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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[Mark One]
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
to
Commission File Number
01-19826
MOHAWK INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1604305
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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<S> <C>
P. O. Box 12069, 160 S. Industrial Blvd., Calhoun, Georgia 30701
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (706) 629-7721
Securities Registered Pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
------------------- -----------------------------------------
Common Stock, $.01 par value New York Stock Exchange
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No[_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. [_]
The aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant (26,551,688 shares) on March 6, 2000 was
$547,628,565. The aggregate market value was computed by reference to the
closing price of the Common Stock on such date.
Number of shares of Common Stock outstanding as of March 6, 2000:
55,046,097 shares of Common Stock, $.01 par value.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Definitive Proxy Statement for the 2000 Annual Meeting of
Stockholders--Part III
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PART I
Item 1. Business
General
Mohawk Industries, Inc. ("Mohawk" or the "Company," a term which includes
the Company and its subsidiaries, including its primary operating subsidiaries,
Mohawk Carpet Corporation ("Mohawk Carpet"), Aladdin Manufacturing Corporation
("Aladdin Manufacturing", formerly known as Mohawk Manufacturing Corporation)
and Durkan Patterned Carpets, Inc. ("Durkan")) is a leading producer of woven
and tufted broadloom carpet and rugs for principally residential applications.
The Company is the second largest carpet and rug manufacturer in the United
States, with 1999 net sales of approximately $3.1 billion. The Company designs,
manufactures and markets carpet and rugs in a broad range of colors, textures
and patterns. The Company is widely recognized through its premier brand names,
some of which are "Mohawk," "Aladdin," "American Rug Craftsmen," "American
Weavers," "Bigelow," "Custom Weave," "Durkan," "Galaxy," "Harbinger," "Helios,"
"Horizon," "Image," "Karastan," "Mohawk Commercial," "Newmark Rug," "World" and
"WundaWeve," and markets its products primarily through carpet retailers, home
centers, mass merchandisers, department stores, commercial dealers and
commercial end users. Mohawk's operations are vertically integrated from the
extrusion of resin and post-consumer plastics into fiber, to the conversion of
fiber into yarn and to the manufacture and shipment of finished carpet and rugs.
History
The Company was organized in Delaware in 1988 to acquire Aladdin
Manufacturing from its predecessor owner, Mohasco Corporation, in a leveraged
buyout transaction. The Company completed its initial public offering of Common
Stock in April 1992, raising approximately $42.5 million in proceeds, which were
used to retire indebtedness and redeem preferred stock outstanding at that time.
Mohawk acquired Horizon Industries, Inc. ("Horizon") in October 1992 for
approximately $63.9 million in cash and 4,009,500 shares of Common Stock valued
at approximately $22.5 million. Mohawk purchased American Rug Craftsmen, Inc.
("American Rug") in April 1993 for approximately $32.0 million in cash and
Karastan Bigelow in July 1993 for approximately $155.5 million, which was
substantially all cash. In May 1993, the Company completed an offering of
4,725,000 shares of Common Stock. Of the total number of shares, 3,600,000
shares were sold by the Company and 1,125,000 shares were sold by selling
stockholders. The net proceeds to the Company were approximately $46.0 million.
On February 25, 1994, Mohawk acquired all of the common stock of Aladdin Mills,
Inc. ("Aladdin") in exchange for approximately 20,343,000 shares of Common
Stock, valued at $386.5 million, based upon the closing stock price at the date
the agreement was executed. On January 13, 1995, Mohawk acquired all of the
capital stock of Galaxy Carpet Mills, Inc. ("Galaxy") for $42.2 million in cash.
On July 23, 1997, the Company acquired certain assets of Diamond Rug &
Carpet Mills, Inc. ("Diamond") and other assets owned by Diamond's principal
shareholders for approximately $36.0 million, which consisted of $19.6 million
in cash at closing, $7.0 million in cash over the six-month period following
closing and a $9.4 million note payable in seven annual installments of
principal plus interest at 6%. The acquisition was accomplished through a plan
of reorganization filed by Diamond under Chapter 11 of the United States
Bankruptcy Code.
The Company completed its acquisitions of Newmark & James, Inc. ("Newmark")
and American Weavers LLC ("American Weavers"), on June 30, 1998 and August 10,
1998, respectively. On November 12, 1998, the Company acquired all of the
outstanding capital stock of World Carpets, Inc. ("World") in exchange for
approximately 4.9 million shares of the Company's common stock valued at $149.5
million, based on the closing stock price on the day the agreement was executed.
On January 29, 1999, the Company acquired certain assets of Image
Industries, Inc. ("Image") for approximately $192 million, including the
assumption of $30 million of tax exempt bonds, and on March 9, 1999, the Company
acquired all of the outstanding capital stock of Durkan, for approximately 3.1
million shares valued at $116.5 million based on the closing stock price the day
the letter of intent was executed.
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On October 23, 1997, the Board of Directors of the Company declared a
3-for-2 stock split that was paid as a 50% stock dividend on December 4, 1997,
to holders of record on November 4, 1997. All share information presented herein
gives effect to this stock split and the World and Durkan mergers.
Industry
According to the most recent figures available from the United States
Department of Commerce, worldwide carpet and rug sales volume of American
manufacturers and their domestic divisions was 1.8 billion square yards in 1998.
This volume represents a market in excess of approximately $10.9 billion at the
"mill level," which management believes, based on standard industry mark-ups,
translates into approximately $17.4 billion to $19.5 billion at the retail
level. Based upon data obtained from recent industry publications, the worldwide
carpet and rug sales volume of American manufacturers in 1999 was approximately
1.9 billion square yards and $11.1 billion. The overall level of sales in the
carpet industry is influenced by a number of factors, including consumer
confidence in spending for durable goods, interest rates, turnover in housing,
the condition of the residential and commercial construction industries and the
overall strength of the economy.
Broadloom carpet (defined as carpet over six feet by nine feet in size)
represented 82% of the volume shipped by the industry in 1998. Tufted broadloom
carpet (a category that refers to the manner of construction in addition to
size) represented 95% of the broadloom industry volume shipped in 1998. The
broadloom carpet industry has two primary markets, residential and commercial,
with the residential market making up approximately 74% of industry volume
shipped and the commercial market comprising approximately 26% in 1998. An
estimated 55% of industry shipments is made in response to replacement demand,
which usually involves exact yardage (or "cut order") shipments that typically
provide higher profit margins than sales of carpet sold in full rolls. Because
the replacement business generally involves higher quality carpet cut to order
by the manufacturer, rather than the dealer, this business tends to be more
profitable for manufacturers than the new construction business.
Products and Markets
The Company designs, manufactures and markets hundreds of styles of carpet,
rugs and mats in a broad range of colors, textures and patterns. Mohawk
positions its products in all price ranges and emphasizes quality, style,
performance and service. The Company is widely recognized through its premier
brand names, "Mohawk," "Aladdin," "American Rug Craftsmen," "American Weavers,"
"Bigelow," "Bigelow Commercial," "Custom Weave," "Durkan," "Galaxy,"
"Harbinger," "Helios," "Horizon," "Image," "Karastan," "Karastan Contract,"
"Mohawk Commercial," "Newmark Rug," "World" and "WundaWeve," and markets its
products primarily through carpet retailers, home centers, mass merchandisers,
department stores, commercial dealers, and commercial end users. Some products
are also marketed through private labeling programs.
Mohawk markets certain of its products outside the United States, but does
not consider sales of such products to be material.
Sales to residential customers represent a significant portion of the total
industry and the majority of the Company's sales. The Company currently markets
approximately 900 residential products to more than 25,000 customers, which
include independent retailers, department stores, mass merchandisers, buying
groups, and building and tenant improvement contractors.
The Company has positioned its premier residential brand names across all
price ranges. "Mohawk," "Custom Weave," "WundaWeve," "Bigelow," "Galaxy,"
"Horizon," "Helios," "Karastan" and "World," are positioned to sell primarily in
the medium-to-high retail price range in the residential broadloom market and
these lines are also sold under private labels. These lines have substantial
brand name recognition among carpet dealers and retailers with the "Karastan,"
"Mohawk" and "Bigelow" brands having the highest consumer recognition in the
industry. "Karastan" is the leader in the exclusive high-end market. The
"Aladdin" brand name competes primarily in the low-to-medium retail price range.
The Company believes it is considered a leader within the industry of U.S.
carpet manufacturers providing marketing support. Through dealer programs like
Karastan Gallery, Mohawk Color Center and Mohawk FloorScapes, the Company offers
intensive marketing and advertising support. These programs offer varying
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degrees of support to dealers in sales and management training, display racks,
exclusive promotions and assistance in certain administrative functions such as
consumer credit, advertising and insurance.
The Company generally markets its residential products through its
residential sales forces that report to common management on a regional basis.
All of the regional vice presidents report to one senior vice president of
sales. Each region has responsibility for sales, distribution and inventory
management in its region, all of which is coordinated by the senior vice
president of sales at a national level. The inventory management on a regional
level is accomplished by a hub-and-spoke distribution network. In this system,
Company trucks generally deliver carpet from mill sites to regional warehouses.
From there, it is shipped to local distribution warehouses, then to retailers.
The Company believes that the current structure of the residential sales group
has contributed to a more efficient and profitable organization.
The commercial customer base is divided into several groups: educational
institutions, corporate office space, hospitality facilities, retail space and
health care facilities. In addition, Mohawk produces and sells carpet for the
export market, the federal government and other niche businesses. Different
purchase decision makers and decision-making processes exist for each group. For
example, in the corporate office group, decisions are usually made by architects
or specifiers, whose responsibility is to manage the project budget and
coordinate interior design. In the institutional group, by comparison, decisions
are often made by purchasing agents employed by the end user who have
longstanding relationships with carpet manufacturers. The commercial market is
generally a more complex market in which to sell than the residential market.
In the commercial market, the Company markets its products under the brand
names "Mohawk Commercial," "Harbinger," "Aladdin," "Durkan Commercial," "World
Contract," "Karastan Contract" and "Bigelow Commercial." The marketing strategy
of the Mohawk Commercial, Karastan Contract and Bigelow Commercial brands is to
leverage the brands' traditional sales strength in the educational institution
part of the market to the office, hospitality, retail and health care groups.
These brands are comprised of specialized products for these groups that
emphasize product quality and specification rather than just price. The Company
has also added carpet tile to its product groups, which service the corporate
space market.
The Harbinger brand is a specialized line of commercial carpet generally
specified by architects and designers for end users in the hospitality,
corporate, health care and institutional market sectors. Harbinger products are
largely custom designed and colored and are marketed through its sales
organization of commercial carpet sales specialists. The Harbinger brand is
considered to be an industry leader in product quality, styling and innovation
for the high-end commercial market. Harbinger products were the first to
introduce "graphics" tufting technology to the industry and have maintained
their product development leadership by employing tufting and dyeing
technologies that produce intricate multicolored patterns.
The Aladdin brand is marketed primarily to the "mainstreet" sector of the
commercial market. The "mainstreet" sector is generally comprised of the low-to-
medium price range styles and is distributed primarily through retail dealers
for smaller installations.
Woven commercial products accounted for a significant portion of the
Company's net sales of commercial product in 1999, including the Mohawk
Commercial brand's exclusive woven interlock products, which are manufactured by
a unique weaving process that increases performance, wear and durability. The
Company's ability to make woven carpet under the Mohawk Commercial, Karastan
Contract and Bigelow Commercial brand names in large volume for commercial
applications differentiates it from other manufacturers, most of which produce
tufted carpet almost exclusively. Woven carpet and specifically the Company's
woven interlock products sell at higher prices than tufted carpet and generally
produce higher profit margins. Management believes that the Company is the
largest producer of woven carpet in the United States and that the Company has
several carpet weaving machines and processes that no other manufacturer has,
thereby allowing the Company to create carpet to meet specifications that its
competitors cannot duplicate.
The machine-made rug market is currently the fastest growing segment of the
U. S. carpet and rug industry with an annual growth rate estimated to be
approximately 6% in 1999. Much of this growth has occurred at the low-to-medium
retail price ranges. The distribution channels for the rug market primarily
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include department stores, mass merchants, floorcovering stores, catalog stores,
home centers and furniture stores.
The Company's product lines include a broad array of rugs. The Karastan
brand name rugs represent the higher retail price ranges with one of the most
valued brand names in the industry and are distributed through specialty stores,
along with department and furniture stores. These are higher quality woven wool
rugs manufactured primarily on Axminster looms.
The Company emphasizes the fast growing lower retail price ranges through
its American Rug Craftsmen and American Weavers brand names. The rugs sold under
these brands are primarily woven polypropylene area rugs, tufted border rugs and
decorative mats, which are made from purchased matting material that is cut,
serged and screen printed by the Company. These products are distributed
primarily through mass merchants and home centers.
The Company also sells to the bath mat and washable bath rug components of
the rug market through its Newmark Rug and Aladdin brand names. The Aladdin
products are tufted nylon and polyester products, which are distributed through
department stores and mass merchants. The Newmark products are high-end washable
cotton bath rugs that are distributed to the luxury market of department stores,
specialty stores, and catalogue businesses.
Advertising and Promotion
The Company promotes its products in the form of co-operative advertising,
point-of-sale displays and marketing literature provided to assist in marketing
various carpet styles. Mohawk also continues to rely on the substantial brand
name identification of its "Aladdin," "Alexander Smith," "American Rug
Craftsmen," "American Weavers," "Bigelow," "Bigelow Commercial," "Custom Weave,"
"Durkan," "Galaxy," "Harbinger," "Helios," "Horizon," "Image," "Karastan,"
"Karastan Contract," "Mohawk," "Mohawk Commercial," "Newmark Rug," "World" and
"WundaWeve" lines. The cost of producing display samples, a significant
promotional expense, is partially offset by sales of samples and support from
raw materials suppliers.
Manufacturing and Operations
The Company's manufacturing operations are vertically integrated and
include the extrusion of resin and post-consumer plastics into polypropylene,
polyester and nylon fiber, yarn processing, tufting, weaving, dyeing, coating
and finishing. Capital expenditures are primarily focused on increasing
capacity, improving productivity and reducing costs. Mohawk incurred $509.6
million in capital expenditures over the past three years, including
acquisitions. These expenditures increased manufacturing efficiency and
capacity, while improving overall cost competitiveness.
Raw Materials and Suppliers
The principal raw materials the Company uses are nylon staple fibers; nylon
filament fibers; raw wool; polypropylene filament fibers; polyester staple
fibers; olefin and polyester resins and post-consumer plastics; synthetic
backing materials, polyurethane and latex; and various dyes and chemicals.
Mohawk obtains all of its major raw materials from independent sources and all
of its externally purchased nylon fibers from four major suppliers: E.I. du Pont
de Nemours and Company, Solutia, Inc., BASF Corporation and Honeywell, Inc. Most
of the fibers the Company uses in carpet production are treated with stain-
resistant chemicals. The Company has not experienced significant shortages of
raw materials in recent years. The Company believes that the loss of any one
supplier would not have a material effect on the Company and that an alternative
supply arrangement could be made in a relatively short period of time.
Competition
All of the markets in which the Company does business are highly competitive,
with less than 100
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companies engaged in the manufacture and sale of carpet in the United States.
Carpet manufacturers also face competition from the hard surface floorcovering
industry. Based on industry publications, the top twenty North American carpet
and rug manufacturers (including their American and foreign divisions) in 1998
had worldwide sales in excess of $10 billion, and the top twenty manufacturers
in 1990 had sales in excess of $6 billion. In 1999, the top five manufacturers
had worldwide sales in excess of $9 billion. Mohawk, with 1999 net sales of
approximately $3.1 billion, is the second largest producer of carpet and rugs
(in terms of sales volume).
Certain of the Company's competitors may have greater financial resources
than the Company. Mohawk has one competitor whose size could allow it certain
manufacturing cost advantages compared to other industry participants.
The principal methods of competition within the industry are price, style,
quality and service. In each of the Company's markets, price competition and
market coverage are particularly important because there is relatively little
perceived differentiation among competing product lines. Mohawk's recent
investments in modernized, advanced manufacturing and data processing equipment,
the extensive diversity of equipment in which it has invested and its marketing
strategy contribute to its ability to compete primarily on the basis of
performance, quality, style and service, rather than just price.
Trademarks
Mohawk uses several trademarks that it considers important in the marketing
of its products, including "Aladdin," "Alexander Smith (R)," "American Rug
Craftsmen," "Bigelow (R)," "Ciboney (R)," "Commercial Horizons (R)," "Custom
Weave" "Galaxy(R)" "Hamilton (R)" "Harbinger (R)," "Helios (R)," "Horizon (R),"
"Image," "Karastan (R)," "Mohawk (R)," "Mohawk Color Center (R)," "Mohawk
Commercial," "Tommy Mohawk (R)," "Townhouse," "World" and "WundaWeve."
Sales Terms and Major Customers
The Company's sales terms are the same as those generally available
throughout the industry. The Company generally permits its customers to return
broadloom carpet purchased from it within 30 days from the date of sale if the
customer is not satisfied with the quality of the carpet. This return policy is
consistent with the Company's emphasis on quality, style and performance and
promotes customer satisfaction without generating enough returns to affect
materially the Company's operating results or financial position.
During 1999, no single customer accounted for more than 5.0% of Mohawk's
total net sales. The Company believes the loss of one or a few major customers
would not have a material adverse effect on the Company's business.
Backlog
Backlog of orders is generally insignificant in the carpet manufacturing
business because most residential orders are filled within several days and
commercial backlogs reflect the terms of the relevant contracts, which generally
require delivery within four to six weeks.
Employees
As of December 31, 1999, the Company employed 23,050 persons. Approximately
310 Mohawk employees are members of the Union of Needletrades, Industrial and
Textile Employees, AFL-CIO, CLC with which the Company is party to a collective
bargaining agreement. Other than with respect to these employees, the Company is
not a party to any collective bargaining agreements. Additionally, the Company
has not experienced any strikes or work stoppages. The Company believes that its
relations with its employees are good.
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Environmental Matters
The Company's operations must meet federal, state and local regulations
governing the discharge of materials into the environment. All of the plants
operated by the Company were built or have been upgraded to meet current
environmental standards. The Company believes it is in material compliance with
all applicable regulations. The Company estimates that any expenses incurred in
maintaining compliance with these regulations will not materially affect
earnings.
Cyclical Nature of Industry; Current Economic Conditions
The carpet industry is a cyclical business, influenced by a number of
general economic factors, including consumer confidence, spending for durable
goods, disposable income, interest rates, turnover in housing and the condition
of the residential and commercial construction industries (including the number
of new housing starts and the level of commercial construction). During economic
downturns, the carpet industry can be expected to experience a general decline
in sales and profitability.
Item 2. Properties
The Company owns a 47,500 square foot headquarters office in Calhoun,
Georgia on an eight acre site. The following table lists the principal
manufacturing and distribution facilities owned by the Company:
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Approx.
Enclosed
Area in
Square
Location Primary Products or Purposes Footage
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Dalton, GA............ Carpet and rug manufacturing and warehousing............. 2,089,000
Dalton, GA............ Carpet manufacturing, distribution and offices........... 1,103,200
Dalton, GA............ Carpet manufacturing, distribution and offices........... 396,900
Dalton, GA............ Carpet and yarn manufacturing............................ 1,101,600
Chatsworth, GA........ Carpet manufacturing, warehousing and offices............ 787,800
Dublin, GA............ Carpet manufacturing, warehousing and offices............ 831,000
Lyerly, GA............ Carpet manufacturing and warehousing..................... 820,000
Eden, NC.............. Carpet and rug manufacturing............................. 784,200
Calhoun, GA........... Carpet manufacturing and distribution center............. 792,000
Dalton, GA............ Carpet manufacturing..................................... 342,000
Eton, GA.............. Carpet manufacturing..................................... 577,205
Armuchee, GA.......... Carpet manufacturing..................................... 232,000
Chatsworth, GA........ Distribution center...................................... 812,075
Shannon, GA........... Distribution center...................................... 567,000
Landrum, SC........... Weaving and finishing of carpet.......................... 350,000
Dalton, GA............ Carpet dyeing............................................ 259,000
Dalton, GA............ Carpet dyeing............................................ 216,000
Dalton, GA............ Sample storage and distribution.......................... 123,000
Eden, NC.............. Carpet and rug distribution.............................. 194,000
Summerville, GA....... Sample manufacturing and distribution.................... 235,000
Chatsworth, GA........ Sample manufacturing..................................... 291,800
Sugar Valley, GA...... Rug manufacturing, warehousing and offices............... 472,500
Dalton, GA............ Rug manufacturing and offices............................ 135,000
Calhoun, GA........... Rug manufacturing and warehousing........................ 250,000
Chatsworth, GA........ Yarn extrusion........................................... 257,800
Summerville, GA....... Yarn extrusion........................................... 579,000
Dahlonega, GA......... Yarn manufacturing....................................... 380,000
Calhoun Falls, SC..... Yarn manufacturing....................................... 425,000
Bennettsville, SC..... Yarn manufacturing....................................... 412,000
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Dalton, GA............ Yarn manufacturing....................................... 105,400
Laurel Hill, NC....... Yarn manufacturing....................................... 203,000
Fort Oglethorpe, GA . Yarn manufacturing....................................... 194,000
Dalton, GA............ Yarn manufacturing....................................... 231,000
Dalton, GA............ Yarn manufacturing....................................... 180,000
Calhoun, GA........... Yarn manufacturing....................................... 121,000
Calhoun, GA........... Yarn manufacturing....................................... 113,800
Dillon, SC............ Yarn manufacturing....................................... 102,000
South Pittsburg, TN . Yarn manufacturing....................................... 102,000
Chatsworth, GA........ Yarn manufacturing....................................... 138,100
Rome, GA.............. Yarn manufacturing....................................... 240,400
Rome, GA.............. Yarn manufacturing....................................... 224,000
Cartersville, GA...... Yarn manufacturing....................................... 178,100
Milledgeille, GA...... Yarn manufacturing....................................... 255,000
Ulmer, SC............. Yarn manufacturing....................................... 238,666
Chatsworth, GA........ Yarnset plant............................................ 121,200
Chatsworth, GA........ Commercial warehouse..................................... 128,000
Eton, GA.............. Storage warehouse........................................ 121,300
Greenville, NC........ Wool processing.......................................... 103,000
Calhoun, GA........... Textile and Rug Manufacturing............................ 287,688
</TABLE>
________________
The following table lists the Company's material leased office,
manufacturing and warehouse facilities:
<TABLE>
<CAPTION>
Approx.
Enclosed Lease
Area in Term
Square Through
Location Primary Products or Purposes Footage (1)
- ---------------------- -------------------------------------------------- ------------- --------------
<S> <C> <C> <C>
Calhoun, GA........... Mat manufacturing and warehouse (2)............. 164,400 Jun-2004
La Mirada, CA......... Distribution warehouse.......................... 220,000 Jan-2011
Grand Prairie, TX..... Distribution warehouse.......................... 202,890 Jun-2012
Bowlingbrook, IL...... Distribution warehouse.......................... 201,959 Nov-2019
Glen Burnie, MD....... Distribution warehouse.......................... 187,200 Apr-2007
Pembroke Park, FL..... Distribution warehouse.......................... 186,537 Jul-2020
Pompton Plains, NJ.... Distribution warehouse.......................... 164,347 Jul-2011
Miami, FL............. Distribution warehouse (2)...................... 139,574 May-2001
Columbus, OH.......... Distribution warehouse.......................... 112,500 Sep-2004
Romeoville, IL........ Distribution warehouse.......................... 108,000 Oct-2004
Calhoun, GA........... Carpet manufacturing............................ 80,762 Jun-2000
Rome, GA.............. Warehouse....................................... 140,000 Feb-2000
Bentonville, AR....... Textile manufacturing........................... 134,067 Nov-2004
Kensington, GA........ Warehouse....................................... 277,484 May-2000
</TABLE>
________________
(1) Include renewal options exercisable by the Company.
(2) Includes a number of separately leased adjoining or adjacent buildings with
varying lease terms. The expiration date shown in the table is the earliest
expiration date of the respective group of leases.
The Company's properties are in good condition and adequate for its
requirements. The Company also believes its principal plants are generally
adequate to meet its production plans pursuant to its long-term sales goals. In
the ordinary course of its business, the Company monitors the condition of its
facilities to ensure that they remain adequate to meet long-term sales goals and
production plans.
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Item 3. Legal Proceedings
The Company is involved in routine litigation from time to time in the
regular course of its business. Except as noted below, there are no material
legal proceedings pending or known to be contemplated to which the Company is a
party or to which any of its property is subject.
In December 1995, the Company and four other carpet manufacturers were
added as defendants in a purported class action lawsuit, In re Carpet Antitrust
Litigation, pending in the United States District Court for the Northern
District of Georgia, Rome Division. The amended complaint alleges price-fixing
regarding polypropylene products in violation of Section One of the Sherman Act.
In September 1997, the Court determined that the plaintiffs met their burden of
establishing the requirements for class certification and granted the
plaintiffs' motion to certify the class. The Company is a party to two
consolidated lawsuits captioned Gaehwiler v. Sunrise Carpet Industries, Inc. et
al. and Patco Enterprises, Inc. v. Sunrise Carpet Industries, Inc. et al., both
of which were filed in the Superior Court of the State of California, City and
County of San Francisco, in 1996. Both complaints were brought on behalf of a
purported class of indirect purchasers of carpet in the State of California and
seek damages for alleged violations of California antitrust and unfair
competition laws. The complaints filed do not specify any amount of damages but
do request for any unlawful conduct to be enjoined and treble damages plus
reimbursement for fees and costs. In October 1998, two plaintiffs, on behalf of
an alleged class of purchasers of nylon carpet products, filed a complaint in
the United States District Court for the Northern District of Georgia against
the Company and two of its subsidiaries, as well as a competitor and one of its
subsidiaries. The complaint alleges that the Company acted in concert with other
carpet manufacturers to restrain competition in the sale of certain nylon carpet
products. The Company has filed an answer, denied the allegations in the
complaint and set forth its defenses. In February 1999, a similar complaint was
filed in the Superior Court of the State of California, City and County of San
Francisco, on behalf of a purported class based on indirect purchases of nylon
carpet in the State of California and alleges violations of California antitrust
and unfair competition laws. The complaints described above do not specify any
specific amount of damages but do request injunctive relief and treble damages
plus reimbursement for fees and costs. The Company believes it has meritorious
defenses and intends to vigorously defend against these actions.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders of the Company
during the fourth quarter ended December 31, 1999.
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PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
Market for the Common Stock
The Company's common stock is quoted on the New York Stock Exchange
("NYSE") under the symbol "MHK." The table below shows the high and low sales
prices per share of the Common Stock as reported on the NYSE Composite Tape, for
each fiscal period indicated.
<TABLE>
<CAPTION>
Mohawk
Common Stock
------------------------
High Low
---------- ----------
1998
----
<S> <C> <C>
First quarter.......................................... $ 33.50 20.50
Second quarter......................................... 35.50 28.44
Third quarter.......................................... 34.94 22.63
Fourth quarter......................................... 42.44 22.69
1999
----
First quarter.......................................... $ 42.00 25.94
Second quarter......................................... 38.56 28.19
Third quarter.......................................... 30.44 18.38
Fourth quarter......................................... 26.81 19.69
2000
----
First quarter (through March 6, 2000)................. $ 26.00 20.31
</TABLE>
As of March 6, 2000, there were 463 holders of record of Common Stock.
