newton, Kansas and K & E
Land & Leasing.(1)
10.10 --Sublease and Lease Guarantee Agreement dated April 1, 1980 between
K & E Land & Leasing and Kevco, Inc.(1)
10.11 --Amendment No. 1 to Sublease and Lease Guaranty Agreement by and
between K & E Land & Leasing and Kevco, Inc. dated May 30, 1983.(1)
10.12 --Lease Agreement dated October 12, 1987 between 1741 Conant
Partnership & Kevco Inc.(1)
10.13 --Equipment Lease Agreement dated January 1, 1991 between K & E Land &
Leasing and Kevco, Inc.(1)
10.14 --Amendment No. 1 to Equipment Lease Agreement between K & E Land &
Leasing and Kevco, Inc. dated February 12, 1993.(1)
10.15 --Amendment No. 2 to Equipment Lease Agreement between K & E Land &
Leasing and Kevco, Inc. dated October 26, 1993.(1)
10.16 --Amendment No. 3 to Equipment Lease Agreement between K & E Land &
Leasing and Kevco, Inc. dated May 23, 1994.(1)
10.17 --Deferred Compensation Agreement between Kevco, Inc. and Clyde A.
Reed, Jr. dated May 24, 1977.(1)
10.18 --Amendment No. 1 to Deferred Compensation Agreement dated May ,
1980.(1)
10.19 --Amendment No. 2 to Deferred Compensation Agreement dated March 10,
1992.(1)
10.20 --Amended and Restated Health and Accident Plan of Kevco, Inc.(1)
10.21 --Investment and Tax Advice Plan of Kevco, Inc.(1)
10.22 --Credit Agreement among Kevco, Inc., certain Lenders and NationsBank
of Texas, N.A., as Administrative Lender dated June 30, 1995.(1)
10.23 --First Amendment to Credit Agreement, dated as of September 1, 1995,
among Kevco, Inc., the banks listed on the signature pages thereof,
and NationsBank of Texas, N.A.(1)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.24 --Second Amendment to Credit Agreement, dated as of November 29, 1995,
among Kevco, Inc., the banks listed on the signature pages thereof,
and NationsBank of Texas, N.A.(1)
10.25 --Revolving Credit Note of Kevco, Inc. to NationsBank of Texas, N.A.
dated September 1, 1995 in the amount of $14,285,714.28.(1)
10.26 --Term Loan Note of Kevco, Inc. to NationsBank of Texas, N.A. dated
September 1, 1995 in the amount of $10,714,285.72.(1)
10.27 --Revolving Credit Note of Kevco, Inc. to The Sumitomo Bank, Ltd.
dated February 2, 1996 in the amount of $5,714,285.72.(1)
10.28 --Term Loan Note of Kevco, Inc. to The Sumitomo Bank, Ltd. dated
February 2, 1996 in the amount of $4,285,714.28.(1)
10.29 --PaineWebber Standardized 401(K) Profit-Sharing Adoption Agreement
(No. 005) (To be used with Basic Plan Document No. 03 Only) for
Kevco, Inc. dated May 24, 1996 and PaineWebber Defined Contribution
Plan.(1)
10.30 --Promissory Note of Gerald E. Kimmel to Kevco, Inc. dated October 26,
1993 in the amount of $5,000,000.(1)
10.31 --Amendment No. 4 to Lease dated December 1, 1977 by and between K&E
Land & Leasing and Kevco, Inc. dated October 26, 1993.(1)
10.32 --Assignment and Acceptance dated February 2, 1996 between The Daiwa
Bank, Limited and The Sumitomo Bank, Ltd., Chicago Branch.(1)
10.33 --Form of Tax Indemnification and Distribution Agreement.(1)
10.34 --Form of Promissory Note made by Kevco Texas, Inc. in the amount of
$3,733,000 (the Prior S Corporation Earnings Note).(1)
10.35 --Form of Promissory Note made by Kevco Texas, Inc. (the Future S
Corporation Earnings Note).(1)
10.36 --Form of Assignment of $5,000,000 Note made by Kevco, Inc. (n/k/a
Kevco Delaware, Inc.).(1)
10.37 --Form of Adoption Agreement by Kevco, Inc. and Kevco Texas, Inc. (re:
1995 Stock Option Plan and 1996 Stock Option Plan).(1)
10.38 --Amendment No. 1 dated September 21, 1988, to Lease Agreement by 1741
Conant Partnership as lessor and Kevco, Inc. (n/k/a Kevco Delaware,
Inc.).(1)
10.39 --Letter Agreement dated June 22, 1982, between Kevco, Inc. (n/k/a
Kevco Delaware, Inc.) and K&E Land & Leasing (re: lease rentals).(1)
10.40 --Letter Agreement dated October 1, 1996 by Kevco, Inc., K&E Land &
Leasing, and 1741 Conant Partnership (re: lease rental).(1)
10.41 --Form of Parent Pledge Agreement.(1)
10.42 --Consent and Waiver, dated as of October 21, 1996, by and among
NationsBank of Texas, N.A., The Sumitomo Bank, Ltd. and Kevco Texas,
Inc.(1)
10.43 --Amended and Restated Credit Agreement, dated as of February 27,
1997, by and among Kevco Delaware, Inc., certain lenders and
NationsBank of Texas, N.A.(5)
10.44 --Amendment No. 2 to 1995 Stock Option Plan (Amended and Restated 1995
Stock Option Plan of Kevco, Inc.) and Supplementary Letter. (4)
10.45 --Senior Commitment Letter dated October 27, 1997 from NationsBank of
Texas, N.A. and NationsBanc Montgomery Securities, Inc.(6)
10.46 --First Amendment to Amended and Restated Credit Agreement dated as of
November 25, 1997 between Kevco Delaware, Inc., certain lenders and
NationsBank of Texas, N.A.(7)
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.47 --Second Amended and Restated Credit Agreement dated December 1, 1997
between Kevco, Inc., certain lenders and NationsBank of Texas,
N.A.(7)(8)
10.48 --Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
NationsBank of Texas, N.A. in the original principal amount of
$11,666,666.66.(7)
10.49 --Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
National City Bank of Kentucky in the original principal amount of
$8,166,666.67.(7)
10.50 --Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
Guaranty Federal Bank, F.S.B. in the original principal amount of
$7,000,000.00.(7)
10.51 --Revolving Credit Note dated December 1, 1997 between Kevco, Inc. and
The Sumitomo Bank, Limited in the original principal amount of
$8,166,666.67.(7)
10.52 --Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc.
and NationsBank of Texas, N.A. in the original principal amount of
$13,333,333.34.(7)
10.53 --Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc.
and National City Bank Kentucky in the original principal amount of
$9,333,333.33.(7)
10.54 --Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc.
and Guaranty Federal Bank, F.S.B. in the original principal amount of
$8,000,000.00.(7)
10.55 --Facility A Term Loan Note dated December 1, 1997 between Kevco, Inc.
and The Sumitomo Bank, Limited in the original principal amount of
$9,333,333.33.(7)
10.56 --Facility B Term Loan Note dated December 1, 1997 between Kevco, Inc.
and NationsBank of Texas, N.A. in the original principal amount of
$50,000,000.00.(7)
10.57 --Security Agreement dated December 1, 1997 between Kevco, Inc., and
NationsBank of Texas, N.A. as Administrative Agent.(7)
10.58 --Registration Rights Agreement dated December 1, 1997 by and among
Kevco, Inc., as Issuer, the Subsidiaries of Kevco, Inc. identified
therein, as Subsidiary Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation and NationsBanc Montgomery Securities, Inc.,
as Initial Purchasers.(3)
10.59 --Indenture dated December 1, 1997 among Kevco, Inc., SCC Acquisition
Corp., Kevco Delaware, Inc., Sunbelt Wood Components, Inc.,
Consolidated Forest Products, Inc., Bowen Supply, Inc. and Encore
Industries, Inc., as Subsidiary Guarantors and United States Trust
Company of New York, as Trustee.(3)
10.60 --Supplemental Indenture between Shelter Components Corporation, a
Subsidiary of Kevco, Inc., and United States Trust Company of New
York, as Trustee.(9)
10.61 --Supplemental Indenture dated as of December 1, 1997 between Shelter
Distribution, L.P., a Subsidiary of Kevco, Inc., and United States
Trust Company of New York, as Trustee.(9)
10.62 --Supplemental Indenture dated as of December 1, 1997 between DCM,
Inc., a Subsidiary of Kevco, Inc., and United States Trust Company of
New York, as Trustee.(9)
10.63 --Supplemental Indenture dated as of December 1, 1997 between Duo-Form
of Michigan, Inc., a Subsidiary of Kevco, Inc., and United States
Trust Company of New York, as Trustee.(9)
10.64 --Supplemental Indenture dated as of December 1, 1997 between Design
Components, Inc., a Subsidiary of Kevco, Inc., and United States
Trust Company of New York, as Trustee.(9)
10.65 --Supplemental Indenture dated as of December 1, 1997 between Shelter
Components of Indiana, Inc., a Subsidiary of Kevco, Inc., and United
States Trust Company of New York, as Trustee.(9)
10.66 --Supplemental Indenture dated as of December 1, 1997 between BPR
Holdings, Inc., a Subsidiary of Kevco, Inc., and United States Trust
Company of New York as Trustee.(9)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
11.1 --Computation of Earnings per Common Share.(3)
12.1 --Computation of Ratio of Earnings to Fixed Charges.(3)
21.1 --Subsidiaries.(9)
23.1 --Consent of Coopers & Lybrand L.L.P.(9)
23.2 --Consent of Rylander, Clay & Opitz, L.L.P.(9)
23.3 --Consent of Price Waterhouse LLP(9)
23.4 --Consent of Coopers & Lybrand L.L.P.(9)
23.5 --Consent of Dougherty McKinnon & Luby(9)
23.6 --Consent of Coopers & Lybrand L.L.P.(9)
23.7 --Consent of Rumsey & Huckaby, P.C.(9)
23.8 --Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1 hereto).
24.1 --Power of Attorney.(3)
25.1 --Statement of Eligibility of Trustee(9)
99.1 --Form of Letter of Transmittal.(9)
99.2 --Form of Instructions to Holder and/or Book-Entry Transfer Facility
Participant.(9)
99.3 --Form of Notice of Guaranteed Delivery.(9)
</TABLE>
- ---------------------
(1) Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-11173) and incorporated herein by reference.
(2) Previously filed as an exhibit to the Company's Current Report on Form 8-K
dated February 27, 1997, and incorporated herein by reference.
(3) Previously filed herewith.
(4) Previously filed as an exhibit to the Company's registration statement on
Form S-8 (No. 333-19959), and incorporated herein by reference.
(5) Previously filed as an exhibit to the Company's Quarterly Report on Form
10-Q, for the quarter ended March 31, 1997 and incorporated herein by
reference.
(6) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1 filed October 28, 1997, and incorporated herein by
reference.
(7) Previously filed as an exhibit to the Company's Tender Offer Statement on
Schedule 14D-1/A, filed December 12, 1997, and incorporated herein by
reference.
(8) Schedules and similar attachments to this exhibit have not been filed
herewith, but the nature of their contents is described in the body of
this exhibit. The Company agrees to furnish a copy of any such omitted
schedules and attachments to the Securities and Exchange Commission upon
request.
(9) Filed herewith.
5
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
KEVCO DELAWARE, INC.
ARTICLE ONE
The name of the corporation is KEVCO DELAWARE, INC.
ARTICLE TWO
The corporation will have perpetual existence.
ARTICLE THREE
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
ARTICLE FOUR
The aggregate number of shares of capital stock that the corporation will
have authority to issue is 1,000 shares of common stock, having a par value of
$.01 per share.
ARTICLE FIVE
No stockholder of the corporation will, solely by reason of holding shares
of any class, have any preemptive or preferential right to purchase or subscribe
for any shares of the corporation, now or hereafter to be authorized, or any
notes, debentures, bonds or other securities convertible into or carrying
warrants, rights or options to purchase shares of any class, now or hereafter to
be authorized, whether or not the issuance of any such shares or such notes,
debentures, bonds or other securities would adversely affect the dividend,
voting or any other rights of such stockholder. The board of directors may
authorize the issuance of, and the corporation may issue, shares of any class of
the corporation, or any notes, debentures, bonds or other securities convertible
into or carrying warrants, rights
<PAGE>
or options to purchase any such shares, without offering any shares of any class
to the existing holders of any class of stock of the corporation.
ARTICLE SIX
At all meetings of stockholders, a quorum will be present if the holders of
a majority of the shares entitled to vote at the meeting are represented at the
meeting in person or by proxy.
ARTICLE SEVEN
Stockholders of the corporation will not have the right of cumulative
voting for the election of directors or for any other purpose.
ARTICLE EIGHT
The board of directors is expressly authorized to alter, amend or repeal
the bylaws of the corporation and to adopt new bylaws.
ARTICLE NINE
(a) (i) The corporation shall, to the fullest extent provided by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended, indemnify each of its directors from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such law;
(ii) The corporation may, to the fullest extent permitted by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended, indemnify any officer, employee or agent of the corporation, from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by such law.
(iii) Such indemnification may be provided pursuant to any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his director or officer capacity and as to action in another
capacity while holding such office, will continue as to a person who has ceased
to be a director, officer, employee or agent, and will inure to the benefit of
the heirs, executors and administrators of such a person.
<PAGE>
(b) To the extent indemnified under the preceding paragraph (a), if a
claim is not paid in full by the corporation within 30 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 will be entitled
to be paid also the expense of prosecuting such claim. It will 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 that make it
permissible under the laws of the State of Delaware for the corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense will 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 laws 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, will be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
ARTICLE TEN
To the fullest extent permitted by the laws of the State of Delaware as the
same exist or may hereafter be amended, a director of the corporation will not
be liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director. Any repeal or modification of this Article will
not increase the personal liability of any director of the corporation for any
act or occurrence taking place before such repeal or modification, or adversely
affect any right or protection of a director of the corporation existing at the
time of such repeal or modification. The provisions of this Article Ten shall
not be deemed to limit or preclude indemnification of a director by the
corporation for any liability of a director that has not been eliminated by the
provisions of this Article Ten.
ARTICLE ELEVEN
<PAGE>
The address of the corporation's initial registered office is 1209 Orange
Street, Wilmington, Delaware 19801, County of New Castle, and the name of its
initial registered agent at that address is The Corporation Trust Company.
ARTICLE TWELVE
The number of directors constituting the initial board of directors of the
corporation is two and the names and mailing addresses of such persons, who are
to serve as directors until the first annual meeting of the stockholders or
until their successors are elected and qualified, are:
Jerry E. Kimmel 1300 So. University Drive, Suite 200
Fort Worth, Texas 76107
Richard S. Tucker 777 Main Street, Suite 1800
Fort Worth, Texas 76102-5306
Hereafter, the number of directors will be determined in accordance with
the bylaws of the corporation.
ARTICLE THIRTEEN
The powers of the incorporator will terminate upon the filing of this
Certificate. The name and mailing address of the incorporator is:
Richard S. Tucker 777 Main Street, Suite 1800
Fort Worth, Texas 76102-5306
EXECUTED on this the 8th day of October, 1996.
/s/ Richard S. Tucker
-----------------------------------
Richard S. Tucker
<PAGE>
EXHIBIT 3.4
BYLAWS
KEVCO DELAWARE, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - OFFICES
Section 1. Registered Office.......................... 1
Section 2. Other Offices.............................. 1
ARTICLE II - STOCKHOLDERS
Section 1. Place of Meetings.......................... 1
Section 2. Annual Meeting............................. 1
Section 3. List of Stockholders....................... 1
Section 4. Special Meetings........................... 2
Section 5. Notice..................................... 2
Section 6. Quorum..................................... 2
Section 7. Voting..................................... 2
Section 8. Method of Voting........................... 3
Section 9. Record Date................................ 3
Section 10. Action by Consent.......................... 3
ARTICLE III - BOARD OF DIRECTORS
Section 1. Management................................. 4
Section 2. Qualification; Election; Term.............. 4
Section 3. Number..................................... 4
Section 4. Removal.................................... 4
Section 5. Vacancies.................................. 4
Section 6. Place of Meetings.......................... 4
Section 7. Annual Meeting............................. 4
Section 8. Regular Meetings........................... 5
Section 9. Special Meetings........................... 5
Section 10. Quorum..................................... 5
Section 11. Interested Directors....................... 5
Section 12. Committees................................. 5
Section 13. Action by Consent.......................... 6
Section 14. Compensation of Directors.................. 6
ARTICLE IV - NOTICE
Section 1. Form of Notice............................. 6
Section 2. Waiver..................................... 6
ARTICLE V - OFFICERS AND AGENTS
Section 1. In General................................. 6
Section 2. Election................................... 7
Section 3. Other Officers and Agents.................. 7
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Section 4. Compensation................................. 7
Section 5. Term of Office and Removal................... 7
Section 6. Employment and Other Contracts............... 7
Section 7. Chairman of the Board of Directors........... 7
Section 8. President.................................... 7
Section 9. Vice Presidents.............................. 8
Section 10. Secretary.................................... 8
Section 11. Assistant Secretaries........................ 8
Section 12. Treasurer.................................... 8
Section 13. Assistant Treasurers......................... 8
Section 14. Bonding...................................... 8
ARTICLE VI - CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates......................... 9
Section 2. Lost Certificates............................ 9
Section 3. Transfer of Shares........................... 9
Section 4. Registered Stockholders...................... 10
ARTICLE VII - GENERAL PROVISIONS
Section 1. Dividends.................................... 10
Section 2. Reserves..................................... 10
Section 3. Telephone and Similar Meetings............... 10
Section 4. Books and Records............................ 10
Section 5. Fiscal Year.................................. 11
Section 6. Seal......................................... 11
Section 7. Indemnification.............................. 11
Section 8. Expenses..................................... 12
Section 9. Insurance.................................... 12
Section 10. Resignation.................................. 12
Section 11. Amendment of Bylaws.......................... 12
Section 12. Invalid Provisions........................... 12
Section 13. Relation to the Certificate of Incorporation. 12
</TABLE>
<PAGE>
BYLAWS
OF
KEVCO DELAWARE, INC.
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office and registered
--------- -----------------
agent of KEVCO DELAWARE, INC. (the "Corporation") will be as from time to time
set forth in the Corporation's Certificate of Incorporation or in any
certificate filed with the Secretary of State of the State of Delaware, and the
appropriate county Recorder or Recorders, as the case may be, to amend such
information.
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
STOCKHOLDERS
------------
Section 1. Place of Meetings. All meetings of the stockholders for the
--------- -----------------
election of Directors will be held at such place, within or without the State of
Delaware, as may be fixed from time to time by the Board of Directors. Meetings
of stockholders for any other purpose may be held at such time and place, within
or without the State of Delaware, as may be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of the stockholders will
--------- --------------
be held at such time as may be determined by the Board of Directors, at which
meeting the stockholders will elect a Board of Directors, and transact such
other business as may properly be brought before the meeting.
Section 3. List of Stockholders. At least ten days before each meeting
--------- --------------------
of stockholders, a complete list of the stockholders entitled to vote at said
meeting, arranged in alphabetical order, with the address of and the number of
voting shares registered in the name of each, will be prepared by the officer or
agent having charge of the stock transfer books. Such list will 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 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
will be specified in the notice of the meeting, or if not so specified at the
place where the meeting is to be held. Such list will be produced and kept open
at the time and place of the meeting during the whole time thereof, and will be
subject to the inspection of any stockholder who may be present.
<PAGE>
Section 4. Special Meetings. Special meetings of the stockholders, for
--------- ----------------
any purpose or purposes, unless otherwise prescribed by law, the Certificate of
Incorporation or these Bylaws, may be called by the Chairman of the Board, the
President or the Board of Directors. Business transacted at all special
meetings will be confined to the purposes stated in the notice of the meeting
unless all stockholders entitled to vote are present and consent.
Section 5. Notice. Written or printed notice stating the place, day and
--------- ------
hour of any meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, will be delivered not less
than ten nor more than sixty days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board, the
President, the Secretary, or the officer or person calling the meeting, to each
stockholder of record entitled to vote at the meeting. If mailed, such notice
will be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the Corporation, with postage thereon prepaid.
Section 6. Quorum. At all meetings of the stockholders, the presence in
--------- ------
person or by proxy of the holders of a majority of the shares issued and
outstanding and entitled to vote will be necessary and sufficient to constitute
a quorum for the transaction of business except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws. If, however, such quorum is
not present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, will have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present or represented. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting will
be given to each stockholder of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
notified.
Section 7. Voting. When a quorum is present at any meeting of the
--------- ------
Corporation's stockholders, the vote of the holders of a majority of the shares
entitled to vote on, and voted for or against, any matter will decide any
questions brought before such meeting, unless the question is one upon which, by
express provision of law, the Certificate of Incorporation or these Bylaws, a
different vote is required, in which case such express provision will govern and
control the decision of such question. The stockholders present in person or by
proxy at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
Section 8. Method of Voting. Each outstanding share of the
--------- ----------------
Corporation's capital stock, regardless of class, will be entitled to one vote
on each matter submitted to a vote at a meeting of stockholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the Certificate of Incorporation, as amended from time to time. At
any meeting of the stockholders, every stockholder having the right to vote will
be entitled to vote in person, or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to such meeting, unless such instrument provides
<PAGE>
for a longer period. Each proxy will be revocable unless expressly provided
therein to be 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. Such
proxy will be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Voting on any question or in any election, other than for
directors, may be by voice vote or show of hands unless the presiding officer
orders, or any stockholder demands, that voting be by written ballot.
Section 9. Record Date. The Board of Directors may fix in advance a
--------- -----------
record date for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, which record date will not precede the
date upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date will not be less than ten nor more than sixty
days prior to such meeting. In the absence of any action by the Board of
Directors, the close of business on the date next preceding the day on which the
notice is given will be the record date, or, if notice is waived, the close of
business on the day next preceding the day on which the meeting is held will be
the record date.
Section 10. Action by Consent. Any action required or permitted by law,
---------- -----------------
the Certificate of Incorporation or these Bylaws to be taken at a meeting of the
stockholders of the Corporation may be taken without a meeting if a consent or
consents in writing, setting forth the action so taken, is 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 will be delivered to the
Corporation by delivery to its registered office in Delaware, its principal
place of business or an officer or agent of the Corporation having custody of
the minute book.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Management. The business and affairs of the Corporation will
--------- ----------
be managed by or under the direction of its Board of Directors who may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law, by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 2. Qualification; Election; Term. None of the Directors need be
--------- -----------------------------
a stockholder of the Corporation or a resident of the State of Delaware. The
Directors will be elected by written ballot, by plurality vote at the annual
meeting of the stockholders, except as hereinafter provided, and each Director
elected will hold office until whichever of the following occurs first: his
successor is elected and qualified, his resignation, his removal from office by
the stockholders or his death.
<PAGE>
Section 3. Number. The number of Directors of the Corporation will be
--------- ------
at least two (2) and not more than four (4). The number of Directors authorized
will be fixed as the Board of Directors may from time to time designate, or if
no such designation has been made, the number of Directors will be the same as
the number of members of the initial Board of Directors as set forth in the
Certificate of Incorporation.
Section 4. Removal. Any Director or the entire Board of Directors may
--------- -------
be removed either for or without cause, at any meeting of stockholders by the
holders of a majority of the shares of the corporation entitled to vote at an
election of Directors; provided that notice of the intention to act upon such
matter has been given in the notice calling such meeting.
Section 5. Vacancies. Newly created directorships resulting from any
--------- ---------
increase in the authorized number of Directors and any vacancies occurring in
the Board of Directors caused by death, resignation, retirement,
disqualification or removal from office of any Directors or otherwise, may be
filled by the vote of a majority of the Directors then in office, though less
than a quorum, or a successor or successors may be chosen at a special meeting
of the stockholders called for that purpose, and each successor Director so
chosen will hold office until the next election of the class for which such
Director has been chosen or until whichever of the following occurs first: his
successor is elected and qualified, his resignation, his removal from office by
the stockholders or his death.
Section 6. Place of Meetings. Meetings of the Board of Directors,
--------- -----------------
regular or special, may be held at such place within or without the State of
Delaware as may be fixed from time to time by the Board of Directors.
Section 7. Annual Meeting. The first meeting of each newly elected
--------- --------------
Board of Directors will be held without further notice immediately following the
annual meeting of stockholders and at the same place, unless by unanimous
consent, the Directors then elected and serving change such time or place.
Section 8. Regular Meetings. Regular meetings of the Board of Directors
--------- ----------------
may be held without notice at such time and place as is from time to time
determined by resolution of the Board of Directors.
Section 9. Special Meetings. Special meetings of the Board of Directors
--------- ----------------
may be called by the Chairman of the Board or the President on oral or written
notice to each Director, given either personally, by telephone, by telegram or
by mail; special meetings will be called by the Chairman of the Board, President
or Secretary in like manner and on like notice on the written request of at
least two Directors. The purpose or purposes of any special meeting will be
specified in the notice relating thereto.
Section 10. Quorum. At all meetings of the Board of Directors the
---------- ------
presence of a majority of the number of Directors fixed by these Bylaws will be
necessary and sufficient to constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority
<PAGE>
of the Directors present at any meeting at which there is a quorum will be the
act of the Board of Directors, except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these Bylaws. If a quorum is not
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 is present.
Section 11. Interested Directors. No contract or transaction between the
---------- --------------------
Corporation and one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of the Corporation's Directors or officers are
directors or officers or have a financial interest, will be void or voidable
solely for this reason, or solely because the Director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
that authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if: (i) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested Directors, even though the
disinterested Directors be less than a quorum, (ii) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee that authorizes the contract or transaction.
Section 12. Committees. The Board of Directors may, by resolution passed
---------- ----------
by a majority of the entire Board, designate committees, each committee to
consist of one or more Directors of the Corporation, which committees will have
such power and authority and will perform such functions as may be provided in
such resolution. Such committee or committees will have such name or names as
may be designated by the Board and will keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
Section 13. Action by Consent. Any action required or permitted to be
---------- -----------------
taken at any meeting of the Board of Directors or any committee of the Board of
Directors may be taken without such a meeting if a consent or consents in
writing, setting forth the action so taken, is signed by all the members of the
Board of Directors or such committee, as the case may be.
Section 14. Compensation of Directors. Directors will receive such
---------- -------------------------
compensation for their services and reimbursement for their expenses as the
Board of Directors, by resolution, may establish; provided that nothing herein
contained will be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
<PAGE>
NOTICE
------
Section 1. Form of Notice. Whenever by law, the Certificate of
--------- --------------
Incorporation or of these Bylaws, notice is to be given to any Director or
stockholder, and no provision is made as to how such notice will be given, such
notice may be given in writing, by mail, postage prepaid, addressed to such
Director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail will be
deemed to be given at the time the same is deposited in the United States mails.
Section 2. Waiver. Whenever any notice is required to be given to any
--------- ------
stockholder or Director of the Corporation as required by law, the Certificate
of Incorporation or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated in such notice, will be equivalent to the giving of such notice.
Attendance of a stockholder or Director at a meeting will constitute a waiver of
notice of such meeting, except where such stockholder or Director attends for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened.
ARTICLE V
OFFICERS AND AGENTS
-------------------
Section 1. In General. The officers of the Corporation will be elected
--------- ----------
by the Board of Directors and will be a President, a Vice President, a Secretary
and a Treasurer. The Board of Directors may also elect a Chairman of the Board,
additional Vice Presidents, Assistant Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurers. Any two or more offices may be held by
the same person.
Section 2. Election. The Board of Directors, at its first meeting after
--------- --------
each annual meeting of stockholders, will elect the officers, none of whom need
be a member of the Board of Directors.
Section 3. Other Officers and Agents. The Board of Directors may also
--------- -------------------------
elect and appoint such other officers and agents as it deems necessary, who will
be elected and appointed for such terms and will exercise such powers and
perform such duties as may be determined from time to time by the Board.
Section 4. Compensation. The compensation of all officers and agents of
--------- ------------
the Corporation will be fixed by the Board of Directors or any committee of the
Board, if so authorized by the Board.
Section 5. Term of Office and Removal. Each officer of the Corporation
--------- --------------------------
will hold office until his death, his resignation or removal from office, or the
election and qualification of his successor, whichever occurs first. Any officer
or agent elected or appointed by the Board of Directors may be removed at any
time, for or without cause, by the affirmative vote of a
<PAGE>
majority of the entire Board of Directors, but such removal will not prejudice
the contract rights, if any, of the person so removed. If the office of any
officer becomes vacant for any reason, the vacancy may be filled by the Board of
Directors.
Section 6. Employment and Other Contracts. The Board of Directors may
--------- ------------------------------
authorize any officer or officers or agent or agents to enter into any contract
or execute and deliver any instrument in the name or on behalf of the
Corporation, and such authority may be general or confined to specific
instances. The Board of Directors may, when it believes the interest of the
Corporation will best be served thereby, authorize executive employment
contracts that will have terms no longer than ten years and contain such other
terms and conditions as the Board of Directors deems appropriate. Nothing
herein will limit the authority of the Board of Directors to authorize
employment contracts for shorter terms.
Section 7. Chairman of the Board of Directors. If the Board of
--------- ----------------------------------
Directors has elected a Chairman of the Board, he will preside at all meetings
of the stockholders and the Board of Directors. Except where by law the
signature of the President is required, the Chairman will have the same power as
the President to sign all certificates, contracts and other instruments of the
Corporation. During the absence or disability of the President, the Chairman
will exercise the powers and perform the duties of the President.
Section 8. President. The President will be the chief executive officer
--------- ---------
of the Corporation and, subject to the control of the Board of Directors, will
supervise and control all of the business and affairs of the Corporation. He
will, in the absence of the Chairman of the Board, preside at all meetings of
the stockholders and the Board of Directors. The President will have all powers
and perform all duties incident to the office of President and will have such
other powers and perform such other duties as the Board of Directors may from
time to time prescribe.
Section 9. Vice Presidents. Each Vice President will have the usual and
--------- ---------------
customary powers and perform the usual and customary duties incident to the
office of Vice President, and will have such other powers and perform such other
duties as the Board of Directors or any committee thereof may from time to time
prescribe or as the President may from time to time delegate to him. In the
absence or disability of the President and the Chairman of the Board, a Vice
President designated by the Board of Directors, or in the absence of such
designation the Vice Presidents in the order of their seniority in office, will
exercise the powers and perform the duties of the President.
Section 10. Secretary. The Secretary will attend all meetings of the
---------- ---------
stockholders and record all votes and the minutes of all proceedings in a book
to be kept for that purpose. The Secretary will perform like duties for the
Board of Directors and committees thereof when required. The Secretary will
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors. The Secretary will keep in safe
custody the seal of the Corporation. The Secretary will be under the supervision
of the President. The Secretary will have such other powers and perform such
other duties as the
<PAGE>
Board of Directors may from time to time prescribe or as the President may from
time to time delegate to him.
Section 11. Assistant Secretaries. The Assistant Secretaries in the
---------- ---------------------
order of their seniority in office, unless otherwise determined by the Board of
Directors, will, in the absence or disability of the Secretary, exercise the
powers and perform the duties of the Secretary. They will have such other
powers and perform such other duties as the Board of Directors may from time to
time prescribe or as the President may from time to time delegate to them.
Section 12. Treasurer. The Treasurer will have responsibility for the
---------- ---------
receipt and disbursement of all corporate funds and securities, will keep full
and accurate accounts of such receipts and disbursements, and will deposit or
cause to be deposited all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be designated by the
Board of Directors. The Treasurer will render to the Directors whenever they
may require it an account of the operating results and financial condition of
the Corporation, and will have such other powers and perform such other duties
as the Board of Directors may from time to time prescribe or as the President
may from time to time delegate to him.
Section 13. Assistant Treasurers. The Assistant Treasurers in the order
---------- --------------------
of their seniority in office, unless otherwise determined by the Board of
Directors, will, in the absence or disability of the Treasurer, exercise the
powers and perform the duties of the Treasurer. They will have such other
powers and perform such other duties as the Board of Directors may from time to
time prescribe or as the President may from time to time delegate to them.
Section 14. Bonding. The Corporation may secure a bond to protect the
---------- -------
Corporation from loss in the event of defalcation by any of the officers, which
bond may be in such form and amount and with such surety as the Board of
Directors may deem appropriate.
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
--------------------------------
Section 1. Form of Certificates. Certificates, in such form as may be
--------- --------------------
determined by the Board of Directors, representing shares to which stockholders
are entitled will be delivered to each stockholder. Such certificates will be
consecutively numbered and will be entered in the stock book of the Corporation
as they are issued. Each certificate will state on the face thereof the
holder's name, the number, class of shares, and the par value of such shares or
a statement that such shares are without par value. They will be signed by the
President or a Vice President and the Secretary or an Assistant Secretary, and
may be sealed with the seal of the Corporation or a facsimile thereof. If any
certificate is countersigned by a transfer agent, or an assistant transfer agent
or registered by a registrar, either of which is other than the Corporation or
an employee of the Corporation, the signatures of the Corporation's officers may
be facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on such certificate or
certificates, ceases to be such officer or officers of the Corporation, whether
because of death, resignation or otherwise, before such certificate or
<PAGE>
certificates have been delivered by the Corporation or its agents, such
certificate or certificates may nevertheless be adopted by the Corporation and
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.
Section 2. Lost Certificates. The Board of Directors may direct that a
--------- -----------------
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing such issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost or destroyed certificate, or his
legal representative, to advertise the same in such manner as it may require
and/or to give the Corporation a bond, in such form, in such sum, and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed. When a certificate has been lost, apparently destroyed
or wrongfully taken, and the holder of record fails to notify the Corporation
within a reasonable time after such holder has notice of it, and the Corporation
registers a transfer of the shares represented by the certificate before
receiving such notification, the holder of record is precluded from making any
claim against the Corporation for the transfer of a new certificate.
Section 3. Transfer of Shares. Shares of stock will be transferable
--------- ------------------
only on the books of the Corporation by the holder thereof in person or by such
holder's duly authorized attorney. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it will be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
Section 4. Registered Stockholders. The Corporation will be entitled to
--------- -----------------------
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, will 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 has express or other notice thereof, except as otherwise
provided by law.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the outstanding shares 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. Dividends may be declared and paid in cash, in property, or in shares
of the Corporation, subject to the provisions of the General Corporation Law of
the State of Delaware and the Certificate of Incorporation. The Board of
Directors may fix in advance a record date for the purpose of determining
stockholders entitled to receive
<PAGE>
payment of any dividend, such record date will not precede the date upon which
the resolution fixing the record date is adopted, and such record date will not
be more than sixty days prior to the payment date of such dividend. In the
absence of any action by the Board of Directors, the close of business on the
date upon which the Board of Directors adopts the resolution declaring such
dividend will be the record date.
Section 2. Reserves. There may be created by resolution of the Board of
--------- --------
Directors out of the surplus of the Corporation such reserve or reserves as the
Directors from time to time, in their discretion, deem proper to provide for
contingencies, or to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the Directors may deem
beneficial to the Corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created. Surplus of the Corporation to
the extent so reserved will not be available for the payment of dividends or
other distributions by the Corporation.
Section 3. Telephone and Similar Meetings. Stockholders, directors and
--------- ------------------------------
committee members may participate in and hold meetings by means of conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear each other. Participation in such a meeting will
constitute presence in person at the meeting, except where a person participates
in the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
Section 4. Books and Records. The Corporation will keep correct and
--------- -----------------
complete books and records of account and minutes of the proceedings of its
stockholders and Board of Directors, and will keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
Section 5. Fiscal Year. The fiscal year of the Corporation will be
--------- -----------
fixed by resolution of the Board of Directors.
Section 6. Seal. The Corporation may have a seal, and the seal may be
--------- ----
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. Any officer of the Corporation will have authority to
affix the seal to any document requiring it.
Section 7. Indemnification. The Corporation shall, to the fullest
--------- ---------------
extent provided by the Delaware General Corporation Law, as the same exists or
may hereafter be amended, indemnify each of its officers and directors from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by such law. The Corporation may, to the fullest extent permitted by
the Delaware Corporation Law, as the same exists or may hereafter be amended,
indemnify any employee or agent of the Corporation, from and against any and all
of the expenses, liabilities or other matters referred to in or covered by such
law. Such indemnification may be provided pursuant to any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his director or officer capacity and as
<PAGE>
to action in another capacity while holding such office, will continue as to a
person who has ceased to be a director, officer, employee or agent, and will
inure to the benefit of the heirs, executors and administrators of such a
person.
Section 8. Expenses. To the extent indemnified under the preceding
--------- --------
Section 7, if a claim thereunder is not paid in full by the Corporation within
30 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
will be entitled to be paid also the expense of prosecuting such claim. It will
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 that make it permissible under the laws of the State of Delaware for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense will 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 laws 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, will be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 9. Insurance. The Corporation may at the discretion of the
--------- ---------
Board of Directors purchase and maintain insurance on behalf of the Corporation
and any person whom it has the power to indemnify pursuant to law, the
Certificate of Incorporation, these Bylaws or otherwise.
Section 10. Resignation. Any director, officer or agent may resign by
---------- -----------
giving written notice to the President or the Secretary. Such resignation will
take effect at the time specified therein or immediately if no time is specified
therein. Unless otherwise specified therein, the acceptance of such resignation
will not be necessary to make it effective.
Section 11. Amendment of Bylaws. These Bylaws may be altered, amended,
---------- -------------------
or repealed at any meeting of the Board of Directors at which a quorum is
present, by the affirmative vote of a majority of the Directors present at such
meeting.
Section 12. Invalid Provisions. If any part of these Bylaws is held
---------- ------------------
invalid or inoperative for any reason, the remaining parts, so far as possible
and reasonable, will be valid and operative.
Section 13. Relation to the Certificate of Incorporation. These Bylaws
---------- --------------------------------------------
are subject to, and governed by, the Certificate of Incorporation of the
Corporation.
<PAGE>
EXHIBIT 3.5
CERTIFICATE OF INCORPORATION
OF
SUNBELT WOOD COMPONENTS, INC.
ARTICLE ONE
The name of the corporation is Sunbelt Wood Components, Inc.
ARTICLE TWO
The corporation will have perpetual existence.
ARTICLE THREE
The purpose of the corporation is to engage in any lawful act or activity
for which corporations may be organized under the Delaware General Corporation
Law.
ARTICLE FOUR
The aggregate number of shares of capital stock that the corporation will
have authority to issue is 1,000 shares of common stock, having a par value of
$.01 per share.
ARTICLE FIVE
No stockholder of the corporation will, solely by reason of holding shares
of any class, have any preemptive or preferential right to purchase or subscribe
for any shares of the corporation, now or hereafter to be authorized, or any
notes, debentures, bonds or other securities convertible into or carrying
warrants, rights or options to purchase shares of any class, now or hereafter to
be authorized, whether or not the issuance of any such shares or such notes,
debentures, bonds or other securities would adversely affect the dividend,
voting or any other rights of such stockholder. The board of directors may
authorize the issuance of, and the corporation may issue, shares of any class of
the corporation, or any notes, debentures, bonds or other securities convertible
into or carrying warrants, rights
<PAGE>
or options to purchase any such shares, without offering any shares of any class
to the existing holders of any class of stock of the corporation.
ARTICLE SIX
At all meetings of stockholders, a quorum will be present if the holders of
a majority of the shares entitled to vote at the meeting are represented at the
meeting in person or by proxy.
ARTICLE SEVEN
Stockholders of the corporation will not have the right of cumulative
voting for the election of directors or for any other purpose.
ARTICLE EIGHT
The board of directors is expressly authorized to alter, amend or repeal
the bylaws of the corporation and to adopt new bylaws.
ARTICLE NINE
(a) (i) The corporation shall, to the fullest extent provided by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended, indemnify each of its directors from and against any and all of the
expenses, liabilities or other matters referred to in or covered by such law;
(ii) The corporation may, to the fullest extent permitted by the
Delaware General Corporation Law, as the same exists or may hereafter be
amended, indemnify any officer, employee or agent of the corporation, from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by such law.
(iii) Such indemnification may be provided pursuant to any bylaw,
agreement, vote of stockholders or disinterested directors or otherwise, both as
to action in his director or officer capacity and as to action in another
capacity while holding such office, will continue as to a person who has ceased
to be a director, officer, employee or agent, and will inure to the benefit of
the heirs, executors and administrators of such a person.
<PAGE>
(b) To the extent indemnified under the preceding paragraph (a), if a
claim is not paid in full by the corporation within 30 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 will be entitled
to be paid also the expense of prosecuting such claim. It will 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 that make it
permissible under the laws of the State of Delaware for the corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense will 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 laws 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, will be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
ARTICLE TEN
To the fullest extent permitted by the laws of the State of Delaware as the
same exist or may hereafter be amended, a director of the corporation will not
be liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director. Any repeal or modification of this Article
will not increase the personal liability of any director of the corporation for
any act or occurrence taking place before such repeal or modification, or
adversely affect any right or protection of a director of the corporation
existing at the time of such repeal or modification. The provisions of this
Article Ten shall not be deemed to limit or preclude indemnification of a
director by the corporation for any liability of a director that has not been
eliminated by the provisions of this Article Ten.
<PAGE>
ARTICLE ELEVEN
The address of the corporation's initial registered office is 1209 Orange
Street, Wilmington, Delaware 19801, County of New Castle, and the name of its
initial registered agent at that address is The Corporation Trust Company.
ARTICLE TWELVE
The number of directors constituting the initial board of directors of the
corporation is two and the names and mailing addresses of such persons, who are
to serve as directors until the first annual meeting of the stockholders or
until their successors are elected and qualified, are:
Jerry E. Kimmel 1300 So. University Drive, Suite 200
Fort Worth, Texas 76107
Richard S. Tucker 777 Main Street, Suite 1800
Fort Worth, Texas 76102-5306
Hereafter, the number of directors will be determined in accordance with
the bylaws of the corporation.
ARTICLE THIRTEEN
The powers of the incorporator will terminate upon the filing of this
Certificate. The name and mailing address of the incorporator is:
Richard S. Tucker 777 Main Street, Suite 1800
Fort Worth, Texas 76102-5306
EXECUTED on this the 8th day of October, 1996.
/s/ RICHARD S. TUCKER
-----------------------------
Richard S. Tucker
<PAGE>
EXHIBIT 3.6
BYLAWS
SUNBELT WOOD COMPONENTS, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - OFFICES
Section 1. Registered Office......................................... 1
Section 2. Other Offices............................................. 1
ARTICLE II - STOCKHOLDERS
Section 1. Place of Meetings......................................... 1
Section 2. Annual Meeting............................................ 1
Section 3. List of Stockholders...................................... 1
Section 4. Special Meetings.......................................... 2
Section 5. Notice.................................................... 2
Section 6. Quorum.................................................... 2
Section 7. Voting.................................................... 2
Section 8. Method of Voting.......................................... 3
Section 9. Record Date............................................... 3
Section 10. Action by Consent......................................... 3
ARTICLE III - BOARD OF DIRECTORS
Section 1. Management................................................ 4
Section 2. Qualification; Election; Term............................. 4
Section 3. Number.................................................... 4
Section 4. Removal................................................... 4
Section 5. Vacancies................................................. 4
Section 6. Place of Meetings......................................... 4
Section 7. Annual Meeting............................................ 4
Section 8. Regular Meetings.......................................... 5
Section 9. Special Meetings.......................................... 5
Section 10. Quorum.................................................... 5
Section 11. Interested Directors...................................... 5
Section 12. Committees................................................ 5
Section 13. Action by Consent......................................... 6
Section 14. Compensation of Directors................................. 6
ARTICLE IV - NOTICE
Section 1. Form of Notice............................................ 6
Section 2. Waiver.................................................... 6
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE V - OFFICERS AND AGENTS
Section 1. In General................................................ 6
Section 2. Election.................................................. 7
Section 3. Other Officers and Agents................................. 7
Section 4. Compensation.............................................. 7
Section 5. Term of Office and Removal................................ 7
Section 6. Employment and Other Contracts............................ 7
Section 7. Chairman of the Board of Directors........................ 7
Section 8. President................................................. 7
Section 9. Vice Presidents........................................... 8
Section 10. Secretary................................................. 8
Section 11. Assistant Secretaries..................................... 8
Section 12. Treasurer................................................. 8
Section 13. Assistant Treasurers...................................... 8
Section 14. Bonding................................................... 8
ARTICLE VI - CERTIFICATES REPRESENTING SHARES
Section 1. Form of Certificates...................................... 9
Section 2. Lost Certificates......................................... 9
Section 3. Transfer of Shares........................................ 9
Section 4. Registered Stockholders................................... 10
ARTICLE VII - GENERAL PROVISIONS
Section 1. Dividends................................................. 10
Section 2. Reserves.................................................. 10
Section 3. Telephone and Similar Meetings............................ 10
Section 4. Books and Records......................................... 10
Section 5. Fiscal Year............................................... 11
Section 6. Seal...................................................... 11
Section 7. Indemnification........................................... 11
Section 8. Expenses.................................................. 12
Section 9. Insurance................................................. 12
Section 10. Resignation............................................... 12
Section 11. Amendment of Bylaws....................................... 12
Section 12. Invalid Provisions........................................ 12
Section 13. Relation to the Certificate of Incorporation.............. 12
</TABLE>
<PAGE>
BYLAWS
OF
SUNBELT WOOD COMPONENTS, INC.
ARTICLE I
OFFICES
-------
Section 1. Registered Office. The registered office and registered
--------- -----------------
agent of SUNBELT COMPONENTS, INC. (the "Corporation") will be as from time to
time set forth in the Corporation's Certificate of Incorporation or in any
certificate filed with the Secretary of State of the State of Delaware, and the
appropriate county Recorder or Recorders, as the case may be, to amend such
information.
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
STOCKHOLDERS
------------
Section 1. Place of Meetings. All meetings of the stockholders for the
--------- -----------------
election of Directors will be held at such place, within or without the State of
Delaware, as may be fixed from time to time by the Board of Directors. Meetings
of stockholders for any other purpose may be held at such time and place, within
or without the State of Delaware, as may be stated in the notice of the meeting
or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. An annual meeting of the stockholders will
--------- --------------
be held at such time as may be determined by the Board of Directors, at which
meeting the stockholders will elect a Board of Directors, and transact such
other business as may properly be brought before the meeting.
Section 3. List of Stockholders. At least ten days before each meeting
--------- --------------------
of stockholders, a complete list of the stockholders entitled to vote at said
meeting, arranged in alphabetical order, with the address of and the number of
voting shares registered in the name of each, will be prepared by the officer or
agent having charge of the stock transfer books. Such list will 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 days prior to the meeting,
either at a place within the city where the meeting is to be held, which place
will be specified in the notice of the meeting, or if not so specified at the
place where the meeting is to be held. Such list will be produced and kept open
at the time and place of the meeting during the whole time thereof, and will be
subject to the inspection of any stockholder who may be present.
<PAGE>
Section 4. Special Meetings. Special meetings of the stockholders, for
--------- ----------------
any purpose or purposes, unless otherwise prescribed by law, the Certificate of
Incorporation or these Bylaws, may be called by the Chairman of the Board, the
President or the Board of Directors. Business transacted at all special
meetings will be confined to the purposes stated in the notice of the meeting
unless all stockholders entitled to vote are present and consent.
Section 5. Notice. Written or printed notice stating the place, day and
--------- ------
hour of any meeting of the stockholders and, in case of a special meeting, the
purpose or purposes for which the meeting is called, will be delivered not less
than ten nor more than sixty days before the date of the meeting, either
personally or by mail, by or at the direction of the Chairman of the Board, the
President, the Secretary, or the officer or person calling the meeting, to each
stockholder of record entitled to vote at the meeting. If mailed, such notice
will be deemed to be delivered when deposited in the United States mail,
addressed to the stockholder at his address as it appears on the stock transfer
books of the Corporation, with postage thereon prepaid.
Section 6. Quorum. At all meetings of the stockholders, the presence in
--------- ------
person or by proxy of the holders of a majority of the shares issued and
outstanding and entitled to vote will be necessary and sufficient to constitute
a quorum for the transaction of business except as otherwise provided by law,
the Certificate of Incorporation or these Bylaws. If, however, such quorum is
not present or represented at any meeting of the stockholders, the stockholders
entitled to vote thereat, present in person or represented by proxy, will have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present or represented. If the
adjournment is for more than 30 days, or if after the adjournment a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting will
be given to each stockholder of record entitled to vote at the meeting. At such
adjourned meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
notified.
Section 7. Voting. When a quorum is present at any meeting of the
--------- ------
Corporation's stockholders, the vote of the holders of a majority of the shares
entitled to vote on, and voted for or against, any matter will decide any
questions brought before such meeting, unless the question is one upon which, by
express provision of law, the Certificate of Incorporation or these Bylaws, a
different vote is required, in which case such express provision will govern and
control the decision of such question. The stockholders present in person or by
proxy at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
Section 8. Method of Voting. Each outstanding share of the
--------- ----------------
Corporation's capital stock, regardless of class, will be entitled to one vote
on each matter submitted to a vote at a meeting of stockholders, except to the
extent that the voting rights of the shares of any class or classes are limited
or denied by the Certificate of Incorporation, as amended from time to time. At
any meeting of the stockholders, every stockholder having the right to vote will
be entitled to vote in person, or by proxy appointed by an instrument in writing
subscribed by such stockholder and bearing a date not more than three years
prior to such meeting, unless such instrument provides
<PAGE>
for a longer period. Each proxy will be revocable unless expressly provided
therein to be 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. Such
proxy will be filed with the Secretary of the Corporation prior to or at the
time of the meeting. Voting on any question or in any election, other than for
directors, may be by voice vote or show of hands unless the presiding officer
orders, or any stockholder demands, that voting be by written ballot.
Section 9. Record Date. The Board of Directors may fix in advance a
--------- -----------
record date for the purpose of determining stockholders entitled to notice of or
to vote at a meeting of stockholders, which record date will not precede the
date upon which the resolution fixing the record date is adopted by the Board of
Directors, and which record date will not be less than ten nor more than sixty
days prior to such meeting. In the absence of any action by the Board of
Directors, the close of business on the date next preceding the day on which the
notice is given will be the record date, or, if notice is waived, the close of
business on the day next preceding the day on which the meeting is held will be
the record date.
Section 10. Action by Consent. Any action required or permitted by law,
---------- -----------------
the Certificate of Incorporation or these Bylaws to be taken at a meeting of the
stockholders of the Corporation may be taken without a meeting if a consent or
consents in writing, setting forth the action so taken, is 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 will be delivered to the
Corporation by delivery to its registered office in Delaware, its principal
place of business or an officer or agent of the Corporation having custody of
the minute book.
ARTICLE III
BOARD OF DIRECTORS
------------------
Section 1. Management. The business and affairs of the Corporation will
--------- ----------
be managed by or under the direction of its Board of Directors who may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by law, by the Certificate of Incorporation or by these Bylaws directed or
required to be exercised or done by the stockholders.
Section 2. Qualification; Election; Term. None of the Directors need be
--------- -----------------------------
a stockholder of the Corporation or a resident of the State of Delaware. The
Directors will be elected by written ballot, by plurality vote at the annual
meeting of the stockholders, except as hereinafter provided, and each Director
elected will hold office until whichever of the following occurs first: his
successor is elected and qualified, his resignation, his removal from office by
the stockholders or his death.
<PAGE>
Section 3. Number. The number of Directors of the Corporation will be
--------- ------
at least two (2) and not more than four (4). The number of Directors authorized
will be fixed as the Board of Directors may from time to time designate, or if
no such designation has been made, the number of Directors will be the same as
the number of members of the initial Board of Directors as set forth in the
Certificate of Incorporation.
Section 4. Removal. Any Director or the entire Board of Directors may
--------- -------
be removed either for or without cause, at any meeting of stockholders by the
holders of a majority of the shares of the corporation entitled to vote at an
election of Directors; provided that notice of the intention to act upon such
matter has been given in the notice calling such meeting.
Section 5. Vacancies. Newly created directorships resulting from any
--------- ---------
increase in the authorized number of Directors and any vacancies occurring in
the Board of Directors caused by death, resignation, retirement,
disqualification or removal from office of any Directors or otherwise, may be
filled by the vote of a majority of the Directors then in office, though less
than a quorum, or a successor or successors may be chosen at a special meeting
of the stockholders called for that purpose, and each successor Director so
chosen will hold office until the next election of the class for which such
Director has been chosen or until whichever of the following occurs first: his
successor is elected and qualified, his resignation, his removal from office by
the stockholders or his death.
Section 6. Place of Meetings. Meetings of the Board of Directors,
--------- -----------------
regular or special, may be held at such place within or without the State of
Delaware as may be fixed from time to time by the Board of Directors.
Section 7. Annual Meeting. The first meeting of each newly elected
--------- --------------
Board of Directors will be held without further notice immediately following the
annual meeting of stockholders and at the same place, unless by unanimous
consent, the Directors then elected and serving change such time or place.
Section 8. Regular Meetings. Regular meetings of the Board of Directors
--------- ----------------
may be held without notice at such time and place as is from time to time
determined by resolution of the Board of Directors.
Section 9. Special Meetings. Special meetings of the Board of Directors
--------- ----------------
may be called by the Chairman of the Board or the President on oral or written
notice to each Director, given either personally, by telephone, by telegram or
by mail; special meetings will be called by the Chairman of the Board, President
or Secretary in like manner and on like notice on the written request of at
least two Directors. The purpose or purposes of any special meeting will be
specified in the notice relating thereto.
Section 10. Quorum. At all meetings of the Board of Directors the
---------- ------
presence of a majority of the number of Directors fixed by these Bylaws will be
necessary and sufficient to constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority
<PAGE>
of the Directors present at any meeting at which there is a quorum will be the
act of the Board of Directors, except as may be otherwise specifically provided
by law, the Certificate of Incorporation or these Bylaws. If a quorum is not
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 is present.
Section 11. Interested Directors. No contract or transaction between the
---------- --------------------
Corporation and one or more of its Directors or officers, or between the
Corporation and any other corporation, partnership, association or other
organization in which one or more of the Corporation's Directors or officers are
directors or officers or have a financial interest, will be void or voidable
solely for this reason, or solely because the Director or officer is present at
or participates in the meeting of the Board of Directors or committee thereof
that authorizes the contract or transaction, or solely because his or their
votes are counted for such purpose, if: (i) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the Board of Directors or the committee, and the Board of Directors
or committee in good faith authorizes the contract or transaction by the
affirmative vote of a majority of the disinterested Directors, even though the
disinterested Directors be less than a quorum, (ii) the material facts as to his
relationship or interest and as to the contract or transaction are disclosed or
are known to the stockholders entitled to vote thereon, and the contract or
transaction is specifically approved in good faith by vote of the stockholders
or (iii) the contract or transaction is fair as to the Corporation as of the
time it is authorized, approved or ratified by the Board of Directors, a
committee thereof or the stockholders. Common or interested directors may be
counted in determining the presence of a quorum at a meeting of the Board of
Directors or of a committee that authorizes the contract or transaction.
Section 12. Committees. The Board of Directors may, by resolution passed
---------- ----------
by a majority of the entire Board, designate committees, each committee to
consist of one or more Directors of the Corporation, which committees will have
such power and authority and will perform such functions as may be provided in
such resolution. Such committee or committees will have such name or names as
may be designated by the Board and will keep regular minutes of their
proceedings and report the same to the Board of Directors when required.
Section 13. Action by Consent. Any action required or permitted to be
---------- -----------------
taken at any meeting of the Board of Directors or any committee of the Board of
Directors may be taken without such a meeting if a consent or consents in
writing, setting forth the action so taken, is signed by all the members of the
Board of Directors or such committee, as the case may be.
Section 14. Compensation of Directors. Directors will receive such
---------- -------------------------
compensation for their services and reimbursement for their expenses as the
Board of Directors, by resolution, may establish; provided that nothing herein
contained will be construed to preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.
<PAGE>
ARTICLE IV
NOTICE
------
Section 1. Form of Notice. Whenever by law, the Certificate of
--------- --------------
Incorporation or of these Bylaws, notice is to be given to any Director or
stockholder, and no provision is made as to how such notice will be given, such
notice may be given in writing, by mail, postage prepaid, addressed to such
Director or stockholder at such address as appears on the books of the
Corporation. Any notice required or permitted to be given by mail will be
deemed to be given at the time the same is deposited in the United States mails.
Section 2. Waiver. Whenever any notice is required to be given to any
--------- ------
stockholder or Director of the Corporation as required by law, the Certificate
of Incorporation or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated in such notice, will be equivalent to the giving of such notice.
Attendance of a stockholder or Director at a meeting will constitute a waiver of
notice of such meeting, except where such stockholder or Director attends for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business on the ground that the meeting has not been lawfully
called or convened.
ARTICLE V
OFFICERS AND AGENTS
-------------------
Section 1. In General. The officers of the Corporation will be elected
--------- ----------
by the Board of Directors and will be a President, a Vice President, a Secretary
and a Treasurer. The Board of Directors may also elect a Chairman of the Board,
additional Vice Presidents, Assistant Vice Presidents and one or more Assistant
Secretaries and Assistant Treasurers. Any two or more offices may be held by
the same person.
Section 2. Election. The Board of Directors, at its first meeting after
--------- --------
each annual meeting of stockholders, will elect the officers, none of whom need
be a member of the Board of Directors.
Section 3. Other Officers and Agents. The Board of Directors may also
--------- -------------------------
elect and appoint such other officers and agents as it deems necessary, who will
be elected and appointed for such terms and will exercise such powers and
perform such duties as may be determined from time to time by the Board.
Section 4. Compensation. The compensation of all officers and agents of
--------- ------------
the Corporation will be fixed by the Board of Directors or any committee of the
Board, if so authorized by the Board.
<PAGE>
Section 5. Term of Office and Removal. Each officer of the Corporation
--------- --------------------------
will hold office until his death, his resignation or removal from office, or the
election and qualification of his successor, whichever occurs first. Any officer
or agent elected or appointed by the Board of Directors may be removed at any
time, for or without cause, by the affirmative vote of a majority of the entire
Board of Directors, but such removal will not prejudice the contract rights, if
any, of the person so removed. If the office of any officer becomes vacant for
any reason, the vacancy may be filled by the Board of Directors.
Section 6. Employment and Other Contracts. The Board of Directors may
--------- ------------------------------
authorize any officer or officers or agent or agents to enter into any contract
or execute and deliver any instrument in the name or on behalf of the
Corporation, and such authority may be general or confined to specific
instances. The Board of Directors may, when it believes the interest of the
Corporation will best be served thereby, authorize executive employment
contracts that will have terms no longer than ten years and contain such other
terms and conditions as the Board of Directors deems appropriate. Nothing
herein will limit the authority of the Board of Directors to authorize
employment contracts for shorter terms.
Section 7. Chairman of the Board of Directors. If the Board of
--------- ----------------------------------
Directors has elected a Chairman of the Board, he will preside at all meetings
of the stockholders and the Board of Directors. Except where by law the
signature of the President is required, the Chairman will have the same power as
the President to sign all certificates, contracts and other instruments of the
Corporation. During the absence or disability of the President, the Chairman
will exercise the powers and perform the duties of the President.
Section 8. President. The President will be the chief executive officer
--------- ---------
of the Corporation and, subject to the control of the Board of Directors, will
supervise and control all of the business and affairs of the Corporation. He
will, in the absence of the Chairman of the Board, preside at all meetings of
the stockholders and the Board of Directors. The President will have all powers
and perform all duties incident to the office of President and will have such
other powers and perform such other duties as the Board of Directors may from
time to time prescribe.
Section 9. Vice Presidents. Each Vice President will have the usual and
--------- ---------------
customary powers and perform the usual and customary duties incident to the
office of Vice President, and will have such other powers and perform such other
duties as the Board of Directors or any committee thereof may from time to time
prescribe or as the President may from time to time delegate to him. In the
absence or disability of the President and the Chairman of the Board, a Vice
President designated by the Board of Directors, or in the absence of such
designation the Vice Presidents in the order of their seniority in office, will
exercise the powers and perform the duties of the President.
Section 10. Secretary. The Secretary will attend all meetings of the
---------- ---------
stockholders and record all votes and the minutes of all proceedings in a book
to be kept for that purpose. The Secretary will perform like duties for the
Board of Directors and committees thereof when required. The Secretary will
give, or cause to be given, notice of all meetings of the
<PAGE>
stockholders and special meetings of the Board of Directors. The Secretary will
keep in safe custody the seal of the Corporation. The Secretary will be under
the supervision of the President. The Secretary will have such other powers and
perform such other duties as the Board of Directors may from time to time
prescribe or as the President may from time to time delegate to him.
Section 11. Assistant Secretaries. The Assistant Secretaries in the
---------- ---------------------
order of their seniority in office, unless otherwise determined by the Board of
Directors, will, in the absence or disability of the Secretary, exercise the
powers and perform the duties of the Secretary. They will have such other
powers and perform such other duties as the Board of Directors may from time to
time prescribe or as the President may from time to time delegate to them.
Section 12. Treasurer. The Treasurer will have responsibility for the
---------- ---------
receipt and disbursement of all corporate funds and securities, will keep full
and accurate accounts of such receipts and disbursements, and will deposit or
cause to be deposited all moneys and other valuable effects in the name and to
the credit of the Corporation in such depositories as may be designated by the
Board of Directors. The Treasurer will render to the Directors whenever they
may require it an account of the operating results and financial condition of
the Corporation, and will have such other powers and perform such other duties
as the Board of Directors may from time to time prescribe or as the President
may from time to time delegate to him.
Section 13. Assistant Treasurers. The Assistant Treasurers in the order
---------- --------------------
of their seniority in office, unless otherwise determined by the Board of
Directors, will, in the absence or disability of the Treasurer, exercise the
powers and perform the duties of the Treasurer. They will have such other
powers and perform such other duties as the Board of Directors may from time to
time prescribe or as the President may from time to time delegate to them.
Section 14. Bonding. The Corporation may secure a bond to protect the
---------- -------
Corporation from loss in the event of defalcation by any of the officers, which
bond may be in such form and amount and with such surety as the Board of
Directors may deem appropriate.
<PAGE>
ARTICLE VI
CERTIFICATES REPRESENTING SHARES
--------------------------------
Section 1. Form of Certificates. Certificates, in such form as may be
--------- --------------------
determined by the Board of Directors, representing shares to which stockholders
are entitled will be delivered to each stockholder. Such certificates will be
consecutively numbered and will be entered in the stock book of the Corporation
as they are issued. Each certificate will state on the face thereof the
holder's name, the number, class of shares, and the par value of such shares or
a statement that such shares are without par value. They will be signed by the
President or a Vice President and the Secretary or an Assistant Secretary, and
may be sealed with the seal of the Corporation or a facsimile thereof. If any
certificate is countersigned by a transfer agent, or an assistant transfer agent
or registered by a registrar, either of which is other than the Corporation or
an employee of the Corporation, the signatures of the Corporation's officers may
be facsimiles. In case any officer or officers who have signed, or whose
facsimile signature or signatures have been used on such certificate or
certificates, ceases 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 or its agents, such
certificate or certificates may nevertheless be adopted by the Corporation and
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.
Section 2. Lost Certificates. The Board of Directors may direct that a
--------- -----------------
new certificate be issued in place of any certificate theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of that fact by the person claiming the certificate to be lost or
destroyed. When authorizing such issue of a new certificate, the Board of
Directors, in its discretion and as a condition precedent to the issuance
thereof, may require the owner of such lost or destroyed certificate, or his
legal representative, to advertise the same in such manner as it may require
and/or to give the Corporation a bond, in such form, in such sum, and with such
surety or sureties as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost or destroyed. When a certificate has been lost, apparently destroyed
or wrongfully taken, and the holder of record fails to notify the Corporation
within a reasonable time after such holder has notice of it, and the Corporation
registers a transfer of the shares represented by the certificate before
receiving such notification, the holder of record is precluded from making any
claim against the Corporation for the transfer of a new certificate.
Section 3. Transfer of Shares. Shares of stock will be transferable
--------- ------------------
only on the books of the Corporation by the holder thereof in person or by such
holder's duly authorized attorney. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate representing shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it will be the duty of the Corporation or the transfer
agent of the Corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
<PAGE>
Section 4. Registered Stockholders. The Corporation will be entitled to
--------- -----------------------
treat the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, will 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 has express or other notice thereof, except as otherwise
provided by law.