Mohawk has not paid or declared any cash dividends on shares of its Common Stock
since completing its initial public offering. The Company's policy is to retain
all net earnings for the development of its business, and it does not anticipate
paying cash dividends on the Common Stock in the foreseeable future. The payment
of future cash dividends will be at the sole discretion of the Board of
Directors and will depend upon the Company's profitability, financial condition,
cash requirements, future prospects and other factors deemed relevant by the
Board of Directors. The payment of cash dividends is limited by certain
covenants within various Company loan agreements.
On March 9, 1999, the Company issued approximately 3.1 million shares of
Common Stock to the former shareholders of Durkan in exchange for all of their
shares of Durkan. This issuance of securities was made in reliance on the
exemption from registration provided under Section 4(2) of the Securities Act of
1933 as a transaction by an issuer not involving a public offering. All of the
securities were acquired by the recipients for investment and with no view
toward the public resale or distribution of the securities without registration.
There was not any public solicitation and the issued stock certificates bear
restrictive legends.
10
<PAGE>
Item 6. Selected Financial Data
The following table sets forth the selected financial data of the Company
for the periods indicated, derived from the consolidated financial statements of
the Company. On January 13, 1995, the Company acquired all of the outstanding
capital stock of Galaxy. On July 23, 1997, the Company acquired certain assets
of Diamond Rug & Carpet Mills, Inc. and other assets owned by Diamond's
principal shareholders. The acquisitions of Galaxy and Diamond were recorded
using the purchase method of accounting. On November 12, 1998, the Company
acquired all of the outstanding capital stock of World in exchange for
approximately 4.9 million shares of the Company's common stock in a transaction
recorded using the pooling-of-interests method of accounting. On January 29,
1999, the Company acquired certain assets and assumed certain liabilities of
Image. The acquisition was recorded using the purchase method of accounting. On
March 9, 1999, the Company acquired all of the outstanding capital stock of
Durkan in exchange for approximately 3.1 million shares of the Company's common
stock in a transaction recorded using the pooling-of-interests method of
accounting. All financial data has been restated to include the accounts and
results of operations of World and Durkan. The selected financial data should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated financial
statements and notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
At or for the Years ended December 31,
-----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- -------------- ------------- ------------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of earnings data:
Net sales............................. $ 3,083,264 2,744,620 2,429,085 2,239,471 2,041,865
Cost of sales......................... 2,306,405 2,063,333 1,869,221 1,726,765 1,594,050
--------------- ------------- ------------- ------------- -------------
Gross profit........................ 776,859 681,287 559,864 512,706 447,815
Selling, general and administrative
expenses............................ 482,062 432,191 383,523 367,251 348,278
Restructuring costs (a)............... - - - 700 8,439
Carrying value reduction of property,
plant and equipment and other
assets (b).......................... - 2,900 5,500 3,060 23,711
Compensation expense for stock
option exercises (c)................ - - 2,600 - 4,000
--------------- ------------- ------------- ------------- -------------
Operating income.................... 294,797 246,196 168,241 141,695 63,387
--------------- ------------- ------------- ------------- -------------
Interest expense...................... 32,632 31,023 36,474 39,772 42,398
Acquisition costs - World Merger (d) - 17,700 - - -
Other expense, net.................... 2,266 2,667 338 4,586 1,170
--------------- ------------- ------------- ------------- -------------
34,898 51,390 36,812 44,358 43,568
--------------- ------------- ------------- ------------- -------------
Earnings before income taxes........ 259,899 194,806 131,429 97,337 19,819
Income taxes ......................... 102,660 79,552 51,866 40,395 8,022
--------------- ------------- ------------- ------------- -------------
Net earnings........................ $ 157,239 115,254 79,563 56,942 11,797
=============== ============= ============= ============= =============
Basic earnings per share (e).......... $ 2.63 1.91 1.33 0.96 0.21
=============== ============= ============= ============= =============
Weighted-average common shares
outstanding (e)..................... 59,730 60,393 59,962 59,310 57,235
=============== ============= ============= ============= =============
Diluted earnings per share (e)........ $ 2.61 1.89 1.32 0.95 0.20
=============== ============= ============= ============= =============
Weighted-average common and
dilutive potential common shares
outstanding (e).................... 60,349 61,134 60,453 59,899 58,485
=============== ============= ============= ============= =============
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
At or for the Years ended December 31,
-----------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- -------------- ------------- ------------- -------------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Balance sheet data:
Working capital....................... $ 560,057 438,474 389,378 390,889 305,370
Total assets.......................... 1,682,873 1,405,486 1,233,361 1,226,959 1,110,438
Short-term note payable............... - - - 21,200 50,000
Long-term debt (including current
portion) . 596,065 377,089 402,854 486,952 435,940
Stockholders' equity.................. 692,546 611,059 493,841 409,616 343,452
</TABLE>
(a) During 1995 and 1996, the Company recorded pre-tax restructuring costs of
$8.4 million and $0.7 million, respectively, related to certain mill closings
whose operations have been consolidated into other Mohawk facilities.
(b) During 1995, the Company adopted FAS No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, as of January
1, 1995. A charge of $23.7 million was recorded for the reduction of the
carrying value of property, plant and equipment at certain mills. During 1996,
the Company recorded a charge of $3.1 million arising from the write-down of
property, plant and equipment to be disposed of related to the closing of a
manufacturing facility in 1996 and a revision in the estimate of fair value of
certain property, plant and equipment based on current market conditions related
to mill closings in 1995. During 1997, the Company recorded a charge of $5.5
million arising from a revision in the estimated fair value of certain property,
plant and equipment held for sale based on current appraisals and other market
information related to a mill closing in 1995. During 1998, the Company recorded
a charge of $2.9 million for the write-down of assets to be disposed of relating
to the acquisition of World.
(c) Charges of $4.0 million and $2.6 million were recorded in 1995 and 1997,
respectively, for income tax reimbursements to be made to certain executives
related to the exercise of stock options granted in 1988 and 1989 in connection
with the Company's 1988 leveraged buyout.
(d) The Company recorded a one-time charge of $17.7 million in 1998 for
transaction expenses related to the World Merger.
(e) The Board of Directors declared a 3-for-2 stock split on October 23, 1997,
which was paid on December 4, 1997 to holders of record on November 4, 1997.
Earnings per share and weighted-average common share data have been restated to
reflect the split.
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
During the three-year period ended December 31, 1999, the Company continued to
experience significant growth both internally and through acquisitions.
On July 23, 1997, the Company acquired certain assets of Diamond Rug & Carpet
Mills, Inc. ("Diamond") and other assets owned by Diamond's principal
shareholders for approximately $36.0 million, which consisted of $19.6 million
in cash at closing, $7.0 million in cash over the six-month period following
closing and a $9.4 million note payable in seven annual installments of
principal plus interest at 6%. The acquisition was accounted for using the
purchase method of accounting.
The Company completed its acquisitions of Newmark and American Weavers on June
30, 1998 and August 10, 1998, respectively. Both of these acquisitions were
accounted for using the purchase method of accounting. On November 12, 1998,
the Company acquired all of the outstanding capital stock of World in exchange
for approximately 4.9 million shares of the Company's common stock valued at
$149.5 million, based on the closing stock price on the day the agreement was
executed. The acquisition of World was accounted for using the pooling-of-
interests method of accounting.
On January 29, 1999, the Company acquired certain assets of Image for
approximately $192 million, including acquisition costs and the assumption of
$30 million of tax-exempt debt, and on March 9, 1999, the Company acquired all
of the outstanding capital stock of Durkan for approximately 3.1 million shares
of the Company's common stock valued at $116.5 million based on the closing
stock price the day the letter of intent was executed. The Image acquisition
was accounted for using the purchase method of accounting, and the Durkan
acquisition was accounted for using the pooling-of-interests method of
accounting.
These acquisitions have created opportunities to enhance Mohawk's operations
by (i) broadening price points, (ii) increasing vertical integration efforts,
(iii) expanding distribution capabilities and (iv) facilitating entry into niche
businesses, such as rugs, decorative throws and table runners.
Prior to December 31, 1999, the impact of the changeover to 2000 on computer
software programs and internal operating systems was uncertain and recent
publications have suggested that February 29, 2000, may cause interruptions or
system failure in computer software programs and internal operating systems. In
1999, the Company spent approximately $.5 million to review and upgrade its
computer and business systems in its effort to make these systems Year 2000
compliant and thereby avoid such interruptions resulting from the changeover to
2000 or the occurrence of February 29, 2000. To date the Company has not
incurred, and does not expect to incur any significant interruptions as a result
of the changeover to 2000 and the Company is not expecting to incur significant
interruptions as a result of the occurrence of February 29, 2000.
Effective January 1, 2000, the Company changed the estimated useful lives of
certain property, plant and equipment. Management believes this change more
accurately reflects the actual lives of these assets and is more consistent with
industry practice. The prospective change is estimated to reduce annual
depreciation expense by approximately $20 million in 2000. See accompanying
Notes to Consolidated Financial Statements for further discussion.
Results of Operations
Year Ended December 31, 1999 as Compared with Year Ended December 31, 1998
- --------------------------------------------------------------------------
Net sales for the year ended December 31, 1999 were $3,083.3 million,
reflecting an increase of $338.6 million, or approximately 12.3%, over the
$2,744.6 million reported in the year ended December 31, 1998. All major
product categories achieved sales increases in 1999 as compared to 1998. The
Company believes that the 1999 net sales increase was attributable to internal
growth and the acquisition of Image.
13
<PAGE>
Quarterly net sales and the percentage changes in net sales by quarter for
1999 versus 1998 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 Change
--------------- --------------- ---------------
<S> <C> <C> <C>
First quarter...................... $ 707,167 589,473 20.0%
Second quarter..................... 790,617 689,488 14.7
Third quarter...................... 809,933 718,772 12.7
Fourth quarter..................... 775,547 746,887 3.8
--------------- --------------- ---------------
Total year.................. $ 3,083,264 2,744,620 12.3%
=============== =============== ===============
</TABLE>
The Company's fiscal calendar reflected differences for the 1999 first
quarter, with four more shipping days, when compared to 1998 and four fewer
shipping days when the fourth quarter of 1999 is compared to 1998.
Gross profit for 1999 was $776.9 million (25.2% of net sales) and represented
an increase over the gross profit of $681.3 million (24.8% of net sales) for
1998. Gross profit dollars for the current year were impacted favorably by
better absorption of fixed costs through higher production volume.
Selling, general and administrative expenses for 1999 were $482.1 million
(15.6% of net sales) compared to $432.2 million (15.7% of net sales) for 1998.
Interest expense for the current year was $32.6 million compared to $31.0
million in 1998. The primary factor contributing to the increase was an
increase in debt levels, which was attributable to acquisitions, the stock
repurchase program and capital expenditures, compared to the prior year, which
was offset by a decrease in the Company's weighted average interest rate in
1999.
In the current year, income tax expense was $102.7 million, or 39.5% of
earnings before income taxes. In 1998, income tax expense was $79.6 million,
representing 40.8% of earnings before income taxes. The primary reason for the
decrease in the 1999 effective income tax rate was that certain costs included
in the nonrecurring pre-tax charge of $17.7 million related to the World
acquisition recorded in 1998 were not deductible for income tax purposes.
Year Ended December 31, 1998 as Compared with Year Ended December 31, 1997
- --------------------------------------------------------------------------
Net sales for the year ended December 31, 1998 were $2,744.6 million,
reflecting an increase of $315.5 million, or approximately 13%, over the
$2,429.1 million reported in the year ended December 31, 1997. All major
product categories achieved sales increases in 1998 as compared to 1997. These
sales increases were impacted by continued favorable industry conditions and a
gain in the Company's market share, which, the Company believes, primarily
resulted from continued emphasis on supporting its dealers and strong customer
acceptance of new product introductions.
Quarterly net sales and the percentage changes in net sales by quarter for
1998 versus 1997 were as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 Change
--------------- --------------- ---------------
<S> <C> <C> <C>
First quarter...................... $ 589,473 537,145 9.7%
Second quarter..................... 689,488 607,059 13.6
Third quarter...................... 718,772 626,751 14.7
Fourth quarter..................... 746,887 658,130 13.5
--------------- --------------- ---------------
Total year.................. $ 2,744,620 2,429,085 13.0%
=============== =============== ===============
</TABLE>
Gross profit for 1998 was $681.3 million (24.8% of net sales) and represented
an increase over the gross profit of $559.9 million (23.0% of net sales) for
1997. Gross profit dollars for 1998 were impacted favorably by better
absorption of fixed costs through higher production volume, and continued
improvements in manufacturing efficiencies from restructuring efforts.
14
<PAGE>
Selling, general and administrative expenses for 1998 were $432.2 million
(15.7% of net sales) compared to $383.5 million (15.8% of net sales) for 1997.
Selling, general and administrative expenses as a percentage of net sales
decreased primarily due to lower administrative, bad debt and sample expenses.
During the fourth quarter of 1998, the Company recorded a charge of $2.9
million for the write-down of fixed assets to be disposed of in connection with
the World acquisition. Also, a $17.7 million charge was recorded for
nonrecurring costs associated with the World acquisition.
During the fourth quarter of 1997, the Company revised its estimate of the
fair value of certain property, plant and equipment held for sale. The revision
resulted in a $5.5 million write-down to the carrying value of those assets.
The revision was based upon current appraisals and other market information. In
addition, a $2.6 million charge was recorded for additional income tax
reimbursements to be made to certain executives for the exercise of stock
options. The income tax reimbursements were recorded in connection with stock
options granted in 1988 and 1989 related to the Company's 1988 leveraged buyout.
Interest expense for 1998 was $31.0 million compared to $36.5 million in 1997.
The primary factor contributing to the decrease was a significant reduction in
debt levels.
In 1998, income tax expense was $79.6 million, or 40.8% of earnings before
income taxes. In 1997, income tax expense was $51.9 million, representing 39.5%
of earnings before income taxes. The primary reason for the increase in the
1998 effective income tax rate was that certain costs included in the
nonrecurring pre-tax charge of $17.7 million related to the World acquisition
were not deductible for income tax purposes.
Liquidity and Capital Resources
The Company's primary capital requirements are for working capital, capital
expenditures and acquisitions. The Company's capital needs are met through a
combination of internally generated funds, bank credit lines and credit terms
from suppliers.
The level of accounts receivable increased from $331.9 million at the
beginning of 1999 to $337.8 million at December 31, 1999. The $5.9 million
increase was attributable to strong sales growth. Inventories increased from
$423.8 million at the beginning of 1999 to $494.8 million at December 31, 1999,
due primarily to acquisitions and the need for a higher level of inventory to
meet the increased sales volume.
Capital expenditures totaled $146 million during 1999, and the Company spent
an additional $162 million related to the Image acquisition. The capital
expenditures made during 1999 were incurred primarily to modernize and expand
manufacturing facilities and equipment. The Company's capital projects are
primarily focused on increasing capacity, improving productivity and reducing
costs. Capital expenditures for Mohawk, including $233 million for
acquisitions, have totaled $510 million over the past three years. Capital
spending during 2000 is expected to range from $105 million to $120 million, the
majority of which will be used to purchase equipment to increase production
capacity and productivity.
On November 23, 1999, the Company amended and restated its credit agreement to
provide for an interest rate of either (i) LIBOR plus 0.2% to 0.5%, depending
upon the Company's performance measured against certain financial ratios, or
(ii) the prime rate less 1.0%. Additionally, the termination date of the credit
agreement was extended to January 28, 2004. At December 31, 1999, the Company
had credit availability of $450 million under its revolving credit line and $45
million under various short-term uncommitted credit lines. At December 31, 1999,
a total of approximately $110.5 million was unused under these lines. The
credit agreement contains customary financial and other covenants. The Company
must pay an annual facility fee ranging from .0015 to .0025 of the total credit
commitment, depending upon the Company's performance measured against specific
coverage ratios, under the revolving credit line.
The Company's Board of Directors approved a stock repurchase plan in September
1999, whereby the Company's management was authorized to purchase up to five
million common shares. In December 1999 it amended the plan to increase the
shares authorized for purchase by an additional five million shares, bringing
the total authorized repurchase up to 10 million shares of its outstanding
common shares. For the year ended
15
<PAGE>
December 31, 1999, a total of approximately four million shares of the Company's
common stock had been purchased at an aggregate cost of approximately $84
million. All of this repurchase has been financed through the Company's
operations and revolving line of credit.
Impact of Inflation
Inflation affects the Company's manufacturing costs and operating expenses.
The carpet industry has experienced moderate inflation in the prices of raw
materials and outside processing for the last three years. The Company has
generally passed along nylon fiber price increases to its customers.
Seasonality
The carpet business is seasonal, with the Company's second, third and fourth
quarters typically producing higher net sales and operating income. By
comparison, results for the first quarter tend to be the weakest. This
seasonality is primarily attributable to consumer residential spending patterns
and higher installation levels during the spring and summer months.
Certain factors affecting the Company's performance
In addition to the other information provided in this Form 10-K, the following
risk factors should be considered when evaluating an investment in shares of
Mohawk common stock.
A failure by Mohawk to complete acquisitions and successfully integrate acquired
- --------------------------------------------------------------------------------
operations could materially and adversely affect its business.
- --------------------------------------------------------------
Management intends to pursue acquisitions of complementary businesses as part
of its business and growth strategies. Although management regularly evaluates
acquisition opportunities, it cannot offer assurance that it will be able to:
. successfully identify suitable acquisition candidates;
. obtain sufficient financing on acceptable terms to fund acquisitions;
. complete acquisitions;
. integrate acquired operations into Mohawk's existing operations; or
. profitably manage acquired businesses.
Acquired operations may not achieve levels of sales, operating income or
productivity comparable to those of Mohawk's existing operations, or otherwise
perform as expected. Acquisitions may also involve a number of special risks,
some or all of which could have a material adverse effect on Mohawk's business,
results of operations and financial condition, including, among others:
. possible adverse effects on Mohawk's operating results;
. diversion of Mohawk management's attention and its resources; and
. dependence on retaining and training acquired key personnel.
The carpet industry is cyclical and a downturn in the overall economy could
- ---------------------------------------------------------------------------
lesson the demand for Mohawk's products and impair growth and profitability.
- ----------------------------------------------------------------------------
The carpet industry is cyclical and is influenced by a number of general
economic factors. Prevailing interest rates, consumer confidence, spending for
durable goods, disposable income, turnover in housing and the condition of the
residential and commercial construction industries (including the number of new
housing starts and the level of new commercial construction) all have an impact
on Mohawk's growth and profitability. In addition, sales of Mohawk's principal
products are related to construction and renovation of commercial and
residential buildings. Any adverse cycle could lessen the overall demand for
Mohawk's products and could, in turn, impair Mohawk's growth and profitability.
The carpet business is seasonal and this seasonality causes Mohawk's results of
- -------------------------------------------------------------------------------
operations to fluctuate on a quarterly basis.
- ---------------------------------------------
Mohawk is a calendar year end company and its results of operations for the
first quarter tend to be the weakest. Mohawk's second, third and fourth quarters
typically produce higher net sales and operating income. These results are
primarily due to consumer residential spending patterns and more carpet being
installed in the spring and summer months.
16
<PAGE>
Mohawk's business is competitive and a failure by Mohawk to compete effectively
- -------------------------------------------------------------------------------
could have a material and adverse impact on Mohawk's results of operations.
- ---------------------------------------------------------------------------
Mohawk operates in a highly competitive industry. Mohawk and other
manufacturers in the carpet industry compete on the basis of price, style,
quality and service. Some of Mohawk's competitors may have greater financial
resources at their disposal. Mohawk has one competitor whose size could allow it
certain manufacturing cost advantages compared to other industry participants.
If competitors substantially increase production and marketing of competing
products, then Mohawk might be required to lower its prices or spend more on
product development, marketing and sales, which could adversely affect Mohawk's
profitability.
An increase in the cost of raw materials could negatively impact Mohawk's
- -------------------------------------------------------------------------
profitability.
- --------------
The cost of raw materials has a significant impact on the profitability of
Mohawk. In particular, Mohawk's business requires it to purchase large volumes
of nylon fiber and polypropylene resin, which is used to manufacture fiber.
Mohawk does not have any long-term supply contracts for any of these products.
While Mohawk generally attempts to match cost increases with price increases,
large increases in the cost of such raw materials could adversely affect its
business, results of operations and financial condition if it is unable to pass
these costs through to its customers.
Mohawk may be responsible for environmental cleanup, which could negatively
- ---------------------------------------------------------------------------
impact profitability.
- ---------------------
Various federal, state and local environmental laws govern the use of Mohawk's
facilities. Such laws govern:
. discharges to air and water;
. handling and disposal of solid and hazardous substances and waste; and
. remediation of contamination from releases of hazardous substances in
Mohawk's facilities and off-site disposal locations.
Mohawk's operations are also governed by the laws relating to workplace safety
and worker health, which, among other things, establish asbestos and noise
standards and regulate the use of hazardous chemicals in the workplace. Mohawk
has taken and will continue to take steps to comply with these laws. Based upon
current available information, Mohawk believes that complying with environmental
and safety and health requirements will not require material capital
expenditures in the foreseeable future. However, Mohawk cannot provide assurance
that complying with these environmental or health and safety laws and
requirements will not adversely affect its business, results of operations and
financial condition. Future laws, ordinances or regulations could give rise to
additional compliance or remediation costs, which could have a material adverse
effect on its business, results of operations and financial condition.
Forward-Looking Information
Certain of the matters discussed in the preceding pages, particularly
regarding anticipating future financial performance, business prospects, growth
and operating strategies, proposed acquisitions, new products and similar
matters, and those preceded by, followed by or that otherwise include the words
"believes," "expects," "anticipates," "intends," "estimates" or similar
expressions constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended. For those statements,
Mohawk claims the protection of the safe harbor for forward-looking statements
contained in the Private Securities Litigation Reform Act of 1995. Forward-
looking statements involve a number of risks and uncertainties. The following
important factors, in addition to those discussed elsewhere in this document,
affect the future results of Mohawk and could cause those results to differ
materially from those expressed in the forward-looking statements: materially
adverse changes in economic conditions generally in the carpet, rug and
floorcovering markets served by Mohawk; competition from other carpet, rug and
floorcovering manufacturers; raw material prices; timing and level of capital
expenditures; the successful integration of acquisitions, including the
challenges inherent in diverting Mohawk management's attention and resources
from other strategic matters and from operational matters for an extended period
of time; the successful introduction of new products; the successful
rationalization of existing operations; and other risks identified from time to
time in the Company's SEC reports and public announcements.
17
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's market risk-sensitive instruments do not subject the Company to
material market risk exposures.
Item 8. Consolidated Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Independent Auditors' Reports............................................................... 19
Consolidated Balance Sheets as of December 31, 1999 and 1998................................ 21
Consolidated Statements of Earnings for the Years ended December 31, 1999, 1998 and 1997.... 22
Consolidated Statements of Stockholders' Equity for the Years ended
December 31, 1999, 1998 and 1997....................................................... 23
Consolidated Statements of Cash Flows for the Years ended December 31, 1999, 1998 and 1997.. 24
Notes to Consolidated Financial Statements.................................................. 25
</TABLE>
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
Mohawk Industries, Inc.:
We have audited the consolidated financial statements of Mohawk Industries, Inc.
and subsidiaries as listed in the accompanying index. In connection with our
audits of the consolidated financial statements, we also have audited the
financial statement schedules as listed in Item 14(a)2. These consolidated
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and financial statement schedules based on our
audits. We did not audit the consolidated statements of operations and cash
flows of World Carpets, Inc. and Subsidiary, a wholly owned subsidiary, for the
year ended June 28, 1998 (not presented herein), which statements of operations
and cash flows have been combined with those of Mohawk Industries, Inc. and
subsidiaries for the year ended December 31, 1997. The consolidated statement
of operations of World Carpets, Inc. and Subsidiary reflects total net sales
constituting 18 percent for the year ended December 31, 1997, of the related
consolidated total. Those statements were audited by other auditors whose
report has been furnished to us, and our opinion, insofar as it relates to the
amounts included for World Carpets, Inc. and Subsidiary, is based solely on the
report of the other auditors.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Mohawk Industries, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly, in all material respects, the information set forth
therein.
KPMG LLP
Atlanta, Georgia
February 11, 2000
19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
and Shareholders of
World Carpets, Inc.
In our opinion, the consolidated statements of operations, of changes in
shareholders' equity and of cash flows present fairly, in all material respects,
the results of operations and cash flows of World Carpets Inc. and its
subsidiary (the "Company") for the year ended June 28, 1998 (not presented
separately herein), 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 audit. We conducted our audit 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 and significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above. We have not audited the
consolidated financial statements of the Company for any period subsequent to
June 28, 1998.
PricewaterhouseCoopers LLP
Atlanta, Georgia
September 21, 1998
20
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS 1999 1998
---------------- ------------
<S> <C> <C>
Current assets:
Cash............................................................................... $ - 2,384
Receivables........................................................................ 337,824 331,928
Inventories........................................................................ 494,774 423,837
Prepaid expenses................................................................... 25,184 19,322
Deferred income taxes.............................................................. 76,628 69,464
---------------- --------------
Total current assets............................................................ 934,410 846,935
Property, plant and equipment, net.................................................. 624,814 454,867
Other assets........................................................................ 123,649 103,684
---------------- --------------
$ 1,682,873 1,405,486
================ ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................................. $ 33,961 44,424
Accounts payable and accrued expenses.............................................. 340,392 364,037
---------------- --------------
Total current liabilities....................................................... 374,353 408,461
Deferred income taxes............................................................... 53,783 47,921
Long-term debt, less current portion................................................ 562,104 332,665
Other long-term liabilities......................................................... 87 5,380
---------------- --------------
Total liabilities............................................................... 990,327 794,427
---------------- --------------
Stockholders' equity:
Preferred stock, $.01 par value; 60 shares authorized; no shares issued............ - -
Common stock, $.01 par value; 150,000 shares authorized; 60,657 and 60,533
shares issued in 1999 and 1998, respectively...................................... 607 606
Additional paid-in capital......................................................... 179,993 172,045
Retained earnings.................................................................. 595,932 438,408
---------------- --------------
776,532 611,059
Less treasury stock at cost; 3,952 shares in 1999................................ 83,986 -
---------------- --------------
Total stockholders' equity..................................................... 692,546 611,059
Commitments and contingencies (Notes 10 and 12).....................................