ARTICLE VII
GENERAL PROVISIONS
------------------
Section 1. Dividends. Dividends upon the outstanding shares 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. Dividends may be declared and paid in cash, in property, or in shares
of the Corporation, subject to the provisions of the General Corporation Law of
the State of Delaware and the Certificate of Incorporation. The Board of
Directors may fix in advance a record date for the purpose of determining
stockholders entitled to receive payment of any dividend, such record date will
not precede the date upon which the resolution fixing the record date is
adopted, and such record date will not be more than sixty days prior to the
payment date of such dividend. In the absence of any action by the Board of
Directors, the close of business on the date upon which the Board of Directors
adopts the resolution declaring such dividend will be the record date.
Section 2. Reserves. There may be created by resolution of the Board of
--------- --------
Directors out of the surplus of the Corporation such reserve or reserves as the
Directors from time to time, in their discretion, deem proper to provide for
contingencies, or to equalize dividends, or to repair or maintain any property
of the Corporation, or for such other purpose as the Directors may deem
beneficial to the Corporation, and the Directors may modify or abolish any such
reserve in the manner in which it was created. Surplus of the Corporation to
the extent so reserved will not be available for the payment of dividends or
other distributions by the Corporation.
Section 3. Telephone and Similar Meetings. Stockholders, directors and
--------- ------------------------------
committee members may participate in and hold meetings by means of conference
telephone or similar communications equipment by which all persons participating
in the meeting can hear each other. Participation in such a meeting will
constitute presence in person at the meeting, except where a person participates
in the meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business on the ground that the meeting has
not been lawfully called or convened.
Section 4. Books and Records. The Corporation will keep correct and
--------- -----------------
complete books and records of account and minutes of the proceedings of its
stockholders and Board of Directors, and will keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
<PAGE>
Section 5. Fiscal Year. The fiscal year of the Corporation will be
--------- -----------
fixed by resolution of the Board of Directors.
Section 6. Seal. The Corporation may have a seal, and the seal may be
--------- ----
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise. Any officer of the Corporation will have authority to
affix the seal to any document requiring it.
Section 7. Indemnification. The Corporation shall, to the fullest
--------- ---------------
extent provided by the Delaware General Corporation Law, as the same exists or
may hereafter be amended, indemnify each of its officers and directors from and
against any and all of the expenses, liabilities or other matters referred to in
or covered by such law. The Corporation may, to the fullest extent permitted by
the Delaware Corporation Law, as the same exists or may hereafter be amended,
indemnify any employee or agent of the Corporation, from and against any and all
of the expenses, liabilities or other matters referred to in or covered by such
law. Such indemnification may be provided pursuant to any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action in
his director or officer capacity and as to action in another capacity while
holding such office, will continue as to a person who has ceased to be a
director, officer, employee or agent, and will inure to the benefit of the
heirs, executors and administrators of such a person.
Section 8. Expenses. To the extent indemnified under the preceding
--------- --------
Section 7, if a claim thereunder is not paid in full by the Corporation within
30 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
will be entitled to be paid also the expense of prosecuting such claim. It will
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 that make it permissible under the laws of the State of Delaware for the
Corporation to indemnify the claimant for the amount claimed, but the burden of
proving such defense will 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 laws 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, will be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
Section 9. Insurance. The Corporation may at the discretion of the
--------- ---------
Board of Directors purchase and maintain insurance on behalf of the Corporation
and any person whom it has the power to indemnify pursuant to law, the
Certificate of Incorporation, these Bylaws or otherwise.
Section 10. Resignation. Any director, officer or agent may resign by
---------- -----------
giving written notice to the President or the Secretary. Such resignation will
take effect at the time specified
<PAGE>
therein or immediately if no time is specified therein. Unless otherwise
specified therein, the acceptance of such resignation will not be necessary to
make it effective.
Section 11. Amendment of Bylaws. These Bylaws may be altered, amended,
---------- -------------------
or repealed at any meeting of the Board of Directors at which a quorum is
present, by the affirmative vote of a majority of the Directors present at such
meeting.
Section 12. Invalid Provisions. If any part of these Bylaws is held
---------- ------------------
invalid or inoperative for any reason, the remaining parts, so far as possible
and reasonable, will be valid and operative.
Section 13. Relation to the Certificate of Incorporation. These Bylaws
---------- --------------------------------------------
are subject to, and governed by, the Certificate of Incorporation of the
Corporation.
<PAGE>
EXHIBIT 3.7
ARTICLES OF INCORPORATION
OF
BOWEN SUPPLY, INC.
I.
The name of the corporation is "BOWEN SUPPLY, INC."
II.
The corporation shall have perpetual duration.
III.
The corporation is a corporation for profit and is organized for the
general purposes of distributing various tools, equipment and supplies used in
the mobile home manufacturing industry and engaging in any lawful business or
activities relating thereto.
IV.
The corporation shall have authority, acting by its Board of Directors, to
issue not more than 3,000,000 shares of common stock having a par value of $1.00
per share.
V.
The corporation shall not commence business until it shall have received at
least $500 in payment for the issuance of shares of its stock.
VI.
The holders of shares of the corporation's stock shall not have any
preemptive rights to acquire any unissued shares of its stock.
VII.
The registered office shall be located at 3330 Peachtree Road, N.E.,
Atlanta, Georgia 30326. The initial registered agent of the corporation shall be
Harold P. Bowen.
<PAGE>
VIII.
The initial Board of Directors shall consist of three members, who shall
be:
Harold P. Bowen
3330 Peachtree Road, N.E.,
Atlanta, Georgia 30326
John Groom
P.0. Box 1008
Americus, Georgia
Anne P. Bowen
3330 Peachtree Road, N.E.,
Atlanta, Georgia 30326
IX.
The name and address of the incorporator is:
Michael J. Egan
3100 First National Bank Tower
Atlanta, Georgia 30303
X.
In accordance with, but not in limitation of, the general powers conferred
by law, the corporation shall have the power to make distributions to its
shareholders out of its capital surplus; to purchase its own shares out of the
unreserved and unrestricted capital surplus available therefore; and to carry
out any lawful business.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
Articles of Incorporation.
/s/ Michael J. Egan
-----------------------------------------------
Michael J. Egan
<PAGE>
ARTICLES OF AMENDMENT
---------------------
Prior to the issuance of any shares of
BOWEN SUPPLY, INC.
A corporation organized and existing under the laws of the state of Georgia, the
incorporator of said corporation on November 6, 1972, adopted the following
amendment to the Articles of Incorporation of said corporation.
Article IV of the Articles of Incorporation is hereby deleted in its
entirety and the following inserted Article IV is adopted:
The corporation shall have authority, acting by its Board of Directors, to
issue not more than 3,000,000 shares of common stock having a par value of $0.10
per share.
IN WITNESS WHEREOF, the incorporator has executed these Articles of
Amendment and has affixed his hand and seal, this 20th day of November, 1972.
/s/ Michael J. Egan
-----------------------------------------------
Michael J. Egan
Incorporator
<PAGE>
ARTICLES OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
BOWEN SUPPLY, INC.
1.
The name of the corporation whose Articles of Incorporation are hereby
amended is BOWEN SUPPLY, INC.
2.
The Articles of Incorporation are hereby amended as follows:
(1) By deleting Item III in its entirety and inserting in lieu thereof the
following:
ARTICLE III
The purpose for which the corporation is organized is for
profit and to maintain, operate, and conduct a lawful corporate
business with full powers granted by the laws of the State of
Georgia, and generally to manufacture or otherwise produce,
purchase, prepare, and sell and distribute all types and kinds of
tools, equipment, and supplies used in the mobile home
manufacturing industry;
to buy, lease, acquire, and own all necessary vehicles,
appliances and fixtures necessary or convenient for the carrying
out of said business;
to purchase, acquire, own, sell, lease and control real
estate necessary for the transaction of the business;
to buy, sell, trade, and deal in stocks, bonds, and
securities of every nature, and commodities of every nature, and
contracts for the future delivery of commodities of every nature,
on
<PAGE>
margin or otherwise; and in conjunction therewith, to borrow money and to
pledge any and all stocks, bonds, securities, commodities, and contracts
for the future delivery thereof;
to do any and all acts and things necessary, convenient, expedient,
ancilliary to, or in aid of the accomplishment of any legal business
purpose.
3.
The date of the adoption of the amendment by the shareholders was November
12, 1984.
4.
The shareholder vote requires to adopt the amendment is 315,000 shares. By
resolution dated the 1st day of November, 1984, a copy of which is hereto
attached, a special called meeting was held on November 12, 1984, at which
meeting the shareholders present represented 575,000 shares of common stock of
the corporation, representing the only class of stock issued by the corporation
and being 91.27% of the issued and outstanding stock in the corporation. The
vote in favor of the amendment was 550,000 shares with 25,000 shares abstaining.
IN WITNESS WHEREOF the officers of the corporation have hereunto executed
these Articles of Amendment and have affixed their hands and seals this 16th day
of November, 1984.
BOWEN SUPPLY, INC.
By: /s/ Harold P. Bowen
________________________________
President
ATTEST:
By: /s/ Mary R. Gillis
________________________________
Mary R. Gillis
Secretary
<PAGE>
EXHIBIT 3.8
BYLAWS
OF
BOWEN SUPPLY, INC.
AMENDED AND RESTATED AS OF FEBRUARY 28, 1997
<PAGE>
BYLAWS
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE ONE - OFFICES AND AGENT
Section 1.1 Registered Office and Agent..................... 1
Section 1.2 Other Offices................................... 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS
Section 2.1 Place of Meetings............................... 1
Section 2.2 Annual Meetings................................. 1
Section 2.3 Special Meetings................................ 1
Section 2.4 Notice of Meetings.............................. 1
Section 2.5 Voting Group.................................... 2
Section 2.6 Quorum.......................................... 2
Section 2.7 Vote Required for Action........................ 2
Section 2.8 Voting of Shares................................ 2
Section 2.9 Proxies......................................... 2
Section 2.10 Presiding Officer............................... 3
Section 2.11 Adjournments.................................... 3
Section 2.12 Action of Shareholders Without a Meeting........ 3
ARTICLE THREE - THE BOARD OF DIRECTORS
Section 3.1 General Powers.................................. 3
Section 3.2 Number, Election and Term of Office............. 4
Section 3.3 Removal......................................... 4
Section 3.4 Vacancies....................................... 4
Section 3.5 Compensation.................................... 4
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meetings................................ 4
Section 4.2 Special Meetings................................ 5
Section 4.3 Place of Meetings............................... 5
Section 4.4 Notice of Meetings.............................. 5
Section 4.5 Quorum.......................................... 5
Section 4.6 Vote Required for Action........................ 5
Section 4.7 Participation by Conference Telephone........... 5
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.8 Action by Directors Without a Meeting........... 6
Section 4.9 Adjournments.................................... 6
Section 4.10 Committees of the Board of Directors............ 6
ARTICLE FIVE - MANNER OF NOTICE AND WAIVER AS TO
SHAREHOLDERS AND DIRECTORS
Section 5.1 Procedure....................................... 6
Section 5.2 Waiver.......................................... 7
ARTICLE SIX - OFFICERS
Section 6.1 Number.......................................... 8
Section 6.2 Election and Term............................... 8
Section 6.3 Compensation.................................... 8
Section 6.4 President....................................... 8
Section 6.5 Vice Presidents................................. 8
Section 6.6 Secretary....................................... 8
Section 6.7 Treasurer....................................... 8
Section 6.8 Bonds........................................... 9
ARTICLE SEVEN - DISTRIBUTIONS AND SHARE DIVIDENDS
Section 7.1 Authorization or Declaration.................... 9
Section 7.2 Record Date With Regard to Distributions
and Share Dividends............................ 9
ARTICLE EIGHT - SHARES
Section 8.1 Authorization and Issuance of Shares............ 9
Section 8.2 Share Certificates.............................. 9
Section 8.3 Rights of Corporation With Respect
to Registered Owners........................... 10
Section 8.4 Transfers of Shares............................. 10
Section 8.5 Duty of Corporation to Register Transfer........ 10
Section 8.6 Lost, Stolen or Destroyed Certificates.......... 10
Section 8.7 Fixing of Record Date With Regard
Shareholder Action............................. 11
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE NINE - INDEMNIFICATION
Section 9.1 Definitions..................................... 11
Section 9.2 Basic Indemnification Arrangement............... 12
Section 9.3 Advances for Expenses........................... 12
Section 9.4 Authorization of and Determination of
Entitlement to Indemnification................. 13
Section 9.5 Court-Ordered Indemnification and
Advances for Expenses........................... 14
Section 9.6 Indemnification of Employees and Agents......... 15
Section 9.7 Shareholder Approved Indemnification............ 15
Section 9.8 Liability Insurance............................. 15
Section 9.9 Witness Fees.................................... 16
Section 9.10 Report to Shareholders.......................... 16
Section 9.11 Amendments; Severability........................ 16
ARTICLE TEN - MISCELLANEOUS
Section 10.1 Inspection of Books and Records................. 16
Section 10.2 Fiscal Year..................................... 16
Section 10.3 Corporate Seal.................................. 16
Section 10.4 Annual Financial Statements..................... 16
Section 10.5 Conflict With Articles of Incorporation......... 17
ARTICLE ELEVEN - AMENDMENTS
Section 11.1 Power to Amend Bylaws........................... 17
</TABLE>
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ARTICLE ONE
OFFICES AND AGENT
Section 1.1 Registered Office and Agent. The corporation shall maintain
---------------------------
a registered office in the State of Georgia and shall have a registered agent
whose business office is identical to the registered office.
Section 1.2 Other Offices. In addition to its registered office, the
-------------
corporation may have offices at any other place or places, within or without the
State of Georgia, as the Board of Directors may from time to time select or as
the business of the corporation may require or make desirable.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
Section 2.1 Place of Meetings. Meetings of shareholders may be held at
-----------------
any place within or without the State of Georgia, as set forth in the notice
thereof, or in the event of a meeting held pursuant to waiver of notice, as set
forth in the waiver, or if no place is so specified, at the principal office of
the corporation.
Section 2.2 Annual Meetings. The annual meeting of shareholders shall
---------------
be held on May 1 unless that day is a legal holiday, and in that event on the
next succeeding business day, or on such other day as may be determined from
time to time by the Board of Directors, for the purpose of electing directors
and transacting any and all business that may properly come before the meeting.
If an annual meeting of shareholders is not held as provided in this Section
2.2, any business, including the election of directors, that might properly have
been acted upon at that meeting may be acted upon at a special meeting in lieu
of the annual meeting held pursuant to these bylaws or held pursuant to a court
order.
Section 2.3 Special Meetings. Special meetings of shareholders or a
----------------
special meeting in lieu of the annual meeting of shareholders may be called at
any time by the Board of Directors or the President. Special meetings of
shareholders or a special meeting in lieu of the annual meeting of shareholders
shall be called by the corporation upon the written request of the holders of
twenty-five percent (25%) of all the votes entitled to be cast on the issue or
issues proposed to be considered at the proposed special meeting.
Section 2.4 Notice of Meetings. Unless waived as contemplated in
------------------
Section 5.2, a notice of each meeting of shareholders stating the date, time and
place of the meeting shall be given not less than ten (10) days nor more than
sixty (60) days before the date thereof, by or at the direction of the
President, the Secretary or the officer or persons calling the meeting, to each
shareholder entitled to vote at that meeting. In the case of an annual meeting,
the notice need not state the purpose or purposes of the meeting unless the
articles of incorporation or the Georgia Business Corporation Code (the "Code")
requires otherwise. In the case of a special meeting, including a
<PAGE>
special meeting in lieu of an annual meeting, the notice of meeting shall state
the purpose or purposes for which the meeting is called.
Section 2.5 Voting Group. Voting group means all shares of one or more
------------
classes or series that are entitled to vote and be counted together collectively
on a matter at a meeting of shareholders. All shares entitled to vote generally
on the matter are for that purpose a single voting group.
Section 2.6 Quorum. With respect to shares entitled to vote as a
------
separate voting group on a matter at a meeting of shareholders, the presence, in
person or by proxy, of a majority of the votes entitled to be cast on the matter
by the voting group shall constitute a quorum of that voting group for action on
that matter unless the articles of incorporation or the Code provides otherwise.
Once a share is represented for any purpose at a meeting, other than solely to
object to holding the meeting or to transacting business at the meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of the meeting unless a new record date is or must be set for the
adjourned meeting pursuant to Section 8.7 of these bylaws.
Section 2.7 Vote Required for Action. If a quorum exists, action on a
------------------------
matter (other than the election of directors) by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the articles of incorporation, provisions of these
bylaws validly adopted by the shareholders or the Code requires a greater number
of affirmative votes. If the articles of incorporation or the Code provides for
voting by two or more voting groups on a matter, action on that matter is taken
only when voted upon by each of those voting groups counted separately. Action
may be taken by one voting group on a matter even though no action is taken by
another voting group entitled to vote on the matter. With regard to the
election of directors, unless otherwise provided in the articles of
incorporation, if a quorum exists, action on the election of directors is taken
by a plurality of the votes cast by the shares entitled to vote in the election.
Section 2.8 Voting of Shares. Unless the articles of incorporation or
----------------
the Code provides otherwise, each outstanding share having voting rights shall
be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Voting on all matters shall be by voice vote or by show of hands
unless any qualified voter, prior to the voting on any matter, demands vote by
ballot, in which case each ballot shall state the name of the shareholder voting
and the number of shares voted by him, and if the ballot be cast by proxy, it
shall also state the name of the proxy.
Section 2.9 Proxies. A shareholder entitled to vote pursuant to Section
-------
2.8 may vote in person or by proxy pursuant to an appointment of proxy executed
in writing by the shareholder or by his attorney-in-fact. An appointment of
proxy shall be valid for only one meeting to be specified therein, and any
adjournments of such meeting, but shall not be valid for more than eleven months
unless expressly provided therein. Appointments of proxy shall be dated and
filed with the records of the meeting to which they relate. If the validity of
any appointment of proxy is questioned, it must be submitted to the secretary of
the meeting of shareholders for examination
2
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or to a proxy officer or committee appointed by the person presiding at the
meeting. The secretary of the meeting or, if appointed, the proxy officer or
committee, as the case may be, shall determine the validity or invalidity of any
appointment of proxy submitted and reference by the secretary in the minutes of
the meeting to the regularity of an appointment of proxy shall be received as
prima facie evidence of the facts stated for the purpose of establishing the
presence of a quorum at the meeting and for all other purposes.
Section 2.10 Presiding Officer. The President shall serve as the
-----------------
chairman of every meeting of shareholders unless another person is elected by
the shareholders to serve as chairman at the meeting. The chairman shall
appoint any persons he deems required to assist with the meeting.
Section 2.11 Adjournments. Whether or not a quorum is present to
------------
organize a meeting, any meeting of shareholders (including an adjourned meeting)
may be adjourned by the holders of a majority of the voting shares represented
at the meeting to reconvene at a specific time and place, but no later than 120
days after the date fixed for the original meeting unless the requirements of
the Code concerning the selection of a new record date have been met. At any
reconvened meeting within that time period, any business may be transacted that
could have been transacted at the meeting that was adjourned. If notice of the
adjourned meeting was properly given, it shall not be necessary to give any
notice of the reconvened meeting or of the business to be transacted, if the
date, time and place of the reconvened meeting are announced at the meeting that
was adjourned and before adjournment; provided, however, that if a new record
date is or must be fixed, notice of the reconvened meeting must be given to
persons who are shareholders as of the new record date.
Section 2.12 Action of Shareholders Without a Meeting. Action required
----------------------------------------
or permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action or, if so provided in the articles of incorporation, by persons who would
be entitled to vote at a meeting shares having voting power to cast not less
than the minimum number (or numbers, in the case of voting by groups) of votes
that would be necessary to authorize or take the action at a meeting at which
all shareholders entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed by
shareholders entitled to take action without a meeting, and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
The corporation shall give written notice of actions taken as required by the
Code.
ARTICLE THREE
THE BOARD OF DIRECTORS
Section 3.l General Powers. All corporate powers shall be exercised by
--------------
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the Board of Directors. In addition to the
powers and authority expressly conferred upon it
3
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by these bylaws, the Board of Directors may exercise all powers of the
corporation and do all lawful acts and things that are not by law, by any legal
agreement among shareholders, by the articles of incorporation or by these
bylaws directed or required to be exercised or done by the shareholders.
Section 3.2 Number, Election and Term of Office. The number of
-----------------------------------
directors of the corporation shall be two (2). Except as provided in Section
3.4, the directors shall be elected by the vote of shareholders as set forth in
Section 2.7 at each annual meeting of shareholders or special meeting in lieu of
the annual meeting. Except in case of death, written resignation, retirement,
disqualification or removal, each director shall serve until the next succeeding
annual meeting and thereafter until his successor is elected and qualifies or
until the number of directors is decreased.
Section 3.3 Removal. One or more directors may be removed from office
-------
with or without cause by the shareholders by a majority of the votes entitled to
be cast. If the director was elected by a voting group, only the Shareholders
of that voting group may participate in the vote to remove him. Removal action
may be taken at any meeting of shareholders with respect to which the notice
stated that the purpose, or one of the purposes, of the meeting is removal of
the director, and a removed director's successor may be elected at the same
meeting.
Section 3.4 Vacancies. A vacancy occurring in the Board of Directors,
---------
other than by reason of an increase in the number of directors, shall be filled
for the unexpired term by the first to take action of (a) the shareholders or
(b) the Board of Directors, and if the directors remaining in office constitute
fewer than a quorum of the Board of Directors, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office. If the
vacant office was held by a director elected by a voting group, only the holders
of shares of that voting group or the remaining directors elected by that voting
group are entitled to vote to fill the vacancy. A vacancy occurring in the
Board of Directors by reason of an increase in the number of directors shall be
filled in like manner as any other vacancy but if filled by action of the Board
of Directors, shall only be for a term of office continuing until the next
election of directors by the shareholders and until the election and
qualification of a successor.
Section 3.5 Compensation. Unless the articles of incorporation provide
------------
otherwise, the Board of Directors may determine from time to time the
compensation, if any, directors may receive for their services as directors. A
director may also serve the corporation in a capacity other than that of
director and receive compensation, as determined by the Board of Directors, for
services rendered in such other capacity.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meeting. Regular meetings of the Board of Directors
---------------
shall be held
4
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immediately after the annual meeting of shareholders or a special meeting in
lieu of the annual meeting. In addition, the Board of Directors may schedule
other meetings to occur at regular intervals throughout the year.
Section 4.2 Special Meetings. Special meetings of the Board of
----------------
Directors may be called by or at the request of the President or by any two
directors in office at that time.
Section 4.3 Place of Meetings. Directors may hold their meetings at any
-----------------
place within or without the State of Georgia as the Board of Directors may from
time to time establish for regular meetings or as set forth in the notice of
special meetings or, in the event of a meeting held pursuant to waiver of
notice, as set forth in the waiver.
Section 4.4 Notice of Meetings. No notice shall be required for any
------------------
regularly scheduled meeting of the directors. Unless waived as contemplated in
Section 5.2, each director shall be given at least one day's notice (as set
forth in Section 5.1) of each special meeting stating the date, time and place
of the meeting.
Section 4.5 Quorum. Unless a greater number is required by the articles
------
of incorporation, these bylaws or the Code, a quorum of the Board of Directors
consists of a majority of the total number of directors that has been prescribed
by resolution of the shareholders or of the Board of Directors pursuant to
Section 3.2.
Section 4.6 Vote Required for Action.
------------------------
(a) If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present is the act of the Board of Directors unless the
Code, the articles of incorporation or these bylaws require the vote of a
greater number of directors.
(b) A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed to
have assented to the action taken unless:
(i) he objects at the beginning of the meeting (or promptly upon
his arrival) to holding it or transacting business at the meeting;
(ii) his dissent or abstention from the action taken is entered in
the minutes of the meeting; or
(iii) he delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action
5
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taken.
Section 4.7 Participation by Conference Telephone. Any or all directors
-------------------------------------
may participate in a meeting of the Board of Directors or of a committee of the
Board of Directors through the use of any means of communication by which all
directors participating may simultaneously hear each other during the meeting.
Section 4.8 Action by Directors Without a Meeting. Unless the articles
-------------------------------------
of incorporation or these bylaws provide otherwise, any action required or
permitted to be taken at any meeting of the Board of Directors, or any action
that may be taken at a meeting of a committee of the Board of Directors, may be
taken without a meeting if the action is taken by all the members of the Board
of Directors (or of the committee, as the case may be). The action must be
evidenced by one or more written consents describing the action taken, signed by
each director (or each director serving on the committee, as the case may be),
and delivered to the corporation for inclusion in the minutes or filing with the
corporate records.
Section 4.9 Adjournments. Whether or not a quorum is present to
------------
organize a meeting, any meeting of directors (including an adjourned meeting)
may be adjourned by a majority of the directors present to reconvene at a
specific time and place. At any reconvened meeting, any business may be
transacted that could have been transacted at the meeting that was adjourned.
If notice of the adjourned meeting was properly given, it shall not be necessary
to give any notice of the reconvened meeting or of the business to be
transacted, if the date, time and place of the reconvened meeting are announced
at the meeting that was adjourned.
Section 4.10 Committees of the Board of Directors. The Board of
------------------------------------
Directors by resolution may designate from among its members an executive
committee and one or more other committees, each consisting of one or more
directors all of whom serve at the pleasure of the Board of Directors. Except
as limited by the Code, each committee shall have the authority set forth in the
resolution establishing the committee. The provisions of this Article Four as
to the Board of Directors and its deliberations shall be applicable to any
committee of the Board of Directors.
ARTICLE FIVE
MANNER OF NOTICE AND WAIVER AS TO SHAREHOLDERS AND DIRECTORS
Section 5.1 Procedure. Whenever these bylaws require notice to be given
---------
to any shareholder or director, the notice shall be given in accordance with
this Section 5.1. Notice under these bylaws shall be in writing unless oral
notice is reasonable under the circumstances. Any notice to directors may be
written or oral. Notice may be communicated in person; by telephone, telegraph,
teletype or other form of wire or wireless communication; or by mail or private
carrier. If these forms of personal notice are impracticable, notice may be
communicated by a newspaper of general circulation in the area where published,
or by radio, television or other
6
<PAGE>
form of public broadcast communication. Written notice to the shareholders, if
in a comprehensible form, is effective when mailed, if mailed with first-class
postage prepaid and correctly addressed to the shareholder's address shown in
the corporation's current record of shareholders. Except as otherwise provided
in this Section 5.1, written notice, if in a comprehensible form, is effective
at the earliest of the following:
(a) when received or when delivered, properly addressed, to the
addressee's last known principal place of business or residence;
(b) five days after its deposit in the mail, as evidenced by the postmark,
if mailed with first-class postage prepaid and correctly addressed; or
(c) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
Oral notice is effective when communicated if communicated in a comprehensible
manner.
In calculating time periods for notice, when a period of time measured in
days, weeks, months, years or other measurement of time is prescribed for the
exercise of any privilege or the discharge of any duty, the first day shall not
be counted but the last day shall be counted.
Section 5.2 Waiver.
------
(a) A shareholder may waive any notice before or after the date and time
stated in the notice. Except as provided in subsection 5.2(b), the waiver must
be in writing, be signed by the shareholder entitled to the notice, and be
delivered to the corporation for inclusion in the minutes or filing with the
corporate records.
(b) A shareholder's attendance at a meeting (i) waives objection to lack
of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (ii) waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the shareholder objects to considering the matter
when it is presented.
(c) Unless required by the Code, neither the business transacted nor the
purpose of the meeting need be specified in the waiver.
(d) A director may waive any notice before or after the date and time
stated in the notice. Except as provided in subsection 5.2(e), the waiver must
be in writing, signed by the director entitled to the notice, and delivered to
the corporation for inclusion in the minutes or filing with the corporate
records.
7
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(e) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
ARTICLE SIX
OFFICERS
Section 6.1 Number. The officers of the corporation shall consist of a
------
Chairman of the Board, a President, a Secretary and a Treasurer and any other
officers as may be appointed by the Board of Directors or appointed by a duly
appointed officer pursuant to this Article Six. The Board of Directors shall
from time to time create and establish the duties of the other officers. Any two
or more offices may be held by the same person.
Section 6.2 Election and Term. All officers shall be appointed by the
-----------------
Board of Directors or by a duly appointed officer pursuant to this Article Six
and shall serve at the pleasure of the Board of Directors or the appointing
officers, as the case may be. All officers, however appointed, may be removed
with or without cause by the Board of Directors and any officer appointed by
another officer may also be removed by the appointing officer with or without
cause.
Section 6.3 Compensation. The compensation of all officers of the
------------
corporation appointed by the Board of Directors shall be fixed by the Board of
Directors.
Section 6.4 Chairman of the Board. The Chairman of the Board shall be
---------------------
the chief executive officer of the corporation and shall preside at all meetings
of the shareholders and the Board of Directors of the corporation. He shall
perform such other duties and have such other authority and power as the Board
of Directors may from time to time prescribe.
Section 6.5 President. In the absence or upon the disability of the
---------
Chairman of the Board, the President shall preside at meetings of the
shareholders and the Board of Directors. He shall be the chief operating
officer of the corporation and in connection therewith shall have general
supervision of the business of the corporation. The President shall see that
all orders and resolutions of the Board of Directors are carried into effect.
The President shall perform such other duties as may from time to time be
delegated by the Board of Directors.
Section 6.6 Vice Presidents. In the absence or disability of the
---------------
President, or at the direction of the President, the Vice President, if any,
shall perform the duties and exercise the powers of the President. If the
corporation has more than one Vice President, the one designated by the Board of
Directors shall act in lieu of the President. Vice Presidents shall perform
whatever duties and have whatever powers the Board of Directors may from time to
time assign.
Section 6.7 Secretary. The Secretary shall be responsible for preparing
---------
minutes of the
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acts and proceedings of all meetings of the shareholders and of the Board of
Directors and any committees thereof. The Secretary shall have authority to give
all notices required by the Code or other applicable law or these bylaws. The
Secretary shall be responsible for the custody of the corporate books, records,
contracts and other documents. The Secretary may affix the corporate seal to
any lawfully executed documents and shall sign any instruments as may require
his or her signature. The Secretary shall authenticate records of the
corporation. The Secretary shall perform whatever additional duties and have
whatever additional powers the Board of Directors may from time to time assign.
In the absence or disability of the Secretary or at the direction of the
President, any assistant secretary may perform the duties and exercise the
powers of the Secretary.
Section 6.8 Treasurer. The Treasurer shall be responsible for the
---------
custody of all funds and securities belonging to the corporation and for the
receipt, deposit or disbursement of funds and securities under the direction of
the Board of Directors. The Treasurer shall cause to be maintained full and
true accounts of all receipts and disbursements and shall make reports of the
same to the Board of Directors and the President upon request. The Treasurer
shall perform all duties as may be assigned to him from time to time by the
Board of Directors.
Section 6.9 Bonds. The Board of Directors may by resolution require any
-----
or all of the officers, agents or employees of the corporation to give bonds to
the corporation, with sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or positions, and to
comply with any other conditions as from time to time may be required by the
Board of Directors.
ARTICLE SEVEN
DISTRIBUTIONS AND SHARE DIVIDENDS
Section 7.1 Authorization or Declaration. Unless the articles of
----------------------------
incorporation provide otherwise, the Board of Directors from time to time in its
discretion may authorize or declare distributions or share dividends in
accordance with the Code.
Section 7.2 Record Date With Regard to Distributions and Share
--------------------------------------------------
Dividends. For the purpose of determining shareholders entitled to a
distribution (other than one involving a purchase, redemption or other
reacquisition of the corporation's shares) or a share dividend, the Board of
Directors may fix a date as the record date. If no record date is fixed by the
Board of Directors, the record date shall be determined in accordance with the
provisions of the Code.
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ARTICLE EIGHT
SHARES
Section 8.1 Authorization and Issuance of Shares. In accordance with
------------------------------------
the Code, the Board of Directors may authorize shares of any class or series
provided for in the articles of incorporation to be issued for any consideration
valid under the provisions of the Code. To the extent provided in the articles
of incorporation, the Board of Directors shall determine the preferences,
limitations and relative rights of the shares.
Section 8.2 Share Certificates. The interest of each shareholder in
------------------
the corporation shall be evidenced by a certificate or certificates representing
shares of the corporation which shall be in such form as the Board of Directors
from time to time may adopt. Share certificates shall be numbered
consecutively, shall be in registered form, shall indicate the date of issuance,
the name of the corporation and that it is organized under the laws of the State
of Georgia, the name of the shareholder, and the number and class of shares and
the designation of the series, if any, represented by the certificate. Each
certificate shall be signed by any one of the President, a Vice President, the
Secretary or the Treasurer. The corporate seal need not be affixed.
Section 8.3 Rights of Corporation With Respect to Registered Owners.
-------------------------------------------------------
Prior to due presentation for transfer of registration of its shares, the
corporation may treat the registered owner of the shares as the person
exclusively entitled to vote the shares, to receive any share dividend or
distribution with respect to the shares, and for all other purposes; and the
corporation shall not be bound to recognize any equitable or other claim to or
interest in the shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
Section 8.4 Transfers of Shares. Transfers of shares shall be made
-------------------
upon the transfer books of the corporation, kept at the office of the transfer
agent designated to transfer the shares, only upon direction of the person named
in the certificate, or by an attorney lawfully constituted in writing; and
before a new certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost, stolen
or destroyed, the requirements of Section 8.6 of these bylaws shall have been
met.
Section 8.5 Duty of Corporation to Register Transfer.
----------------------------------------
Notwithstanding any of the provisions of Section 8.4 of these bylaws, the
corporation is under a duty to register the transfer of its shares only if:
(a) the certificate is endorsed by the appropriate person or persons;
(b) reasonable assurance is given that the endorsement or affidavit is
genuine and effective;
(c) the corporation either has no duty to inquire into adverse claims or
has discharged
10
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that duty;
(d) the requirements of any applicable law relating to the collection of
taxes have been met; and
(e) the transfer in fact is rightful or is to a bona fide purchaser.
Section 8.6 Lost, Stolen or Destroyed Certificates. Any person claiming
--------------------------------------
a share certificate to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in the manner required by the Board of Directors and, if
the Board of Directors requires, shall give the corporation a bond of indemnity
in form and amount, and with one or more sureties satisfactory to the Board of
Directors, as the Board of Directors may require, whereupon an appropriate new
certificate may be issued in lieu of the one alleged to have been lost, stolen
or destroyed.
Section 8.7 Fixing of Record Date With Regard to Shareholder Action.
-------------------------------------------------------
For the purpose of determining shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote or to take any other
action, the Board of Directors may fix a future date as the record date, which
date shall be not more than seventy (70) days prior to the date on which the
particular action requiring a determination of shareholders is to be taken. A
determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. If no record date is fixed by the Board of Directors, the record date
shall be determined in accordance with the provisions of the Code.
ARTICLE NINE
INDEMNIFICATION
Section 9.1 Definitions. As used in this Article, the term:
-----------
(a) "Corporation" includes any domestic or foreign predecessor entity
of this corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
corporation or an individual who, while a director of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. A director is
considered to be serving an employee benefit plan at the corporation's request
if his duties to the corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
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(c) "Expenses" includes attorneys' fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan) or reasonable expenses incurred with respect to a proceeding.
(e) "Officer" means an individual who is or was an officer of the
corporation or an individual who, while an officer of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. An officer is
considered to be serving an employee benefit plan at the corporation's request
if his duties to the corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
"Officer" includes, unless the context requires otherwise, the estate or
personal representative of an officer.
(f) "Party" includes an individual who was, is, or is threatened to be
made, a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
Section 9.2 Basic Indemnification Arrangement.
---------------------------------
(a) Except as provided in subsections 9.2(d) and 9.2(e), the corporation
shall indemnify an individual who is made a party to a proceeding because he is
or was a director or officer against liability incurred by him in the proceeding
if he acted in a manner he believed in good faith to be in or not opposed to the
best interests of the corporation and, in the case of any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful.
(b) A person's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection 9.2(a).
(c) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, be determinative that the proposed indemnitee did not meet the standard
of conduct set forth in subsection 9.2(a).
(d) The corporation shall not indemnify a person under this Article in
connection with (i) a proceeding by or in the right of the corporation in which
such person was adjudged liable to the corporation or (ii) any proceeding in
which such person was adjudged liable on the basis that he improperly received a
personal benefit unless, and then only to the extent that, a court of competent
jurisdiction determines pursuant to Section 14-2-854 of the Code that in view of
the
12
<PAGE>
circumstances of the case, such person is fairly and reasonably entitled to
indemnification.
(e) Indemnification permitted under this Article in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 9.3 Advances for Expenses.
---------------------
(a) The corporation shall pay for or reimburse the reasonable expenses
incurred by a director or officer as a party to a proceeding in advance of final
disposition of the proceeding if:
(i) such person furnishes the corporation a written affirmation of
his good faith belief that he has met the standard of conduct set forth in
subsection 9.2(a); and
(ii) such person furnishes the corporation a written undertaking
(meeting the qualifications set forth in subsection 9.3(b)), executed
personally or on his behalf, to repay any advances if it is ultimately
determined that he is not entitled to indemnification under this Article or
otherwise.
(b) The undertaking required by subsection 9.3(a)(ii) must be an unlimited
general obligation of the proposed indemnitee but need not be secured and may be
accepted without reference to financial ability to make repayment.
Section 9.4 Authorization of and Determination of Entitlement to
----------------------------------------------------
Indemnification.
- ---------------
(a) The corporation acknowledges that indemnification of a director or
officer under Section 9.2 has been pre-authorized by the corporation in the
manner described in subsection 9.4(b). Nevertheless, the corporation shall not
indemnify a director or officer under Section 9.2 unless a separate
determination has been made in the specific case that indemnification of such
person is permissible in the circumstances because he has met the standard of
conduct set forth in subsection 9.2(a); provided, however, that regardless of
the result or absence of any such determination, and unless limited by the
articles of incorporation, to the extent that a director or officer has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party, or in defense of any claim, issue or matter therein,
because he is or was a director or officer, the corporation shall indemnify such
person against reasonable expenses incurred by him in connection therewith.
(b) The determination referred to in subsection 9.4(a) shall be made, at
the election of the Board of Directors:
(i) by the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
13
<PAGE>
(ii) if a quorum cannot be obtained under subdivision (i), by
majority vote of a committee duly designated by the Board of Directors (in
which designation directors who are parties may participate), consisting
solely of two or more directors not at the time parties to the proceeding;
(iii) by special legal counsel:
(1) selected by the Board of Directors or its committee in the
manner prescribed in subdivision (i) or (ii); or
(2) if a quorum of the Board of Directors cannot be obtained
under subdivision (i) and a committee cannot be designated under
subdivision (ii), selected by a majority vote of the full Board of
Directors (in which selection directors who are parties may
participate); or
(iv) by the shareholders; provided that shares owned by or voted
under the control of directors or officers who are at the time parties to
the proceeding may not be voted on the determination.
(c) As acknowledged in this Section 9.4, the corporation has pre-
authorized the indemnification of directors and officers hereunder, subject to a
case-by-case determination that the proposed indemnitee met the applicable
standard of conduct under subsection 9.2(a). Consequently, no further decision
need or shall be made on a case-by-case basis as to the authorization of the
corporation's indemnification of directors or officers hereunder. Nevertheless,
evaluation as to reasonableness of expenses of a director or officer in the
specific case shall be made in the same manner as the determination that
indemnification is permissible, as described in subsection 9.4(b), except that
if the determination is made by special legal counsel, evaluation as to
reasonableness of expenses shall be made by those entitled under subsection
9.4(b)(iii) to select counsel.
Section 9.5 Court-Ordered Indemnification and Advances for Expenses.
-------------------------------------------------------
Unless the articles of incorporation provide otherwise, a director or officer
who is a party to a proceeding may apply for indemnification or advances for
expenses to the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any notice
the court considers necessary, may order indemnification or advances for
expenses if it determines that:
(a) the applicant is entitled to mandatory indemnification under the final
clause of subsection 9.4(a) (in which case the corporation shall pay the
indemnitee's reasonable expenses incurred to obtain court-ordered
indemnification);
(b) the applicant is fairly and reasonably entitled to indemnification in
view of all the
14
<PAGE>
relevant circumstances, whether or not he met the standard of conduct set forth
in subsection 9.2(a) or was adjudged liable as described in subsection 9.2(d)
(but if he was adjudged so liable, any court-ordered indemnification shall be
limited to reasonable expenses incurred by the indemnitee unless the articles of
incorporation or a bylaw, contract or resolution approved or ratified by the
shareholders pursuant to Section 9.7 provides otherwise); or
(c) in the case of advances for expenses, the applicant is entitled
pursuant to the articles of incorporation, bylaws or any applicable resolution
or agreement, to payment for or reimbursement of his reasonable expenses
incurred as a party to a proceeding in advance of final disposition of the
proceeding.
Section 9.6 Indemnification of Employees and Agents. Unless the
---------------------------------------
articles of incorporation provide otherwise, the corporation may indemnify and
advance expenses under this Article to an employee or agent of the corporation
who is not a director or officer to the same extent as to a director or officer.
Section 9.7 Shareholder Approved Indemnification.
------------------------------------
(a) If authorized by the articles of incorporation or a bylaw, contract or
resolution approved or ratified by the shareholders of the corporation by a
majority of the votes entitled to be cast, the corporation may indemnify or
obligate itself to indemnify a person made a party to a proceeding, including a
proceeding brought by or in the right of the corporation, without regard to the
limitations in other sections of this Article. The corporation shall not
indemnify a person under this Section 9.7 for any liability incurred in a
proceeding in which the person is adjudged liable to the corporation or is
subjected to injunctive relief in favor of the corporation:
(i) for any appropriation, in violation of his duties, of any
business opportunity of the corporation;
(ii) for acts or omissions which involve intentional misconduct or a
knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-832 of the
Code; or
(iv) for any transaction from which he received an improper personal
benefit.
(b) Where approved or authorized in the manner described in subsection
9.7(a), the corporation may advance or reimburse expenses incurred in advance of
final disposition of the proceeding only if:
(i) the proposed indemnitee furnishes the corporation a written
affirmation of his good faith belief that his conduct does not constitute
behavior of the kind described in subsection 9.7(a)(i) - (iv); and
15
<PAGE>
(ii) the proposed indemnitee furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay any advances if
it is ultimately determined that he is not entitled to indemnification.
Section 9.8 Liability Insurance. The corporation may purchase and
-------------------
maintain insurance on behalf of a director or officer or an individual who is or
was an employee or agent of the corporation or who, while an employee or agent
of the corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against liability asserted against or incurred by him in
that capacity or arising from his status as a director, officer, employee or
agent, whether or not the corporation would have the power to indemnify him
against the same liability under this Article Nine.
Section 9.9 Witness Fees. Nothing in this Article shall limit the
------------
corporation's power to pay or reimburse expenses incurred by a person in
connection with his appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in the proceeding.
Section 9.10 Report to Shareholders. If the corporation indemnifies or
----------------------
advances expenses to a director in connection with a proceeding by or in the
right of the corporation, the corporation shall report the indemnification or
advance, in writing, to the shareholders with or before the notice of the next
shareholders' meeting.
Section 9.11 Amendments, Severability. No amendment, modification or
------------------------
rescission of this Article Nine, or any provision hereof, the effect of which
would diminish the rights to indemnification or advancement of expenses as set
forth herein shall be effective as to any person with respect to any action
taken or omitted by such person prior to such amendment, modification or
rescission. In the event that any of the provisions of this Article (including
any provision within a single section, subsection, division or sentence) is held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions of this Article shall remain enforceable
to the fullest extent permitted by law.
ARTICLE TEN
MISCELLANEOUS
Section 10.1 Inspection of Books and Records. The Board of Directors
-------------------------------
shall have the power to determine which accounts, books and records of the
corporation shall be opened to the inspection of the shareholders, except those
as may by law specifically be made open to inspection, and shall have the power
to fix reasonable rules and regulations not in conflict with the applicable law
for the inspection of accounts, books and records which by law or by
determination of the Board of Directors shall be open to inspection. Without
the prior approval of the Board of Directors in their discretion, the right of
inspection set forth in Section 14-2-1602(c) of the Code
16
<PAGE>
shall not be available to any shareholder owning two percent (2%) or less of the
shares outstanding.
Section 10.2 Fiscal Year. The Board of Directors is authorized to fix
-----------
the fiscal year of the corporation and to change the same from time to time as
it deems appropriate.
Section 10.3 Corporate Seal. If the Board of Directors determines that
--------------
there should be a corporate seal for the corporation, it shall be in the form as
the Board of Directors may from time to time determine.
Section 10.4 Annual Financial Statements. In accordance with the Code,
---------------------------
the corporation shall prepare and provide to the shareholders such financial
statements as may be required by the Code.
Section 10.5 Conflict With Articles of Incorporation. In the event that
---------------------------------------
any provision of these bylaws conflicts with any provision of the articles of
incorporation, the articles of incorporation shall govern.
ARTICLE ELEVEN
AMENDMENTS
Section 11.1 Power to Amend Bylaws. The Board of Directors shall have
---------------------
the power to alter, amend or repeal these bylaws or adopt new bylaws, but any
bylaws adopted by the Board of Directors may be altered, amended or repealed,
and new bylaws adopted, by the shareholders. The shareholders may prescribe, by
expressing in the action they take in adopting or amending any bylaw or bylaws,
that the bylaw or bylaws so adopted or amended shall not be altered, amended or
repealed by the Board of Directors.
17
<PAGE>
EXHIBIT 3.9
CRISP, OXFORD, MCKELVEY, & JONES, P.C.
ATTORNEYS AT LAW
P.O. BOX J
AMERICUS GA 31709
STATE OF GEORGIA
COUNTY OF SUMTER
ARTICLES OF INCORPORATION
OF
ENCORE INDUSTRIES, INC.
1.
The name of the corporation shall be ENCORE INDUSTRIES, INC.
2.
The corporation is being organized under the Georgia Business Corporation
Code for profit, with a perpetual duration.
3.
The corporation is a corporation organized for profit for the following
purposes: To carry on all lawful business purposes, including but not limited
to, maintenance, operation and conduct of a business buying, selling, exchanging
and leasing of all types of personal property and real estate; to import goods
for the purpose of resale; to act as a manufacturer's agent; and to do any and
all acts and things necessary, convenient, expedient, ancilliary to or in aid of
the foregoing as authorized by law.
<PAGE>
CRISP, OXFORD, MCKELVEY, & JONES, P.C.
ATTORNEYS AT LAW
P.O. BOX J
AMERICUS GA 31709
4.
The corporation has authority to issue not more 1,000,000 shares of common
stock at $1.00 par value.
5.
The corporation shall not commence business until the sum of at least FIVE
HUNDRED DOLLARS has been received for the issuance of common stock.
6.
The address of the registered office of the corporation shall be 1414
Felder Street, Americus, Georgia 31709, and the initial registered agent for the
corporation is Vicki B. Hendrick.
7.
The initial Board of Directors shall consist of one member who is Thomas
Meyers, and whose address is 3241 Brushwood Court, Clearwater, Florida 33519.
9.
The name and address of the incorporator of the corporation is Thomas
Meyers, 3241 Brushwood Court, Clearwater, Florida 33519.
10.
Any provision required to be set forth in Title 14, Chapter 2, Business
Corporations, may be set forth in the By-Laws of this Corporation.
<PAGE>
CRISP, OXFORD, MCKELVEY, & JONES, P.C.
ATTORNEYS AT LAW
P.O. BOX J
AMERICUS GA 31709
11.
Personal liability of a director to this Corporation or to its shareholders
for monetary damages for breach of duty of care or other duty as a Director is
hereby eliminated, provided, however, that the elimination of liability of a
Director shall not apply to any appropriation, in violation of his duties, of
any business opportunity of the Corporation; to any act or omission not in good
faith or which involves intentional misconduct or a knowing violation of the
law; the types of liability set forth in O.C.G.A. (S)14-2-154 or any transaction
from which the Director derived an improper personal benefit.
WHEREFORE PETITIONER PRAYS that such order or orders as may be appropriate
granting these Articles of Incorporation do issue.
CRISP, OXFORD,
McKELVEY & JONES, P.C.
By: /s/ Randolph B. Jones, Jr.
------------------------------
Randolph B. Jones, Jr.
Attorney for Incorporator
P.O. Box J
Americus, GA 31709
Tel. 912/924-6108
<PAGE>
CRISP, OXFORD, MCKELVEY, & JONES, P.C.
ATTORNEYS AT LAW
P.O. BOX J
AMERICUS GA 31709
STATE OF GEORGIA
COUNTY OF SUMTER
To: The Hon. Max Cleland
Secretary of State
Corporations Division
200 Piedmont Avenue, S.E.
Suite 306, West Tower
Atlanta, Georgia 30334
RE: ENCORE INDUSTRIES, INC.
Pursuant to the Georgia Business Corporation Code, please allow this to
serve as my consent to be the registered agent of Encore Industries, Inc.
This 3rd day of April, 1990.
/s/ Vicki B. Hendrick
----------------------------------
Vicki B. Hendrick
<PAGE>
EXHIBIT 3.10
BYLAWS
OF
ENCORE INDUSTRIES, INC.
AMENDED AND RESTATED AS OF FEBRUARY 28, 1997
<PAGE>
BYLAWS
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE ONE - OFFICES AND AGENT
Section 1.1 Registered Office and Agent.............................. 1
Section 1.2 Other Offices............................................ 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS
Section 2.1 Place of Meetings........................................ 1
Section 2.2 Annual Meetings.......................................... 1
Section 2.3 Special Meetings......................................... 1
Section 2.4 Notice of Meetings....................................... 1
Section 2.5 Voting Group............................................. 2
Section 2.6 Quorum................................................... 2
Section 2.7 Vote Required for Action................................. 2
Section 2.8 Voting of Shares......................................... 2
Section 2.9 Proxies.................................................. 2
Section 2.10 Presiding Officer........................................ 3
Section 2.11 Adjournments............................................. 3
Section 2.12 Action of Shareholders Without a Meeting................. 3
ARTICLE THREE - THE BOARD OF DIRECTORS
Section 3.1 General Powers........................................... 3
Section 3.2 Number, Election and Term of Office...................... 4
Section 3.3 Removal.................................................. 4
Section 3.4 Vacancies................................................ 4
Section 3.5 Compensation............................................. 4
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meetings......................................... 4
Section 4.2 Special Meetings......................................... 5
Section 4.3 Place of Meetings........................................ 5
Section 4.4 Notice of Meetings....................................... 5
Section 4.5 Quorum................................................... 5
Section 4.6 Vote Required for Action................................. 5
Section 4.7 Participation by Conference Telephone.................... 5
Section 4.8 Action by Directors Without a Meeting.................... 6
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 4.9 Adjournments............................................. 6
Section 4.10 Committees of the Board of Directors..................... 6
ARTICLE FIVE - MANNER OF NOTICE AND WAIVER AS TO
SHAREHOLDERS AND DIRECTORS
Section 5.1 Procedure................................................ 6
Section 5.2 Waiver................................................... 7
ARTICLE SIX - OFFICERS
Section 6.1 Number................................................... 8
Section 6.2 Election and Term........................................ 8
Section 6.3 Compensation............................................. 8
Section 6.4 President................................................ 8
Section 6.5 Vice Presidents.......................................... 8
Section 6.6 Secretary................................................ 8
Section 6.7 Treasurer................................................ 8
Section 6.8 Bonds.................................................... 9
ARTICLE SEVEN - DISTRIBUTIONS AND SHARE DIVIDENDS
Section 7.1 Authorization or Declaration............................. 9
Section 7.2 Record Date With Regard to Distributions
and Share Dividends...................................... 9
ARTICLE EIGHT - SHARES
Section 8.1 Authorization and Issuance of Shares..................... 9
Section 8.2 Share Certificates....................................... 9
Section 8.3 Rights of Corporation With Respect
to Registered Owners..................................... 10
Section 8.4 Transfers of Shares...................................... 10
Section 8.5 Duty of Corporation to Register Transfer................. 10
Section 8.6 Lost, Stolen or Destroyed Certificates................... 10
Section 8.7 Fixing of Record Date With Regard
Shareholder Action....................................... 11
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE NINE - INDEMNIFICATION
Section 9.1 Definitions.............................................. 11
Section 9.2 Basic Indemnification Arrangement........................ 12
Section 9.3 Advances for Expenses.................................... 12
Section 9.4 Authorization of and Determination of
Entitlement to Indemnification........................... 13
Section 9.5 Court-Ordered Indemnification and
Advances for Expenses.................................... 14
Section 9.6 Indemnification of Employees and Agents.................. 15
Section 9.7 Shareholder Approved Indemnification..................... 15
Section 9.8 Liability Insurance...................................... 15
Section 9.9 Witness Fees............................................. 16
Section 9.10 Report to Shareholders................................... 16
Section 9.11 Amendments; Severability................................. 16
ARTICLE TEN - MISCELLANEOUS
Section 10.1 Inspection of Books and Records.......................... 16
Section 10.2 Fiscal Year.............................................. 16
Section 10.3 Corporate Seal........................................... 16
Section 10.4 Annual Financial Statements.............................. 16
Section 10.5 Conflict With Articles of Incorporation.................. 17
ARTICLE ELEVEN - AMENDMENTS
Section 11.1 Power to Amend Bylaws.................................... 17
</TABLE>
iii
<PAGE>
ARTICLE ONE
OFFICES AND AGENT
Section 1.1 Registered Office and Agent. The corporation shall maintain
---------------------------
a registered office in the State of Georgia and shall have a registered agent
whose business office is identical to the registered office.
Section 1.2 Other Offices. In addition to its registered office, the
-------------
corporation may have offices at any other place or places, within or without the
State of Georgia, as the Board of Directors may from time to time select or as
the business of the corporation may require or make desirable.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
Section 2.1 Place of Meetings. Meetings of shareholders may be held at
-----------------
any place within or without the State of Georgia, as set forth in the notice
thereof, or in the event of a meeting held pursuant to waiver of notice, as set
forth in the waiver, or if no place is so specified, at the principal office of
the corporation.
Section 2.2 Annual Meetings. The annual meeting of shareholders shall
---------------
be held on May 1 unless that day is a legal holiday, and in that event on the
next succeeding business day, or on such other day as may be determined from
time to time by the Board of Directors, for the purpose of electing directors
and transacting any and all business that may properly come before the meeting.
If an annual meeting of shareholders is not held as provided in this Section
2.2, any business, including the election of directors, that might properly have
been acted upon at that meeting may be acted upon at a special meeting in lieu
of the annual meeting held pursuant to these bylaws or held pursuant to a court
order.
Section 2.3 Special Meetings. Special meetings of shareholders or a
----------------
special meeting in lieu of the annual meeting of shareholders may be called at
any time by the Board of Directors or the President. Special meetings of
shareholders or a special meeting in lieu of the annual meeting of shareholders
shall be called by the corporation upon the written request of the holders of
twenty-five percent (25%) of all the votes entitled to be cast on the issue or
issues proposed to be considered at the proposed special meeting.
Section 2.4 Notice of Meetings. Unless waived as contemplated in
------------------
Section 5.2, a notice of each meeting of shareholders stating the date, time and
place of the meeting shall be given not less than ten (10) days nor more than
sixty (60) days before the date thereof, by or at the direction of the
President, the Secretary or the officer or persons calling the meeting, to each
shareholder entitled to vote at that meeting. In the case of an annual meeting,
the notice need not state the purpose or purposes of the meeting unless the
articles of incorporation or the Georgia Business Corporation Code (the "Code")
requires otherwise. In the case of a special meeting, including a special
meeting in lieu of an annual meeting, the notice of meeting shall
<PAGE>
state the purpose or purposes for which the meeting is called.
Section 2.5 Voting Group. Voting group means all shares of one or more
------------
classes or series that are entitled to vote and be counted together collectively
on a matter at a meeting of shareholders. All shares entitled to vote generally
on the matter are for that purpose a single voting group.
Section 2.6 Quorum. With respect to shares entitled to vote as a
------
separate voting group on a matter at a meeting of shareholders, the presence, in
person or by proxy, of a majority of the votes entitled to be cast on the matter
by the voting group shall constitute a quorum of that voting group for action on
that matter unless the articles of incorporation or the Code provides otherwise.
Once a share is represented for any purpose at a meeting, other than solely to
object to holding the meeting or to transacting business at the meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of the meeting unless a new record date is or must be set for the
adjourned meeting pursuant to Section 8.7 of these bylaws.
Section 2.7 Vote Required for Action. If a quorum exists, action on a
------------------------
matter (other than the election of directors) by a voting group is approved if
the votes cast within the voting group favoring the action exceed the votes cast
opposing the action, unless the articles of incorporation, provisions of these
bylaws validly adopted by the shareholders or the Code requires a greater number
of affirmative votes. If the articles of incorporation or the Code provides for
voting by two or more voting groups on a matter, action on that matter is taken
only when voted upon by each of those voting groups counted separately. Action
may be taken by one voting group on a matter even though no action is taken by
another voting group entitled to vote on the matter. With regard to the
election of directors, unless otherwise provided in the articles of
incorporation, if a quorum exists, action on the election of directors is taken
by a plurality of the votes cast by the shares entitled to vote in the election.
Section 2.8 Voting of Shares. Unless the articles of incorporation or
----------------
the Code provides otherwise, each outstanding share having voting rights shall
be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Voting on all matters shall be by voice vote or by show of hands
unless any qualified voter, prior to the voting on any matter, demands vote by
ballot, in which case each ballot shall state the name of the shareholder voting
and the number of shares voted by him, and if the ballot be cast by proxy, it
shall also state the name of the proxy.
Section 2.9 Proxies. A shareholder entitled to vote pursuant to Section
-------
2. 8 may vote in person or by proxy pursuant to an appointment of proxy executed
in writing by the shareholder or by his attorney-in-fact. An appointment of
proxy shall be valid for only one meeting to be specified therein, and any
adjournments of such meeting, but shall not be valid for more than eleven months
unless expressly provided therein. Appointments of proxy shall be dated and
filed with the records of the meeting to which they relate. If the validity of
any appointment of proxy is questioned, it must be submitted to the secretary of
the meeting of shareholders for examination or to a proxy officer or committee
appointed by the person
2
<PAGE>
presiding at the meeting. The secretary of the meeting or, if appointed, the
proxy officer or committee, as the case may be, shall determine the validity or
invalidity of any appointment of proxy submitted and reference by the secretary
in the minutes of the meeting to the regularity of an appointment of proxy shall
be received as prima facie evidence of the facts stated for the purpose of
establishing the presence of a quorum at the meeting and for all other purposes.
Section 2.10 Presiding Officer. The President shall serve as the
-----------------
chairman of every meeting of shareholders unless another person is elected by
the shareholders to serve as chairman at the meeting. The chairman shall
appoint any persons he deems required to assist with the meeting.
Section 2.11 Adjournments. Whether or not a quorum is present to
------------
organize a meeting, any meeting of shareholders (including an adjourned meeting)
may be adjourned by the holders of a majority of the voting shares represented
at the meeting to reconvene at a specific time and place, but no later than 120
days after the date fixed for the original meeting unless the requirements of
the Code concerning the selection of a new record date have been met. At any
reconvened meeting within that time period, any business may be transacted that
could have been transacted at the meeting that was adjourned. If notice of the
adjourned meeting was properly given, it shall not be necessary to give any
notice of the reconvened meeting or of the business to be transacted, if the
date, time and place of the reconvened meeting are announced at the meeting that
was adjourned and before adjournment; provided, however, that if a new record
date is or must be fixed, notice of the reconvened meeting must be given to
persons who are shareholders as of the new record date.
Section 2.12 Action of Shareholders Without a Meeting. Action required
----------------------------------------
or permitted to be taken at a meeting of shareholders may be taken without a
meeting if the action is taken by all shareholders entitled to vote on the
action or, if so provided in the articles of incorporation, by persons who would
be entitled to vote at a meeting shares having voting power to cast not less
than the minimum number (or numbers, in the case of voting by groups) of votes
that would be necessary to authorize or take the action at a meeting at which
all shareholders entitled to vote were present and voted. The action must be
evidenced by one or more written consents describing the action taken, signed by
shareholders entitled to take action without a meeting, and delivered to the
corporation for inclusion in the minutes or filing with the corporate records.
The corporation shall give written notice of actions taken as required by the
Code.
ARTICLE THREE
THE BOARD OF DIRECTORS
Section 3.1 General Powers. All corporate powers shall be exercised by
--------------
or under the authority of, and the business and affairs of the corporation shall
be managed under the direction of, the Board of Directors. In addition to the
powers and authority expressly conferred upon it by these bylaws, the Board of
Directors may exercise all powers of the corporation and do all lawful acts and
things that are not by law, by any legal agreement among shareholders, by the
3
<PAGE>
articles of incorporation or by these bylaws directed or required to be
exercised or done by the shareholders.
Section 3.2 Number, Election and Term of Office. The number of
-----------------------------------
directors of the corporation shall be two (2). Except as provided in Section
3.4, the directors shall be elected by the vote of shareholders as set forth in
Section 2.7 at each annual meeting of shareholders or special meeting in lieu of
the annual meeting. Except in case of death, written resignation, retirement,
disqualification or removal, each director shall serve until the next succeeding
annual meeting and thereafter until his successor is elected and qualifies or
until the number of directors is decreased.
Section 3.3 Removal. One or more directors may be removed from office
-------
with or without cause by the shareholders by a majority of the votes entitled to
be cast. If the director was elected by a voting group, only the Shareholders
of that voting group may participate in the vote to remove him. Removal action
may be taken at any meeting of shareholders with respect to which the notice
stated that the purpose, or one of the purposes, of the meeting is removal of
the director, and a removed director's successor may be elected at the same
meeting.
Section 3.4 Vacancies. A vacancy occurring in the Board of Directors,
---------
other than by reason of an increase in the number of directors, shall be filled
for the unexpired term by the first to take action of (a) the shareholders or
(b) the Board of Directors, and if the directors remaining in office constitute
fewer than a quorum of the Board of Directors, they may fill the vacancy by the
affirmative vote of a majority of all the directors remaining in office. If the
vacant office was held by a director elected by a voting group, only the holders
of shares of that voting group or the remaining directors elected by that voting
group are entitled to vote to fill the vacancy. A vacancy occurring in the
Board of Directors by reason of an increase in the number of directors shall be
filled in like manner as any other vacancy but if filled by action of the Board
of Directors, shall only be for a term of office continuing until the next
election of directors by the shareholders and until the election and
qualification of a successor.
Section 3.5 Compensation. Unless the articles of incorporation provide
------------
otherwise, the Board of Directors may determine from time to time the
compensation, if any, directors may receive for their services as directors. A
director may also serve the corporation in a capacity other than that of
director and receive compensation, as determined by the Board of Directors, for
services rendered in such other capacity.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meeting. Regular meetings of the Board of Directors
---------------
shall be held immediately after the annual meeting of shareholders or a special
meeting in lieu of the annual meeting. In addition, the Board of Directors may
schedule other meetings to occur at regular intervals throughout the year.
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Section 4.2 Special Meetings. Special meetings of the Board of
----------------
Directors may be called by or at the request of the President or by any two
directors in office at that time.
Section 4.3 Place of Meetings. Directors may hold their meetings at any
-----------------
place within or without the State of Georgia as the Board of Directors may from
time to time establish for regular meetings or as set forth in the notice of
special meetings or, in the event of a meeting held pursuant to waiver of
notice, as set forth in the waiver.
Section 4.4 Notice of Meetings. No notice shall be required for any
------------------
regularly scheduled meeting of the directors. Unless waived as contemplated in
Section 5.2, each director shall be given at least one day's notice (as set
forth in Section 5.1) of each special meeting stating the date, time and place
of the meeting.
Section 4.5 Quorum. Unless a greater number is required by the articles
------
of incorporation, these bylaws or the Code, a quorum of the Board of Directors
consists of a majority of the total number of directors that has been prescribed
by resolution of the shareholders or of the Board of Directors pursuant to
Section 3.2.
Section 4.6 Vote Required for Action.
------------------------
(a) If a quorum is present when a vote is taken, the affirmative vote of a
majority of directors present is the act of the Board of Directors unless the
Code, the articles of incorporation or these bylaws require the vote of a
greater number of directors.
(b) A director who is present at a meeting of the Board of Directors or a
committee of the Board of Directors when corporate action is taken is deemed to
have assented to the action taken unless:
(i) he objects at the beginning of the meeting (or promptly upon his
arrival) to holding it or transacting business at the meeting;
(ii) his dissent or abstention from the action taken is entered in
the minutes of the meeting; or
(iii) he delivers written notice of his dissent or abstention to the
presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting.
The right of dissent or abstention is not available to a director who votes in
favor of the action taken.
Section 4.7 Participation by Conference Telephone. Any or all directors
-------------------------------------
may participate in a meeting of the Board of Directors or of a committee of the
Board of Directors through the use of any means of communication by which all
directors participating may
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simultaneously hear each other during the meeting.