---------------- --------------
$ 1,682,873 1,405,486
================ ==============
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Earnings
Years Ended December 31, 1999, 1998 and 1997
(In thousands, except per share data)
<TABLE>
<CAPTION>
1999 1998 1997
----------------- ----------- -----------
<S> <C> <C> <C>
Net sales.............................................................. $ 3,083,264 2,744,620 2,429,085
Cost of sales.......................................................... 2,306,405 2,063,333 1,869,221
----------------- ----------- -----------
Gross profit.................................................... 776,859 681,287 559,864
Selling, general and administrative expenses........................... 482,062 432,191 383,523
Carrying value reduction of property, plant and equipment and
other assets....................................................... - 2,900 5,500
Compensation expense for stock option exercises........................ - - 2,600
----------------- ------------ -----------
Operating income................................................ 294,797 246,196 168,241
----------------- ------------ -----------
Other expense:
Interest expense.................................................... 32,632 31,023 36,474
Acquisition costs - World Merger.................................... - 17,700 -
Other expense, net.................................................. 2,266 2,667 338
----------------- ------------ -----------
34,898 51,390 36,812
----------------- ------------ -----------
Earnings before income taxes.................................... 259,899 194,806 131,429
Income taxes........................................................... 102,660 79,552 51,866
----------------- ------------ -----------
Net earnings.................................................... $ 157,239 115,254 79,563
================= ============ ===========
Basic earnings per share............................................... $ 2.63 1.91 1.33
================= =========== ============
Weighted-average common shares outstanding............................. 59,730 60,393 59,962
================== =========== ===========
Diluted earnings per share............................................. $ 2.61 1.89 1.32
================= =========== ===========
Weighted-average common and dilutive potential common
shares outstanding................................................. 60,349 61,134 60,453
================= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Common stock Additional Total
--------------------------- paid-in Retained Treasury stockholders'
Shares Amount capital earnings stock equity
-------- --------- ----------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996........... 59,757 $ 598 162,707 246,311 - 409,616
Stock options exercised................. 460 5 3,631 - - 3,636
Dividends paid.......................... - - - (24) - (24)
Tax benefit from exercise of stock
options............................ - - 1,050 - - 1,050
Net earnings............................ - - - 79,563 - 79,563
--------- --------- ----------- ---------- ---------- --------------
Balances at December 31, 1997........... 60,217 603 167,388 325,850 - 493,841
Stock options exercised................. 316 3 4,414 - - 4,417
Dividends paid.......................... - - - (24) - (24)
Tax benefit from exercise of stock
options............................ - - 243 - - 243
Adjustments to conform fiscal year end
of World........................... - - - (2,672) - (2,672)
Net earnings............................ - - - 115,254 - 115,254
--------- --------- ----------- ---------- ---------- --------------
Balances at December 31, 1998........... 60,533 606 172,045 438,408 - 611,059
Stock options exercised................. 124 1 1,390 - - 1,391
Purchase of treasury stock.............. - - - - (83,986) (83,986)
Tax benefit from exercise of stock
options............................ - - 836 - - 836
Durkan pooling adjustment............... - - 5,722 - - 5,722
Adjustments to conform fiscal year end
of Durkan.......................... - - - 285 - 285
Net earnings............................ - - - 157,239 - 157,239
--------- --------- ----------- ---------- ---------- --------------
Balances at December 31, 1999........... 60,657 $ 607 179,993 595,932 (83,986) 692,546
========= ========= =========== ========== ========== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings...................................................... $ 157,239 115,254 79,563
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Depreciation and amortization................................... 105,297 72,591 72,893
Deferred income taxes........................................... (1,302) (14,194) (3,132)
Provision for doubtful accounts................................. 15,804 13,173 8,458
Loss (gain) on sale of property, plant and equipment............ 2,516 2,121 (440)
Carrying value reduction of property, plant and equipment
and other assets............................................... - 2,900 5,500
Compensation expense for stock option exercises................. - - 2,600
Changes in assets and liabilities, net of effects of
acquisitions:
Receivables.................................................... 2,904 (36,523) (33,720)
Inventories.................................................... (32,437) (31,083) 23,610
Accounts payable and accrued expenses.......................... (57,274) 57,295 29,953
Other assets and prepaid expenses.............................. (16,086) (7,653) 1,502
Other liabilities.............................................. (5,293) (1,673) (2,571)
-------------- -------------- --------------
Net cash provided by operating activities..................... 171,368 172,208 184,216
-------------- -------------- --------------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment and other
assets ........................................................ - - 2,168
Additions to property, plant and equipment........................ (145,621) (83,180) (47,625)
Acquisitions...................................................... (162,463) (36,574) (34,141)
Other............................................................. - - 895
-------------- -------------- --------------
Net cash used in investing activities......................... (308,084) (119,754) (78,703)
-------------- -------------- --------------
Cash flows from financing activities:
Net change in revolving line of credit............................ 255,530 83,658 (83,376)
Payment of note payable........................................... - - (21,200)
Payments on term loans............................................ (32,229) (38,554) (22,896)
Redemption of acquisition indebtedness............................ (20,917) (102,201) -
Proceeds from new loan............................................ - - 10,661
(Redemption) proceeds from Industrial Revenue Bonds and other,
net of payments............................................... (7,779) 11,329 11,593
Change in outstanding checks in excess of cash.................... 15,479 (6,486) (5,841)
Dividends paid.................................................... - (24) (24)
Acquisition of treasury stock..................................... (83,986) - -
Common stock transactions......................................... 8,234 1,988 4,686
-------------- -------------- --------------
Net cash provided by (used in) financing activities........... 134,332 (50,290) (106,397)
-------------- -------------- --------------
Net change in cash............................................ (2,384) 2,164 (884)
Cash, beginning of year............................................. 2,384 220 1,104
-------------- -------------- --------------
Cash, end of year................................................... $ - 2,384 220
============== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(In thousands, except per share data)
(1) Summary of Significant Accounting Policies
(a) Basis of Presentation
The consolidated financial statements include the accounts of Mohawk
Industries, Inc. and its subsidiaries (the "Company" or "Mohawk"). All
significant intercompany balances and transactions have been eliminated in
consolidation. On November 12, 1998, the Company acquired all of the outstanding
capital stock of World Carpets, Inc. ("World") in exchange for 4,900 shares of
the Company's common stock ("World Merger"). On November 12, 1998, the
Securities and Exchange Commission declared effective a shelf registration
statement to register for resale 4,900 shares of Company common stock issued in
connection with the World Merger. The historical consolidated financial
statements have been restated to give retroactive effect to the World Merger.
The World Merger is being accounted for as a pooling-of-interests in the
accompanying consolidated financial statements.
On March 9, 1999, the Company acquired all of the outstanding capital stock
of Durkan Patterned Carpets, Inc. ("Durkan") for 3,150 shares of the Company's
common stock ("Durkan Merger"). On April 28, 1999, a shelf registration
statement was filed with the Securities and Exchange Commission to register for
resale 3,150 shares of the Company's common stock in connection with the Durkan
Merger. The historical consolidated financial statements have been restated to
give retroactive effect to the Durkan Merger. The Durkan Merger is being
accounted for as a pooling-of-interests in the accompanying consolidated
financial statements.
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.
(b) Accounts Receivable and Revenue Recognition
The Company is principally a broadloom carpet and rug manufacturer and
sells carpet and rugs throughout the United States principally for residential
use. The Company grants credit to customers, most of whom are retail carpet
dealers, under credit terms that are customary in the industry.
Revenues are recognized when goods are shipped. The Company provides
allowances for expected cash discounts, returns, claims and doubtful accounts
based upon historical bad debt and claims experience and periodic evaluations of
the aging of the accounts receivable.
(c) Inventories
Inventories are stated at the lower of cost or market (net realizable
value). Cost is determined using the last-in, first-out (LIFO) method, which
matches current costs with current revenues, for substantially all inventories
and the first-in, first-out (FIFO) method for the remaining inventories.
(d) Property, Plant and Equipment
Property, plant and equipment is stated at cost, including interest on
funds borrowed to finance the acquisition or construction of major capital
additions. Depreciation is calculated on a straight-line basis over the
estimated remaining useful lives, which are 25 years for buildings and
improvements and 5-7 years for furniture and equipment.
25
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
Effective January 1, 2000, the Company changed the estimated useful lives
of buildings (25 years to 35 years), tufting equipment (7 years to 10 years),
extrusion equipment (7 years to 15 years) and furniture and fixtures (5 years to
7 years). Management believes this change more accurately reflects the actual
lives of these assets and is more consistent with industry practice. The
prospective change is estimated to reduce annual depreciation expense by
approximately $20,000 in 2000.
(e) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(f) Earnings per Share ("EPS")
The Company applies the provisions of Financial Accounting Standards Board
("FASB") FAS No. 128, Earnings per Share, which requires companies to present
basic EPS and diluted 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 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 Company.
The Company's weighted-average common and dilutive potential common shares
outstanding have been adjusted for the 3-for-2 stock split approved by the Board
of Directors on October 23, 1997 and paid on December 4, 1997 to holders of
record on November 4, 1997 and for the World and Durkan mergers. Dilutive common
stock options are included in the diluted EPS calculation using the treasury
stock method. Common stock options that were not included in the diluted EPS
computation because the options' exercise price was greater than the average
market price of the common shares for the periods presented are immaterial.
(g) Financial Instruments
The Company's financial instruments consist primarily of cash, accounts
receivable, accounts payable, notes payable and long-term debt. The carrying
amount of cash, accounts receivable, accounts payable and notes payable
approximates their fair value because of the short-term maturity of such
instruments. Interest rates that are currently available to the Company for
issuance of long-term debt with similar terms and remaining maturities are used
to estimate the fair value of the Company's long-term debt. The estimated fair
value of the Company's long-term debt at December 31, 1999 and 1998 was $605,332
and $384,242, compared to a carrying amount of $596,065 and $377,089,
respectively.
(h) Fiscal Year
The Company ends its fiscal year on December 31. Each of the first three
quarters in the fiscal year ends on the Saturday nearest the calendar quarter
end.
(i) Goodwill
Goodwill arises in connection with business combinations accounted for as
purchases. Goodwill is amortized primarily on a straight-line basis over 40
years. Amortization charged to earnings was $2,808 in 1999, $2,437 in 1998 and
$2,518 in 1997.
26
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(j) Impairment of Long-Lived Assets
The Company accounts for long-lived assets in accordance with the
provisions of FAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. Under FAS No. 121, the Company
evaluates impairment of long-lived assets on a business unit basis, rather than
on an aggregate entity basis, whenever events or changes in circumstances
indicate that the carrying amount of such assets may not be recoverable. If the
sum of the expected future undiscounted cash flows is less than the carrying
amount of the asset, an impairment loss is recognized. Measurement of an
impairment loss for long-lived assets is based on the fair value of the asset.
(k) Effect of New Accounting Pronouncement
In 1997, the FASB issued FAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, which supersedes FAS No. 14, Financial
Reporting for Segments of a Business Enterprise. This statement, which the
Company was required to adopt in fiscal year 1998, requires public companies to
report certain financial and descriptive information about their reportable
operating segments, including related disclosures about products and services,
geographic areas and major customers. The implementation of FAS No. 131 did not
have a material effect on the Company's consolidated financial statements.
(l) Reclassifications
Certain prior period financial statement balances have been reclassified to
conform with the current period's presentation.
(2) Acquisitions
The Company completed its acquisitions of Newmark & James, Inc. and
American Weavers, LLC on June 30, 1998 and August 10, 1998, respectively. Both
of these acquisitions have been accounted for under the purchase method of
accounting and their results are included in the Company's 1998 consolidated
statement of earnings from the respective dates of acquisition.
On November 12, 1998, the Company acquired all of the outstanding capital
stock of World in exchange for 4,900 shares of the Company's common stock. The
acquisition of World has been accounted for under the pooling-of-interests basis
of accounting and, accordingly, the Company's historical consolidated financial
statements have been restated to include the accounts and results of operations
of World. The Company incurred before-tax, nonrecurring charges aggregating
$20,600 in 1998 related to the World Merger, of which $17,700 of the charge was
recorded as nonoperating expense and $2,900 of the charge was recorded as a
write-down of World computer equipment that was disposed of.
On January 29, 1999, the Company acquired certain assets of Image
Industries, Inc. ("Image") for approximately $192,000, including acquisition
costs and the assumption of $30,000 of tax-exempt debt. The acquisition was
accounted for using the purchase method of accounting and, accordingly, the
purchase price was allocated to the assets acquired and liabilities assumed
based on the estimated fair values at the date of acquisition. The estimated
fair values were $205,366 for assets acquired and $42,903 for liabilities
assumed.
The operating results of Image are included in the Company's 1999
consolidated statement of earnings from the date of acquisition. The following
unaudited pro forma information presents a summary of consolidated results of
operations of the Company and Image for the fiscal years ended December 31, 1999
and 1998, respectively as if the acquisition had occurred at the beginning of
1998.
27
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Net sales........................................................... $ 3,099,113 2,946,736
Net earnings........................................................ $ 156,877 119,360
Basic earnings per share............................................ $ 2.63 1.98
Diluted earnings per share.......................................... $ 2.60 1.95
</TABLE>
On March 9, 1999, the Company acquired all of the outstanding capital stock
of Durkan for approximately 3,100 shares of the Company's common stock valued at
$116,500 based on the closing price the day the letter of intent was executed.
The Durkan acquisition has been accounted for under the pooling-of-interests
method of accounting and, accordingly, the Company's historical consolidated
financial statements have been restated to include the accounts and results of
operations of Durkan.
The results of operations previously reported by the separate enterprises
and the combined amounts presented in the accompanying consolidated financial
statements are presented below:
<TABLE>
<CAPTION>
Three Months Year Ended Year Ended
Ended December 31, December 31,
April 3, 1999 1998 1997
--------------- --------------- --------------
<S> <C> <C> <C>
(unaudited)
Net sales
Mohawk....................................... $ 683,494 2,638,820 2,327,341
Durkan....................................... 23,673 105,800 101,744
--------------- --------------- --------------
Combined..................................... $ 707,167 2,744,620 2,429,085
=============== =============== ==============
Net earnings
Mohawk....................................... $ 27,128 107,613 73,424
Durkan....................................... 764 7,641 6,139
--------------- --------------- --------------
Combined..................................... $ 27,892 115,254 79,563
=============== =============== ==============
</TABLE>
Prior to the combination, Durkan's fiscal year ended on February 28. In
recording the pooling-of-interests combination, Durkan's financial statements
for the year ended December 31, 1999 were combined with Mohawk's consolidated
financial statements for the same period. Durkan's financial statements for the
years ended February 27, 1999 and February 28, 1998 were combined with Mohawk's
financial statements for the years ended December 31, 1998 and 1997,
respectively. An adjustment has been made to stockholders' equity in the year
ended December 31, 1999 to eliminate the effect of including Durkan's results of
operations for the two months ended February 28, 1999 in the Company's
consolidated financial statements for the years ended December 31, 1999 and
1998. There were no significant inter-company transactions between Mohawk and
Durkan prior to the combination.
(3) Receivables
Receivables are as follows:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Customers, trade............................................... $ 405,477 385,783
Other.......................................................... 2,826 4,378
----------- ----------
408,303 390,161
Less allowance for discounts, returns, claims and
doubtful accounts............................................ 70,479 58,233
----------- ----------
Net receivables.......................................... $ 337,824 331,928
=========== ==========
</TABLE>
28
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(4) Inventories
The components of inventories are as follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Finished goods..................................................... $ 254,179 219,776
Work in process.................................................... 65,456 60,266
Raw materials...................................................... 175,139 143,795
---------- ----------
Total inventories................................... $ 494,774 423,837
========== ==========
</TABLE>
(5) Property, Plant and Equipment
Following is a summary of property, plant and equipment:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Land............................................................... $ 21,767 14,320
Buildings and improvements......................................... 236,119 177,264
Machinery and equipment............................................ 791,839 613,997
Furniture and fixtures............................................. 33,436 31,666
Leasehold improvements............................................. 4,854 5,085
Construction in progress........................................... 51,645 41,576
----------- -----------
1,139,660 883,908
Less accumulated depreciation and amortization..................... 514,846 429,041
----------- -----------
Net property, plant and equipment................... $ 624,814 454,867
=========== ===========
</TABLE>
Property, plant and equipment includes capitalized interest of $3,213,
$1,661 and $799 in 1999, 1998 and 1997, respectively.
During 1998, the Company recorded a charge of $2,900 related to a write-
down of computer equipment acquired in the World acquisition and disposed of in
1999.
During 1997, the Company recorded a charge of $5,500 arising from a
revision in the estimated fair value of certain property, plant and equipment
held for sale based on current appraisals and other market information related
to a mill closing in 1995.
(6) Other Assets
The components of other assets are summarized below:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Goodwill, net of accumulated amortization of $13,171 and
$10,363, respectively............................................. $ 113,560 85,972
Other assets....................................................... 10,089 17,712
----------- -----------
Total other assets.................................. $ 123,649 103,684
=========== ===========
</TABLE>
29
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(7) Long-Term Debt
On November 23, 1999, the Company amended and restated its credit agreement
to provide for an interest rate of either (i) LIBOR plus 0.2% to 0.5%, depending
upon the Company's performance measured against certain financial ratios, or
(ii) the prime rate less 1.0%. Additionally, the termination date of the credit
agreement was extended to January 28, 2004. At December 31, 1999, the Company
had credit availability of $450,000 under its revolving credit line and $45,000
under various short-term uncommitted credit lines. At December 31, 1999, a total
of $110,548 was unused under these lines. The credit agreement contains
customary financial and other covenants. The Company must pay an annual facility
fee ranging from .0015 to .0025 of the total credit commitment, depending upon
the Company's performance measured against specific coverage ratios, under the
revolving credit line.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Revolving line of credit, due January 28, 2004............................. $ 384,452 128,922
Durkan term loans, interest payable at prime or LIBOR plus
1.5% to 3%, payable in monthly installments of $207....................... - 11,696
Durkan revolving line of credit, interest payable at LIBOR
plus 1.25% to 2.75%, due November 1999.................................... - 3,277
Note payable to Durkan officer, interest payable at 8.5%,
due February 2000......................................................... - 5,400
8.46% senior notes, payable in annual principal installments
beginning in 1998, due September 16, 2004, interest
payable quarterly......................................................... 71,429 85,714
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually............................................. 56,666 66,111
8.48% term loans, payable in annual principal installments,
due October 26, 2002, interest payable quarterly.......................... 17,143 22,857
7.58% senior notes, payable in annual principal installments
beginning in 1997, due July 30, 2003, interest payable
semiannually.............................................................. 5,714 7,143
6% term note, payable in annual principal and interest
installments beginning in 1998, due July 23, 2004......................... 6,679 8,014
Industrial Revenue Bonds and other......................................... 53,982 37,955
------------- -------------
Total long-term debt............................................ 596,065 377,089
Less current portion....................................................... 33,961 44,424
------------- -------------
Long-term debt, excluding current portion....................... $ 562,104 332,665
============= =============
The aggregate maturities of long-term debt as of December 31,
1999 are as follows:
2000....................................................................... $ 33,961
2001....................................................................... 33,593
2002....................................................................... 33,396
2003....................................................................... 27,179
2004....................................................................... 409,546
Thereafter................................................................. 58,390
-------------
$ 596,065
=============
</TABLE>
30
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(8) Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses are as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Outstanding checks in excess of cash............................. $ 42,373 26,897
Accounts payable, trade.......................................... 159,812 159,966
Accrued expenses................................................. 83,253 126,023
Accrued compensation............................................. 54,954 51,151
------------ ------------
Total accounts payable and accrued expenses $ 340,392 364,037
============ ============
</TABLE>
(9) Stock Options, Stock Compensation and Treasury Stock
Under the Company's 1992 and 1993 stock option plans, options may be
granted to directors and key employees through 2002 and 2003 to purchase a
maximum of 2,250 and 675 shares of common stock, respectively. During 1999,
options to purchase 20 and 356 shares, respectively, were granted under these
plans. Options granted under each of these plans expire 10 years from the date
of grant and become exercisable at such dates and at prices as determined by the
Compensation Committee of the Company's Board of Directors.
During 1996, the Company adopted the 1997 Non-Employee Director Stock
Compensation Plan. The plan provides for awards of common stock of the Company
for nonemployee directors to receive in lieu of cash for their annual retainers.
During 1999, a total of 3 shares were awarded to the nonemployee directors under
the plan.
During 1997, the Board of Directors adopted the 1997 Long-Term Incentive Plan
whereby the Company reserved 2,550 shares of common stock for issuance in
connection with options and awards. During 1999, a total of 433 shares were
awarded to employees under this plan.
Additional information relating to the Company's stock option plans
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Options outstanding at beginning of year ................. 1,387 1,568 2,142
Options granted........................................... 809 174 65
Options exercised......................................... (124) (316) (460)
Options canceled.......................................... (29) (39) (179)
------------- ------------- -------------
Options outstanding at end of year........................ 2,043 1,387 1,568
============= ============= =============
Options exercisable at end of year........................ 873 686 742
============= ============= =============
Option prices per share:
Options granted during the year........................... $ 19.69 - 35.13 17.23 - 32.31 5.67 - 19.38
=============== ============= =============
Options exercised during the year......................... $ 5.67 - 19.17 5.67 - 19.38 0.02 - 19.17
=============== ============= =============
Options canceled during the year.......................... $ 9.33 - 35.13 5.67 - 31.94 5.67 - 19.17
=============== ============= =============
Options outstanding at end of year........................ $ 5.61 - 35.13 5.61 - 32.31 5.61 - 19.38
=============== ============= =============
</TABLE>
A charge of $2,600 was recorded in the fourth quarter of 1997 for income
tax reimbursements to be made to certain executives for the exercise of stock
options. The income tax reimbursements were recorded in connection with stock
options granted in 1988 and 1989 related to the Company's 1988 leveraged buyout.
The agreements allowed the Company to receive an income tax benefit on its tax
return for the tax effect of the taxable compensation provided to the
individuals upon the exercise of these options. Such income tax benefit
31
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
resulted in a direct increase in stockholders' equity of $7,606 in 1996
primarily from the exercise of these options.
As allowed under FAS No. 123, the Company accounts for stock options
granted as prescribed under Accounting Principles Board Opinion No. 25, which
recognizes compensation cost based upon the intrinsic value of the award.
Accordingly, no compensation expense has been recognized in the consolidated
statement of earnings for any stock options granted in 1999, 1998 and 1997. The
following table represents pro forma net income and pro forma earnings per share
had the Company elected to account for stock option grants using the fair value
based method.
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net income
As reported.......................................... $ 157,239 115,254 79,563
Pro forma............................................ 155,282 114,411 78,898
Net income per common share (basic)
As reported.......................................... $ 2.63 1.91 1.33
Pro forma............................................ 2.60 1.89 1.32
Net income per common share (diluted)
As reported.......................................... $ 2.61 1.89 1.32
Pro forma............................................ 2.57 1.87 1.31
</TABLE>
This pro forma impact only takes into account options granted.since January
1, 1996 and is likely to increase in future years as additional options are
granted and amortized ratably over the vesting period. The average.fair value of
options granted during 1999, 1998 and 1997 was $15.28, $17.24 and $9.41,
respectively. This fair value was estimated using the Black-Scholes option
pricing model based on a weighted-average market price at grant date of $ 26.48
in 1999, $30.44 in 1998 and $17.03 in 1997 and the following weighed-average
assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
-------------- --------------- --------------
<S> <C> <C> <C>
Dividend yield............................................ - - -
Risk-free interest rate................................... 6.4% 4.7% 6.2%
Volatility................................................ 46.7% 48.9% 45.0%
Expected life (years)..................................... 7 7 7
</TABLE>
Summarized information about stock options outstanding and exercisable at
December 31, 1999, is as follows:
<TABLE>
<CAPTION>
Outstanding Exercisable
-------------------------------------------------- ---------------------------------
Number of Average Life Average Number of Average
Exercise price range Shares (1) Price Shares (2) Life (1)
- ------------------------------- -------------- -------------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Under $11.00................... 741 5.56 $ 10.54 538 $ 10.29
$12.00 to 17.00................ 204 4.63 14.40 189 14.49
$17.00 to 19.69................ 531 8.38 19.49 118 19.03
$19.94 to 31.94................ 276 8.97 29.06 25 31.11
$32.00 to 36.00................ 291 9.11 34.93 3 32.31
-------------- --------------
Total 2,043 873
============== ==============
</TABLE>
_____________
(1) Weighted average contractual life remaining in years.
(2) Weighted average exercise price.
The Company's Board of Directors approved a stock repurchase plan in
September 1999, whereby the Company's management was authorized to purchase up
to 5,000 common shares. In December 1999, it
32
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
amended the plan to increase the shares authorized for purchase by an additional
5,000 shares, bringing the total authorized repurchase up to 10,000 shares of
its outstanding common shares. For the year ended December 31, 1999, a total of
3,952 shares of the Company's common stock had been purchased at an aggregate
cost of $83,986. All of this repurchase has been financed through the Company's
operations and revolving line of credit.
(10) Employee Benefit Plans
The Company has a 401(k) retirement savings plan (the "Plan") open to
substantially all of its employees who have completed one year of eligible
service. The Company contributes $0.50 for every $1.00 of employee contributions
up to a maximum of 4% of the employee's salary. The Company amended the Plan
during 1999 to match an additional $0.25 for every $1.00 of employee
contribution in excess of 4% of the employee's salary up to a maximum of 6%.
This change is effective January 1, 2000. Employee and employer contributions to
the Plan were $14,873 and $5,080 in 1999, $12,345 and $4,213 in 1998, and $9,334
and $3,075 in 1997, respectively. The Company also made a discretionary
contribution to the Plan of $2,100 during the year.
A portion of the employees who were not eligible to participate in the Plan
participated in a defined contribution profit-sharing plan through June 1997.
After June 1997, the employee balances in the profit-sharing plan were rolled
over into the 401(k) retirement savings plan. Contributions were discretionary
and the Company expensed $991 for the year ended December 31, 1997.
The World Carpet Savings Retirement Plan (the "World Plan"), a defined
contribution 401(k) plan covering substantially all World employees, was merged
into the Plan on March 1, 1999. Employees were eligible to participate after
completion of one year of service. Under the terms of the World Plan, World
would match employee contributions up to a maximum of 2% of the employee's
salary and employees vested in the contributions based on years of credited
service. For the years ended December 31, 1999, 1998 and 1997, the Company
contributed approximately $142, $703 and $698, respectively, to the World Plan.
Durkan maintains a 401(k) retirement savings plan (the" Durkan Plan") open
to substantially all Durkan employees. Durkan contributes $0.50 for every $1.00
of employee contributions up to a maximum of 6% of eligible wages. For the years
ended December 31, 1999, 1998 and 1997, Durkan contributed approximately $343,
$328 and $265, respectively, to the Durkan Plan.
(11) Income Taxes
Income tax expense attributable to earnings before income taxes for the
years ended December 31, 1999, 1998 and 1997 consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
--------------- --------------- --------------
<S> <C> <C> <C>
1999:
U.S. federal............................. $ 92,736 (1,928) 90,808
State and local.......................... 12,104 (252) 11,852
--------------- --------------- --------------
$ 104,840 (2,180) 102,660
=============== =============== ==============
1998:
U.S. federal............................. $ 75,985 (11,485) 64,500
State and local.......................... 17,761 (2,709) 15,052
--------------- --------------- --------------
$ 93,746 (14,194) 79,552
=============== =============== ==============
1997:
U.S. federal............................. $ 45,921 (2,540) 43,381
State and local.......................... 9,077 (592) 8,485
--------------- --------------- --------------
$ 54,998 (3,132) 51,866
=============== =============== ==============
</TABLE>
33
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
Income tax expense attributable to earnings before income taxes differs from
the amounts computed by applying the U.S. statutory federal income tax rate to
earnings before income taxes as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- --------------- ---------------
<S> <C> <C> <C>
Computed "expected" tax expense........ $ 90,965 68,182 46,000
State and local income taxes, net of federal
income tax benefit.................. 7,704 9,784 4,810
Amortization of goodwill............... 684 746 472
Other, net............................. 3,307 840 584
-------------------- --------------- ---------------
$ 102,660 79,552 51,866
==================== =============== ===============
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31,
1999 and 1998 are presented below:
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Deferred tax assets:
Accounts receivable............................... $ 21,621 17,860
Inventories...................................... 15,533 12,381
Accrued expenses.................................. 41,366 39,442
-------------- -------------
Gross deferred tax assets................. 78,520 69,683
-------------- -------------
Deferred tax liabilities:
Plant and equipment............................... (47,138) (43,428)
Prepaid expenses.................................. (1,892) (219)
Other............................................. (6,645) (4,493)
-------------- -------------
Gross deferred tax liabilities............ (55,675) (48,140)
-------------- -------------
Net deferred tax assets................... $ 22,845 21,543
============== =============
</TABLE>
Based upon the level of historical and projected taxable income over periods
in which the deferred tax assets are deductible, the Company's management
believes it is more likely than not the Company will realize the benefits of
these deductible differences at December 31, 1999.