Section 4.8 Action by Directors Without a Meeting. Unless the articles
-------------------------------------
of incorporation or these bylaws provide otherwise, any action required or
permitted to be taken at any meeting of the Board of Directors, or any action
that may be taken at a meeting of a committee of the Board of Directors, may be
taken without a meeting if the action is taken by all the members of the Board
of Directors (or of the committee, as the case may be). The action must be
evidenced by one or more written consents describing the action taken, signed by
each director (or each director serving on the committee, as the case may be),
and delivered to the corporation for inclusion in the minutes or filing with the
corporate records.
Section 4.9 Adjournments. Whether or not a quorum is present to
------------
organize a meeting, any meeting of directors (including an adjourned meeting)
may be adjourned by a majority of the directors present to reconvene at a
specific time and place. At any reconvened meeting, any business may be
transacted that could have been transacted at the meeting that was adjourned.
If notice of the adjourned meeting was properly given, it shall not be necessary
to give any notice of the reconvened meeting or of the business to be
transacted, if the date, time and place of the reconvened meeting are announced
at the meeting that was adjourned.
Section 4.10 Committees of the Board of Directors. The Board of
------------------------------------
Directors by resolution may designate from among its members an executive
committee and one or more other committees, each consisting of one or more
directors all of whom serve at the pleasure of the Board of Directors. Except
as limited by the Code, each committee shall have the authority set forth in the
resolution establishing the committee. The provisions of this Article Four as
to the Board of Directors and its deliberations shall be applicable to any
committee of the Board of Directors.
ARTICLE FIVE
MANNER OF NOTICE AND WAIVER AS TO SHAREHOLDERS AND DIRECTORS
Section 5.1 Procedure. Whenever these bylaws require notice to be given
---------
to any shareholder or director, the notice shall be given in accordance with
this Section 5.1. Notice under these bylaws shall be in writing unless oral
notice is reasonable under the circumstances. Any notice to directors may be
written or oral. Notice may be communicated in person; by telephone, telegraph,
teletype or other form of wire or wireless communication; or by mail or private
carrier. If these forms of personal notice are impracticable, notice may be
communicated by a newspaper of general circulation in the area where published,
or by radio, television or other form of public broadcast communication. Written
notice to the shareholders, if in a comprehensible form, is effective when
mailed, if mailed with first-class postage prepaid and correctly addressed to
the shareholder's address shown in the corporation's current record of
shareholders. Except as otherwise provided in this Section 5.1, written notice,
if in a comprehensible form, is effective at the earliest of the following:
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(a) when received or when delivered, properly addressed, to the
addressee's last known principal place of business or residence;
(b) five days after its deposit in the mail, as evidenced by the postmark,
if mailed with first-class postage prepaid and correctly addressed; or
(c) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by or on
behalf of the addressee.
Oral notice is effective when communicated if communicated in a comprehensible
manner.
In calculating time periods for notice, when a period of time measured in
days, weeks, months, years or other measurement of time is prescribed for the
exercise of any privilege or the discharge of any duty, the first day shall not
be counted but the last day shall be counted.
Section 5.2 Waiver.
------
(a) A shareholder may waive any notice before or after the date and time
stated in the notice. Except as provided in subsection 5.2(b), the waiver must
be in writing, be signed by the shareholder entitled to the notice, and be
delivered to the corporation for inclusion in the minutes or filing with the
corporate records.
(b) A shareholder's attendance at a meeting (i) waives objection to lack
of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; and (ii) waives objection to consideration of a particular
matter at the meeting that is not within the purpose or purposes described in
the meeting notice, unless the shareholder objects to considering the matter
when it is presented.
(c) Unless required by the Code, neither the business transacted nor the
purpose of the meeting need be specified in the waiver.
(d) A director may waive any notice before or after the date and time
stated in the notice. Except as provided in subsection 5.2(e), the waiver must
be in writing, signed by the director entitled to the notice, and delivered to
the corporation for inclusion in the minutes or filing with the corporate
records.
(e) A director's attendance at or participation in a meeting waives any
required notice to him of the meeting unless the director at the beginning of
the meeting (or promptly upon his arrival) objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or assent
to action taken at the meeting.
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ARTICLE SIX
OFFICERS
Section 6.1 Number. The officers of the corporation shall consist of a
------
Chairman of the Board, a President, a Secretary and a Treasurer and any other
officers as may be appointed by the Board of Directors or appointed by a duly
appointed officer pursuant to this Article Six. The Board of Directors shall
from time to time create and establish the duties of the other officers. Any two
or more offices may be held by the same person.
Section 6.2 Election and Term. All officers shall be appointed by the
-----------------
Board of Directors or by a duly appointed officer pursuant to this Article Six
and shall serve at the pleasure of the Board of Directors or the appointing
officers, as the case may be. All officers, however appointed, may be removed
with or without cause by the Board of Directors and any officer appointed by
another officer may also be removed by the appointing officer with or without
cause.
Section 6.3 Compensation. The compensation of all officers of the
------------
corporation appointed by the Board of Directors shall be fixed by the Board of
Directors.
Section 6.4 Chairman of the Board. The Chairman of the Board shall be
---------------------
the chief executive officer of the corporation and shall preside at all meetings
of the shareholders and the Board of Directors of the corporation. He shall
perform such other duties and have such other authority and power as the Board
of Directors may from time to time prescribe.
Section 6.5 President. In the absence or upon the disability of the
---------
Chairman of the Board, the President shall preside at meetings of the
shareholders and the Board of Directors. He shall be the chief operating
officer of the corporation and in connection therewith shall have general
supervision of the business of the corporation. The President shall see that
all orders and resolutions of the Board of Directors are carried into effect.
The President shall perform such other duties as may from time to time be
delegated by the Board of Directors.
Section 6.6 Vice Presidents. In the absence or disability of the
---------------
President, or at the direction of the President, the Vice President, if any,
shall perform the duties and exercise the powers of the President. If the
corporation has more than one Vice President, the one designated by the Board of
Directors shall act in lieu of the President. Vice Presidents shall perform
whatever duties and have whatever powers the Board of Directors may from time to
time assign.
Section 6.7 Secretary. The Secretary shall be responsible for preparing
---------
minutes of the acts and proceedings of all meetings of the shareholders and of
the Board of Directors and any committees thereof. The Secretary shall have
authority to give all notices required by the Code or other applicable law or
these bylaws. The Secretary shall be responsible for the custody of the
corporate books, records, contracts and other documents. The Secretary may affix
the corporate seal to any lawfully executed documents and shall sign any
instruments as may require
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his or her signature. The Secretary shall authenticate records of the
corporation. The Secretary shall perform whatever additional duties and have
whatever additional powers the Board of Directors may from time to time assign.
In the absence or disability of the Secretary or at the direction of the
President, any assistant secretary may perform the duties and exercise the
powers of the Secretary.
Section 6.8 Treasurer. The Treasurer shall be responsible for the
---------
custody of all funds and securities belonging to the corporation and for the
receipt, deposit or disbursement of funds and securities under the direction of
the Board of Directors. The Treasurer shall cause to be maintained full and
true accounts of all receipts and disbursements and shall make reports of the
same to the Board of Directors and the President upon request. The Treasurer
shall perform all duties as may be assigned to him from time to time by the
Board of Directors.
Section 6.9 Bonds. The Board of Directors may by resolution require any
-----
or all of the officers, agents or employees of the corporation to give bonds to
the corporation, with sufficient surety or sureties, conditioned on the faithful
performance of the duties of their respective offices or positions, and to
comply with any other conditions as from time to time may be required by the
Board of Directors.
ARTICLE SEVEN
DISTRIBUTIONS AND SHARE DIVIDENDS
Section 7.1 Authorization or Declaration. Unless the articles of
----------------------------
incorporation provide otherwise, the Board of Directors from time to time in its
discretion may authorize or declare distributions or share dividends in
accordance with the Code.
Section 7.2 Record Date With Regard to Distributions and Share
--------------------------------------------------
Dividends. For the purpose of determining shareholders entitled to a
- ---------
distribution (other than one involving a purchase, redemption or other
reacquisition of the corporation's shares) or a share dividend, the Board of
Directors may fix a date as the record date. If no record date is fixed by the
Board of Directors, the record date shall be determined in accordance with the
provisions of the Code.
ARTICLE EIGHT
SHARES
Section 8.1 Authorization and Issuance of Shares. In accordance with
------------------------------------
the Code, the Board of Directors may authorize shares of any class or series
provided for in the articles of incorporation to be issued for any consideration
valid under the provisions of the Code. To the extent provided in the articles
of incorporation, the Board of Directors shall determine the preferences,
limitations and relative rights of the shares.
Section 8.2 Share Certificates. The interest of each shareholder in
------------------
the corporation
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shall be evidenced by a certificate or certificates representing shares of the
corporation which shall be in such form as the Board of Directors from time to
time may adopt. Share certificates shall be numbered consecutively, shall be in
registered form, shall indicate the date of issuance, the name of the
corporation and that it is organized under the laws of the State of Georgia, the
name of the shareholder, and the number and class of shares and the designation
of the series, if any, represented by the certificate. Each certificate shall be
signed by any one of the President, a Vice President, the Secretary or the
Treasurer. The corporate seal need not be affixed.
Section 8.3 Rights of Corporation With Respect to Registered Owners.
-------------------------------------------------------
Prior to due presentation for transfer of registration of its shares, the
corporation may treat the registered owner of the shares as the person
exclusively entitled to vote the shares, to receive any share dividend or
distribution with respect to the shares, and for all other purposes; and the
corporation shall not be bound to recognize any equitable or other claim to or
interest in the shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by law.
Section 8.4 Transfers of Shares. Transfers of shares shall be made
-------------------
upon the transfer books of the corporation, kept at the office of the transfer
agent designated to transfer the shares, only upon direction of the person named
in the certificate, or by an attorney lawfully constituted in writing; and
before a new certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost, stolen
or destroyed, the requirements of Section 8.6 of these bylaws shall have been
met.
Section 8.5 Duty of Corporation to Register Transfer. Notwithstanding
----------------------------------------
any of the provisions of Section 8.4 of these bylaws, the corporation is under a
duty to register the transfer of its shares only if:
(a) the certificate is endorsed by the appropriate person or persons;
(b) reasonable assurance is given that the endorsement or affidavit is
genuine and effective;
(c) the corporation either has no duty to inquire into adverse claims or
has discharged that duty;
(d) the requirements of any applicable law relating to the collection of
taxes have been met; and
(e) the transfer in fact is rightful or is to a bona fide purchaser.
Section 8.6 Lost, Stolen or Destroyed Certificates. Any person
--------------------------------------
claiming a share certificate to be lost, stolen or destroyed shall make an
affidavit or affirmation of the fact in the manner required by the Board of
Directors and, if the Board of Directors requires, shall give
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the corporation a bond of indemnity in form and amount, and with one or more
sureties satisfactory to the Board of Directors, as the Board of Directors may
require, whereupon an appropriate new certificate may be issued in lieu of the
one alleged to have been lost, stolen or destroyed.
Section 8.7 Fixing of Record Date With Regard to Shareholder Action.
-------------------------------------------------------
For the purpose of determining shareholders entitled to notice of a
shareholders' meeting, to demand a special meeting, to vote or to take any other
action, the Board of Directors may fix a future date as the record date, which
date shall be not more than seventy (70) days prior to the date on which the
particular action requiring a determination of shareholders is to be taken. A
determination of shareholders entitled to notice of or to vote at a
shareholders' meeting is effective for any adjournment of the meeting unless the
Board of Directors fixes a new record date, which it must do if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting. If no record date is fixed by the Board of Directors, the record date
shall be determined in accordance with the provisions of the Code.
ARTICLE NINE
INDEMNIFICATION
Section 9.1 Definitions. As used in this Article, the term:
-----------
(a) "Corporation" includes any domestic or foreign predecessor entity
of this corporation in a merger or other transaction in which the predecessor's
existence ceased upon consummation of the transaction.
(b) "Director" means an individual who is or was a director of the
corporation or an individual who, while a director of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise. A director is
considered to be serving an employee benefit plan at the corporation's request
if his duties to the corporation also impose duties on, or otherwise involve
services by, him to the plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the estate or
personal representative of a director.
(c) "Expenses" includes attorneys' fees.
(d) "Liability" means the obligation to pay a judgment, settlement,
penalty, fine (including an excise tax assessed with respect to an employee
benefit plan) or reasonable expenses incurred with respect to a proceeding.
(e) "Officer" means an individual who is or was an officer of the
corporation or an individual who, while an officer of the corporation, is or was
serving at the corporation's request as a director, officer, partner, trustee,
employee or agent of another foreign or domestic
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corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. An officer is considered to be serving an employee benefit plan at
the corporation's request if his duties to the corporation also impose duties
on, or otherwise involve services by, him to the plan or to participants in or
beneficiaries of the plan. "Officer" includes, unless the context requires
otherwise, the estate or personal representative of an officer.
(f) "Party" includes an individual who was, is, or is threatened to be
made, a named defendant or respondent in a proceeding.
(g) "Proceeding" means any threatened, pending or completed action, suit
or proceeding, whether civil, criminal, administrative or investigative and
whether formal or informal.
Section 9.2 Basic Indemnification Arrangement.
---------------------------------
(a) Except as provided in subsections 9.2(d) and 9.2(e), the
corporation shall indemnify an individual who is made a party to a proceeding
because he is or was a director or officer against liability incurred by him in
the proceeding if he acted in a manner he believed in good faith to be in or not
opposed to the best interests of the corporation and, in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful.
(b) A person's conduct with respect to an employee benefit plan for a
purpose he believed in good faith to be in the interests of the participants in
and beneficiaries of the plan is conduct that satisfies the requirement of
subsection 9.2(a).
(c) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, be determinative that the proposed indemnitee did not meet the standard
of conduct set forth in subsection 9.2(a).
(d) The corporation shall not indemnify a person under this Article in
connection with (i) a proceeding by or in the right of the corporation in which
such person was adjudged liable to the corporation or (ii) any proceeding in
which such person was adjudged liable on the basis that he improperly received a
personal benefit unless, and then only to the extent that, a court of competent
jurisdiction determines pursuant to Section 14-2-854 of the Code that in view of
the circumstances of the case, such person is fairly and reasonably entitled to
indemnification.
(e) Indemnification permitted under this Article in connection with a
proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Section 9.3 Advances for Expenses.
---------------------
(a) The corporation shall pay for or reimburse the reasonable expenses
incurred by a director or officer as a party to a proceeding in advance of final
disposition of the proceeding
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if:
(i) such person furnishes the corporation a written affirmation of
his good faith belief that he has met the standard of conduct set forth in
subsection 9.2(a); and
(ii) such person furnishes the corporation a written undertaking
(meeting the qualifications set forth in subsection 9.3(b)), executed
personally or on his behalf, to repay any advances if it is ultimately
determined that he is not entitled to indemnification under this Article or
otherwise.
(b) The undertaking required by subsection 9.3(a)(ii) must be an unlimited
general obligation of the proposed indemnitee but need not be secured and may be
accepted without reference to financial ability to make repayment.
Section 9.4 Authorization of and Determination of Entitlement to
----------------------------------------------------
Indemnification.
- ---------------
(a) The corporation acknowledges that indemnification of a director or
officer under Section 9.2 has been pre-authorized by the corporation in the
manner described in subsection 9.4(b). Nevertheless, the corporation shall not
indemnify a director or officer under Section 9.2 unless a separate
determination has been made in the specific case that indemnification of such
person is permissible in the circumstances because he has met the standard of
conduct set forth in subsection 9.2(a); provided, however, that regardless of
the result or absence of any such determination, and unless limited by the
articles of incorporation, to the extent that a director or officer has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party, or in defense of any claim, issue or matter therein,
because he is or was a director or officer, the corporation shall indemnify such
person against reasonable expenses incurred by him in connection therewith.
(b) The determination referred to in subsection 9.4(a) shall be made, at
the election of the Board of Directors:
(i) by the Board of Directors by majority vote of a quorum
consisting of directors not at the time parties to the proceeding;
(ii) if a quorum cannot be obtained under subdivision (i), by
majority vote of a committee duly designated by the Board of Directors (in
which designation directors who are parties may participate), consisting
solely of two or more directors not at the time parties to the proceeding;
(iii) by special legal counsel:
(1) selected by the Board of Directors or its committee in the
manner prescribed in subdivision (i) or (ii); or
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(2) if a quorum of the Board of Directors cannot be obtained
under subdivision (i) and a committee cannot be designated under
subdivision (ii), selected by a majority vote of the full Board of
Directors (in which selection directors who are parties may
participate); or
(iv) by the shareholders; provided that shares owned by or voted
under the control of directors or officers who are at the time parties to
the proceeding may not be voted on the determination.
(c) As acknowledged in this Section 9.4, the corporation has pre-authorized
the indemnification of directors and officers hereunder, subject to a case-by-
case determination that the proposed indemnitee met the applicable standard of
conduct under subsection 9.2(a). Consequently, no further decision need or shall
be made on a case-by-case basis as to the authorization of the corporation's
indemnification of directors or officers hereunder. Nevertheless, evaluation as
to reasonableness of expenses of a director or officer in the specific case
shall be made in the same manner as the determination that indemnification is
permissible, as described in subsection 9.4(b), except that if the determination
is made by special legal counsel, evaluation as to reasonableness of expenses
shall be made by those entitled under subsection 9.4(b)(iii) to select counsel.
Section 9.5 Court-Ordered Indemnification and Advances for Expenses.
-------------------------------------------------------
Unless the articles of incorporation provide otherwise, a director or officer
who is a party to a proceeding may apply for indemnification or advances for
expenses to the court conducting the proceeding or to another court of competent
jurisdiction. On receipt of an application, the court, after giving any notice
the court considers necessary, may order indemnification or advances for
expenses if it determines that:
(a) the applicant is entitled to mandatory indemnification under the final
clause of subsection 9.4(a) (in which case the corporation shall pay the
indemnitee's reasonable expenses incurred to obtain court-ordered
indemnification);
(b) the applicant is fairly and reasonably entitled to indemnification in
view of all the relevant circumstances, whether or not he met the standard of
conduct set forth in subsection 9.2(a) or was adjudged liable as described in
subsection 9.2(d) (but if he was adjudged so liable, any court-ordered
indemnification shall be limited to reasonable expenses incurred by the
indemnitee unless the articles of incorporation or a bylaw, contract or
resolution approved or ratified by the shareholders pursuant to Section 9.7
provides otherwise); or
(c) in the case of advances for expenses, the applicant is entitled
pursuant to the articles of incorporation, bylaws or any applicable resolution
or agreement, to payment for or reimbursement of his reasonable expenses
incurred as a party to a proceeding in advance of final disposition of the
proceeding.
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Section 9.6 Indemnification of Employees and Agents. Unless the
---------------------------------------
articles of incorporation provide otherwise, the corporation may indemnify and
advance expenses under this Article to an employee or agent of the corporation
who is not a director or officer to the same extent as to a director or officer.
Section 9.7 Shareholder Approved Indemnification.
------------------------------------
(a) If authorized by the articles of incorporation or a bylaw, contract or
resolution approved or ratified by the shareholders of the corporation by a
majority of the votes entitled to be cast, the corporation may indemnify or
obligate itself to indemnify a person made a party to a proceeding, including a
proceeding brought by or in the right of the corporation, without regard to the
limitations in other sections of this Article. The corporation shall not
indemnify a person under this Section 9.7 for any liability incurred in a
proceeding in which the person is adjudged liable to the corporation or is
subjected to injunctive relief in favor of the corporation:
(i) for any appropriation, in violation of his duties, of any
business opportunity of the corporation;
(ii) for acts or omissions which involve intentional misconduct or a
knowing violation of law;
(iii) for the types of liability set forth in Section 14-2-832 of the
Code; or
(iv) for any transaction from which he received an improper personal
benefit.
(b) Where approved or authorized in the manner described in subsection
9.7(a), the corporation may advance or reimburse expenses incurred in advance of
final disposition of the proceeding only if:
(i) the proposed indemnitee furnishes the corporation a written
affirmation of his good faith belief that his conduct does not constitute
behavior of the kind described in subsection 9.7(a)(i) - (iv); and
(ii) the proposed indemnitee furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay any advances if
it is ultimately determined that he is not entitled to indemnification.
Section 9.8 Liability Insurance. The corporation may purchase and
-------------------
maintain insurance on behalf of a director or officer or an individual who is or
was an employee or agent of the corporation or who, while an employee or agent
of the corporation, is or was serving at the request of the corporation as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against liability asserted against or incurred by him in
that capacity or arising from his status as a director, officer, employee or
agent, whether or not the corporation would have
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the power to indemnify him against the same liability under this Article Nine.
Section 9.9 Witness Fees. Nothing in this Article shall limit the
------------
corporation's power to pay or reimburse expenses incurred by a person in
connection with his appearance as a witness in a proceeding at a time when he
has not been made a named defendant or respondent in the proceeding.
Section 9.10 Report to Shareholders. If the corporation indemnifies or
----------------------
advances expenses to a director in connection with a proceeding by or in the
right of the corporation, the corporation shall report the indemnification or
advance, in writing, to the shareholders with or before the notice of the next
shareholders' meeting.
Section 9.11 Amendments, Severability. No amendment, modification or
------------------------
rescission of this Article Nine, or any provision hereof, the effect of which
would diminish the rights to indemnification or advancement of expenses as set
forth herein shall be effective as to any person with respect to any action
taken or omitted by such person prior to such amendment, modification or
rescission. In the event that any of the provisions of this Article (including
any provision within a single section, subsection, division or sentence) is held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable, the remaining provisions of this Article shall remain enforceable
to the fullest extent permitted by law.
ARTICLE TEN
MISCELLANEOUS
Section 10.1 Inspection of Books and Records. The Board of Directors
-------------------------------
shall have the power to determine which accounts, books and records of the
corporation shall be opened to the inspection of the shareholders, except those
as may by law specifically be made open to inspection, and shall have the power
to fix reasonable rules and regulations not in conflict with the applicable law
for the inspection of accounts, books and records which by law or by
determination of the Board of Directors shall be open to inspection. Without
the prior approval of the Board of Directors in their discretion, the right of
inspection set forth in Section 14-2-1602(c) of the Code shall not be available
to any shareholder owning two percent (2%) or less of the shares outstanding.
Section 10.2 Fiscal Year. The Board of Directors is authorized to fix
-----------
the fiscal year of the corporation and to change the same from time to time as
it deems appropriate.
Section 10.3 Corporate Seal. If the Board of Directors determines that
--------------
there should be a corporate seal for the corporation, it shall be in the form as
the Board of Directors may from time to time determine.
Section 10.4 Annual Financial Statements. In accordance with the Code,
---------------------------
the corporation shall prepare and provide to the shareholders such financial
statements as may be
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required by the Code.
Section 10.5 Conflict With Articles of Incorporation. In the event that
---------------------------------------
any provision of these bylaws conflicts with any provision of the articles of
incorporation, the articles of incorporation shall govern.
ARTICLE ELEVEN
AMENDMENTS
Section 11.1 Power to Amend Bylaws. The Board of Directors shall have
---------------------
the power to alter, amend or repeal these bylaws or adopt new bylaws, but any
bylaws adopted by the Board of Directors may be altered, amended or repealed,
and new bylaws adopted, by the shareholders. The shareholders may prescribe, by
expressing in the action they take in adopting or amending any bylaw or bylaws,
that the bylaw or bylaws so adopted or amended shall not be altered, amended or
repealed by the Board of Directors.
17
<PAGE>
EXHIBIT 3.11
CERTIFICATE OF LIMITED PARTNERSHIP
----------------------------------
OF
--
SHELTER DISTRIBUTION, L.P.
--------------------------
The undersigned person, being the General Partner of Shelter Distribution,
L.P., a limited partnership being organized under the Revised Uniform Limited
Partnership Act of Indiana (hereinafter referred to as the "Partnership"),
hereby certifies that:
1. The name of the Partnership is Shelter Distribution, L.P., and the
affairs of the Partnership shall be conducted in such name.
2. The address of the office of the Partnership required to be maintained
under IND. CODE (S) 23-16-2-3 is as follows:
27217 County Road 6
Elkhart, Indiana 46514-0026
3. The name and address of the Partnership's registered agent required to
be maintained by IND. CODE (S) 23-16-2-3 is as follows:
Richard E. Summers
27217 County Road 6
Elkhart, Indiana 46514-0026
4. The name and business address of each General Partner is as follows:
BPR Holdings, Inc.
27217 County Road 6
Elkhart, Indiana 46514-0026
5. The latest date upon which the Partnership is to dissolve is December
31, 2025, unless the term is extended by written agreement of all Partners.
6. There are no other matters the General Partner has agreed to include in
this certificate.
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this certificate on this
20th day of December, 1995.
GENERAL PARTNER:
BPR Holdings, Inc.
By: /s/ LARRY D. RENBARGER
-----------------------------------
Larry D. Renbarger, President
-2-
<PAGE>
EXHIBIT 3.12
LIMITED PARTNERSHIP AGREEMENT
-----------------------------
OF
--
SHELTER DISTRIBUTION, L.P.
--------------------------
<PAGE>
CONTENTS
--------
Page
----
ARTICLE ONE
-----------
NAME OF PARTNERSHIP, PLACE,
---------------------------
CHARACTER OF BUSINESS AND INTEREST
----------------------------------
1.01. Name......................................................... 1
----
1.02. Registered Office and Place of Business...................... 1
---------------------------------------
1.03. Character of Business........................................ 1
---------------------
1.04. Interest in Partnership...................................... 2
-----------------------
ARTICLE TWO
-----------
TERM OF PARTNERSHIP
-------------------
2.01. Term of Partnership.......................................... 2
-------------------
2.02. Wind-Up...................................................... 2
-------
ARTICLE THREE
-------------
CAPITAL CONTRIBUTIONS AND CAPITAL UNITS
---------------------------------------
3.01. Partnership Capital.......................................... 2
-------------------
3.02. Capital Contributions........................................ 2
---------------------
3.03. Additional Contributions..................................... 3
------------------------
3.04. Mandatory Additional Contributions........................... 3
----------------------------------
3.05. Right To Maintain Proportionate Interest..................... 3
----------------------------------------
3.06. Adjustment of Capital Units.................................. 4
---------------------------
3.07. Failure to Make Required Contributions....................... 4
--------------------------------------
3.08. Liability of Partners........................................ 5
---------------------
3.09. Return of Contribution....................................... 5
----------------------
3.10. Capital Accounts............................................. 6
----------------
3.11. Capital Account Restatement.................................. 6
---------------------------
3.12. Deficit Capital Accounts..................................... 7
------------------------
ARTICLE FOUR
------------
ALLOCATION OF INCOME, GAIN, LOSS, DEDUCTION AND CREDIT
------------------------------------------------------
4.01. Net Income and Net Loss...................................... 7
-----------------------
4.02. Allocation of Net Income and Net Loss........................ 8
-------------------------------------
4.03. Special Allocations.......................................... 8
-------------------
4.04. Curative Allocations......................................... 11
--------------------
4.05. Effects of Varying General and Limited Partnership
--------------------------------------------------
Interests During a Partnership Year........................ 13
-----------------------------------
(i)
<PAGE>
4.06. Allocation of Income, Gain, Loss and Deduction;
-----------------------------------------------
Section 704(c)............................................... 13
--------------
4.07. Allocation of Tax Items...................................... 13
-----------------------
4.08. Interest, Salaries or Fees Paid to Partners.................. 13
-------------------------------------------
4.09. Definitions.................................................. 13
-----------
4.10. Certain Interests of General Partners........................ 14
-------------------------------------
ARTICLE FIVE
------------
DISTRIBUTIONS
-------------
5.01. Cash Available for Distribution.............................. 15
-------------------------------
5.02. Allocation of Cash Available for Distribution................ 15
---------------------------------------------
5.03. Working Capital and Property Replacement Reserves............. 15
------------------------------------------------
5.04. Distributions of Cash........................................ 16
---------------------
5.05. Distributions of Non-Cash Available for Distribution......... 16
----------------------------------------------------
5.06. Distributions of Property.................................... 16
-------------------------
ARTICLE SIX
-----------
MANAGEMENT AND PARTNERS' DUTIES
-------------------------------
6.01. Management of Partnership.................................... 16
-------------------------
6.02. Operation of Partnership Business............................ 16
---------------------------------
6.03. Control of the Business by Limited Partners.................. 18
-------------------------------------------
6.04. Limitations of General Partners.............................. 19
-------------------------------
6.05. Loans by Partners............................................ 19
-----------------
6.06. Liability of the General Partners............................ 20
---------------------------------
ARTICLE SEVEN
-------------
BANK ACCOUNTS, FISCAL YEAR, BOOKS, ACCOUNTING
---------------------------------------------
AND ELECTIONS
-------------
7.01. Partnership Bank Account..................................... 20
------------------------
7.02. Partnership Fiscal Year...................................... 20
-----------------------
7.03. Partnership Books............................................ 21
-----------------
7.04. Partnership Accounting....................................... 21
----------------------
7.05. Tax Elections................................................ 21
-------------
7.06. Other Tax Matters............................................ 21
-----------------
7.07. Required Records............................................. 21
----------------
ARTICLE EIGHT
-------------
ASSIGNMENT OF PARTNERSHIP INTEREST
----------------------------------
AND RIGHT OF FIRST REFUSAL
--------------------------
8.01. Transfer of Partnership Interest............................. 22
--------------------------------
8.02. Interest of General Partner.................................. 22
---------------------------
(ii)
<PAGE>
8.03. Transfer of Interest of Limited Partner...................... 23
---------------------------------------
8.04. Sale to Third Party by Limited Partner....................... 23
--------------------------------------
8.05. Acceptances Conditional...................................... 24
-----------------------
8.06. Purchase Price............................................... 24
--------------
8.07. Completion of Sale........................................... 25
------------------
8.08. Evidence of Deferred Payment................................. 25
----------------------------
8.09. Consent Before Any Transfer.................................. 25
---------------------------
8.10. Continuing Responsibility.................................... 26
-------------------------
8.11. Family Transfers............................................. 26
----------------
8.12. Corporate Transfers Prohibited............................... 26
------------------------------
8.13. Transfers Further Restricted................................. 26
----------------------------
8.14. Terminated Trusts or Custodianships.......................... 26
-----------------------------------
ARTICLE NINE
------------
TERMINATION AND DISSOLUTION
---------------------------
9.01. Priority of Dissolution..................................... 27
-----------------------
9.02. Events Causing Dissolution.................................. 27
--------------------------
9.03. Agreement in Event of Dissolution by Act or Event
-------------------------------------------------
Relating to Less Than All Partners........................ 28
--------------------------------
9.04. Designation of a General Partner............................ 28
--------------------------------
9.05. Bankruptcy, Incompetency or Death of a Limited Partner...... 29
------------------------------------------------------
9.06. Time to Dissolve............................................ 29
----------------
9.07. Date of Termination......................................... 29
-------------------
9.08. Contingent Liabilities...................................... 29
----------------------
ARTICLE TEN
-----------
AMENDMENT AND ENTIRE AGREEMENT
------------------------------
ARTICLE ELEVEN
--------------
REMEDIES
--------
11.01. Attorneys' Fees............................................. 30
---------------
11.02. Waiver of Actions........................................... 30
-----------------
ARTICLE TWELVE
--------------
DEALINGS WITH THE PARTNERSHIP
-----------------------------
12.01. Dealings With the Partnership............................... 31
----------------------------
12.02. Dealings Outside the Partnership............................ 31
--------------------------------
12.03. Partners' Salary............................................ 31
----------------
12.04. Management Fee.............................................. 31
--------------
12.05. Fiduciary Obligations....................................... 32
---------------------
(iii)
<PAGE>
ARTICLE THIRTEEN
----------------
POWER OF ATTORNEY
-----------------
13.01. Power of Attorney........................................... 32
-----------------
13.02. Appointment Irrevocable..................................... 32
-----------------------
ARTICLE FOURTEEN
----------------
GENERAL
-------
14.01. Notices and Registered Agent................................ 32
----------------------------
14.02. Partnership Action.......................................... 33
------------------
14.03. Certificate of Limited Partnership.......................... 33
----------------------------------
14.04. Execution in Counterparts................................... 33
-------------------------
14.05. Titles...................................................... 33
------
14.06. Applicable Law.............................................. 33
--------------
14.07. Time of Essence............................................. 34
---------------
14.08. Partial Invalidity.......................................... 34
------------------
14.09. Singular and Plural......................................... 34
-------------------
14.10. General and Limited Partners................................ 34
----------------------------
14.11. Further Action.............................................. 34
--------------
14.12. Pronouns.................................................... 34
--------
14.13. Partnership Obligations Binding............................. 34
-------------------------------
14.14. Partition................................................... 34
---------
14.15. Prime Rate.................................................. 34
----------
14.16. Signatory Requirements...................................... 35
----------------------
14.17. Statutory Accountings, Etc.................................. 35
--------------------------
14.18. Book Value.................................................. 35
----------
**********
Exhibit " 3.02" List of Property and Value Thereof
Exhibit "13.01" Special Power of Attorney
(iv)
<PAGE>
LIMITED PARTNERSHIP AGREEMENT
-----------------------------
OF
--
SHELTER DISTRIBUTION, L.P.
--------------------------
THIS LIMITED PARTNERSHIP AGREEMENT (the "Agreement"), is hereby made and
entered into effective the 20th day of December, 1995, by:
1. BPR Holdings, Inc., an Indiana corporation (hereinafter referred to
collectively as the "General Partners" and separately as a "General
Partner"); and
2. Shelter Components of Indiana, Inc., an Indiana corporation, and those
limited partners who sign a "Limited Partner Signature Page" to this
Agreement (hereinafter referred to collectively as the "Limited Partners"
and separately as a "Limited Partner").
All General Partners and Limited Partners (hereinafter referred to collectively
as the "Partners" and separately as a "Partner"), desiring to form a limited
partnership under the provisions and conditions of the Revised Uniform Limited
Partnership Act of Indiana, Ind. Code (S) 23-16-1-1, et seq. (the "Act"), hereby
---- ---- -- ---
state, confirm and agree as follows:
WITNESSETH:
-----------
ARTICLE ONE
-----------
NAME OF PARTNERSHIP, PLACE,
---------------------------
CHARACTER OF BUSINESS AND INTEREST
----------------------------------
Section 1.01. Name. The name of the partnership shall be Shelter Distribution,
------------ ----
L.P. (hereinafter referred to as the "Partnership").
Section 1.02. Registered Office and Place of Business. The registered office
------------ ---------------------------------------
shall be 27217 County Road 6, Elkhart, Indiana 46514-0026 (located in Elkhart
County, State of Indiana), or at such other place within or without the State of
Indiana as may from time to time be determined by Partnership Action as defined
in Section 14.02 below. The place of business of the Partnership shall be at the
registered office, or at such other place or places within or without the State
of Indiana as may from time to time be determined by Partnership Action.
Section 1.03. Character of Business. The Partnership is formed for the
------------ ---------------------
principal purpose of engaging in the acquisition, ownership, management and
leasing of property, including, but not limited to, real and personal property
and tangible and intangible property. To those ends, the Partnership may
acquire, finance or otherwise deal with real and personal property or the
proceeds thereof. In addition, this Partnership may undertake any other lawful
<PAGE>
act or engage in any other business or venture permitted under the Act as may
from time to time be determined by Partnership Action.
Section 1.04. Interest in Partnership. The units of Partnership capital held
------------ -----------------------
by either General or Limited Partners of the Partnership shall be personal
property for all purposes. All property owned by the Partnership, including, but
not limited to, real and personal property and tangible and intangible property,
shall be deemed to be owned by the Partnership as an entity, and no Partner,
individually or otherwise, shall have any ownership interest in such property.
ARTICLE TWO
-----------
TERM OF PARTNERSHIP
-------------------
Section 2.01. Term of Partnership. The Partnership shall be formed at the time
------------ -------------------
of the filing of the initial Certificate of Limited Partnership of the
Partnership in the office of the Secretary of State of the State of Indiana (or
at any later time specified in the initial Certificate of Limited Partnership),
and shall continue until dissolved pursuant to the provisions of Article Nine
below.
Section 2.02. Wind-Up. Upon dissolution of the Partnership, the business shall
------------ -------
be wound up and the remaining property of the Partnership shall be distributed
and applied as provided in Article Nine below.
ARTICLE THREE
-------------
CAPITAL CONTRIBUTIONS AND CAPITAL UNITS
---------------------------------------
Section 3.01. Partnership Capital. The capital of the Partnership shall
------------ -------------------
consist of 1,000 partnership units. A Partner may be both a General Partner and
a Limited Partner of the Partnership. Although accounts shall be maintained
separately for each General Partner and for each Limited Partner, the combined
accounts of any Partner shall constitute his single capital account maintained
as required under Treas. Reg. (S) 1.704-1(b).
Section 3.02. Capital Contributions. Each of the Partners shall contribute to
------------ ---------------------
the initial capital of the Partnership and the initial capital accounts of each
Partner shall equal the amount specified opposite the Partner's name in cash or
the fair market value of property (net of liabilities securing such contributed
property that the Partnership is considered to assume or take subject to under
Section 752 of the Internal Revenue Code of 1986, as amended (the "Code")). For
each One Hundred Dollars ($100.00) of value contributed to the Partnership upon
its formation, each Partner shall be allocated one (1) Partnership unit. Each of
the Partners shall be allocated the number of unites of Partnership capital
specified below:
2
<PAGE>
Ownership
Contribution Units Percentage
------------ ----- ----------
GENERAL PARTNERS
- ----------------
BPR Holdings, Inc. $ 170,380 10 1%
LIMITED PARTNERS
- ----------------
Shelter Components of Indiana, net assets valued at 990 99%
Inc. $ 17,038,000
TOTALS $ 17,208,380 1,000 100%
============ ===== ===
The initial capital accounts of such Partners shall be credited accordingly. A
list of all property which is contributed pursuant to this Section 3.02 and
value thereof shall be shown on Exhibit "3.02" which is attached hereto and
--------------
incorporated herein by reference.
Section 3.03. Additional Contributions. No Partner, either General or Limited,
------------ ------------------------
shall have any right to make any additional contributions to the capital of the
Partnership except as provided in this Agreement. Except as otherwise provided
in this Agreement, no Limited Partner shall be required to make any contribution
other than that contribution specified in Section 3.02 above.
Section 3.04. Mandatory Additional Contributions. From time to time it may be
------------ ----------------------------------
determined by Partnership Action that additional contributions are required for
the proper operation of the Partnership's business. In this event, the General
Partners shall make such additional contributions to the Partnership in the
proportion which the number of capital units held by each General Partner bears
to the total number of capital units held by all General Partners at that time.
Section 3.05. Right To Maintain Proportionate Interest. Notwithstanding
------------ ----------------------------------------
anything herein to the contrary, at any time when additional capital is
required, each Limited Partner shall have the right, but not the obligation, to
contribute the proportion of such additional contributions which the number of
capital units held by each Limited Partner bears to the total number of capital
units held by all Partners at that time. To the extent of such contribution by a
Limited Partner, the obligation of the General Partners as set forth in Section
3.04 above shall be reduced.
3
<PAGE>
Section 3.06. Adjustment of Capital Units. Upon contribution of all
------------ ---------------------------
amounts required pursuant to Section 3.04 above or permitted pursuant to Section
3.05 above, then, unless such contributions are made by all Partners in
proportion to the number of capital units held by each Partner, such
contributing Partners shall receive additional capital units with respect to
such contributions. The number of additional capital units to be received for
such additional contributions shall be determined as follows:
a. The value of the capital units of the Partnership shall be determined
in accordance with the provisions of Section 9.01 below as though the
Partnership were dissolved and such value shall constitute the total
value of all capital units. In making such determinations, the value
of the capital units shall be determined as of the last day of the
month preceding the date of such contributions (hereinafter referred to
as the "Adjustment Date") and shall be adjusted to reflect the
appraised value of all property owned by the Partnership. For this
purpose, the appraised value of such property shall be the value to
which all Partners may agree to or, lacking such agreement, the value
to which three (3) appraisers (one (1) selected by the Partners
contributing such additional contributions, one (1) selected by the
Partners not contributing such additional contributions and one (1)
selected by the other two (2) appraisers) may agree upon, or lacking
such agreement, the average of the bona fide appraised values
determined by such appraisers.
b. The total value of all capital units (determined as of the Adjustment
Date) shall be divided by the number of capital units held by all
Partners at that time. The result shall be the value of each capital
unit.
c. Each Partner making an additional contribution shall receive that
number of additional capital units (valued as determined in this
Section 3.06) having an aggregate value equal to the value of such
additional contribution contributed by such Partner.
Section 3.07. Failure to Make Required Contributions. In the event any
------------ --------------------------------------
General Partner should fail to make any contribution to the Partnership which is
required by this Agreement when and as required, the Partnership shall give
notice of such failure to make the required contribution to the General Partner
failing to make such contribution (hereinafter referred to as the "Non-
Contributing Partner") as well as to the General Partners making their required
contributions. If the Non-Contributing Partner does not make the required
contribution within thirteen (13) days of the receipt of such notice, then the
General Partners who have made their required contribution may either institute
an appropriate action in the name of the Partnership against the Non-
Contributing Partner for specific performance of this Agreement or they may
4
<PAGE>
contribute to the Partnership the amount of the required contribution and the
amount so contributed shall be deemed a loan from the General Partner or
Partners contributing such funds to the General Partner or Partners who have
failed to make their required contribution. Such advances shall be due on demand
and shall bear interest at the Prime Rate (as defined in Section 14.15) from
time to time from the date advanced until paid. In the event the amounts so
advanced are not paid within thirty (30) days of the date of demand, the General
Partner or Partners who advanced such contributions shall have the option of
purchasing the Partnership interest of the Non-Contributing Partner in such
proportions as they advanced such contribution and on the following terms and
conditions:
a. The purchase price for such interest shall be an amount equal to the
lesser of (i) fifty percent (50%) of the amounts previously contributed
to the Partnership by the Non-Contributing Partner, or (ii) seventy-
five percent (75%) of the current balance in the Non-Contributing
Partner's capital account;
b. Such purchase price shall be paid in cash at closing; and
c. Such option may be exercised by giving written notice within one
hundred and eighty (180) days of the occurrence of the act or event
giving rise to such option to purchase and the notice shall specify the
time where such purchase shall be closed. The place where such purchase
shall be closed shall be the registered office of Partnership. In no
event shall the closing be more than thirty (30) days after the date
such notice is given.
Each General Partner hereby nominates, constitutes and appoints each other
General Partner as said Partner's agent and attorney-in-fact for the purpose of
executing and delivering any and all documents necessary to transfer said
Partner's interest in the Partnership pursuant to the provisions of this Section
3.07. The power of attorney granted herein, being coupled with an interest, is
irrevocable and shall not be affected by the death or incompetence of the
principal and, in addition, shall be effective to the fullest extent permitted
pursuant to Ind. Code (S) 30-5-1-1, et seq.
--- ---- -- ---
Section 3.08. Liability of Partners. In addition to a Partner's capital
------------ ---------------------
contribution, each General Partner shall be personally liable for the
obligations of the Partnership. Such liability as between General Partners shall
be in the proportion which the number of capital units held by each General
Partner bears to the total number of capital units held by all General Partners
at that time. Except as otherwise provided in this Agreement, a Limited
Partner's liability for the obligations of the Partnership shall be limited to
the aggregate amount of the Limited Partner's agreed upon contribution to the
Partnership.
Section 3.09. Return of Contribution. No Partner, General or Limited, shall
------------ ----------------------
have any right to the return or withdrawal of said Partner's capital
contributions, until termination of the Partnership, unless such withdrawal is
consented to by all other Partners or otherwise provided
5
<PAGE>
for herein or by law. Except as otherwise provided in this Agreement, the
General Partners shall not be personally liable for the return of all or any
portion of the contributions of the Limited Partners, it being understood and
agreed that any such return shall be made solely from Partnership assets.
Section 3.10. Capital Accounts. The appropriate capital account of each
------------ ----------------
Partner shall be determined and maintained in accordance with the rules of
Treas. Reg. (S) 1.704-1(b)(2)(iv) and the appropriate initial capital account of
each Partner shall be increased by (a) the amount of each Partner's additional
cash capital contribution, (b) the fair market value of any additional property
contributed by the Partner to the Partnership (net of liabilities securing such
contributed property that the Partnership is considered to assume or take
subject to under Section 752 of the Code) and (c) allocations to the Partner of
Partnership income and gain (or items thereof), including income and gain exempt
from tax and income and gain described in Treas. Reg. (S) 1.704-1(b)(2)(iv)(g),
but excluding income and gain described in Treas. Reg. (S) 1.704-1(b)(4)(i); and
decreased by (d) the amount of cash distributed to the Partner by the
Partnership, (e) the fair market value of property distributed to the Partner by
the Partnership (net of liabilities securing such distributed property that such
Partner is considered to assume or take subject to under Section 752 of the
Code), (f) allocations to the Partner of expenditures of the Partnership
described in Section 705(a)(2)(B) of the Code, and (g) allocations of
Partnership loss and deduction (or item thereof), including loss and deduction
described in Treas. Reg. (S) 1.704-1(b)(2)(iv)(g), but excluding items described
in subparagraph (f) of this Section and loss or deduction described in Treas.
Reg. (S) 1.704-1(b)(4)(i) or (iii); provided, however, that each Partner's
capital account shall be otherwise adjusted as required by Treas. Reg. (S)
1.704-1(b)(2)(iv). Each Partner who has more than one interest in the
Partnership shall have a single capital account that reflects all such
interests as required by Treas. Reg. (S) 1.704-1(b).
Section 3.11. Capital Account Restatement. The appropriate capital accounts
------------ ---------------------------
of the Partners shall be restated in the event that additional contributions are
made to the Partnership, Partnership property is distributed to a Partner, a new
Partner is admitted to the Partnership, a Partner withdraws from the
Partnership, the Partnership is dissolved or in any other event as the General
Partners deem appropriate; provided, however, that a capital account restatement
-------- -------
shall be effected in such manner and at such time as required by Section 704(b)
of the Code. The appropriate capital accounts shall be restated by (a)
determining the fair market value of all Partnership assets (taking Section
7701(g) of the Code into account) as of the date of such restatement, (b)
allocating any unrealized income, gain, loss or deduction inherent in such
assets (that has not been reflected previously in the capital accounts) among
the Partners as if there were a taxable disposition of such assets for their
fair market value as of the date of such restatement, (c) making any adjustment
required in accordance with Treas. Reg. (S) 1.704-1(b)(2)(iv)(g) for allocations
to the Partners of depreciation, depletion, amortization and gain or loss, as
computed for book purposes, with respect to such assets, and (d) determining the
Partner's distributive share of depreciation, depletion amortization, and gain
or loss, as computed for tax purposes, with respect to such assets so as to take
into account the variation between the adjusted tax basis and Book Value (as
defined in Section 14.18) of such property in the same manner as required by
Section 704(c) of the Code.
6
<PAGE>
Section 3.12. Deficit Capital Accounts. A deficit in the capital account of
------------ ------------------------
a General Partner (but not a Limited Partner) shall be deemed to create a debt
from such General Partner to the Partnership in the event of the dissolution of
the Partnership as provided in Article Nine below.
ARTICLE FOUR
------------
ALLOCATION OF INCOME, GAIN, LOSS, DEDUCTION AND CREDIT
------------------------------------------------------
Section 4.01. Net Income and Net Loss. The terms "Net Income" or "Net
------------ -----------------------
Loss," as the case may be, of the Partnership shall mean the Partnership's
taxable income or taxable loss for Federal income taxation purposes as
determined by the accountants then employed by the Partnership in accordance
with Section 703(a) of the Code, with the items required to be separately stated
by Section 703(a)(1) of the Code combined into a single net amount; provided,
--------
however, that in the event the taxable income or taxable loss of the Partnership
- -------
for such fiscal year is later adjusted in any manner, as a result of an audit by
the Internal Revenue Service (the "Service") or otherwise, then the taxable
income or taxable loss of the Partnership shall be adjusted to the same extent.
"Net Income" and "Net Loss" shall be further adjusted as follows:
a. "Net Income" and "Net Loss," as the case may be, shall be adjusted to
treat items of tax-exempt income described in Section 705(a)(1)(B) of
the Code as items of gross income, and to treat as deductible items all
non-deductible, non-capital expenditures described in Section
705(a)(2)(B) of the Code, including any items treated under Treas. Reg.
(S) 1.704-1(b)(2)(iv) as items described in Section 705(a)(2)(B) of
the Code.
b. In lieu of depreciation, depletion, cost recovery and amortization
deductions allowable for Federal income taxation purposes to the
Partnership with respect to property contributed to the Partnership by
a Partner, there shall be taken into account an amount equal to the
product derived by multiplying the Book Value (as defined in Section
14.18) of such property at the beginning of such fiscal year by a
fraction, the numerator of which is the amount of depreciation,
depletion, cost recovery or amortization deductions allowable with
respect to such property for Federal income taxation purposes and the
denominator of which is the adjusted basis for Federal income taxation
purposes of such property at the beginning of such fiscal year.
c. In lieu of actual gain or loss recognized by the Partnership for
Federal income taxation purposes as a result of the sale or other
disposition of property of the Partnership, there shall be taken into
account the gain or loss that would have been recognized by the
Partnership for Federal income taxation purposes if the Book Value (as
defined in Section 14.18)
7
<PAGE>
of such property as of the date sold or otherwise disposed of by the
Partnership were its adjusted basis for Federal income taxation
purposes.
Section 4.02. Allocation of Net Income and Net Loss. After giving effect to
------------ -------------------------------------
the special allocations set forth in Sections 4.03, 4.04 and 4.06 hereof:
a. Net Income. Net Income for the fiscal year shall be allocated in the
----------
following order of priority:
i. First, one hundred percent (100%) to the General Partners, in
proportion to which the number of capital units held by each
General Partner bears to the total number of capital units held by
all General Partners, until aggregate Net Income allocated to the
General Partners under this Section 4.02(a)(i) for such fiscal year
and all previous fiscal years is equal to the aggregate losses
allocated to the General Partners pursuant to Section 4.02(b)(ii)
for all prior fiscal years; and
ii. Second, the balance, if any, to all Partners, in proportion to
which the number of capital units held by each Partner bears to the
total number of capital units held by all Partners.
b. Net Loss. Net Loss for the fiscal year shall be allocated in the
--------
following order of priority:
i. First, one hundred percent (100%) shall be allocated among all the
Partners, in proportion to which the number of capital units held
by each Partner bears to the total number of capital units held by
all Partners, to the extent that such allocation would not cause
the Limited Partners to have Adjusted Capital Account Deficits at
the end of such fiscal year; and
ii. Second, the balance, if any, shall be allocated among all the
General Partners, in proportion to which the number of capital
units held by each General Partner bears to the total number of
capital units held by all General Partners.
Section 4.03. Special Allocations. The following special allocations shall
------------ -------------------
be made in the following order:
a. Minimum Gain Chargeback. Except as otherwise provided in Treas. Reg.
-----------------------
(S) 1.704-2(f), notwithstanding any other provision of this Article
Four, if there is a net decrease in Partnership Minimum Gain during any
Partnership fiscal year, each General Partner, Limited Partner and
8
<PAGE>
assignee or transferee of a partnership interest shall be specially
allocated items of Partnership income and gain for such fiscal year
(and, if necessary, subsequent years) in an amount equal to the portion
of such General Partner's, Limited Partner's or assignee's or
transferee's share of the net decrease in Partnership Minimum Gain,
determined in accordance with Treas. Reg. (S) 1.704-2(g). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each General Partner,
Limited Partner and assignee or transferee of a partnership interest
pursuant thereto. The items to be so allocated shall be determined in
accordance with Treas. Reg. (S) 1.704-2(f)(6) and (S) 1.704-2(j)(2).
This Section 4.03(a) is intended to comply with the minimum gain
chargeback requirement in Treas. Reg. (S) 1.704-2(f) and shall be
interpreted consistently therewith.
b. Partner Minimum Gain Chargeback. Except as otherwise provided in
-------------------------------
Treas. Reg. (S) 1.704-2(i)(4), notwithstanding any other provision of
this Article Four, if there is a net decrease in Partner Nonrecourse
Debt Minimum Gain attributable to a Partner Nonrecourse Debt during any
Partnership fiscal year, each General Partner, Limited Partner or
assignee or transferee of a partnership interest who has a share of the
Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treas. Reg. (S)
1.704-2(i)(5), shall be specially allocated items of Partnership income
and gain for such year (and, if necessary, subsequent years) in an
amount equal to the portion of such General Partner's, Limited
Partner's or assignee's or transferee's share of the net decrease in
Partner Nonrecourse Debt Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treas. Reg. (S) 1.704-
2(i)(4). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each
General Partner, Limited Partner and assignee or transferee of a
partnership interest pursuant thereto. The items to be so allocated
shall be determined in accordance with Treas. Reg. (S) 1.704-2(i)(4)
and (S) 1.704-2(j)(2). This Section 4.03(b) is intended to comply with
the minimum gain chargeback requirement in Treas. Reg. (S) 1.704-
2(i)(4) and shall be interpreted consistently therewith.
c. Qualified Income Offset. In the event any Limited Partner or assignee
-----------------------
or transferee of a limited partnership interest unexpectedly receives
any adjustments, allocations, or distributions described in Treas. Reg.
(S) 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specially allocated to each such Limited Partner or assignee or
transferee of a limited partnership interest in an amount and manner
sufficient to eliminate, to the extent required by Treas. Reg. (S)
1.7047-1(b)(2)(ii)(d), the Adjusted Capital Account Deficit
9
<PAGE>
of such Limited Partner or assignee or transferee of a limited
partnership interest as quickly as possible, provided that an
allocation pursuant to this Section 4.03(c) shall be made only if and
to the extent that such Limited Partner or assignee or transferee of a
limited partnership interest would have an Adjusted Capital Account
Deficit after all other allocations provided for in this Article Four
have been tentatively made as if this Section 4.03(c) were not in the
Agreement.
d. Gross Income Allocation. In the event any Limited Partner or assignee
-----------------------
or transferee of a limited partnership interest has a deficit capital
account at the end of any Partnership fiscal year which is in excess of
the sum of (i) the amount such Limited Partner or assignee or
transferee of a limited partnership interest is obligated to restore
pursuant to any provision of this Agreement, and (ii) the amount such
Limited Partner or assignee or transferee of a limited partnership
interest is deemed to be obligated to restore pursuant to the
penultimate sentences of Treas. Regs. (S) 1.704-2(g)(1) and 1.704-
2(i)(5), each such Limited Partner or assignee or transferee of a
limited partnership interest shall be specially allocated items of
Partnership income and gain in the amount of such excess as quickly as
possible, provided that an allocation pursuant to this Section 4.03(d)
shall be made only if and to the extent that such Limited Partner or
assignee or transferee of a limited partnership interest would have a
deficit capital account in excess of such sum after all other
allocations provided for in this Article Four have been tentatively
made as if Section 4.03(c) above and this Section 4.03(d) were not in
the Agreement.
e. Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year or
----------------------
other period shall be specially allocated as provided in Section
4.02(a)(ii) above.
f. Partner Loan Nonrecourse Deductions. Any Partner Loan Nonrecourse
-----------------------------------
Deductions for any fiscal year or other period shall be specially
allocated to the Partner or assignee or transferee of a partnership
interest who bears the economic risk of loss with respect to the
Partner Nonrecourse Debt to which such Partner Loan Nonrecourse
Deductions are attributable in accordance with Treas. Reg. (S) 1.704-
2(i).
g. Section 754 Adjustments. To the extent Treas. Reg. (S) 1.704-
-----------------------
(b)(2)(iv)(m) requires an adjustment to the adjusted tax basis of any
Partnership asset pursuant to Code Section 734(b) or Code Section
743(b) to be taken into account in determining capital accounts, the
amount of such adjustment to the capital accounts shall be treated as
an item of gain (if the adjustment increases the basis of the asset) or
loss (if the adjustment decreases such basis) and such gain or loss
shall be specially allocated to the Partners and
10
<PAGE>
assignees or transferees of a partnership interest in a manner
consistent with the manner in which their capital accounts are required
to be adjusted pursuant to such Section of the Regulations;
Section 4.04. Curative Allocations.
------------ --------------------
a. The "Regulatory Allocations" consist of the "Basic Regulatory
Allocations," as defined in Section 4.04(b) hereof, the "Nonrecourse
Regulatory Allocations," as defined in Section 4.04(c) hereof, and the
"Partner Nonrecourse Regulatory Allocations," as defined in Section
4.04(d) hereof.
b. The "Basic Regulatory Allocations" consist of (i) allocations pursuant
to Section 4.02(b)(ii) hereof, and (ii) allocations pursuant to
Sections 4.03(c), 4.03(d), and 4.03(g) hereof. Notwithstanding any
other provision of this Agreement, other than the Regulatory
Allocations, the Basic Regulatory Allocations shall be taken into
account in allocating items of income, gain, loss and deduction among
the General Partners, Limited Partners and assignees or transferees of
a partnership interest so that, to the extent possible, the net amount
of such allocations of other items and the Basic Regulatory Allocations
to each General Partner, Limited Partner and assignee or transferee of
a partnership interest shall be equal to the net amount that would have
been allocated to each such General Partner, Limited Partner and
assignee or transferee of a partnership interest if the Basic
Regulatory Allocations had not occurred. For purposes of applying the
foregoing sentence, allocations pursuant to this Section 4.04(b) shall
only be made with respect to allocations pursuant to Section 4.03(g)
hereof to the extent the General Partner or General Partners reasonably
determine that such allocations will otherwise be inconsistent with
the economic agreement among the parties to this Agreement.
c. The "Nonrecourse Regulatory Allocations" consist of all allocations
pursuant to Sections 4.03(a) and 4.03(e) hereof. Notwithstanding any
other provision of this Agreement, other than the Regulatory
Allocations, the Nonrecourse Regulatory Allocations shall be taken into
account in allocating items of income, gain, loss and deduction among
the General Partners, Limited Partners and assignees or transferees of
a partnership interest so that, to the extent possible, the net amount
of such allocations of other items and the Nonrecourse Regulatory
Allocations to each General Partner, Limited Partner and assignee or
transferee of a partnership interest shall be equal to the net amount
that would have been allocated to each such General Partner, Limited
Partner and assignee or transferee of a partnership interest if the
Nonrecourse Regulatory Allocations had not occurred. For purposes of
applying the foregoing
11
<PAGE>
sentence (i) no allocations pursuant to this Section 4.04(c) shall be
made prior to the Partnership fiscal year during which there is a net
decrease in Partnership Minimum Gain, and then only to the extent
necessary to avoid any potential economic distortions caused by such
net decrease in Partnership Minimum Gain, and (ii) allocations pursuant
to this Section 4.04(c) shall be deferred with respect to allocations
pursuant to Section 4.03(e) hereof to the extent the General Partner or
General Partners reasonably determine that such allocations are likely
to be offset by subsequent allocations pursuant to Section 4.03(a)
hereof.
d. The "Partner Nonrecourse Regulatory Allocations" consist of all
allocations pursuant to Sections 4.03(b) and 4.03(f) hereof.
Notwithstanding any other provision of this Agreement, other than the
Regulatory Allocations, the Partner Nonrecourse Regulatory Allocations
shall be taken into account in allocating items of income, gain, loss
and deduction among the General Partners, Limited Partners and
assignees or transferees of a partnership interest so that, to the
extent possible, the net amount of such allocations of other items
and the Partner Nonrecourse Regulatory Allocations to each General
Partner, Limited Partner and assignee or transferee of a partnership
interest shall be equal to the net amount that would have been
allocated to each such General Partner, Limited Partner and assignee or
transferee of a partnership interest if the Partner Nonrecourse
Regulatory Allocation had not occurred. For purposes of applying the
foregoing sentence (i) no allocations pursuant to this Section 4.04(d)
shall be made with respect to allocations pursuant to Section 4.03(f)
relating to a particular Partner Nonrecourse Debt prior to the
Partnership fiscal year during which there is a net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, and then
only to the extent necessary to avoid any potential economic
distortions caused by such net decrease in Partner Minimum Gain, and
(ii) allocations pursuant to this Section 4.04(d) shall be deferred
with respect to allocations pursuant to Section 4.03(f) hereof relating
to a particular Partner Nonrecourse Debt to the extent the General
Partner or General Partners reasonably determine that such allocations
are likely to be offset by subsequent allocations pursuant to Section
4.03(b) hereof.
e. The General Partner or General Partners shall have reasonable
discretion, with respect to each Partnership fiscal year, to (i) apply
the provisions of Sections 4.04(b), 4.04(c) and 4.04(d) hereof in
whatever order is likely to minimize the economic distortions that
might otherwise result from the Regulatory Allocations, and (ii) divide
all allocations pursuant to Section 4.04(b), 4.04(c) and 4.04(d) hereof
among the Partners in a manner that is likely to minimize such economic
distortions.
12
<PAGE>
Section 4.05. Effects of Varying General and Limited Partnership Interests
------------ ------------------------------------------------------------
During a Partnership Year. In the event a Partner's interest as a General or
- -------------------------
Limited Partner varies during any fiscal year of the Partnership (whether by
reason of withdrawal, additional capital contributions or otherwise), Net
Income and Net Loss shall be computed and allocated in accordance with this
Agreement as if periods between such variations were each a separate fiscal year
of the Partnership.
Section 4.06. Allocation of Income, Gain, Loss and Deduction; Section 704
------------ -----------------------------------------------------------
(c). Upon the sale of any property contributed by any Partner, the gain or
- ---
loss represented by the difference between the adjusted basis for Federal income
taxation purposes and Book Value of the property to the Partnership shall be
allocated to the Partner who contributed such property, and the gain or loss in
excess of that so allocated shall be allocated among the Partners as provided in
Sections 4.01, 4.02, 4.03 and 4.04 above. In addition, any other item of income,
gain, loss or deduction with respect to such property shall be allocated in a
manner consistent with the requirements of Section 704(c) of the Code and Treas.
Reg. (S) 1.704-1(b)(2)(iv)(g), as amended from time to time.
Section 4.07. Allocation of Tax Items. All items of depreciation, gain,
------------ -----------------------
loss, deduction or credit that are taken into account in determining Net Income
or Net Loss, shall be allocated among the Partners in the same proportion as is
provided in this Article Four.
Section 4.08. Interest. Salaries or Fees Paid to Partners. Any interest
------------ -------- ---------------------------------
paid on loans made by Partners to the Partnership pursuant to the terms of this
Agreement and all salaries and fees paid to any Partner, if any, shall be
deducted from gross income for Partnership book and tax purposes.
Section 4.09. Definitions. Capitalized words and phrases used in this
------------ -----------
Article Four have the following meanings:
a. Adjusted Capital Account Deficit means, with respect to any Limited
--------------------------------
Partner, the deficit balance, if any, in such Limited Partner's
capital account as of the end of the relevant fiscal year, after giving
effect to the following adjustments:
i. Credit to such capital account any amounts which such Limited
Partner is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Treas. Reg. (S) 1.704-2(g)(1) and (S)
1.704-2(i)(5); and
ii. Debit to such capital account the items described in Treas. Reg.
(S) 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6).
13
<PAGE>
The foregoing definition of Adjusted Capital Account Deficit is
intended to comply with the provisions of Treas. Reg. (S) 1.704-
1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
b. Nonrecourse Deductions has the meaning set forth in Treas. Reg. (S)
----------------------
1.704-2(c). The amount of Nonrecourse Deductions for a Partnership
fiscal year equals the net increase, if any, in the amount of
Partnership Minimum Gain during that fiscal year, determined according
to the provisions of Treas. Reg. (S) 1.704-2(c).
c. Partner Loan Nonrecourse Deductions has the meaning set forth in Treas.
-----------------------------------
Reg. (S) 1.704-2(i)(1) and 1.704-2(i)(2). The amount of Partner Loan
Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a
Partnership fiscal year equals the excess, if any, of the net increase,
if any, in the amount of Partner Minimum Gain attributable to such
Partner Nonrecourse Debt during that fiscal year over the aggregate
amount of any distributions during that fiscal year to the General
Partners, Limited Partners, or assignees or transferees of a
partnership interest that bear the economic risk of loss for such
Partner Nonrecourse Debt to the extent such distributions are from the
proceeds of such Partner Nonrecourse Debt and are allocable to an
increase in Partner Minimum Gain attributable to such Partner
Nonrecourse Debt, determined in accordance with Treas. Reg. (S) 1.704-
2(i)(2).
d. Partner Nonrecourse Debt Minimum Gain means an amount, with respect to
-------------------------------------
each Partner Nonrecourse Debt, equal to the Partnership Minimum Gain
that would result if such Partner Nonrecourse Debt were treated as a
nonrecourse liability (as defined in Treas. Reg. (S) 1.704-2(b)(3)),
determined in accordance with Treas. Reg. (S) 1.704-2(i)(3).
e. Partner Nonrecourse Debt has the meaning set forth in Treas. Reg. (S)
------------------------
1.704-2(b)(4).
f. Partnership Minimum Gain has the meaning set forth in Treas. Reg. (S)
------------------------
1.704-2(b)(2) and 1.704-2(d).
g. Regulations means the regulations promulgated under the Code, as such
-----------
regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
h. Service means the Internal Revenue Service.
-------
Section 4.10. Certain Interests of General Partners. Notwithstanding
------------ -------------------------------------
anything to the contrary that may be expressed or implied in this Agreement,
the interests of all General
14
<PAGE>
Partners, taken together, in each material item of Partnership income, gain,
loss, deduction or credit is equal to at least one percent (1%) of each such
item at all times during the existence of the Partnership. In determining the
General Partners' interests in such items, both the limited and general
partnership units owned by the General Partners may be taken into account.
ARTICLE FIVE
------------
DISTRIBUTIONS
-------------
Section 5.01. Cash Available for Distribution. The term "Cash Available
------------ -------------------------------
for Distribution" shall mean the net income or net loss of the Partnership
determined in accordance with generally accepted accounting principles with the
following adjustments:
a. Any non-cash charges deducted in the computation of net income or loss
of the Partnership shall be added thereto;
b. Required principal payments on all Partnership indebtedness, cash
expenditures which were not deducted in determining the net income or
loss of the Partnership, and any amounts for working capital and
property replacement reserves of the Partnership determined by
Partnership Action shall be deducted therefrom;
c. The proceeds from any sales or dispositions of Partnership assets, any
financing or refinancing of Partnership obligations and any insurance
recoveries which were included in determining net income or loss of the
Partnership shall be deducted therefrom; and
d. Any amounts released from working capital and property replacement
reserves by Partnership Action shall be added thereto.
Section 5.02. Allocation of Cash Available for Distribution. For each
------------ ---------------------------------------------
fiscal year of the Partnership, Cash Available for Distribution shall be
distributed to each of the Partners in proportion to which the number of capital
units held by each Partner bears to the total number of capital units held by
all Partners.
Section 5.03. Working Capital and Property Replacement Reserves. The
------------ -------------------------------------------------
General Partners may, from time to time, establish a working capital reserve or
property replacement reserve. Such reserves shall be established only to the
extent the General Partners, acting in good faith and within their fiduciary
duty to all Partners, reasonably believe such additions to be necessary to
permit the Partnership to pay projected cash obligations for succeeding fiscal
years as such obligations become due without being required to liquidate
Partnership assets or incur debt. In addition, amounts existing in a working
capital reserve or property replacement reserve shall be released from such
reserve at the end of the fiscal year unless the General Partners, acting in
good faith and within their fiduciary duty to all Partners, reasonably believe
15
<PAGE>
retention of such amounts in such reserves are necessary to permit the
Partnership to pay its cash obligations for succeeding fiscal years as they
become due without being required to liquidate Partnership assets or incur debt.
Section 5.04. Distributions of Cash. Cash Available for Distribution,
------------ ---------------------
determined in accordance with the provisions of this Article Five, shall be
distributed to the Partners at reasonable intervals during each fiscal year of
the Partnership and, in any event, within ninety (90) days after the close of
each such fiscal year.
Section 5.05. Distributions of Non-Cash Available for Distribution. In the
------------ ----------------------------------------------------
event of the distribution of cash or property not constituting Cash Available
for Distribution, the amount to be distributed to each Partner shall, except
with the unanimous consent of all Partners, be determined by multiplying the
amount of distribution (net of any liabilities to be assumed by such Partner and
liabilities to which the property is subject) by a fraction the numerator of
which shall be the positive balance of such Partner's capital account in the
Partnership at the time of distribution and the denominator of which shall be
the aggregate positive balance of the capital accounts of all Partners in the
Partnership at the time of distribution.
Section 5.06. Distributions of Property. Any distribution by the
------------ -------------------------
Partnership to the Partners under any provision of this Agreement shall be made
in cash, check or promissory note of the Partnership unless the Partners
unanimously agree that property may be distributed. In the event of any such
property distribution, the capital accounts shall be adjusted and restated as
provided in Article Three above.
ARTICLE SIX
-----------
MANAGEMENT AND PARTNERS' DUTIES
-------------------------------
Section 6.01. Management of Partnership. The General Partners shall be
------------ -------------------------
responsible for conducting the business and operations of the Partnership and
each General Partner shall devote so much attention, skill and energies to the
business and operations of the Partnership as may be reasonable and/or necessary
to promote adequately the interests of the Partnership and the mutual interest
of all Partners.
Section 6.02. Operation of Partnership Business. All decisions and
------------ ---------------------------------
determinations respecting the operation of the Partnership, its business or
properties shall be made or taken by Partnership Action and the General Partners
shall have the exclusive right and authority to manage, conduct and operate the
business of the Partnership. Specifically, but not by way of limitation, upon
authorization by Partnership Action, the General Partners and the Partnership
shall have the right, power and authority to do or cause to be done any and all
acts deemed by the General Partners to be necessary or appropriate including,
without limitation, the right, power and authority:
16
<PAGE>
a. To borrow money for the Partnership and to issue notes, debentures and
any other debt securities of the Partnership, to mortgage, or subject
to any other security instrument or lien, any or all of the property of
the Partnership, and to repay, refinance, modify, consolidate or extend
any loan and any mortgage or other security instrument or lien;
b. To acquire or enter into any contract of insurance for the protection
of the Partnership, for the conservation of Partnership assets, or for
any other purpose convenient or beneficial to the Partnership;
c. To pay, either directly or by reimbursement, the General Partners or
others, for all operating costs and general administrative expenses;
d. To settle, compromise, arbitrate or otherwise adjust claims in favor of
or against the Partnership, on such terms and in such manner as the
General Partners may determine, and similarly to prosecute, settle or
defend litigation with respect to the Partners, the Partnership or any
assets of the Partnership;
e. To execute, acknowledge, swear to and deliver any contract, note, deed,
mortgage, assignment, lease, agreement, check, draft, bill of sale or
other document or instrument which the General Partners deem necessary
to effectuate and exercise the rights and powers possessed;
f. To invest any excess funds of the Partnership in savings accounts, in
federally insured financial institutions, in certificates of deposit
issued by federally insured financial institutions, in short term
interest bearing obligations of publicly held corporations, state and
local governments and the United States, and money market funds;
g. To make any and all elections required or permitted to be made by the
Partnership under the Code and take such action, execute and deliver
such documents and to perform such acts as provided in Section 7.06
below;
h. To admit a person as an additional or substitute Limited Partner or as
an additional or substitute General Partner as otherwise provided by
this Agreement;
i. To obligate the Partnership to incur debts in the ordinary course of
the business of the Partnership;
j. To enter into any agreement for the sharing of profits or any joint
venture with any person or entity;
17
<PAGE>
k. To manage, lease, sell and otherwise deal with and use Partnership
assets at such price, rental or amount, in the form of cash,
securities, or other property, and upon such terms and conditions, as
the General Partners may determine;
l. To let or lease all or any portion of any of the assets of the
Partnership, whether or not the terms of said leases extend beyond the
termination date of the Partnership and whether or not any portion of
the assets so leased are to be occupied by the lessee, or, in turn,
subleased in whole or part to others for such consideration and on such
terms as the General Partners may determine;
m. To sell, assign, convey or otherwise dispose of for such consideration
and upon such terms and conditions as the General Partners may
determine, all or any part of the property of the Partnership, and in
connection therewith to execute and deliver such instruments as the
General Partners may determine;
n. To employ on behalf of the Partnership agents, employees, accountants,
lawyers, consultants, real estate managers, brokers and such other
persons, as the General Partners may deem necessary or appropriate, and
to pay therefor such remuneration as the General Partners may deem
reasonable and appropriate;
o. To purchase, lease, acquire or obtain the use of machinery, equipment,
tools, materials and all other kinds and types of real or personal
property that may in any way be deemed necessary or appropriate for the
conduct of the business of the Partnership;
p. To designate from among themselves a Managing Partner who shall
exercise such rights and powers and undertake such duties as may be
delegated to the Managing Partner by the General Partners or as are
specified in this Agreement; and
q. To take such other action, execute and deliver such other documents and
perform such other acts as may be necessary or appropriate for the
conduct of the business and affairs of the Partnership and to possess
and enjoy all of the rights and powers of a general partner as provided
by the Act.
Section 6.03. Control of the Business by Limited Partners. In no event
------------ -------------------------------------------
shall a Limited Partner (except one who may also be a General Partner, and then
only in his capacity as a General Partner and within the scope of his authority
under this Agreement) be permitted to participate in the control of the business
of the Partnership. For this purpose, a Limited Partner
18
<PAGE>
does not participate in the control of the business of the Partnership solely by
doing one (1) or more of the enumerated powers set forth in Ind. Code (S) 23-16-
--- ----
4-3(b). In addition, the reference to the enumeration of the powers set forth in
Ind. Code (S) 23-16-4-3(b) is not intended, and shall not be construed, to
- --- ----
create any greater liability for the obligations of the Partnership than is
imposed upon a Limited Partner by the Act.
Section 6.04. Limitations of General Partners. The General Partners shall
------------ -------------------------------
not have any right, power or authority without the prior written consent of all
Partners:
a. To do any act in contravention or violation of this Agreement or the
Certificate of Limited Partnership;
b. To do any act which would make it impossible to carry on the business
of the Partnership;
c. To confess a judgment against the Partnership;
d. To possess any Partnership property, or assign the rights of the
Partners in the specific Partnership property, for other than a
Partnership purpose;
e. To assign the Partnership property or assets in trust for creditors or
on the basis of an assignee's promise or undertaking to pay the debts
or obligations of the Partnership; or
f. To cause the Partnership to make loans to the General Partners or to
commingle Partnership funds with the funds of others.
Section 6.05. Loans by Partners.
------------ -----------------
a. As monies are required from time to time to meet the costs, expenses,
obligations, liabilities and other charges arising out of or resulting
from the operation of the Partnership, the General Partners shall cause
such monies to be withdrawn from the Partnership bank accounts and used
to discharge such costs, expenses, obligations, liabilities or other
charges. In the event the funds available in those accounts shall at
any time be insufficient to meet such costs, expenses, obligations,
liabilities and other charges, or to make any expenditure authorized by
this Agreement, then the General Partners shall undertake to borrow on
behalf of the Partnership the additional funds which are needed. It is
the intention of all Partners that any funds, in excess of funds
available in Partnership accounts, necessary for the operation of the
Partnership shall be obtained by the Partnership through financing from
sources outside the Partnership. In the event the General Partners are
unable to arrange financing as herein contemplated, then any one or
more of the Partners may, but shall not be
19
<PAGE>
obligated to, advance the necessary funds, and all amounts so advanced
under this Section 6.05 shall be treated as loans to the Partnership
for all purposes and shall bear interest at a rate agreed upon by the
General Partners and the advancing Partners.
b. Voluntary loans to the Partnership made by Partners under this Section
6.05 are in addition to and not in lieu of the additional capital
contributions that may be agreed upon under Article Three above.
c. This Section 6.05 shall not apply to any extension of credit to the
Partnership by a Partner in connection with the Partnership's purchase
of assets or properties from such Partner.
d. In the event that the General Partners are required, as a result of
their general liability for Partnership debts and obligations, to pay a
Partnership debt or obligation, such payment shall be treated as a non-
interest bearing loan by the General Partners to the Partnership, which
loan shall be payable on demand by the General Partners.
Section 6.06. Liability of the General Partners. As among the Partners, and
------------ ---------------------------------
except for losses caused by the fraud of the General Partners, no personal
liability shall be imposed upon the General Partners with respect to any of the
obligations and duties imposed upon them by the terms of this Agreement, or with
respect to the liabilities of the Partnership. The liabilities of the General
Partners arising from their performance of those obligations and duties imposed
upon them by the terms of this Agreement and the liabilities of the Partnership
shall be enforced and satisfied only out of the assets of the Partnership. The
Partnership shall indemnify and save harmless the General Partners from any loss
or damage incurred by reason of any act performed by them for and on behalf of
the Partnership and in furtherance of its interests unless such act constituted
gross negligence, willful or wanton misconduct, or intentional malfeasance.
ARTICLE SEVEN
-------------
BANK ACCOUNTS, FISCAL YEAR, BOOKS, ACCOUNTING
---------------------------------------------
AND ELECTIONS
-------------
Section 7.01. Partnership Bank Account. All funds of the Partnership shall
------------ ------------------------
be deposited in the Partnership's name in such bank or banks, and all
withdrawals therefrom shall be upon such signatures, as may from time to time be
determined by Partnership Action.
Section 7.02. Partnership Fiscal Year. The fiscal year of the Partnership
------------ -----------------------
for accounting, income tax and all other purposes shall be the calendar year;
provided, however, that the fiscal year of the Partnership may from time to time
- -------- -------
be changed by Partnership Action.
20
<PAGE>
Section 7.03. Partnership Books. The General Partners shall keep or cause
------------ -----------------
to be kept complete and accurate books and accounts with respect to Partnership
business. The books and accounts of the Partnership shall at all times be kept
and maintained at the Partnership's principal place of business and shall be
maintained on a cash receipts and disbursements method of accounting or such
other method of accounting as may be determined by Partnership Action.
Section 7.04. Partnership Accounting. An accounting shall be made of all
------------ ----------------------
Partnership transactions (for each fiscal year or lesser period of time) and the
General Partners shall cause to be prepared for the Partnership a balance sheet,
a statement of cash receipts and disbursements, a statement of net profits and
losses, a statement of Cash Available for Distribution by the Partnership and a
statement of each Partner's share of Partnership net profits and losses and Cash
Available for Distribution. The General Partners shall cause the necessary
federal, state and local income tax returns and reports required of the
Partnership to be prepared and filed no later than required by law.
Section 7.05. Tax Elections. All elections required or permitted by the
------------ -------------
Partnership under the terms of the Code shall be made by Partnership Action in
such manner as will be most advantageous to all Partners and the Partnership. In
the event of the distribution of property by the Partnership within the meaning
of Section 734 of the Code, or the transfer of an interest in the Partnership
within the meaning of Section 743 of the Code, the General Partners, in their
sole discretion, may elect to adjust the basis of the Partnership property
pursuant to Sections 734, 743 and 754 of the Code. Any Partners affected by
such election shall supply the information as may be required to make, or give
effect to, such elections by the Partnership.
Section 7.06. Other Tax Matters. The General Partners shall make such
------------ -----------------
elections and shall take such other action as the General Partners believe
necessary (a) to extend the statute of limitations for assessment of tax
deficiencies against the Limited Partners with respect to any adjustment to the
Partnership's federal and state income tax returns; (b) to cause the Partnership
and the Limited Partners to be represented before the Service, any other taxing
authorities or any courts in matters affecting the Partnership and the Limited
Partners; and (c) to cause to be executed any agreements or other documents that
bind the Limited Partners with respect to such tax matters or otherwise affect
the rights of the Partnership or the Limited Partners. The General Partners are
specifically authorized to act as the "Tax Matters Partners" under the Code and
in any similar matter under state law.
Section 7.07. Required Records. The General Partners shall continuously
------------ ----------------
maintain the following documents at the Partnership's registered office:
a. A current list of the full name and last known mailing address of each
Partner (specifying separately the General and Limited Partners) in
alphabetical order;
21
<PAGE>
b. A copy of the Certificate of Limited Partnership and all certificates
of amendment thereto, together with executed copies of any powers of
attorney pursuant to which any certificate has been executed;
c. Copies of the Partnership's federal, state and local tax returns and
reports, if any, for the three (3) most recent years;
d. Copies of this Agreement, any amendments to this Agreement and any
amended and restated partnership agreements;
e. Copies of any financial statements of the Partnership for the three (3)
most recent years; and
f. A current list showing the amounts of cash and a description and a
statement of and the value of other property and services which each
Partner agreed to contribute to the Partnership and actually
contributed to the Partnership.
The General Partners shall make these documents available during normal business
hours for inspection and copying, at the reasonable request of and at the
expense of any Partner. The General Partners shall not be required to deliver or
to mail to each Limited Partner a copy of the Certificate of Limited
Partnership, or any amendments thereto, upon the return of either the
certificate or any amendments from the Secretary of State of the State of
Indiana.
ARTICLE EIGHT
-------------
ASSIGNMENT OF PARTNERSHIP INTEREST
----------------------------------
AND RIGHT OF FIRST REFUSAL
--------------------------
Section 8.01. Transfer of Partnership Interest. Except as provided in this
------------ --------------------------------
Article Eight, Article Nine below and in Section 3.07 above, no interest in the
Partnership may be assigned, transferred, encumbered, hypothecated or otherwise
disposed of and no person may be added as a General or Limited Partner of the
Partnership, without the prior written consent of all Partners, and any
attempted transfer, assignment, encumbrance, hypothecation or other disposition
or the addition of any Partner without such written consent shall be null and
void and have no force or effect whatsoever.
Section 8.02. Interest of General Partner. Except as provided in Section
------------ ---------------------------
3.07 above and Section 9.04 below, no General Partner shall assign, transfer,
encumber, hypothecate or otherwise dispose of such Partner's interest in the
Partnership without prior written consent of all Partners, which consent shall
not be unreasonably withheld, and any attempted transfer, assignment,
encumbrance, hypothecation or other disposition of such property or the
attempted addition of any General Partner without such written consent shall be
null and void and of no force or effect whatsoever; provided, however, that to
-------- -------
the extent required by law, an assignee
22
<PAGE>
of any interest in this Partnership because of a transfer or assignment which is
not consented to in writing by all Partners (except to the extent as is
otherwise provided by this Agreement) shall be entitled only to the rights and
benefits not inconsistent with this Agreement as presently provided by Ind. Code
--- ----
(S) 23-16-8-1 through (S) 23-16-8-5 for such assignee and shall be subject to
all the restrictions and conditions provided in that section for such assignee;
provided, further, that in no event shall any General Partner be relieved of
- -------- -------
such General Partner's responsibilities under this Agreement without the prior
written consent of all Partners.
Section 8.03. Transfer of Interest of Limited Partner. No Limited Partner
------------ ---------------------------------------
(hereinafter referred to as the "Selling Limited Partner") shall offer to sell,
transfer or assign all or any portion of said Partner's interest in the
Partnership without first offering, in writing, to sell such interest to the
other Limited Partners (hereinafter referred to as the "Non-Selling Limited
Partners") on the terms and conditions set forth in Section 8.06 below. Each
Non-Selling Limited Partner may accept such offer within twenty (20) days of the
receipt thereof in the proportion which the number of the Non-Selling Limited
Partner's capital units bears to the total number of all Non-Selling Limited
Partner's capital units, at that time. If any of the Non-Selling Limited
Partners fail to accept such offer, either in whole or in part, within such
twenty (20) day period, then the units not so accepted may be purchased by the
other Non-Selling Limited Partners in proportion to the number of such capital
units held by the other Non-Selling Limited Partners until each Non-Selling
Limited Partner has had an opportunity to purchase all of the units offered by
the Selling Limited Partner but not accepted by the other Non-Selling Limited
Partners.
Section 8.04. Sale to Third Party by Limited Partner. If any Limited
------------ --------------------------------------
Partner receives a bona fide offer to purchase all or any portion of said
Partner's interest in the Partnership and such Limited Partner desires to sell
such interest in accordance with the terms and conditions set forth in such
offer, then such Limited Partner (hereinafter referred to as the "Selling
Limited Partner") shall First offer in writing to sell such interest to the
other Limited Partners (hereinafter referred to as the "Non-Selling Limited
Partners") utilizing the procedure and, except as otherwise provided in this
Section 8.04, upon the terms and conditions set forth in Section 8.03 above.
Such offer shall be in addition to any offer previously made pursuant to the
provisions of Section 8.03 above, shall be in writing and shall state the name
and address of the person or persons to whom the interest will be sold in the
event the Limited Partners fail to accept such offer and the price and terms
upon which such interest will be sold. If the Non-Selling Limited Partners do
not agree to purchase the interest which the Selling Limited Partner has offered
to sell within the time period provided above, then the Selling Limited Partner
may sell such interest to the person whose name is stated in the offer at the
price and the terms set forth in such offer if the following conditions are
fulfilled:
a. Such transfer or assignment is subject to an effective registration
statement pursuant to the federal securities laws, including, without
limitation, the Securities Act of 1933, and applicable state securities
laws or, in the opinion of counsel for the Partnership, such transfer
or assignment is exempt from the registration requirements of such
laws;
23
<PAGE>
b. Such transferee or assignee agrees in writing to be bound by the terms
and conditions of this Agreement and appoints the General Partners as
the transferee's or assignee's true and lawful attorney-in-fact for the
purposes set forth in Article Thirteen below; and
c. The Partnership is reimbursed for all costs and expenses related to
such transfer or assignment, including reasonable attorneys' fees and
costs of amending its Certificate of Limited Partnership;
provided, however, that if such sale is not completed within thirty (30) days
- -------- -------
after the date the Non-Selling Limited Partners could no longer accept such
offer, then such Selling Limited Partner shall not sell, transfer or assign such
interest without again complying with the terms and conditions of this
Agreement.
Section 8.05. Acceptances Conditional. If the Non-Selling Limited Partners,
------------ -----------------------
pursuant to Section 8.03 or 8.04 above, agree to purchase less than the entire
interest offered by the Selling Limited Partner, then the Selling Limited
Partner may refuse to sell such partial interest. In this event, the parties'
rights under this Agreement shall be determined as though there were no
acceptances of the Selling Limited Partner's offer pursuant to Section 8.03 or
8.04 above.
Section 8.06. Purchase Price. The price at which any interest may be
------------ --------------
purchased by a Non-Selling Limited Partner pursuant to Section 8.03 above and
the terms of payment shall, at the election of the Non-Selling Limited Partners,
be either at the price and on the terms which the Selling Limited Partner is
otherwise willing to accept from a third party purchaser pursuant to Section
8.04 above or at the following price and on the following terms:
a. Except as otherwise provided in this Agreement, the value of the
Selling Limited Partner's capital units to be purchased pursuant to
Section 8.03 above shall be determined in accordance with the
provisions of Section 9.01 as though the Partnership were dissolved and
such value shall constitute the total purchase price to be paid. In
making such determinations, the value of the capital units shall be
determined as of the last day of the month preceding the written offer
and shall be adjusted to reflect the appraised value of all property
owned by the Partnership. For this purpose, the appraised value of such
property shall be the value which all Partners may agree to or, lacking
such agreement, the value to which three (3) appraisers (one (1)
selected by the Partnership, one (1) selected by the Selling Limited
Partner and one (1) selected by the other two (2) appraisers) may agree
upon, or lacking such agreement, the average of the bona fide appraised
values determined by such appraisers.
b. If the total purchase price to be paid by the Non-Selling Limited
Partner(s) is less than or equal to Twenty Thousand Dollars
($20,000.00), then the purchase price shall be paid in full upon
completion of the sale. If the
24
<PAGE>
total purchase price to be paid by the Non-Selling Limited Partner(s)
is greater than Twenty Thousand Dollars ($20,000.00), then the total
purchase price shall be paid in full upon completion of the sale or, at
the option of the Non-Selling Limited Partner(s), the greater of Twenty
Thousand Dollars ($20,000.00) or twenty-five percent (25%) of the
purchase price shall be paid at the time the sale is completed and the
balance shall be paid in eight (8) equal quarterly installments
commencing on the first day of the fourth month following the month in
which such sale is completed. Interest on the unpaid balance of the
purchase price shall accrue at the Prime Rate on the date the sale is
completed, shall be paid on each installment payment date and shall be
adjusted to the then prevailing Prime Rate on each installment payment
date.
Section 8.07. Completion of Sale. The purchase of any interest shall be
------------ ------------------
completed within thirty (30) days of the date upon which the offer is accepted
or, if a series of offers is required, then within thirty (30) days of the date
the final offer in any series of offers is accepted.
Section 8.08. Evidence of Deferred Payment. Any unpaid portion of the
------------ ----------------------------
purchase price shall be evidenced by one or more promissory notes executed by
the purchasing Limited Partner or Partners, as the case may be. Such promissory
note or notes shall be made payable to the person or persons entitled to receive
the proceeds of the sale of such interest, shall provide for prepayment without
penalty, and shall contain a provision giving the holder of such note the option
to accelerate all payments under such note in the event of any default in the
payment of principal or interest which continues for thirteen (13) days after
written notice of such default is given to maker. The unpaid portion of the
purchase price shall be secured by a pledge of the interest so purchased to the
Selling Limited Partner; any such pledge shall be evidenced by an agreement in
the form and content customarily utilized by commercial lenders in the county in
which the registered office of the Partnership is located. In the event the
pledgee acquires the interest through execution of the pledge or otherwise, then
such pledgee shall again become bound by the terms of this Agreement.
Section 8.09. Consent Before Any Transfer. Except as otherwise provided in
------------ ---------------------------
Section 8.11, Section 9.04 and Section 9.05 below, no assignee or transferee of
any Partner's interest in the Partnership shall be substituted or added as a
Partner of the Partnership unless and until all Partners, both General and
Limited, consent to such substitution or addition in writing and such assignee
or transferee agrees in writing to be bound by this Agreement. Until such time,
such assignee shall be entitled only to the rights and benefits not inconsistent
with this Agreement as are presently provided by Ind. Code (S) 23-16-8-1 through
--- ----
(S) 23-16-8-5 for such assignee and shall be subject to all the restrictions and
conditions provided in those sections for such assignee. Such assignee shall pay
all costs and expenses in connection with such admission or substitution,
including but not limited to, the cost of preparing, filing and recording any
amendments to the Partnership's Certificate of Limited Partnership.
25
<PAGE>
Section 8.10. Continuing Responsibility. Notwithstanding anything contained
------------ -------------------------
herein to the contrary, neither a Limited Partner nor a General Partner shall be
relieved of any of such Partner's responsibilities under this Agreement without
the prior written consent of all other Partners, both Limited and General.
Section 8.11. Family Transfers. Notwithstanding anything hereinabove to the
------------ ----------------
contrary provided for in this Article Eight, capital units held by any Limited
Partner may, without the consent of the Partners, be transferred to said Limited
Partner's children or grandchildren or to a trust or custodianship for the
benefit of said Limited Partner's children or grandchildren, whether by sale,
gift, devise, bequest, operation of law or otherwise; provided, however, that
-------- -------
notwithstanding any such transfer, the rights and obligations of the parties
hereunder shall remain in full force and effect, including but not limited to,
the rights and obligations to buy and sell provided in this Article Eight. Any
transferee pursuant to this Section 8.11 shall, without the consent of the
Partners, be substituted or added as a Limited Partner and shall be bound by the
provisions of this Limited Partnership Agreement as though such transferee was
an initial party to this Agreement. Before any transfer for the benefit of a
Limited Partner's family member is effected, the family member and, if
applicable, the trustee or custodian shall, if requested by the Partnership,
confirm in writing that such person is bound by the provisions of this Limited
Partnership Agreement.
Section 8.12. Corporate Transfers Prohibited. No Partnership interest,
------------ ------------------------------
General or Limited, shall be transferred, assigned or otherwise disposed of to a
corporation without the prior written consent of all Partners.
Section 8.13. Transfers Further Restricted. No Partner shall make any
------------ ----------------------------
transfer of capital units if such transfer would result in a termination of the
Partnership for federal, state or local income tax purposes without the prior
written consent of all Partners.
Section 8.14. Terminated Trusts or Custodianships. Notwithstanding
------------ -----------------------------------
anything hereinabove to the contrary, upon the termination of any trust or
custodianship, any capital units held by such trust or custodianship shall be
transferred, without the consent of the Partners, to such person or persons
entitled thereto in accordance with the provisions of such trust or
custodianship; provided, however, that notwithstanding such transfer, the rights
-------- -------
and obligations of the parties hereunder shall remain in full force and effect,
including but not limited to, the rights and obligations to buy and sell
provided in this Article Eight. Any transferee pursuant to this Section 8.14
shall, without the consent of the Partners, be substituted or added as a Limited
Partner and be bound by the provisions of this Agreement as though such
transferee was an initial party to this Agreement. Before any such transfer is
effected, the transferee shall, if requested by the Partnership, confirm in
writing that such person is bound by the provisions of this Agreement.
26
<PAGE>
ARTICLE NINE
------------
TERMINATION AND DISSOLUTION
---------------------------
Section 9.01. Priority of Dissolution. Upon the occurrence of any of the
------------ -----------------------
events set forth in Section 9.02 below, the Partnership shall be dissolved, the
affairs of the Partnership wound up and the property of the Partnership
distributed and applied in the following order of priority:
a. First, to the payments of any debts and liabilities of the Partnership
owing to persons other than any of the Partners;
b. Second, to the payment of any debts and liabilities of the Partnership
owing to any Partner, but in the event the amount available for such
payment is insufficient to satisfy all such debts and liabilities, then
to such Partners in the proportion which their respective claims bear
to the claims of all such Partners; and
c. Last, to the Partners in the proportion which the positive balance in
each Partner's positive capital account bears to the aggregate capital
account balance of all Partners at that time.
No Partner shall have a priority over any other Partner with respect to the
distribution under subparagraph (c) above. Distributions made in accordance with
this Section 9.01 shall be in full satisfaction of the Partner's claim against
the Partnership for distribution and liquidation. A General Partner (but not a
Limited Partner) shall be liable to restore to the Partnership any negative
balance standing in such Partner's capital account, following the distributions
required under this Section 9.01, which amount shall, when paid to the
Partnership, be distributed by the Partners to the creditors of the Partnership,
or to the other Partners in accordance with this Section 9.01. The Partner
restoring any such negative balance shall be required to do so at a time not
later than the latest permissible time permitted under Treas. Reg. (S) 1.704-
1(b)(2)(ii). In making distributions to the Partners, the positive capital
account balances of the Partners shall be determined after taking into account
all capital account adjustments required by Treas. Reg. (S) 1.704-1(b)(2).
Section 9.02. Events Causing Dissolution. The following events shall
------------ --------------------------
cause the dissolution of the Partnership:
a. Upon the mutual consent in writing executed by all Partners;
b. Upon the occurrence of an event specified under the laws of the State
of Indiana as one effecting dissolution (except to the extent as may be
otherwise provided in this Agreement and the Act);
27
<PAGE>
c. Upon the withdrawal of a General Partner at a time when there is no
other General Partner (except to the extent as may be otherwise
provided in this Agreement and the Act);
d. On December 31, 2035, unless extended by written agreement of all
Partners;
e. Upon the entry of a decree of judicial dissolution under the Act; or
f. Upon the failure of a new General Partner to qualify under the
provisions of Section 9.04 below.
In the case of an individual General Partner, the term "withdrawal" shall
include not only a court order adjudicating a General Partner incompetent, but
also a written statement signed by two (2) licensed physicians (each of whom
shall represent in such written statement (i) as to such physician's
certification by a recognized medical board and (ii) that the physician
currently practices medicine in the county or metropolitan area in which the
General Partner is then residing) certifying that they have examined the
General Partner and are of the opinion that, by reason of mental or physical
infirmity or other incapacity, the General Partner is unable to manage the
General Partner's own person or property.
Section 9.03. Agreement in Event of Dissolution by Act or Event Relating to
------------ -------------------------------------------------------------
Less Than All Partners. If the act of, or an event relating to, less than all
- ----------------------
Partners (the "Dissolving Partners"), including, without limitation, the
withdrawal of a General Partner, shall for any purpose be considered an event of
dissolution of the Partnership, then the remaining Partners shall enter into a
new partnership upon the terms and conditions set forth above and upon the same
terms and conditions governing the present Partnership, and each party to this
Agreement hereby agrees for himself, his executor, administrator, heirs and
assigns to enter into such new partnership and to execute any and all
instruments necessary therefor. The act or event relating to the Dissolving
Partners shall be treated as a notice of withdrawal by the Dissolving Partners
of the entire capital account or capital accounts of the Dissolving Partners.
Section 9.04. Designation of a General Partner. Upon the withdrawal of BPR
------------ --------------------------------
Holdings, Inc., as a General Partner or upon the withdrawal of the last General
Partner who may have been designated in accordance with the provisions of this
Section 9.04, the Partnership shall continue for a period not exceeding ninety
(90) days immediately following the withdrawal of the last General Partner.
During such time, the Partners holding more than fifty percent (50%) of the
total number of capital units held by all Partners at that time shall designate
a person or other legal entity as a new General Partner and such designee shall
become a new General Partner by accepting such designation in writing and
assuming the obligations of the last General Partner under this Agreement. In
the event a new General Partner is not qualified within the time prescribed,
then at the expiration of such period the Partnership shall dissolve and the
affairs of the Partnership wound up and the property of the Partnership
distributed as provided in this Article Nine. Except as provided in the
immediately preceding sentence, if the
28
<PAGE>
withdrawal of any General Partner shall for any purpose be considered as a
dissolution of the Partnership, then the provisions set forth in this Section
9.04 shall be construed as an agreement to enter into a new partnership upon the
terms and conditions set forth in this Agreement and each party to this
Agreement hereby agrees for himself, his executor, administrator, heirs and
assigns to enter into such new partnership and to execute any and all
instruments necessary therefor.
Section 9.05. Bankruptcy, Incompetency or Death of a Limited Partner. Upon
------------ ------------------------------------------------------
the death, adjudication of incompetency or bankruptcy of a Limited Partner, then
the personal representative of such deceased Limited Partner, the trustee of
such bankrupt Limited Partner or the legal representative of an incompetent
Limited Partner, as the case may be, shall be considered an assignee of such
Limited Partner's interest in this Partnership and, unless admitted to the
Partnership as a new or substituted Partner pursuant to Article Eight above,
such personal representative, trustee or legal representative shall be entitled
only to the rights and benefits not inconsistent with this Agreement as are
presently provided by Ind. Code (S) 23-16-8-3 for a creditor of a person having
--- ----
a partnership interest. In addition, the personal representative of a deceased
Limited Partner shall, without the consent of the Partners, be permitted to
transfer said Partnership interests to the deceased Limited Partner's spouse,
children, or grandchildren or to a trust or custodianship for the benefit of
said Limited Partner's spouse, children or grandchildren pursuant to the
provisions and, except as otherwise provided in this Section 9.05, upon the
terms and conditions set forth in Section 8.11 above. In such event, the
transferee shall, without the consent of the Partners, be substituted or added
as a Limited Partner and shall be bound by all the provisions of this Agreement.
Section 9.06. Time to Dissolve. A reasonable time shall be allowed for the
------------ ----------------
orderly liquidation of the assets of the Partnership and the discharge of
liabilities to creditors so as to minimize the normal losses attendant upon such
liquidation. Each of the Partners during the course of winding up the
Partnership affairs and dissolution shall be furnished with a statement prepared
by the General Partners which shall set forth the assets and liabilities of the
Partnership as of the date of the termination of the Partnership.
Section 9.07. Date of Termination. The Partnership shall be terminated when
------------ -------------------
all of its assets have been applied and distributed in accordance with the
provisions of Section 9.01 above. The establishment of any reserves for the
payment of any contingent or unforeseen liabilities or obligations of the
Partnership shall not have the effect of extending the term of the Partnership,
and such reserve shall be applied and distributed in the manner otherwise
provided in Section 9.01 above upon the expiration of the period of such
reserve. Upon the termination of the Partnership, there shall be recorded a
Certificate of Cancellation of the Partnership.
Section 9.08. Contingent Liabilities. Notwithstanding any of the
------------ ----------------------
provisions of this Agreement upon the dissolution of the Partnership each
General Partner shall continue to be personally liable for the liabilities of
the Partnership (absolute, contingent or otherwise, and whether or not known at
the time of dissolution) which become payable subsequent to the date of
dissolution arising out of events occurring prior to the date of dissolution.
Each General
29
<PAGE>
Partner shall be responsible for the proportion of such liability as such
General Partner was liable prior to the dissolution of the Partnership in
accordance with Section 3.08 above. Each General Partner shall, if necessary,
pay to the other General Partners any amounts as are necessary to insure that
the terms of this Section are made fully effective.
ARTICLE TEN
-----------
AMENDMENT AND ENTIRE AGREEMENT
------------------------------
This Agreement shall not be amended, altered, changed or added to except by
a written instrument executed by all Partners as of the time of such alteration
or amendment. This instrument contains the entire understanding and agreement of
the Partners with respect to all matters referred to herein and all prior
negotiations and understandings are hereby merged into this Agreement.
ARTICLE ELEVEN
--------------
REMEDIES
--------
Section 11.01. Attorneys' Fees. In the event any Partner finds it necessary
------------- ---------------
to bring an action at law or other proceeding against any other party to enforce
any of the terms, covenants and conditions hereof, or by reason of any breach or
default hereunder, the party prevailing in any such action or other proceeding
shall be paid all reasonable attorneys' fees by the other party, and in the
event any judgment is secured by such prevailing party, all such attorneys' fees
shall be included in any such judgment as determined by the court and not by the
jury.
Section 11.02. Waiver of Actions. The Partners agree that irreparable
------------- -----------------
damage will be done to the goodwill and reputation of the Partnership if any
Partner should bring any action in court to dissolve this Partnership. Care
has been taken in this Agreement to provide for the fair and just compensation
to a Partner desiring to terminate said Partner's relationship with the
Partnership for any reason. Accordingly, each Partner accepts the provisions of
this Agreement as the sole entitlement on the termination of said Partner's
relationship with the Partnership and acknowledges that such provisions are just
and reasonable; waives and renounces said Partner's right to seek a court decree
of dissolution or accounting, or to seek the appointment of a liquidator by
judicial action; and agrees that in the event any Partner should bring any
action to dissolve this Partnership or for the appointment of a liquidator in
contravention of this provision, such Partner shall be entitled only to the
balance in such Partner's capital account, and that in the event any Partner
should bring any action for an accounting such Partner shall pay all costs, fees
and expenses incurred by the Partnership and the remaining Partners in such
action including, without limitation, attorneys' fees, accounting fees and other
costs.
30
<PAGE>
ARTICLE TWELVE
--------------
DEALINGS WITH THE PARTNERSHIP
-----------------------------
Section 12.01. Dealings With the Partnership. Any Partner may deal with
------------- -----------------------------
the Partnership as an independent contractor or as an agent for others, and may
receive from such others or the Partnership normal profits, compensation,
commissions or other income incident to such dealings. Except as hereinafter
provided, no Partner nor any related person or entity in which they, or any one
of them, may hold a material ownership interest, shall deal with the Partnership
as an independent contractor or as agent for others without first disclosing to
all Partners the existence of such relationship or ownership interest and the
compensation or price to be received by the Partner or such related person or
entity. The amount payable by the Partnership to any Partner or such related
person or entity shall not be greater than the amount which the Partnership
would have to pay under an arms-length contract with an unrelated person or
entity. In the event any Partner fails to make such disclosure, such Partner
shall remit to the Partnership, on demand of the General Partners or the other
Partners, all compensation or sales price derived by the Partner or related
person or entity from such dealings.
Section 12.02. Dealings Outside the Partnership. During the continuance
------------- --------------------------------
of the Partnership, the General Partners individually or collectively shall, at
any time and from time to time, devote such time and effort to the Partnership
business as may be necessary to promote adequately the interests of the
Partnership and the mutual interests of the Partners. Except as otherwise
provided by agreement with one or more of the General Partners, the General
Partners shall not be required to devote full time to Partnership business.
During the continuance of the Partnership, the Partners individually or
collectively may, at any time and from time to time, engage in and possess an
interest in other business ventures of any and every type and description,
independently or with others, and neither the Partnership nor any Partner shall
by virtue of this Agreement have any right, title or interest in or to such
independent ventures of the Partners.
Section 12.03. Partners' Salary. No Partner shall receive a regular salary
------------- ----------------
or fees for services rendered in management or operation of the Partnership
business or property unless specifically agreed to by Partnership Action and
such agreement is evidenced by a written agreement specifying such salary;
provided, however, that no Partner shall be required to contribute any materials
- -------- -------
or services for the business or operations of the Partnership and, to the extent
any Partner provides such services or the use of any equipment to the
Partnership which the Partnership would otherwise have been required to obtain
by contract, the Partner or Partners providing such services or equipment shall
be paid by the Partnership at the customary or prevailing rates for such service
or equipment in the locale where they were provided.
Section 12.04. Management Fee. Any Partner may, by agreement of the
------------- --------------
Partners, be compensated for performance of its duties and responsibilities as a
Partner. Any such compensation shall be considered guaranteed payments within
the meaning of Section 707(c) of the Code.
31
<PAGE>
Section 12.05. Fiduciary Obligations. The General Partners shall have a
------------- ---------------------
fiduciary responsibility to all Partners, both General and Limited, and shall
exercise the General Partners' rights and powers in such manner as will best
serve the interests of all Partners, including the safekeeping and use of all
funds and assets of the Partnership, whether or not in their immediate
possession or control. The General Partners shall not employ, or permit another
to employ, such funds or assets in any manner except for the exclusive benefit
of the Partnership.
ARTICLE THIRTEEN
----------------
POWER OF ATTORNEY
-----------------
Section 13.01. Power of Attorney. Each Limited Partner does hereby
------------- -----------------
nominate, constitute and appoint the General Partners as said Limited Partner's
true and lawful agent and attorney-in-fact, in said Limited Partner's name,
place and stead, to make, execute, acknowledge, swear to and file:
a. Any certificate or other instrument which may be required to be filed
by the Partnership under the laws of any state or of the United
States; and
b. Any and all amendments, modifications, or cancellations of such
certificate or instrument, including any amendment to the Certificate
of Limited Partnership required in accordance with the provisions of
this Agreement and the Special Power of Attorney which is attached
hereto as Exhibit "13.01" and incorporated herein by reference.
---------------
Section 13.02. Appointment Irrevocable. This power of attorney granted
------------- -----------------------
herein being coupled with an interest is irrevocable and shall not be affected
by death or incompetence of the principal and, in addition, shall be effective
to the fullest extent permitted pursuant to Ind. Code (S) 30-5-1-1, et seq.
--- ---- -- ---
ARTICLE FOURTEEN
----------------
GENERAL
-------
Section 14.01. Notices and Registered Agent. The registered agent of the
------------- ----------------------------
Partnership shall be as follows:
REGISTERED AGENT: Richard E. Summers
27217 County Road 6
Elkhart, Indiana 46514-0026
or at such other address as may hereafter be designated in accordance with the
Act. All notices, demands, offers or other communication which any party hereto
is required or may desire to
32
<PAGE>
give to any other party hereto may be delivered in person or may be mailed by
certified or registered mail, postage prepaid, addressed to the other party as
follows:
PARTNERSHIP: Shelter Distribution, L.P.
27217 County Road 6
Elkhart, Indiana 46514-0026
GENERAL
PARTNERS: BPR Holdings, Inc.
27217 County Road 6
Elkhart, Indiana 46514-0026
LIMITED
PARTNERS: Shelter Components of Indiana, Inc.
27217 County Road 6
Elkhart, Indiana 46514-0026
or at such other address as any Partner may hereafter specify in writing to the
Partnership and the other Partners. Any notice or demand pursuant to this
Agreement shall be deemed given and received immediately if delivered in person
or if delivered by mail then forty-eight (48) hours after deposit in United
States mail postage prepaid.
Section 14.02. Partnership Action. As used in this Agreement, the term
------------- ------------------
"Partnership Action" shall mean authorization by a majority of the General
Partners at that time.
Section 14.03. Certificate of Limited Partnership. As soon as practicable
------------- ----------------------------------
after the execution of this Agreement, the Partnership shall cause to be filed
with the Secretary of State of the State of Indiana a Certificate of Limited
Partnership meeting the requirements of the Act. In addition, the Partnership
shall cause to be filed any amendment to the Certificate of Limited Partnership
as required by the Act or as the General Partners deem advisable and permitted
by the Act.
Section 14.04. Execution in Counterparts. This Agreement may be executed in
------------- -------------------------
one or more counterparts, each of which may be executed by one of the parties
hereto, with the same force and effect as though all the parties executing such
counterparts had executed but one instrument.
Section 14.05. Titles. The titles and headings in this Agreement are for
------------- ------
convenience only and shall in no way affect, limit or control the meaning or
application of any article or section hereof.
Section 14.06. Applicable Law. This Agreement shall be construed in
------------- --------------
accordance with the laws of the State of Indiana.
33
<PAGE>
Section 14.07. Time of Essence. Time is of the essence in this Agreement
------------- ---------------
and all the terms and provisions hereof. This Agreement and all the terms and
provisions hereof shall, except as herein otherwise provided, inure to the
benefit of and shall be binding upon the heirs, personal representatives,
successors and assigns of the parties hereto.
Section 14.08. Partial Invalidity. If any of the terms and provisions of
------------- ------------------
this Agreement are determined to be invalid, such invalid term or provision
shall not affect or impair the remainder of this Agreement, but such remainder
shall continue in full force and effect to the same extent as though such
invalid term or provision were not contained herein.
Section 14.09. Singular and Plural. In this Agreement, whenever the
------------- -------------------
context so requires, the singular includes the plural and the plural includes
the singular.
Section 14.10. General and Limited Partners. As provided in Section 3.01
------------- ----------------------------
above, capital units may be held by either General and Limited Partners of the
Partnership and a Partner may be both a General and Limited Partner of the
Partnership. For purposes of determining a Partner's rights and obligations
under this Agreement, a Partner who is both a General and Limited Partner shall
have such Partner's rights and obligations determined independently as though
such Partner held only a General or Limited Partnership interest.
Section 14.11. Further Action. The Partners shall execute and deliver all
------------- --------------
documents, provide all information and take or forebear from all such action as
may be necessary or appropriate to achieve the purposes of this Agreement.
Section 14.12. Pronouns. All pronouns and variations thereof shall be
------------- --------
deemed to refer to the masculine, feminine and neuter as the identity of the
person or persons may require.
Section 14.13. Partnership Obligations Binding. Each Partner agrees that
------------- -------------------------------
the promises, covenants and conditions contained herein are given individually
and as a Partner and inure to and are binding upon his successors, assigns and
estate.
Section 14.14. Partition. The Partners hereby agree that no Partner, nor
------------- ---------
any successor in interest to any Partner, shall have the right while this
Agreement remains in effect to have the Partnership property partitioned, or to
file a complaint or institute any proceeding at law or in equity to have the
property partitioned, and each Partner on behalf of himself, his successors,
successors in title and assigns, hereby waives any such right.
Section 14.15. Prime Rate. As used in this Agreement, the term "Prime Rate"
------------- ----------
shall mean the prime rate as published in The Wall Street Journal, and which is
-----------------------
described as the base rate on corporate loans at large United States money
center commercial banks, as the rate may vary from time to time. If such base
rate is expressed as a range, the higher of the reported range will apply.
34
<PAGE>
Section 14.16. Signatory Requirements. Each Limited Partner or additional
------------- ----------------------
or substitute Limited Partner may become a signatory hereof by signing a Limited
Partner Signature Page to this Agreement and such other instruments as the
General Partners shall determine. By so signing, each Limited Partner or
additional or substitute Limited Partner shall be deemed to have adopted and
agreed to be bound by all the provisions of this Agreement, as amended from time
to time in accordance with the provisions of this Agreement.
Section 14.17. Statutory Accountings, Etc. The Partners hereby agree that
-------------- --------------------------
no Partner, nor any successor in interest to any Partner, shall have the right
while this Agreement remains in effect to any statutory right to an accounting
or to institute any proceeding at law or in equity to obtain such accounting,
and each Partner on behalf of himself, his successors, successors in title and
assigns, hereby waives any such rights and hereby accepts the provisions of
Section 7.04 above as such Partner's sole right to any Partnership accountings.
Section 14.18. Book Value. As used in this Agreement, the term "Book Value"
------------- ----------
of any item of Partnership property as of any particular date shall be
determined as follows: (a) the Book Value of any item of property contributed by
a Partner to the capital of the Partnership shall be the agreed-upon gross fair
market value of such item of property as of the date such property was
contributed to the Partnership, as adjusted for depreciation, depletion, cost
recovery and amortization deductions with respect to such property computed in
the manner provided in Section 4.01(a) above; and (b) the Book Value of any
other item of Partnership property shall be its adjusted basis for Federal
income taxation purposes.
IN WITNESS WHEREOF, the parties hereto have set their hands, effective as
of the day and year first above written, on this 20th day of December, 1995.
GENERAL PARTNER LIMITED PARTNER
- --------------- ---------------
BPR HOLDINGS, INC. SHELTER COMPONENTS OF INDIANA,
INC.
By: /s/ LARRY D. RENBARGER By: /s/ DALE LEDBETTER
----------------------------- ---------------------------
Larry D. Renbarger, President Dale Ledbetter, President
35
<PAGE>
STATE OF INDIANA )
) SS:
COUNTY OF ELKHART )
Before me, a Notary Public in and for said county and state, personally
appeared Larry D. Renbarger, known to me to be the President of BPR Holdings,
Inc., and who executed this Agreement on behalf of BPR Holdings, Inc., as a
General Partner, and being duly sworn, acknowledged that execution for the
purposes therein contained as of the date of the Agreement referred to therein.
Witness my hand and official seal.
/s/ NANCY L. BARNETT
-----------------------------------------
Nancy L. Barnett, Notary Public
Residing in St. Joseph County, Indiana
My Commission Expires:
April 24, 1996
- ----------------------
STATE OF INDIANA )
) SS:
COUNTY OF ELKHART )
Before me, a Notary Public in and for said county and state, personally
appeared Dale Ledbetter, known to me to be the President of Shelter Components
of Indiana, Inc., and who executed this Agreement on behalf of Shelter
Components of Indiana, Inc., as a Limited Partner, and being duly sworn,
acknowledged that execution for the purposes therein contained as of the date of
the Agreement referred to therein.
Witness my hand and official seal.
/s/ NANCY L. BARNETT
-----------------------------------------
Nancy L. Barnett, Notary Public
Residing in St. Joseph County, Indiana
My Commission Expires:
April 24, 1996
- ----------------------
36
<PAGE>
EXHIBIT "3.02"
--------------
LIMITED PARTNERSHIP AGREEMENT
-----------------------------
OF
--
SHELTER DISTRIBUTION, L.P.
--------------------------
<TABLE>
<CAPTION>
Description of Property Value
----------------------- -----
<S> <C>
Cash: $ 170,380
- ----
Assets: $
- ------
TOTAL GROSS VALUE $
-----------
Liabilities: $
- -----------
TOTAL LIABILITIES $
-----------
TOTAL NET VALUE $17,208,380
===========
</TABLE>
37
<PAGE>
EXHIBIT "13.01"
---------------
SPECIAL POWER OF ATTORNEY
-------------------------
The undersigned, Shelter Components of Indiana, Inc., hereby constitutes
and appoints the General Partners of Shelter Distribution, L.P., a limited
partnership being organized under the Revised Uniform Limited Partnership Act of
Indiana (hereinafter referred to as the "Partnership"), and Larry D. Renbarger
or any of them, as the undersigned's true and lawful attorney-in-fact in the
undersigned's name, place and stead to:
1. Sign and certify under oath such original Certificate of Limited
Partnership with respect to the Partnership as is required by the Revised
Uniform Limited Partnership Act of Indiana.
2. Sign and certify under oath such amended Certificates of Limited
Partnership with respect to the Partnership as required from time to time in
order to reflect:
a. A change in the name of the Partnership;
b. The admission of a new General Partner in accordance with the
provisions of the Partnership Agreement;
c. The withdrawal of a General Partner in accordance with the provisions
of the Partnership Agreement;
d. The continuation of the business of the Partnership after an event of
withdrawal of a General Partner in accordance with the provisions of
the Partnership Agreement;
e. The discovery by a General Partner that any statement in the original
Certificate of Limited Partnership or any amendment thereof was false
when made;
f. The facts or arrangements described in the original Certificate of
Limited Partnership or any amendment thereof have changed making the
original Certificate of Limited Partnership or any amendment thereof
inaccurate in any respect; or
g. Any other change or modification of the original Certificate of Limited
Partnership or any amendment thereof that the General Partners agree
to.
3. Execute such amendments to the Limited Partnership Agreement of the
Partnership as are necessary to reflect the admission of additional Limited
Partners or substitution of Limited Partners in accordance with the agreement.
<PAGE>
4. Execute and file all documents which may be required to effect the
dissolution of the Partnership pursuant to the Limited Partnership Agreement.
5. Execute and file all assumed name certificates required to be filed on
behalf of the Partnership.
This power of attorney is coupled with an interest and shall be irrevocable
to the General Partners and Larry D. Renbarger, or any of them, so long as said
person or persons continues as a General Partner of the Partnership and shall
not be affected by the death or incompetence of the principal and, in addition,
shall be effective to the fullest extent permitted pursuant to Ind. Code (S) 30-
--- ----
5-1-1, et seq.
This special power of attorney shall be governed by and construed in
accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF, the undersigned has executed this special power of
attorney this 20th day of December, 1995.
Shelter Components, of Indiana, Inc.
By: /s/ DALE LEDBETTER
-----------------------------------------
Dale Ledbetter, President
<PAGE>
STATE OF INDIANA )
) SS:
COUNTY OF ELKHART )
Before me, a Notary Public in and for said county and state, personally
appeared Dale Ledbetter, the President of Shelter Components of Indiana, Inc.,
and executed this Special Power of Attorney for and on behalf of the
Corporation, this 20 day of December, 1995.
Witness my hand and official seal.
/s/ NANCY L. BARNETT
--------------------------------------
Nancy L. Barnett, Notary Public
Residing in St. Joseph County, Indiana
My Commission Expires:
April 24, 1996
- ----------------------
This instrument prepared by J. Scott Troeger, Attorney at Law, Barnes &
Thornburg, 301 South Main Street, Suite 305, Elkhart, Indiana 46516, (219) 293-
0681.
<PAGE>
SPECIAL POWER OF ATTORNEY
-------------------------
The undersigned, Shelter Components of Indiana, Inc., hereby constitutes
and appoints the General Partners of Shelter Distribution, L.P., a limited
partnership being organized under the Revised Uniform Limited Partnership Act of
Indiana (hereinafter referred to as the "Partnership"), and Larry D. Renbarger
or any of them, as the undersigned's true and lawful attorney-in-fact in the
undersigned's name, place and stead to:
1. Sign and certify under oath such original Certificate of Limited
Partnership with respect to the Partnership as is required by the Revised
Uniform Limited Partnership Act of Indiana.
2. Sign and certify under oath such amended Certificates of Limited
Partnership with respect to the Partnership as required from time to time in
order to reflect:
a. A change in the name of the Partnership;
b. The admission of a new General Partner in accordance with the
provisions of the Partnership Agreement;
c. The withdrawal of a General Partner in accordance with the provisions
of the Partnership Agreement;
d. The continuation of the business of the Partnership after an event of
withdrawal of a General Partner in accordance with the provisions of
the Partnership Agreement;
e. The discovery by a General Partner that any statement in the original
Certificate of Limited Partnership or any amendment thereof was false
when made;
f. The facts or arrangements described in the original Certificate of
Limited Partnership or any amendment thereof have changed making the
original Certificate of Limited Partnership or any amendment thereof
inaccurate in any respect; or
g. Any other change or modification of the original Certificate of Limited
Partnership or any amendment thereof that the General Partners agree
to.
3. Execute such amendments to the Limited Partnership Agreement of the are
necessary to reflect the admission of additional Limited Partners or of Limited
Partners in accordance with the agreement.
<PAGE>
4. Execute and file all documents which may be required to effect the
dissolution of the Partnership pursuant to the Limited Partnership
Agreement.
5. Execute and file all assumed name certificates required to be filed on
behalf of the Partnership.
This power of attorney is coupled with an interest and shall be irrevocable
to the General Partners and Larry D. Renbarger, or any of them, so long as said
person or persons continues as a General Partner of the Partnership and shall
not be affected by the death or incompetence of the principal and, in addition,
shall be effective to the fullest extent permitted pursuant to Ind. Code (S) 30-
--- ----
5-1-1, et seq.
-- ---
This special power of attorney shall be governed by and construed in
accordance with the laws of the State of Indiana.
IN WITNESS WHEREOF, the undersigned has executed this special power of
attorney this 20th day of December, 1995.
Shelter Components of Indiana, Inc.
By: /s/ DALE LEDBETTER
-----------------------------------------
Dale Ledbetter, President
STATE OF INDIANA )
) SS:
COUNTY OF ELKHART )
Before me, a Notary Public in and for said county and state, personally
appeared Dale Ledbetter, the President of Shelter Components of Indiana, Inc.,
and executed this Special Power of Attorney for and on behalf of the
Corporation, this 2Oth day of December, 1995.
Witness my hand and official seal.
/s/ NANCY L. BARNETT
-----------------------------------------------
Nancy L. Barnett, Notary Public
Residing in St. Joseph County, Indiana
My Commission Expires:
April 24, 1996
- ---------------------
This instrument prepared by J. Scott Troeger, Attorney at Law, Barnes &
Thornburg, 301 South Main Street, Suite 305, Elkhart, Indiana 46516, (219) 293-
0681.
<PAGE>
EXHIBIT 3.13
ARTICLES OF RESTATEMENT
OF THE
ARTICLES OF INCORPORATION OF
SHELTER NEWCO, INC.
SHELTER NEWCO, INC. (hereinafter referred to as the "Corporation"),
existing pursuant to the Indiana Business Corporation law and desiring to give
notice of corporate action effectuating a restatement of its Articles of
Incorporation, sets forth the following facts:
ARTICLE I
Restatement of the
Articles of Incorporation
Section 1. The Name of the Corporation following this restatement shall be
changed to SHELTER COMPONENTS CORPORATION.
Section 2. The Corporation's Articles of Incorporation are restated in the
form attached hereto.
Section 3. The effective date of the Restatement shall be October 23, 1987.
ARTICLE II
Manner of Adoption and Vote
SECTION 1. The Restatement was approved and adopted by the Corporation's
Board of Directors. The Restatement contains an amendment requiring shareholder
approval, and it was submitted to the Corporation's shareholders for their
approval. The Restated Articles of Incorporation were approved by the sole
shareholder of the Corporation pursuant to a written consent of the sole
shareholder dated October 21, 1987, signed by the holder of 100 shares of the
Corporation's common stock, representing all of the outstanding shares of the
Corporation's stock and all of the shares thereof being entitled to vote in
respect of the Restatement.
Section 2. The manner of the adoption of the Restated Articles of
Incorporation and the vote by which they were adopted constitute full legal
compliance with the provisions of the
<PAGE>
Indiana Business Corporation Law and the Corporation's Articles of Incorporation
and By-Laws.
IN WITNESS WHEREOF, the undersigned officer of SHELTER NEWCO, INC. has
executed these Articles of Restatement this 21st day of October, 1987.
/s/ ARTHUR M. BORDEN
----------------------------------
Arthur M. Borden
Assistant Secretary
2
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
SHELTER NEWCO, INC.
SHELTER NEWCO, INC. (hereinafter referred to as the "Corporation"),
having duly elected to be governed by IC 23-1-18 through IC 23-1-54 (except for
IC 23-1-18-3, IC 23-1-21 and IC 23-1-53-3) effective July 29, 1987, and desiring
to amend and restate its Articles of Incorporation effective October 23, 1987,
pursuant to the provisions of the Indiana Business Corporation Law (hereinafter
referred to as the "Corporation Law"), submits the following Restated Articles
of Incorporation:
ARTICLE I
Name
The name of the Corporation is SHELTER COMPONENTS CORPORATION.
ARTICLE II
Purposes and Powers
Section 2.1. Purposes of the Corporation. The purposes for which the
----------- ---------------------------
Corporation is formed are (a) to engage in the general business of conducting
and operating a holding company, and to carry on such activities of every kind
or nature as may be allied or incidental to such business, and (b) to engage in
the transaction of any or all lawful business for which corporations may now or
hereafter be incorporated under the Corporation Law.
Section 2.2. Powers of the Corporation. The Corporation shall have
----------- -------------------------
(a) all powers now or hereafter authorized by or vested in corporations pursuant
to the provisions of the Corporation Law, (b) all powers now or hereafter vested
in corporations by common law or any other statute or act, and (c) all powers
authorized by or vested in the Corporation by the provisions of these Restated
Articles of Incorporation or by the provisions of its By-Laws as from time to
time in effect.
1
<PAGE>
ARTICLE III
Term of Existence
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
Registered Office and Agent
The street address of the Corporation's registered office at the time
of adoption of these Restated Articles of Incorporation is Circle Tower,
Indianapolis, Indiana, 46204 and the name of its Resident Agent at such office
at the time of adoption of these Restated Articles of Incorporation is Prentice
Hall Corporation System, Inc.
ARTICLE V
Shares
Section 5.1. Authorized Classes and Number of Shares. The total
----------- ---------------------------------------
number of shares which the Corporation has authority to issue shall be Eleven
Million (11,000,000) shares, consisting of Ten Million (10,000,000) common
shares (the "Common Shares") and One Million (1,000,000) special shares (the
"Special Shares"). The Corporation's shares shall have a par value of $.01 per
share.
Section 5.2. General Terms of All Shares. The Board of Directors of
----------- ---------------------------
the Corporation has authority to authorize and direct the acquisition by the
Corporation of the issued and outstanding Special Shares and Common Shares at
such times, in such amounts, from such persons, for such considerations, from
such sources and upon such terms and conditions as it may, from time to time,
determine upon, subject only to the restrictions, limitations, conditions and
requirements imposed by the Corporation Law, other applicable laws and these
Restated Articles of Incorporation, as the same may, from time to time, be
amended. Shares of the Corporation purchased, redeemed or otherwise acquired by
it shall constitute authorized but unissued shares, unless prior to any such
purchase, redemption or other acquisition, or within thirty (30) days
thereafter, the Board of Directors adopts a resolution providing that such
shares constitute authorized and issued but not outstanding shares.
2
<PAGE>
The Board of Directors of the Corporation has authority to authorize
and direct the issuance by the Corporation of Special Shares and Common Shares
at such times, in such amounts, to such persons, for such considerations and
upon such terms and conditions as it may, from time to time, determine upon,
subject only to the restrictions, limitations, conditions and requirements
imposed by the Corporation Law, other applicable laws and these Restated
Articles of Incorporation, as the same may, from time to time, be amended;
Shares may be disposed of, issued and sold to such persons, firms or
corporations as the Board of Directors may determine, without any preemptive or
other right on the part of the owners or holders of other shares of the
Corporation of any class or kind to acquire such shares by reason of their
ownership of such other shares.
The Corporation shall have the power to declare and pay dividends or
other distributions upon the issued and outstanding shares of the Corporation,
subject to the limitation that a dividend or other distribution may not be made
if, after giving it effect, the Corporation would not be able to pay its debts
as they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities (calculated without regard to
any amounts that would be needed, if the Corporation were to be dissolved at the
time of the dividend or other distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
of the holders of shares receiving the dividend or other distribution, unless
otherwise expressly provided with respect to a series of Special Shares in the
provisions of an amendment to these Restated Articles of Incorporation adopted
by the Board of Directors pursuant to Section 5.5 hereof describing the terms of
such series). The Corporation shall have the power to issue shares of one class
or series as a share dividend or other distribution in respect of that class or
series or one or more other classes or series.
Section 5.3. Voting Rights of Shares.
----------- -----------------------
(a) Common Shares. Except as otherwise provided by the Corporation Law
-------------
and subject to such shareholder disclosure and recognition procedures
(which may include voting prohibition sanctions) as the Corporation may by
action of its Board of Directors establish, the Common Shares have
unlimited voting rights and each outstanding Common Share shall, when
validly issued by the Corporation, entitle the record holder thereof to one
vote at all shareholders' meetings on all matters submitted to a vote of
the shareholders of the Corporation.
3
<PAGE>
(b) Special Shares. Except as required by the Corporation Law or by
--------------
the provisions of an amendment to these Restated Articles of Incorporation
that may be adopted, from time to time, by the Board of Directors pursuant
to Section 5.5 hereof describing the terms of Special Shares or a series
thereof, the holders of Special Shares shall have no voting rights or
powers. Special Shares shall, when validly issued by the Corporation,
entitle the record holder thereof to vote as and; on such matters, but only
as and on such matters, as the holders thereof are entitled to vote under
the Corporation Law or under the provisions of an amendment to these
Restated Articles of Incorporation adopted by the Board of Directors
pursuant to Section 5.5 hereof describing the terms of Special Shares or a
series thereof (which provisions may provide for special, conditional,
limited or unlimited voting rights, including multiple or fractional votes
per share, or for no right to vote, except to the extent required by the
Corporation Law) and subject to such shareholder disclosure and recognition
procedures (which may include voting prohibition sanctions) as the
Corporation may by action of the Board of Directors establish.