(12) Commitments and Contingencies
The Company is obligated under various capital and operating leases for office
and manufacturing space, machinery and equipment.
Future minimum lease payments under noncancelable capital and operating leases
(with initial or remaining lease terms in excess of one year) at December 31,
1999 are:
34
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
<TABLE>
<CAPTION>
Total
Capital Operating Future
Leases Leases Payments
------------------ -------------- --------------
<S> <C> <C> <C>
2000.................................. $ 2,009 30,168 32,177
2001.................................. 1,432 24,979 26,411
2002.................................. 1,223 19,926 21,149
2003.................................. 647 15,188 15,835
2004.................................. - 10,797 10,797
Thereafter............................ - 20,118 20,118
------------------ -------------- ------------
Total payments........................ $ 5,311 121,176 126,487
============== ==============
Less amount representing interest..... 608
------------------
Present value of capitalized lease
payments with a weighted interest
rate of 7.85%........................ $ 4,703
==================
</TABLE>
The Company assumed several capitalized leases from recent acquisitions for
machinery and equipment, at a cost of $8,899 for both periods ended December 31,
1999 and 1998. The amortization of these capital leases is included in
depreciation expense. Accumulated amortization was $3,619 at December 31, 1999
and $2,547 at December 31, 1998.
Rental expense under operating leases was $28,407, $27,347 and $20,970 in
1999, 1998 and 1997, respectively.
In December 1995, the Company and four other carpet manufacturers were added
as defendants in a purported class action lawsuit, In re Carpet Antitrust
Litigation, pending in the United States District Court for the Northern
District of Georgia, Rome Division. The amended complaint alleges price-fixing
regarding polypropylene products in violation of Section One of the Sherman Act.
In September 1997, the Court determined that the plaintiffs met their burden of
establishing the requirements for class certification and granted the
plaintiffs' motion to certify the class. The Company is a party to two
consolidated lawsuits captioned Gaehwiler v. Sunrise Carpet Industries, Inc. et
al. and Patco Enterprises, Inc. v. Sunrise Carpet Industries, Inc. et al., both
of which were filed in the Superior Court of the State of California, City and
County of San Francisco, in 1996. Both complaints were brought on behalf of a
purported class of indirect purchasers of carpet in the State of California and
seek damages for alleged violations of California antitrust and unfair
competition laws. The complaints filed do not specify any amount of damages but
do request for any unlawful conduct to be enjoined and treble damages plus
reimbursement for fees and costs. In October 1998, two plaintiffs, on behalf of
an alleged class of purchasers of nylon carpet products, filed a complaint in
the United States District Court for the Northern District of Georgia against
the Company and two of its subsidiaries, as well as a competitor and one of its
subsidiaries. The complaint alleges that the Company acted in concert with other
carpet manufacturers to restrain competition in the sale of certain nylon carpet
products. The Company has filed an answer, denied the allegations in the
complaint and set forth its defenses. In February 1999, a similar complaint was
filed in the Superior Court of the State of California, City and County of San
Francisco, on behalf of a purported class based on indirect purchases of nylon
carpet in the State of California and alleges violations of California antitrust
and unfair competition laws. The complaints described above do not specify any
specific amount of damages but do request injunctive relief and treble damages
plus reimbursement for fees and costs. The Company believes it has meritorious
defenses and intends to vigorously defend against these actions.
35
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements - (Continued)
(13) Consolidated Statements of Cash Flows Information
Supplemental disclosures of cash flow information are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- --------------- ---------------
<S> <C> <C> <C>
Net cash paid during the year for:
Interest....................... $ 37,740 30,852 37,849
==================== =============== ===============
Income taxes................... $ 120,371 75,640 55,882
==================== =============== ===============
</TABLE>
(14) Quarterly Financial Data (Unaudited)
The supplemental quarterly financial data are as follows:
<TABLE>
<CAPTION>
Quarters Ended
---------------------------------------------------------------------------
April 3, July 3, October 2, Dec. 31,
1999 1999 1999 1999
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales................. $ 707,167 790,617 809,933 775,547
Gross profit.............. 178,329 200,911 203,246 194,373
Net earnings.............. 27,892 44,093 45,079 40,175
Basic earnings per share.. 0.46 0.73 0.74 0.70
Diluted earnings per share.. 0.46 0.72 0.74 0.70
Quarters Ended
---------------------------------------------------------------------------
March 28, June 27, Sept. 26, Dec. 31,
1998 1998 1998 1998
-------------------- --------------- --------------- ---------------
Net sales................. $ 589,473 689,488 718,772 746,887
Gross profit.............. 136,389 177,606 177,762 189,530
Net earnings.............. 17,135 35,947 37,060 25,112
Basic earnings per share.. 0.28 0.60 0.61 0.42
Diluted earnings per share 0.28 0.59 0.61 0.41
</TABLE>
36
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 2000 Annual
Meeting of Stockholders under the following headings: "Election of Directors--
Director, Director Nominee and Executive Officer Information"; "--Nominees for
Director"; "--Continuing Directors"; "--Executive Officers;" and "--Section 16a
Beneficial Ownership Reporting Compliance."
Item 11. Executive Compensation
The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 2000 Annual
Meeting of Stockholders under the following headings: "Executive Compensation
and Other Information--Summary of Cash and Certain Other Compensation"; "--
Option Grants"; "--Option Exercises and Holdings"; "--Pension Plans"; "--Certain
Relationships and Related Transactions"; and "Election of Directors--Meetings
and Committees of the Board of Directors."
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 2000 Annual
Meeting of Stockholders under the following heading: "Executive Compensation and
Other Information--Principal Stockholders of the Company."
Item 13. Certain Relationships and Related Transactions
The information required by this item is incorporated by reference to
information contained in the Company's Proxy Statement for the 2000 Annual
Meeting of Stockholders under the following heading: "Executive Compensation and
Other Information--Certain Relationships and Related Transactions."
37
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Consolidated Financial Statements
The Consolidated Financial Statements of Mohawk Industries, Inc. and
subsidiaries listed in Item 8 of Part II are incorporated by reference into this
item.
2. Consolidated Financial Statement Schedules
Schedule I-Condensed Financial Information of Registrant............. 44
Schedule II-Consolidated Valuation and Qualifying Accounts........... 48
Schedules not listed above have been omitted because they are not applicable
or the required information is included in the consolidated financial statements
or notes thereto.
3. Exhibits
The exhibit number for the exhibit as originally filed is included in
parentheses at the end of the description.
Mohawk
Exhibit
Number Description
------ -----------
*2.1 Agreement and Plan of Merger dated as of December 3, 1993 and
amended as of January 17, 1994 among Mohawk, AMI Acquisition
Corp., Aladdin and certain Shareholders of Aladdin.
(Incorporated herein by reference to Exhibit 2(i)(a) in Mohawk's
Registration Statement on Form S-4, Registration No. 33-74220.)
*2.2 Stock Purchase Agreement by and among Mohawk, Galaxy and the
Stockholder of Galaxy dated December 1, 1994. (Incorporated
herein by reference to Exhibit 2 in Mohawk's Current Report on
Form 8-K dated January 13, 1995.)
*2.3 Agreement and Plan of Merger by and among Mohawk, WC Acquisition
Corp., World Carpets, Inc. and the shareholders of World
Carpets, Inc. dated as of October 22, 1998. (Incorporated herein
by reference to Exhibit 2 of the Mohawk Registration Statement
on Form S-3, Registration No. 333-66061, as filed October 22,
1998).
*2.4 Asset Purchase Agreement by and among Aladdin Manufacturing
Corporation, Image Industries, Inc. and The Maxim Group, Inc.
dated as of November 12, 1998, as amended and restated on
January 29, 1999. (Incorporated herein by reference to Exhibit
2.1 in Mohawk's Current Report on Form 8-K dated January 29,
1999).
*2.5 Agreement and Plan of Merger by and among Mohawk, Durkan
Acquisition Corp., Nonpareil Acquisition Corp.,Durkan Patterned
Carpets, Inc.; the shareholders of Durkan Patterned Carpets,
Inc. and the shareholders of Nonpareil Dying and finishing,
Inc., dated as of February 26, 1999. (Incorporated herein by
reference to Exhibit 2.1 of the Mohawk Registration Statement on
Form S-3, Registration No. 333-77231, as filed April 28, 1999).
*3.1 Restated Certificate of Incorporation of Mohawk, as amended.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's
Annual report on Form 10-K for the fiscal year ended December
31, 1999.)
*3.2 Amended and Restated Bylaws of Mohawk. (Incorporated herein by
reference to Exhibit 3.2 in Mohawk's Annual Report on Form 10-K
for the fiscal year ended December 31, 1996).
38
<PAGE>
*4.1 See Article 4 of the Restated Certificate of Incorporation of
Mohawk. (Incorporated herein by reference to Exhibit 3.1 in
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.)
*4.2 See Articles 2, 6, and 9 of the Amended and Restated Bylaws of
Mohawk. (Incorporated herein by reference to Exhibit 3.2 in
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.)
*10.1 Lease dated April 1, 1988 between Horizon and Kay D. Owens
concerning the addition between the Tufting and Coater Buildings
on South Industrial Boulevard in Calhoun, Georgia. (Incorporated
herein by reference to Exhibit 10.24 in Mohawk's Registration
Statement on Form S-1, Registration No. 33-53932.)
*10.2 Lease dated August 15, 1989 between Joan Jones Webb and assigns
and Aladdin related to a finished goods distribution warehouse
in Miami, Florida. (Incorporated herein by reference to Exhibit
10.27 of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993.)
*10.3 Lease dated October 15, 1990 between NBD Trust Company of
Illinois and Aladdin related to a finished goods distribution
warehouse in Romeoville, Illinois. (Incorporated herein by
reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993.)
*10.4 Lease dated October 3, 1994 between Almoda and Aladdin related to
a finished goods distribution warehouse in Columbus, Ohio.
(Incorporated herein by reference to Exhibit 10.29 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994.)
*10.5 Lease dated March 1, 1994 between Design Leasing and Holding
Company, Inc. and American Rug Craftsmen, Inc. related to a
manufacturing facility and warehouse in Calhoun, Georgia.
(Incorporated herein by reference to Exhibit 10.35 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994.)
*10.6 Lease dated May 1, 1997 between Opus East, LLC and Mohawk
concerning a distribution warehouse in Glen Burnie, Maryland.
(Incorporated herein by reference to Exhibit 10.8 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1998.)
*10.7 Lease dated September 23, 1996 between West End Road Associates
and Mohawk concerning a distribution warehouse in Pompton
Plains, New Jersey. (Incorporated herein by reference to Exhibit
10.10 of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.)
*10.8 Lease dated September 1, 1996 between Catellus Development Corp.
and Mohawk concerning a distribution warehouse in LaMirada,
California. (Incorporated herein by reference to Exhibit 10.11
of Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.)
*10.9 Lease dated November 27, 1996 between CP-Regency Business Park
LTD and Aladdin concerning a distribution warehouse in Grand
Prairie, Texas. (Incorporated herein by reference to Exhibit
10.12 of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.)
*10.10 Lease dated December 14, 1992, between First Union National Bank
of Georgia, as Trustee under item 8 u/w of James E. Minge; First
Union National Bank of Georgia, as Trustee u/a W. G. Minge,
dated September 15, 1987; First Union National Bank of Georgia
and Jerry L. Minge, co-executors u/w/o C. A. Minge and Image, as
amended by that certain lease modification and extension
agreement dated July 24, 1995 with respect to that certain
warehouse located at 15 Old Airport Road in Rome, Georgia.
(Incorporated herein by reference to Exhibit 10.24 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1998.)
39
<PAGE>
10.11 Lease dated June 1, 1998 between Intermark USA, Inc. and Aladdin
Manufacturing Corporation concerning a warehouse in Kensington,
Georgia.
10.12 Lease dated February 18, 1999 between Aladdin Manufacturing
Corporation and Industrial Developments International Inc.
concerning a warehouse in Bolingbrook, Illinois.
10.13 Lease dated February 18, 1999 between Mohawk Industries, Inc. and
Senecca G&H, L.L.C. concerning a warehouse in Miami, Florida.
10.14 Lease dated December 3, 1999 between Aladdin Manufacturing
Corporation and Ex-Cell Home Fashions, Inc. concerning a plant
in Bentonville, Arkansas.
10.15 Fifth Amended and Restated Credit Agreement dated as of November
23, 1999 among Mohawk, Wachovia Bank, N.A. Suntrust Bank,
Atlanta and First Union National Bank.
*10.16 Amended and Restated Series Note Agreement dated as of August 31,
1999 for $85 million of senior notes due September 1, 2005 among
Mohawk, John Hancock Mutual Life Insurance Company, John Hancock
Variable Life Insurance Company, Investors Partner Life
Insurance Company, Principal Life Insurance Company, The
Franklin Life Insurance Company and The Prudential Insurance
Company of America. (Incorporated herein by reference to Exhibit
10.2 of Mohawk's Quarterly Report on Form 10-Q for the quarter
ended October 2, 1999.)
*10.17 Amended and Restated Note Purchase Agreement dated as of August
31, 1999 for $100 million senior notes due September 16, 2004
among Mohawk, The Prudential Insurance Company of America,
Principal Life Insurance Company, John Hancock Mutual Life
Insurance Company, Massachusetts Mutual Life Insurance Company,
Alexander Hamilton Life Insurance Company of America and The
Franklin Life Insurance Company. (Incorporated herein by
reference to Exhibit 10.2 of Mohawk's Quarterly Report on Form
10-Q for the quarter ended October 2, 1999.)
*10.18 Registration Rights Agreement by and among Mohawk, Citicorp
Investments, Inc., ML-Lee Acquisition Fund, L.P. and Certain
Management Investors. (Incorporated herein by reference to
Exhibit 10.14 of Mohawk's Registration Statement on Form S-1,
Registration No. 33-45418.)
*10.19 Voting Agreement, Consent of Stockholders and Amendment to 1992
Registration Rights Agreement dated December 3, 1993 by and
among Aladdin, Mohawk, Citicorp Investments, Inc., ML-Lee
Acquisition Fund, L.P., David L. Kolb, Donald G. Mercer, Frank
A. Procopio and John D. Swift. (Incorporated herein by reference
to Exhibit 10(b) of Mohawk's Registration Statement on Form S-4,
Registration No. 33-74220.)
*10.20 Registration Rights Agreement by and among Mohawk and the former
shareholders of Aladdin. (Incorporated herein by reference to
Exhibit 10.32 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.)
*10.21 Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as
of March 23, 1994 to the Registration Rights Agreement dated as
of February 25, 1994 between Mohawk and those other persons who
are signatories thereto. (Incorporated herein by reference to
Exhibit 10.3 of Mohawk's Quarterly Report on Form 10-Q for the
quarter ended July 2, 1994.)
*10.22 Stock Restriction and Registration Rights Agreement dated as of
October 22, 1998 by and among Mohawk and the former shareholders
of World. (Incorporated herein by reference to Exhibit 99.1 of
Mohawk's Current Report on Form 8-K dated February 19, 1999.)
*10.23 Second Consolidated, Amended and Restated Note Agreement dated as
of August 31, 1999 for $50 million of senior notes, $40,000,000
of which are due October 26, 2002 and $10,000,000 of which are
due July 30, 2002, among Mohawk and The Prudential Insurance
Company of America.
40
<PAGE>
(Incorporated herein by reference to Exhibit 10.3 of Mohawk's
Quarterly Report on Form 10-Q dated October 2, 1999.)
Exhibits Related to Executive Compensation Plans, Contracts and other
Arrangements:
*10.24 Mohawk Carpet Corporation Retirement Savings Plan, as amended.
(Incorporated herein by reference to Exhibit 10.1 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.25 Mohawk Carpet Corporation Supplemental Executive Retirement Plan,
as amended. (Incorporated herein by reference to Exhibit 10.2 of
Mohawk's Registration Statement on Form S-1, Registration No.
33-45418.)
*10.26 World Carpets, Inc. Savings and Retirement Plan dated January 1,
1989. (Incorporated herein by reference to Exhibit 10.70 of
Mohawk's Annual Report on Form 10-K for the year ended December
31, 1998)
*10.27 Mohawk Industries, Inc. Employee Stock Purchase Plan together
with forms of related Management Investment Agreement, Non-
Qualified Stock Option Agreement, and amendments thereto.
(Incorporated herein by reference to Exhibit 10.3 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.28 Stock Purchase Agreement dated as of December 30, 1988 between
Mohawk and Mohasco as supplemented by Supplement to Stock
Purchase Agreement dated December 30, 1988. (Incorporated herein
by reference to Exhibit 10.4 of Mohawk's Registration Statement
on Form S-1, Registration No. 33-45418.)
*10.29 Securities Purchase and Holders Agreement dated as of December
31, 1988, as amended and restated March 30, 1989, together with
amendments thereto and forms of related Non-Qualified Stock
Option Agreement and amendments thereto. (Incorporated herein by
reference to Exhibit 10.5 of Mohawk's Registration Statement on
Form S-1, Registration No. 33-45418.)
*10.30 Investment Agreement dated as of March 31, 1989 among Mohawk,
Mohawk Carpet, Citicorp Capital Investors Ltd., Citicorp Venture
Capital Ltd. and ML-Lee Acquisition Fund, L.P. (Incorporated
herein by reference to Exhibit 10.6 of Mohawk's Registration
Statement on Form S-1, Registration No. 33-45418.)
*10.31 Equity Securities Agreement dated March 31, 1989 among Mohawk,
ML-Lee Acquisition Fund, L.P. and Citicorp Venture Capital Ltd.
(Incorporated herein by reference to Exhibit 10.7 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.32 Securities Holders Agreement among Mohawk and Certain Management
Investors dated as of March 6, 1992. (Incorporated herein by
reference to Exhibit 10.40 of Mohawk's Annual Report on Form 10-
K for the fiscal year ended December 31, 1993.)
*10.33 Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated
herein by reference to Exhibit 10.8 of Mohawk's Registration
Statement on Form S-1, Registration No. 33-45418.)
*10.34 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992
Stock Option Plan. (Incorporated herein by reference to Exhibit
10.2 in Mohawk's quarterly report on Form 10-Q for the quarter
ended July 3, 1993.)
10.35 Second Amendment dated February 17, 2000 to the Mohawk
Industries, Inc. 1992 Stock Option Plan.
*10.36 Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.15 of Mohawk's
Registration Statement on Form S-1, Registration Number 33-
53932.)
*10.37 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992
Mohawk-Horizon Stock Option Plan. (Incorporated herein by
reference to Exhibit 10.1 of Mohawk's quarterly report on Form
10-Q for the quarter ended July 3, 1993.)
41
<PAGE>
10.38 Second Amendment dated February 17, 2000 to the Mohawk
Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan.
*10.39 Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated
herein by reference to Exhibit 10.39 of Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1992.)
10.40 First Amendment dated February 17, 2000 to Mohawk Industries,
Inc. 1993 Stock Option Plan.
*10.41 Form of Promissory Note between Mohawk and each of the following;
David L. Kolb, John D. Swift and Frank A. Procopio.
(Incorporated herein by reference to Exhibit 10.75 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1995.)
*10.42 The Mohawk Industries, Inc. Executive Deferred Compensation Plan.
(Incorporated herein by reference to Exhibit 10.65 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December
31, 1994.)
*10.43 The Mohawk Industries, Inc. Management Deferred Compensation
Plan. (Incorporated herein by reference to Exhibit 10.66 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.)
*10.44 1997 Non-Employee Director Stock Compensation Plan. (Incorporated
herein by reference to Exhibit 10.79 of Mohawk's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996.)
*10.45 1997 Long-Term Incentive Plan. (Incorporated herein by reference
to Exhibit 10.80 of Mohawk's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996.)
*10.46 Amendment No. 1 to 1997 Non-Employee Director Stock Compensation
Plan. (Incorporated herein by reference to Exhibit 10.74 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997.)
11 Statement re: Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent - KPMG LLP.
23.2 Consent of Independent Accountants - PricewaterhouseCoopers LLP.
27.1 1999 Financial Data Schedule.
27.2 1998 Financial Data Schedule (restated)
- -----------
* Indicates exhibit incorporated by reference.
(b) Reports on Form 8-K.
1. Current Report on Form 8-K: Reclassified prior period financial
statements, dated October 7, 1999.
2. Current Report on Form 8-K: Third quarter earnings press release,
dated October 21, 1999.
3. Current Report on Form 8-K: Stock repurchase press release dated,
December 16, 1999.
4. Current Report on Form 8-K: Fourth quarter earnings press release
dated, February 10, 2000.
42
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Mohawk Industries, Inc.
Dated: March 6, 2000
By: /s/ David L. Kolb
----------------------------------------------
David L. Kolb,
Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 6, 2000 /s/ David L. Kolb
-------------------------------------------------
David L. Kolb,
Chairman of the Board and Chief Executive Officer
(principal executive officer)
Dated: March 6, 2000 /s/ John D. Swift
-------------------------------------------------
John D. Swift,
Chief Financial Officer, Vice President-Finance
and Assistant Secretary
(principal financial and accounting officer)
Dated: March 6, 2000 /s/ Leo Benatar
-------------------------------------------------
Leo Benatar,
Director
Dated: March 6, 2000 /s/ Bruce C. Bruckmann
-------------------------------------------------
Bruce C. Bruckmann,
Director
Dated: March 6, 2000 /s/ S. H. Sharpe
-------------------------------------------------
S. H. Sharpe
Director
Dated: March 6, 2000 /s/ Jeffrey S. Lorberbaum
-------------------------------------------------
Jeffrey S. Lorberbaum,
Director
Dated: March 6, 2000 /s/ Larry W. McCurdy
-------------------------------------------------
Larry W. McCurdy,
Director
Dated: March 6, 2000 /s/ Robert N. Pokelwaldt
-------------------------------------------------
Robert N. Pokelwaldt,
Director
43
<PAGE>
SCHEDULE I
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.
Balance Sheets
December 31, 1999 and 1998
(In thousands, except per share data)
<TABLE>
<CAPTION>
ASSETS 1999 1998
------------ ----------
<S> <C> <C>
Current assets - intercompany receivable............................................ $ 507,386 47,734
Investment in subsidiaries.......................................................... 720,564 563,325
------------ ----------
$ 1,227,950 611,059
============ ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities-current portion of long-term debt............................... $ 30,873 -
Long-term debt, less current portion................................................ 504,531 -
------------ ----------
Total liabilities.............................................................. 535,404 -
============ ==========
Preferred stock, $.01 par value; 60 shares authorized; no shares issued............. - -
Common stock, $.01 par value; 150,000 shares authorized; 60,657 and 60,533
shares issued in 1999 and 1998, respectively..................................... 607 606
Additional paid-in capital.......................................................... 179,993 172,045
Retained earnings................................................................... 595,932 438,408
------------ ----------
776,532 611,059
Less treasury stock at cost; 3,952 shares in 1999............................... 83,986 -
------------ ----------
Total stockholder's equity.................................................... 692,546 611,059
------------ ----------
$ 1,227,950 611,059
============ ==========
</TABLE>
44
<PAGE>
SCHEDULE I
(continued)
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.
Statements of Earnings
Years Ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
--------- ------- -------
<S> <C> <C> <C>
Equity in earnings of subsidiaries.................................... $ 157,239 115,254 79,563
---------- -------- -------
Net earnings....................................................... $ 157,239 115,254 79,563
========== ======== =======
</TABLE>
45
<PAGE>
SCHEDULE I
(continued)
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Condensed Financial Information Of Registrant
Mohawk Industries, Inc.
Statements of Cash Flows
Years Ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
1999 1998 1997
Cash flows from operating activities: ---------- -------- --------
<S> <C> <C> <C>
Net earnings....................................................... $ 157,239 115,254 79,563
Adjustments to reconcile net earnings to net cash used in
operating activities:
Equity in earnings of subsidiaries.............................. (157,239) (115,254) (79,563)
Increase in intercompany receivable............................. 459,652 1,964 4,662
---------- -------- --------
Net cash used in operating activities........................... 459,652 1,964 4,662
---------- -------- --------
Cash flows from financing activities:
Net proceeds from revolving line of credit......................... 384,452 - -
Net proceeds from term loans...................................... 150,952 - -
Stock options exercised............................................ 1,391 4,417 3,636
Tax benefit from exercise of stock options......................... 216 243 1,050
Purchase of treasury stock......................................... (83,986) - -
Other.............................................................. 6,627 (2,696) (24)
---------- -------- --------
Net cash provided by financing activities....................... 459,652 1,964 4,662
---------- -------- --------
Net change in cash.......................................... - - -
Cash, beginning of year............................................... - - -
---------- -------- --------
Cash, end of year..................................................... $ - - -
========== ======== ========
</TABLE>
46
<PAGE>
SCHEDULE I
(continued)
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Notes to Condensed Financial Information Of Registrant
Mohawk Industries, Inc.
December 31, 1999 and 1998
(In thousands, except per share data)
(1) Long-Term Debt
On November 23, 1999 the Company amended and restated its credit agreement to
provide for an interest rate of either (i) LIBOR plus 0.2% to 0.5%, depending
upon the Company's performance measured against certain financial ratios, or
(ii) the prime rate less 1.0%. Additionally, the termination date of the credit
agreement was extended to January 28, 2004. At December 31, 1999, the Company
had credit availability of $450,000 under its revolving credit line and $45,000
under various short-term uncommitted credit lines. At December 31, 1999, a total
of $110,548 was unused under these lines. The credit agreement contains
customary financial and other covenants. The Company must pay an annual facility
fee ranging from .0015 to .0025 of the total credit commitment, depending upon
the Company's performance measured against specific coverage ratios, under the
revolving credit line.
Long term debt consists of the following
<TABLE>
<CAPTION>
1999 1998
--------------- --------------
<S> <C> <C>
Revolving line of credit, due January 28, 2004................. $ 384,452 -
8.46% senior notes, payable in annual principal installments
beginning in 1998, due September 16, 2004, interest payable
quarterly.................................................... 71,429 -
7.14%-7.23% senior notes, payable in annual principal
installments beginning in 1997, due September 1, 2005,
interest payable semiannually................................ 56,666 -
8.48% term loans, payable in annual principal installments,
due October 26, 2002, interest payable quarterly............. 17,143 -
7.58% senior notes, payable in annual principal installments
beginning in 1997, due July 30, 2003, interest payable
semiannually................................................. 5,714 -
---------------- --------------
Total long-term debt.................................. 535,404 -
Less current portion.......................................... 30,873 -
---------------- --------------
Long-term debt, excluding current portion............. $ 504,531 -
================ ==============
The aggregate maturities of long-term debt as of December 31,
1999 are as follows:
2000.......................................................... $ 30,873
2001.......................................................... 30,873
2002.......................................................... 30,873
2003.......................................................... 25,159
2004.......................................................... 408,182
Thereafter.................................................... 9,444
----------------
$ 535,404
================
</TABLE>
47
<PAGE>
SCHEDULE II
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
Consolidated Valuation and Qualifying Accounts
Years Ended December 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged to Balance
beginning costs and at end
Description of year expenses Deductions(1) of year
----------- ------------- ------------- ----------------- --------------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful accounts - trade........... $ 15,829 8,458 7,125 17,162
Provision for cash discounts...................... 7,124 51,971 49,059 10,036
Provision for claims and allowances............... 17,821 121,812 114,596 25,037
------------- ------------- ----------------- --------------
Total.......................................... $ 40,774 182,241 170,780 52,235
============= ============= ================= ==============
Year ended December 31, 1998:
Allowance for doubtful accounts - trade........... $ 17,162 13,173 7,325 23,010
Provision for cash discounts...................... 10,036 73,349 72,898 10,487
Provision for claims and allowances............... 25,037 190,730 191,031 24,736
------------- ------------- ----------------- --------------
Total.......................................... $ 52,235 277,252 271,254 58,233
============= ============= ================= ==============
Year ended December 31, 1999:
Allowance for doubtful accounts - trade........... $ 23,010 15,804 4,710 34,104
Provision for cash discounts...................... 10,487 75,155 76,680 8,962
Provision for claims and allowances............... 24,736 238,413 235,736 27,413
------------- ------------- ----------------- --------------
Total.......................................... $ 58,233 329,372 317,126 70,479
============= ============= ================= ==============
</TABLE>
_______________
(1) Represents charge offs, net of recoveries, to the reserves.
48
<PAGE>
EXHIBIT INDEX
Mohawk
Exhibit
Number Description
- ------ -----------
*2.1 Agreement and Plan of Merger dated as of December 3, 1993 and amended
as of January 17, 1994 among Mohawk, AMI Acquisition Corp., Aladdin
and certain Shareholders of Aladdin. (Incorporated herein by
reference to Exhibit 2(i)(a) in Mohawk's Registration Statement on
Form S-4, Registration No. 33-74220.)
*2.2 Stock Purchase Agreement by and among Mohawk, Galaxy and the
Stockholder of Galaxy dated December 1, 1994. (Incorporated herein by
reference to Exhibit 2 in Mohawk's Current Report on Form 8-K dated
January 13, 1995.)
*2.3 Agreement and Plan of Merger by and among Mohawk, WC Acquisition
Corp., World Carpets, Inc. and the shareholders of World Carpets,
Inc. dated as of October 22, 1998. (Incorporated herein by reference
to Exhibit 2 of the Mohawk Registration Statement on Form S-3,
Registration No. 333-66061, as filed October 22, 1998).
*2.4 Asset Purchase Agreement by and among Aladdin Manufacturing
Corporation, Image Industries, Inc. and The Maxim Group, Inc. dated
as of November 12, 1998, as amended and restated on January 29, 1999.
(Incorporated herein by reference to Exhibit 2.1 in Mohawk's Current
Report on Form 8-K dated January 29, 1999).
*2.5 Agreement and Plan of Merger by and among Mohawk, Durkan Acquisition
Corp., Nonpareil Acquisition Corp.,Durkan Patterned Carpets, Inc.;
the shareholders of Durkan Patterned Carpets, Inc. and the
shareholders of Nonpareil Dying and finishing, Inc., dated as of
February 26, 1999. (Incorporated herein by reference to Exhibit 2.1
of the Mohawk Registration Statement on Form S-3, Registration No.
333-77231, as filed April 28, 1999).
*3.1 Restated Certificate of Incorporation of Mohawk, as amended.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual
report on Form 10-K for the fiscal year ended December 31, 1999.)
*3.2 Amended and Restated Bylaws of Mohawk. (Incorporated herein by
reference to Exhibit 3.2 in Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996).
*4.1 See Article 4 of the Restated Certificate of Incorporation of Mohawk.
(Incorporated herein by reference to Exhibit 3.1 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
*4.2 See Articles 2, 6, and 9 of the Amended and Restated Bylaws of Mohawk.
(Incorporated herein by reference to Exhibit 3.2 in Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996.)
*10.1 Lease dated April 1, 1988 between Horizon and Kay D. Owens concerning
the addition between the Tufting and Coater Buildings on South
Industrial Boulevard in Calhoun, Georgia. (Incorporated herein by
reference to Exhibit 10.24 in Mohawk's Registration Statement on Form
S-1, Registration No. 33-53932.)
*10.2 Lease dated August 15, 1989 between Joan Jones Webb and assigns and
Aladdin related to a finished goods distribution warehouse in Miami,
Florida. (Incorporated herein by reference to Exhibit 10.27 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.)
*10.3 Lease dated October 15, 1990 between NBD Trust Company of Illinois and
Aladdin related to a finished goods distribution warehouse in
Romeoville, Illinois. (Incorporated herein by
<PAGE>
reference to Exhibit 10.28 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.)
*10.4 Lease dated October 3, 1994 between Almoda and Aladdin related to a
finished goods distribution warehouse in Columbus, Ohio.
(Incorporated herein by reference to Exhibit 10.29 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1994.)
*10.5 Lease dated March 1, 1994 between Design Leasing and Holding Company,
Inc. and American Rug Craftsmen, Inc. related to a manufacturing
facility and warehouse in Calhoun, Georgia. (Incorporated herein by
reference to Exhibit 10.35 of Mohawk's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.)
*10.6 Lease dated May 1, 1997 between Opus East, LLC and Mohawk concerning a
distribution warehouse in Glen Burnie, Maryland. (Incorporated herein
by reference to Exhibit 10.8 of Mohawk's Annual Report on Form 10-K
for the fiscal year ended December 31, 1998.)
*10.7 Lease dated September 23, 1996 between West End Road Associates and
Mohawk concerning a distribution warehouse in Pompton Plains, New
Jersey. (Incorporated herein by reference to Exhibit 10.10 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.)
*10.8 Lease dated September 1, 1996 between Catellus Development Corp. and
Mohawk concerning a distribution warehouse in LaMirada, California.
(Incorporated herein by reference to Exhibit 10.11 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
*10.9 Lease dated November 27, 1996 between CP-Regency Business Park LTD and
Aladdin concerning a distribution warehouse in Grand Prairie, Texas.
(Incorporated herein by reference to Exhibit 10.12 of Mohawk's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998.)
*10.10 Lease dated December 14, 1992, between First Union National Bank of
Georgia, as Trustee under item 8 u/w of James E. Minge; First Union
National Bank of Georgia, as Trustee u/a W. G. Minge, dated September
15, 1987; First Union National Bank of Georgia and Jerry L. Minge,
co-executors u/w/o C. A. Minge and Image, as amended by that certain
lease modification and extension agreement dated July 24, 1995 with
respect to that certain warehouse located at 15 Old Airport Road in
Rome, Georgia. (Incorporated herein by reference to Exhibit 10.24 of
Mohawk's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998.)
10.11 Lease dated June 1, 1998 between Intermark USA, Inc. and Aladdin
Manufacturing Corporation concerning a warehouse in Kensington,
Georgia.
10.12 Lease dated February 18, 1999 between Aladdin Manufacturing
Corporation and Industrial Developments International Inc. concerning
a warehouse in Bolingbrook, Illinois.
10.13 Lease dated February 18, 1999 between Mohawk Industries, Inc. and
Senecca G&H, L.L.C. concerning a warehouse in Miami, Florida.
10.14 Lease dated December 3, 1999 between Aladdin Manufacturing Corporation
and Ex-Cell Home Fashions, Inc. concerning a plant in Bentonville,
Arkansas.
10.15 Fifth Amended and Restated Credit Agreement dated as of November 23,
1999 among Mohawk, Wachovia Bank, N.A. Suntrust Bank, Atlanta and
First Union National Bank.
<PAGE>
*10.16 Amended and Restated Series Note Agreement dated as of August 31,
1999 for $85 million of senior notes due September 1, 2005 among
Mohawk, John Hancock Mutual Life Insurance Company, John Hancock
Variable Life Insurance Company, Investors Partner Life Insurance
Company, Principal Life Insurance Company, The Franklin Life
Insurance Company and The Prudential Insurance Company of America.
(Incorporated herein by reference to Exhibit 10.2 of Mohawk's
Quarterly Report on Form 10-Q for the quarter ended October 2,
1999.)
*10.17 Amended and Restated Note Purchase Agreement dated as of August 31,
1999 for $100 million senior notes due September 16, 2004 among
Mohawk, The Prudential Insurance Company of America, Principal Life
Insurance Company, John Hancock Mutual Life Insurance Company,
Massachusetts Mutual Life Insurance Company, Alexander Hamilton Life
Insurance Company of America and The Franklin Life Insurance
Company. (Incorporated herein by reference to Exhibit 10.2 of
Mohawk's Quarterly Report on Form 10-Q for the quarter ended October
2, 1999.)
*10.18 Registration Rights Agreement by and among Mohawk, Citicorp
Investments, Inc., ML-Lee Acquisition Fund, L.P. and Certain
Management Investors. (Incorporated herein by reference to Exhibit
10.14 of Mohawk's Registration Statement on Form S-1, Registration
No. 33-45418.)
*10.19 Voting Agreement, Consent of Stockholders and Amendment to 1992
Registration Rights Agreement dated December 3, 1993 by and among
Aladdin, Mohawk, Citicorp Investments, Inc., ML-Lee Acquisition
Fund, L.P., David L. Kolb, Donald G. Mercer, Frank A. Procopio and
John D. Swift. (Incorporated herein by reference to Exhibit 10(b) of
Mohawk's Registration Statement on Form S-4, Registration No.
33-74220.)
*10.20 Registration Rights Agreement by and among Mohawk and the former
shareholders of Aladdin. (Incorporated herein by reference to
Exhibit 10.32 of Mohawk's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993.)
*10.21 Waiver Agreement between Alan S. Lorberbaum and Mohawk dated as of
March 23, 1994 to the Registration Rights Agreement dated as of
February 25, 1994 between Mohawk and those other persons who are
signatories thereto. (Incorporated herein by reference to Exhibit
10.3 of Mohawk's Quarterly Report on Form 10-Q for the quarter ended
July 2, 1994.)
*10.22 Stock Restriction and Registration Rights Agreement dated as of
October 22, 1998 by and among Mohawk and the former shareholders of
World. (Incorporated herein by reference to Exhibit 99.1 of Mohawk's
Current Report on Form 8-K dated February 19, 1999.)
*10.23 Second Consolidated, Amended and Restated Note Agreement dated as of
August 31, 1999 for $50 million of senior notes, $40,000,000 of
which are due October 26, 2002 and $10,000,000 of which are due July
30, 2002, among Mohawk and The Prudential Insurance Company of
America. (Incorporated herein by reference to Exhibit 10.3 of
Mohawk's Quarterly Report on Form 10-Q dated October 2, 1999.)
Exhibits Related to Executive Compensation Plans, Contracts and other
Arrangements:
*10.24 Mohawk Carpet Corporation Retirement Savings Plan, as amended.
(Incorporated herein by reference to Exhibit 10.1 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.25 Mohawk Carpet Corporation Supplemental Executive Retirement Plan, as
amended. (Incorporated herein by reference to Exhibit 10.2 of
Mohawk's Registration Statement on Form S-1, Registration No.
33-45418.)
<PAGE>
*10.26 World Carpets, Inc. Savings and Retirement Plan dated January 1,
1989. (Incorporated herein by reference to Exhibit 10.70 of Mohawk's
Annual Report on Form 10-K for the year ended December 31, 1998)
*10.27 Mohawk Industries, Inc. Employee Stock Purchase Plan together with
forms of related Management Investment Agreement, Non-Qualified
Stock Option Agreement, and amendments thereto. (Incorporated herein
by reference to Exhibit 10.3 of Mohawk's Registration Statement on
Form S-1, Registration No. 33-45418.)
*10.28 Stock Purchase Agreement dated as of December 30, 1988 between Mohawk
and Mohasco as supplemented by Supplement to Stock Purchase
Agreement dated December 30, 1988. (Incorporated herein by reference
to Exhibit 10.4 of Mohawk's Registration Statement on Form S-1,
Registration No. 33-45418.)
*10.29 Securities Purchase and Holders Agreement dated as of December 31,
1988, as amended and restated March 30, 1989, together with
amendments thereto and forms of related Non-Qualified Stock Option
Agreement and amendments thereto. (Incorporated herein by reference
to Exhibit 10.5 of Mohawk's Registration Statement on Form S-1,
Registration No. 33-45418.)
*10.30 Investment Agreement dated as of March 31, 1989 among Mohawk, Mohawk
Carpet, Citicorp Capital Investors Ltd., Citicorp Venture Capital
Ltd. and ML-Lee Acquisition Fund, L.P. (Incorporated herein by
reference to Exhibit 10.6 of Mohawk's Registration Statement on Form
S-1, Registration No. 33-45418.)
*10.31 Equity Securities Agreement dated March 31, 1989 among Mohawk, ML-Lee
Acquisition Fund, L.P. and Citicorp Venture Capital Ltd.
(Incorporated herein by reference to Exhibit 10.7 of Mohawk's
Registration Statement on Form S-1, Registration No. 33-45418.)
*10.32 Securities Holders Agreement among Mohawk and Certain Management
Investors dated as of March 6, 1992. (Incorporated herein by
reference to Exhibit 10.40 of Mohawk's Annual Report on Form 10-K
for the fiscal year ended December 31, 1993.)
*10.33 Mohawk Industries, Inc. 1992 Stock Option Plan. (Incorporated herein
by reference to Exhibit 10.8 of Mohawk's Registration Statement on
Form S-1, Registration No. 33-45418.)
*10.34 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992
Stock Option Plan. (Incorporated herein by reference to Exhibit 10.2
in Mohawk's quarterly report on Form 10-Q for the quarter ended July
3, 1993.)
10.35 Second Amendment dated February 17, 2000 to the Mohawk Industries,
Inc. 1992 Stock Option Plan.
*10.36 Mohawk Industries, Inc. 1992 Mohawk-Horizon Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.15 of Mohawk's
Registration Statement on Form S-1, Registration Number 33-53932.)
*10.37 Amendment dated July 22, 1993 to the Mohawk Industries, Inc. 1992
Mohawk-Horizon Stock Option Plan. (Incorporated herein by reference
to Exhibit 10.1 of Mohawk's quarterly report on Form 10-Q for the
quarter ended July 3, 1993.)
10.38 Second Amendment dated February 17, 2000 to the Mohawk Industries,
Inc. 1992 Mohawk-Horizon Stock Option Plan.
*10.39 Mohawk Industries, Inc. 1993 Stock Option Plan. (Incorporated herein
by reference to Exhibit 10.39 of Mohawk's Annual Report on Form 10-K
for the fiscal year ended December 31, 1992.)
10.40 First Amendment dated February 17, 2000 to Mohawk Industries, Inc.
1993 Stock Option Plan.
*10.41 Form of Promissory Note between Mohawk and each of the following;
David L. Kolb, John D. Swift and Frank A. Procopio. (Incorporated
herein by reference to Exhibit 10.75 of Mohawk's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995.)
<PAGE>
*10.42 The Mohawk Industries, Inc. Executive Deferred Compensation Plan.
(Incorporated herein by reference to Exhibit 10.65 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994.)
*10.43 The Mohawk Industries, Inc. Management Deferred Compensation Plan.
(Incorporated herein by reference to Exhibit 10.66 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994.)
*10.44 1997 Non-Employee Director Stock Compensation Plan. (Incorporated
herein by reference to Exhibit
10.79 of Mohawk's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.)
*10.45 1997 Long-Term Incentive Plan. (Incorporated herein by reference to
Exhibit 10.80 of Mohawk's
Annual Report on Form 10-K for the fiscal year ended December 31,
1996.)
*10.46 Amendment No. 1 to 1997 Non-Employee Director Stock Compensation
Plan. (Incorporated herein by
reference to Exhibit 10.74 of Mohawk's Annual Report on Form 10-K
for the fiscal year ended December 31, 1997.)
11 Statement re: Computation of Per Share Earnings.
21 Subsidiaries of the Registrant.
23.1 Independent Auditors' Consent - KPMG LLP.
23.2 Consent of Independent Accountants - PricewaterhouseCoopers LLP.
27.1 1999 Financial Data Schedule.
27.2 1998 Financial Data Schedule (restated)
_________
* Indicates exhibit incorporated by reference.
(b) Reports on Form 8-K.
1. Current Report on Form 8-K: Reclassified prior period financial
statements, dated October 7, 1999.
2. Current Report on Form 8-K: Third quarter earnings press release, dated
October 21, 1999.
3. Current Report on Form 8-K: Stock repurchase press release dated,
December 16, 1999.
4. Current Report on Form 8-K: Fourth quarter earnings press release dated,
February 10, 2000.
<PAGE>
EXHIBIT 10.11
STATE OF GEORGIA
COUNTY OF WALKER
THIS AGREEMENT made as of the 1st day of June, 1998, by and between
INTERMARK USA, INC., as Landlord (hereinafter referred to as "Landlord"), and
Aladdin Manufacturing Corporation having an address of 106 JOHN BANKSON DR.
SUMMERVILLE, as Tenant (hereinafter referred to as "Tenant"). GEORGIA 30747
W I T N E S S E T H:
--------------------
WHEREAS, Landlord and Tenant heretofore entered into a Commercial Lease
Contract (the "Lease") respecting certain premises together with the building
thereon located in Kensington, Walker County, Georgia, and being more
particularly described in the Lease; and
Paragraph 1 Leased property
---------------------------
1. The Landlord, for and in consideration of the rents, covenants,
agreements and stipulations hereinafter mentioned, provided for and
contained, to be paid, kept and performed by the Tenant, has leased and
rented, and by these presents leases and rents, unto the said Tenant, and
said Tenant hereby leases and takes upon the terms and conditions which
hereinafter appear, the following described property (hereinafter called
"Premises"), to wit:
(a) From the period of June l, 1999 through May 31, 2000, 136,020
----------------------------------------------------
square feet located in the old Archer plant, (known as Sections A-4, A-5
and A-6)); and
141,464 square feet located in the old Archer plant (known as
Sections B-4)
and being known as Highway 341, Kensington, Georgia. No easement for light
or air is included in the Premises.
Paragraph 2 Rental and Period of Lease
--------------------------------------
Tenant agrees to pay Landlord an annual rental in the amount of $225,000,
which shall be paid, commencing promptly on June 1, 1999, and on the first
day of each month thereafter in advance during the term of this Lease, in
equal monthly installments of $18,500. Rent shall be on a pro rata basis for
square footage described in paragraph 1.
Paragraph 3 Default
-------------------
It is mutually agreed that in the event the Tenant shall default in the
payment of rent herein reserved, when due, and fails to cure said default
within ten (10) days after written notice hereof from the Landlord; or if
the Tenant shall be in default in performing any of the terms or provisions
of the lease other than the provision requiring the payment of rent, and
fails to cure such default within thirty (30) days after the written notice
of default from the landlord; or if the Tenant is
<PAGE>
adjudicated bankrupt or if a permanent receiver is appointed for the Tenant's
property and such receiver is not removed within sixty (60) days after written
notice from the Landlord to Tenant to obtain such removal; or if, whether
voluntary or involuntary, Tenant takes advantage of any debtor relief
proceedings under any present or future law, whereby the rent or any part
thereof is, is proposed to be, reduced or payment thereof deferred; or if the
Tenant makes an assignment for benefit of creditors; or if the Tenant's property
or any part thereof should be levied upon or attached under process against
Tenant and not satisfied or dissolved within thirty (30) days after written
notice from Landlord to Tenant to obtain satisfaction thereof; then, in any said
events, Landlord at his option, may at once, or within six (6) months thereafter
(but only during continuance of such default or condition), terminate this
lease by written notification to the Tenant; where upon this lease shall end.
After an authorized assignment or subletting of the entire premises covered by
this lease, the occurring of any of the foregoing defaults or events shall
affect this lease only if caused by, or happening to the assignee or sub-
tenant. Any notice provide in this paragraph may be given by Landlord, or Agent
herein named. Upon such termination by Landlord, Tenant will at once surrender
possession of the premises to Landlord and remove all Tenant's property
therefrom; and Landlord may forewith re-enter the premises and repossess himself
hereof, and remove all property therefrom, using such force as may be necessary
without being guilty of trespass, forcible entry to detainer or other tort, or
the violation or any of the terms of this lease.
Paragraph 4 Reletting by Landlord
- ---------------------------------
Landlord as Tenant's agent, without termination of this lease, upon Tenant's
breaching any of the terms of this contract, may at the Landlord's option, enter
upon and rent said premises at the best price obtainable by reasonable effort
without advertisement or private negotiations and for any term Landlord deems
proper. Tenant shall be liable to Landlord for the deficiency, if any, between
Tenant's rent hereunder and the price obtained by Landlord on re-letting. In
case this lease is terminated and/or Tenant is dispossessed from the Premises on
account of Tenant's default hereunder, Landlord agrees to use good-faith,
commercially reasonable efforts to re-let same and to otherwise mitigate
damages.
Paragraph 5 Collection by an attorney
- -------------------------------------
If any rent owing under this lease is collected by or through an attorney at
law, Tenant agrees to pay ten (10%) percent thereof as attorney's fees. Tenant
waives all right to homestead and exemptions which he or any member of his
family or other person may have under any law as against any obligations arising
under this lease, and Tenant hereby assigns to Landlord his homestead and
exemption.
Paragraph 6 Subletting by Tenant
- --------------------------------
Tenant may sublease portions of the leased premises to others provided that such
operation is in part of the general operation of the Tenant and under the
supervision and control of the Tenant, and provided that such operation is
within the purposes for which said premises shall be used. Except as provided in
the preceding sentence, Tenant shall not, without the written consent of the
Landlord, assign the lease or any interest hereunder, or sublet premises or any
part thereof, or permit the use of premises by any party other than the Tenant,
any assignee of the Tenant, at option of Landlord, shall become directly liable
to Landlord for all obligations of Tenant hereunder, but no sublease or
assignment by Tenant shall relieve Tenant of any liability hereunder.
Paragraph 6 Signs
- -----------------
<PAGE>
Tenant shall paint no signs on the outside walls or place any signs on the roof
of the leased premises except with the written consent of Landlord. Any and all
signs placed on or within the leased premises by the Tenant shall be maintained
in compliance with the rules and regulations governing such signs and the Tenant
shall be responsible to Landlord for any damage caused by installation, use or
maintenance of said signs, and Tenant agrees, upon removal of said signs, to
repair damage incident to such removal.
Paragraph 7 Control & responsibility
- ------------------------------------
Landlord gives Tenant exclusive control of the premises, and shall be under no
obligation to inspect said premises. Tenant shall at once report in writing to
landlord any defective condition known to him which Landlord is required to
repair, and failure to so report such defect shall make the Tenant
responsibility to the Landlord for any liability incurred by Landlord by reason
of such defect. If such defect shall result in a leak or other condition needing
attention in the roof, Landlord upon receipt of written notice from Tenant shall
within 5 working days reasonable promptness have made the necessary repairs.
Should Landlord fail to make such repairs with reasonable promptness, Tenant is
authorized to have the necessary repairs made and deduct the costs from the next
rental payment due hereunder. Landlord shall not be liable, under any
circumstances, for damage by water, or otherwise, by reason of the failure of
the building to protect persons property, nor shall Landlord be liable for
damages by reason of flood water the basement, or otherwise.
Paragraph 8 Delivery at expiration
- ----------------------------------
Tenant will deliver said premises at the expiration of this lease in as good
order and repair as when first received, natural wear and tear and fire and
other casualty loss excepted. Tenant shall have the right, within the term of
the lease, if not in default thereunder, to remove all furniture or trade
fixtures that have been installed by Tenant, but Tenant will repair, at or
before the end of the term, all injury done by the installation or removal of
furniture and property.
Paragraph 9 Changes in premises
- -------------------------------
Tenant is to make no change of any substantial or permanent nature in the above
named premises, including painting of outside walls without first obtaining
written consent from said Landlord.
Paragraph 10 Improvements by Tenant
- -----------------------------------
Any improvements, repairs, betterment's or additions placed on the premises by
the Tenant, shall not be a charge against the Landlord or the property.
Paragraph 11 Ordinances
- -----------------------
Tenant agrees to comply with all rules, orders, ordinances and regulations of
the City, County and State in which the property is located, in any and all of
their departments.
Paragraph 12 Carding
- --------------------
Landlord has the privilege of carding the premises for rent or for sale at any
time within ninety (90) days previous to the expiration of this lease, and may
at any time exhibit said premises during reasonable hours with notification in
writing to Tenant.
Paragraph 13 Use of premises
- ----------------------------
Premises shall be used as general warehouse. No wines, beer, whiskeys, liquors
or intoxicating beverages of any kind shall be kept on, sold or delivered on
said premises.
<PAGE>
Paragraph 14 Hold over
- ----------------------
This lease, under no circumstances, shall extend beyond the timer herein
provided; and in the event that Tenant remains in the property after the
expiration date of the term herein, with or without payment of rent, this shall
not automatically extend the lease but he shall be as a tenant at will, and
subject to the terms and conditions of the original lease.
Paragraph 15 Light & easement
- -----------------------------
Nothing herein contained shall be construed to confer upon Tenant easement to
light or air.
Paragraph 16 Right of use only
- ------------------------------
This contract shall create the relationship of Landlord and Tenant between the
parties hereto. No estate shall pass out of Landlord. Tenant has only a
usufruct, not subject to levy and sale, and not assignable by Tenant except by
Landlord's consent.
Paragraph 17
- ------------
All rights, powers and privileges conferred hereunder upon parties hereto shall
be cumulative but not restrictive to those given by law.
Paragraph 18 Non waiver of rights
- ---------------------------------
No failure of Landlord to exercise any power given landlord hereunder, or to
insist upon strict compliance by Tenant with his obligations hereunder, and no
custom or practice of the parties at variance with the terms hereof shall
construe a waiver of Landlord's right to demand exact compliance with terms
hereof.
Paragraph 19
- ------------
Time is of the essence of this agreement.
Paragraph 20 Definition of parties
- ----------------------------------
"Landlord" as used in this lease, shall also include his heirs, representatives,
assigns and successors in title to premises. "Tenant" includes also
representatives, and if this lease shall be validly assigned or said premises
sub-let, shall include also Tenant's assignees or sub-tenants as to premises
covered by such assignment or sub-lease. "Agent" shall include its successors,
assigns and representatives. "Landlord" and "Tenant" include male and female,
singular and plural, corporation, partnership or individual, as may fit
particular parties.
Paragraph 21 Notices
- --------------------
The depositing in the United States Post Office, directed to Tenant at Tenant's
address shown above of any notice required or permitted under this lease to be
given by Landlord to Tenant, shall be conclusive of delivery thereof to Tenant.