Section 5.4. Other Terms of Common Shares. The Common Shares shall be
----------- ----------------------------
equal in every respect insofar as their relationship to the Corporation is
concerned, but such equality of rights shall not imply equality of treatment as
to redemption or other acquisition of shares by the Corporation. Subject to the
rights of the holders of any outstanding Special Shares issued under Section 5.5
hereof, the holders of Common Shares shall be entitled to share ratably in such
dividends or other distributions (other than purchases, redemptions or other
acquisitions of shares by the Corporation), if any, as are declared and paid
from time to time on the Common Shares at the discretion of the Board of
Directors. In the event of any liquidation, dissolution or winding up of the
Corporation, either voluntary or involuntary, after payment shall have been made
to the holders of the Special Shares of the full amount to which they shall be
entitled under this Article V, the holders of Common Shares shall be entitled,
to the exclusion of the holders of the Special Shares of any and all series, to
share, ratably according to the number of shares of Common Shares held by them,
in all remaining assets of the Corporation available for distribution to its
shareholders.
Section 5.5. Other Term of Special Shares. The Board of Directors of
----------- ----------------------------
the Corporation is vested with authority to determine and state the designations
and the relative
4
<PAGE>
preferences, limitations, voting rights, if any, and other rights of the Special
Shares and of each series of Special Shares by the adoption and filing in
accordance with the Corporation Law (which adoption and filing will be effective
without any shareholder approval or other action), before the issuance of any
Special Shares or series of Special Shares, of an amendment or amendments to
these Restated Articles of Incorporation as the same may, from time to time, be
amended, determining the terms of such Special Shares or series of Special
Shares. All Special Shares of the same series shall be identical with each other
in all respects.
ARTICLE VI
Directors
Section 6.1. Number. The number of Directors comprising the Board of
----------- ------
Directors at the time of adoption of these Restated Articles of Incorporation is
nine (9), and the number of Directors shall be fixed by the By-Laws and may be
changed from time to time by amendment to the By-Laws, but which number shall
in no event be greater than twelve (12). The By-Laws may provide for staggering
the Directors' terms in the manner and to the full extent permitted by the
Corporation Law.
Section 6.2. Qualifications and Nominations. Directors need not be
----------- ------------------------------
shareholders of the Corporation or residents of this or any other state in the
United States. Nominations for the election of Directors may be made by the
Board of Directors or by any shareholder entitled to vote for the election of
Directors. Except as may be otherwise provided in an amendment to these Restated
Articles of Incorporation adopted by the Board of Directors pursuant to Section
5.5 hereof describing the terms of the series of Special Shares, nominations for
the election of Directors other than by the Board of Directors shall be made by
notice in writing, delivered or mailed by first class United States mail,
postage prepaid, to the Secretary of the Corporation not less than ninety (90)
days prior to the first anniversary of the date of the last meeting of
shareholders of the Corporation called for the election of Directors.
Each notice shall set forth (i) the name, age and address of the
shareholder who intends to make the nomination and of the person or persons to
be nominated; (ii) a representation that the shareholder is a holder of record
of stock of the Corporation entitled to vote at the meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (iii) the
5
<PAGE>
name, age, business address and, if known, residence address of each nominee
proposed in such notice; (iv) the principal occupation or employment of each
such nominee; (v) a description of all arrangements or understandings between
the shareholder and each such nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or nominations are to
be made by the shareholder; (vi) such other information regarding each such
nominee as would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had each
nominee been nominated, or intended to be nominated, by the Board of Directors
of the Corporation; and (vii) the consent of each such nominee to serve as a
Director of the Corporation if so elected.
The Chairman of any meeting of shareholders may, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the foregoing procedure, and if he or she should so determine,
the Chairman shall so declare to the meeting and the defective nomination shall
be disregarded.
Section 6.3. Vacancies. Vacancies occurring in the Board of Directors
----------- ---------
shall be filled in the manner provided in the By-Laws or, if the By-Laws do not
provide for the filling of vacancies, in the manner provided by the Corporation
Law. The By-Laws may also provide that in certain circumstances specified
therein, vacancies occurring in the Board of Directors may be filled by vote of
the shareholders at a special meeting called for that purpose or at the next
annual meeting of shareholders.
Section 6.4. Liability of Directors. A Director's responsibility to
----------- ----------------------
the Corporation shall be limited to discharging his or her duties as a Director,
including his duties as a member of any committee of the Board of Directors upon
which he or she may serve, in good faith, with the care an ordinarily prudent
person in a like position would exercise under similar circumstances, and in a
manner the Director reasonably believes to be in the best interests of the
Corporation, all based on the facts then known to the Director.
In discharging his or her duties, a Director is entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the Corporation whom
the Director reasonably be-
6
<PAGE>
believes to be reliable and competent in the matters presented;
(b) Legal counsel, public accountants, or other persons as to matters
the Director reasonably believes are within such person's professional or
expert competence; or
(c) A committee of the Board of which the Director is not a member if
the Director reasonably believes the committee merits confidence;
but a Director is not acting in good faith if the Director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
this Section 6.4 unwarranted. A Director may, in considering the best interests
of the Corporation, consider the effects of any action on shareholders,
employees, suppliers and customers of the Corporation, and communities in which
offices or other facilities of the Corporation are located, and any other
factors the Director considers pertinent.
A Director shall not be liable for any action taken as a Director, or
any failure to take any action, unless (a) the Director has breached or failed
to perform the duties of the Director's office in compliance with this Section
6.4, and (b) the breach or failure to perform constitutes willful misconduct or
recklessness.
Section 6.5. Removal of Directors. Any one or more of the members of
----------- --------------------
the Board of Directors may be removed only for good cause at a meeting of the
Board of Directors for which notice of the purpose of the meeting has been
given, by a vote of at least a majority of all persons then serving as
Directors. In addition, any one or more of the members of the Board of Directors
may be removed only for good cause at a meeting of the shareholders called
expressly for that purpose, by the affirmative vote of the holders of
outstanding shares representing at least sixty-six and two-thirds percent
(66-2/3%) of all the votes then entitled to be cast at an election of
Directors. No Director may be removed except as provided in this Section 6.5.
Notwithstanding any provision in these Restated Articles of Incorporation to the
contrary, the provisions set forth in this Section 6.5 may not be amended,
altered, changed or repealed, nor may any provision inconsistent with this
Section 6.5 be added to these Restated Articles of Incorporation or to the By-
Laws of the Corporation, as from time to time in effect, except upon the
affirmative vote of the holders of not less than sixty-six and two-thirds
percent (66-2/3%) of all outstanding
7
<PAGE>
shares of the voting stock of the Corporation voted as a single class.
Section 6.6. Election of Directors by Holders of Special Shares.
----------- --------------------------------------------------
The holders of one (1) or more series of Special Shares may be entitled to elect
all or a specified number of Directors, but only to the extent and subject to
such limitations as may be set forth in the provisions of an amendment to these
Restated Articles of Incorporation adopted by the Board of Directors pursuant to
Section 5.5 hereof describing the terms of the series of Special Shares.
ARTICLE VII
Provisions for Regulation of Business
And Conduct of Affairs of Corporation
Section 7.1. By-Laws. The Board of Directors shall have the exclusive
----------- -------
power to make, alter, amend or repeal, or to waive provisions of, the By-Laws of
the Corporation by the affirmative vote of a majority of the entire number of
Directors at the time, except as expressly provided by the Corporation Law.
Provisions for the regulation of the business and management of the affairs of
the Corporation not stated in these Restated Articles of Incorporation may be
stated in the By-Laws. The Board of Directors may adopt Emergency By-Laws of
the Corporation and shall have the exclusive power (except as may otherwise be
provided therein) to make, alter, amend or repeal, or to waive provisions of,
the Emergency By-Laws by the affirmative vote of a majority of the entire
number of Directors at such time.
Section 7.2. Interest of Directors. (a) A conflict of interest
------------ ---------------------
transaction is a transaction with the Corporation in which a Director of the
Corporation has a direct or indirect interest. A conflict of interest
transaction is not voidable by the Corporation solely because of the Director's
interest in the transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the Director's interest
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.
(2) The material facts of the transaction and the Director's interest
were disclosed or known to
8
<PAGE>
the shareholders entitled to vote and they authorized, approved, or
ratified the transaction.
(3) The transaction was fair to the Corporation.
(b) For purposes of this Section 7.2, a Director of the Corporation has an
indirect interest in a transaction if:
(1) Another entity in which the Director has a material financial
interest or in which the Director is a general partner is a party to the
transaction; or
(2) Another entity of which the Director is a director, officer, or
trustee is a party to the transaction and the transaction is, or is
required to be, considered by the Board of Directors of the Corporation.
(c) For purposes of Section 7.2(a)(l), a conflict of interest transaction
is authorized, approved, or ratified if it receives the affirmative vote of a
majority of the Directors on the Board of Directors (or on the committee) who
have no direct or indirect interest in the transaction, but a transaction may
not be authorized, approved, or ratified under this section by a single
Director. If a majority of the Directors who have no direct or indirect
interest in the transaction vote to authorize, approve, or ratify the
transaction, a quorum shall be deemed present for the purpose of taking action
under this Section 7.2. The presence of, or a vote cast by, a Director with a
direct or indirect interest in the transaction does not affect the validity of
any action taken under Section 7.2(a)(l), if the transaction is otherwise
authorized, approved, or ratified as provided in such subsection.
(d) For purposes of Section 7.2(a)(2), a conflict of interest transaction
is authorized, approved, or ratified if it receives the affirmative vote of the
holders of shares representing a majority of the votes entitled to be cast.
Shares owned by or voted under the control of a Director who has a direct or
indirect interest in the transaction, and shares owned by or voted under the
control of an entity described in Section 7.2(b), may be counted in such a vote
of shareholders.
(e) This Section 7.2 shall not be construed to require authorization,
approval, or ratification by the shareholders of any conflict of interest
transaction, or to invalidate any
9
<PAGE>
such transaction, that would otherwise be valid under the common and statutory
law applicable thereto.
Section 7.3. Indemnification of Officers, Directors and Other
----------- ------------------------------------------------
Eligible Persons.
- ----------------
(a) To the extent not inconsistent with applicable law, every Eligible
Person shall be indemnified by the Corporation against all Liability and
reasonable Expense that may be incurred by him or her in connection with or
resulting from any Claim, (i) if such Eligible Person is Wholly Successful with
respect to the Claim, or (ii) if not Wholly Successful, then if such Eligible
Person is determined, as provided in either Section 7.3(f) or 7.3(g), to have
acted in good faith, in what he or she reasonably believed to be the best
interests of the Corporation or at least not opposed to its best interests and,
in addition, with respect to any criminal claim is determined to have had
reasonable cause to believe that his or her conduct was lawful or had no
reasonable cause to believe that his or her conduct was unlawful. The
termination of any Claim, by judgment, order, settlement (whether with or
without court approval), or conviction or upon a plea of guilty or of nolo
----
contendere, or its equivalent, shall not create a presumption that an Eligible
- ----------
Person did not meet the standards of conduct set forth in clause (ii) of this
subsection (a). The actions of an Eligible Person with respect to an employee
benefit plan subject to the Employee Retirement Income Security Act of 1974
shall be deemed to have been taken in what the Eligible Person reasonably
believed to be the best interests of the Corporation or at least not opposed to
its best interests if the Eligible Person reasonably believed he or she was
acting in conformity with the requirements of such Act or he or she reasonably
believed his or her actions to be in the interests of the participants in or
beneficiaries of the plan.
(b) The term "Claim" as used in this Section 7.3 shall include every
pending, threatened or completed claim, action, suit or proceeding and all
appeals thereof (whether brought by or in the right of this Corporation or any
other corporation or otherwise), civil, criminal, administrative or
investigative, formal or informal, in which an Eligible Person may become
involved, as a party or otherwise:
(i) by reason of his or her being or having been an Eligible Person,
or
(ii) by reason of any action taken or not taken by him or her in his
or her capacity as an Eligible Person, whether or not he or she continued
10
<PAGE>
in such capacity at the time such Liability or Expense shall have been
incurred.
(c) The term "Eligible Person" as used in this Section 7.3 shall mean every
person (and the estate, heirs and personal representatives of such person) who
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,
agent or fiduciary of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other organization or entity,
whether for profit or not. An Eligible Person shall also be considered to have
been serving an employee benefit plan at the request of the corporation if his
or her duties to the Corporation also imposed duties on, or otherwise involved
services by, him or her to the plan or to participants in or beneficiaries of
the plan.
(d) The terms "Liability" and "Expense" as used in this Section 7.3 shall
include, but shall not be limited to, counsel fees and disbursements and amounts
of judgments, fines or penalties against (including excise taxes assessed with
respect to an employee benefit plan), and amounts paid in settlement by or on
behalf of, an Eligible Person.
(e) The term "Wholly Successful" as used in this Section 7.3 shall mean (i)
termination of any Claim against the Eligible Person in question without any
finding of liability or guilt against him or her, (ii) approval by a court or
agency, with knowledge of the indemnity herein provided, of a settlement of any
Claim, or (iii) the expiration of a reasonable period of time after the
threatened making of any Claim without commencement of an action, suit or
proceeding and without any payment or promise made to induce a settlement.
(f) Every Eligible Person claiming indemnification hereunder (other than
one who has been Wholly Successful with respect to any Claim) shall be entitled
to indemnification (i) if special independent legal counsel, which may be
regular counsel of the Corporation or other disinterested person or persons, in
either case selected by the Board of Directors, whether or not a disinterested
quorum exists (such counsel or person or persons being hereinafter called the
"Referee"), shall deliver to the Corporation a written finding that such
Eligible Person has met the standards of conduct set forth in Section
7.3(a)(ii), and (ii) if the Board of Directors, acting upon such written
finding, so determines. The Board of Directors shall, if an Eligible Person is
found to be entitled to indemnification pursuant to the preceding sentence, also
determine the reasonableness of the
11
<PAGE>
Eligible Person's Expenses. The Eligible Person claiming indemnification shall,
if requested, appear before the Referee, answer questions that the Referee deems
relevant and shall be given ample opportunity to present to the Referee evidence
upon which he or she relies for indemnification. The Corporation shall, at the
request of the Referee, make available facts, opinions or other evidence in any
way relevant to the Referee's finding that are within the possession or control
of the Corporation.
(g) If an Eligible Person claiming indemnification pursuant to Section
7.3(f) is found not to be entitled thereto, or if the Board of Directors fails
to select a Referee under Section 7.3(f) within a reasonable amount of time
following a written request of an Eligible Person for the selection of a
Referee, or if the Referee or the Board of Directors fails to make a
determination under Section 7.3(f) within a reasonable amount of time following
the selection of a Referee, the Eligible Person may apply for indemnification
with respect to a Claim to a court of competent jurisdiction, including a court
in which the Claim is pending against the Eligible Person. On receipt of an
application, the court, after giving notice to the Corporation and giving the
Corporation ample opportunity to present to the court any information or
evidence relating to the claim for indemnification that the Corporation deems
appropriate, may order indemnification if it determines that the Eligible Person
is entitled to indemnification with respect to the Claim because such Eligible
Person met the standards of conduct set forth in Section 7.3(a)(ii). If the
court determines that the Eligible Person is entitled to indemnification, the
court shall also determine the reasonableness of the Eligible Person's Expenses.
(h) The rights of indemnification provided in this Section 7.3 shall be in
addition to any rights to which any Eligible Person may otherwise be entitled.
Irrespective of the provisions of this Section 7.3, the Board of Directors may,
at any time and from time to time, (i) approve indemnification of any Eligible
Person to the full extent permitted by the provisions of applicable law at the
time in effect, whether on account of past or future transactions, and (ii)
authorize the Corporation to purchase and maintain insurance on behalf of any
Eligible Person against any Liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability.
(i) Expenses incurred by an Eligible Person with respect
12
<PAGE>
to any Claim, may be advanced by the Corporation (by action of the Board of
Directors, whether or not a disinterested quorum exists) prior to the final
disposition thereof upon receipt of an undertaking by or on behalf of the
Eligible Person to repay such amount unless he or she is determined to be
entitled to indemnification.
(j) The provisions of this Section 7.3 shall be deemed to be a, contract
between the corporation and each Eligible Person, and an Eligible Person's
rights hereunder shall not be diminished or otherwise adversely affected by any
repeal, amendment or modification of this Section 7.3 that occurs subsequent to
such person becoming an Eligible Person.
(k) The provisions of this Section 7.3 shall be applicable to Claims made
or commenced after the adoption hereof, whether arising from acts or omissions
to act occurring before or after the adoption hereof.
ARTICLE VIII
Miscellaneous Provisions
Section 8.1. Amendment or Repeal. Except as otherwise expressly
----------- ---------------------
provided for in these Restated Articles of Incorporation, the Corporation shall
be deemed, for all purposes, to have reserved the right to amend, alter, change
or repeal any provision contained in these Restated Articles of Incorporation to
the extent and in the manner now or hereafter permitted or prescribed by
statute, and all rights herein conferred upon shareholders are granted subject
to such reservation.
Section 8.2. Redemption of Shares Acquired in Control Share
----------- ----------------------------------------------
Acquisitions. If and whenever the provisions of IC 23-1-42 apply to the
- ------------
Corporation, it is authorized to redeem its securities pursuant to IC 23-1-42-
10.
Section 8.3. Headings. The headings of the Articles and Sections of
----------- --------
these Restated Articles of Incorporation have been inserted for convenience of
reference only and do not in any way define, limit, construe or describe the
scope or intent of any Article or Section hereof.
IN WITNESS WHEREOF, the undersigned officer of Shelter Newco, Inc. has
executed these Restated Articles of Incorporation this 21st day of October,
1987.
/s/ ARTHUR R. BORDEN
--------------------------------------
Arthur M. Borden,
Assistant Secretary
13
<PAGE>
EXHIBIT 3.14
BY-LAWS
OF
SHELTER COMPONENTS CORPORATION
ARTICLE I
---------
Meetings of Shareholders
------------------------
Section 1.1. Annual Meetings. Annual meetings of the shareholders of
----------- ---------------
the Corporation shall be held on the second Tuesday of May of each year, at such
hour and at such place within or without the State of Indiana as shall be
designated by the Board of Directors. In the absence of designation, the
meeting shall be held at the principal office of the Corporation at 10:00 a.m.
(Local time). The Board of Directors may, by resolution, change the date or
time of such annual meeting. If the day fixed for any annual meeting of
shareholders shall fall on a legal holiday, then such annual meeting shall be
held on the first following day that is not a legal holiday.
Section 1.2. Special Meetings. Special meetings of the shareholders of
----------- ----------------
the Corporation may be called at any time by the Board of Directors or the
Chairman of the Board and shall be called by the Board of Directors if the
Secretary receives written, dated and signed demands for a special meeting,
describing in reasonable detail the purpose or purposes for which it is to be
held, from the holders of shares representing at least twenty-five percent (25%)
of all votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting. If the Secretary receives one (1) or more proper
written demands for a special meeting of shareholders, the Board of Directors
may set a record date for determining shareholders entitled to make such demand.
The Board of Directors or the Chairman of the Board, as the case may be,
calling a special meeting of shareholders shall set the date, time and place of
such meeting, which may be held within or without the State of Indiana.
Section 1.3. Notices. A written notice, stating the date, time and
----------- -------
place of any meeting of the shareholders, and in the case of a special meeting
the purpose or purposes for which such meeting is called, shall be delivered or
mailed by the Secretary of the Corporation, to each shareholder of record of the
Corporation entitled to notice of or to vote at such meeting no fewer than ten
(10) nor more than sixty (60) days before the date of the meeting. In the event
of a special meeting of shareholders required to be called as the result of a
demand therefor made by share-
<PAGE>
holders, such notice shall be given no later than the sixtieth (60th) day after
the Corporation's receipt of the demand requiring the meeting to be called.
Notice of shareholders' meetings, if mailed, shall be mailed, postage prepaid,
to each shareholder at his address shown in the Corporation's current record of
shareholders.
Notice of a meeting of shareholders shall be given to shareholders not
entitled to vote, but only if a purpose for the meeting is to vote on any
amendment to the Corporation's Restated Articles of Incorporation, merger or
share exchange to which the Corporation would be a party, sale of the
Corporation's assets, dissolution of the Corporation, or consideration of voting
rights to be accorded to shares acquired or to be acquired in a "control share
acquisition" (as such term is defined in the Indiana Business Corporation Law).
Except as required by the foregoing sentence or as otherwise required by the
Indiana Business Corporation Law or the Corporation's Restated Articles of
Incorporation, notice of a meeting of shareholders is required to be given only
to shareholders entitled to vote at the meeting.
A shareholder or his proxy may at any time waive notice of a meeting if
the waiver is in writing and is delivered to the Corporation for inclusion in
the minutes of filing with the Corporation's records. A shareholder's
attendance at a meeting, whether in person or by proxy, (a) waives objection to
lack of notice or defective notice of the meeting, unless the shareholder or his
proxy at the beginning of the meeting objects to holding the meeting or
transacting business at the meeting, and (b) waives objection to consideration
of a particular matter at the meeting that is not within the purpose or purposes
described in the meeting notice, unless the shareholder or his proxy objects to
considering the matter when it is presented. Each shareholder who has in the
manner above provided waived notice or objection to notice of a shareholders'
meeting shall be conclusively presumed to have been given due notice of such
meeting, including the purpose or purposes thereof.
If an annual or special shareholders' meeting is adjourned to a
different date, time or place, notice need not be given of the new date, time or
place if the new date, time or place is announced at the meeting before
adjournment, unless a new record date is or must be established for the
adjourned meeting.
Section 1.4. Voting. Except as otherwise provided by the Indiana
----------- ------
Business Corporation Law or the Corporation's Restated Articles of
Incorporation, each share of the capital stock of any class of the Corporation
that is outstanding at the record date established for any annual or special
meeting
-2-
<PAGE>
of shareholders and is outstanding at the time of and represented in person or
by proxy at the annual or special meeting, shall entitle the record holder
thereof, or his proxy, to one (1) vote on each matter voted on at the meeting.
Section 1.5. Quorum. Unless the Corporation's Restated Articles of
----------- ------
Incorporation or the Indiana Business Corporation Law provide otherwise, at all
meetings of shareholders a majority of the votes entitled to be cast on a
matter, represented in person or by proxy, constitutes a quorum for action on
the matter. Action may be taken at shareholders' meeting only on matters with
respect to which a quorum exists; provided, however, that any meeting of
shareholders, including annual and special meetings and any adjournments
thereof, may be adjourned to a later date although less than a quorum is
present. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
Section 1.6. Vote Required to Take Action. If a quorum exists as to a
----------- ----------------------------
matter to be considered at a meeting of shareholders, action on such matter
(other than the election of Directors) is approved if the votes properly cast
favoring the action exceed the votes properly cast opposing the action, except
as the Corporation's Restated Articles of Incorporation or the Indiana Business
Corporation Law require a greater number of affirmative votes. Directors shall
be elected by a plurality of the votes properly cast.
Section 1.7. Record Date. Only such persons shall be entitled to
----------- -----------
notice of or to vote, in person or by proxy, at any shareholders' meeting as
shall appear as shareholders upon the books of the Corporation as of such record
date as the Board of Directors shall determine, which date may not be earlier
than the date seventy (70) days immediately preceding the meeting. In the
absence of such determination, the record date shall be the fiftieth (50th) day
immediately preceding the date of such meeting. Unless otherwise provided by
the Board of Directors, shareholders shall be determined as of the close of
business on the record date.
Section 1.8. Proxies. A shareholder may vote his shares either in
----------- -------
person or by proxy. A shareholder may appoint a proxy to vote or otherwise act
for the shareholder (including authorizing the proxy to receive, or to waive,
notice of any shareholders' meetings within the effective period of such proxy)
by signing an appointment form, either personally or by the shareholder's
attorney-in-fact. An appointment of a proxy is effective when received by the
Secretary or other officer or agent authorized to tabulate
-3-
<PAGE>
votes and is effective for eleven (11) months unless a shorter or longer period
is expressly provided in the appointment form. The proxy's authority may be
limited to a particular meeting or may be general and authorize the proxy to
represent the shareholder at any meeting of shareholders held within the time
provided in the appointment form. Subject to the Indiana Business Corporation
Law and to any express limitation on the proxy's authority appearing on the face
of the appointment form, the Corporation is entitled to accept the proxy's vote
or other action as that of the shareholder making the appointment.
Section 1.9. Removal of Directors. Unless the Corporation's Restated
----------- --------------------
Articles of Incorporation provide otherwise, any one or more of the members of
the Board of Directors may be removed only for good cause (a) at a meeting of
the Board of Directors for which notice of the purpose of the meeting has been
given, by a vote of at least a majority of all persons then serving as
Directors, or (b) at a meeting of the shareholders called expressly for that
purpose, by the affirmative vote of the holders of outstanding shares
representing at least sixty-six and two-thirds percent (66-2/3%) of all the
votes then entitled to be cast at an election of Directors.
Section 1.10. Participation by Conference Telephone. The Chairman of
------------ -------------------------------------
the Board or the Board of Directors may permit any or all shareholders to
participate in an annual or special meeting of shareholders by, or through the
use of, any means of communication, such as conference telephone, by which all
shareholders participating may simultaneously hear each other during the
meeting. A shareholder participating in a meeting by such means shall be deemed
to be present in person at the meeting.
ARTICLE II
----------
Directors
---------
Section 2.1. Number and Terms. The business and affairs of the
----------- ----------------
Corporation shall be managed under the direction of a Board of Directors
consisting of nine (9) Directors, or such other number as may be fixed by the
Board of Directors from time to time, but which shall in no event be greater
than twelve (12). The Board of Directors shall be classified as follows:
Class A shall consist of three Directors, Class B shall consist of three
Directors, and Class C shall consist of three Directors. Unless sooner
displaced, the term of office of each Class A Director shall expire when he is
re-
-4-
<PAGE>
elected or his successor is elected and qualified at the 1988 annual meeting of
shareholders and every three years thereafter; the term of office of each Class
B Director shall expire when he is re-elected or his successor is elected and
qualified at the 1989 annual meeting of shareholders and every three years
thereafter; and the term of office of each Class C Director shall expire when he
is re-elected or his successor is elected and qualified at the 1990 annual
meeting of shareholders and every three years thereafter. The designation of
Directors as Class A, Class B or Class C Directors may be changed from time to
time by amendment to these By-Laws, but no change of designation shall change
the term of any Director in office at such time.
Despite the expiration of a Director's term, the Director shall continue
to serve until his successor is elected and qualified, or until the earlier of
his death, resignation, disqualification or removal, or until there is a
decrease in the number of Directors. Any vacancy occurring in the Board of
Directors, from whatever cause arising, shall be filled by selection of a
successor by a majority vote of the remaining members of the Board of Directors
(although less than a quorum); provided, however, that if such vacancy or
vacancies leave the Board of Directors with no members or if the remaining
members of the Board are unable to agree upon a successor or determine not to
select a successor, such vacancy may be filled by a vote of the shareholders at
a special meeting called for that purpose or at the next annual meeting of
shareholders. The term of a Director elected or selected to fill a vacancy
shall expire at the end of the term for which such Director's predecessor was
elected.
The Directors and each of them shall have no authority to bind the
Corporation except when acting as a Board.
Section 2.2. Quorum and Vote Required to Take Action. A majority of
----------- ---------------------------------------
the whole Board of Directors shall be necessary to constitute a quorum for the
transaction of any business, except the filling of vacancies. If a quorum is
present when a vote is taken, the affirmative vote of a majority of the
Directors present shall be the act of the Board of Directors, unless the act of
a greater number is required by the Indiana Business Corporation Law, the
Corporation's Restated Articles of Incorporation or these By-Laws.
Section 2.3. Annual and Regular Meetings. The Board of Directors shall
----------- ---------------------------
meet annually, without notice, immediately following the annual meeting of the
shareholders, for the purposes of transacting such business as properly may come
before the meeting. Other regular meetings of the Board
-5-
<PAGE>
of Directors, in addition to said annual meeting, shall be held on such dates,
at such times and at such places as shall be fixed by resolution adopted by the
Board of Directors and specified in a notice of each such regular meeting, or
otherwise communicated to the Directors. The Board of Directors may at any time
alter the date for the next regular meeting of the Board of Directors.
Section 2.4. Special Meetings. Special meetings of the Board of
----------- ----------------
Directors may be called by any member of the Board of Directors upon not less
than twenty-four (24) hours' notice given to each Director of the date, time and
place of the meeting, which notice need not specify the purpose or purposes of
the special meeting, unless the purpose of the meeting is to consider the
removal of one or more Directors pursuant to Section 1.9 of these By-Laws. Such
notice may be communicated in person (either in writing or orally), by
telephone, telegraph, teletype, or other form of wire or wireless communication,
or by mail, and shall be effective at the earlier of the time of its receipt or
if mailed, five (5) days after its mailing. Notice of any meeting of the Board
may be waived in writing at any time if the waiver is signed by the Director
entitled to the notice and is filed with the minutes or corporate records. A
Director's attendance at or participation in a meeting waives any required
notice to the Director of the meeting, unless the Director at the beginning of
the meeting (or promptly upon the Director's arrival) objects to holding the
meeting of transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.
Section 2.5. Written Consents. Any action required or permitted to be
----------- ----------------
taken at any meeting of the Board of Directors may be taken without a meeting if
the action is taken by all members of the Board. The action must be evidenced by
one (1) or more written consents describing the action taken, signed by each
director, and included in the minutes or filed with the corporate records
reflecting the action taken. Action taken under this Section 2.5 is effective
when the last Director signs the consent, unless the consent specified a
different prior or subsequent effective date, in which cases the action is
effective on or as of the specified date. A consent signed under this Section
2.5 shall have the same effect as a unanimous vote of all members of the Board
and may be described as such in any document.
Section 2.6. Participation by Conference Telephone. The Board of
----------- -------------------------------------
Directors may permit any or all Directors to participate in a regular or special
meeting by, or through the use of, any means of communication, such as
conference telephone, by which all Directors participating may simultaneously
hear each other during the meeting. A
-6-
<PAGE>
Director participating in a meeting by such means shall be deemed to be present
in person at the meeting.
Section 2.7. Committees. (a) The Board of Directors may create one
----------- ----------
(1) or more committees and appoint members of the Board of Directors to serve on
them, by resolution of the Board of Directors adopted by a majority of all the
Directors in office when the resolution is adopted. Each committee may have one
(1) or more members, and all the members of a committee shall serve at the
pleasure of the Board of Directors.
(b) To the extent specified by the Board of Directors in the resolution
creating a committee, each committee may exercise all of the authority of the
Board of Directors; provided, however, that a committee may not:
(1) authorize dividends or other distributions, except a committee (or
an executive officer of the Corporation designated by the Board of
Directors) may authorize or approve a reacquistion of shares or
other distribution if done according to a formula or method, or
within a range, prescribed by the Board of Directors;
(2) approve or propose to shareholders action that is required to be
approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) amend the Corporation's Restated Articles of Incorporation under IC
23-1-38-2;
(5) adopt, amend, repeal, or waive provisions of these By-Laws;
(6) approve a plan of merger not requiring shareholder approval; or
(7) authorize or approve the issuance or sale or a contract for sale of
shares, or determine the designation and relative rights,
preferences and limitations of a class of series of shares, except
the Board of Directors may authorize a committee (or an executive
officer of the Corporation designated by the Board of Directors)
to take action described in this subdivision within limits
prescribed by the Board of Directors.
(c) Except to the extent inconsistent with the
-7-
<PAGE>
resolutions creating a committee, Sections 2.1 through 2.6 of these By-Laws,
which govern meetings, action without meetings, notice and waiver of notice,
quorum and voting requirements and telephone participation in meetings of the
Board of Directors, apply to each committee and its members as well.
ARTICLE III
-----------
Officers
--------
Section 3.1. Designation, Selection and Terms. The officers of the
----------- --------------------------------
Corporation shall consist of the Chairman of the Board, the President, the Chief
Executive Officer, the Treasurer, and the Secretary. The Board of Directors may
also elect other Vice Presidents, including an Executive Vice-President,
Assistant Secretaries, Assistant Treasurers, and such other officers or
assistant officers as may be described in these By-Laws from time to time or as
the Board of Directors may from time to time determine by resolution creating
the office and defining the duties thereof. The officers of the Corporation
shall be elected by the Board of Directors and need not be selected from among
the members of the Board of Directors, except for the Chairman of the Board and
the CEO, who shall be members of the Board of Directors. All officers shall
serve at the pleasure of the Board of Directors. The election or appointment of
an officer does not itself create contract rights.
Section 3.2. Removal. The Board of Directors may remove any officer at
----------- -------
any time with or without cause. Vacancies in such offices, however occurring,
may be filled by the Board of Directors at any meeting of the Board of
Directors.
Section 3.3. Chairman of the Board. Subject to the authority of the
----------- ---------------------
Board of Directors, the Chairman of the Board, if an employee of the Company,
shall be the principal policy-making officer of the Corporation. Otherwise, the
Chairman will preside over the Annual Meeting and the Board of Directors'
Meeting.
-8-
<PAGE>
Section 3.3A. CEO. The Chief Executive Officer shall formulate the
------------ ---
major policies to be pursued in the administration of the Corporation's affairs.
He shall study and make reports and recommendations to the Board of Directors
with respect to major problems and activities of the Corporation and shall see
that the established policies are placed into effect and carried out under the
direction of the President. He shall also be responsible to effect policies and
practices that will be for the betterment of the Corporation.
Section 3.4. President. Subject to the provisions of Section 3.3 and
----------- ---------
3.3A, the President shall be the Chief Operating Officer of the Corporation,
shall exercise the powers and perform the duties which ordinarily appertain to
that office and shall manage and operate the businesses and affairs of the
Corporation in conformity with the policies established by the Board of
Directors and by the Chief Executive Officer, or as may be provided for in these
By-Laws. In connection with the performance of his duties, he shall keep the
CEO fully informed as to all phases of the Corporation's activities.
Section 3.5. Executive Vice-President. In the absence of the President
----------- ------------------------
or in event of his death, inability or refusal to act, the Executive
Vice-President 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. The Executive Vice-President shall perform such other duties as from
time to time may be assigned to him by the President, the CEO, or by the
directors.
Section 3.6. Treasurer. The Treasurer shall perform all of the duties
----------- ---------
customary to that office, including the duty of supervising the keeping of the
records of the receipts and disbursements of the Corporation. He shall submit
to the Board of Directors at such times as the Board may require full statements
showing in detail the financial condition and affairs of the Corporation. He
shall also be responsible for causing the Corporation to furnish financial
statements to its shareholders pursuant to IC 23-1-53-1.
Section 3.7. Secretary. The Secretary shall be the custodian of the
----------- ---------
books, papers and records of the Corporation and of its corporate seal, if any,
and shall be responsible for seeing that the Corporation maintains the records
required by IC 23-1-52-1 (other than accounting records) and that the
Corporation files with the Indiana Secretary of State the annual report required
by IC 23-1-53-3. The Secretary shall be responsible for preparing minutes of
the meetings of the shareholders and of the Board of Directors and for
authenticating records of the Corporation,
-9-
<PAGE>
and he shall perform all of the other duties usual in the office of Secretary of
a corporation.
Section 3.8. Assistant Secretary. In the absence or inability of the
----------- -------------------
Secretary, the Assistant Secretary, if any, shall perform only such duties as
are provided herein or specifically assigned to him, in writing, by the Board of
Directors, the Chairman of the Board, the President, or the Secretary.
Section 3.9. Controller. The Controller shall be responsible for
----------- ----------
maintaining the Corporation's accounting books and records and preparing its
financial statements, subject to the supervision and direction of the Chairman
of the Board, President and Executive Vice President of the Corporation.
Section 3.10. Salary. The Board of Directors may, at its discretion,
------------ ------
from time to time, fix the salary of any officer by resolution included in the
minute book of the Corporation.
ARTICLE IV
----------
Checks
------
All checks, drafts or other orders for payment of money shall be signed
in the name of the Corporation by such officers or persons as shall be
designated from time to time by resolution adopted by the Board of Directors and
included in the minute book of the Corporation; and in the absence of such
designation, such checks, drafts or other orders for payment shall be signed by
the Chairman of the Board, the President or the Treasurer.
ARTICLE V
---------
Loans
-----
Such of the officers of the Corporation as shall be designated from time
to time by resolution adopted by the Board of Directors and included in the
minute book of the Corporation shall have the power, with such limitations
thereon as may be fixed by the Board of Directors, to borrow money in the
Corporation's behalf, to establish credit, to discount bills and papers, to
pledge collateral and to execute such notes, bonds, debentures or other
evidences of indebtedness, and such mortgages, trust indentures and other
instruments in connection therewith, as may be authorized from time to time, by
the Board of Directors.
-10-
<PAGE>
ARTICLE VI
----------
Execution of Documents
----------------------
The CEO or the President or an authorized Vice-President or other
Officers may, in the Corporation's name, sign all deeds, leases, contracts or
similar documents that may be authorized by the Board of Directors unless
otherwise directed by the Board of Directors or otherwise provided herein or in
the Corporation's Restated Articles of Incorporation, or as otherwise required
by law.
ARTICLE VII
-----------
Stock
-----
Section 7.1. Execution. Certificates for shares of the capital stock
----------- ---------
of the Corporation shall be signed by the Chairman of the Board or the President
and by the Treasurer or the Secretary and the seal of the Corporation (or a
facsimile thereof), if any, may be thereto affixed. Where any such certificate
is also signed by a transfer agent or a registrar, or both, the signatures of
the officers of the Corporation may be facsimiles. The Corporation may issue
and deliver any such certificates notwithstanding that any such officer who
shall have signed, or whose facsimile signature shall have been imprinted on,
such certificate shall have ceased to be such officer.
-11-
<PAGE>
Section 7.2. Contents. Each certificate shall state on its face the
----------- --------
name of the Corporation and that it is organized under the laws of the State of
Indiana, the name of the person to whom it is issued, and the number and class
of shares and the designation of the series, if any, the certificate represents,
and shall state conspicuously on its front or back that the Corporation will
furnish the shareholder, upon his written request and without charge, a summary
of the designations, relative rights, preferences and limitations applicable to
each class and the variations in rights, preferences and limitations determined
for each series (and the authority of the Board of Directors to determine
variations for future series).
Section 7.3. Transfers. Except as otherwise provided by law or by
----------- ---------
resolution of the Board of Directors, transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof in person or by duly authorized attorney, on payment of all taxes
thereon and surrender for cancellation of the certificate or certificates for
such shares (except as hereinafter provided in the case of loss, destruction or
mutilation of certificates) properly endorsed by the holder thereof or
accompanied by the proper evidence of succession, assignment or authority to
transfer, and delivered to the Secretary or an Assistant Secretary.
Section 7.4. Stock Transfer Records. There shall be entered upon the
----------- ----------------------
stock records of the Corporation the number of each certificate issued, the name
and address of the registered holder of such certificate, the number, kind and
class of shares represented by such certificate, the date of issue, whether the
shares are originally issued or transferred, the registered holder from whom
transferred and such other information as is commonly required to be shown by
such records. The stock records of the Corporation shall be kept at its
principal office, unless the Corporation appoints a transfer agent or registrar,
in which case the Corporation shall keep at its principal office a complete and
accurate shareholders' list giving the names and addresses of all shareholders
and the number and class of shares held by each. If a transfer agent is
appointed by the Corporation, shareholders shall give written notice of any
changes in their addresses from time to time to the transfer agent.
Section 7.5. Transfer Agents and Registrars. The Board of Directors
----------- ------------------------------
may appoint one or more transfer agents and one or more registrars and may
require each stock certificate to bear the signature of either or both.
-12-
<PAGE>
Section 7.6. Loss, Destruction or Mutilation of Certificates. The
----------- ------------------------------------------------
holder of any of the capital stock of the Corporation shall immediately notify
the Corporation of any loss, destruction or mutilation of the certificate
therefor, and the Board of Directors may, in its discretion, cause to be issued
to him a new certificate or certificates of stock, upon the surrender of the
mutilated certificate, or, in the case of loss or destruction, upon satisfactory
proof of such loss or destruction. The Board of Directors may, in its
discretion, require the holder of the lost or destroyed certificate or his legal
representative to give the Corporation a bond in such sum and in such form, and
with such surety or sureties as it may direct, to indemnify the Corporation, its
transfer agents and registrars, if any, against any claim that may be made
against them or any of them with respect to the capital stock represented by the
certificate or certificates alleged to have been lost or destroyed, but the
Board of Directors may, in its discretion, refuse to issue a new certificate or
certificates, save upon the order of a court having jurisdiction in such
matters.
Section 7.7. Form of Certificates. The form of the certificates for
----------- --------------------
shares of the capital stock of the Corporation shall conform to the requirements
of Section 7.2 of these By-Laws and be in such printed form as shall from time
to time be approved by resolution of the Board of Directors.
ARTICLE VIII
------------
Seal
----
The corporate seal of the Corporation shall, if the Corporation elects
to have one, be in the form of a disc, with the name of the Corporation and
"INDIANA" on the periphery thereof and the word "SEAL" in the center.
ARTICLE IX
----------
Miscellaneous
-------------
Section 9.1. Indiana Business Corporation Law. The provisions of the
----------- --------------------------------
Indiana Business Corporation Law, as amended, applicable to all matters relevant
to, but not specifically covered by, these By-Laws are hereby, by reference,
incorporated in and made a part of these By-Laws.
Section 9.2. Fiscal Year. The fiscal year of the Corporation shall end
----------- -----------
on the 31st of December of each year.
-13-
<PAGE>
Section 9.3. Amendments. These By-Laws may be rescinded, changed or
----------- ----------
amended, and provisions hereof may be waived, at any meeting of the Board of
Directors by the affirmative vote of a majority of the entire number of
Directors at the time, except as otherwise required by the Corporation's
Restated Articles of Incorporation or by the Indiana Business Corporation Law.
-14-
<PAGE>
EXHIBIT 3.15
ARTICLES OF INCORPORATION
-------------------------
of
--
BPR HOLDINGS, INC.
------------------
The undersigned incorporator, desiring to form a corporation (the
"Corporation") pursuant to the provisions of The Indiana Business Corporation
Law (such law, as amended from time to time, is referred to as the "Act"),
executes the following Articles of Incorporation.
ARTICLE I
---------
Name
----
The name of the Corporation is BPR Holdings, Inc.
ARTICLE II
----------
Purposes
--------
The purpose for which the Corporation is organized is to engage in any
lawful business for which corporations may be incorporated under the Act.
ARTICLE III
-----------
Amount of Capital Stock
-----------------------
The total number of shares which the Corporation has authority to issue is
1,000 shares.
ARTICLE IV
----------
Terms of Capital Stock
----------------------
1. Classes and Rights. All shares of the Corporation shall be of one
-------------------
class and shall be known as shares of Common Stock. All shares of Common Stock
shall have the same relative rights, preferences, limitations and restrictions.
Each Shareholder of Common Stock shall be entitled to one vote for each share of
Common Stock standing in that Shareholder's name on the books of the
Corporation on each matter voted at a Shareholders' meeting. Holders of
outstanding Common Stock shall be entitled to receive the net assets of the
Corporation on dissolution.
2. Issue and Consideration. The Board of Directors may authorize shares to
------------------------
be issued for consideration consisting of any tangible or intangible property of
benefit to the Corporation, including cash, promissory notes, services
performed, contracts for services to be performed, or other securities of the
Corporation. If shares are authorized to be issued for promissory notes or for
promises to render services in the future, the Corporation must comply with the
notice requirements of the Act. The Corporation, through the Board of Directors,
may but is not required to place in escrow shares issued for a contract for
future services or benefits or a promissory note, or make other arrangements to
restrict the transfer of the shares, and may but is not required to credit
distributions in respect of the shares against their purchase price, until the
services are performed, the note is paid, or the benefits received. If the
services are
<PAGE>
not performed, the note is not paid, or the benefits are not received, the
shares escrowed or restricted and the distributions credited may, at the
discretion of the Board of Directors, be cancelled in whole or in part.
3. Distributions. A distribution to Shareholders may not be made if,
-------------
after giving it effect, the Corporation would not be able to pay its debts as
they become due in the usual course of business, or the Corporation's total
assets would be less than the sum of its total liabilities.
ARTICLE V
---------
Directors
---------
1. Number. The number of Directors may be fixed from time to time by the
-------
by-laws of the Corporation.
2. Initial Directors. The following individuals shall serve as the initial
------------------
Board of Directors of the Corporation:
Name Address
---- -------
Larry D. Renbarger 27217 County Road 6
Elkhart, IN 46514-0026
Mark C. Neilson 27217 County Road 6
Elkhart, IN 46514-0026
3. Vacancies. If a vacancy occurs on the Board of Directors, including a
----------
vacancy resulting from an increase in the number of Directors, it may be filled
by the Shareholders or as otherwise provided by the by-laws of the Corporation
or by law.
ARTICLE VI
----------
By-Law Agreements
-----------------
The By-Laws of the Corporation may be amended by the Board of Directors.
ARTICLE VII
-----------
Indemnification
---------------
The Corporation shall indemnify every person who is or was a Director of
the Corporation against all liability to the fullest extent permitted by Chapter
37 of the Act, provided that such person is determined in the manner specified
by Chapter 37 of the Act to have met the standard of conduct specified in
Chapter 37 of the Act. The Corporation shall, to the fullest extent permitted by
Chapter 37 of the Act, pay for or reimburse the reasonable expenses incurred by
every person who is or was a Director who is a party to a proceeding in advance
-2-
<PAGE>
of final disposition of the proceeding, in the manner specified by Chapter 37 of
the Act. The Corporation shall indemnify and advance expenses to every person
who is or was an Officer of the Corporation to the same extent as if such person
were a Director of the Corporation (All such persons who are or were directors
or officers of the Corporation are referred to as "Indemnitee"). The
indemnification and advance of expenses for Indemnitees shall apply to service
in the Indemnitee's official capacity with the Corporation, and to service at
the Corporation's request, while also acting in an official capacity with the
Corporation, as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, whether for profit or not. All
references in this paragraph to Chapter 37 of the Act shall be deemed to include
any amendment or successor to the Act. When a word or phrase used in this
paragraph is defined in Chapter 37 of the Act, such word or phrase shall have
the same meaning in this paragraph that it has in Chapter 37 of the Act. Nothing
contained in this paragraph shall limit or preclude the exercise of any right
relating to indemnification or advance of expenses to any Indemnitee or the
ability of the Corporation to otherwise indemnify or advance expenses to any
Indemnitee. These provisions shall be binding upon any successor to the
Corporation so that each Indemnitee shall be in the same position with respect
to any resulting, surviving, or succeeding entity as he or she would have been
had the separate legal existence of the Corporation continued; provided, that
unless expressly provided or agreed otherwise, this sentence shall be applicable
only to Indemnitees acting in an official capacity or in another capacity set
forth above prior to termination of the separate legal existence of the
Corporation. These provisions shall be deemed to create a contract right for the
benefit of every Indemnitee if (i) any act or omission complained of in a
proceeding against the Indemnitee, (ii) any portion of a proceeding, or (iii)
any determination or assessment of liability, occurs while the provisions are in
effect. If any word, clause, or sentence of the provisions regarding
indemnification or advancement of expenses shall be held invalid as contrary to
law or public policy, it shall be severable and the provisions remaining shall
not be otherwise affected. If any Court holds any word, clause, or sentence of
this paragraph invalid, the Court is authorized and empowered to rewrite these
provisions to achieve their purpose to the extent possible. All references in
this paragraph to any Indemnitee shall include the heirs, estate, executors,
administrators and personal representatives of such person.
ARTICLE VIII
------------
Registered Agent
----------------
The name and business address of the registered agent at the Corporation's
registered office is:
Richard E. Summers
27217 County Road 6
Elkhart, IN 46514-0026
-3-
<PAGE>
ARTICLE IX
----------
Incorporator(s)
---------------
The name and address of the incorporator is:
Name Address
---- -------
Stephen P. Merchant 1313 Merchants Bank Building
11 South Meridian Street
Indianapolis, Indiana 46204
IN WiTNESS WHEREOF, the undersigned incorporator executes these Articles of
Incorporation of the Corporation and certifies to the truth of the facts herein
stated this 29th day of November, 1995.
/s/ STEPHEN P. MERCHANT
--------------------------
Incorporator
-4-
<PAGE>
EXHIBIT 3.16
CODE OF BY-LAWS
---------------
OF
--
BPR HOLDINGS, INC.
------------------
ARTICLE 1
---------
Identification
--------------
Section 1.01. Name. The name of the Corporation is BPR Holdings, Inc.
------------- -----
("Corporation").
Section 1.02. Place of Keeping Corporate Books and Records. The Corporation
------------- --------------------------------------------
shall keep a copy of the following records at its principal office:
(1) Its Articles of Incorporation ("Articles") or restated Articles
and all amendments currently in effect.
(2) Its Code of By-Laws ("By-Laws") or restated By-Laws and all
amendments currently in effect.
(3) Resolutions adopted by its Board of Directors ("Board") with
respect to one (1) or more classes or series of shares and fixing
their relative rights, preferences, and limitations, if shares
issued pursuant to those resolutions are outstanding.
(4) The minutes of all Shareholders' meetings, and records of all
action taken by Shareholders without a meeting, for the past
three (3) years.
(5) All written communications by the Corporation to Shareholders
within the past three (3) years, including the financial
statements furnished for the past three (3) years.
(6) A list of the names and business addresses of its current
Directors and Officers.
(7) Its most recent annual report delivered to the Secretary of
State.
The Corporation shall also maintain and keep at its principal office, or at
any other place that the Board directs, the following records:
(1) Minutes of all meetings of its Shareholders and Board, a record
of all actions taken by the Shareholders or Board without a
meeting, and a record of all actions taken by a committee of the
Board in place of the Board on behalf of the Corporation.
(2) Appropriate accounting records.
<PAGE>
CODE OF BY-LAWS
---------------
OF
--
BPR HOLDINGS, INC.
------------------
ARTICLE 1
---------
Identification
--------------
Section 1.01. Name. The name of the Corporation is BPR Holdings, Inc.
------------- -----
("Corporation").
Section 1.02. Place of Keeping Corporate Books and Records. The Corporation
------------- --------------------------------------------
shall keep a copy of the following records at its principal office:
(1) Its Articles of Incorporation ("Articles") or restated Articles
and all amendments currently in effect.
(2) Its Code of By-Laws ("By-Laws") or restated By-Laws and all
amendments currently in effect.
(3) Resolutions adopted by its Board of Directors ("Board") with
respect to one (1) or more classes or series of shares and fixing
their relative rights, preferences, and limitations, if shares
issued pursuant to those resolutions are outstanding.
(4) The minutes of all Shareholders' meetings, and records of all
action taken by Shareholders without a meeting, for the past
three (3) years.
(5) All written communications by the Corporation to Shareholders
within the past three (3) years, including the financial
statements furnished for the past three (3) years.
(6) A list of the names and business addresses of its current
Directors and Officers.
(7) Its most recent annual report delivered to the Secretary of
State.
The Corporation shall also maintain and keep at its principal office, or at
any other place that the Board directs, the following records:
(1) Minutes of all meetings of its Shareholders and Board, a record
of all actions taken by the Shareholders or Board without a
meeting, and a record of all actions taken by a committee of the
Board in place of the Board on behalf of the Corporation.
(2) Appropriate accounting records.
<PAGE>
(3) A record of its Shareholders, in a form that permits preparation
of a list of the names and addresses of all Shareholders, in
alphabetical order by class of shares showing the number of
shares held by each.
All of the records described in this section shall be maintained in written form
or in another form capable of conversion into written form within a reasonable
time.
Section 1.03. Seal. The Board may designate the design and cause the
------------- -----
Corporation to obtain and use a corporate seal, but the failure of the Board to
designate a seal or the absence of the impression of the seal from any document
shall not affect in any way the validity or effect of the document.
Section 1.04. Fiscal Year. The fiscal year of the Corporation shall end at
------------- ------------
the time determined by the Board. If the Board does not make a determination,
the fiscal year of the Corporation shall be the fiscal year adopted in the first
federal income tax return of the Corporation.
Section 1.05. Annual Financial Statements to Shareholders. On written
------- ----- --------------------------------------------
request of any Shareholder, the Corporation shall prepare and mail to the
Shareholder annual financial statements, which may be consolidated or combined
statements of the Corporation and one (1) or more of its subsidiaries, as
appropriate, that include a balance sheet as of the end of the fiscal year most
recently completed, an income statement for that year, and a statement of
changes in Shareholders' equity for that year unless that information appears
elsewhere in the financial statements. If financial statements are prepared for
the Corporation on the basis of generally accepted accounting principles, the
annual financial statements must also be prepared on that basis. If the annual
financial statements are reported upon by a public accountant, the public
accountant's report must accompany them. If not, the statements must be
accompanied by a statement of the President or the person responsible for the
Corporation's accounting records:
(1) Stating the person's reasonable belief whether the statements were
prepared on the basis of generally accepted accounting principles
and, if not, describing the basis of preparation; and
(2) Describing any respects in which the statements were not prepared
on a basis of accounting consistent with the statements prepared
for the preceding year.
ARTICLE 2
---------
Shares
------
Section 2.01. Certificates for Shares. Each holder of the Common Stock of
------------- ------------------------
the Corporation shall be entitled to a certificate in the form prescribed by the
Board from time to time, signed by the President or the Vice-President, and the
Secretary or Treasurer (or Assistant Secretary or Assistant Treasurer, if any)
of the Corporation, or by the sole officer if the Corporation has only one
officer.
-2-
<PAGE>
Section 2.02. Transfer of Shares. The Common Stock of the Corporation shall
------------- -------------------
be transferable only on the books of the Corporation upon surrender of the
certificate or certificates representing the same. The certificate or
certificates (or an instrument of transfer or assignment satisfactory to the
Corporation and delivered to the Corporation) must be properly endorsed by the
registered holder or by his duly authorized attorney, with the endorsement or
endorsements witnessed by one witness or guaranteed by a bank or registered
securities broker or dealer. The requirement for a witness or guarantee may be
waived in writing upon the form of endorsement by the President of the
Corporation.
Section 2.03. Lost, Stolen or Destroyed Certificates. The Corporation may
------------- ---------------------------------------
issue a new certificate for shares of Common Stock in the place of any
certificate alleged to have been lost, stolen or destroyed, but the Board may
require the owner of the lost, stolen or destroyed certificate, or his legal
representative, to furnish an affidavit as to the loss, theft or destruction and
to give a bond in such form and substance, and with such surety or sureties,
with fixed or open penalty, as it may direct to indemnify the Corporation
against any claim that may be made on account of the alleged loss, theft or
destruction of the certificate. A new certificate may be issued without
requiring any bond when, in the judgment of the Board, it is not imprudent to do
so.
Section 2.04. Shares Issued for Notes or Future Services. If the
-------------- -------------------------------------------
Corporation authorizes the issuance of shares for promissory notes or for
promises to render services in the future, the Corporation shall report in
writing to the Shareholders the number of shares authorized to be so issued with
or before the notice of the next Shareholders' meeting.
ARTICLE 3
---------
Meetings of Shareholders
------------------------
Section 3.01. Place of Meetings. All meetings of Shareholders of the
------------- ------------------
Corporation shall be held at the principal office of the Corporation or at any
other place, within or without the State of Indiana, as may be specified in the
notices or waivers of notice of the meeting.
Section 3.02. Annual Meeting. Unless otherwise determined by the Board, the
------------- ---------------
annual meeting of the Shareholders for the election of Directors, and for the
transaction of other business which may properly come before the meeting, shall
be held at 2:00 p.m. on the third (3rd) Thursday of the third (3rd) month
following the close of each fiscal year, if not a legal holiday, and if a
holiday then on the first following day that is not a legal holiday. Failure to
hold the annual meeting at the designated time shall not work any forfeiture or
a dissolution of the Corporation.
Section 3.03. Special Meetings. Special meetings of the Shareholders may be
------------- -----------------
called by the President or by the Board, and shall be called by the President if
Shareholders holding of record not less than one-fourth (1/4) of all the shares
of Stock outstanding and entitled to vote on the business proposed to be
transacted sign, date and deliver to the Secretary of the Corporation one or
more written demands for the meeting. Any request or demand for a special
meeting of the Shareholders shall state the purpose or purposes of the proposed
meeting.
-3-
<PAGE>
Section 3.04. Record Date. The Board of Directors may fix a record date,
------------- ------------
not exceeding seventy (70) days prior to the date of any meeting of
Shareholders, for the purpose of determining the Shareholders entitled to notice
of and to vote at the meeting. In the absence of action by the Board fixing a
record date, the record date shall be the fourteenth (14th) day prior to the
date of the meeting.
Section 3.05. Notice of Meetings. A notice stating the place, day and hour
------------- -------------------
of the meeting, and, in the case of a special meeting or when otherwise required
by any provision of the Indiana Business Corporation Law (the "Act"), the
Articles or the By-Laws, the purpose or purposes for which the meeting is
called, shall be delivered or mailed to each holder of Stock of the Corporation
entitled to vote or otherwise entitled to notice under the Act, at the address
which appears on the records of the Corporation, or shall be given orally in
person or by telephone, at least ten (10) days but not more than sixty (60) days
before the date of the meeting.
Section 3.06. Waiver of Notice. Notice of any meeting may be waived before
------------- -----------------
or after the date and time stated in the notice in writing by any Shareholder if
the waiver is delivered to the Corporation for inclusion in the minutes or
filing with the corporate records. Attendance at any meeting in person or by
proxy waives objection to lack of notice or defective notice of the meeting
unless the Shareholder (or his proxy) at the beginning of the meeting objects to
holding the meeting or transacting business at the meeting, and waives objection
to consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the Shareholder (or
his proxy) objects to considering the matter when it is presented.
Section 3.07. Proxies. A Shareholder entitled to vote at any meeting of
------------- --------
Shareholders may vote either in person or by proxy appointed in a writing signed
by the Shareholder or a duly authorized attorney-in-fact of such Shareholder. An
appointment of a proxy is effective when received by the Secretary or other
officer or agent authorized to tabulate votes. The general proxy of a fiduciary
shall be given the same effect as the general proxy of any other Shareholder. No
appointment of a proxy shall be valid after eleven (11) months from the date of
its execution unless it expressly provides a longer time.
Section 3.08. Quorum. At any meeting of Shareholders, the holders of a
------------- -------
majority of the outstanding shares which may be voted on the business to be
transacted at the meeting, represented at the meeting in person or by proxy,
shall constitute a quorum, and action on a matter, except election of Directors,
is approved if votes cast favoring the action exceed the votes cast opposing the
action, unless a greater number is required by law, the Articles or the By-Laws.
Directors shall be elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present. If a
quorum is not present at any meeting, the holders of record of a majority of
shares present in person or by proxy may adjourn the meeting from time to time,
without notice, other than announcement at the meeting, until a quorum shall be
present or represented, unless the Board fixes a new record date, which it must
do if the meeting is adjourned to a date more than one hundred twenty (120) days
after the date fixed for the original meeting. At any adjourned meeting at which
a quorum shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally scheduled.
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<PAGE>
Section 3.09. Voting Lists. The Secretary of the Corporation shall make a
------------- -------------
complete list of the Shareholders entitled to notice of each meeting, arranged
in alphabetical order by voting group (and within each voting group by class or
series of shares), with the address and number of shares held by each, which
list shall be on file at the principal office of the Corporation, or at a place
identified in the meeting notice in the city where the meeting will be held, and
subject to inspection by any Shareholder on written demand at any time during
regular business hours for a period of five (5) days before the meeting. The
list shall be produced at the meeting and subject to inspection by any
Shareholder during the meeting. The original stock register or transfer book, or
a duplicate kept in the State of Indiana, shall be the only evidence as to who
are the Shareholders entitled to examine the list, or to notice of or to vote at
any meeting of the Shareholders.
Section 3.10. Action Without Meeting. Any action required or permitted to
------------- -----------------------
be taken at any meeting of the Shareholders may be taken without a meeting if
one or more consents in writing setting forth the action taken are signed by all
the Shareholders entitled to vote on the action, and the written consents are
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records. Action taken under this section is effective when the last
Shareholder signs the consent, unless the consent specifies a different prior or
subsequent effective date.
Section 3.11. Meeting By Telephone, Etc. Any or all Shareholders may
-------------- --------------------------
participate in any meeting of Shareholders by, or through the use of, any means
of communication by which all Shareholders participating may simultaneously hear
each other during the meeting. A Shareholder so participating is deemed to be
present in person.
ARTICLE 4
---------
Board of Directors
------------------
Section 4.01. Duties and Number. The business and affairs of the
-------------- ------------------
Corporation shall be managed under the direction of a Board consisting of not
fewer than one (1) nor more than seven (7) members. The actual number of
Directors may be fixed or changed, from time to time, within the maximum and
minimum, by the Board. In the absence of a resolution by the Board fixing or
changing the number of Directors, the number shall be the number of Directors on
the initial Board.
Section 4.02. Election, Term of Office and Qualification. Directors shall
------------- -------------------------------------------
be elected at each annual meeting of the Shareholders by a plurality of the
votes cast by the holders of the Stock entitled by the Articles to elect
Directors. Directors shall be elected for a term of one year and shall hold
office until their respective successors are elected and qualified. Directors
need not be Shareholders of the Corporation. No decrease in the number of
Directors shall have the effect of shortening the term of any incumbent
Director.
Section 4.03. Powers of Directors. The Board shall exercise all the powers
------------- --------------------
of the Corporation, subject to the restrictions imposed by law, the Articles or
the By-Laws.
Section 4.04. Annual Meeting. Unless otherwise determined by the
------------- ---------------
President one Board, the Board shall meet each year immediately after the
annual meeting of the Shareholders,
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<PAGE>
at the place where the meeting of the Shareholders was held, for the purpose of
electing Officers and considering any other business that may properly be
brought before the meeting. No notice shall be necessary for the holding of this
annual meeting. If the annual meeting is not held as above provided, the
election of Officers may be held at any subsequent duly constituted meeting of
the Board.
Section 4.05. Other Meetings. Regular meetings of the Board may be held,
------------- ---------------
without notice, at the time as may from time to time be fixed by resolution of
the Board. Special meetings of the Board may be called at any time by the
President, and shall be called on the written request of any member of the
Board. Special meetings may be held at any place within or without the State of
Indiana. Notice of a special meeting shall be sent to each Director at his
residence or usual place of business by letter sent by first class, certified,
or registered United States mail, postage prepaid, or private carrier service,
fees prepaid or billed to sender, or by telegram, telegraph, teletype, or other
form of wire or wireless communication, and shall be effective if received on or
before the second (2nd) day preceding the day of the meeting or five (5) days
after mailing; or may be personally delivered or given orally to a Director in
person or by telephone at any time on or before the second (2nd) day preceding
the day of the meeting. A Director may waive any required notice before or after
the date and time stated in the notice. Except as provided in the next sentence,
the waiver must be in writing, signed by the Director entitled to the notice,
and filed with the minutes or corporate records. A Director's attendance at or
participation in a meeting waives any required notice to the Director of the
meeting unless the Director at the beginning of the meeting or promptly upon the
Director's arrival objects to holding the meeting or transacting business at the
meeting and does not vote for or assent to action taken at the meeting.
Section 4.06. Meeting by Telephone, etc. Any or all of the members of the
------------- --------------------------
Board or of any committee designated by the Board may participate in a meeting
of the Board or the committee by means of conference telephone or similar
communications equipment by which all Directors participating may simultaneously
hear each other during the meeting, and participation by these means constitutes
presence in person at the meeting.
Section 4.07. Quorum. A majority of the number of Directors designated for
------------- -------
a full Board shall be necessary to constitute a quorum for transacting any
business except filling vacancies, and the act of the majority of the Directors
present at a meeting at which a quorum is present shall be the act of the Board
unless the act of a greater number is required by law, the Articles or the
By-Laws.
Section 4.08. Action Without Meeting. Any action required or permitted to
------------- -----------------------
be taken at any meeting of the Board or of any committee of the Board may be
taken without a meeting if one or more written consents setting forth the action
taken are signed by all members of the Board or of the committee, as the case
may be, and the written consents are included in the minutes of proceedings of
the Board or committee or filed with the corporate records. Action taken in this
manner is effective when the last director signs the consent unless the concern
specifies a different prior or subsequent effective date.
Section 4.09. Resignations. Any Director may resign at any time by giving
------------- --------------
notice to the Board, the President or the Secretary. Such resignation shall
take effect when
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<PAGE>
delivered unless the notice specifies a later effective date, and unless
otherwise specified in the resignation, the acceptance of the resignation shall
not be necessary to make it effective.