<PAGE>
SPECIAL STIPULATIONS
Insofar as the following stipulations conflict with any of the foregoing
provisions, the following shall control.
A. Insurance. Landlord shall, at its cost and expense, cause the following
---------
insurance coverage to be provided and kept in force without lapse at any time
and for any reason during the term of this Lease:
(i) Insurance covering the premises against loss or damage by fire and
lightning and such risks as are included in "Special Form" or All
Risk coverage endorsements to policies covering property similar to
the premises in an amount equal to 100% of the full replacement value
thereof (excluding foundations and excavation costs), which names
Tenant as an additional insured and which includes an endorsement
waiving the right of subrogation. Notwithstanding anything contained
in this lease to the contrary, regardless of whether or not Landlord
causes the required insurance covering losses for such causes to be
provided and kept in force and regardless of whether or not Tenant,
its agents, employees, contractors or others under the control of
Tenant cause such damages, Landlord shall be responsible for
repairing all damages to the premises caused by fire and lightning
and such risks as are customarily included in "Special Form" or All
Risk coverage endorsements to policies covering property similar to
the premises.
(ii) Commercial General Liability coverage on an "Occurrence Form" basis
with limits of at least $1,000,000 Each Occurrence, and $2,000,000
General Aggregate for all claims arising out of Bodily Injury,
Personal Injury, and Property Damage Liability, including Contractual
Liability.
(iii) Business Auto Liability coverage for all vehicles owned by Landlord,
including Non-Owned and Hired Autos, with limits of at least
$1,000,000 Each Occurrence for Bodily Injury and Property Damage
Liability.
(iv) Workers Compensation coverage covering all employees, contractors and
subcontractors of Landlord, as applicable, working in the State of
Georgia under the statutory provisions of the Georgia Workers
Compensation Act.
Landlord and Tenant expressly agree that either Landlord's failure to provide
Tenant a certificate of insurance as temporary evidence of the insurance
coverage required by this lease within ten (10) days from the effective date of
this lease, or Landlord's failure to provide Tenant a final policy or policies
of insurance evidencing the insurance coverage required by this lease within
sixty (60) days from the effective date of this lease, shall render Landlord in
default
<PAGE>
under the lease and shall entitle Tenant to exercise any applicable remedies
upon default provided in the lease or allowed by law. The policies required
under this section shall not be canceled without thirty (30) days' prior written
notice to Tenant.
B. Damage or Destruction. Within 30 days should said premises, or the
---------------------
building of which same are a part, be damaged by fire or any act of Providence,
the Landlord shall cause the damaged part to be restored as soon as within 30
days reasonably practicable and hold the lease in full force and effect. From
the date of such damage until the damage is restored, the rental shall abate to
the proportionate extent that the damaged part bears to the whole premises.
Should the damage be so great as to amount substantially to total destruction,
then either Landlord or Tenant shall have the right to terminate the lease,
provided that either party shall within twenty (20) days after such damage
notify the other party in writing of the election to terminate this lease.
C. Environmental Compliance. To the best of Landlord's knowledge and belief,
------------------------
there are no existing violations of any federal, state and local environmental
laws and regulations and any amendments thereto including, but not limited to,
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
the Superfund Amendments and Reauthorization Act of 1986, and the Resource
Conservation Recovery Act of 1976. Landlord shall indemnify and hold Tenant
harmless from and against any and all damages, penalties, fines, claims, liens,
suits, liabilities, costs (including cleaning-up costs), judgments and expenses
(including, but not limited to, attorneys', consultants' and experts' fees and
expenses) of any kind and nature suffered by or asserted against Tenant as a
direct or indirect result of any preexisting condition prior to the occupancy of
said premises by Tenant or as a direct or indirect result of any condition or
violation taking place after the termination of the lease term or Tenant's
occupancy of the property. The foregoing indemnification shall survive the
expiration or termination of the lease term.
D. Increased Insurance Rates. Notwithstanding anything contained herein to
-------------------------
the contrary, Tenant shall not be liable for any increase in insurance rates on
the leased premises due to Tenant's initial occupancy thereof for the uses
specified herein. Additionally, Landlord acknowledges and agrees that the
proposed use does not require the physical presence of employees of Tenant at
the leased premises during normal working hours, since Tenant's use as a
warehouse facility will require the physical presence of Tenant's employees only
<PAGE>
during times of deliveries to or from the facility. Landlord represents and
warrants that the demised premises are designed for and adequate for the use by
Tenant as a warehouse for materials used in the production of carpet.
E. Taxes. Tenant shall not be responsible for the payment of ad valorem
-----
property taxes assessed against the premises.
F. Consents. Each party agrees that to the extent any acquiescence, consent
--------
or agreement herein is permitted or required, such acquiescence, consent or
agreement should not be unreasonably withheld, delayed or denied.
G. Quiet Enjoyment/Authority. Landlord covenants and warrants to Tenant that
-------------------------
Landlord has full right and lawful authority to enter into and perform
Landlord's obligations under this lease, that Landlord has a leasehold interest
in the property pursuant to the Prior Lease, free and clear of all other
contracts, leases, tenancy agreements, restrictions, violations, encumbrances or
defects in title of any nature whatsoever that would restrict the use or
enjoyment of Tenant of the premises.
H. Brokerage Commission. Tenant shall have no responsibility for any
-------------------
commission payable to any broker in connection with the execution of this lease.
I. Mutual Indemnification. Tenant hereby indemnifies Landlord for any bodily
----------------------
injury or property damage of any third parties by reason of Tenant's negligence,
and the negligence of its employees, agents, servants or contractors, in its use
or occupancy of the leased premises. Landlord hereby indemnifies Tenant for any
bodily injury or property damage of any third parties by reason of Landlord's
negligence and the negligence of its employees, agents, servants or contractors,
in its maintenance, use or occupancy of the leased premises.
J. Sprinkler system. As a precondition to the effectiveness of this lease
----------------
Landlord agrees to keep the sprinkler system in working order as required by
Tenant's insurance carrier, and to not turn off the water supply to the
sprinkler system other than for routine maintenance.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this lease as of the
day and year first above written.
LANDLORD:
INTERMARK USA, INC.
Signed, sealed and delivered
In the presence of
BY: /s/ Drennon Crutchfield
- ----------------------------- ------------------------------
WITNESS
/s/ Mary Smith ATTEST:
- ----------------------------- --------------------------
NOTARY PUBLIC
TENANT:
SIGNED, SEALED AND DELIVERED ALADDIN MANUFACTURING CORPORATION
IN THE PRESENCE OF:
BY: /s/ Sal Perillo
- ----------------------------- ------------------------------
WITNESS
/s/ Mary Pritchard ATTEST:
- ----------------------------- --------------------------
NOTARY PUBLIC
<PAGE>
RIDER TO INTERMARK U.S.A.
A. Aladdin Manufacturing Corporation.
B. In case this lease is terminated and/or Tenant is dispossessed from the
Premises on account of Tenant's default hereunder, Landlord agrees to use
good-faith, commercially reasonable efforts to re-let same and to otherwise
mitigate damages.
C. Within 5 working days.
D. Within 30 days.
E. Aladdin Manufacturing Corporation.
<PAGE>
EXHIBIT 10.12
INDUSTRIAL LEASE AGREEMENT
BETWEEN
INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC.
AS LANDLORD
AND
ALADDIN MANUFACTURING CORPORATION
AS TENANT
<PAGE>
LEASE INDEX
-----------
Section Subject
- ------- -------
1 Basic Lease Provisions
2 Demised Premises
3 Term
4 Base Rent
5 [INTENTIONALLY OMITTED]
6 Operating Expenses and Additional Rent
7 Use of Demised Premises
8 Insurance
9 Utilities
10 Maintenance and Repairs
11 Tenant's Personal Property; Indemnity
12 Tenant's Fixtures
13 Signs
14 No Landlord's Lien
15 Governmental Regulations
16 Environmental Matters
17 Construction of Demised Premises
18 Tenant Alterations and Additions
19 Services by Landlord
20 Fire and Other Casualty
21 Condemnation
22 Tenant's Default
23 Landlord's Right of Entry
24 Lender's Rights
25 Estoppel Certificate
26 Landlord's Liability
27 Notices
28 Brokers
29 Assignment and Subleasing
30 Termination of Expiration
31 [INTENTIONALLY OMITTED]
32 Late Payments
33 Rules and Regulations
34 Quiet Enjoyment
35 Miscellaneous
36 Lease Date
37 Authority
38 No Offer Until Executed
Exhibit "A" Demised Premises
Exhibit "B" Prevailing Market Rate
Exhibit "C" Preliminary Plans and Specifications/Work
Exhibit "D" Subordination, Nondisturbance and Attornment Agreement
Exhibit "E" Rules and Regulations
Exhibit "F" Certificate of Authority
Exhibit "G" Special Stipulations
<PAGE>
INDUSTRIAL LEASE AGREEMENT
--------------------------
THIS LEASE AGREEMENT (the "Lease") is made as of the "Lease Date" (as defined
in Section 37 herein) by and between INDUSTRIAL DEVELOPMENTS INTERNATIONAL,
INC., a Delaware corporation ("Landlord"), and ALADDIN MANUFACTURING
CORPORATION, a Delaware corporation ("Tenant") (the words "Landlord" and
"Tenant" to include their respective legal representatives, successors and
permitted assigns where the context requires or permits).
W I T N E S S E T H:
1. Basic Lease Provisions. The following constitute the basic provisions of
----------------------
this Lease:
(a) Demised Premises Address: ____________________________
Bolingbrook, Illinois; as provided in
Section 2, the Demised Premises includes
the non-exclusive right of Tenant to use
the parking area and driveways which are
part of the Building Common Area (as
defined in Section 6).
(b) Demised Premises Square Footage: approximately 201,959 square feet
(c) Building Square Footage: approximately 352,338 square feet
(d) Annual Base Rent:
Lease Years one (1) through five (5) $763,405.02
Lease Years six (6) through ten (10) $862,364.93
(e) Monthly Base Rent Installments:
Lease Years one (1) through five (5) $ 63,617.09
Lease Years six (6) through ten (10) $ 71,863.74
(f) Lease Commencement Date: The date of Substantial Completion (as
defined in Section 17 of this Lease).
(g) Base Rent Commencement Date: The Lease Commencement Date.
(h) Expiration Date: The date which is ten (10) years after the Lease
Commencement Date (subject to adjustment in accordance with Section
3 of this Lease).
(i) Term: Ten (10) years after the Lease Commencement Date (subject to
adjustment in accordance with Section 3 of this Lease).
(j) Tenant's Operating Expense Percentage: 57.32%
(k) [INTENTIONALLY OMITTED]
(l) Permitted Use. Storage, warehousing, and distribution of carpet and
carpet sundries, and general office use related thereto.
(m) Address for notice:
Landlord: INDUSTRIAL DEVELOPMENTS
INTERNATIONAL, INC.
3424 Peachtree Road, N.E.
Suite 1500
Atlanta, Georgia 30326
Attention: Vice President - Operations
Tenant: ALADDIN MANUFACTURING CORPORATION
160 South Industrial Boulevard, S.W.
Calhoun, Georgia 30703-7002
Attention: Salvatore J. Perillo, Esquire
General Counsel
<PAGE>
(n) Address for rental INDUSTRIAL DEVELOPMENTS
payments: INTERNATIONAL, INC.
c/o IDI Services Group, Inc.
P.O. Box 930190
Atlanta, Georgia 31193
(o) Broker: Grubb & Ellis
2. Demised Premises. For and in consideration of the rent hereinafter
----------------
reserved and the mutual covenants hereinafter contained, Landlord does hereby
lease and demise unto Tenant, and Tenant does hereby hire, lease and accept,
from Landlord all upon the terms and conditions hereinafter set forth the
following premises, referred to as the "Demised Premises", as outlined on
Exhibit A attached hereto and incorporated herein: (i) approximately 201,959
- ---------
square feet of space, approximately 10,000 square feet of which is office space,
having an address as set forth in Section 1(a), located within a building known
as Inventory Facility I (the "Building"), which contains a total of
approximately 352,338 square feet and is located on a parcel of land ("Land")
containing approximately 16.24 acres within Bolingbrook Corporate Center (the
"Project"), in Bolingbrook, Illinois and (ii) a non-exclusive right to use, in
common with other tenants of the Building (and the employees, guests and other
invitees of such tenants), all Building Common Area. The Demised Premises will
be delivered to Tenant in the condition and on the schedule described in Section
17.
3. Term. To have and to hold the Demised Premises for a term (the "Term")
----
commencing on the Lease Date and terminating on the Expiration Date, as the
Lease Commencement Date and the Expiration Date may be revised pursuant to
Section 17; provided that if the Lease Commencement Date is a day other than the
first day of a calendar month, the Term shall expire ten (10) years after the
first day of the first full calendar month after the Lease Commencement Date and
shall, accordingly, include the period between the Lease Commencement Date and
the end of the calendar month in which the Base Commencement Date occurs. The
term "Lease Year", as used in this Lease, shall mean the 12-month period
commencing on the Lease Commencement Date, and each 12-month period thereafter
during the Term; provided, however, that if the first Lease Year begins on a day
other than the first day of a calendar month, the first Lease Year shall include
the period between the Lease Commencement Date and the end of the calendar month
in which the Lease Commencement Date occurs and shall extend through the end of
the twelfth (12th) full calendar month following the Lease Commencement Date.
3.1 Renewal Option.
--------------
(a) Provided that no Event of Default (as defined in Section 22) has
occurred and is then continuing, Tenant shall have the right and option to
extend the Primary Term of this Lease for two (2) successive additional periods
of five (5) years each (the "First Renewal Term" and the "Second Renewal Term",
respectively, and, collectively, the "Renewal Terms") in accordance with this
Section 3.1. If Tenant does not extend the Primary Term for the First Renewal
Term, it shall have no right to extend the Term for the Second Renewal Term. The
option for the First Renewal Term my be exercised by Tenant by written notice
given to Landlord not less than nine (9) months prior to the end of the Primary
Term. If Tenant properly exercises its right to the First Renewal Term, the
option for the Second Renewal Term may be exercised by Tenant by written notice
given to Landlord not less than nine (9) months prior to the end of the First
Renewal Term. Subject to the terms of subsection (b) of this Section 3.1, all of
the terms and provisions of this Lease shall govern and be applicable to the
First Renewal Term and the Second Renewal Term (with the exceptions that (i)
there will be no period of rent-free occupancy at the commencement of either of
the Renewal Terms, (ii) Landlord will have no obligation to construct any
improvements, provide any allowances or grant any rental abatement prior to
commencement of accrual of Base Rent for either Renewal Term and (iii) there
will be no renewal of the Term other than the Renewal Terms) if Tenant timely
exercises its right to extend the Term in accordance with this subsection (a).
(b) If Tenant timely and properly exercises its right to the First
Renewal Term, Tenant shall pay to Landlord as Annual Base Rent during the First
Renewal Term, in lawful money of the United States commencing at the
commencement of the First Renewal Term, a per annum sum equal to the greater of
(i) the product obtained by multiplying the square footage of the Demised
Premises times an amount equal to the "Prevailing Market Rate" (as defined and
calculated in the manner set forth in Exhibit B attached to this Lease and
---------
incorporated herein by reference) in effect on the first day of the First
Renewal Term or (ii) the Base Rent which was in effect at the end of the Primary
Term. If Tenant properly exercises its right to the First Renewal Term, and
thereafter timely exercises its right to the Second Renewal Term, Tenant shall
pay to Landlord as Annual Base Rent during the Second Renewal Term, in lawful
money of the United States commencing at the commencement of the Second Renewal
Term, a per annum sum equal to the greater of (i) the product obtained by
multiplying the square footage of the Demised Premises times an amount equal to
the Prevailing Market Rate in effect as of the first day of the Second Renewal
Term or (ii) the Base Rent which was in effect at the end of the First Renewal
Term.
4. Base Rent. Tenant shall pay to Landlord at the address set forth in
---------
Section 1(n), as base rent for the Demised Premises, commencing on the Base Rent
Commencement Date and continuing throughout the Term in lawful money of the
United States, the annual amount set forth in Section 1(d) payable in equal
monthly installments as set forth in Section 1(e) (the "Base Rent"), payable in
advance,
-2-
<PAGE>
payable in equal monthly installments as set forth in Section 1(e) (the "Base
Rent"), payable in advance, without demand and without abatement, reduction,
set-off or deduction, on the first day of each calendar month during the Term.
If the Base Rent Commencement Date shall fall on a day other than the first day
of a calendar month, the Base Rent shall be apportioned pro rata on a per diem
basis (i) for the period between the Base Rent Commencement Date and the first
day of the following calendar month (which pro rata payment shall be due and
payable on the Base Rent Commencement Date), and (ii) for the last partial month
of the Term, if applicable. No payment by Tenant or receipt by Landlord of rent
hereunder shall be deemed to be other than on account of the amount due, and no
endorsement or statement on any check or any letter accompanying any check or
payment of rent shall be deemed an accord and satisfaction, and Landlord may
accept such check as payment without prejudice to Landlord's right to recover
the balance of such installment or payment of rent or pursue any other remedies
available to Landlord.
4.1 Landlord hereby agrees to provide to Tenant an allowance in the
amount of $400,000.00 ("Maximum Construction Allowance") for the installation of
the interior finish of the office area of the Demised Premises ("Allowance
Work"). If, following the final approval of the Plans and Specifications (as
defined in Section 17(a) of this Lease), Landlord reasonably determines that the
cost of the Allowance Work will exceed the amount of the Maximum Construction
Allowance, Landlord will give written notice of such determination to Tenant,
which notice will specify the estimated amount by which the cost of the
Allowance Work will exceed the Maximum Construction Allowance. Subject to the
rights of review and approval granted Tenant hereinafter in this Section 4.1,
Tenant agrees to deliver to Landlord such excess amount in cash within ten (10)
business days following receipt of such notice. If Tenant does not utilize the
full Maximum Construction Allowance, the unused portion may be applied by Tenant
as a credit against Base Rent and Additional Rent (as defined in Section 6)
which would otherwise accrue in accordance with this Lease. At any time after
the occurrence of Substantial Completion, Landlord and Tenant shall, within
thirty (30) days after receipt by Tenant of a written request from Landlord,
execute and deliver an amended and restated version of this Lease which will
delete this Section 4.1 in its entirety and delete any other references in this
Lease to the provisions of this Section 4.1. With respect to the Maximum
Construction Allowance, Landlord agrees that Landlord will give Tenant a
reasonable opportunity to review and approve any bids or contracts which
Landlord desires to accept from any contractor for performance of the work which
will be paid from the Maximum Construction Allowance; provided that Tenant must
respond in writing within five (5) business days after receipt of any written
submission from Landlord. A failure to respond timely shall constitute approval.
Landlord will not accept a bid or enter into a contract without the approval of
Tenant; provided that Tenant acknowledges that (i) Landlord will not be in a
position to submit an application for the Permits (as defined in Section 17(a))
without the required approval from Tenant and (ii) each day that elapses after
such fifth (5th) business day, until the requisite approval is obtained from
Tenant, will constitute a day of Tenant Delay (as defined in Section 17.1).
4.2 Additional Allowance. In addition to the Maximum Construction
--------------------
Allowance, Landlord hereby agrees to provide to Tenant an additional allowance
("Supplemental Allowance") in the amount of $500,000.00, which will be available
for use by Tenant in accordance with this Section 4.2. Tenant may use the
Supplemental Allowance to fund the payment of the cost of any Allowance Work
which exceeds the Maximum Construction Allowance and then the payment of the
installation by Landlord of permanent improvements at the Demised Premises
("Additional Improvements"), in addition to the Allowance Work; provided that
the nature and scope of such work will be subject to the approval of Landlord,
not to be unreasonably withheld, delayed or conditioned. Landlord will, to the
extent reasonably practicable, perform the Additional Work concurrently with
performance of the Allowance Work, subject to the condition that Landlord will
not be required to perform the Additional Work in any manner which would delay
the occurrence of Substantial Completion. To the extent that Tenant does not
utilize the Additional Allowance to pay excess cost for the Allowance Work or
the cost of Additional Improvements, the unused portion of the Additional
Allowance shall then be applied as a credit against Base Rent and Additional
Rent, up to a maximum of $243,229.26, and the balance, if any, will be paid to
Tenant in cash. Under no circumstances will Tenant have any right to receive the
payment from the Additional Allowance (except to the extent that Landlord may be
performing Additional Work), either in cash or as a credit against Base Rent,
until Tenant has acknowledged in writing the occurrence of Substantial
Completion.
5. [INTENTIONALLY OMITTED]
6. Operating Expenses and Additional Rent.
--------------------------------------
(a) Tenant agrees to pay as Additional Rent (as defined in Section 6(b)
below) its proportionate share of Operating Expenses (as hereinafter defined).
"Operating Expenses" shall be defined as all reasonable expenses for operation,
repair, replacement and maintenance as necessary to keep the Building and the
common areas, driveways, and parking areas associated therewith (collectively,
the "Building Common Area") in good order, condition and repair, including but
not limited to, utilities for the Building Common Area, expenses associated with
the driveways and parking areas (including sealing and restriping, and snow,
trash and ice removal), security systems, fire detection and prevention systems,
lighting facilities, landscaped areas, walkways, painting and caulking,
directional signage, curbs, drainage strips, sewer lines, all charges assessed
against or attributed to the Building pursuant to any applicable easements,
covenants, restrictions, agreements, declaration of protective covenants or
development standards, property management fees (provided that the amount of
management fees
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included in the Operating Expenses actually billed to Tenant shall not exceed,
on an annual basis, two percent (2.0%) of the Base Rent in effect from time to
time), all real property taxes and special assessments imposed upon the
Building, the Building Common Area and the land on which the Building and the
Building Common Area are constructed, all costs of insurance paid by Landlord
with respect to the Building and the Building Common Area, and costs of
improvements to the Building and the Building Common Area required by any law,
ordinance or regulation applicable to the Building and the Building Common Area
generally (and not because of the particular use of the Building or the Building
Common Area by a particular tenant), which cost shall be amortized on a straight
line basis over the useful life of such improvement, as reasonably determined by
Landlord. Operating Expenses shall not include expenses for the costs of any
maintenance and repair required to be performed by Landlord at its own expense
under Section (10)(b). Further, Operating Expenses shall not include the costs
for capital improvements unless such costs are incurred for the purpose of
causing a material decrease in the Operating Expenses of the Building or the
Building Common Area or are made with respect to improvements made to comply
with laws, ordinances or regulations as described above. The proportionate share
of Operating Expenses to be paid by Tenant shall be a percentage of the
Operating Expenses based upon the proportion that the square footage of the
Demised Premises bears to the total square footage of the Building (such figure
referred to as "Tenant's Operating Expense Percentage" and set forth in Section
1(j)). Prior to or promptly after the beginning of each calendar year during the
Term. Landlord shall estimate the total amount of Operating Expenses to be paid
by Tenant during each such calendar year and Tenant shall pay to Landlord one-
twelfth (1/12) of such sum on the first day of each calendar month during each
such calendar year, or part thereof, during the Term. Within a reasonable time
after the end of each calendar year, Landlord shall submit to Tenant a statement
of the actual amount of Operating Expenses for such calendar year, and the
actual amount owed by Tenant, and within thirty (30) days after receipt of such
statement, Tenant shall pay any deficiency between the actual amount owed and
the estimates paid during such calendar year, or in the event of overpayment.
Landlord shall credit the amount of such overpayment toward the next installment
of Operating Expenses owed by Tenant or remit such overpayment to Tenant if the
Term has expired or has been terminated and no Event of Default exists
hereunder. The obligations in the immediately preceding sentence shall survive
the expiration or any earlier termination of this Lease. If the Lease
Commencement Date shall fall on other than the first day of the calendar year,
and/or if the Expiration Date shall fall on other than the last day of the
calendar year, Tenant's proportionate share of the Operating Expenses for such
calendar year shall be apportioned prorata.
(b) Any amounts required to be paid by Tenant hereunder (in addition to
Base Rent) and any charges or expenses incurred by Landlord on behalf of Tenant
under the terms of this Lease shall be considered "Additional Rent" payable in
the same manner and upon the same terms and conditions as the Base Rent reserved
hereunder except as set forth herein to the contrary. Any failure on the part of
Tenant to pay such Additional Rent when and as the same shall become due shall
entitle Landlord to the remedies available to it for non-payment of Base Rent.
Tenant's obligations for payment of Additional Rent shall begin to accrue on the
Lease Commencement Date regardless of the Base Rent Commencement Date.
(c) If applicable in the jurisdiction where the Demised Premises are
located, Tenant shall pay and be liable for all rental, sales, use and inventory
taxes or other similar taxes, if any, on the amounts payable by Tenant hereunder
levied or imposed by any city, state, county or other governmental body having
authority, such payments to be in addition to all other payments required to be
paid Landlord by Tenant under the terms of this Lease. Such payment shall be
made by Tenant directly to such governmental body if billed to Tenant, or if
billed to Landlord, such payment shall be paid concurrently with the payment of
the Base Rent, Additional Rent, or such other charge upon which the tax is
based, all as set forth herein.
(d) The books and records of Landlord pertaining to the determination of
Operating Expenses for any calendar year may be reviewed and/or audited by
Tenant or its representatives, at the expense of Tenant and during normal
business hours at the offices of Landlord located at 3424 Peachtree Road, Suite
1500, Atlanta, Georgia 30326 at any time within thirty-six (36) months following
the end of the calendar year for which review and/or the audit is to be
performed, provided that Tenant shall give Landlord not less than ten (10) days
prior written notice of the intent of Tenant to conduct the review and/or audit.
7. Use of Demised Premises.
-----------------------
(a) The Demised Premises shall be used for the Permitted Use set forth in
Section 1(1) and for no other purpose.
(b) Tenant will permit no liens to attach or exist against the Demised
Premises, and shall not commit any waste.
(c) The Demised Premises shall not be used for any illegal purposes, and
Tenant shall not allow, suffer, or permit any vibration, noise, odor, light or
other effect to occur within or around the Demised Premises that could
constitute a nuisance or trespass for Landlord of any occupant of the Building
or an adjoining building, its customers, agents, or invitees. Upon notice by
Landlord to Tenant
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that any of the aforesaid prohibited uses are occurring. Tenant agrees to
promptly remove or control the same.
(d) Tenant shall not in any way violate any law, ordinance or restrictive
covenant affecting the Demised Premises, and shall not in any manner use the
Demised Premises so as to cause cancellation of, prevent the use of, or increase
the rate of, the fire and extended coverage insurance policy required hereunder.
Landlord makes no (and does hereby expressly disclaim any) covenant,
representation or warranty as to the Permitted Use being allowed by or being in
compliance with any applicable laws, rules, ordinances or restrictive covenants
now or hereafter affecting the Demised Premises, and any zoning letters, copies
of zoning ordinances or other information from any governmental agency or other
third party provided to Tenant by Landlord or any of Landlord's agents or
employees shall be for informational purposes only, Tenant hereby expressly
acknowledging and agreeing that Tenant shall conduct and rely solely on its own
due diligence and investigation with respect to the compliance of the Permitted
Use with all such applicable laws, rules, ordinances and restrictive covenants
and not on any such information provided by Landlord or any of its agents or
employees.
(e) In the event insurance premiums pertaining to the Demised Premises,
the Building, or the Building Common Area, whether paid by Landlord or Tenant,
are increased over the least hazardous rate available due to the nature of the
use of the Demised Premises by Tenant, Tenant shall pay such additional amount
as Additional Rent.
8. Insurance.
---------
(a) Tenant covenants and agrees that from and after the Lease
Commencement Date or any earlier date upon which Tenant enters or occupies the
Demised Premises or any portion thereof, Tenant will carry and maintain, at its
sole cost and expense, the following types of insurance, in the amounts
specified and in the form hereinafter provided for:
(i) Liability insurance in the Commercial General Liability form (or
reasonable equivalent thereto) covering the Demised Premises and Tenant's use
thereof against claims for bodily injury or death, property damage and product
liability occurring upon, in or about the Demised Premises, such insurance to be
written on an occurrence basis (not a claims made basis), to be in combined
single limits amounts not less than $3,000,000.00 and to have general aggregate
limits of not less than $5,000,000.00 for each policy year. The insurance
coverage required under this Section 8(a)(i) shall, in addition, extend to any
liability of Tenant arising out of the indemnities provided for in Section 11
and, if necessary, the policy shall contain a contractual endorsement to that
effect. The liability insurance coverage required by this subsection (i) may be
provided through a combination of primary and umbrella coverage as may be
customarily utilized by Tenant, subject to the prior review and approval of
Landlord, not to be unreasonably withheld, delayed or conditioned.
(ii) Insurance covering (A) all of the items included in the
leasehold improvements constructed in the Demised Premises by or at the expenses
of Landlord (collectively, the "Improvements"), including but not limited to
demising walls and the heating, ventilating and air conditioning system and (B)
Tenant's trade fixtures, merchandise and personal property from time to time in,
on or upon the Demised Premises, in an amount not less than one hundred percent
(100%) of their full replacement value from time to time during the Term,
providing protection against perils included within the standard form of "all-
risks" fire and casualty insurance policy, together with insurance against
sprinkler damage, vandalism and malicious mischief. Any policy proceeds from
such insurance relating to the Improvements shall be used solely for the repair,
construction and restoration or replacement of the Improvements damaged or
destroyed unless this Lease shall cease and terminate under the provisions of
Section 20.
(b) All policies of the insurance provided for in Section 8(a) shall be
issued in form reasonably acceptable to Landlord by insurance companies with a
rating of not less than "A," and financial size of not less than Class XII, in
the most current available "Best's Insurance Reports", and licensed to do
business in the state in which the Building is located. Each and every such
policy:
(i) shall name Landlord, Lender (as defined in Section 24), and any
other party reasonably designated by Landlord, as an additional insured. In
addition, the coverage described in Section 8(a)(ii)(A) relating to the
Improvements shall also name Landlord as "loss payee";
(ii) shall be delivered to Landlord, in the form of an insurance
certificate acceptable to Landlord as evidence of such policy, prior to the
Lease Commencement Date and thereafter within thirty (30) days prior to the
expiration of each such policy, and, as often as any such policy shall expire or
terminate. Renewal or additional policies shall be procured and maintained by
Tenant in like manner and to like extent;
(iii) shall contain a provision that the insurer will give to
Landlord and such other parties in interest at least fifteen (15) days notice in
writing in advance of any material change, cancellation, termination or lapse,
or the effective date of any reduction in the amounts of insurance; and
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<PAGE>
(iv) shall be written as a primary policy which does not contribute
to and is not in excess of coverage which Landlord may carry.
(c) In the event that Tenant shall fail to carry and maintain the
insurance coverages set forth in this Section 8, Landlord may upon thirty (30)
days notice to Tenant (unless such coverages will lapse in which event no such
notice shall be necessary) procure such policies of insurance and Tenant shall
promptly reimburse Landlord therefor.
(d) Any insurance provided for in Section 8(a) may be maintained by
means of a policy or policies of blanket insurance, covering additional items or
locations or insureds, provided, however, that:
(i) Landlord and any Mortgagee (as defined in Section 24) shall be
named as an additional insured thereunder as its interest may appear, and
(ii) the requirements set forth in this Section 8 are otherwise
satisfied.
(e) Landlord covenants and agrees that, from and after the Lease
Commencement Date, Landlord will carry and maintain the following types of
insurance (with all premium costs related thereto being included in Operating
Expenses), in the form and with amounts of coverage as hereinafter required:
(i) Liability insurance in the commercial general liability form,
covering the Building and the Land, against claims for personal injury or death
and property damage upon, in or about the Land and the Building, such Insurance
to be written on an occurrence basis (not a claims made basis) with combined
single limit coverage of not less than $3,000,000.00 and with a general
aggregate limit of not less than $5,000,000.00 for each policy year;
(ii) insurance on the "all-risk" or equivalent form, on a
replacement cost basis, against loss or damage to the Building (excluding
foundation); and
(iii) rent loss insurance covering loss of rental income under this
Lease for a period of not less than twelve (12) months and such other insurance
as Landlord reasonably deems necessary for prudent ownership and management of
the Building.
All policies of insurance required to be carried by Landlord pursuant to this
Section 8(e) shall be issued by insurance companies with a rating of not less
than A+, with a financial size reasonably consistent with the size and nature
of the risk being insured and licensed to do business in the State of Illinois.
With respect to each and every policy of insurance carried by Landlord pursuant
to this subsection (e), Landlord shall, within ten (10) business days after
receipt of a written request from Tenant, deliver to Tenant a certificate
evidencing the required coverage and containing a provision that each insurer
will give to Tenant at least thirty (30) days notice in writing in advance of
any material change, cancellation, termination or lapse, or the effective date
of any reduction in the amounts of insurance.
(f) Landlord and Tenant hereby waive any rights each may have against the
other on account of any loss or damage occasioned to Landlord or Tenant, as the
case may be, their respective property, the Demised Premises, its contents or to
the other portions of the Building, arising from any risk covered by all risks
fire and extended coverage insurance of the type and amount required to be
carried hereunder, provided that such waiver does not invalidate such policies
or prohibit recovery thereunder. The parties hereto shall cause their respective
insurance companies insuring the property of either Landlord or Tenant against
any such loss, to waive any right of subrogation that such insurers may have
against Landlord or Tenant, as the case may be.
9. Utilities. During the Term, Tenant shall promptly pay as billed to Tenant
---------
all rents and charges for water and sewer services and all costs and charges for
gas, steam, electricity, fuel, light, power, telephone, heat and any other
utility or service used or consumed in or servicing the Demised Premises and all
other costs and expenses involved in the care, management and use thereof. To
the extent reasonably possible, such utilities shall be separately metered and
billed to Tenant. Any utilities which are not separately metered shall be billed
to Tenant by Landlord at Landlord's actual cost. In the event Tenant's use of
any utility not metered is in excess of the average use by other tenants,
Landlord shall have the right to install a meter for such utility, at Tenant's
expense, and bill Tenant for Tenant's actual use. If Tenant fails to pay any
utility bills or charges, Landlord may, at its option and upon reasonable notice
to Tenant, pay the same and in such event, the amount of such payment, together
with interest thereon at the Interest Rate as defined in Section 32 from the
date of such payment by Landlord, will be added to Tenant's next due payment as
Additional Rent.
10. Maintenance and Repairs.
-----------------------
(a) Tenant shall, at its own cost and expense, maintain in good condition
and repair the interior of the Demised Premises, including but not limited to
the heating, air conditioning and ventilation systems, glass, windows and doors,
sprinkler, all plumbing and sewage systems, fixtures, interior walls, floors
(including floor slabs), ceilings, storefronts, plate glass, skylights, all
electrical
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<PAGE>
facilities and equipment including, without limitation, lighting fixtures,
lamps, fans and any exhaust equipment and systems, electrical motors, and all
other appliances and equipment (including, without limitation, dock levelers,
dock shelters, dock seals and dock lighting) of every kind and nature located
in, upon or about the Demised Premises, except as to such maintenance and
repair as is the obligation of Landlord pursuant to Section 10(b). During the
Term, Tenant shall maintain in full force and effect a service contract for the
maintenance of the heating, ventilation and air conditioning systems with an
entity reasonably acceptable to Landlord. Tenant shall deliver to Landlord (i) a
copy of said service contract prior to the Lease Commencement Date, and (ii)
thereafter, a copy of a renewal or substitute service contract within thirty
(30) days prior to the expiration of the existing service contract. Tenant's
obligation shall exclude any maintenance and repair required because of the act
or negligence of Landlord, its employees, contractors or agents, which shall be
the responsibility of Landlord. Tenant shall not be required under any provision
of this Lease to place the Demised Premises in better condition than the
condition in which the Demised Premises was delivered to Tenant.
(b) Landlord shall, at its own cost and expense, maintain in good
condition and repair the roof, foundation (beneath the floor slab) and
structural frame of the Building. Landlord's obligation shall exclude the cost
of any maintenance or repair required because of the act or negligence of Tenant
or Tenant's agents, contractors, employees and invitees (collectively, "Tenant's
Affiliates"), the cost of which shall be the responsibility of Tenant.
(c) Unless the same is caused solely by the negligent action or inaction
of Landlord, its employees or agents, and is not covered by the insurance
required to be carried by Tenant pursuant to the terms of this Lease, Landlord
shall not be liable to Tenant or to any other person for any damage occasioned
by failure in any utility system or by the bursting or leaking of any vessel
or pipe in or about the Demised Premises, or for any damage occasioned by water
coming into the Demised Premises or arising from the acts or neglects of
occupants of adjacent property or the public.
11. Tenant's Personal Property; Indemnity. All of Tenant's personal property
-------------------------------------
in the Demised Premises shall be and remain at Tenant's sole risk. Landlord,
its agents, employees and contractors, shall not be liable for, and Tenant
hereby releases Landlord from, any and all liability for theft thereof or any
damage thereto occasioned by any act of God or by any acts, omissions or
negligence of any persons. Landlord and Tenant each hereby agrees to indemnify,
defend, protect and hold the other party harmless from and against any and all
losses, costs, liabilities, damages and expenses, including, but not limited to,
penalties, fines, reasonable attorney's fees and costs actually incurred, but
specifically excluding consequential and indirect damages (collectively,
"Claims"), to the extent such Claims (i) are caused or result from the
activities (including the negligence or willfulness conduct) of the indemnifying
party or its respective agents, contractors or employees in or on the Demised
Premises, Building or Land, and (ii) are not insured (or required to be insured)
by the indemnified party pursuant to the provisions of this Lease; provided,
however, that the foregoing indemnity shall not extend to any Claims to the
extent resulting from the negligence or willful misconduct of the indemnified
party. The foregoing mutual indemnity is intended to be consistent with the
waivers as set forth in Section 8(e) of this Lease, pursuant to which (A) each
party has waived its respective rights against the other party to the extent any
losses, damages or other Claims are insured or required to be insured under
property damage policies by such party pursuant to the provisions of this Lease,
and (B) has agreed to cause such party's respective insurance carrier to include
a waiver of subrogation (to the extent obtainable) in their respective property
damage insurance policies. The foregoing indemnities, and the waivers set forth
in Section 8(e), are not intended to and shall not relieve any insurance carrier
of its obligations to provide insurance coverage pursuant to insurance policies
obtained pursuant to the provisions of this Lease. The provisions of this
Section 11 shall survive the expiration or earlier termination of this Lease.
12. Tenant's Fixtures. Tenant shall have the right to install in the Demised
-----------------
Premises trade fixtures required by Tenant or used by it in its business, and if
installed by Tenant, to remove any or all such trade fixtures from time to time
during and upon termination or expiration of this Lease, provided no Event of
Default, as defined Section 22, then exists; provided, however, that Tenant
-------- -------
shall repair and restore any damage or injury to the Demised Premises (to the
condition in which the Demised Premises existed prior to such installation)
caused by the installation and/or removal of any such trade fixtures.
13. Signs. No sign, advertisement or notice shall be inscribed, painted,
-----
affixed, or displayed on the windows or exterior walls of the Demised Premises
or on any public area of the Building, except in such places, numbers, sizes,
colors and styles as are approved in advance in writing by Landlord, which
approval will not be unreasonably withheld, delayed or conditioned, and which
conform to all applicable laws, ordinances, or covenants affecting the Demised
Premises. Any and all signs installed or constructed by or on behalf of Tenant
pursuant hereto shall be installed, maintained and removed by Tenant at Tenant's
sole cost and expense.
14. No Landlord's Lien. With the exception of any lien which Landlord may
------------------
obtain by virtue of a judgment against Tenant, Landlord hereby waives and
releases any lien or claim of lien, statutory or otherwise, which Landlord may
be entitled to assert under the laws of the state of Illinois upon or against
any personal property and trade fixtures of Tenant situated in and upon the
Demised Premises. Landlord acknowledges and agrees that Tenant will have the
right to grant security interests to third parties in the personal property of
Tenant at the Demised Premises. Landlord waives its rights under the laws of the
state of Illinois to file or seek a distress or distraint levy or warrant with
respect to any personal property
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<PAGE>
of Tenant at the Demised Premises which is subject to any form of security
interest held by a third party unrelated to Tenant.
15. Governmental Regulations. Tenant shall promptly comply throughout the
------------------------
Term, at Tenant's sole cost and expense, with all present and future laws,
ordinances, orders, rules, regulations or requirements of all federal, state and
municipal governments and appropriate departments, commissions, boards and
officers thereof (collectively, "Governmental Requirements") relating to (a) all
or any part of the Demised Premises, and (b) to the use or manner of use by
Tenant of the Demised Premises and the Building Common Area. Tenant shall also
observe and comply with the requirements of all policies of public liability,
fire and other policies of insurance at any time in force with respect to the
Demised Premises.
16. Environmental Matters.
---------------------
(a) For purposes of this Lease:
(i) "Contamination" as used herein means the presence of or release
of Hazardous Substances (as hereinafter defined) into any environmental media
from, upon, within, below, into or on any portion of the Demised Premises, the
Building, the Building Common Area or the Project so as to require remediation,
cleanup or investigation under any applicable Environmental Law (as hereinafter
defined).
(ii) "Environmental Laws" as used herein means all federal, state,
and local laws, regulations, orders, permits, ordinances or other requirements,
which exist now or as may exist hereafter, concerning protection of human
health, safety and the environment, all as may be amended from time to time.
(iii) "Hazardous Substances" as used herein means any hazardous or
toxic substance, material, chemical, pollutant, contaminant or waste as those
terms are defined by any applicable Environmental Laws (including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. 9601 et seq. ("CERCLA") and the Resource Conservation and
Recovery Act, 42 U.S.C. 6901 et seq. ["RCRA"]) and any solid wastes,
polychlorinated biphenyls, urea formaldehyde, asbestos, radioactive materials,
radon, explosives, petroleum products and oil.
(b) Landlord represents that, except as revealed to Tenant in writing by
Landlord, to Landlord's actual knowledge, Landlord has not treated, stored or
disposed of any Hazardous Substances upon or within the Demised Premises, nor,
to Landlord's actual knowledge, has any predecessor owner of the Demised
Premises.
(c) Tenant covenants that all its activities, and the activities of
Tenant's Affiliates (as defined in Section 10(b)), on the Demised Premises,
the Building, or the Project during the Term will be conducted in compliance
with Environmental Laws. Tenant warrants that it is currently in compliance with
all applicable Environmental Laws and that there are no pending or threatened
notices of deficiency, notices of violation, orders, or judicial or
administrative actions involving alleged violations by Tenant of any
Environmental Laws. Tenant, at Tenant's sole cost and expense, shall be
responsible for obtaining all permits or licenses or approvals under
Environmental Laws necessary for Tenant's operation of its business on the
Demised Premises and shall make all notifications and registrations required by
any applicable Environmental Laws. Tenant, at Tenant's sole cost and expense,
shall at all times comply with the terms and conditions of all such permits,
licenses, approvals, notifications and registrations and with any other
applicable Environmental Laws. Tenant warrants that it has obtained all such
permits, licenses or approvals and made all such notifications and registrations
required by any applicable Environmental Laws necessary for Tenant's operation
of its business on the Demised Premises.
(d) Tenant shall not cause or permit any Hazardous Substances to be
brought upon, kept or used in or about the Demised Premises, the Building, or
the Project without the prior written consent of Landlord, which consent shall
not be unreasonably withheld; provided, however, that the consent of Landlord
-------- -------
shall not be required for the use at the Demised Premises of cleaning supplies,
toner for photocopying machines and other similar materials, in containers and
quantities reasonably necessary for and consistent with normal and ordinary use
by Tenant in the routine operation or maintenance of Tenant's office equipment
or in the routine janitorial service, cleaning and maintenance for the Demised
Premises. For purposes of this Section 16, Landlord shall be deemed to have
reasonably withheld consent if Landlord determines that the presence of such
Hazardous Substance within the Demised Premises could result in a risk of harm
to person or property or otherwise negatively affect the value or marketability
of the Building or the Project.
(e) Tenant shall not cause or permit the release of any Hazardous
Substances by Tenant or Tenant's Affiliates into any environmental media such as
air, water or land, or into or on the Demised Premises, the Building or the
Project in any manner that violates any Environmental Laws. If such release
shall occur, Tenant shall (i) take all steps reasonably necessary to contain and
control such release and any associated Contamination, (ii) clean up or
otherwise remedy such release and any associated Contamination to the extent
required by, and take any and all other actions required under,
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applicable Environmental Laws and (iii) notify and keep Landlord reasonably
informed of such release and response.
(f) Regardless of any consents granted by Landlord pursuant to Section
16(d) allowing Hazardous Substances upon the Demised Premises, Tenant shall
under no circumstances whatsoever cause or permit (i) any activity on the
Demised Premises which would cause the Demised Premises to become subject to
regulation as a hazardous waste treatment, storage or disposal facility under
RCRA or the regulations promulgated thereunder, (ii) the discharge of Hazardous
Substances into the storm sewer system serving the Project or (iii) the
installation of any underground storage tank or underground piping on or under
the Demised Premises.
(g) Tenant shall and hereby does indemnify Landlord and hold Landlord
harmless from and against any and all expense, loss, and liability suffered by
Landlord (except to the extent that such expenses, losses, and liabilities arise
out of Landlord's own negligence or willful act), by reason of the storage,
generation, release, handling, treatment, transportation, disposal, or
arrangement for transportation or disposal, of any Hazardous Substances (whether
accidental, intentional, or negligent) by Tenant or Tenant's Affiliates or by
reason of Tenant's breach of any of the provisions of this Section 16. Such
expenses, losses and liabilities shall include, without limitation, (i) any and
all expenses that Landlord may incur to comply with any Environmental Laws; (ii)
any and all costs that Landlord may incur in studying or remedying any
Contamination at or arising from the Demised Premises, the Building, or the
Project; (iii) any and all costs that Landlord may incur in studying, removing,
disposing or otherwise addressing any Hazardous Substances; (iv) any and all
fines, penalties or other sanctions assessed upon Landlord; and (v) any and all
legal and professional fees and costs incurred by Landlord in connection with
the foregoing. The indemnity contained herein shall survive the expiration or
earlier termination of this Lease.
17. Construction of Demised Premises.
--------------------------------
(a) Landlord will submit to Tenant, within ten (10) calendar days
execution of this Lease, a proposed floor plan for the interior of the Demised
Premises. If Tenant does not approve the proposed floor plan within ten (10)
calendar days after receipt of the proposed plan or after the Lease Date,
whichever is later, each day that elapses after such tenth (10th) calendar day,
until the approval is given by Tenant, will constitute a day of Tenant Delay.
Within ten (10) days after the date on which Landlord receives written approval
from Tenant for such floor plan for the interior of the Demised Premises,
Landlord shall prepare, at Landlord's sole cost and expense (provided that all
such costs incurred and payable by Landlord to third parties shall be chargeable
against the Maximum Construction Allowance), and submit to Tenant a set of plans
and specifications and/or construction drawings (collectively, the "Plans and
Specifications") based on the preliminary plans and specifications and/or
preliminary floor plans set forth on Exhibit C attached hereto and incorporated
---------
herein, covering all work to be performed by Landlord in constructing the
interior improvements for the Demised Premises. Tenant shall have five (5)
business days to approve the Plans and Specifications. A failure of any proposed
plans or specifications to conform to Exhibit C shall be a proper basis for
---------
disapproval. In the process of reviewing and approving the proposed Plans and
Specifications, Tenant shall not have the right to request any material change
in scope of the work after final approval of the Plans and Specifications by
Tenant, any subsequent changes thereto requested by Tenant shall be at Tenant's
sole cost and expense and subject to Landlord's written approval, which shall
not be unreasonably withheld, delayed or conditioned Landlord will, promptly
after receipt of the written approval of the Plans and Specifications by Tenant,
submit to the Village of Bolingbrook, such applications as may be necessary to
obtain all permits (collectively, the "Permits") required for the work
contemplated by the Plans and Specifications (which will include the Allowance
Work). Landlord will diligently pursue issue of the Permits.
(b) Landlord shall, subject to the occurrence of Permitted Delay (as
defined in Section 17.1), use reasonable diligence to achieve Substantial
Completion (as defined in subsection (g), below) of the improvements
contemplated by the Plans and Specifications (the "Landlord's Work"), at
Landlord's sole cost and expense (subject to the provisions of Section 4.1 and
use of the Maximum Construction Allowance for costs incurred by Landlord and
payable to third parties), and have the Demised Premises ready for occupancy not
later than May 1, 1999. In the event Landlord fails to achieve Substantial
Completion not later than May 1, 1999 as extended by Permitted Delay, then, in
either such event, this Lease shall remain in full force and effect and the
Lease Commencement Date and the Expiration Date shall be postponed one day for
each day that Substantial Completion is delayed, until the Demised Premises are
Substantially Complete; provided, however, that if Landlord fails to achieve
Substantial Completion not later than September 1, 1999, as such date may be
extended only by Tenant Delay (as defined in Section 17.1), Tenant will have
the right, as its sole remedy, to terminate this Lease by giving written notice
to Landlord at any time prior to the occurrence of Substantial Completion. If
Tenant was entitled to give a notice of termination, but fails or elects not
to do so, and Landlord achieves Substantial Completion, the right of Tenant to
terminate this Lease pursuant to this subsection (b) will automatically expire.
(c) Upon Substantial Completion of the Demised Premises, a representative
of Landlord and a representative of Tenant together shall inspect the Demised
Premises and generate a punchlist of defective or uncompleted item, relating to
the completion of construction of the improvements within the Demised Premises.
After such punchlist is prepared and agreed upon in writing
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by Landlord and Tenant ("Punchlist"), with each of Landlord and Tenant acting
reasonably and in good faith. Landlord shall in accordance with the terms of
this Lease (i) within forty-five (45) calendar days thereafter complete such
incomplete work and remedy such nonconforming or defective work as is set forth
on the Punchlist, in accordance with the Plans and Specifications, and which are
of such a nature that completion thereof is reasonably practicable within forty-
five (45) days and (ii) complete all remaining items on the Punchlist with due
diligence and within a time period, as to each particular item, which is
reasonable, giving due regard for the nature of the work to be performed.
(d) Upon acceptance of the Demised Premises by Tenant, Tenant shall
execute and deliver to Landlord a letter of acceptance confirming that the Lease
Commencement Date and Base Rent Commencement Date, and Expiration Date remain as
set forth in Section 1, or if revised pursuant to the terms hereof, setting
forth such dates as so revised.
(e) Landlord shall, subject to the occurrence of Permitted Delay, use
reasonable diligence to achieve Partial Completion (as defined in Subsection
(f), below) of the Landlord's Work not later than April 1, 1999; provided that
Landlord shall not incur any penalty or liability as a result of a failure to
achieve Partial Completion by such date. Tenant shall have the right, upon the
occurrence of Partial Completion, to enter the Demised Premises in order to
install racking and otherwise prepare the Demised Premises for occupancy. In
connection with such entry, (i) Tenant shall comply with all terms and
conditions of this Lease other than the obligation to pay rent, (ii) Tenant
shall not interfere with Landlord's completion of the Demised Premises and (iii)
Tenant shall not begin operation of its business or store any inventory or
equipment.
(f) For purposes of this Lease, the term "Substantial Completion" shall
mean completion of construction of the Landlord's Work in accordance with the
Plans and Specifications, subject only to Punchlist items established pursuant
to Section 17(c), so that Tenant can lawfully occupy and conduct its business at
the Demised Premises, as evidenced by the delivery by Landlord to Tenant of a
certificate of occupancy (or temporary certificate of occupancy or its
equivalent) for the Demised Premises issued by the appropriate governmental
authority. In the event Substantial Completion is delayed because of Tenant
Delay (as defined in Section 17.1), then Substantial Completion shall, for the
purpose of establishing the Lease Commencement Date, be deemed to mean the date
when Substantial Completion would have been achieved but for such Tenant Delay.
For purposes of this Lease, the term "Partial Completion" shall mean completion
of Landlord's Work to the following extent: sufficient completion of the
warehouse to allow installation of racking.
(g) Landlord hereby warrants to Tenant that the materials and equipment
furnished by Landlord's contractors in the completion of the Improvements will
be of good quality and new, that during the one (1) year period following the
Lease Commencement Date, such materials and equipment and the work of such
contractors shall be free from defects not inherent in the quality required or
permitted hereunder, that such work will conform to the Plans and Specifications
and that such work will conform to applicable codes, laws and regulations of
governmental authorities in effect on the date of Substantial Completion. This
warranty shall exclude damages or defects caused by Tenant or Tenant's
Affiliates, improper or insufficient maintenance, improper operation, or normal
wear and tear under normal usage.
17.1 Delay.
-----
(a) With respect to the provisions (collectively "Construction
Provisions") of this Lease which govern (i) construction of the Demised Premises
and (ii) restoration of the Demised Premises after the occurrence of a casualty
or condemnation, neither Landlord nor Tenant shall be liable to the other nor
shall either be deemed to be in default under this Lease for any failure or
delay in performance of such party's obligations if and only to the extent such
failure or delay is caused by any "Permitted Delay", as defined in this Section
17.1, and subject in each instance to all the requirements of this Section 17.1.
Unless this Lease specifically provides otherwise, any such performance or time
for performance shall be extended for the period of any Permitted Delay,
provided the party claiming the benefit of the Permitted Delay adheres to the
requirements of this Section 17.1.
(b) An event or occurrence constituting a Permitted Delay shall include
any of the following (provided, however, that the events set forth in the
following subsections (i), (ii) and (iii) shall not constitute a Permitted Delay
for Tenant nor extend the Lease Commencement Date):
(i) any act or neglect of Tenant or of any contractor or
representative or employee employed or controlled by Tenant to the extent
actually causing a delay in performance by Landlord of its obligations under
this Lease;
(ii) any failure of Tenant to provide Landlord with any required
documents, specifications, consents or approvals within the time limitations set
forth in this Lease;
(iii) any change in the Landlord's Work requested by Tenant after
final approval by Tenant of the Plans and Specifications which provides for an
extension of time for
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<PAGE>
performance by Landlord (the events described in the foregoing (i), (ii) and
(iii) are sometimes referred to collectively as "Tenant Delay");
(iv) confiscation or requisitioning of facilities or inability to
secure materials or labor solely as a result of an act, order or regulation of
any governmental authority;
(v) civil disturbances or acts of declared or undeclared war or
the public enemy;
(vi) strikes or other labor troubles;
(vii) casualty or condemnation;
(viii) floods or earthquakes; and
(ix) adverse weather conditions.