Section 4.10. Removal. Any Director may be removed, either with or without
------------- --------
cause, at any meeting of the Shareholders called for that purpose if the meeting
notice states that the purpose or one of the purposes of the meeting is removal
of the Director and if the number of votes cast to remove the Director exceeds
the number of votes cast not to remove the Director. If the notice so provides,
the vacancy caused by the removal may be filled at the meeting by vote of the
holders of a majority of the outstanding shares present and entitled to vote for
the election of Directors.
Section 4.11. Vacancies. Any vacancy occurring in the Board, caused by
-------------- ----------
removal, resignation, death or other incapacity, or increase in the number of
Directors, may be filled by the Shareholders or by the Board, or, if the
Directors remaining in office constitute fewer than a quorum of the Board, they
may fill the vacancy by a majority vote of the remaining members of the Board,
until the next annual meeting of the Shareholders, or until the earlier removal,
resignation, death or other incapacity of the Director. Shareholders shall be
notified of any increase in the number of Directors and of the name, address,
and principal occupation of any Director elected by the Board to fill any
vacancy in the next mailing sent to the Shareholders following any such increase
or election. If the vote of the remaining members of the Board results in a tie,
the vacancy shall be filled by vote of the Shareholders at a special meeting
called for the purpose.
Section 4.12. Compensation of Directors. The Board is authorized to fix the
------------- --------------------------
compensation of Directors for attendance at meetings of the Board and additional
compensation for additional services which any Director may perform for the
Corporation.
ARTICLE 5
---------
Committees of the Board
-----------------------
Section 5.01. Designation of Committees. The Board, by resolution adopted
------------- --------------------------
by the greater of a majority of the actual number of Directors elected and
qualified or the number of Directors required to take action under Section 4.07
of these By-Laws, may designate two (2) or more of its number to constitute one
or more committees, and may, at any time, increase or decrease the number of
members of any committee, fill vacancies, change any member, and change the
functions or terminate the existence of any committee.
Section 5.02. Powers of Committees. During the intervals between meetings
------------- ---------------------
of the Board, and subject to any limitations required by law or by resolution of
the Board, each committee shall have and may exercise all of the authority of
the Board, except that a committee shall not have authority to (i) authorize
distributions, except that a committee (or an executive officer of the
Corporation designated by the Board) may authorize or approve a reacquisition of
shares or other distribution if done according to a formula or method, or within
a range. prescribed by the Board; (ii) approve or propose to the Shareholders
action that by law is required to be approved by the Shareholders; (iii) fill
vacancies on the Board or on any of its committees; (iv) except to the extent
permitted by subsection (vii) below, amend the Articles when no Shareholder
action is required by law; (v) adopt, amend, or repeal By-Laws; (vi)
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<PAGE>
approve a plan of merger not requiring Shareholder approval; or (vii) authorize
or approve the issuance or sale or a contact for sale of shares, or determine
the designation and relative rights, preferences, and limitations of a class or
series of shares, except the Board may authorize a committee (or an executive
officer of the Corporation designated by the Board) to take the action described
in this subsection within limits prescribed by the Board.
Section 5.03. Meetings: Procedure: Quorum. The provisions of these By-Laws
------------- -----------------------------
and those required by law applicable to the Board respecting meetings, action
without meetings, notice and waiver of notice, and quorum and voting
requirements apply to the committees and their members as well. The members of
any committee shall act only as a committee, and the individual members shall
have no power as such. All minutes of meetings of committees shall be submitted
to the next succeeding meeting of the Board for approval; but failure to submit
the minutes or to receive approval shall not invalidate any action taken by the
Corporation upon authorization by a committee.
ARTICLE 6
---------
Officers
--------
Section 6.01. Number and Qualifications. The Officers of the Corporation
------------- --------------------------
shall consist of the President, one (1) or more Vice-Presidents (if any), the
Secretary, the Treasurer, and any other officers chosen by the Board at the
times, in the manner and for the terms prescribed by the Board. Any two (2) or
more offices may be held by the same person.
Section 6.02. Election and Term of Office. The Officers shall be chosen
-------------- ----------------------------
annually by the Board, except that Assistant Officers may be designated as
provided in Section 6.10 of these By-Laws. Each Officer shall hold office until
his successor is chosen and qualified, or until his death, or until he resigns
or is removed in the manner provided in these By-Laws.
Section 6.03. Resignations. Any Officer may resign at any time by giving
-------------- -------------
written notice to the Board, the President or the Secretary. A resignation shall
take effect when the notice is delivered unless the notice specifies a later
effective date. Unless the notice specifies otherwise, the acceptance of a
resignation shall not be necessary to make it effective.
Section 6.04. Removal. Any Officer may be removed either with or without
------------- --------
cause, at any time, by the Board or, in the case of an Assistant Officer, by the
Officer who appointed that Assistant Officer.
Section 6.05. Vacancies. Whenever a vacancy occurs in any office by reason
------------- ----------
of death, resignation, removal, increase in the number of offices of the
Corporation, or otherwise, it shall be filled by the Board, and the Officer so
chosen shall hold office during the remainder of the term for which his
predecessor was chosen or as otherwise provided in these By-Laws. Assistant
Officers may be designated to fill vacancies in the manner provided in Section
6.10 of these By-Laws.
Section 6.06. President. Subject to the general control of the Board, the
------------- ----------
President shall manage and supervise all the affairs and personnel of the
Corporation and shall discharge all the usual functions of the chief executive
officer of a corporation. He shall preside at all
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<PAGE>
meetings of Shareholders and Directors, discharge all the duties which devolve
upon a presiding officer, and perform such other duties as the By-Laws or the
Board may prescribe. The President shall have full authority to execute proxies
in behalf of the Corporation, to vote stock owned by it in any other
corporation, and to execute, with the Secretary, powers of attorney appointing
other corporations, partnerships, or individuals the agent of the Corporation,
all subject to the provisions of the Act, the Articles and the By-Laws.
Section 6.07. Vice-Presidents. The Vice-Presidents, in the order designated
------------- ----------------
by the President or the Board, shall have all powers of, and perform all duties
incumbent upon, the President during his absence or disability and shall have
any additional powers and duties which the By-Laws, the Board or the President
may prescribe.
Section 6.08. Secretary. The Secretary shall authenticate records of the
------------- ----------
Corporation, attend all meetings of the Shareholders and of the Board, keep or
cause to be kept a true and complete record of the proceedings of Directors and
Shareholders' meetings, perform a like duty, when required, for all committees
appointed by the Board, and perform any other duties which the By-Laws, the
Board or the President may prescribe. He shall give all notices of the
Corporation; however, in case of his absence, negligence or refusal so to do,
any notice may be given by a person directed by the President or by the
requisite number of Directors or Shareholders upon whose request the meeting is
called.
Section 6.09. Treasurer. The Treasurer shall keep correct and complete
------------- ----------
records of account, showing accurately at all times the financial condition of
the Corporation. He shall be the legal custodian of all moneys, notes,
securities and other valuables which may from time to time come into the
possession of the Corporation. He shall immediately deposit all funds of the
Corporation coming into his hands in a reliable bank or other depository to be
designated by the Board, and shall keep the account in the name of the
Corporation. He shall furnish at meetings of the Board, or whenever requested, a
statement of the financial condition of the Corporation, and shall perform the
other duties which the By-Laws, the Board or the President may prescribe. The
Treasurer may be required to furnish bond in an amount determined by the Board.
Section 6.10. Assistant Officers. The Board or any Officer may from time to
------------- -------------------
time designate and elect Assistant Officers who shall have the powers and duties
as the Officers whom they are elected to assist shall specify and delegate to
them, and any other powers and duties which the By-Laws, the Board or the
President may prescribe. An Assistant Secretary may, in the absence or
disability of the Secretary, attest the execution of all documents by the
Corporation.
Section 6.11. Delegation of Authority. In case of the absence of any
------------- ------------------------
Officer of the Corporation, or for any other reason that the Board may deem
sufficient, the Board may temporarily delegate the powers or duties of the
Officer to any other Officer or Assistant Officer or to any Director.
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<PAGE>
ARTICLE 7
---------
Special Corporate Acts, Negotiable
---------------------------------
Instruments, Deeds, Contracts and Stock
---------------------------------------
Section 7.01. Execution of Negotiable Instruments. All checks, drafts,
------------- ------------------------------------
bills of exchange and orders for the payment of money of the Corporation shall,
unless otherwise directed by the Board, or unless otherwise required by law, be
signed by any two (2) of the following officers: President, Vice-President,
Secretary or Treasurer. The Board may, however, authorize any one or more of
these officers to sign checks, drafts, bills of exchange and orders for the
payment of money by the Corporation singly and without necessity of
countersignature; and the Board may designate any employee or employees of the
Corporation, in addition to those named above, who may, in the name of the
Corporation, execute checks, drafts, bills of exchange and orders for the
payment of money by the Corporation or in its behalf.
Section 7.02. Execution of Deeds. Contracts. Etc. All deeds, notes, bonds
------------- -------------------
and mortgages made by the Corporation and all other written contracts and
agreements, other than those executed in the ordinary course of corporate
business, to which the Corporation shall be a party shall be executed in its
name by the President, the Vice-President or by any other Officer so authorized
by the Board, acting by resolution; and the Secretary, when necessary or
required, shall attest the execution thereof.
Section 7.03. Ordinary Contracts and Agreements. All written contracts and
------------- ----------------------------------
agreements into which the Corporation enters in the ordinary course of business
operations shall be executed by any Officer of the Corporation or by any other
employee of the Corporation designated by the President to execute such
contracts and agreements.
Section 7.04. Endorsement of Certificates for Shares. Unless otherwise
------------- ---------------------------------------
directed by the Board, any share or shares issued by any corporation and owned
by the Corporation (including reacquired shares of the Corporation) may, for
sale or transfer, be endorsed in the name of the Corporation by the President or
the Vice-President, duly attested by the Secretary.
Section 7.05. Voting of Shares Owned by Corporation. Unless otherwise
------------- --------------------------------------
directed by the Board or limited by law, any share or shares issued by any other
corporation and owned or controlled by the Corporation may be voted at any
shareholders' meeting of the other corporation by the President of the
Corporation if he be present, or in his absence by the Vice-President of the
Corporation. Whenever, in the judgment of the President, it is desirable for the
Corporation to execute a proxy or give a shareholders' consent in respect to any
share or shares issued by any other corporation and owned by the Corporation,
the proxy or consent shall be executed in the name of the Corporation by the
President or the Vice-President of the Corporation. Any person or persons
designated in the manner above stated as the proxy or proxies of the Corporation
shall have full right, power and authority to vote the share or shares issued by
the other corporation and owned by the Corporation in the same manner as the
share or shares might be voted by the Corporation.
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<PAGE>
ARTICLE 8
---------
Amendments
----------
Section 8.01. Amendment of By-Laws. These By-Laws may be amended, altered
------------- ---------------------
or revoked at any meeting of the Directors by the affirmative vote of a majority
of the Directors.
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<PAGE>
EXHIBIT 3.17
RESTATED ARTICLES OF INCORPORATION
OF
SC ACQUISITION CORP.
SC ACQUISITION CORP. (hereinafter referred to as the "Corporation"),
having duly elected to be governed by IC 23-1-18 through IC 23-1-54 (except for
IC 23-1-18-3, IC 23-1-21 and IC 23-1-53-3) effective July 29, 1987, and desiring
to amend and restate its Articles of Incorporation effective August 19, 1987,
pursuant to the provisions of the Indiana Business Corporation Law (hereinafter
referred to as the "Corporation Law"), submits the following Restated Articles
of Incorporation:
ARTICLE I
Name
The name of the Corporation is SC ACQUISITION CORP.
ARTICLE II
Purposes
--------
Section 2.1. Purposes of the Corporation. The purposes for which the
----------- ---------------------------
Corporation is formed are:
(a) To engage in the business of manufacturing, compounding, and/or
constructing such articles, products, and equipment, either from wood, metal,
glass, plastics, or any other substance whatsoever, and any combination of same
which the Board of Directors of the Corporation may from time to time determine,
and to that end to buy the necessary materials incident to such manufacturing,
compounding, and/or constructing, and to sell the articles, products, and/or
equipment so manufactured, compounded and/or constructed.
(b) To advance, loan and lend money; buy, purchase, acquire, sell, deal
in and otherwise dispose of notes, bonds, mortgages, debentures, stocks,
conditional sales contracts, accounts receivable and all other forms of
securities or obligations issued by any person, firm or corporation.
<PAGE>
(c) To apply for, obtain, lease, register or otherwise acquire, and to take
hold, use, develop, sell, assign or otherwise dispose of, trade processes,
methods, copyrights, formulae, designs, brands, and labels of the United States
or any other country or government and to use, exercise, accept licenses for and
grant licenses on or in respect to any of said trade marks, trade names, letters
patent, patent rights, improvements, processes, methods, copyrights, formulae,
designs, brands, and labels of the United States or any other country or
government.
(d) To purchase or otherwise acquire, and to hold, own, maintain, work,
develop, sell, lease, convey, mortgage, or otherwise dispose of lands and
leaseholds and any interest, estate and rights in real property which may be
required, convenient or appropriate for carrying on any of the businesses or
corporate objects herein set out.
(e) To acquire by purchase, subscription or otherwise, and to own, hold,
sell, assign, deal in, exchange, transfer, mortgage, pledge, or otherwise
dispose of any shares of the capital stock, bonds, mortgages, securities or
evidences of indebtedness, issued or created by any other domestic or foreign
corporation and to issue in payment or exchange therefor shares of the capital
stock, bonds, securities, or other obligations of the Corporation.
(f) To guarantee the payment of and to pay the dividends, debts,
liabilities or obligations of any corporation, domestic or foreign, in which the
Corporation may own any of the shares of the capital stock, bonds, securities or
evidences of indebtedness.
(g) To borrow money and to make, accept, endorse, transfer, assign, execute
and issue bonds, promissory notes, debentures and all other evidences of
indebtedness, for the purpose of securing any of its obligations or contracts,
upon such terms and conditions as the Board of Directors shall authorize and as
may be permitted by law.
(h) To acquire, hold, deal in, sell, transfer, cancel or otherwise dispose
of any shares of its own capital stock, provided, however, that the use of the
funds of the Corporation for any of said purposes shall not impair its capital.
(i) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes of the attainment of any of the objects or
the furtherance of any of the powers hereinbefore set forth, either alone or in
association with other firms, individuals or corporations, and to
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<PAGE>
do every other thing or things, act or acts, incidental or appurtenant to or
growing out of or connected with the aforesaid business or powers or any part or
parts thereof, provided the same be not inconsistent with, or in violation of,
the laws under which the Corporation is organized.
(j) To engage in the transaction of any or all lawful business for which
corporations may now or hereafter be incorporated under the Corporation Law.
Section 2.2. Powers of the Corporation. The Corporation shall have (a)
----------- -------------------------
all powers now or hereafter authorized by or vested in corporations pursuant to
the provisions of the Corporation Law, (b) all powers now or hereafter vested in
corporations by common law or any other statute or act, and (c) all powers
authorized by or vested in the Corporation by the provisions of these Restated
Articles of Incorporation or by the provisions of its By-Laws as from time to
time in effect.
ARTICLE III
Term of Existence
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
Registered Office and Agent
The street address of the Corporation's registered office at the time
of adoption of these Restated Articles of Incorporation is Circle Tower,
Indianapolis, Indiana 46204 and the name of its Resident Agent at such office at
the time of adoption of these Restated Articles of Incorporation is Prentice
Hall Corporation System, Inc.
ARTICLE V
Shares
Section 5.1. Authorized Class and Number of Shares. The capital stock
----------- -------------------------------------
of the Corporation shall be of one class and kind, which may be referred to as
common shares. The total number of shares which the Corporation has authority to
issue shall be One Thousand (1,000) shares. The Corporation's shares do not
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<PAGE>
have any par or stated value, except that, solely for the purpose of any statute
or regulation of any jurisdiction imposing any tax or fee based upon the
capitalization of the Corporation, each of the Corporation's shares shall be
deemed to have a par value of $1.00 per share.
Section 5.2. Voting Rights of Shares. Except as otherwise provided by
----------- -----------------------
the Corporation Law and subject to such shareholder disclosure and recognition
procedures (which may include voting prohibition sanctions) as the Corporation
may by action of its Board of Directors establish, the Corporation's shares have
unlimited voting rights and each outstanding share shall, when validly issued by
the Corporation, entitle the record holder thereof to one vote at all
shareholders' meetings on all matters submitted to a vote of the shareholders of
the Corporation.
Section 5.3. Other Terms of Shares. The Corporation's shares shall be
----------- ---------------------
equal in every respect insofar as their relationship to the Corporation is
concerned (but such equality of rights shall not imply equality of treatment as
to redemption or other acquisition of shares by the Corporation). The holders of
shares shall be entitled to share ratably in such dividends or other
distributions (other than purchases, redemptions or other acquisitions of shares
by the Corporation), if any, as are declared and paid from time to time on the
shares at the discretion of the Board of Directors. In the event of any
liquidation, dissolution or winding up of the Corporation, either voluntary or
involuntary, the holders of shares shall be entitled to share, ratably according
to the number of shares held by them, in all remaining assets of the Corporation
available for distribution to its shareholders.
The Corporation shall have the power to declare and pay dividends or
other distributions upon the issued and outstanding shares of the Corporation,
subject to the limitation that a dividend or other distribution may not be made
if, after giving it effect, the Corporation would not be able to pay its debts
as they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities. The Corporation shall have the
power to issue shares as a share dividend or other distribution in respect of
issued and outstanding shares.
The Board of Directors of the Corporation has authority to authorize
and direct the acquisition by the Corporation of the issued and outstanding
shares of the Corporation at such times, in such amounts, from such
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<PAGE>
persons, for such considerations, from such sources and upon such terms and
conditions as it may, from time to time, determine upon, subject only to the
restrictions, limitations, conditions and requirements imposed by the
Corporation Law, other applicable laws and these Restated Articles of
Incorporation, as the same may, from time to time, be amended. Shares of the
Corporation purchased, redeemed or otherwise acquired by it shall constitute
authorized but unissued shares, unless prior to any such purchase, redemption or
other acquisition, or within thirty (30) days thereafter, the Board of Directors
adopts a resolution providing that such shares constitute authorized and issued
but not outstanding shares.
The Board of Directors of the Corporation has authority to authorize
and direct the issuance by the Corporation of shares at such times, in such
amounts, to such persons, for such considerations and upon such terms and
conditions as it may, from to time, determine upon, subject only to the
restrictions, limitations, conditions and requirements imposed by the
Corporation Law, other applicable laws and these Restated Articles of
Incorporation, as the same may, from time to time, be amended. Shares may be
disposed of, issued and sold to such persons, firms or corporations as the Board
of Directors may determine, without any preemptive or other right on the part of
the owners or holders of other shares of the Corporation to acquire such shares
by reason of their ownership of such other shares.
ARTICLE VI
Directors
Section 6.1. Number. The number of Directors comprising the Board of
----------- ------
Directors at the time of adoption of these Restated Articles of Incorporation is
three (3), and the number of Directors shall be fixed by the By-Laws and may be
changed from time to time by amendment to the By-Laws, but which number shall in
no event be greater than twelve (12).
Section 6.2. Qualifications. Directors need not be shareholders of the
----------- --------------
Corporation or residents of this or any other state in the United States.
Section 6.3. Vacancies. Vacancies occurring in the Board of Directors
----------- ---------
shall be filled in the manner provided in the By-Laws or, if the By-Laws do
not provide for the filling of vacancies, in the manner provided by the
Corporation Law. The By-Laws may also provide that in certain
-5-
<PAGE>
circumstances specified therein, vacancies occurring in the Board of Directors
may be filled by vote of the shareholders at a special meeting called for that
purpose or at the next annual meeting of shareholders.
Section 6.4. Liability of Directors. A Director's responsibility to the
----------- ----------------------
Corporation shall be limited to discharging his or her duties as a Director,
including his duties as a member of any committee of the Board of Directors upon
which he or she may serve, in good faith, with the care an ordinarily prudent
person in a like position would exercise under similar circumstances, and in a
manner the Director reasonably believes to be in the best interests of the
Corporation, all based on the facts then known to the Director.
In discharging his or her duties, a Director is entitled to rely on
information, opinions, reports, or statements, including financial statements
and other financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the Corporation whom the
Director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to matters
the Director reasonably believes are within such person's professional or
expert competence; or
(c) A committee of the Board of which the Director is not a member if
the Director reasonably believes the committee merits confidence;
but a Director is not acting in good faith if the Director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
this Section 6.4 unwarranted. A Director may, in considering the best interests
of the Corporation, consider the effects of any action on shareholders,
employees, suppliers and customers of the Corporation, and communities in which
offices or other facilities of the corporation are located, and any other
factors the Director considers pertinent.
A Director shall not be liable for any action taken as a Director, or
any failure to take any action, unless (a) the Director has breached or failed
to perform the duties of the Director's office in compliance with this Section
6.4, and (b) the breach or failure to perform constitutes willful misconduct or
recklessness.
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<PAGE>
Section 6.5. Removal of Directors. Any one or more of the members of
----------- --------------------
the Board of Directors may be removed only for good cause at a meeting of the
Board of Directors for which notice of the purpose of the meeting has been
given, by a vote of at least a majority of all persons then serving as
Directors. In addition, any one or more of the members of the Board of Directors
may be removed only for good cause at a meeting of the shareholders called
expressly for that purpose, by the affirmative vote of the holders of
outstanding shares representing at least sixty-six and two-thirds percent
(66-2/3%) of all the votes then entitled to be cast at an election of Directors.
No Director may be removed except as provided in this Section 6.5.
ARTICLE VII
Provisions for Regulation of Business
And Conduct of Affairs of Corporation
Section 7.1. By-Laws. The Board of Directors shall have the exclusive
----------- -------
power to make, alter, amend or repeal, or to waive provisions of, the By-Laws of
the Corporation by the affirmative vote of a majority of the entire number of
Directors at the time, except as expressly provided by the Corporation Law.
Provisions for the regulation of the business and management of the affairs of
the Corporation not stated in these Restated Articles of Incorporation may be
stated in the By-Laws. The Board of Directors may adopt Emergency By-Laws of
the Corporation and shall have the exclusive power (except as may otherwise be
provided therein) to make, alter, amend or repeal, or to waive provisions of,
the Emergency By-Laws by the affirmative vote of a majority of the entire
number of Directors at such time.
Section 7.2. Interest of Directors. (a) A conflict of interest
----------- ---------------------
transaction is a transaction with the Corporation in which a Director of the
Corporation has a direct or indirect interest. A conflict of interest
transaction is not voidable by the Corporation solely because of the Director's
interest in the transaction if any one (1) of the following is true:
(1) The material facts of the transaction and the Director's interest
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.
-7-
<PAGE>
(2) The material facts of the transaction and the Director's interest
were disclosed or known to the shareholders entitled to vote and they
authorized, approved, or ratified the transaction.
(3) The transaction was fair to the Corporation.
(b) For purposes of this Section 7.2, a Director of the Corporation has an
indirect interest in a transaction if:
(1) Another entity in which the Director has a material financial
interest or in which the Director is a general partner is a party to the
transaction; or
(2) Another entity of which the Director is a director, officer, or
trustee is a party to the transaction and the transaction is, or is
required to be, considered by the Board of Directors of the Corporation.
(c) For purposes of Section 7.2(a)(l), a conflict of interest transaction
is authorized, approved, or ratified if it receives the affirmative vote of a
majority of the Directors on the Board of Directors (or on the committee) who
have no direct or indirect interest in the transaction, but a transaction may
not be authorized, approved, or ratified under this section by a single
Director. If a majority of the Directors who have no direct or indirect interest
in the transaction vote to authorize, approve, or ratify the transaction, a
quorum shall be deemed present for the purpose of taking action under this
Section 7.2. The presence of, or a vote cast by, a Director with a direct or
indirect interest in the transaction does not affect the validity of any action
taken under Section 7.2(a)(l), if the transaction is otherwise authorized,
approved, or ratified as provided in such subsection.
(d) For purposes of Section 7.2(a)(2), a conflict of interest transaction
is authorized, approved, or ratified if it receives the affirmative vote of the
holders of shares representing a majority of the votes entitled to be cast.
Shares owned by or voted under the control of a Director who has a direct or
indirect interest in the transaction, and shares owned by or voted under the
control of an entity described in Section 7.2(b), may be counted in such a vote
of shareholders.
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<PAGE>
(e) This Section 7.2 shall not be construed to require authorization,
approval or ratification by the shareholders of any conflict of interest
transaction, or to invalidate any such transaction, that would otherwise be
valid under the common and statutory law applicable thereto.
Section 7.3. Indemnification of Officers, Directors and Other
----------- ------------------------------------------------
Eligible Persons.
- ----------------
(a) To the extent not inconsistent with applicable law, every Eligible
Person shall be indemnified by the Corporation against all Liability and
reasonable Expense that may be incurred by him or her in connection with or
resulting from any Claim, (i) if such Eligible Person is Wholly Successful with
respect to the Claim, or (ii) if not Wholly Successful, then if such Eligible
Person is determined, as provided in either Section 7.3(f) or 7.3(g), to have
acted in good faith, in what he or she reasonably believed to be the best
interests of the Corporation or at least not opposed to its best interests and,
in addition, with respect to any criminal claim is determined to have had
reasonable cause to believe that his or her conduct was lawful or had no
reasonable cause to believe that his or her conduct was unlawful. The
termination of any Claim, by judgment, order, settlement (whether with or
without court approval), or conviction or upon a plea of guilty or of nolo
----
contendere, or its equivalent, shall not create a presumption that an Eligible
- ----------
Person did not meet the standards of conduct set forth in clause (ii) of this
subsection (a). The actions of an Eligible Person with respect to an employee
benefit plan subject to the Employee Retirement Income Security Act of 1974
shall be deemed to have been taken in what the Eligible Person reasonably
believed to be the best interests of the Corporation or at least not opposed to
its best interests if the Eligible Person reasonably believed he or she was
acting in conformity with the requirements of such Act or he or she reasonably
believed his or her actions to be in the interests of the participants in
or beneficiaries of the plan.
(b) The term "Claim" as used in this Section 7.3 shall include every
pending, threatened or completed claim, action, suit or proceeding and all
appeals thereof (whether brought by or in the right of this Corporation or any
other corporation or otherwise), civil, criminal, administrative or
investigative, formal or informal, in which an Eligible Person may become
involved, as a party or otherwise:
(i) by reason of his or her being or having been an Eligible Person,
or
-9-
<PAGE>
(ii) by reason of any action taken or not taken by him or her in his or
her capacity as an Eligible Person, whether or not he or she continued in
such capacity at the time such Liability or Expense shall have been
incurred.
(c) The term "Eligible Person" as used in this Section 7.3 shall mean every
person (and the estate, heirs and personal representatives of such person) who
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,
agent or fiduciary of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan or other organization or entity,
whether for profit or not. An Eligible Person shall also be considered to have
been serving an employee benefit plan at the request of the Corporation if his
or her duties to the Corporation also imposed duties on, or otherwise involved
services by, him or her to the plan or to participants in or beneficiaries of
the plan.
(d) The terms "Liability" and "Expense" as used in this Section 7.3 shall
include, but shall not be limited to, counsel fees and disbursements and amounts
of judgments, fines or penalties against (including excise taxes assessed with
respect to an employee benefit plan), and amounts paid in settlement by or on
behalf of, an Eligible Person.
(e) The term "Wholly Successful" as used in this Section 7.3 shall mean (i)
termination of any Claim against the Eligible Person in question without any
finding of liability or guilt against him or her, (ii) approval by a court or
agency, with knowledge of the indemnity herein provided, of a settlement of any
Claim, or (iii) the expiration of a reasonable period of time after the
threatened making of any Claim without commencement of an action, suit or
proceeding and without any payment or promise made to induce a settlement.
(f) Every Eligible Person claiming indemnification hereunder (other than
one who has been Wholly Successful with respect to any Claim) shall be entitled
to indemnification (i) if special independent legal counsel, which may be
regular counsel of the Corporation or other disinterested person or persons, in
either case selected by the Board of Directors, whether or not a disinterested
quorum exists (such counsel or person or persons being hereinafter called the
"Referee"), shall deliver to the Corporation a written finding that such
Eligible Person has met the standards of conduct set forth in Section
7.3(a)(ii), and (ii) if the Board of Directors, acting upon such written
finding, so determines. The Board of
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<PAGE>
Directors shall, if an Eligible Person is found to be entitled to
indemnification pursuant to the preceding sentence, also determine the
reasonableness of the Eligible Person's Expenses. The Eligible Person claiming
indemnification shall, if requested, appear before the Referee, answer questions
that the Referee deems relevant and shall be given ample opportunity to present
to the Referee evidence upon which he or she relies for indemnification. The
Corporation shall, at the request of the Referee, make available facts, opinions
or other evidence in any way relevant to the Referee's finding that are within
the possession or control of the Corporation.
(g) If an Eligible Person claiming indemnification pursuant to Section
7.3(f) is found not to be entitled thereto, or if the Board of Directors fails
to select a Referee under Section 7.3(f) within a reasonable amount of time
following a written request of an Eligible Person for the selection of a
Referee, or if the Referee or the Board of Directors fails to make a
determination under Section 7.3(f) within a reasonable amount of time following
the selection of a Referee, the Eligible Person may apply for indemnification
with respect to a Claim to a court of competent jurisdiction, including a court
in which the Claim is pending against the Eligible Person. On receipt of an
application, the court, after giving notice to the Corporation and giving the
Corporation ample opportunity to present to the court any information or
evidence relating to the claim for indemnification that the Corporation deems
appropriate, may order indemnification if it determines that the Eligible Person
is entitled to indemnification with respect to the Claim because such Eligible
Person met the standards of conduct set forth in Section 7.3(a)(ii). If the
court determines that the Eligible Person is entitled to indemnification, the
court shall also determine the reasonableness of the Eligible Person's Expenses.
(h) The rights of indemnification provided in this Section 7.3 shall be in
addition to any rights to which any Eligible Person may otherwise be entitled.
Irrespective of the provisions of this Section 7.3, the Board of Directors may,
at any time and from time to time, (i) approve indemnification of any Eligible
Person to the full extent permitted by the provisions of applicable law at the
time in effect, whether on account of past or future transactions, and (ii)
authorize the Corporation to purchase and maintain insurance on behalf of any
Eligible Person against any Liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the Corporation would have the power to indemnify him or her
against such liability.
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<PAGE>
(i) Expenses incurred by an Eligible Person with respect to any Claim, may
be advanced by the Corporation (by action of the Board of Directors, whether or
not a disinterested quorum exists) prior to the final disposition thereof upon
receipt of an undertaking by or on behalf of the Eligible Person to repay such
amount unless he or she is determined to be entitled to indemnification.
(j) The provisions of this Section 7.3 shall be deemed to be a contract
between the Corporation and each Eligible Person, and an Eligible Person's
rights hereunder shall not be diminished or otherwise adversely affected by any
repeal, amendment or modification of this Section 7.3 that occurs subsequent to
such person becoming an Eligible Person.
(k) The provisions of this Section 7.3 shall be applicable to Claims made
or commenced after the adoption hereof, whether arising from acts or omissions
to act occurring before or after the adoption hereof.
ARTICLE VIII
Miscellaneous Provisions
Section 8.1. Amendment or Repeal. Except as otherwise expressly provided
----------- -------------------
for in these Restated Articles of Incorporation, the Corporation shall be
deemed, for all purposes, to have reserved the right to amend, alter, change or
repeal any provision contained in these Restated Articles of Incorporation to
the extent and in the manner now or hereafter permitted or prescribed by
statute, and all rights herein conferred upon shareholders are granted subject
to such reservation.
Section 8.2. Redemption of Shares Acquired in Control Share Acquisitions.
----------- -----------------------------------------------------------
If and whenever the provisions of IC 23-1-42 apply to the Corporation, it is
authorized to redeem its securities pursuant to IC 23-1-42-10.
Section 8.3. Headings. The headings of the Articles and Sections of these
----------- --------
Restated Articles of Incorporation have been inserted for convenience of
reference only and do not in any way define, limit, construe or describe the
scope or intent of any Article or Section hereof.
IN WITNESS WHEREOF, the undersigned officer of SC Acquisition Corp. has
executed these Restated Articles of Incorporation this 17th day of August, 1987.
/s/ WILLIAM J. BARRETT
-----------------------------
William J. Barrett, President
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<PAGE>
IN WITNESS WHEREOF, the undersigned officer of Sc ACQUISITION CORP. has
executed these Articles of Restatement this 17th day of August, 1987.
/s/ WILLIAM J. BARRETT
-----------------------------
William J. Barrett, President
<PAGE>
STATE OF INDIANA
State Form 28791
OFFICE OF THE SECRETARY OF STATE
To Whom These Presents Come, Greeting:
WHEREAS, there has been presented to me at this office, Articles of Merger,
merging,
SHELTER COMPONENTS, INC. 4275-134
- ------------------------------------------------------------------------------
the non-survivor(s), into
SC ACQUISITION CORP. 8706-758
- ------------------------------------------------------------------------------
an Indiana Corporation, the survivor, changing the corporate name to
SHELTER COMPONENTS OF INDIANA, INC.
- ----------------------------------
Said Articles of Merger have been prepared and signed in accordance with the
provisions of the Indiana Business Corporation Law;
WHEREAS, upon due examination, I find that it satisfies the requirements of
IC. 23-1-18-1:
NOW, THEREFORE, I, EVAN BAYH, Secretary of State of the State of Indiana hereby
certify that I have this day filed said Articles in this office.
Effective date the provisions will apply is February 5, 1988
----------------
In Witness Whereof, I have hereunto set my hand
and affixed the seal of the State of Indiana, at
[SEAL APPEARS HERE] the City of Indianapolis,
this 5th day of
------------------------
February , 1988
--------------------------------------
--------------------------------------
Evan Bayh, Secretary of State,
--------------------------------------
By
--------------------------------------
Deputy
<PAGE>
EXHIBIT 3.18
BY-LAWS
OF
SC ACQUISITION CORP
ARTICLE I
---------
Meetings of Shareholders
------------------------
Section 1.1. Annual Meetings. Annual meetings of the shareholders of the
----------- ---------------
Corporation shall be held on the second Tuesday of May of each year, at such
hour and at such place within or without the State of Indiana as shall be
designated by the Board of Directors. In the absence of designation, the meeting
shall be held at the principal office of the Corporation at 10:00 a.m. (Local
time). The Board of Directors may, by resolution, change the date or time of
such annual meeting. If the day fixed for any annual meeting of shareholders
shall fall on a legal holiday, then such annual meeting shall be held on the
first following day that is not a legal holiday.
Section 1.2. Special Meetings. Special meetings of the shareholders of the
----------- ----------------
Corporation may be called at any time by the Board of Directors or the Chairman
of the Board and shall be called by the Board of Directors if the Secretary
receives written, dated and signed demands for a special meeting, describing in
reasonable detail the purpose or purposes for which it is to be held, from the
holders of shares representing at least twenty-five percent (25%) of all votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting. If the Secretary receives one (1) or more proper written
demands for a special meeting of shareholders, the Board of Directors may set a
record date for determining shareholders entitled to make such demand. The Board
of Directors or the Chairman of the Board, as the case may be, calling a special
meeting of shareholders shall set the date, time and place of such meeting,
which may be held within or without the State of Indiana.
Section 1.3. Notices. A written notice, stating the date, time and place of
----------- -------
any meeting of the shareholders, and in the case of a special meeting the
purpose or purposes for which such meeting is called, shall be delivered or
mailed by the Secretary of the Corporation, to each shareholder of record of the
Corporation entitled to notice of or to vote at such meeting no fewer than ten
(10) nor more than sixty (60) days before the date of the meeting. In the event
of a special meeting of shareholders required to be called as the result of a
demand therefor made by
<PAGE>
shareholders, such notice shall be given no later than the sixtieth (60th) day
after the Corporation's receipt of the demand requiring the meeting to be
called. Notice of shareholders' meetings, if mailed, shall be mailed, postage
prepaid, to each shareholder at his address shown in the Corporation's current
record of shareholders.
Notice of a meeting of shareholders shall be given to shareholders not
entitled to vote, but only if a purpose for the meeting is to vote on any
amendment to the Corporation's Restated Articles of Incorporation, merger or
share exchange to which the Corporation would be a party, sale of the
Corporation's assets, dissolution of the Corporation, or consideration of voting
rights to be accorded to shares acquired or to be acquired in a "control share
acquisition" (as such term is defined in the Indiana Business Corporation Law).
Except as required by the foregoing sentence or as otherwise required by the
Indiana Business Corporation Law or the Corporation's Restated Articles of
Incorporation, notice of a meeting of shareholders is required to be given only
to shareholders entitled to vote at the meeting.
A shareholder or his proxy may at any time waive notice of a meeting if the
waiver is in writing and is delivered to the Corporation for inclusion in the
minutes or filing with the Corporation's records. A shareholder's attendance at
a meeting, whether in person or by proxy, (a) waives objection to lack of notice
or defective notice of the meeting, unless the shareholder or his proxy at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting, and (b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder or his proxy objects to considering the
matter when it is presented. Each shareholder who has in the manner above
provided waived notice or objection to notice of a shareholders' meeting shall
be conclusively presumed to have been given due notice of such meeting,
including the purpose or purposes thereof.
If an annual or special shareholders' meeting is adjourned to a different
date, time or place, notice need not be given of the new date, time or place if
the new date, time or place is announced at the meeting before adjournment,
unless a new record date is or must be established for the adjourned meeting.
Section 1.4. Voting. Except as otherwise provided by the Indiana Business
----------- ------
Corporation Law or the Corporations's Restated Articles of Incorporation, each
share of the capital stock of any class of the Corporation that is outstanding
at the record date established for any annual or special meeting
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<PAGE>
of shareholders and is outstanding at the time of and represented in person or
by proxy at the annual or special meeting, shall entitle the record holder
thereof, or his proxy, to one (1) vote on each matter voted on at the meeting.
Section 1.5. Quorum. Unless the Corporation's Restated Articles of
----------- ------
Incorporation or the Indiana Business Corporation Law provide otherwise, at all
meetings of shareholders a majority of the votes entitled to be cast on a
matter, represented in person or by proxy, constitutes a quorum for action on
the matter. Action may be taken at shareholders' meeting only on matters with
respect to which a quorum exists; provided, however, that any meeting of
shareholders, including annual and special meetings and any adjournments
thereof, may be adjourned to a later date although less than a quorum is
present. Once a share is represented for any purpose at a meeting, it is deemed
present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
Section 1.6. Vote Required to Take Action. If a quorum exists as to a
----------- ----------------------------
matter to be considered at a meeting of shareholders, action on such matter
(other than the election of Directors) is approved if the votes properly cast
favoring the action exceed the votes properly cast opposing the action, except
as the Corporation's Restated Articles of Incorporation or the Indiana Business
Corporation Law require a greater number of affirmative votes. Directors shall
be elected by a plurality of the votes properly cast.
Section 1.7. Record Date. Only such persons shall be entitled to notice of
----------- -----------
or to vote, in person or by proxy, at any shareholders' meeting as shall appear
as shareholders upon the books of the Corporation as of such record date as the
Board of Directors shall determine, which date may not be earlier than the date
seventy (70) days immediately preceding the meeting. In the absence of such
determination, the record date shall be the fiftieth (50th) day immediately
preceding the date of such meeting. Unless otherwise provided by the Board of
Directors, shareholders shall be determined as of the close of business on the
record date.
Section 1.8. Proxies. A shareholder may vote his shares either in person or
----------- -------
by proxy. A shareholder may appoint a proxy to vote or otherwise act for the
shareholder (including authorizing the proxy to receive, or to waive, notice of
any shareholders' meetings within the effective period of such proxy) by signing
an appointment form, either personally or by the shareholder's attorney-in-fact.
An appointment of a proxy is effective when received by the Secretary or other
officer or agent authorized to tabulate
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<PAGE>
votes and is effective for eleven (11) months unless a shorter or longer period
is expressly provided in the appointment form. The proxy s authority may be
limited to a particular meeting or may be general and authorize the proxy to
represent the shareholder at any meeting of shareholders held within the time
provided in the appointment form. Subject to the Indiana Business Corporation
Law and to any express limitation on the proxy's authority appearing on the face
of the appointment form, the Corporation is entitled to accept the proxy's vote
or other action as that of the shareholder making the appointment.
Section 1.9. Removal of Directors. Unless the Corporation's Restated
----------- --------------------
Articles of Incorporation provide otherwise, any one or more of the members of
the Board of Directors may be removed only for good cause (a) at a meeting of
the Board of Directors for which notice of the purpose of the meeting has been
given, by a vote of at least a majority of all persons then serving as
Directors, or (b) at a meeting of the shareholders called expressly for that
purpose, by the affirmative vote of the holders of outstanding shares
representing at least sixty-six and two-thirds percent (66-2/3%) of all the
votes then entitled to be cast at an election of Directors.
Section 1.10. Participation by Conference Telephone. The Chairman of the
------------ -------------------------------------
Board or the Board of Directors may permit any or all shareholders to
participate in an annual or special meeting of shareholders by, or through the
use of, any means of communication, such as conference telephone, by which all
shareholders participating may simultaneously hear each other during the
meeting. A shareholder participating in a meeting by such means shall be deemed
to be present in person at the meeting.
ARTICLE II
----------
Directors
---------
Section 2.1. Number and Terms. The business and affairs of the Corporation
----------- ----------------
shall be managed under the direction of a Board of Directors consisting of nine
(9) Directors, or such other number as may be fixed by the Board of Directors
from time to time, but which shall in no event be greater than twelve (12). Each
Director shall be elected for a term of office to expire at the annual meeting
of shareholders next following his election.
Despite the expiration of a Director's term, the Director shall continue to
serve until his successor is elected and qualified, or until the earlier of his
death,
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<PAGE>
resignation, disqualification or removal, or until there is a decrease in the
number of Directors. Any vacancy occurring in the Board of Directors, from
whatever cause arising, shall be filled by selection of a successor by a
majority vote of the remaining members of the Board of Directors (although less
than a quorum); provided, however, that if such vacancy or vacancies leave the
Board of Directors with no members or if the remaining members of the Board are
unable to agree upon a successor or determine not to select a successor, such
vacancy may be filled by a vote of the shareholders at a special meeting called
for that purpose or at the next annual meeting of shareholders. The term of a
Director elected or selected to fill a vacancy shall expire at the end of the
term for which such Director's predecessor was elected.
The Directors and each of them shall have no authority to bind the
Corporation except when acting as a Board.
Section 2.2. Quorum and Vote Required to Take Action. A majority of the
----------- ----------------------------------------
whole Board of Directors shall be necessary to constitute a quorum for the
transaction of any business, except the filling of vacancies. If a quorum is
present when a vote is taken, the affirmative vote of a majority of the
Directors present shall be the act of the Board of Directors, unless the act of
a greater number is required by the Indiana Business Corporation Law, the
Corporation's Restated Articles of Incorporation or these By-Laws.
Section 2.3. Annual and Regular Meetings. The Board of Directors shall meet
----------- ---------------------------
annually, without notice, immediately following the annual meeting of the
shareholders, for the purposes of transacting such business as properly may come
before the meeting. Other regular meetings of the Board of Directors, in
addition to said annual meeting, shall be held on such dates, at such times and
at such places as shall be fixed by resolution adopted by the Board of Directors
and specified in a notice of each such regular meeting, or otherwise
communicated to the Directors. The Board of Directors may at any time alter the
date for the next regular meeting of the Board of Directors.
Section 2.4. Special Meetings. Special meetings of the Board of Directors
----------- ----------------
may be called by any member of the Board of Directors upon not less than twenty-
four (24) hours' notice given to each Director of the date, time and place of
the meeting, which notice need not specify the purpose or purposes of the
special meeting, unless the purpose of the meeting is to consider the removal of
one or more Directors pursuant to Section 1.9 of these By-Laws. Such notice may
be communicated in person (either in writing or orally), by
-5-
<PAGE>
telephone, telegraph, teletype or other form of wire or wireless communication,
or by mail, and shall be effective at the earlier of the time of its receipt or
if mailed, five (5) days after its mailing. Notice of any meeting of the Board
may be waived in writing at any time if the waiver is signed by the Director
entitled to the notice and is filed with the minutes or corporate records. A
Director's attendance at or participation in a meeting waives any required
notice to the Director of the meeting, unless the Director at the beginning of
the meeting (or promptly upon the Director's arrival) objects to holding the
meeting or transacting business at the meeting and does not thereafter vote for
or assent to action taken at the meeting.
Section 2.5. Written Consents. Any action required or permitted to be taken
----------- ----------------
at any meeting of the Board of Directors may be taken without a meeting if the
action is taken by all members of the Board. The action must be evidenced by one
(1) or more written consents describing the action taken, signed by each
director, and included in the minutes or filed with the corporate records
reflecting the action taken. Action taken under this Section 2.5 is effective
when the last Director signs the consent, unless the consent specified a
different prior or subsequent effective date, in which cases the action is
effective on or as of the specified date. A consent signed under this Section
2.5 shall have the same effect as a unanimous vote of all members of the Board
and may be described as such in any document.
Section 2.6. Participation by Conference Telephone. The Board of
------------ -------------------------------------
Directors may permit any or all Directors to participate in a regular or special
meeting by, or through the use of, any means of communication, such as
conference telephone, by which all Directors participating may simultaneously
hear each other during the meeting. A Director participating in a meeting by
such means shall be deemed to be present in person at the meeting.
Section 2.7. Committees. (a) The Board of Directors may create one (1) or
------------ ----------
more committees and appoint members of the Board of Directors to serve on them,
by resolution of the Board of Directors adopted by a majority of all the
Directors in office when the resolution is adopted. Each committee may have one
(1) or more members, and all the members of a committee shall serve at the
pleasure of the Board of Directors.
(b) To the extent specified by the Board of Directors in the resolution
creating a committee, each committee may exercise all of the authority of the
Board of Directors; provided, however, that a committee may not:
-6-
<PAGE>
(1) authorize dividends or other distributions, except a committee (or an
executive officer of the Corporation designated by the Board of
Directors) may authorize or approve a reacquisition of shares or
other distribution if done according to a formula or method, or
within a range, prescribed by the Board of Directors;
(2) approve or propose to shareholders action that is required to be
approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its committees;
(4) amend the Corporation's Restated Articles of Incorporation under IC
23-1-38-2;
(5) adopt, amend, repeal, or waive provisions of these By-Laws;
(6) approve a plan of merger not requiring shareholder approval; or
(7) authorize or approve the issuance or sale or a contract for sale of
shares, or determine the designation and relative rights, preferences
and limitations of a class or series of shares, except the Board of
Directors may authorize a committee (or an executive officer of the
Corporation designated by the Board of Directors) to take action
described in this subdivision within limits prescribed by the Board
of Directors.
(c) Except to the extent inconsistent with the resolutions creating a
committee, Sections 2.1 through 2.6 of these By-Laws, which govern meetings,
action without meetings, notice and waiver of notice, quorum and voting
requirements and telephone participation in meetings of the Board of Directors,
apply to each committee and its members as well.
ARTICLE III
-----------
Officers
--------
Section 3.1. Designation, Selection and Terms. The officers of the
----------- ---------------------------------
Corporation shall consist of the Chairman of the Board, the President, the
Executive Vice President, the Treasurer, the Secretary and the Controller. The
Board of Directors may also elect other Vice Presidents, Assistant Secretaries,
Assistant Treasurers, Assistant Controllers, and
-7-
<PAGE>
such other officers or assistant officers as may be described in these By-Laws
from time to time or as the Board of Directors may from time to time determine
by resolution creating the office and defining the duties thereof. In addition,
the Chairman of the Board may, by a certificate of appointment creating the
office and defining the duties thereof delivered to the Secretary for inclusion
with the corporate records, from time to time create and appoint such assistant
officers as he deems desirable. The officers of the Corporation shall be elected
by the Board of Directors (or appointed by the Chairman of the Board as provided
above) and need not be selected from among the members of the Board of
Directors, except for the Chairman of the Board and the President who shall be
members of the Board of Directors. Any two (2) or more offices may be held by
the same person. All officers shall serve at the pleasure of the Board of
Directors and, with respect to officers appointed by the Chairman of the Board,
also at the pleasure of the Chairman of the Board. The election or appointment
of an officer does not itself create contract rights.
Section 3.2. Removal. The Board of Directors may remove any officer at any
----------- -------
time with or without cause. An officer appointed by the Chairman of the Board
may also be removed at any time, with or without cause, by the Chairman of the
Board. Vacancies in such offices, however occurring, may be filled by the Board
of Directors at any meeting of the Board of Directors (or by appointment by the
Chairman of the Board, to the extent provided in Section 3.1 of these By-Laws).
Section 3.3. Chairman of the Board. The Chairman of the Board shall be the
----------- ---------------------
chief executive and principal policy-making officer of the Corporation. Subject
to the authority of the Board of Directors, he shall formulate the major
policies to be pursued in the administration of the Corporation's affairs. He
shall study and make reports and recommendations to the Board of Directors with
respect to major problems and activities of the Corporation and shall see that
the established policies are placed into effect and carried out under the
direction of the President. The Chairman of the Board shall, if present, preside
at all meetings of the shareholders and of the Board of Directors.
Section 3.4. President. Subject to the provisions of Section 3.3, the
----------- ---------
President shall be the chief operating officer of the Corporation, shall
exercise the powers and perform the duties which ordinarily appertain to that
office and shall manage and operate the businesses and affairs of the
Corporation in conformity with the policies established by the Board of
Directors and by the Chairman of the Board, or as may be provided for in these
By-Laws. In connection
-8-
<PAGE>
with the performance of his duties, he shall keep the Chairman of the Board
fully informed as to all phases of the Corporation's activities. In the absence
of the Chairman of the Board, the President shall preside at meetings of the
shareholders and of the Board of Directors.
Section 3.5. Treasurer. The Treasurer shall perform all of the duties
----------- ---------
customary to that office, including the duty of supervising the keeping of the
records of the receipts and disbursements of the Corporation. He shall submit to
the Board of Directors at such times as the Board may require full statements
showing in detail the financial condition and affairs of the Corporation. He
shall also be responsible for causing the Corporation to furnish financial
statements to its shareholders pursuant to IC 23-1-53-1.
Section 3.6. Secretary. The Secretary shall be the custodian of the books,
----------- ---------
papers and records of the Corporation and of its corporate seal, if any, and
shall be responsible for seeing that the Corporation maintains the records
required by IC 23-1-52-1 (other than accounting records) and that the
Corporation files with the Indiana Secretary of State the annual report required
by IC 23-1-53-3. The Secretary shall be responsible for preparing minutes of the
meetings of the shareholders and of the Board of Directors and for
authenticating records of the Corporation, and he shall perform all of the other
duties usual in the office of Secretary of a corporation.
Section 3.7. Salary. The Board of Directors may, at its discretion, from
----------- ------
time to time, fix the salary of any officer by resolution included in the minute
book of the Corporation.
ARTICLE IV
----------
Checks
------
All checks, drafts or other orders for payment of money shall be signed in
the name of the Corporation by such officers or persons as shall be designated
from time to time by resolution adopted by the Board of Directors and included
in the minute book of the Corporation; and in the absence of such designation,
such checks, drafts or other orders for payment shall be signed by the Chairman
of the Board, the President or the Treasurer.
-9-
<PAGE>
ARTICLE V
---------
Loans
-----
Such of the officers of the Corporation as shall be designated from time to
time by resolution adopted by the Board of Directors and included in the minute
book of the Corporation shall have the power, with such limitations thereon as
may be fixed by the Board of Directors, to borrow money in the Corporation's
behalf, to establish credit, to discount bills and papers, to pledge collateral
and to execute such notes, bonds, debentures or other evidences of indebtedness,
and such mortgages, trust indentures and other instruments in connection
therewith, as may be authorized from time to time, by the Board of Directors.
ARTICLE VI
----------
Execution of Documents
----------------------
The Chairman of the Board or the President may, in the Corporation's name,
sign all deeds, leases, contracts or similar documents that may be authorized by
the Board of Directors unless otherwise directed by the Board of Directors or
otherwise provided herein or in the Corporation's Restated Articles of
Incorporation, or as otherwise required by law.
ARTICLE VII
-----------
Stock
-----
Section 7.1. Execution. Certificates for shares of the capital stock of the
----------- ---------
Corporation shall be signed by the Chairman of the Board or the President and by
the Treasurer or the Secretary and the seal of the Corporation (or a facsimile
thereof), if any, may be thereto affixed. Where any such certificate is also
signed by a transfer agent or a registrar, or both, the signatures of the
officers of the Corporation may be facsimiles. The Corporation may issue and
deliver any such certificates notwithstanding that any such officer who shall
have signed, or whose facsimile signature shall have been imprinted on, such
certificate shall have ceased to be such officer.
-10-
<PAGE>
Section 7.2. Contents. Each certificate shall state on its face the name of
----------- --------
the Corporation and that it is organized under the laws of the State of Indiana,
the name of the person to whom it is issued, and the number and class of shares
and the designation of the series, if any, the certificate represents, and shall
state conspicuously on its front or back that the Corporation will furnish the
shareholder, upon his written request and without charge, a summary of the
designations, relative rights, preferences and limitations applicable to each
class and the variations in rights, preferences and limitations determined for
each series (and the authority of the Board of Directors to determine variations
for future series).
Section 7.3. Transfers. Except as otherwise provided by law or by
------------ ---------
resolution of the Board of Directors, transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof in person or by duly authorized attorney, on payment of all taxes
thereon and surrender for cancellation of the certificate or certificates for
such shares (except as hereinafter provided in the case of loss, destruction or
mutilation of certificates) properly endorsed by the holder thereof or
accompanied by the proper evidence of succession, assignment or authority to
transfer, and delivered to the Secretary or an Assistant Secretary.
Section 7.4. Stock Transfer Records. There shall be entered upon the stock
----------- ----------------------
records of the Corporation the number of each certificate issued, the name and
address of the registered holder of such certificate, the number, kind and class
of shares represented by such certificate, the date of issue, whether the shares
are originally issued or transferred, the registered holder from whom
transferred and such other information as is commonly required to be shown by
such records. The stock records of the Corporation shall be kept at its
principal office, unless the Corporation appoints a transfer agent or registrar,
in which case the Corporation shall keep at its principal office a complete and
accurate shareholders' list giving the names and addresses of all shareholders
and the number and class of shares held by each. If a transfer agent is
appointed by the Corporation, shareholders shall give written notice of any
changes in their addresses from time to time to the transfer agent.
Section 7.5. Transfer Agents and Registrars. The Board of Directors may
----------- ------------------------------
appoint one or more transfer agents and one or more registrars and may require
each stock certificate to bear the signature of either or both.
-11-
<PAGE>
Section 7.6. Loss, Destruction or Mutilation of Certificates. The holder of
----------- -----------------------------------------------
any of the capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of the certificate therefor,
and the Board of Directors may, in its discretion, cause to be issued to him a
new certificate or certificates of stock, upon the surrender of the mutilated
certificate, or, in the case of loss or destruction, upon satisfactory proof of
such loss or destruction. The Board of Directors may, in its discretion, require
the holder of the lost or destroyed certificate or his legal representative to
give the Corporation a bond in such sum and in such form, and with such surety
or sureties as it may direct, to indemnify the Corporation, its transfer agents
and registrars, if any, against any claim that may be made against them or any
of them with respect to the capital stock represented by the certificate or
certificates alleged to have been lost or destroyed, but the Board of Directors
may, in its discretion, refuse to issue a new certificate or certificates, save
upon the order of a court having jurisdiction in such matters.
Section 7.7. Form of Certificates. The form of the certificates for shares
----------- --------------------
of the capital stock of the Corporation shall conform to the requirements of
Section 7.2 of these By-Laws and be in such printed form as shall from time to
time be approved by resolution of the Board of Directors.
ARTICLE VIII
------------
Seal
----
The corporate seal of the Corporation shall, if the Corporation elects to
have one, be in the form of a disc, with the name of the Corporation and
"INDIANA" on the periphery thereof and the word "SEAL" in the center.
ARTICLE IX
----------
Miscellaneous
-------------
Section 9.1. Indiana Business Corporation Law. The provisions of the
----------- --------------------------------
Indiana Business Corporation Law, as amended, applicable to all matters relevant
to, but not specifically covered by, these By-Laws are hereby, by reference,
incorporated in and made a part of these By-Laws.
Section 9.2. Fiscal Year. The fiscal year of the Corporation shall end on
----------- -----------
the 31st of December of each year.
-12-
<PAGE>
EXHIBIT 3.19
ARTICLES OF INCORPORATION Provided by: EVAN BAYH
State Form 4159 (R6 / 3-88) Secretary of State
Room 155, State House
INSTRUCTIONS: Use 8 1/2x11 inch Indianapolis, Indiana 46204
white paper for inserts. Filing (317) 232-6576
requirements - Present original
and one copy to the address in Indiana Code 23-1-21-2
the upper right corner of this
form. FILING FEE $90.00
- -------------------------------------------------------------------------------
ARTICLES OF INCORPORATION OF
- -------------------------------------------------------------------------------
(Indicate the appropriate act)
The undersigned desiring to form a corporation (herein after referred to as
"Corporation") pursuant to the provisions of:
[XX] Indiana Business Corporation Law
[ ] Indiana Professional Corporation Act 1983
As amended, executes the following Articles of Incorporation:
- -------------------------------------------------------------------------------
ARTICLE I NAME
- -------------------------------------------------------------------------------
Name of Corporation
M P Acquisition Corp.
- -------------------------------------------------------------------------------
(The name must contain the word "Corporation," "Incorporated," "Limited,"
"Company" or an abbreviation of one of those words.)
- -------------------------------------------------------------------------------
ARTICLE II REGISTERED OFFICE AND AGENT
- -------------------------------------------------------------------------------
(The street address of the corporation's initial registered office in Indiana
and the name of its initial registered agent at that office is:)
- -------------------------------------------------------------------------------
Name of Agent
Richard E. Summers
- -------------------------------------------------------------------------------
Street Address of Registered Office Zip Code
27217 County Road 6, Elkhart, IN 46514
- -------------------------------------------------------------------------------
ARTICLE III AUTHORIZED SHARES
- -------------------------------------------------------------------------------
Number of Shares: 1,000
--------------------------------------------------------------
If there is more than one class of shares, shares with rights
and preferences, list such information on "Exhibit A."
- -------------------------------------------------------------------------------
ARTICLE IV INCORPORATORS
(The name(s) and address(es) of the incorporator(s) of the corporation:)
- -------------------------------------------------------------------------------
NAME NUMBER AND STREET CITY STATE ZIP CODE
OR BUILDING
- -------------------------------------------------------------------------------
Richard E. Summers 27217 Cty Rd 6 Elkhart IN 46514
- -------------------------------------------------------------------------------
In Witness Whereof, the undersigned being all the incorporators of said
corporation execute these Articles of Incorporation and verify, subject to
penalties of perjury, that the statements contained herein are true, this
15th day of January, 1993.
- ----- --------------
- -------------------------------------------------------------------------------
Signature Printed Name
/s/ Richard E. Summers Richard E. Summers, Attorney
- -------------------------------------------------------------------------------
This instrument was prepared by (Name)
Richard E. Summers, Attorney
- -------------------------------------------------------------------------------
Address (Street, Number, City and State) Zip Code
27217 County Road 6, Elkhart, IN 46514
- -------------------------------------------------------------------------------
<PAGE>
ARTICLES OF AMENDMENT OF THE Provided by: EVAN BAYH
ARTICLES OF INCORPORATION
State Form 38333 (RA / 6-88) Secretary of State
Approved by State Board of Room 155, State House
Accounts, 1988. Indianapolis, Indiana 46204
(317) 232-6576
INSTRUCTIONS: Use 8 1/2x11 inch Indiana Code 23-1-38-1 et seq.
white paper for inserts. Filing
requirements - Present original FILING FEE $90.00
and one copy to the address in
the upper right corner of this
form.
- -------------------------------------------------------------------------------
ARTICLES OF AMENDMENT OF THE
ARTICLES OF INCORPORATION OF:
- -------------------------------------------------------------------------------
The undersigned officers of
M P Acquisition Corp.
- -------------------------------------------------------------------------------
(hereinafter referred to as the "Corporation") existing pursuant to the
provisions of:
(Indicate appropriate act)
[XX] Indiana Business Corporation Law
[ ] Indiana Professional Corporation Act of 1988
as amended (hereinafter referred to as the "Act"), desiring to give notice of
corporate action effectuating amendment of certain provisions of its Articles of
Incorporation, certify the following facts:
- -------------------------------------------------------------------------------
ARTICLE I Amendment(s)
- -------------------------------------------------------------------------------
SECTION 1 The date of incorporation of the corporation is:
1-15-93
- -------------------------------------------------------------------------------
SECTION 2 The name of the corporation following this amendment to the Articles
of Incorporation is:
Design Components, Inc.
- ------------------------------------------------------------------------------
SECTION 3
The exact text of Article(s)_______________________of the Articles of
Incorporation is now as follows:
Design Components, Inc.
- -------------------------------------------------------------------------------
SECTION 4 Date of each amendment's adoption:
Article 1 10-7-93
- -------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
ARTICLE II Manner of Adoption and Vote
- --------------------------------------------------------------------------------
SECTION 1 Action by Directors:
The Board of Directors of the Corporation duly adopted a resolution
proposing to amend the terms
and provisions of Article (s) 1 of the Articles of Incorporation and directing
---
a meeting of the Shareholders, to be held on 10-7-93, allowing such Shareholders
-------
to vote on the proposed amendment.
The resolution was adopted by: (select appropriate paragraph)
(a) Vote of the Board of Directors at a meeting held on October 6, 1993
--------------------
at which a quorum of such Board was present.
(b) Written consent executed on N/A, 19 , and signed by all members of the
----- --
Board of Directors.
- --------------------------------------------------------------------------------
SECTION 2 Action by Shareholders:
The Shareholders of the Corporation entitled to vote in respect of the
Articles of Amendment adopted the proposed amendment.
The amendment was adopted by: (select appropriate paragraph)
(a) Vote of such Shareholders during the meeting called by the Board of
Directors. The result of such vote is as follows:
TOTAL
------------------
SHAREHOLDERS ENTITLED TO VOTE: 100 Shares
------------------
SHAREHOLDERS VOTED IN FAVOR: 100 Shares
------------------
SHAREHOLDERS VOTED AGAINST: -0-
------------------
(b) Written consent executed on N/A , 19 , and signed by all such
Shareholders
- --------------------------------------------------------------------------------
SECTION 3 Compliance with Legal Requirements.
The manner of the adoption of the Articles of Amendment and the vote by
which they were adopted constitute full legal compliance with the provisions of
the Act, the Articles of Incorporation, and the By-Laws of the Corporation.
- --------------------------------------------------------------------------------
ARTICLE III Statement of Changes Made With Respect to Any Increase In The Number
of Shares Heretofore Authorized
- --------------------------------------------------------------------------------
Aggregate Number of Shares
Previously Authorized 1,000
--------------------
Increase (indicate "o" or
"N/A" if no increase) N/A
--------------------
Aggregate Number of Shares
To Be Authorized After
Effect of This Amendment 1,000
--------------------
- --------------------------------------------------------------------------------
I hereby verify subject to the penalties of perjury that the facts contained
herein are true.
- --------------------------------------------------------------------------------
Current Officer's Signature Officer's Name Printed
/s/ Richard E. Summers Richard E. Summers
- --------------------------------------------------------------------------------
Officer's Title
Vice President
<PAGE>
EXHIBIT 3.20
BY-LAWS
-------
OF
--
DESIGN COMPONENTS, INC.
-----------------------
ARTICLE I - OFFICES
-------------------
The office of the Corporation shall be located in the City and State designated
in the Articles of Incorporation. The Corporation may also maintain offices at
such other places within or without the United States as the Board of Directors
may, from time to time, determine.
ARTICLE II - MEETING OF SHAREHOLDERS
------------------------------------
Section 1 - Annual Meetings:
- ---------------------------
The annual meeting of the shareholders of the Corporation shall be held within
five months after the close of the fiscal year of the Corporation, for the
purpose of electing directors, and transacting such other business as may
properly come before the meeting.
Section 2 - Special Meetings:
- ----------------------------
Special meetings of the shareholders may be called at any time by the Board of
Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holders of ten per cent (10%) of the
shares then outstanding and entitled to vote thereat, or as otherwise required
under the provisions of the Business Corporation Act.
Section 3 - Place of Meetings:
- -----------------------------
All meetings of shareholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of notice of such meetings.
By-Laws - 1
<PAGE>
Section 4 - Notice of Meetings:
- ------------------------------
(a) Except as otherwise provided by Statute, written notice of each meeting of
shareholders, whether annual or special, stating the time when and place where
it is to be held, shall be served either personally or by mail, not less than
ten or more than fifty days before the meeting, upon each shareholder of record
entitled to vote at such meeting, and to any other shareholder to whom the
giving of notice may be required by law. Notice of a special meeting shall also
state the purpose or purposes for which the meeting is called, and shall
indicate that it is being issued by, or at the direction of, the person or
persons calling the meeting. If, at any meeting, action is proposed to be taken
that would, if taken, entitle shareholders to receive payment for their shares
pursuant to Statute, the notice of such meeting shall include a statement of
that purpose and to that effect. If mailed, such notice shall be directed to
each such shareholder at his address, as it appears on the records of the
shareholders of the Corporation, unless he shall have previously filed with the
Secretary of the Corporation a written request that notices intended for him be
mailed to the address designated in such request.
(b) Notice of any meeting need not be given to any person who may become a
shareholder of record after the mailing of such notice and prior to the meeting,
or to any shareholder who attends such meeting, in person or by proxy, or to any
shareholder who, in person or by proxy, submits a signed waiver of notice either
before or after such meeting. Notice of any adjourned meeting of shareholders
need not be given, unless otherwise required by statute.
Section 5 - Quorum:
- ------------------
(a) Except as otherwise provided herein, or by statute, or in the Certificate of
Incorporation (such Certificate and any amendments thereof being hereinafter
collectively referred to as the "Certificate of Incorporation"), at all meetings
of shareholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of shareholders holding of record a majority of
the total number of shares of the Corporation then issued and outstanding and
entitled to vote, shall be necessary and
By-Laws - 2
<PAGE>
sufficient to constitute a quorum for the transaction of any business. The
withdrawal of any shareholder after the commencement of a meeting shall have no
effect on the existence of a quorum, after a quorum has been established at such
meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
shareholders, the shareholders, by a majority of the votes cast by the holders
of shares entitled to vote thereon, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
at the meeting as originally called if a quorum had been present.
Section 6 - Voting:
- ------------------
(a) Except as otherwise provided by statute or by the Certificate of
Incorporation, any corporate action, other than the election of directors to be
taken by vote of the shareholders, shall be authorized by a majority of votes
cast at a meeting of shareholders by the holders of shares entitled to vote
thereon.
(b) Except as otherwise provided by statute or by the Certificate of
Incorporation, at each meeting of shareholders, each holder of record of stock
of the Corporation entitled to vote thereat, shall be entitled to one vote for
each share of stock registered in his name on the books of the Corporation.
(c) Each shareholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the shareholder
himself, or by his attorney-in-fact thereunto duly authorized in writing. No
proxy shall be valid after the expiration of eleven months from the date of its
execution, unless the persons executing it shall have specified therein the
length of time it is to continue in force. Such instrument shall be exhibited to
the Secretary at the meeting and shall be filed with the records of the
Corporation.
By-Laws - 3
<PAGE>
(d) Any resolution in writing, signed by all of the shareholders entitled to
vote thereon, shall be and constitute action by such shareholders to the effect
therein expressed, with the same force and effect as if the same had been duly
passed by unanimous vote at a duly called meeting of shareholders and such
resolution so signed shall be inserted in the Minute Book of the Corporation
under its proper date.
ARTICLE III - BOARD OF DIRECTORS
--------------------------------
Section 1 - Number, Election and Term of Office:
- -----------------------------------------------
(a) The number of the directors of the Corporation shall be ( ), unless
and until otherwise determined by vote of a majority of the entire Board of
Directors. The number of Directors shall not be less than three, unless all of
the outstanding shares are owned beneficially and of record by less than three
shareholders, in which event the number of directors shall not be less than the
number of shareholders permitted by statute.
(b) Except as may otherwise be provided herein or in the Certificate of
Incorporation, the members of the Board of Directors of the Corporation, who
need not be shareholders, shall be elected by a majority of the votes cast at a
meeting of shareholders, by the holders of shares, present in person or by
proxy, entitled to vote in the election.
(c) Each director shall hold office until the annual meeting of the shareholders
next succeeding his election, and until his successor is elected and qualified,
or until his prior death, resignation or removal.
Section 2 - Duties and Powers:
- -----------------------------
The Board of Directors shall be responsible for the control and management of
the affairs, property and interests of the Corporation, and may exercise all
powers of the Corporation, except as are in the Certificate of Incorporation or
by statute expressly conferred upon or reserved to the shareholders.
Section 3 - Annual and Regular Meetings; Notice:
- -----------------------------------------------
(a) A regular annual meeting of the Board of Directors shall be held immediately
following the annual meeting of the shareholders, at the place of such annual
meeting of shareholders.
By-Laws - 4
<PAGE>
(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each director who shall not have been present at the meeting at which such
action was taken within the time limited, and in the manner set forth in
paragraph (b) of Section 4 of this Article III, with respect to special
meetings, unless such notice shall be waived in the manner set forth in
paragraph (c) of such Section 4.
Section 4 - Special Meetings; Notice:
- ------------------------------------
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meeting shall be
mailed directly to each director, addressed to him at his residence or usual
place of business, at least two (2) days before the day on which the meeting is
to be held, or shall be sent to him at such place by telegram, radio or cable,
or shall be delivered to him personally or given to him orally, not later than
the day before the day on which the meeting is to be held. A notice, or waiver
of notice, except as required by Section 8 of this Article III, need not specify
the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him, or who submits a signed waiver of
notice, whether before or after the meeting. Notice of any adjourned meeting
shall not be required to be given.
Section 5 - Chairman:
- --------------------
At all meetings of the Board of Directors the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be absent,
then the President shall preside, and in his absence, a Chairman chosen by the
directors shall preside.
By-Laws - 5
<PAGE>
Section 6 - Quorum and Adjournments:
- -----------------------------------
(a) At all meetings of the Board of Directors, the presence of a majority of the
entire Board shall be necessary and sufficient to constitute a quorum for the
transaction of business, except as otherwise provided by law, by the Certificate
of Incorporation, or by these By-Laws.
(b) A majority of the directors present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.
Section 7 - Manner of Acting:
- ----------------------------
(a) At all meetings of the Board of Directors, each director present shall have
one vote, irrespective of the number of shares of stock, if any, which he may
hold.
(b) Except as otherwise provided by statute, by the Certificate of
Incorporation, or these By-Laws, the action of a majority of the directors
present at any meeting at which a quorum is present shall be the act of the
Board of Directors. Any action authorized in writing, by all of the directors
entitled to vote thereon and filed with the minutes of the corporation shall be
the act of the Board of Directors with the same force and effect as if the same
had been passed by unanimous vote at a duly called meeting of the Board.
Section 8 - Vacancies:
- ---------------------
Any vacancy in the Board of Directors occurring by reason of an increase in the
number of directors, or by reason of the death, resignation, disqualification,
removal (unless a vacancy created by the removal of a director by the
shareholders shall be filled by the shareholders at the meeting at which the
removal was effected) or inability to act of any director, or otherwise, shall
be filled for the unexpired portion of the term by a majority vote of the
remaining directors, though less than a quorum, at any regular meeting or
special meeting of the Board of Directors called for that purpose.
Section 9 - Resignation:
- -----------------------
Any director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
By-Laws - 6
<PAGE>
Section 10 - Removal:
- --------------------
Any director may be removed with or without cause at any time by the affirmative
vote of shareholders holding of record in the aggregate at least a majority of
the outstanding shares of the Corporation at a special meeting of the
shareholders called for that purpose, and may be removed for caused by action of
the Board.
Section 11 - Salary:
- -------------------
No stated salary shall be paid to directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
Section 12 - Contracts:
- ----------------------
(a) No contract or other transaction between this Corporation and any other
Corporation shall be impaired, affected or invalidated, nor shall any director
be liable in any way by reason of the fact that any one or more of the directors
of this Corporation is or are interested in, or is a director or officer, or are
directors or officers of such other Corporation, provided that such facts are
disclosed or made known to the Board of Directors.
(b) Any director, personally and individually, may be a party to or may be
interested in any contract or transaction of this Corporation, and no director
shall be liable in any way by reason of such interest, provided that the fact of
such interest be disclosed or made known to the Board of Directors, and provided
that the Board of Directors shall authorize, approve or ratify such contract or
transaction by the vote (not counting the vote of any such director) of a
majority of a quorum, notwithstanding the presence of any such director at the
meeting at which such action is taken. Such director or directors may be counted
in determining the presence of a quorum at such meeting. This Section shall not
By-Laws - 7
<PAGE>
be construed to impair or invalidate or in any way affect any contract or other
transaction which would otherwise be valid under the law (common, statutory or
otherwise) applicable thereto.
Section 13 - Committees:
- -----------------------
The Board of Directors, by resolution adopted by a majority of the entire Board,
may from time to time designate from among its members an executive committee
and such other committees, and alternate members thereof, as they deem
desirable, each consisting of three or more members, with such powers and
authority (to the extent permitted by law) as may be provided in such
resolution. Each such committee shall serve at the pleasure of the Board.
ARTICLE IV - OFFICERS
---------------------
Section 1 - Number, Qualifications, Election
- -------------------------------------------
and Term of Office:
------------------
(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, and such other officers, including a Chairman of the Board of
Directors, and one or more Vice Presidents, as the Board of Directors may from
time to time deem advisable. Any officer other than the Chairman of the Board of
Directors may be, but is not required to be, a director of the Corporation. Any
two or more offices may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
shareholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his election, and until his successor shall have been
elected and qualified, or until his death, resignation or removal.
Section 2 - Resignation:
- -----------------------
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or by such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
By-Laws - 8
<PAGE>
Section 3 - Removal:
- -------------------
Any officer may be removed, either with or without cause, and a successor
elected by a majority of the Board of Directors at any time.
Section 4 - Vacancies:
- ---------------------
A vacancy in any office by reason of death, resignation, inability to act,
disqualification, or any other cause, may at any time be filled for the
unexpired portion of the term by the Board of Directors.
Section 5 - Duties of Officers:
- ------------------------------
Officers of the Corporation shall, unless otherwise provided by the Board of
Directors, each have such powers and duties as generally pertain to their
respective offices as well as such powers and duties as may be set forth in
these By-laws, or may from time to time be specifically conferred or imposed by
the Board of Directors. The President shall be the chief executive officer of
the Corporation.
Section 6 - Sureties and Bonds:
- ------------------------------
In case the Board of Directors shall so require, any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his duties to the Corporation, including
responsibility for negligence and for the accounting for all property, funds or
securities of the Corporation which may come into his hands.
Section 7 - Shares of Other Corporations:
- ----------------------------------------
Whenever the Corporation is the holder of shares of any other Corporation, any
right or power of the Corporation as such shareholder (including the attendance,
acting and voting at shareholders' meetings and execution of waivers, consents,
proxies or other instruments) may be exercised on behalf of the Corporation by
the President, any Vice President, or such other person as the Board of
Directors may authorize.
By-Laws - 9
<PAGE>
ARTICLE V - SHARES OF STOCK
---------------------------
Section 1 - Certificate of Stock:
- --------------------------------
(a) The certificates representing shares of the Corporation shall be in such
form as shall be adopted by the Board of Directors, and shall be numbered and
registered in the order issued. They shall bear the holder's name and the number
of shares, and shall be signed by (i) the Chairman of the Board or the President
or a Vice President, and (ii) the Secretary or Treasurer, or any Assistant
Secretary or Assistant Treasurer, and shall bear the corporate seal.
(b) No certificate representing shares shall be issued until the full amount of
consideration therefor has been paid, except as otherwise permitted by law.
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share which shall entitle the holder
to exercise voting rights, receive dividends and participate in liquidating
distributions, in proportion to the fractional holdings; or it may authorize the
payment in cash of the fair value of fractions of a share as of the time when
those entitled to receive such fractions are determined; or it may authorize the
issuance, subject to such conditions as may be permitted by law, of scrip in
registered or bearer form over the signature of an officer or agent of the
Corporation, exchangeable as therein provided for full shares, but such scrip
shall not entitle the holder to any rights of a shareholder, except as therein
provided.
Section 2 - Lost or Destroyed Certificates:
- ------------------------------------------
The holder of any certificate representing shares of the Corporation shall
immediately notify the Corporation of any loss or destruction of the certificate
representing the same. The Corporation may issue a new certificate in the place
of any certificate theretofore issued by it, alleged to have been lost or
destroyed. On production of such evidence of loss or destruction as the Board of
Directors in its discretion may require, the Board of Directors may, in its
discretion, require the owner of the lost or destroyed certificate, or his legal
representatives, to give the Corporation a bond in such sum as the Board may
direct, and with such surety or sureties as may be satisfactory to the Board, to
indemnify the Corporation against any claims, loss, liability or damage it may
suffer on account of the issuance of the new certificate. A new certificate may
be issued without requiring any such evidence or bond when, in the judgment of
the Board of Directors, it is proper so to do.
By-Laws - 10
<PAGE>
Section 3 - Transfers of Shares:
- -------------------------------
(a) Transfers of shares of the Corporation shall be made on the share records of
the Corporation only by the holder of record thereof, in person or by his duly
authorized attorney, upon surrender for cancellation of the certificate or
certificates representing such shares, with an assignment or power of transfer
endorsed thereon or delivered therewith, duly executed, with such proof of the
authenticity of the signature and of authority to transfer and of payment of
transfer taxes as the Corporation or its agents may require.
(b) The Corporation shall be entitled to treat the holder of record of any share
or shares as the absolute owner thereof for all purposes and, accordingly, shall
not be bound to recognize any legal, 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, except as otherwise expressly
provided by law.
Section 4 - Record Date:
- -----------------------
In lieu of closing the share records of the Corporation, the Board of Directors
may fix, in advance, a date not exceeding fifty days, nor less than ten days, as
the record date for the determination of shareholders entitled to receive notice
of, or to vote at, any meeting of shareholders, or to consent to any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividends, or allotment of any rights, or for the purpose
of any other action. If no record date is fixed, the record date for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if no notice is given, the day on which the
meeting is held; the record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the resolution of
the directors relating thereto is adopted. When a determination of shareholders
of record entitled to notice of or to vote at any meeting of shareholders has
been made as provided for herein, such determination shall apply to any
adjournment thereof, unless the directors fix a new record date for the
adjourned meeting.
By-Laws - 11
<PAGE>
ARTICLE VI - DIVIDENDS
----------------------
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amounts, and at such time or times as the
Board of Directors may determine.
ARTICLE VII - FISCAL YEAR
-------------------------
The fiscal year of the Corporation shall be fixed by the Board of Directors from
time to time, subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
-----------------------------
The corporate seal, if any, shall be in such form as shall be approved from time
to time by the Board of Directors.
ARTICLE IX - AMENDMENTS
-----------------------
Section 1 - By Shareholders:
- ---------------------------
All by-laws of the Corporation shall be subject to alteration or repeal, and new
by-laws may be made, by the affirmative vote of shareholders holding of record
in the aggregate at least a majority of the outstanding shares entitled to vote
in the election of directors at any annual or special meeting of shareholders,
provided that the notice or waiver of notice of such meeting shall have
summarized or set forth in full therein, the proposed amendment.
Section 2 - By Directors:
- ------------------------
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, by-laws of the Corporation; provided, however, that the
shareholders entitled to vote with respect thereto as in this Article IX above-
provided may alter, amend or repeal by-laws made by the Board of Directors,
except that the Board of Directors shall have no power to change the quorum for
meetings of shareholders or of the Board of Directors, or to change any
provisions of the by-laws with respect to the removal of directors or the
filling of vacancies in the Board resulting from the removal by the
shareholders. If any by-law regulating an impending election of directors is
adopted, amended or repealed by the Board of Directors, there shall be set forth
in the notice of the next meeting of shareholders for the election of directors,
the by-law so adopted, amended or repealed, together with a concise statement of
the changes made.
By-Laws - 12
<PAGE>
ARTICLE X - INDEMNITY
---------------------
(a) Any person made a party to any action, suit or proceeding, by reason of the
fact that he, his testator or intestate representative is or was a director,
officer or employee of the Corporation, or of any Corporation in which he served
as such at the request of the Corporation, shall be indemnified by the
Corporation against the reasonable expenses, including attorney's fees, actually
and necessarily incurred by him in connection with the defense of such action,
suit or proceedings, or in connection with any appeal therein that such officer,
director or employee is liable for negligence or misconduct in the performance
of his duties.
(b) The foregoing right of indemnification shall not be deemed exclusive of any
other rights to which any officer or director or employee may be entitled apart
from the provisions of this section.
(c) The amount of indemnity to which any officer or any director may be entitled
shall be fixed by the Board of Directors, except that in any case where there is
no disinterested majority of the Board available, the amount shall be fixed by
arbitration pursuant to then existing rules of the American Arbitration
Association.
The undersigned Incorporator certifies that he has adopted the foregoing
by-laws as the first by-laws of the Corporation.
Dated:
-----------------
---------------------------------------
Incorporator
By-Laws - 13
<PAGE>
EXHIBIT 3.21
(Profit Domestic Corporation)
ARTICLES OF INCORPORATION
These Articles of Incorporation are signed by the incorporator(s) for the
purpose of forming a profit corporation pursuant to the provisions of Act 284,
Public Acts of 1972, as amended, as follows:
ARTICLE I.
The name of the corporation is DUO-FORM OF MICHIGAN, INC.
-------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE II.
The purpose or purposes for which the corporation is organized is to engage
in any activity within the purposes for which corporations may be organized
under the Business Corporation Act of Michigan.
ARTICLE III.
The total authorized capital stock is:
(Preferred shs. Par value $ )
(1) ( ------------------- ----------)
(Common shs. 500 Par value $100.00 ) per share
( ------------------- ---------- )
(Preferred )
and/or shs. of (2) ( --------------) no par value, (see part 3 of
(Common ) instructions)
( --------------)
(3) A statement of all or any of the relative rights, preferences and
limitations of the shares of each class is as follows:
Shares of capital stock of this corporation may be issued by the
corporation for such an amount of consideration as may be fixed from
time to time by the Board of Directors and may be paid in whole or in
part, in money, in other property, tangible or intangible, or in labor
actually performed for or services actually rendered to the corporation.
The shares of the capital stock of this corporation as originally
authorized shall be issued pursuant and subject to Section 1244 of the
Internal Revenue Code of 1954, as amended.
- -------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
ARTICLE IV.
The address of the initial registered office is:
19 South Third Street, Niles Michigan 49120
- -------------------------------------------------------, -------------
(No. and Street) (Town or City) (Zip Code)
The mailing address of the initial registered office is (need not be
completed unless different from the above address):
19 South Third Street, P.O. Box 360, Niles Michigan 49120
- -------------------------------------------------------, --------------
(No. and Street) (Town or City) (Zip Code)
The name of the initial resident agent at the registered office is:
James L. Mollison
- --------------------------------------------------------------------------------
ARTICLE V.
The names(s) and address(es) of the incorporators(s) are as follows:
Name Residence or Business Address
---- -----------------------------
Albert S. Brodhead R.R. #1, Dowagiac, Michigan 49047
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Philip Beardslee 110 S. East Street
- --------------------------------------------------------------------------------
Cassopolis, Michigan 49031
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ARTICLE VI.
OPTIONAL (Delete Article VI if not applicable.)
When a compromise or arrangement or a plan of reorganization of this
corporation is proposed between this corporation and its creditors or any class
of them or between this corporation and its shareholders or any class of them, a
court of equity jurisdiction within the state, on application of this
corporation or of a creditor or shareholder thereof, or on application of a
receiver appointed for the corporation, may order a meeting of the creditors or
class of creditors or of the shareholders or class of shareholders to be
affected by the proposed compromise or arrangement or reorganization, to be
summoned in such manner as the court directs. If a majority in number
representing 3/4 in value of the creditors or class of creditors, or of the
shareholders or class of shareholders to be affected by the proposed compromise
or arrangement or a reorganization, agree to a compromise or arrangement or a
reorganization of this corporation as a consequence of the compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, or on all the shareholders or class of
shareholders and also on this corporation.
- -------------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
ARTICLE VII.
(Here insert any desired additional provisions authorized by the Act)
Effective date of corporation - upon filing
I (We), the incorporator(s), sign my (our) name(s) this 21st day of May, 1976
---- --- ----
/s/ ALBERT S. BRODHEAD
- --------------------------------- ----------------------------------
Albert S. Brodhead
/s/ PHILIP BEARDSLEE
- --------------------------------- ----------------------------------
Philip Beardslee
- --------------------------------- ----------------------------------
- --------------------------------- ----------------------------------
- --------------------------------- ----------------------------------
(See Instructions on Reverse Side)
- -------------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
(Please do not write in spaces below - for Department use)
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
Date Received
- ----------------------------
May 25 1976
- ---------------------------- FILED
Michigan Department of Commerce
- ----------------------------
May 27 1976
- ----------------------------
[SIGNATURE ILLEGIBLE]
- ---------------------------- Director
- ----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INFORMATION AND INSTRUCTIONS
----------------------------
Articles of Incorporation - Profit Domestic Corporations
1. Article 1 - The corporate name of a domestic profit corporation is required
to contain one of the following words or abbreviations: "Corporation",
"Company", "Incorporated", "Limited", "Corp.", "Co.", "Inc." or "Ltd."
2. Article II may state, in general terms, the character of the particular
business to be carried on. Under section 202(b) of the law, it is a
sufficient compliance to state substantially, alone or with specifically
enumerated purposes, that the corporation may engage in any activity within
the purposes for which corporations may be organized under the Business
Corporation Act. The law requires, however, that educational corporations
must state their specific purposes.
3. Article III - The law requires the incorporators of a domestic corporation
having shares without par value to submit in writing the amount of
consideration proposed to be received for each share which shall be
allocated to stated capital.
4. Article V - The law requires one or more incorporators.
The addresses should include a street number and name (or other
designation), in addition to the name of the city and state.
5. The duration of the corporation should be stated in the Articles only if the
duration is not perpetual.
6. The Articles must be signed in ink by each incorporator. The names of the
incorporators as set out in Article V should correspond with the signatures.
7. One original copy of the Articles is required. A true copy will be prepared
by the Corporation and Securities Bureau and returned to the person
submitting the Articles for filing.
8. An effective date, not later than 90 days subsequent to the date of filing,
may be stated in the Articles of Incorporation.
9, FEES: Filing Fee.....................................................$10.00
Franchise Fee - 1/2 mill one each dollar of authorized capital
stock, with a minimum franchise fee of.........................$25.00
10. Mail Articles of Incorporation and fees to:
Michigan Department of Commerce
Corporation and Securities Bureau
Corporation Division
P.O. Drawer C
Lansing, Michigan 48904
- -------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
CAS-113 (Rev. 2-81)
(Please do not write in spaces below - for Department use)
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
Date Received
FILED ---------------------
OCT 9 1981 SEP 29 1981
Administrator ---------------------
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau ---------------------
- --------------------------------------------------------------------------------
CERTIFICATE OF CHANGE OF REGISTERED OFFICE AND/OR CHANGE OF RESIDENT AGENT
For Use by Domestic and Foreign Corporations
(See Instructions on Reverse Side)
-----------------------------------------------
INSERT CORPORATION NUMBER 037-815
-----------------------------------------------
This certificate is executed in accordance with the provisions of Section
242 of Act 284, Public Acts of 1972, as amended, as follows:
- --------------------------------------------------------------------------------
1. The name of the corporation is DUO-FORM OF MICHIGAN, INC.
---------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. The address of its registered office as currently on file with the
Corporation and Securities Bureau is:
(See Part 2 of instructions on reverse side)
19 South Third Street Niles , Michigan 49120
- ---------------------------------------------------- -----------------
(No. and Street) (Town or City) (Zip Code)
The mailing address of its registered office is: (Need not be completed
unless different from the above address, see Part 3 of instructions)
19 South Third Street, P.O. Box 360, Niles , Michigan 49120
- ---------------------------------------------------- -----------------
(P.O. Box) (Town or City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. (The following is to be completed if the address of the registered office is
changed.)
The address of the registered office is changed to: (See Part 3 of
instructions)
24 North St. Joseph Avenue Niles , Michigan 49120
- ---------------------------------------------------- -----------------
(No. and Street) (Town or City) (Zip Code)
The mailing address of the registered office is changed to: (Need not be
completed unless different from the above address, see Part 3 of
instructions)
24 North St. Joseph Avenue Niles , Michigan 49120
- ---------------------------------------------------- -----------------
(P.O. Box) (Town or City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. The name of the resident agent as currently on file with the Corporation and
Securities Bureau is
(See Part 4 of instructions) James J. Mollison
- --------------------------------------------------------------------------------
5. (The following is to be completed if the resident agent is changed.)
The name of the successor resident agent is
----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. The corporation further states that the address of its registered office and
the address of the business office of its resident agent, as changed, are
identical.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. The changes designated above were authorized by resolution duly adopted by
its board of directors or trustees.
- --------------------------------------------------------------------------------
Signed this 28th day of September , 19 81 .
--------- ------------------- ----
By /s/ ALBERT S. BRODHEAD
------------------------------------------------------
(Signature of President, Vice-President, Secretary,
Assistant Secretary, Chairperson or Vice-Chairperson)
Albert S. Brodhead, President
------------------------------------------------------
(Type or Print Name and Title)
- ----------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
CAS-113 (Rev. 2-81)
(Please do not write in spaces below - for Department use)
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
Date Received
FILED ---------------------
MAY 20 1983 MAY 06 1983
Administrator ---------------------
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau ---------------------
- --------------------------------------------------------------------------------
CERTIFICATE OF CHANGE OR REGISTERED OFFICE AND/OR CHANGE OF RESIDENT AGENT
For Use by Domestic and Foreign Corporations
(See Instructions on Reverse Side)
-----------------------------------------------
INSERT CORPORATION NUMBER 037-815
-----------------------------------------------
This certificate is executed in accordance with the provisions of Section
242 of Act 284, Public Acts of 1972, as amended, as follows:
- --------------------------------------------------------------------------------
1. The name of the corporation is DUO-FORM OF MICHIGAN, INC.
---------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. The address of its registered office as currently on file with the
Corporation and Securities Bureau is:
(See Part 2 of instructions on reverse side)
24 North St. Joseph Avenue Niles , Michigan 49120
- ---------------------------------------------------- -----------------
(No. and Street) (Town or City) (Zip Code)
The mailing address of its registered office is: (Need not be completed
unless different from the above address, see Part 3 of instructions)
, Michigan
- ---------------------------------------------------- -----------------
(P.O. Box) (Town or City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. (The following is to be completed if the address of the registered office is
changed.)
The address of the registered office is changed to: (See Part 3 of
instructions)
69836 Kraus Road, Edwardsburg, , Michigan 49112
- ---------------------------------------------------- -----------------
(No. and Street) (Town or City) (Zip Code)
The mailing address of the registered office is changed to: (Need not be
completed unless different from the above address, see Part 3 of
instructions)
, Michigan
- ---------------------------------------------------- -----------------
(P.O. Box) (Town or City) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. The name of the resident agent as currently on file with the Corporation and
Securities Bureau is
(See Part 4 of instructions) James J. Mollison
- --------------------------------------------------------------------------------
5. (The following is to be completed if the resident agent is changed.)
The name of the successor resident agent is Albert S. Brodhead
----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. The corporation further states that the address of its registered office and
the address of the business office of its resident agent, as changed, are
identical.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7. The changes designated above were authorized by resolution duly adopted by
its board of directors or trustees.
- --------------------------------------------------------------------------------
Signed this 4th day of May , 19 83 .
--------- ------------------- ----
By /s/ ALBERT S. BRODHEAD
------------------------------------------------------
(Signature of President, Vice-President, Secretary,
Assistant Secretary, Chairperson or Vice-Chairperson)
Albert S. Brodhead, President
------------------------------------------------------
(Type or Print Name and Title)
- -------------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
C&S S41 (10/89) 902B#4674 0516 ORG&FI $10.00
- --------------------------------------------------------------------------------
MICHIGAN DEPARTMENT OF COMMERCE - CORPORATION AND SECURITIES BUREAU
- --------------------------------------------------------------------------------
(FOR BUREAU USE ONLY) Date Received
FILED ---------------------
MAY 21 1990 MAY 15 1990
Administrator ---------------------
MICHIGAN DEPARTMENT OF COMMERCE
Corporation & Securities Bureau ---------------------
---------------------
EXPIRATION DATE: December 31, 1995
--
- --------------------------------------------------------------------------------
CERTIFICATE OF ASSUMED NAME
For Use by Corporations And Limited Partnerships
(Please read information and instructions on reverse side)
Pursuant to the provisions of Act 284, Public Acts of 1972. (profit
corporations), Act 162, Public Acts of 1982 (nonprofit corporations), or Act
213, Public Acts of 1982 (limited partnerships), the corporation or limited
partnership in item one below executes the following Certificate:
- --------------------------------------------------------------------------------
1. The true name of the corporation or limited partnership is:
DUO-FORM OF MICHIGAN, INC.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. The identification number assigned by the Bureau is: 037-815
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. The location of the corporate registered office or the office at which the
limited partnership records are maintained is:
69836 Kraus Road, Edwardsburg, Michigan 49112
- --------------------------------------------------------------------------------
(Street Address) (City) (State) (Zip Code)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
4. The assumed name under which business is to be transacted is:
NEW ERA BATH
- --------------------------------------------------------------------------------
Signed this 30th day of April , 19 90
--------- ------------------- ----
By /s/ ALBERT S. BRODHEAD
------------------------------------------------------
Albert S. Brodhead, President
------------------------------------------------------
(Type or Print Name) (Type or Print Title)
------------------------------------------------------
(Limited Partnerships Only-Indicate Name of General
Partner if a corporation or other entity)
- ---------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
NOTE: THE FOLLOWING ANNUAL REPORT HAS BEEN INCLUDED WITHIN THE RECORD FOR THIS
CORPORATION DUE TO THE FILING OF A CHANGE OF REGISTERED OFFICE AND/OR RESIDENT
AGENT ON THE ANNUAL REPORT. THE PRESENCE OF THIS REPORT IN NO WAY IMPLIES THAT
THE REPORT ITSELF, OTHER THAN THE INFORMATION RELATED TO THE CHANGE OF
REGISTERED OFFICE AND/OR RESIDENT AGENT, HAS BEEN ACCEPTED BY THE CORPORATION
AND SECURITIES BUREAU.
- ---------------------------------
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
C&S 2600 (10-89) FOR BUREAU USE ONLY
MICHIGAN DEPARTMENT 904E#3893 0601 P-M8R $15.00
OF COMMERCE 904E#3893 0601 ORG&F1 $5.00
1990 MICHIGAN ANNUAL REPORT - PROFIT CORPORATIONS
(Please read instructions before completing form)
This report shall be filed by all profit corporations no later than May 15,
1990 showing the corporate condition at the close of business on December
31 or upon the date of the close of the latest fiscal year next preceding
the time for filing. ONLY those corporations incorporated or admitted after
December 31, 1989 and before May 15, 1990 are exempt from filing. The
report is required in accordance with the provisions of Section 911, Act
284, Public Acts of 1972. Penalties may be assessed under the Act for
failure to file.
<TABLE>
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
This Report Must Report of Condition on Corporation 037815
be Filed before May 16, 1990 December 31, 1989 or Number
----------
- -----------------------------------------------------------------------------------------------
</TABLE>
1. Corporate Name - COMPLETE 10c. IF THE PREPRINTED ADDRESS IN THIS ITEM HAS
CHANGED.
- --------------------------------------------------------------------------------
DUO-FORM OF MICHIGAN, INC. 7
69836 KRAUS ROAD
EDWARDSBURG, MICHIGAN 49112 8
9
- --------------------------------------------------------------------------------
2. Resident Agent - do not alter preprinted information in this item or item 3.
ALBERT S. BRODHEAD
- --------------------------------------------------------------------------------
3. Registered Office Address in Michigan - No., Street, City, Zip
69836 KRAUS RD.
EDWARDSBURG, MI 49112
- --------------------------------------------------------------------------------
4. Federal Employer No.
38-2111623
- --------------------------------------------------------------------------------
5. Term of Existence
PERPETUAL
- --------------------------------------------------------------------------------
6. Incorporation Date
05/27/1976
- --------------------------------------------------------------------------------
7. State of Incorporation
MI
- --------------------------------------------------------------------------------
8. Date of Admittance
(Foreign Corp.)
- --------------------------------------------------------------------------------
9. Act Under Which Incorporated (If other
than 1931, P.A. 327 or 1972, P.A. 284)
- --------------------------------------------------------------------------------
10. COMPLETE THIS SECTION ONLY IF THE RESIDENT AGENT IN ITEM 2 OR THE REGISTERED
OFFICE IN ITEM 3 HAS CHANGED.
- --------------------------------------------------------------------------------
a. The name of the successor resident agent is: RICHARD E. CLARK
--------------------------------
FILED BY DEPARTMENT JUN 29 '90
b. The address of the registered office is changed to:
69836 KRAUS ROAD EDWARDSBURG , Michigan 49112
- --------------------------------------------------- ------------------
(Street Address) (City) (Zip Code)
c. The mailing address of the registered office if different than above is:
P.O. DRAWER C EDWARDSBURG , Michigan 49112
- --------------------------------------------------- ------------------
(Address) (City) (Zip Code)
ADD $5.00 TO THE $15.00 ANNUAL REPORT FILING FEE IF THIS SECTION IS COMPLETED
- --------------------------------------------------------------------------------
11. Corporate Stock Report - Total Authorized Shares (not merely outstanding)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
a. Type Of Stock No. of Shares Authorized Total Authorized Amount Amount
Capital Subtracted Paid-in
<S> <C> <C> <C> <C>
COMMON 500 $50000 $0 $10000
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
</TABLE>
12. The corporation states that the address of its registered office and the
address of the business office of its resident agent are identical. Any
changes were authorized by resolution duly adopted by its board of
directors, except when filed by the resident agent to change the address of
the registered office.
Signed this 15 day of May , 19 90 .
----------- ---------- ------
By /s/ RICH CLARK
--------------------------------------------------
COMPLETE (SIGNATURE OF AUTHORIZED OFFICER OR AGENT)
ALL ITEMS
MAY 16 1990 RICH CLARK, PRESIDENT
----------------------------------------------------
(Type or Print Name and Title)
* If item 10 is completed, this report must be signed
by the president, vice-president, chairperson, vice-
chairperson, secretary or assistant secretary of the
corporation. If only the registered office address
is changed, it may be signed by the resident agent.
SEAL APPEARS ONLY ON ORIGINAL
<PAGE>
EXHIBIT 3.22
DUO-FORM OF MICHIGAN, INC.
BY-LAWS
===============================================================================
ARTICLE I
---------
CAPITAL STOCK
-------------
SEC. 1. CAPITAL STOCK. The Capital of this Corporation shall be divided
into 500 common shares of $100 par value.
SEC. 2. CERTIFICATE OF SHARES. The Certificates for shares of the Capital
Stock of this Company shall be in such form, not inconsistent with the Articles
of Incorporation, as shall be approved by the Board of Directors. The
Certificates shall be signed by any of the following persons: The Chairman of
the Board; Vice-Chairman of the Board; President; Vice-President; and by any of
the following persons: The Treasurer; Assistant Treasurer; Secretary or
Assistant Secretary.
SEC. 3. TRANSFER OF SHARES. Shares of the Capital Stock of the Company
shall be transferred by endorsement of the certificates representing said shares
by the registered holder thereof or his attorney, and its surrender to the
Secretary for cancellation. Whereupon the Secretary shall issue to the
transferee or transferees, as specified by the endorsement upon the surrendered
certificate, new certificates for a like number of shares. Transfers shall be
made only upon the books of the Company and upon said surrender and
cancellation; and shall entitle the transferee to all the privileges, rights and
interests of a shareholder of this Company. Transfers limited to Agreement dated
May 21, 1976.
SEC. 4. SHAREHOLDERS ENTITLED TO VOTE AND RECEIVE DIVIDENDS. The Board of
Directors shall have the right to fix a date as the record date for the
determination of the shareholders entitled a) to vote at any meeting of
shareholders, or b) to receive any dividend or exercise any right; provided that
said record date shall not be more than sixty days or less than ten days before
the date of the said meeting, nor more than sixty days prior to the date for the
payment of said dividend or for the exercise of said right.
SEC. 5. LIEN. The Corporation shall have a security interest, subject to
the provisions of the Michigan Uniform Commercial Code, in all stock to secure
the payment of any indebtedness owing the corporation by any shareholder. The
said shareholder shall deliver his stock to the Corporation at the same time
that the debt is incurred. The Corporation shall return the said shares when the
indebtedness is discharged.
SEC. 6. LOST CERTIFICATES. In case of the loss of any certificate of shares
of stock, upon due proof by the registered holder or his representatives, by
affidavit of such loss, the Secretary shall issue a duplicate certificate in its
place, upon the corporation being fully indemnified therefor.
<PAGE>
BY-LAWS (Continued)
===============================================================================
SEC. 7. DIVIDENDS. The Board of Directors, in its discretion, from time to
time, may declare dividends upon the Capital Stock from the surplus.
SEC. 8. FISCAL YEAR. The fiscal year of the Company shall end on the 31st
day of December in each year.
SEC. 9. CORPORATE SEAL. The Board of Directors shall provide a suitable
corporate seal, which seal shall be in charge of the Secretary, and shall be
used by him.
ARTICLE II
----------
SHAREHOLDERS' MEETINGS
----------------------
SEC. 1. ANNUAL MEETING. Meetings of the Shareholders of the Company shall
be held annually at the registered office of the Company at 8:00 o'clock, A.M.
on the l5th day of March, of each year not a legal holiday, and if a legal
holiday, then on the day following for the purpose of electing directors and for
the transaction of such other-business as may be brought before the meeting.
SEC. 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the Board of Directors or by any of the Officers of the Corporation.
Special meetings of the Corporation may be called by any shareholder selected to
call said meeting by shareholder's of record owning a majority in amount of the
voting capital stock of the company. Attendance of 100 percent of shareholders
shall be required for special meetings.
SEC. 3. NOTICE. Written notice of the time, place and purposes of a meeting
of shareholders shall be given, either personally or by mail, to each
shareholder of record entitled to vote at the meeting, not less than ten nor
more than sixty days before the date of the meeting. Attendance of a person at a
meeting of shareholders, in person or by proxy, constitutes a waiver of the
notice of the meeting, except when a shareholder attends a meeting 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.
SEC. 4. QUORUM. The holder of shares entitled to cast a majority of the
votes at a meeting constitute a quorum at the said meeting. The shareholders
present in person, or by proxy, at such meeting may continue to do business
until adjournment notwithstanding the withdrawal of enough shareholders to leave
less than a quorum. Whether or not a quorum is present, the meeting may be
adjourned by a vote of the shares present.
SEC. 5. VOTING. Each outstanding share of stock is entitled to one vote on
each matter submitted to a vote. The votes shall be cast orally unless the
<PAGE>
BY-LAWS (Continued)
===============================================================================
holders of a majority of the shares present and entitled to vote at said meeting
shall determine that the vote shall be in writing; provided that the vote for
the Directors shall be in writing; and the Directors shall be voted for at one
time as a group on one ballot; and shall not be voted for individually one at a
time. Any shareholder may vote in person or by proxy provided that the proxy
shall be signed by the shareholder or his authorized agent or representative.
Any proxy shall not be valid after the expiration of three years from its date
unless otherwise provided in the proxy.
SEC. 6. INSPECTORS. If a shareholder present in person or by proxy at a
meeting and entitled to vote at said meeting requests the appointment of
inspectors, the presiding officer at said meeting shall appoint one or more
inspectors who shall determine the number of shares outstanding; and the voting
power of each; the shares represented at the meeting; the existence of a quorum,
the validity and effect of proxies; and said inspector or inspectors shall
receive votes, ballots or consents; hear and determine challenges and questions
arising in connection with the right to vote; count and tabulate votes; ballots
or consents; determine the result; and do such acts as are proper to conduct the
election or vote with fairness to all shareholders.
SEC. 7. ORGANIZATION. The President shall call meetings of the shareholders
to order and shall act as Chairman of such meetings, unless otherwise determined
by the holders of a majority of all the shares of the capital stock issued
outstanding, present in person or by proxy. The Secretary of the Company shall
act as Secretary of all meetings of the Company, but in the absence of the
Secretary at any meeting of the shareholders or his inability to act as
Secretary, the presiding officer may appoint any person to act as Secretary of
the meeting.
SEC. 8. NOTICE. All notices to the shareholders, directors or officers of
the company shall be mailed to the address designated by that person for the
purpose of said notice; or if no address is designated, at his last known
address. The said notice is deemed to have been served when it is deposited with
postage thereon, prepaid, in a U. S. Post Office or U. S. Mail Box.
SEC. 9. NEW SHAREHOLDERS. Every person becoming a shareholder in this
Company shall be deemed to assent to these By-Laws. Said person shall deliver to
the Secretary, the address to which he desires notices to be sent. All notices
mailed to said address shall be deemed to have been properly served upon said
new shareholder. Any person who fails to so designate his address to the said
Secretary, shall be deemed to have waived any and all notices.
<PAGE>
BY-LAWS (Continued)
===============================================================================
ARTICLE III
-----------
DIRECTORS
---------
SEC. 1. NUMBER, CLASSIFICATION AND TERM OF OFFICE.
A. The business and affairs of the corporation shall be managed by the Board of
Directors.
B. The number of Directors shall be 1; but the number may be changed from time
to time by the amendment of these By-Laws. The first Board of Directors shall
hold office until the first annual meeting of shareholders. At the first meeting
of the shareholders and at each annual meeting thereafter, the shareholders
shall elect directors to hold office until the succeeding annual meeting. A
director shall hold office for the term for which he is elected and until his
successor is elected and qualified or until his resignation or removal.
SEC. 2. PLACE OF MEETING. The Directors may hold their meetings in such
place or places within or without this State as a majority of the Board of
Directors may, from time to time determine.
SEC. 3. MEETINGS. Meetings of the Board of Directors may be called at any
time by the President or the Secretary or by a majority of the Board of
Directors. The Directors shall be notified in writing of the time, place and
purpose of all meetings of the Board at least three days prior to the date
scheduled for said meeting with the exception of the annual meeting of the Board
of Directors, for which no notice shall be provided, and which shall be held
immediately after the annual meeting of the shareholders. Attendance of a
director at a meeting constitutes a waiver of notice of said meeting, except
where the director attends the meeting for the express purpose of objecting to
the transaction of any business because the meeting is not lawfully called or
convened. Philip Beardslee shall be notified in accordance with agreement of May
21, 1976.
SEC. 4. QUORUM. A majority of the members of the Board then in office
constitutes a quorum for the transaction of business. The vote of the majority
of members present at a meeting at which a quorum is present constitutes the
action of the Board; provided that amendment of the By-Laws by the Board of
Directors requires the vote of not less than a majority of the members of the
Board then in office.
SEC. 5. ACTION WITHOUT A MEETING. Any action which might be taken at a
meeting of the Board may be taken without a meeting if before or after the said
action all members of the Board consent thereto in writing. The written consents
shall be filed with the Minutes of the proceedings of the Board. The consent has
the same effect as a vote of the Board for all purposes.
SEC. 6. VACANCIES. Vacancies in the Board of Directors may be filled by the
affirmative vote of a majority of the remaining Directors though less
<PAGE>
BY-LAWS (Continued)
===============================================================================
than a quorum of the Board, for a term of office continuing only until the next
election of Directors by the shareholders.
SEC. 7. COMPENSATION. No Director shall receive any salary or compensation
for his services as Director unless otherwise especially ordered by the Board of
Directors or by the By-Laws.
ARTICLE IV
----------
OFFICERS
--------
SEC. 1. At the annual meeting of the Board of Directors the Board shall
select a President, a Secretary and a Treasurer and may select one or more vice
Presidents, Assistant Secretaries and Assistant Treasurers who shall serve for
the period of one year or until their successors shall be chosen. Two or more
offices may be held by the same person but an officer shall not execute,
acknowledge or verify an instrument in more than one capacity if the instrument
is required by law or the Articles of Incorporation or By-Laws to be executed
and acknowledged or verified by two or more officers.
SEC. 2. The Board of Directors may also appoint such other officers and
agents as they may deem necessary for the transaction of the business of the
Corporation. All officers and agents shall respectively have such authority and
perform such duties in the management of the property and affairs of the
Corporation as may be designated by the Board of Directors. Without limitation
of any right of an officer or agent to recover damages for breach of contract,
the Board of Directors may remove any officer or agent whenever, in their
judgment, the business interests of the Corporation will be served thereby.
SEC. 3. The Board of Directors may secure the fidelity of any or all of
such officers by bond or otherwise.
ARTICLE V
---------
DUTIES OF OFFICERS
------------------
SEC. 1. PRESIDENT. The President shall be the chief executive officer of
the Company, and in the recess of the Board of Directors shall have the general
control and management of its business and affairs, subject, however, to the
right of the Board of Directors to delegate any specific power except such as
may be by statute exclusively conferred upon the President, to any other officer
or officers of the Company. He shall preside at all meetings of the Directors
and all meetings of the shareholders, unless otherwise determined by a majority
of all the shares of the capital stock issued and outstanding, present in
person or by proxy.
<PAGE>
BY-LAWS (Continued)
===============================================================================
SEC. 2. VICE-PRESIDENT. In case the office of President shall become vacant
by death, resignation, or otherwise, or in case of the absence of the President,
or his disability to discharge the duties of his office, such duties shall, for
the time being, devolve upon the Vice-President who shall do and perform such
other acts as the Board of Directors may, from time to time, authorize him to
do.
SEC. 3. TREASURER. The Treasurer shall have custody and keep account of all
money, funds and property of the Company, unless otherwise determined by the
Board of Directors, and he shall render such accounts and present such statement
to the Directors and President as may be required of him. He shall deposit all
funds of the Company which may come into his hands in such bank or banks as the
Board of Directors may designate. He shall keep his bank accounts in the name of
the Company, and shall exhibit his books and accounts, at all reasonable times,
to any Director of the Company upon application at the office of the Company
during business hours. He shall pay out money as the business may require upon
the order of the properly constituted officer or officers of the Company, taking
proper vouchers therefor; provided, however, that the Board of Directors shall
have power by resolution to delegate any of the duties of the Treasurer to other
officers, and to provide by what officers, if any, all bills, notes, checks,
vouchers, orders or other instruments shall be countersigned. He shall perform,
in addition, such other duties as may be delegated to him by the Board of
Directors.
SEC. 4. SECRETARY. The Secretary of the Company shall keep the minutes of
all the meetings of the shareholders and Board of Directors in books provided
for that purpose; he shall attend to the giving and receiving of all notices of
the Company; he shall have charge of the certificate books, transfer books and
stock ledgers and such other books and papers as the Board of Directors may
direct; all of which, shall, at all reasonable times, be open to the examination
of any Director upon application at the office of Secretary, and in addition
such other duties as may be delegated to him by the Board of Directors.
SEC. 5. CONTRACTS SIGNED BY OFFICERS. Any of the following officers,
President, Vice President, Secretary or Treasurer may sign any contracts of the
Corporation unless otherwise provided by the Board of Directors.
ARTICLE VI
----------
AMENDMENTS
----------
The shareholders or the Board may alter, amend, repeal or make additions to
the By-Laws.
<PAGE>
EXHIBIT 3.23
RESTATED CHARTER OF
-------------------
DANUBE CARPET MILLS, INC.
-------------------------
UNDER SECTION 48-304 OF THE GENERAL CORPORATION ACT
---------------------------------------------------
Pursuant to the provisions of Section 48-304 of the Tennessee General
Corporation Act, the undersigned corporation adopts the following Restated
Charter:
PART I:
-------
1. The name of the corporation is Danube Carpet Mills, Inc.
2. The duration of the corporation is perpetual.
3. The address of the principal office of the corporation in the State of
Tennessee shall be 8th Floor, 100 West Ninth Street, Chattanooga, Hamilton
County, Tennessee.
4. The corporation is for profit.
5. The purpose or purposes for which the corporation is organized are: to
buy, sell, produce, manufacture, distribute and dispose of all kinds of goods,
wares, merchandise, manufactures, commodities, furniture, machinery, tools,
supplies and products, and generally to engage in and conduct any form of
manufacturing mercantile or commercial enterprise not contrary to law; to lease,
buy, sell, use, mortgage, improve and otherwise handle, deal in, and dispose of
all property, real, personal and mixed, as may be necessary or convenient in
connection with the business of the company; and without limitation upon the
foregoing, to manufacture, buy, sell, lease and generally deal in all types of
rugs, carpet materials, and related textile or tufted products and all other
items of every kind and description, and any and all articles and things
connected therewith or part thereof. The corporation is further authorized and
empowered to engage in any other activity or carry on any other trade or
business which a corporation may legally conduct under the laws of the State of
Tennessee.
1
<PAGE>
6. The maximum number of shares which the corporation shall have authority
to issue is forty thousand (40,000) with Two and 50/100 ($2.50) Dollars par
value per share.
7. The corporation will not commence business until the consideration of
Five Thousand ($5,000.00) Dollars has been received for the issuance of shares.
8. The board may take any action which it is required or permitted to take
by law without a meeting upon written consent, setting forth the action so taken
and signed by all of the members of the board entitled to vote thereon.
9. The by-laws may be adopted, amended or repealed by a majority vote of
the entire board but any by-law adopted by the board may be amended or repeated
by the shareholders.
10. The board, without the vote of the shareholders, may distribute to the
shareholders out of capital surplus of the corporation a portion of its assets,
in cash or property.
11. The corporation shall have the right to purchase, take, receive or
otherwise acquire its own stock, directly or indirectly, to the extent of
unreserved and unrestricted capital surplus available thereto.
12. The date the original Charter was filed by the Secretary of State of
Tennessee was October 20, 1960. The Restated Charter restates the text of the
Charter, as previously amended, and further amends or changes the Charter as
specified below, and was duly authorized by unanimous consent of the
shareholders on October 26, 1978:
(a) The capital structure of the corporation was changed by subdividing
the authorized capital stock of One Hundred thousand ($100,000.00) Dollars into
forty thousand ($40,000) shares each with Two and 50/100 ($2.50) Dollars par
value per share in lieu of one thousand (1,000) shares each with one Hundred
($100.00) Dollars par value per share, each having equal voting rights and
voting privileges with the others.
2
<PAGE>
(b) The principal address of the corporation was changed to 8th Floor,
100 West Ninth Street, Chattanooga, Tennessee.
(c) The corporate purposes and powers were restated in accordance with
changes incorporated in the General Corporation Act effective July 1, 1969.
(d) The board was given the power to act by unanimous written consent.
(e) The board was given the power to adopt or amend or repeal by-laws,
but any by-law adopted by the board may be amended or repealed by the
shareholders.
(f) The board was given the power to distribute to the shareholders out
of capital surplus a portion of the assets in cash or property.
(g) The corporation was given the right to purchase, take, receive or
otherwise acquire its own shares to the extent of unreserved and unrestricted
capital surplus.
3. The manner in which any exchange, reclassification, or conversion of
the shares of the corporation shall be effect shall result in the issuance of
one (1) share for forty (40) shares of new Two and 50/100 ($2.50) Dollar par
value per share. Accordingly the authorized capital stock of the corporation
will remain unchanged, and the total par value held by each shareholder will
similarly remain unchanged. Each shareholder will have forty (40) times as many
shares after the exchange as he held prior to the exchange, but each share would
have a value of only one fortieth (1/40th) of the value before the exchange.
Dated October 26, 1978.
DANUBE CARPET MILLS, INC.
By: /s/ Carl D. Hagaman
-----------------------------------
Carl D. Hagaman, President
3
<PAGE>
ARTICLE OF AMENDMENT
--------------------
TO THE CHARTER OF
-----------------
DANUBE CARPET MILLS, INC.
-------------------------
Pursuant to the provisions of Tennessee Code Annotated, Sections 48-1-302 and
303, the undersigned corporation adopts the following Articles of Amendment to
its Charter:
1. The name of the corporation is Danube Carpet Mills, Inc.
2. The amendment adopted is to change the address of the principal office
of the corporation to 500 Tallan Building, Chattanooga, Hamilton County,
Tennessee 37402.
3. The amendment was duly adopted by unanimous consent of the directors on
October 12, 1987.
Dated this 12th day of October, 1987.
DANUBE CARPET MILLS, INC.
By: /s/ Cornelius J. Murphy
-------------------------------
President
4
<PAGE>
ARTICLES OF AMENDMENT TO THE CHARTER
------------------------------------
OF
--
DANUBE CARPET MILLS, INC.
-------------------------
Pursuant to the provisions of Section 48-20-106 of the Tennessee
Business Corporation Act, the undersigned corporation adopts the following
articles of amendment to its charter:
1. The name of the corporation is:
Danube Carpet Mills, Inc.
2. The text of each amendment adopted is: Paragraph I of the charter
is deleted in its entirety and the following inserted in lieu thereof:
I. The name of the corporation is:
DCM, Inc.
3. The corporation is a for profit corporation.
4. The amendment was duly adopted on 12/31, 1996 by the Board of
Directors and the sole Shareholder.
5. The amendment is to be effective when these articles are filed by
the Secretary of State.
Dated as of this 15th day of January, 1997.
Danube Carpet Mills, Inc.
/s/ Steve Salzer
-------------------------------
By: Steve Salzer
Title: Assistant Secretary
<PAGE>
EXHIBIT 3.24
ADOPTED 2-12-70
---------------
DANUBE CARPET MILLS, INC.
-------------------------
BY-LAWS
-------
ARTICLE I - STOCK AND STOCKHOLDERS
----------------------------------
Section 1. Signatures. Certificates for shares of stock shall
----------
be signed by the president and the secretary.
Section 2. Fractional Shares. The company shall not issue certificates
-----------------
or scrip for fractional shares of stock.
Section 3. Authority to Issue Stock. The directors are authorized,
------------------------
in their discretion, to issue the capital stock of the company to
the full number of shares authorized by the charter of the
company, as amended, in such amounts and for such consideration
as from time to time shall be determined by the board of
directors.
Section 4. Annual meeting. The annual meeting of the shareholders
--------------
shall be held on the second Monday in October, or at such other
date and time as may be set by the directors.
Section 5. Place of Meeting. Meetings of shareholders shall be at the
----------------
principal office of the company or at such other place as may be
set by the directors.
Section 6. Record Date. For the purpose of determining shareholders entitled
-----------
to notice of or entitled to vote at any meeting of shareholders,
or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, the record date for any such
determination of shareholders shall be fifteen (15) days prior to
the date of the meeting of shareholders or the payment of
dividend, as the case may be. The board of directors may fix in
advance a date other than the one specified above as the record
date for any such determination of shareholders as to any special
meeting of shareholders or any dividend payment.
Section 7. Voting Upon Stock Held by the Corporation. Unless otherwise
-----------------------------------------
ordered by the board of directors, the president shall have full
power and authority in behalf of the company to attend and to act
and to vote at any meeting of stockholders of any corporation in
which the company may hold stock, and at any
<PAGE>
such meeting shall possess and may exercise any and all the
rights and powers incident to the ownership of such stock, and
which, as the owner thereof, the company might have possessed and
exercised if present. The board of directors, by resolution from
time to time, may confer like powers upon any other person or
persons.
ARTICLE II - DIRECTORS AND OFFICERS
-----------------------------------
Section 1. Indemnification of Directors and Officers. Any person made or
-----------------------------------------
threatened to be made a party to a suit or proceeding by reason
of the fact that he or his intestate was, is or shall be a
director or officer of the company or at the request of this
company a director or officer of another company controlled by
this company, shall be indemnified by this company to the maximum
extent and upon the conditions provided by the laws of the State
of Tennessee, including Tennessee Code Annotated, (S)(S)540-407
------------------------
through 46-411.
Section 2. Election and Term of Directors. The Company shall have two (2)
------------------------------
directors, whose term of office shall be one (1) year.
Section 3. Newly Created Directorships and Vacancies. Newly created
-----------------------------------------
directorships and vacancies occurring in the board for any
reason, including the removal of directors without cause or for
cause, shall be filled by vote of a majority of the directors
then in office.
Section 4. Removal for Cause. A director may be removed from the board for
-----------------
cause, as defined by law.
Section 5. 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 for the holding of additional regular meetings
without other notice than such resolution.
-2-
<PAGE>
Section 6. Special Meetings. Special meetings of the board of directors may
----------------
be called by or at the request of the chairman of the board, the
president or any two (2) directors. Notice of any special meeting
shall be given at least five (5) days prior thereto by written
notice delivered personally or by regular, registered or
certified mail. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to
the director at his home or business address.
Section 7. Executive and Other Committees. The board, by a resolution
------------------------------
adopted by a majority of the entire board, may designate an
executive committee, consisting of two (2) or more directors, and
other committees, consisting of two (2) or more persons, who may
or may not be directors, and may delegate to such committee or
committees all such authorities of the board that it deems
desirable. The board may designate one or more directors as
alternate members of any such committee, who may replace any
absent member or members at any meeting of such committee.
Section 8. Action Without Meeting. The board of directors may take any
----------------------
action which they are required or permitted to take by law
without a meeting on written consent, setting forth the action so
taken and signed by all of the directors entitled to vote
thereon.
Section 9. Officers. The officers of the company shall consist of the
--------
chairman of the board, the president, such vice-presidents as may
be determined by the board of directors from time to time, the
secretary, the treasurer. All such officers shall be elected by
the board of directors. The term of office of each officer shall
be one (1) year.
Section 10. President. The president shall have general management and
---------
control of the affairs of the corporation in accordance with
policies promulgated by the board.
Section 11. The Vice Presidents. In the event of the absence, death, or
-------------------
inability to act of the president, the vice president (the first
vice president, if there be more than one vice president) shall
perform the duties and be vested
-3-
<PAGE>
with the powers of the president. The vice presidents shall
perform such duties as from time to time may be assigned to them
by the president or by the board of directors.
Section 12. The Secretary. The secretary shall; (a) see that all notices are
-------------
duly given in accordance with the provisions of these by-laws as
required by law; (b) be custodian of the corporate records; (c)
keep a list of the shareholders and their addresses, which
addresses shall be furnished to the secretary by each
shareholder; (d) have general charge of the stock transfer books
of the corporation; (e) take minutes of meetings of the board of
directors and of the shareholders: (f) 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 13. The Treasurer. The treasurer shall: (a) have charge and custody
-------------
and be responsible for all funds and securities of the
corporation; 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 by the president or by the board of
directors. The treasurer shall be bonded for the faithful
discharge of his duties.
Section 14. Salaries. Salaries of officers elected by the board of directors
--------
shall be fixed by the board of directors.
ARTICLE III - FISCAL YEAR
--------------------------
Section 1. The fiscal year of the company shall begin on November 1 and end
on October 31. The board of directors is empowered to change the
fiscal year from time to time.
ARTICLE IV - BY-LAWS
--------------------
Section 1. By-laws may be adopted, amended, or repealed by the shareholders
or by a majority vote of the entire board of directors, but any
by-law adopted by the board of directors may be amended or
repealed by the shareholders.
-4-
<PAGE>
EXHIBIT 5.1
January 23, 1998
Kevco, Inc. and Subsidiaries
1300 S. University Drive, Suite 200
Fort Worth, Texas 76107
Re: Registration Statement on Form S-4 of Kevco, Inc. and subsidiaries
------------------------------------------------------------------
Gentlemen:
We are acting as counsel for Kevco, Inc., a Texas corporation and its
subsidiaries (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Act"), of the offer and sale of up to
$105,000,000 of 10 3/8% Senior Subordinated Notes due 2007 with the related
subsidiary guarantees (the "Exchange Notes") in exchange for the Company's 10
3/8% Senior Subordinated Notes due 2007 (the "144A Notes") issued in a private
placement pursuant to Rule 144A under the Act, as contemplated by the Company's
Registration Statement on Form S-4, which we understand is expected to be filed
with the Securities and Exchange Commission (the "Commission") on or about the
date hereof (as amended, the "Registration Statement").
In reaching the conclusions expressed in this opinion we have examined and
relied on such documents, corporate records and other instruments, including the
Indenture (the "Indenture") dated as of December 1, 1997 between the Company,
the Company's subsidiary guarantors and the United States Trust Company of New
York, N.A. as trustee (the "Trustee") pursuant to which the Exchange Notes are
to be issued, Supplemental Indentures dated as of December 1, 1997, each between
the Trustee and a subsidiary of the Company that was not a party to the
Indenture (the Indenture with the Supplemental Indentures are hereinafter
referred to as the "Indenture"), certificates of public officials and
certificates of officers of the Company, and made such further investigation and
inquiry as we have deemed necessary to reach the opinions expressed herein. In
making the foregoing examinations, we have assumed the genuineness of all
signatures on original documents, the authenticity, accuracy and completeness of
all documents submitted to us as originals and the conformity to original
documents of all copies submitted to us.
Based solely upon the foregoing, subject to the comments and exceptions
hereinafter stated, it is our opinion that:
<PAGE>
1. The Exchange Notes have been duly authorized by all necessary
corporate action on the part of the Company.
2. Subject to the Registration Statement becoming effective under the
Act, to the Indenture being qualified under the Trust Indenture Act
of 1939, as amended, to compliance with any applicable state securities laws,
and to the Exchange Notes being executed by the Company and authenticated by the
Trustee in accordance with the terms of the Indenture, the Exchange Notes
proposed to be exchanged by the Company for the 144A Notes pursuant to the terms
of the exchange offer described in the Registration Statement have been duly
authorized for issuance and, when issued and delivered in exchange for the 144A
Notes in accordance with the terms and provisions of the exchange offer as
described in the Registration Statement and the Indenture, will be entitled to
the benefits of the Indenture and will be valid and legally binding obligations
of the Company, enforceable against the Company in accordance with their terms,
except as enforceability thereof may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws relating
to or affecting creditors' rights generally and (b) by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
Our opinion is further subject to the qualification that certain of the waivers
and remedies in the Indenture and the Exchange Notes may be unenforceable under,
or may be limited by, the laws (including judicial decisions) of the State of
New York and the United States. However, the unenforceability or limitation of
such covenants, waivers and remedies will not, in our opinion, prevent the
substantial realization by the holders thereof of the practical benefits
intended to be provided by the Indenture and the Exchange Notes, except for the
economic consequences of any delay that may result from such enforceability or
limitation.
We express no opinion as to the laws of any jurisdiction other than the law of
the state of Texas, the General Corporation Law of the State of Delaware,
applicable federal laws of the United States of America and the contract law of
the State of New York, in each case as in effect on the date hereof.
We hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference to our firm therein under the caption "Legal
Matters." In giving this consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission promulgated thereunder.
Very truly yours,
/s/ Jackson Walker L.L.P.
<PAGE>
EXHIBIT 10.60
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
December, 1, 1997 between Shelter Components Corporation (the "New Subsidiary
Guarantor"), a Subsidiary of Kevco, Inc., a Texas corporation (the "Company"),
and United States Trust Company of New York, as trustee under the indenture
referred to below (the "Trustee"). Capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Indenture (as
defined below).
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of December 1, 1997, providing
for the issuance of an aggregate principal amount of $105,000,000 of 10 3/8%
Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 10.09 of the Indenture provides that under certain
circumstances the Company may cause certain of its Subsidiaries to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiaries shall unconditionally Guarantee all of the Company's obligations
under the Indenture and the Notes pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Indenture.
2. INDENTURE PROVISION PURSUANT TO WHICH SUBSIDIARY GUARANTEE IS
GIVEN. This Supplemental Indenture is being executed and delivered pursuant to
Section 10.09 of the Indenture.
3. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
irrevocably and unconditionally guarantees that (i) the principal of, premium,
if any, interest and Liquidated Damages, if any, on the Notes shall be duly and
punctually paid in full when due, whether at stated maturity, by acceleration,
call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer,
pursuant to the Escrow Agreement or otherwise, and interest on overdue
principal, premium, if any, (to the extent
<PAGE>
permitted by law) interest on any interest, if any, and Liquidated Damages, if
any, on the Notes and all other obligations of the Company to Holders of Notes
or the Trustee under the Indenture or under the Notes (including fees, expenses
or otherwise) will be promptly paid in full or performed, all in accordance with
the terms thereof, (ii) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, the same shall be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration, call for redemption, upon
a Change of Control Offer, upon an Asset Sale Offer, pursuant to the Escrow
Agreement or otherwise and (iii) the prompt payment of any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder of Notes in enforcing any rights under the Indenture or under the Notes,
on the terms and subject to the conditions set forth in Article 10 of the
Indenture and to be bound by all other applicable provisions of the Indenture
applicable to a Restricted Subsidiary and/or Subsidiary Guarantor thereunder.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
(a) To evidence its Subsidiary Guarantee, the New Subsidiary Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form set forth in Exhibit A to the Indenture shall be endorsed by an officer of
such New Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the New Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture or
on the notation of the Subsidiary Guaranty no longer holds that office at the
time the Trustee authenticates the Note on which a Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The New Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of Notes with respect to
any provisions hereof or thereof, the recovery of any judgement against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
(e) The New Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or its Subsidiary
Guarantee; and the New Subsidiary Guarantor (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not
2
<PAGE>
hinder, delay or impede the execution of any power granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
5. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction hereof.
9. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: December 1, 1997 SHELTER COMPONENTS CORPORATION
By: /s/ ELLIS L. MCKINLEY, JR.
-------------------------------------
Name: Ellis L. McKinley, Jr.
-----------------------------------
Title: Vice President
----------------------------------
3
<PAGE>
Dated: December 1, 1997 UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ G. E. GANEY
-------------------------------------
Name: Gerard E. Ganey
-----------------------------------
Title: Senior Vice President
----------------------------------
4
<PAGE>
EXHIBIT 10.61
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
December, 1, 1997 between Shelter Distribution, L.P. (the "New Subsidiary
Guarantor"), a Subsidiary of Kevco, Inc., a Texas corporation (the "Company"),
and United States Trust Company of New York, as trustee under the indenture
referred to below (the "Trustee"). Capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Indenture (as
defined below).
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of December 1, 1997, providing
for the issuance of an aggregate principal amount of $105,000,000 of 10 3/8%
Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 10.09 of the Indenture provides that under certain
circumstances the Company may cause certain of its Subsidiaries to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiaries shall unconditionally Guarantee all of the Company's obligations
under the Indenture and the Notes pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Indenture.
2. INDENTURE PROVISION PURSUANT TO WHICH SUBSIDIARY GUARANTEE IS
GIVEN. This Supplemental Indenture is being executed and delivered pursuant to
Section 10.09 of the Indenture.
3. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
irrevocably and unconditionally guarantees that (i) the principal of, premium,
if any, interest and Liquidated Damages, if any, on the Notes shall be duly and
punctually paid in full when due, whether at stated maturity, by acceleration,
call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer,
pursuant to the Escrow Agreement or otherwise, and interest on overdue
principal, premium, if any, (to the extent
<PAGE>
permitted by law) interest on any interest, if any, and Liquidated Damages, if
any, on the Notes and all other obligations of the Company to Holders of Notes
or the Trustee under the Indenture or under the Notes (including fees, expenses
or otherwise) will be promptly paid in full or performed, all in accordance with
the terms thereof, (ii) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, the same shall be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration, call for redemption, upon
a Change of Control Offer, upon an Asset Sale Offer, pursuant to the Escrow
Agreement or otherwise and (iii) the prompt payment of any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder of Notes in enforcing any rights under the Indenture or under the Notes,
on the terms and subject to the conditions set forth in Article 10 of the
Indenture and to be bound by all other applicable provisions of the Indenture
applicable to a Restricted Subsidiary and/or Subsidiary Guarantor thereunder.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
(a) To evidence its Subsidiary Guarantee, the New Subsidiary Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form set forth in Exhibit A to the Indenture shall be endorsed by an officer of
such New Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the New Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture or
on the notation of the Subsidiary Guaranty no longer holds that office at the
time the Trustee authenticates the Note on which a Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The New Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of Notes with respect to
any provisions hereof or thereof, the recovery of any judgement against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
(e) The New Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or its Subsidiary
Guarantee; and the New Subsidiary Guarantor (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not
2
<PAGE>
hinder, delay or impede the execution of any power granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
5. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction hereof.
9. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: December 1, 1997 SHELTER DISTRIBUTION, L.P.
By: BPR Holdings, Inc., its general partner
By: /s/ ELLIS L. MCKINLEY, JR.
--------------------------------------------
Name: Ellis L. McKinley, Jr.
------------------------------------------
Title: Vice President
-----------------------------------------
3
<PAGE>
Dated: December 1, 1997 UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ G. E. GANEY
--------------------------------------------
Name: Gerard E. Ganey
------------------------------------------
Title: Senior Vice President
-----------------------------------------
4
<PAGE>
EXHIBIT 10.62
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
December, 1, 1997 between DCM, Inc. (the "New Subsidiary Guarantor"), a
Subsidiary of Kevco, Inc., a Texas corporation (the "Company"), and United
States Trust Company of New York, as trustee under the indenture referred to
below (the "Trustee"). Capitalized terms used herein and not defined herein
shall have the meanings ascribed to them in the Indenture (as defined below).
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of December 1, 1997, providing
for the issuance of an aggregate principal amount of $105,000,000 of 10 3/8%
Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 10.09 of the Indenture provides that under certain
circumstances the Company may cause certain of its Subsidiaries to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiaries shall unconditionally Guarantee all of the Company's obligations
under the Indenture and the Notes pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Indenture.
2. INDENTURE PROVISION PURSUANT TO WHICH SUBSIDIARY GUARANTEE IS
GIVEN. This Supplemental Indenture is being executed and delivered pursuant to
Section 10.09 of the Indenture.
3. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
irrevocably and unconditionally guarantees that (i) the principal of, premium,
if any, interest and Liquidated Damages, if any, on the Notes shall be duly and
punctually paid in full when due, whether at stated maturity, by acceleration,
call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer,
pursuant to the Escrow Agreement or otherwise, and interest on overdue
principal, premium, if any, (to the extent permitted by law) interest on any
interest, if any, and Liquidated Damages, if any, on the Notes and
<PAGE>
all other obligations of the Company to Holders of Notes or the Trustee under
the Indenture or under the Notes (including fees, expenses or otherwise) will be
promptly paid in full or performed, all in accordance with the terms thereof,
(ii) in case of any extension of time of payment or renewal of any Notes or any
of such other obligations, the same shall be promptly paid in full when due or
performed in accordance with the terms of the extension or renewal, whether at
stated maturity, by acceleration, call for redemption, upon a Change of Control
Offer, upon an Asset Sale Offer, pursuant to the Escrow Agreement or otherwise
and (iii) the prompt payment of any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder of Notes in
enforcing any rights under the Indenture or under the Notes, on the terms and
subject to the conditions set forth in Article 10 of the Indenture and to be
bound by all other applicable provisions of the Indenture applicable to a
Restricted Subsidiary and/or Subsidiary Guarantor thereunder.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
(a) To evidence its Subsidiary Guarantee, the New Subsidiary Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form set forth in Exhibit A to the Indenture shall be endorsed by an officer of
such New Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the New Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture or
on the notation of the Subsidiary Guaranty no longer holds that office at the
time the Trustee authenticates the Note on which a Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The New Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of Notes with respect to
any provisions hereof or thereof, the recovery of any judgement against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
(e) The New Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or its Subsidiary
Guarantee; and the New Subsidiary Guarantor (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not
2
<PAGE>
hinder, delay or impede the execution of any power granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
5. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction hereof.
9. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: December 1, 1997 DCM, INC.
By: /s/ ELLIS L. MCKINLEY, JR.
-------------------------------------
Name: Ellis L. McKinley, Jr.
-----------------------------------
Title: Vice President
----------------------------------
3
<PAGE>
Dated: December 1, 1997 UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ G. E. GANEY
-------------------------------------
Name: Gerard E. Ganey
-----------------------------------
Title: Senior Vice President
----------------------------------
4
<PAGE>
EXHIBIT 10.63
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
December, 1, 1997 between Duo-Form of Michigan, Inc. (the "New Subsidiary
Guarantor"), a Subsidiary of Kevco, Inc., a Texas corporation (the "Company"),
and United States Trust Company of New York, as trustee under the indenture
referred to below (the "Trustee"). Capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Indenture (as
defined below).
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of December 1, 1997, providing
for the issuance of an aggregate principal amount of $105,000,000 of 10 3/8%
Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 10.09 of the Indenture provides that under certain
circumstances the Company may cause certain of its Subsidiaries to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiaries shall unconditionally Guarantee all of the Company's obligations
under the Indenture and the Notes pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Indenture.
2. INDENTURE PROVISION PURSUANT TO WHICH SUBSIDIARY GUARANTEE IS
GIVEN. This Supplemental Indenture is being executed and delivered pursuant to
Section 10.09 of the Indenture.
3. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
irrevocably and unconditionally guarantees that (i) the principal of, premium,
if any, interest and Liquidated Damages, if any, on the Notes shall be duly and
punctually paid in full when due, whether at stated maturity, by acceleration,
call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer,
pursuant to the Escrow Agreement or otherwise, and interest on overdue
principal, premium, if any, (to the extent
<PAGE>
permitted by law) interest on any interest, if any, and Liquidated Damages, if
any, on the Notes and all other obligations of the Company to Holders of Notes
or the Trustee under the Indenture or under the Notes (including fees, expenses
or otherwise) will be promptly paid in full or performed, all in accordance with
the terms thereof, (ii) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, the same shall be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration, call for redemption, upon
a Change of Control Offer, upon an Asset Sale Offer, pursuant to the Escrow
Agreement or otherwise and (iii) the prompt payment of any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder of Notes in enforcing any rights under the Indenture or under the Notes,
on the terms and subject to the conditions set forth in Article 10 of the
Indenture and to be bound by all other applicable provisions of the Indenture
applicable to a Restricted Subsidiary and/or Subsidiary Guarantor thereunder.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
(a) To evidence its Subsidiary Guarantee, the New Subsidiary Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form set forth in Exhibit A to the Indenture shall be endorsed by an officer of
such New Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the New Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture or
on the notation of the Subsidiary Guaranty no longer holds that office at the
time the Trustee authenticates the Note on which a Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The New Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of Notes with respect to
any provisions hereof or thereof, the recovery of any judgement against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
(e) The New Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or its Subsidiary
Guarantee; and the New Subsidiary Guarantor (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not
2
<PAGE>
hinder, delay or impede the execution of any power granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
5. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction hereof.
9. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: December 1, 1997 DUO-FORM OF MICHIGAN, INC.
By: /s/ ELLIS L. MCKINLEY, JR.
-------------------------------------
Name: Ellis L. McKinley, Jr.
-----------------------------------
Title: Vice President
----------------------------------
3
<PAGE>
Dated: December 1, 1997 UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ G. E. GANEY
-------------------------------------
Name: Gerard E. Ganey
-----------------------------------
Title: Senior Vice President
----------------------------------
4
<PAGE>
EXHIBIT 10.64
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
December, 1, 1997 between Design Components, Inc. (the "New Subsidiary
Guarantor"), a Subsidiary of Kevco, Inc., a Texas corporation (the "Company"),
and United States Trust Company of New York, as trustee under the indenture
referred to below (the "Trustee"). Capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Indenture (as
defined below).
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of December 1, 1997, providing
for the issuance of an aggregate principal amount of $105,000,000 of 10 3/8%
Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 10.09 of the Indenture provides that under certain
circumstances the Company may cause certain of its Subsidiaries to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiaries shall unconditionally Guarantee all of the Company's obligations
under the Indenture and the Notes pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Indenture.
2. INDENTURE PROVISION PURSUANT TO WHICH SUBSIDIARY GUARANTEE IS
GIVEN. This Supplemental Indenture is being executed and delivered pursuant to
Section 10.09 of the Indenture.
3. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
irrevocably and unconditionally guarantees that (i) the principal of, premium,
if any, interest and Liquidated Damages, if any, on the Notes shall be duly and
punctually paid in full when due, whether at stated maturity, by acceleration,
call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer,
pursuant to the Escrow Agreement or otherwise, and interest on overdue
principal, premium, if any, (to the extent
<PAGE>
permitted by law) interest on any interest, if any, and Liquidated Damages, if
any, on the Notes and all other obligations of the Company to Holders of Notes
or the Trustee under the Indenture or under the Notes (including fees, expenses
or otherwise) will be promptly paid in full or performed, all in accordance with
the terms thereof, (ii) in case of any extension of time of payment or renewal
of any Notes or any of such other obligations, the same shall be promptly paid
in full when due or performed in accordance with the terms of the extension or
renewal, whether at stated maturity, by acceleration, call for redemption, upon
a Change of Control Offer, upon an Asset Sale Offer, pursuant to the Escrow
Agreement or otherwise and (iii) the prompt payment of any and all costs and
expenses (including reasonable attorneys' fees) incurred by the Trustee or any
Holder of Notes in enforcing any rights under the Indenture or under the Notes,
on the terms and subject to the conditions set forth in Article 10 of the
Indenture and to be bound by all other applicable provisions of the Indenture
applicable to a Restricted Subsidiary and/or Subsidiary Guarantor thereunder.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
(a) To evidence its Subsidiary Guarantee, the New Subsidiary Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form set forth in Exhibit A to the Indenture shall be endorsed by an officer of
such New Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the New Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture or
on the notation of the Subsidiary Guaranty no longer holds that office at the
time the Trustee authenticates the Note on which a Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The New Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of Notes with respect to
any provisions hereof or thereof, the recovery of any judgement against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
(e) The New Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or its Subsidiary
Guarantee; and the New Subsidiary Guarantor (to the extent that it may lawfully
do so) hereby expressly waives all benefit or advantage of any such law, and
covenants that it will not
2
<PAGE>
hinder, delay or impede the execution of any power granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
5. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction hereof.
9. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: December 1, 1997 DESIGN COMPONENTS, INC.
By: /s/ ELLIS L. MCKINLEY, JR.
-------------------------------------
Name: Ellis L. McKinley, Jr.
-----------------------------------
Title: Vice President
----------------------------------
3
<PAGE>
Dated: December 1, 1997 UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ G. E. GANEY
-------------------------------------
Name: Gerard E. Ganey
-----------------------------------
Title: Senior Vice President
----------------------------------
4
<PAGE>
EXHIBIT 10.65
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
December, 1, 1997 between Shelter Components of Indiana, Inc. (the "New
Subsidiary Guarantor"), a Subsidiary of Kevco, Inc., a Texas corporation (the
"Company"), and United States Trust Company of New York, as trustee under the
indenture referred to below (the "Trustee"). Capitalized terms used herein and
not defined herein shall have the meanings ascribed to them in the Indenture (as
defined below).
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an Indenture (the "Indenture"), dated as of December 1, 1997, providing
for the issuance of an aggregate principal amount of $105,000,000 of 10 3/8%
Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 10.09 of the Indenture provides that under certain
circumstances the Company may cause certain of its Subsidiaries to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiaries shall unconditionally Guarantee all of the Company's obligations
under the Indenture and the Notes pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without
definition shall have the meanings ascribed to them in the Indenture.
2. INDENTURE PROVISION PURSUANT TO WHICH SUBSIDIARY GUARANTEE IS
GIVEN. This Supplemental Indenture is being executed and delivered pursuant to
Section 10.09 of the Indenture.
3. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby
agrees, jointly and severally with all other Subsidiary Guarantors, to
irrevocably and unconditionally guarantees that (i) the principal of, premium,
if any, interest and Liquidated Damages, if any, on the Notes shall be duly and
punctually paid in full when due, whether at stated maturity, by acceleration,
call for redemption, upon a Change of Control Offer, upon an Asset Sale Offer,
pursuant to the
<PAGE>
Escrow Agreement or otherwise, and interest on overdue principal, premium, if
any, (to the extent permitted by law) interest on any interest, if any, and
Liquidated Damages, if any, on the Notes and all other obligations of the
Company to Holders of Notes or the Trustee under the Indenture or under the
Notes (including fees, expenses or otherwise) will be promptly paid in full or
performed, all in accordance with the terms thereof, (ii) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration, call for redemption, upon a Change of Control Offer,
upon an Asset Sale Offer, pursuant to the Escrow Agreement or otherwise and
(iii) the prompt payment of any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any Holder of Notes in enforcing any
rights under the Indenture or under the Notes, on the terms and subject to the
conditions set forth in Article 10 of the Indenture and to be bound by all other
applicable provisions of the Indenture applicable to a Restricted Subsidiary
and/or Subsidiary Guarantor thereunder.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
(a) To evidence its Subsidiary Guarantee, the New Subsidiary Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form set forth in Exhibit A to the Indenture shall be endorsed by an officer of
such New Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the New Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture or
on the notation of the Subsidiary Guaranty no longer holds that office at the
time the Trustee authenticates the Note on which a Subsidiary Guarantee is
endorsed, the Subsidiary Guarantee shall be valid nevertheless.
(d) The New Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of Notes with respect to
any provisions hereof or thereof, the recovery of any judgement against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
(e) The New Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or its Subsidiary
Guarantee; and the New Subsidiary Guarantor (to the extent that it may lawfully
do so)
2
<PAGE>
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
5. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for
convenience only and shall not effect the construction hereof.
9. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: December 1, 1997 SHELTER COMPONENTS OF INDIANA, INC.
By: /s/ ELLIS L. MCKINLEY, JR.
-------------------------------------
Name: Ellis L. McKinley, Jr.
-----------------------------------
Title: Vice President
----------------------------------
3
<PAGE>
Dated: December 1, 1997 UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ G. E. GANEY
-------------------------------------
Name: Gerard E. Ganey
-----------------------------------
Title: Senior Vice President
----------------------------------
4
<PAGE>
EXHIBIT 10.66
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
December, 1, 1997 between BPR Holdings, Inc. (the "New Subsidiary Guarantor"), a
Subsidiary of Kevco, Inc., a Texas corporation (the "Company"), and United
States Trust Company of New York, as trustee under the indenture referred to
below (the "Trustee"). Capitalized terms used herein and not defined herein
shall have the meanings ascribed to them in the Indenture (as defined below).
W I T N E S S E T H:
WHEREAS, the Company has heretofore executed and delivered to the Trustee
an Indenture (the "Indenture"), dated as of December 1, 1997, providing for the
issuance of an aggregate principal amount of $105,000,000 of 10 3/8% Senior
Subordinated Notes due 2007 (the "Notes");
WHEREAS, Section 10.09 of the Indenture provides that under certain
circumstances the Company may cause certain of its Subsidiaries to execute and
deliver to the Trustee a supplemental indenture pursuant to which such
Subsidiaries shall unconditionally Guarantee all of the Company's obligations
under the Indenture and the Notes pursuant to a Subsidiary Guarantee on the
terms and conditions set forth herein; and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the New
Subsidiary Guarantor and the Trustee mutually covenant and agree for the equal
and ratable benefit of the Holders of Notes as follows:
1. CAPITALIZED TERMS. Capitalized terms used herein without definition
shall have the meanings ascribed to them in the Indenture.
2. INDENTURE PROVISION PURSUANT TO WHICH SUBSIDIARY GUARANTEE IS GIVEN.
This Supplemental Indenture is being executed and delivered pursuant to Section
10.09 of the Indenture.
3. AGREEMENT TO GUARANTEE. The New Subsidiary Guarantor hereby agrees,
jointly and severally with all other Subsidiary Guarantors, to irrevocably and
unconditionally guarantees that (i) the principal of, premium, if any, interest
and Liquidated Damages, if any, on the Notes shall be duly and punctually paid
in full when due, whether at stated maturity, by acceleration, call for
redemption, upon a Change of Control Offer, upon an Asset Sale Offer, pursuant
to the
<PAGE>
Escrow Agreement or otherwise, and interest on overdue principal, premium, if
any, (to the extent permitted by law) interest on any interest, if any, and
Liquidated Damages, if any, on the Notes and all other obligations of the
Company to Holders of Notes or the Trustee under the Indenture or under the
Notes (including fees, expenses or otherwise) will be promptly paid in full or
performed, all in accordance with the terms thereof, (ii) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, the same shall be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration, call for redemption, upon a Change of Control Offer,
upon an Asset Sale Offer, pursuant to the Escrow Agreement or otherwise and
(iii) the prompt payment of any and all costs and expenses (including reasonable
attorneys' fees) incurred by the Trustee or any Holder of Notes in enforcing any
rights under the Indenture or under the Notes, on the terms and subject to the
conditions set forth in Article 10 of the Indenture and to be bound by all other
applicable provisions of the Indenture applicable to a Restricted Subsidiary
and/or Subsidiary Guarantor thereunder.
4. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEES
(a) To evidence its Subsidiary Guarantee, the New Subsidiary Guarantor
hereby agrees that a notation of such Subsidiary Guarantee substantially in the
form set forth in Exhibit A to the Indenture shall be endorsed by an officer of
such New Subsidiary Guarantor on each Note authenticated and delivered by the
Trustee after the date hereof.
(b) Notwithstanding the foregoing, the New Subsidiary Guarantor hereby
agrees that its Subsidiary Guarantee shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such
Subsidiary Guarantee.
(c) If an officer whose signature is on this Supplemental Indenture or on
the notation of the Subsidiary Guaranty no longer holds that office at the time
the Trustee authenticates the Note on which a Subsidiary Guarantee is endorsed,
the Subsidiary Guarantee shall be valid nevertheless.
(d) The New Subsidiary Guarantor hereby agrees that its Subsidiary
Guarantee shall be unconditional, regardless of the validity, regularity or
enforceability of the Notes or the Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of Notes with respect to
any provisions hereof or thereof, the recovery of any judgement against the
Company, any action to enforce the same or any other circumstance which might
otherwise constitute a legal or equitable discharge or defense of a guarantor.
(e) The New Subsidiary Guarantor covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of the Indenture or its Subsidiary
Guarantee; and the New Subsidiary Guarantor (to the extent that it may lawfully
do so)
2
<PAGE>
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
5. NO RECOURSE AGAINST OTHERS. No director, officer, employee,
incorporator or stockholder of any Subsidiary Guarantor, as such, shall have any
liability for any obligations of the Company or any Subsidiary Guarantor under
the Notes, any Subsidiary Guarantees, the Indenture or this Supplemental
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes and the Subsidiary Guarantees.
6. NEW YORK LAW TO GOVERN. The internal law of the State of New York
shall govern and be used to construe this Supplemental Indenture.
7. COUNTERPARTS. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.
8. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not effect the construction hereof.
9. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the correctness of the recitals of fact
contained herein, all of which recitals are made solely by the New Subsidiary
Guarantor.
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed and attested, all as of the date first above
written.
Dated: December 1, 1997 BPR HOLDINGS, INC.
By: /s/ ELLIS L. MCKINLEY, JR.
-------------------------------------
Name: Ellis L. McKinley, Jr.
-----------------------------------
Title: Vice President
----------------------------------
3
<PAGE>
Dated: December 1, 1997 UNITED STATES TRUST COMPANY OF
NEW YORK, as Trustee
By: /s/ G. E. GANEY
-------------------------------------
Name: Gerard E. Ganey
-----------------------------------
Title: Senior Vice President
----------------------------------
4
<PAGE>
EXHIBIT 21
----------
Kevco Delaware, Inc.,
a Delaware corporation.
Sunbelt Wood Components, Inc.,
a Delaware corporation.
Bowen Supply, Inc.,
a Georgia corporation.
Encore Industries, Inc.,
a Georgia corporation.
Shelter Components Corporation,
an Indiana corporation.
BPR Holdings, Inc.,
an Indiana corporation.
Shelter Components of Indiana, Inc.,
an Indiana corporation.
Design Components, Inc.,
an Indiana corporation.
Duo-Form of Michigan, Inc.
a Michigan corporation.
DCM, Inc.,
an Indiana corporation.
Shelter Distribution, L.P.,
an Indiana limited partnership(1).
(1) Sole general partner is BPR Holdings, Inc.; sole limited partner is Shelter
Components of Indiana, Inc.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-43691) of our report dated February 21, 1997, except for Note 13 as to
which the date is June 30, 1997, on our audits of the consolidated financial
statements of Kevco, Inc. as of December 31, 1996 and 1995 and for each of the
two years in the period ended December 31, 1996. We also consent to the
reference to our firm under the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Fort Worth, Texas
January 21, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-43691) of our report dated March 24, 1995, on our audit of the
financial statements of Kevco, Inc. for the year ended December 31, 1994. We
also consent to the reference to our firm under the caption "Experts."
/s/ Rylander, Clay & Opitz, L.L.P.
Fort Worth, Texas
January 21, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of Kevco, Inc. of our report dated February
18, 1997 relating to the consolidated financial statements of Shelter
Components Corporation as of December 31, 1996 and 1995 and for the two years
then ended, which appears in such Prospectus. We also consent to the reference
to us under the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
Indianapolis, Indiana
December 29, 1997
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-43691) of our report dated February 7, 1995, on our audit of the
consolidated statements of income, shareholders' equity and cash flows of
Shelter Components Corporation and subsidiaries for the year ended December
31, 1994. We also consent to the reference to our firm under the caption
"Experts."
/s/ Coopers & Lybrand L.L.P.
South Bend, Indiana
January 21, 1998
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-43691) of our report dated February 14, 1997, except for Note K which
is February 28, 1997, on our audits of the consolidated financial statements
of Bowen Supply, Inc. and Subsidiary as of December 31, 1996 and 1995 and for
the years then ended. We also consent to the reference to our firm under the
caption "Experts."
/s/ Dougherty McKinnon & Luby
Columbus, Georgia
January 21, 1998
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-43691) of our report dated November 8, 1996, except for Note 9 as to
which the date is February 27, 1997, on our audits of the financial statements
of Consolidated Forest Products, L.L.C. as of September 29, 1996 and October
1, 1995 and for the year ended September 29, 1996 and the period December 2,
1994 to October 1, 1995. We also consent to the reference to our firm under
the caption "Experts."
/s/ Coopers & Lybrand L.L.P.
Fort Worth, Texas
January 21, 1998
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT AUDITORS
We consent to the inclusion in this registration statement on Form S-4 (File
No. 333-43691) of our report dated February 28, 1995, on our audit of the
consolidated financial statements of Service Supply Systems, Inc. and
Subsidiary for the year ended December 31, 1994. We also consent to the
reference to our firm under the caption "Experts."
/s/ Rumsey & Huckaby, P.C.
Cordele, Georgia
January 21, 1998
<PAGE>
EXHIBIT 25
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
=====================
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _______
=====================
UNITED STATES TRUST COMPANY OF NEW YORK
(Exact name of trustee as specified in its charter)
NEW YORK 13-3818954
(Jurisdiction of incorporation (I. R. S. Employer
if not a U. S. national bank) Identification No.)
114 WEST 47TH STREET
NEW YORK, NEW YORK 10036-1532
(Address of principal (Zip Code)
executive offices)
NONE
(Name, address and telephone number of agent for service)
========================
KEVCO, INC.
(Exact name of obligor as specified in its charter)
TEXAS 75-2666013
(State or other jurisdiction of Tax I.D. #
incorporation or organization)
1300 S. UNIVERSITY DRIVE, SUITE 1300
FORT WORTH, TEXAS 76107
(Address of principal executive offices) (Zip Code)
10 3/8% SENIOR SUBORDINATED NOTES
(Title of the indenture securities)
<PAGE>
- 2 -
GENERAL
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.
FEDERAL RESERVE BANK OF NEW YORK (2ND DISTRICT), NEW YORK, NEW YORK
(BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM)
FEDERAL DEPOSIT INSURANCE CORPORATION, WASHINGTON, D.C.
NEW YORK STATE BANKING DEPARTMENT, ALBANY, NEW YORK
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
THE TRUSTEE IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
2. Affiliations with the Obligor
-----------------------------
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
NONE
3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 AND 15:
THE OBLIGOR IS CURRENTLY NOT IN DEFAULT UNDER ANY OF ITS OUTSTANDING
SECURITIES FOR WHICH UNITED STATES TRUST COMPANY OF NEW YORK IS TRUSTEE.
ACCORDINGLY, RESPONSES TO ITEMS 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 AND
15 OF FORM T-1 ARE NOT REQUIRED UNDER GENERAL INSTRUCTION B.
16. List of Exhibits
----------------
T-1.1 -- ORGANIZATION CERTIFICATE, AS AMENDED, ISSUED BY THE STATE OF
NEW YORK BANKING DEPARTMENT TO TRANSACT BUSINESS AS A TRUST
COMPANY, IS INCORPORATED BY REFERENCE TO EXHIBIT T-1.1 TO
FORM T-1 FILED ON SEPTEMBER 15, 1995 WITH THE COMMISSION
PURSUANT TO THE TRUST INDENTURE ACT OF 1939, AS AMENDED BY
THE TRUST INDENTURE REFORM ACT OF 1990 (REGISTRATION NO. 33-
97056).
T-1.2 -- INCLUDED IN EXHIBIT T-1.1.
T-1.3 -- INCLUDED IN EXHIBIT T-1.1.
<PAGE>
- 3 -
16. List of Exhibits
----------------
(CONT'D)
T-1.4 -- THE BY-LAWS OF UNITED STATES TRUST COMPANY OF NEW YORK, AS
AMENDED, IS INCORPORATED BY REFERENCE TO EXHIBIT T-1.4 TO
FORM T-1 FILED ON SEPTEMBER 15, 1995 WITH THE COMMISSION
PURSUANT TO THE TRUST INDENTURE ACT OF 1939, AS AMENDED BY
THE TRUST INDENTURE REFORM ACT OF 1990 (REGISTRATION NO.
33-97056).
T-1.6 -- THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE
TRUST INDENTURE ACT OF 1939, AS AMENDED BY THE TRUST
INDENTURE REFORM ACT OF 1990.
T-1.7 -- A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR
EXAMINING AUTHORITY.
NOTE
====
AS OF DECEMBER 19, 1997, THE TRUSTEE HAD 2,999,020 SHARES OF COMMON STOCK
OUTSTANDING, ALL OF WHICH ARE OWNED BY ITS PARENT COMPANY, U.S. TRUST
CORPORATION. THE TERM "TRUSTEE" IN ITEM 2, REFERS TO EACH OF UNITED STATES
TRUST COMPANY OF NEW YORK AND ITS PARENT COMPANY, U.S. TRUST CORPORATION.
IN ANSWERING ITEM 2 IN THIS STATEMENT OF ELIGIBILITY AS TO MATTERS PECULIARLY
WITHIN THE KNOWLEDGE OF THE OBLIGOR OR ITS DIRECTORS, THE TRUSTEE HAS RELIED
UPON INFORMATION FURNISHED TO IT BY THE OBLIGOR AND WILL RELY ON INFORMATION TO
BE FURNISHED BY THE OBLIGOR AND THE TRUSTEE DISCLAIMS RESPONSIBILITY FOR THE
ACCURACY OR COMPLETENESS OF SUCH INFORMATION.
__________________
PURSUANT TO THE REQUIREMENTS OF THE TRUST INDENTURE ACT OF 1939, THE TRUSTEE,
UNITED STATES TRUST COMPANY OF NEW YORK, A CORPORATION ORGANIZED AND EXISTING
UNDER THE LAWS OF THE STATE OF NEW YORK, HAS DULY CAUSED THIS STATEMENT OF
ELIGIBILITY TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, ALL IN THE CITY OF NEW YORK, AND STATE OF NEW YORK, ON THE 4TH OF
DECEMBER 1997.
UNITED STATES TRUST COMPANY
OF NEW YORK, TRUSTEE
BY: /s/ Gerard F. Ganey
-------------------
GERARD F. GANEY
SENIOR VICE PRESIDENT
<PAGE>
Exhibit T-1.6
-------------
THE CONSENT OF THE TRUSTEE REQUIRED BY SECTION 321(B) OF THE ACT.
UNITED STATES TRUST COMPANY OF NEW YORK
114 WEST 47TH STREET
NEW YORK, NY 10036
DECEMBER 19, 1997
SECURITIES AND EXCHANGE COMMISSION
450 5TH STREET, N.W.
WASHINGTON, DC 20549
GENTLEMEN:
PURSUANT TO THE PROVISIONS OF SECTION 321(B) OF THE TRUST INDENTURE ACT OF 1939,
AS AMENDED BY THE TRUST INDENTURE REFORM ACT OF 1990, AND SUBJECT TO THE
LIMITATIONS SET FORTH THEREIN, UNITED STATES TRUST COMPANY OF NEW YORK ("U.S.
TRUST") HEREBY CONSENTS THAT REPORTS OF EXAMINATIONS OF U.S. TRUST BY FEDERAL,
STATE, TERRITORIAL OR DISTRICT AUTHORITIES MAY BE FURNISHED BY SUCH AUTHORITIES
TO THE SECURITIES AND EXCHANGE COMMISSION UPON REQUEST THEREFOR.
VERY TRULY YOURS,
UNITED STATES TRUST COMPANY
OF NEW YORK
/s/ Gerard F. Ganey
-------------------
BY: /S/ GERARD F. GANEY
SENIOR VICE PRESIDENT
<PAGE>
EXHIBIT T-1.7
UNITED STATES TRUST COMPANY OF NEW YORK
CONSOLIDATED STATEMENT OF CONDITION
SEPTEMBER 30, 1997
------------------
($ IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
- ------
CASH AND DUE FROM BANKS $ 116,582
SHORT-TERM INVESTMENTS 183,652
SECURITIES, AVAILABLE FOR SALE 691,965
LOANS 1,669,611
LESS: ALLOWANCE FOR CREDIT LOSSES 16,067
----------
NET LOANS 1,653,544
PREMISES AND EQUIPMENT 61,796
OTHER ASSETS 125,121
----------
Total Assets $2,832,660
==========
LIABILITIES
- -----------
DEPOSITS:
NON-INTEREST BEARING $ 541,619
INTEREST BEARING 1,617,028
----------
TOTAL DEPOSITS 2,158,647
SHORT-TERM CREDIT FACILITIES 365,235
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES 141,793
----------
Total Liabilities $2,665,675
==========
STOCKHOLDER'S EQUITY
- --------------------
Common Stock 14,995
CAPITAL SURPLUS 49,542
RETAINED EARNINGS 99,601
UNREALIZED GAINS (LOSSES) ON SECURITIES
AVAILABLE FOR SALE, NET OF TAXES 2,847
----------
Total Stockholder's Equity 166,985
----------
Total Liabilities and
Stockholder's Equity $2,832,660
==========
</TABLE>
I, RICHARD E. BRINKMANN, SENIOR VICE PRESIDENT & COMPTROLLER OF THE NAMED BANK
DO HEREBY DECLARE THAT THIS STATEMENT OF CONDITION HAS BEEN PREPARED IN
CONFORMANCE WITH THE INSTRUCTIONS ISSUED BY THE APPROPRIATE REGULATORY AUTHORITY
AND IS TRUE TO THE BEST OF MY KNOWLEDGE AND BELIEF.
RICHARD E. BRINKMANN, SVP & CONTROLLER
NOVEMBER 13, 1997
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
TO TENDER FOR EXCHANGE
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
KEVCO, INC.
PURSUANT TO THE PROSPECTUS DATED _______________, 1998
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON MARCH 2, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
PLEASE READ CAREFULLY THE ATTACHED INSTRUCTIONS
If you desire to accept the Exchange Offer, this Letter of Transmittal should be
completed, signed, and submitted to the Exchange Agent:
<TABLE>
<S> <C> <C>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
United States Trust Company of United States Trust Company of United States Trust Company of
New York New York New York
770 Broadway 111 Broadway P.O. Box 844
13th Floor-Corporate Trust Operations Lower Level Cooper Station
New York, New York 10003-9598 New York, New York 10006-1906 New York, New York 10276-0844
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
FOR ANY QUESTIONS REGARDING THIS LETTER OF TRANSMITTAL OR FOR ANY
ADDITIONAL INFORMATION, YOU MAY CONTACT THE EXCHANGE AGENT BY TELEPHONE AT 800-
548-6565.
The undersigned hereby acknowledges receipt of the Prospectus dated
_______________, 1998 (the "Prospectus") of Kevco, Inc., a Texas corporation
(the "Issuer"), and this Letter of Transmittal (the "Letter of Transmittal"),
that together constitute the Issuer's offer (the "Exchange Offer") to exchange
$1,000 in principal amount of its Series B 10 3/8% Senior Subordinated Notes due
2007 (the "Exchange Notes"), which have been registered under the Securities Act
of 1933, as amended (the "Securities Act"), pursuant to a Registration
Statement, for each $1,000 in principal amount of its outstanding 10 3/8% Senior
Subordinated Notes due 2007 (the "Old Notes"), of which $105,000,000 aggregate
principal amount is outstanding. Capitalized terms used but not defined herein
have the meanings ascribed to them in the Prospectus.
The undersigned hereby tenders the Old Notes described in Box 1 below (the
"Tendered Notes") pursuant to the terms and conditions described in the
Prospectus and this Letter of Transmittal. The undersigned is the registered
owner of all the Tendered Notes and the undersigned represents that it has
received from each beneficial owner of the Tendered Notes ("Beneficial Owners")
a duly completed and executed form of "Instructions to Registered Holder
<PAGE>
and/or Book-Entry Transfer Facility Participant from Beneficial Owner"
accompanying this Letter of Transmittal, instructing the undersigned to take the
action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Tendered
Notes, the undersigned hereby exchanges, assigns, and transfers to, or upon the
order of, the Issuer, all right, title, and interest in, to, and under the
Tendered Notes.
Please issue the Exchange Notes exchanged for Tendered Notes in the name(s)
of the undersigned. Similarly, unless otherwise indicated under "Special
Delivery Instructions" below (Box 3), please send or cause to be sent the
certificates for the Exchange Notes (and accompanying documents, as appropriate)
to the undersigned at the address shown below in Box 1.
The undersigned hereby irrevocably constitutes and appoints the Exchange
Agent as the true and lawful agent and attorney in fact of the undersigned with
respect to the Tendered Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest), to
(i) deliver the Tendered Notes to the Issuer or cause ownership of the Tendered
Notes to be transferred to, or upon the order of, the Issuer, on the books of
the registrar for the Old Notes and deliver all accompanying evidences of
transfer and authenticity to, or upon the order of, the Issuer upon receipt by
the Exchange Agent, as the undersigned's agent, of the Exchange Notes to which
the undersigned is entitled upon acceptance by the Issuer of the Tendered Notes
pursuant to the Exchange Offer, and (ii) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Tendered Notes, all in
accordance with the terms of the Exchange Offer.
The undersigned understands that tenders of Old Notes pursuant to the
procedures described under the caption "The Exchange Offer," in the Prospectus
and in the instructions hereto will constitute a binding agreement between the
undersigned and the Issuer upon the terms and subject to the conditions of the
Exchange Offer, subject only to withdrawal of such tenders on the terms set
forth in the Prospectus under the caption "The Exchange Offer-Withdrawal of
Tenders." All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and any Beneficial Owner(s), and
every obligation of the undersigned or any Beneficial Owners hereunder shall be
binding upon the heirs, representatives, successors, and assigns of the
undersigned and such Beneficial Owner(s).
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, assign, and transfer the Tendered
Notes and that the Issuer will acquire good and unencumbered title thereto, free
and clear of all liens, restrictions, charges, encumbrances, and adverse claims
when the Tendered Notes are acquired by the Issuer as contemplated herein. The
undersigned and each Beneficial Owner will, upon request, execute and deliver
any additional documents reasonably requested by the Issuer or the Exchange
Agent as necessary or desirable to complete and give effect to the transactions
contemplated hereby.
The undersigned hereby represents and warrants that the information set
forth in Box 2 is true and correct.
By accepting the Exchange Offer, the undersigned hereby represents and
warrants that (i) the Exchange Notes to be acquired by the undersigned and any
Beneficial Owner(s) in connection with the Exchange Offer are being acquired by
the undersigned and any Beneficial Owner(s) in the ordinary course of business
of the undersigned and any Beneficial Owner(s), (ii) the undersigned and each
Beneficial Owner are not participating, do not intend to participate, and have
no arrangement or understanding with any person to participate, in the
distribution of the Exchange Notes, (iii) neither the undersigned nor any
Beneficial Owner is an "affiliate," as defined in Rule 405 under the Securities
Act, of the Issuer, and (iv) the undersigned and each Beneficial Owner
acknowledge and agree that any person participating in the Exchange Offer with
the intention or for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
of 1933, as amended (together with the rules and regulations promulgated
thereunder, the "Securities Act"), in connection with a secondary resale of the
Exchange Notes acquired by such person and cannot rely on the position of the
Staff of the Securities and Exchange Commission (the "Commission") set forth in
the no-action letters that are discussed in the section of the Prospectus
entitled "The Exchange Offer." In addition, by accepting the Exchange Offer, the
undersigned hereby (i) represents and warrants that, if the undersigned or any
Beneficial Owner of the Old Notes is a Participating Broker
2
<PAGE>
Dealer, such Participating Broker-Dealer acquired the Old Notes for its own
account as a result of market-making activities or other trading activities and
has not entered into any arrangement or understanding with the Company or any
affiliate of the Company (within the meaning of Rule 405 under the Securities
Act) to distribute the Exchange Notes to be received in the Exchange Offer, and
(ii) acknowledges that, by receiving Exchange Notes for its own account in
exchange for Old Notes, where such Old Notes were acquired as a result of
market-making activities or other trading activities, such Participating Broker-
Dealer will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes (provided that, by so
acknowledging and by delivering a prospectus such Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act).
Holders of Old Notes whose Old Notes are accepted for exchange will not
receive accrued interest on such Old Notes for any period from and after the
last date to which interest has been paid or duly provided for on such Old Notes
prior to the original issue date of the Exchange Notes or, if no such interest
has been paid or duly provided for, will not receive any accrued interest on
such Old Notes, and the undersigned waives the right to receive any interest on
such Old Notes accrued from and after the last date to which interest has been
paid or duly provided for on such Old Notes or, if no such interest has been
paid or duly provided for, from and after December 1, 1997.
[___] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED HEREWITH.
[___] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY DELIVERED TO THE EXCHANGE AGENT AND COMPLETE "USE
OF GUARANTEED DELIVERY" BELOW (BOX 4).
[___] CHECK HERE IF TENDERED NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE "USE OF BOOK-ENTRY TRANSFER" BELOW (BOX 5).
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING THE BOXES
<TABLE>
<CAPTION>
=====================================================================================
BOX 1
DESCRIPTION OF OLD NOTES TENDERED (Attach additional signed pages, if necessary)
<S> <C> <C> <C>
NAME(S) AND ADDRESS(ES) OF CERTIFICATE AGGREGATE AGGREGATE
REGISTERED NOTE HOLDER(S), NUMBER(S) OF PRINCIPAL PRINCIPAL
EXACTLY AS NAME(S) APPEAR(S) ON OLD NOTES* AMOUNT AMOUNT
NOTE CERTIFICATE(S) REPRESENTED BY TENDERED**
CERTIFICATE(S)
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
TOTAL
=====================================================================================
</TABLE>
* Need not be completed by persons tendering by book-entry transfer.
** The minimum permitted tender is $1,000 in principal amount of Old Notes.
All other tenders must be in integral multiples of $1,000 of principal
amount. Unless otherwise indicated in this column, the principal amount of
all Old Note Certificates identified in this Box 1 or delivered to the
Exchange Agent herewith shall be deemed tendered. See Instruction 4.
3
<PAGE>
=============================================================================
BOX 2
BENEFICIAL OWNER(S)
STATE OF PRINCIPAL RESIDENCE OF EACH PRINCIPAL AMOUNT OF TENDERED NOTES
BENEFICIAL OWNER OF TENDERED NOTES HELD FOR ACCOUNT OF BENEFICIAL OWNER
- -------------------------------------------------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
===============================================================================
===============================================================================
BOX 3
- -------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 5, 6 AND 7)
- -------------------------------------------------------------------------------
TO BE COMPLETED ONLY IF EXCHANGE NOTES EXCHANGED FOR OLD NOTES AND UNTENDERED
NOTES ARE TO BE SENT TO SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE
UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Note(s) and any untendered Old Notes to:
Name(s):
- -------------------------------------------------------------------------------
(please print)
- -------------------------------------------------------------------------------
Address:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(include Zip Code)
Tax Identification or Social Security No.:
===============================================================================
4
<PAGE>
==============================================================================
BOX 4
- ------------------------------------------------------------------------------
USE OF GUARANTEED DELIVERY
(SEE INSTRUCTION 2)
TO BE COMPLETED ONLY IF OLD NOTES ARE BEING TENDERED BY MEANS OF A NOTICE OF
GUARANTEED DELIVERY.
Name(s) of Registered Holder(s):
- ------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Name of Institution which Guaranteed Delivery:
--------------------------------
==============================================================================
===============================================================================
BOX 5
USE OF BOOK-ENTRY TRANSFER
(SEE INSTRUCTION 1)
TO BE COMPLETED ONLY IF DELIVERY OF TENDERED NOTES IS TO BE MADE BY BOOK-ENTRY
TRANSFER.
Name of Tendering Institution:
-------------------------------------------------
Account Number:
----------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------
================================================================================
5
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================================
BOX 6
TENDERING HOLDER SIGNATURE
(SEE INSTRUCTIONS 1 AND 5) IN ADDITION, COMPLETE SUBSTITUTE FORM W-9
<S> <C>
X Signature Guarantee
------------------------------------------------------
X (If required by Instruction 5)
- -------------------------------------------------------
(Signature of Registered Authorized Signature
Holder(s) or Authorized Signatory)
X
-------------------------------------------------------
Note: The above lines must be signed by the
registered holder(s) of Old Notes as their name(s) Name:
appear(s) on the Old Notes or by person(s) authorized ---------------------------------------------------
to become registered holder(s) (evidence of which (please print)
authorization must be transmitted with this Letter of Title:
Transmittal). If signature is by a trustee, executor, --------------------------------------------------
administrator, guardian, attorney-in-fact, officer, or Name of Firm:
other person acting in a fiduciary or representative -------------------------------------------
capacity, such person must set forth his or her full
title below. See Instruction 5. (Must be an Eligible Institution
as defined in Instruction 2)
Name(s) Address:
------------------------------------------------ ------------------------------------------------
------------------------------------------------
Capacity:
---------------------------------------------- ------------------------------------------------
(include Zip Code)
Street Address:
---------------------------------------- Area Code and Telephone Number:
---------------------------------------- ------------------------------------------------
----------------------------------------
(include Zip Code)
Area Code and Telephone Number: Dated:
------------------------------------------------
----------------------------------------
Tax Identification or Social
Security Number:
----------------------------------------
=================================================================================================================
</TABLE>
<TABLE>
=================================================================================================================
BOX 7
BROKER-DEALER STATUS
- -----------------------------------------------------------------------------------------------------------------
<S> <C>
[__] Check this box if the Beneficial Owner of the Old Notes is a Participating Broker-Dealer and such
Participating Broker-Dealer acquired the Old Notes for its own account as a result of market-making
activities or other trading activities. In such case, you will be sent extra copies of the Prospectus.
=================================================================================================================
</TABLE>
6
<PAGE>
PAYOR'S NAME: KEVCO, INC.
- -------------------------------------------------------------------------------
Name (if joint names, list first and circle the name of the person or
entity whose number you enter in Part 1 below. See instructions if
your name has chanced.)
--------------------------------------------------------------------
Address
--------------------------------------------------------------------
City, State and ZIP Code
SUBSTITUTE
--------------------------------------------------------------------
FORM W-9
Department List account number(s) here (optional)
of the
Treasury
--------------------------------------------------------------------
Internal Revenue Service
PART 1--PLEASE PROVIDE YOUR TAXPAYER Social
IDENTIFICATION NUMBER ("TIN") IN THE BOX Security
AT RIGHT AND CERTIFY BY SIGNING AND Number or
DATING BELOW TIN
--------------------------------------------------------------------
PART 2--Check the box if you are NOT subject to backup withholding
under the provisions of section 3406(a)(1)(C) of the Internal Revenue
Code because (1) you have not been notified that you are subject to
backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified you that
you are no longer subject to backup withholding.
[___]
- --------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF
PERJURY, I CERTIFY THAT THE INFORMATION PART 3--
PROVIDED ON THIS FORM IS TRUE, CORRECT
AND COMPLETE.
Awaiting
SIGNATURE________________________ DATE________ TIN [__]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE 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.
7
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND OLD NOTES. A properly
completed and duly executed copy of this Letter of Transmittal, including
Substitute Form W-9, and any other documents required by this Letter of
Transmittal must be received by the Exchange Agent at its address set forth
herein, and either certificates for Tendered Notes must be received by the
Exchange Agent at its address set forth herein or such Tendered Notes must be
transferred pursuant to the procedures for book-entry transfer described in the
Prospectus under the caption "Exchange Offer --Book-Entry Transfer" (and a
confirmation of such transfer received by the Exchange Agent), in each case
prior to 5:00 p.m., New York time, on the Expiration Date. The method of
delivery of certificates for Tendered Notes, this Letter of Transmittal and all
other required documents to the Exchange Agent is at the election and risk of
the tendering holder and the delivery will be deemed made only when actually
received by the Exchange Agent. If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. Instead of delivery
by mail, it is recommended that the Holder use an overnight or hand delivery
service. In all cases, sufficient time should be allowed to assure timely
delivery. No Letter of Transmittal or Old Notes should be sent to the Company.
Neither the Issuer nor the registrar is under any obligation to notify any
tendering holder of the Issuer's acceptance of Tendered Notes prior to the
closing of the Exchange Offer.
2. GUARANTEED DELIVERY PROCEDURES. Holders who wish to tender their Old
Notes but whose Old Notes are not immediately available, and who cannot deliver
their Old Notes, this Letter of Transmittal or any other documents required
hereby to the Exchange Agent prior to the Expiration Date must tender their Old
Notes according to the guaranteed delivery procedures set forth below, including
completion of Box 4. Pursuant to such procedures: (i) such tender must be made
by or through a firm which is a member of a recognized Medallion Program
approved by the Securities Transfer Association Inc. (an "Eligible Institution")
and the Notice of Guaranteed Delivery must be signed by the holder; (ii) prior
to the Expiration Date, the Exchange Agent must have received from the holder
and the Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of the Tendered Notes and the
principal amount of Tendered Notes, stating that the tender is being made
thereby and guaranteeing that, within five New York Stock Exchange trading days
after the Expiration Date, this Letter of Transmittal together with the
certificates representing the Old Notes and any other required documents will be
deposited by the Eligible Institution with the Exchange Agent; and (iii) such
properly completed and executed Letter of Transmittal, as well as all other
documents required by this Letter of Transmittal and the certificate(s)
representing all Tendered Notes in proper form for transfer, must be received by
the Exchange Agent within five New York Stock Exchange trading days after the
Expiration Date. 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 5:00 p.m., New York time, on 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 an Eligible Holder who attempted to use the guaranteed
delivery process.
3. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS. Only a holder in
whose name Tendered Notes are registered on the books of the registrar (or the
legal representative or attorney-in-fact of such registered holder) may execute
and deliver this Letter of Transmittal. Any Beneficial Owner of Tendered Notes
who is not the registered holder must arrange promptly with the registered
holder to execute and deliver this Letter of Transmittal on his or her behalf
through the execution and delivery to the registered holder of the Instructions
to Registered Holder and/or Book-Entry Transfer Facility Participant from
Beneficial Owner form accompanying this Letter of Transmittal.
4. PARTIAL TENDERS. Tenders of Old Notes will be accepted only in
integral multiples of $1,000 in principal amount. If less than the entire
principal amount of Old Notes held by the holder is tendered, the tendering
holder should fill in the principal amount tendered in the column labeled
"Aggregate Principal Amount Tendered" of the box entitled "Description of Old
Notes Tendered" (Box 1) above. The entire principal amount of Old Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated. If the entire principal amount of all Old Notes held by
the holder is not tendered, then Old Notes for the principal amount of Old
8
<PAGE>
Notes not tendered and Exchanged Notes issued in exchange for any Old Notes
tendered and accepted will be sent to the Holder at his or her registered
address, unless a different address is provided in the appropriate box on this
Letter of Transmittal, as soon as practicable following the Expiration Date.
5. SIGNATURES ON THE LETTER OF TRANSMITTAL; BOND POWERS AND ENDORSEMENTS;
GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed by the
registered holder(s) of the Tendered Notes, the signature must correspond with
the name(s) as written on the face of the Tendered Notes without alteration,
enlargement or any change whatsoever.
If any of the Tendered Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal. If any Tendered
Notes are held in different names, it will be necessary to complete, sign and
submit as many separate copies of the Letter of Transmittal as there are
different names in which Tendered Notes are held.
If this Letter of Transmittal is signed by the registered holder(s) of
Tendered Notes, and Exchange Notes issued in exchange therefor are to be issued
(and any untendered principal amount of Old Notes is to be reissued) in the name
of the registered holder(s), then such registered holder(s) need not and should
not endorse any Tendered Notes, nor provide a separate bond power. In any other
case, such registered holder(s) must either properly endorse the Tendered Notes
or transmit a properly completed separate bond power with this Letter of
Transmittal, with the signature(s) on the endorsement or bond power guaranteed
by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of any Tendered Notes, such Tendered Notes must be endorsed
or accompanied by appropriate bond powers, in each case, signed as the name(s)
of the registered holder(s) appear(s) on the Tendered Notes, with the
signature(s) on the endorsement or bond power guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Tendered 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, unless waived by the
Issuer, evidence satisfactory to the Issuer of their authority to so act must be
submitted with this Letter of Transmittal.
Endorsements on Tendered Notes or signatures on bond powers required by
this Instruction 5 must be guaranteed by an Eligible Institution.
Signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution unless the Tendered Notes are tendered (i) by a registered holder
who has not completed the box set forth herein entitled "Special Delivery
Instructions" (Box 3) or (ii) by an Eligible Institution.
6. SPECIAL DELIVERY INSTRUCTIONS. Tendering holders should indicate, in
the applicable box (Box 3), the name and address to which the Exchange Notes
and/or substitute Old Notes for principal amounts not tendered or not accepted
for exchange are to be sent, if different from the name and address of the
person signing this Letter of Transmittal. In the case of issuance in a
different name, the taxpayer identification or social security number of the
person named must also be indicated.
7. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the exchange of Tendered Notes pursuant to the Exchange Offer.
If, however, a transfer tax is imposed for any reason other than the transfer
and exchange of Tendered Notes pursuant to the Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or on any
other person) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with this
Letter of Transmittal, the amount of such transfer taxes will be billed directly
to such tendering holder.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the Tendered Notes listed in this Letter of
Transmittal.
9
<PAGE>
8. TAX IDENTIFICATION NUMBER. Federal income tax law requires that the
holder(s) of any Tendered Notes which are accepted for exchange must provide the
Issuer (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If the Issuer is not provided with the correct TIN, the Holder
may be subject to backup withholding and a $50 penalty imposed by the Internal
Revenue Service. (If withholding results in an over-payment of taxes, a refund
may be obtained.) Certain holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements.
To prevent backup withholding, each holder of Tendered Notes must provide
such holder's correct TIN by completing the Substitute Form W-9 set forth
herein, certifying that the TIN provided is correct (or that such holder is
awaiting a TIN), and that (i) the holder has not been notified by the Internal
Revenue Service that such holder is subject to backup withholding as a result of
failure to report all interest or dividends or (ii) the Internal Revenue Service
has notified the holder that such holder is no longer subject to backup
withholding. If the Tendered Notes are registered in more than one name or are
not in the name of the actual owner, consult the "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for information on
which TIN to report.
The Issuer reserves the right in its sole discretion to take whatever steps
are necessary to comply with the Issuer's obligation regarding backup
withholding.
9. VALIDITY OF TENDERS. All questions as to the validity, form,
eligibility (including time of receipt), acceptance and withdrawal of Tendered
Notes will be determined by the Issuer in its sole discretion, which
determination will be final and binding. The Issuer reserves the right to
reject any and all Old Notes not validly tendered or any Old Notes the Issuer's
acceptance of which would, in the opinion of the Issuer or their counsel, be
unlawful. The Issuer also reserves the right to waive any conditions of the
Exchange Offer or defects or irregularities in tenders of Old Notes as to any
ineligibility of any holder who seeks to tender Old Notes in the Exchange Offer.
The interpretation of the terms and conditions of the Exchange Offer (including
this Letter of Transmittal and the instructions hereto) by the Issuer shall 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
Issuer shall determine. Neither the Issuer, 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 defects or 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 by the Exchange Agent to the tendering holders, unless
otherwise provided in this Letter of Transmittal, as soon as practicable
following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
amend, waive or modify
any of the conditions in the Exchange Offer in the case of any Tendered Notes.
11. NO CONDITIONAL TENDER. No alternative, conditional, irregular, or
contingent tender of Old Notes or transmittal of this Letter of Transmittal will
be accepted.
12. MUTILATED, LOST, STOLEN OR DESTROYED NOTES. Any tendering Holder
whose Old Notes have been mutilated, lost, stolen or destroyed should contact
the Exchange Agent at the address indicated herein for further instructions.
13. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus or this
Letter of Transmittal may be directed to the Exchange Agent at the address
indicated herein. Holders may also contact their broker, dealer, commercial
bank, trust company or other nominee for assistance concerning the Exchange
Offer.
14. ACCEPTANCE OF TENDERED NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN OF
OLD NOTES. Subject to the terms and conditions of the Exchange Offer, the
Issuer will accept for exchange all validly tendered Old Notes as soon as
practicable after the Expiration Date and will issue Exchange Notes therefor as
soon as practicable thereafter. For purposes of the Exchange Offer, the Issuer
shall be deemed to have accepted
10
<PAGE>
tendered Old Notes when, as and if the Issuer has given written or oral notice
(immediately followed in writing) thereof to the Exchange Agent. If any Tendered
Notes are not exchanged pursuant to the Exchange Offer for any reason, such
unexchanged Old Notes will be returned, without expense, to the undersigned at
the address shown in Box 1 or at a different address as may be indicated herein
under "Special Delivery Instructions" (Box 3).
15. WITHDRAWAL. Tenders may be withdrawn only pursuant to the procedures
set forth in the Prospectus under the caption "The Exchange Offer."
11
<PAGE>
EXHIBIT 99.2
INSTRUCTIONS TO REGISTERED HOLDER AND/OR
BOOK-ENTRY TRANSFER FACILITY PARTICIPANT FROM BENEFICIAL OWNER
OF
KEVCO, INC.
10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
To Registered Holder and/or Participant of the Book-Entry Transfer
Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
_______________, 1998 (the "Prospectus") of Kevco, Inc., a Texas corporation
(the "Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder and/or book-entry transfer
facility participant, as to action to be taken by you relating to the Exchange
Offer with respect to the 10 3/8% Series A Senior Subordinated Notes due 2007
(the "Old Notes") held by you for the account of the undersigned.
The aggregate face amount of the Old Notes held by you for the account of
the undersigned is (FILL IN AMOUNT):
$__________________ of the 10 3/8% Series A Senior Subordinated Notes due
2007
With respect to the Exchange Offer, the undersigned hereby instructs you
(CHECK APPROPRIATE BOX):
[ ] TO TENDER the following Old Notes held by you for the account of the
undersigned (INSERT PRINCIPAL AMOUNT OF NOTES TO BE TENDERED, IF ANY):
[ ] NOT TO TENDER any Old Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Old Notes held by you for
the account of the undersigned, it is understood that you are authorized (a) to
make, on behalf of the undersigned (and the undersigned, by its signature below,
hereby makes to you), the representation and warranties contained in the Letter
of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations that (i) the
undersigned is acquiring the Exchange Notes in the ordinary course of business
of the undersigned, (ii) the undersigned is not participating, does not
participate, and has no arrangement or understanding with any person to
participate in the distribution of the Exchange Notes, (iii) the undersigned
acknowledges that any person participating in the Exchange Offer for the purpose
of distributing the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Act"), in connection with a secondary resale transaction of the Exchange Notes
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer -
Resales of the Exchange Notes," and (iv) the undersigned is not an "affiliate,"
as defined in Rule 405 under the Act, of the Company; (b) to agree, on behalf of
the undersigned, as set forth in the Letter of Transmittal; and (c) to take such
other action as necessary under the Prospectus or the Letter of Transmittal to
effect the valid tender of such Old Notes.
<PAGE>
SIGN HERE
Name of Beneficial Owner(s):
---------------------------------------------------
Signature(s):
------------------------------------------------------------------
Names (please print):
----------------------------------------------------------
Address:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Telephone Number:
--------------------------------------------------------------
Taxpayer Identification or Social Security Number:
-----------------------------
Date:
--------------------------------------------------------------------------
<PAGE>
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 3/8% SENIOR SUBORDINATED NOTES DUE 2007
OF
KEVCO, INC.
Pursuant to the Prospectus Dated _______________, 1998
This form must be used by a holder of 10 3/8% Senior Subordinated Notes due
2007 (the "Old Notes") of Kevco, Inc., a Texas corporation (the "Company"), who
wishes to tender Old Notes to the Exchange Agent pursuant to the guaranteed
delivery procedures described in "The Exchange Offer - Guaranteed Delivery
Procedures" of the Company's Prospectus, dated _______________, 1998 (the
"Prospectus") and in Instruction 2 to the related Letter of Transmittal. Any
holder who wishes to tender Old Notes pursuant to such guaranteed delivery
procedures must ensure that the Exchange Agent receives this Notice of
Guaranteed Delivery prior to the Expiration Date of the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus or the Letter of Transmittal.
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK
TIME, ON MARCH 2, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE").
UNITED STATES TRUST COMPANY OF NEW YORK
(the "Exchange Agent")
<TABLE>
<S> <C> <C>
By Registered or
By Overnight Courier: By Hand: Certified Mail:
United States Trust Company of United States Trust Company of United States Trust Company of
New York New York New York
770 Broadway 111 Broadway P.O. Box 844
13th Floor-Corporate Trust Operations Lower Level Cooper Station
New York, New York 10003-9598 New York, New York 10006-1906 New York, New York 10276-0844
Attn: Corporate Trust Services Attn: Corporate Trust Services Attn: Corporate Trust Services
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible Institution"
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Old Notes set forth below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 2 of the Letter of Transmittal.
The undersigned hereby tenders the Old Notes listed below:
CERTIFICATE NUMBER(S) (IF KNOWN)
OF OLD NOTES OR ACCOUNT NUMBER AGGREGATE PRINCIPAL AGGREGATE PRINCIPAL
AT THE BOOK-ENTRY FACILITY AMOUNT REPRESENTED AMOUNT TENDERED
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- -------------------------------------------------------------------------------
Signature of Registered Holder(s)
or Authorized Signatory:
Date: 1997
- -------------------------------------- ------------------,
Address:
- -------------------------------------- ----------------------------
Name(s) of Registered
Holder(s):
---------------------------- ------------------------------------
- --------------------------------------- Area Code and Telephone No.
---------
- ---------------------------------------
This Notice of Guaranteed Delivery must be signed by the Holder(s) exactly
as their name(s) appear on certificates for Old Notes or on a security position
listing as the owner of Old Notes, or by person(s) authorized to become
Holder(s) by endorsements and documents transmitted with this Notice of
Guaranteed Delivery. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer or other person acting in a fiduciary or
representative capacity, such person must provide the following information.
Please print name(s) and address(es)
Name(s):
-----------------------------------------------------------------------
- -------------------------------------------------------------------------------
Capacity:
----------------------------------------------------------------------
Address(es):
-------------------------------------------------------------------
- -------------------------------------------------------------------------------
2
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a member of a registered national
securities exchange or of the National Association of Securities Dealers, Inc.,
or is a commercial bank or trust company having an office or correspondent in
the United States, or is otherwise an "eligible guarantor institution" within
the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of Transmittal
(or facsimile thereof), together with the Old Notes tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Old Notes
into the Exchange Agent's account at the Book-Entry Transfer Facility described
in the prospectus under the caption "The Exchange Offer - Guaranteed Delivery
Procedures" and in the Letter of Transmittal) and any other required documents,
all by 5:00 p.m., New York time, on the fifth New York Stock Exchange trading
day following the Expiration Date.
Name of Firm
--------------------------- ---------------------------------
(Authorized Signature)
Address:
-------------------------------
Name
------------------------------- ----------------------------
(Include Zip Code) (Please Print)
Area Code and Tel. No. Title
----------------- ----------------------------
Dated , 1997
--------------
DO NOT SEND SECURITIES WITH THIS FORM. ACTUAL SURRENDER OF SECURITIES MUST
BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, AN EXECUTED LETTER OF TRANSMITTAL.
3
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
----------------------------------------------
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and sole risk of the holder,
and the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. As an alternative to delivery by mail, the
holders may wish to consider using an overnight or hand delivery service. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedures, see Instruction 2 of the
Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
------------------------------------------------
Guaranteed Delivery is signed by the registered holder(s) of the Old Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Old Notes without alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the Book-Entry Transfer Facility whose name appears on a security position
listing as the owner of the Old Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Old Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Old Notes listed or a participant of the Book-Entry
Transfer Facility, this Notice of Guaranteed Delivery must be accompanied by
appropriate bond powers, signed as the name of the registered holder(s) appears
on the Old Notes or signed as the name of the participant shown on the Book-
Entry Transfer Facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and submit with the Letter of Transmittal evidence
satisfactory to the Company of such person's authority to so act.
3. Requests for Assistance or Additional Copies. Questions and requests
--------------------------------------------
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
4