(c) The party claiming a Permitted Delay shall endeavor to use
reasonable efforts to perform in spite of the Permitted Delay; provided that
such reasonable efforts shall not require the incurring of any additional
expense or liability.
(d) This Section 17.1 shall apply only to the Construction Provisions and
no other provision of this Lease.
18. Tenant Alterations and Additions.
--------------------------------
(a) Tenant shall not make or permit to be made any alterations,
improvements, or additions to the Demised Premises (a "Tenant's Change"),
without first obtaining on each occasion Landlord's prior written consent (which
consent Landlord agrees not to unreasonably withhold) and Lender's prior written
consent (if such consent is required). As part of its approval process, Landlord
may require that Tenant submit plans and specifications to Landlord, for
Landlord's approval or disapproval, which approval shall not be unreasonably
withheld. All Tenant's Changes shall be performed in accordance with all legal
requirements applicable thereto and in a good and workmanlike manner with first-
class materials. Tenant shall maintain insurance reasonably satisfactory to
Landlord during the construction of all Tenant's Changes. If Landlord at the
time of giving its approval to any Tenant's Change notifies Tenant in writing
that approval is conditioned upon restoration, then Tenant shall, at its sole
cost and expense and upon the termination or expiration of this Lease, remove
the same and restore the Demised Premises to its condition prior to such
Tenant's Change. No Tenant's Change shall be structural in nature or impair the
structural strength of the Building or reduce its value. Tenant shall pay the
full cost of any Tenant's Change and shall give Landlord such reasonable
security as may be requested by Landlord to insure payment of such cost. Except
as otherwise provided herein and in Section 12, all Tenant's Changes and all
repairs and all other property attached to or installed on the Demised Premises
by or on behalf of Tenant shall immediately upon completion or installation
thereof be and become part of the Demised Premises and the property of Landlord
without payment therefor by Landlord and shall be surrendered to Landlord upon
the expiration or earlier termination of this Lease.
(b) To the extent permitted by law, all of Tenant's contracts and
subcontracts for such Tenant's Changes shall provide that no lien shall attach
to or be claimed against the Demised Premises or any interest therein other than
Tenant's leasehold interest in the Demised Premises, and that all subcontracts
let thereunder shall contain the same provison. Whether or not Tenant furnishes
the foregoing, Tenant agrees to hold Landlord harmless against all liens, claims
and liabilities of every kind, nature and description which may arise out of or
in any way be connected with such work. Tenant shall not permit the Demised
Premises to become subject to any mechanics', laborers' or materialmen's lien on
account of labor, material or services furnished to Tenant or claimed to have
been furnished to Tenant in connection with work of any character performed or
claimed to have been performed for the Demised Premises by, or at the direction
or sufferance of Tenant and if any such liens are filed against the Demised
Premises, Tenant shall promptly discharge the same; provided, however, that
-------- -------
Tenant shall have the right to contest, in good faith and with reasonable
diligence, the validity of any such lien or claimed lien if Tenant shall give
to Landlord, within fifteen days after demand, such security as may be
reasonably satisfactory to Landlord to assure payment thereof and to prevent any
sale, foreclosure, or forfeiture of Landlord's interest in the Demised Premises
by reason of non-payment thereof, provided further that on final determination
of the lien or claim for lien, Tenant shall immediately pay any judgment
rendered, with all proper costs and charges, and shall have the lien released
and any judgment satisfied. If Tenant fails to post such security or does not
diligently contest such lien, Landlord may, without investigation of the
validity of the lien claim, discharge such lien and Tenant shall reimburse
Landlord upon demand for all costs and expenses incurred in connection
therewith, which expenses shall include any attorneys' fees, paralegals' fees
and any and all costs associated therewith, including litigation through all
trial and appellate levels and any costs in posting bond to a discharge or
release of the lien. Nothing contained in this Lease shall be construed as a
consent on the part of Landlord to subject the Demised Premises to liability
under any lien law now or hereafter existing of the state in which the Demised
Premises are located.
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<PAGE>
19. Services by Landlord. Landlord shall be responsible for providing for
--------------------
maintenance of the Building Common Area, and, except as required by Section
10(b) hereof, Landlord shall be responsible for no other services whatsoever.
Tenant, by payment of Tenant's share of the Operating Expenses, shall pay
Tenant's pro rata share of the expenses incurred by Landlord hereunder.
20. Fire and Other Casualty. In the event the Demised Premises are damaged by
-----------------------
fire or other casualty insured by Landlord, Landlord agrees to promptly restore
and repair the Demised Premises at Landlord's expense, including the
Improvements to be insured by Tenant but only to the extent Landlord receives
insurance proceeds therefor, including the proceeds from the insurance required
to be carried by Tenant on the improvements. Notwithstanding the foregoing, in
the event that the Demised Premises are (i) in the reasonable opinion of
Landlord, so destroyed that they cannot be repaired or rebuilt within one
hundred eighty (180) days after the date of such damage; or (ii) destroyed by a
casualty which is not covered by Landlord's insurance, or if such casualty is
covered by Landlord's insurance but Lender or other party entitled to insurance
proceeds fails to make such proceeds available to Landlord in an amount
sufficient for restoration of the Demised Premises, then Landlord shall give
written notice to Tenant of such determination (the "Determination Notice")
within sixty (60) days of such casualty. Either Landlord or Tenant may terminate
and cancel this lease effective as of the date of such casualty by giving
written notice to the other party within thirty (30) days after Tenant's receipt
of the Determination Notice. Upon the giving of such termination notice, all
obligations hereunder with respect to periods from and after the effective date
of termination shall thereupon cease and terminate. If no such termination
notice is given, Landlord shall, to the extent of the available insurance
proceeds, make such repair and restoration of the Demised Premises to the
approximate condition existing prior to such casualty, promptly and in such
manner as not to unreasonably interfere with Tenant's use and occupancy of the
Demised Premises (if Tenant is still occupying the Demised Premises). Base Rent
and Additional Rent shall proportionately abate during the time that the Demised
Premises or any part thereof are unusable by reason of any such damage thereto.
21. Condemnation.
------------
(a) If all of the Demised Premises is taken or condemned for a public or
quasi-public use, or if a material portion of the Demised Premises is taken or
condemned for a public or quasi-public use and the remaining portion thereof is
not usable by Tenant in the reasonable opinion of Landlord, this Lease shall
terminate as of the earlier of the date title to the condemned real estate vests
in the condemnor or the date on which Tenant is deprived of possession of the
Demised Premises. In such event, the Base Rent herein reserved and all
Additional Rent and other sums payable hereunder shall be apportioned and paid
in full by Tenant to Landlord to that date, all Base Rent, Additional Rent and
other sums payable hereunder prepaid for periods beyond that date shall
forthwith be repaid by Landlord to Tenant, and neither party shall thereafter
have any liability hereunder, except that any obligation or liability of either
party, actual or contingent, under this Lease which has accrued on or prior to
such termination date shall survive.
(b) If only part of the Demised Premises is taken or condemned for a
public or quasi-public use and this Lease does not terminate pursuant to Section
21(a), Landlord shall, to the extent of the award it receives, restore the
Demised Premises to a condition and to a size as nearly comparable as reasonably
possible to the condition and size thereof immediately prior to the taking, and
there shall be an equitable adjustment to the Base Rent and Additional Rent
based on the loss of use of the Demised Premise suffered by Tenant as a result
of the taking.
(c) Landlord shall be entitled to receive the entire award in any
proceeding with respect to any taking provided for in this Section 21, without
deduction therefrom for any estate vested in Tenant by this Lease, and Tenant
shall receive no part of such award. Nothing herein contained shall be deemed to
prohibit Tenant from making a separate claim, against the condemnor, to the
extent permitted by law, for the value of Tenant's moveable trade fixtures,
machinery and moving expenses, provided that the making of such claim shall not
and does not adversely affect or diminish Landlord's award.
22. Tenant's Default.
----------------
(a) The occurrence of any one or more of the following events shall
constitute an "Event of Default" of Tenant under this Lease:
(i) if Tenant fails to pay Base Rent or any Additional Rent hereunder
as and when such rent becomes due and such failure shall continue for more than
ten (10) days after Landlord gives written notice to Tenant of such failure;
(ii) if a lien held by a person claiming through or under Tenant is
filed against the Demised Premises and Tenant fails to discharge or bond such
lien, or post security with Landlord acceptable to Landlord within thirty (30)
days after receipt by Tenant of written notice thereof;
(iii) if Tenant fails to maintain in force all policies of insurance
required by this Lease and such failure shall continue for more than ten (10)
days after Landlord gives Tenant written notice of such failure;
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<PAGE>
(iv) if any petition is filed by or against Tenant or any guarantor
of this Lease under any present or future section or chapter of the Bankruptcy
Code, or under any similar law or statute of the United States or any state
thereof (which, in the case of an involuntary proceeding, is not permanently
discharged, dismissed, stayed, or vacated, as the case may be, within sixty (60)
days of commencement), or if any final order for relief shall be entered against
Tenant or any guarantor of this Lease in any such proceedings;
(v) if Tenant or any guarantor of this Lease becomes insolvent or
makes a transfer in fraud of creditors or makes an assignment for the benefit of
creditors;
(vi) if a receiver, custodian, or trustee is appointed for the
Demised Premises or for all or substantially all of the assets of Tenant or of
any guarantor of this Lease, which appointment is not vacated within sixty (60)
days following the date of such appointment; or
(vii) if Tenant fails to perform or observe any other term of this
Lease and such failure shall continue for more than thirty (30) days after
Landlord gives Tenant written notice of such failure, or, if such failure cannot
be corrected within such thirty (30) day period, if Tenant does not commence to
correct such default within said thirty (30) day period and thereafter
diligently prosecute the correction of same to completion within a reasonable
time.
(b) Upon the occurrence of any one or more Events of Default, Landlord
may, at Landlord's option, without any demand or notice whatsoever (except as
expressly required in this Lease):
(i) Terminate this Lease by giving Tenant written notice of
termination, in which event this Lease shall expire and terminate on the date
specified in such notice of termination and all rights of Tenant under this
Lease and in and to the Demised Premises shall terminate. Tenant shall remain
liable for all obligations under this Lease arising up to the date of such
termination, and Tenant shall surrender the Demised Premises to Landlord on the
date specified in such notice; or
(ii) Terminate this Lease as provided in Section 22(b)(i) hereof and
recover from Tenant all damages Landlord may incur by reason of Tenant's
default, including, without limitation, an amount which, at the date of such
termination, is calculated as follows: (1) the value of the excess, if any, of
(A) the Base Rent, Additional Rent and all other sums which would have been
payable hereunder by Tenant for the period commencing with the day following the
date of such termination and ending with the Expiration Date had this Lease not
been terminated (the "Remaining Term"), over (B) the aggregate reasonable rental
value of the Demised Premises for the Remaining Term (which excess, if any shall
be discounted to present value at the "Treasury Yield" as defined below for the
Remaining Term); plus (2) the costs of recovering possession of the Demised
----
Premises and all other expenses actually incurred by Landlord due to Tenant's
default, including, without limitation, reasonable attorney's fees; plus (3) the
----
unpaid Base Rent and Additional Rent earned as of the date of termination plus
any interest and late fees due hereunder, plus other sums of money and damages
owing on the date of termination by Tenant to Landlord under this Lease or in
connection with the Demised Premises. The amount as calculated above shall be
deemed immediately due and payable. The payment of the amount calculated in
subparagraph (ii)(1) shall not be deemed a penalty but shall merely constitute
payment of liquidated damages, it being understood and acknowledged by Landlord
and Tenant that actual damages to Landlord are extremely difficult, if not
impossible, to ascertain. "Treasury Yield" shall mean the rate of return in
percent per annum of Treasury Constant Maturities for the length of time
specified as published in document H. 15(519) (presently published by the Board
of Governors of the U.S. Federal Reserve System titled "Federal Reserve
Statistical Release") for the calendar week immediately preceding the calendar
week in which the termination occurs. If the rate of return of Treasury Constant
Maturities for the calendar week in question is not published on or before the
business day preceding the date of the Treasury Yield in question is to became
effective, then the Treasury Yield shall be based upon the rate of return of
Treasury Constant Maturities for the length of time specified for the most
recent calendar week for which such publication has occurred. If no rate of
return for Treasury Constant Maturities is published for the specific length of
time specified, the Treasury Yield for such length of time shall be the weighted
average of the rates of return of Treasury Constant Maturities most nearly
corresponding to the length of the applicable period specified. If the
publishing of the rate of return of Treasury Constant Maturities is ever
discontinued, then the Treasury Yield shall be based upon the index which is
published by the Board of Governors of the U.S. Federal Reserve System in
replacement thereof or, if no such replacement index is published, the index
which, in Landlord's reasonable determination, most nearly corresponds to the
rate of return of Treasury Constant Maturities. In determining the aggregate
reasonable rental value pursuant to subparagraph (ii)(1)(B) above, the parties
hereby agree that, at the time Landlord seeks to enforce this remedy, all
relevant factors should be considered, including, but not limited to, (a) the
length of time remaining in the Term, (b) the then current market conditions in
the general area in which the Building is located, (c) the likelihood of
reletting the Demised Premises for a period of time equal to the remainder of
the Term, (d) the net effective rental rates then being obtained by landlords
for similar type space of similar size in similar type buildings in the general
area in which the Building is located, (e) the vacancy levels in the general
area in which the Building is located, (f) current levels of new construction
that will be completed during the remainder of the Term and how this
construction will likely affect vacancy rates and rental rates and (g)
inflation; or
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<PAGE>
(iii) Without terminating this Lease, in its own name but as agent for
Tenant, enter into and upon and take possession of the Demised Premises or any
part thereof. Upon written notice to Tenant and upon process of law, any
property remaining in the Demised Premises may be removed and stored in a
warehouse or elsewhere at the cost of, and for the account of, Tenant without
Landlord being deemed guilty of trespass or becoming liable for any loss or
damage which may be occasioned thereby unless caused by Landlord's negligence or
misconduct. Thereafter, Landlord may, but shall not be obligated to, lease to a
third party the Demised Premises or any portion thereof as the agent of Tenant
upon such terms and conditions as Landlord may reasonably deem necessary or
desirable in order to relet the Demised Premises. The remainder of any rentals
received by Landlord from such reletting, after the payment of any indebtedness
due hereunder from Tenant to Landlord, and the payment of any costs and expenses
of such reletting, shall be held by Landlord to the extent of and for
application in payment of future rent owed by Tenant, if any, as the same may
become due and payable hereunder. If such rentals received from such reletting
shall at any time or from time to time be less than sufficient to pay to
Landlord the entire sums then due from Tenant hereunder, Tenant shall pay any
such deficiency to Landlord. Notwithstanding any such reletting without
termination, Landlord may at any time thereafter elect to terminate this Lease
for any such previous default provided same has not been cured; or
(iv) Without terminating this Lease, and with or without notice to
Tenant, enter into and upon the Demised Premises in a lawful manner and, without
being liable for prosecution or any claim for damages therefor, maintain the
Demised Premises and repair or replace any damage thereto or do anything or make
any payment for which Tenant is responsible hereunder. Tenant shall reimburse
Landlord immediately upon demand for any reasonable expenses which Landlord
incurs in thus effecting Tenant's compliance under this Lease and Landlord shall
not be liable to Tenant for any damages with respect thereto; or
(v) With or without terminating this Lease, allow the Demised
Premises to remain unoccupied and collect rent from Tenant as it comes due;
provided, however, that nothing contained in this Lease will relieve Landlord of
its obligations under the laws of the State of Illinois to mitigate the damages
which may be suffered by Landlord as a result of an Event of Default or
(vi) Pursue such other remedies as are available at law or equity.
(c) If this Lease shall terminate as a result of or while there exists an
Event of Default hereunder, any funds of Tenant held by Landlord may be applied
by Landlord to any damages payable by Tenant (whether provided for herein or by
law) as a result of such termination or default.
(d) Neither the commencement of any action or proceeding, nor the
settlement thereof, nor entry of judgment thereon shall bar Landlord from
bringing subsequent actions or proceedings from time to time, nor shall the
failure to include in any action or proceeding any sum or sums then due be a bar
to the maintenance of any subsequent actions or proceedings for the recovery of
such sum or sums so omitted.
(e) No agreement to accept a, surrender of the Demised Premises and no
act or omission by Landlord or Landlords agents during the Term shall constitute
an acceptance or surrender of the Demised Premises unless made in writing and
signed by Landlord. No re-entry or taking possession of the Demised Premises by
Landlord shall constitute an election by Landlord to terminate this Lease unless
a written notice of such intention is given to Tenant. No provision of this
Lease shall be deemed to have been waived by either party unless such waiver is
in writing and signed by the party making such waiver. Landlord's acceptance of
Base Rent or Additional Rent in full or in part following an Event of Default
hereunder shall not be construed as a waiver of such Event of Default. No custom
or practice which may grow up between the parties in connection with the terms
of this Lease shall be construed to waive or lessen either party's right to
insist upon strict performance of the terms of this Lease, without a written
notice thereof to the other party.
(f) If an Event of Default shall occur, Tenant shall pay to Landlord, on
demand, all reasonable expenses incurred by Landlord as a result thereof,
including reasonable attorneys' fees, court costs and expenses actually
incurred.
22.1 Landlord Default. If Landlord fails to perform or observe or
----------------
otherwise breaches any term of this Lease and such failure shall continue for
more than thirty (30) days after Tenant gives Landlord written notice of such
failure, or, if such failure does not arise out of a failure by Landlord to pay
a sum of money and cannot reasonably be corrected within such 30-day period, if
Landlord does not commence to correct such default within such 30-day period and
thereafter diligently prosecute the correction of same to completion within a
reasonable time, a "Landlord Event of Default" shall exist under this Lease.
Upon the occurrence of a Landlord Event of Default, Tenant may at Tenant's
option, cure the Landlord Event of Default and the actual cost of such cure
shall be payable by Landlord to Tenant within thirty (30) calendar days after
written demand; provided, however, that if a failure by Landlord to perform or
observe any term of this Lease gives rise to circumstances or conditions which
constitute an emergency threatening human health or safety or substantial damage
to the Demised Premises or Tenant's personal property, or materially impeding
the conduct of the business of Tenant at the Demised Premises, Tenant shall be
entitled to take immediate curative action (prior to the expiration of any
notice and cure period set forth above) to the extent necessary to eliminate the
emergency. If Landlord does not pay to Tenant the
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amount of such cost, upon written demand, Tenant may set off such cost against
installments of Base Rent or other amounts due Landlord under this Lease. Such
cost must be reasonably incurred and must not exceed the scope of the Landlord
Event of Default in question, and if such costs are chargeable as a result of
labor or materials provided directly by Tenant, rather than by unrelated third
parties, the costs shall not exceed the amount which would have been charged by
a qualified third party unrelated to Tenant. The quality of all work performed
by Tenant must equal or exceed the quality of Landlord's Work. Such costs must
be reasonably documented and copies of such documentation must be delivered to
Landlord with the written demand for reimbursement. Tenant shall be permitted to
continue to set off against succeeding installments of Base Rent until the total
amount of such cost actually incurred by Tenant has been recovered by Tenant. If
Tenant elects to exercise its right of set-off, as provided in this Section
22.1, such set-off is intended to be the exclusive remedy available to Tenant
with respect to the Landlord Event of Default which gave rise to the set-off.
Accordingly, once Tenant has fully set off all of the permissible cost of curing
the Landlord Event of Default, Landlord shall no longer be deemed to be in
default under this Lease with respect to the Landlord Event of Default that was
the subject of the set off. Nothing contained in this Section 22.1 shall create
or imply the existence of any obligation by Tenant to cure any Landlord Event of
Default.
23. Landlord's Right of Entry. Tenant agrees to permit Landlord and the
-------------------------
authorized representatives of Landlord and of Lender to enter upon the Demised
Premises at all reasonable times for the purposes of inspecting the Demised
Premises and Tenant's compliance with this Lease, and making any necessary
repairs thereto; provided that, except in the case of an emergency, Landlord
shall give Tenant reasonable prior notice of Landlord's intended entry upon the
Demised Premises. Nothing herein shall imply any duty upon the part of Landlord
to do any work required of Tenant hereunder, and the performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to perform
it. Landlord shall not be liable for inconvenience, annoyance, disturbance or
other damage to Tenant by reason of making such repairs or the performance of
such work in the Demised Premises or on account of bringing materials, supplies
and equipment into or through the Demised Premises during the course thereof,
and the obligations of Tenant under this Lease shall not thereby be affected;
provided, however, that Landlord shall use reasonable efforts not to disturb or
- -------- -------
otherwise interfere with Tenant's operations in the Demised Premises in making
such repairs or performing such work. Landlord also shall have the right to
enter the Demised Premises at all reasonable times to exhibit the Demised
Premises to any prospective purchaser, mortgagee or tenant thereof.
24. Lender's Rights.
---------------
(a) Subject to all the provisions of this Section 24, this Lease may be
either superior or subordinate to any "Mortgage". The term "Mortgage", as used
in this Lease, shall mean any and all mortgages, deeds to secure debt, deeds of
trust, or other instruments creating a lien or conveying a security title at
any time and from time to time, granted by Landlord and affecting or
encumbering the title of Landlord to the Demised Premises or this Lease.
The term "Mortgagee" refers to the holder of the Mortgage. Landlord shall have
no right to grant to any Mortgagee in any Mortgage any rights which, if
exercised, would violate the obligations of Landlord or the rights of Tenant
under this Lease. Landlord hereby warrants to Tenant that, on the Lease Date,
the Demised Premises will not be subject to any Mortgage.
(b) Unless this Lease is subordinated to a Mortgage pursuant to Section
24(c), this Lease shall be superior to such Mortgage. Upon the request by any
Mortgagee, Tenant shall execute and deliver a written instrument, in a form
acceptable for recording in the real estate records of Will County, Illinois,
recognizing that this Lease is superior to the Mortgage held by the requesting
Mortgagee and that, upon foreclosure of or exercise of the power of sale
contained in the Mortgage, Tenant shall recognize and attorn to the purchaser at
the foreclosure sale as the Landlord under this Lease, subject to all the terms
and provisions of this Lease. If a Mortgage is subordinate to this Lease, any
person who becomes the holder of the interest of the Landlord by virtue of
foreclosure of the Mortgage shall be subject to and bound by all the provisions
of this Lease.
(c) Landlord hereby warrants and represents to Tenant that, as of the
Lease Date, there will be no Mortgage encumbering the Demised Premises. If any
future Mortgagee desires for this Lease to be subordinate to its Mortgage,
Tenant agrees that it shall subordinate this Lease by execution and delivery of
a Subordination, Non-Disturbance and Attornment Agreement in the form attached
to this Lease as Exhibit "D" and by this reference made a part hereof in
recordable form; provided, however, that to be effective such Agreement must be
fully executed and delivered by all parties thereto.
25. Estoppel Certificate. Landlord and Tenant agree, at any time, and from
--------------------
time to time, within fifteen (15) days after written request of the other, to
execute, acknowledge and deliver a statement in writing in recordable form to
the requesting party and/or its designee certifying that: (i) this Lease is
unmodified and in full force and effect (or, if there have been modifications,
that the same is in full force and effect, as modified), (ii) the dates to which
Base Rent, Additional Rent and other charges have been paid, (iii) whether or
not, to the best of its knowledge, there exists any failure by the requesting
party to perform any term, covenant or condition contained in this Lease, and,
if so, specifying each such failure, (iv) (if such be the case) Tenant has
unconditionally accepted the Demised Premises and is conducting its business
therein, and (v) and as to such additional matters as may be requested, it being
intended that any
-15-
<PAGE>
such statement delivered pursuant hereto may be relied upon by the requesting
party and by any purchaser of title to the Demised Premises or by any mortgagee
or any assignee thereof or any party to any sale-leaseback of the Demised
Premises, or the landlord under a ground lease affecting the Demised Premises.
26. Landlord Liability. No owner of the Demised Premises, whether or not
------------------
named herein, shall have liability hereunder after it ceases to hold title to
the Demised Premises. Neither Landlord nor any officer, director, shareholder,
partner or principal of Landlord, whether disclosed or undisclosed, shall be
under any personal liability with respect to any of the provisions of this
Lease. In the event Landlord is in breach or default with respect to Landlord's
obligations or otherwise under this Lease, Tenant shall look solely to the
equity of Landlord in the Building for the satisfaction of Tenant's remedies. It
is expressly understood and agreed that Landlord's liability under the terms,
covenants, conditions, warranties and obligations of this Lease shall in no
event exceed the loss of Landlord's equity interest in the Building. Landlord
hereby warrants to Tenant that, as of the Lease Date, the Demised Premises are
not subject to a Mortgage and that Landlord will not, prior to the occurrence of
Substantial Completion, grant a Mortgage encumbering the Demised Premises.
Nothing in this Section 26 will create or imply any restriction on the right of
Landlord to grant Mortgages after the occurrence of Substantial Completion.
26.1 If Landlord fails to observe and perform its obligations under Section
17 of this Lease with respect to the design, construction and delivery of the
Demised Premises and the attainment of Substantial Completion of the Demised
Premises, and such failure becomes a Landlord Event of Default, Tenant shall
have the right, in addition to the rights otherwise available to Tenant as a
result of the occurrence of a Landlord Event of Default, to file an action
against Landlord in any court in the state of Illinois having jurisdiction
seeking to compel specific performance by Landlord of such obligations. Any
judgment obtained by Tenant enforcing specific performance of such obligations
may be enforced against Landlord without regard for the limitations otherwise
applicable under Section 26. Any judgment for damages, however, even if arising
out of the same cause of action, will continue to be subject to the limitations
imposed by Section 26. This Section 26.1 shall automatically terminate upon the
occurrence of Substantial Completion of the Demised Premises in accordance with
Section 17.
27. Notices. Any notice required or permitted to be given or served by either
-------
party to this Lease shall be deemed given when made in writing, and either (i)
personally delivered, (ii) deposited with the United States Postal Service,
postage prepaid, by registered or certified mail, return receipt requested, or
(iii) delivered by licensed overnight delivery service providing proof of
delivery, properly addressed to the address set forth in Section 1(m) (as the
same may be changed by giving written notice of the aforesaid in accordance with
this Section 27). If any notice mailed is properly addressed with appropriate
postage but returned for any reason, such notice shall be deemed to be effective
notice and to be given on the date of mailing.
28. Brokers. Tenant represents and warrants to Landlord that, except for
-------
those parties set forth in Section 1(o) (the "Brokers"), Tenant has not engaged
or had any conversations or negotiations with any broker, finder or other third
party concerning the leasing of the Demised Premises to Tenant who would be
entitled to any commission or fee based on the execution of this Lease. Landlord
acknowledges and agrees that Landlord is obligated to pay the Brokers any
commission due Brokers in connection with this Lease pursuant to a separate
agreement between Landlord and Brokers. Tenant hereby further represents and
warrants to Landlord that Tenant is not receiving and is not entitled to receive
any rebate, payment or other remuneration either directly or indirectly, from
the Brokers, and that it is not otherwise sharing in or entitled to share in any
commission or fee paid to the Brokers by Landlord or any other party in
connection with the execution of this Lease, either directly or indirectly.
Tenant hereby indemnifies Landlord against and from any claims for any brokerage
commissions (except those payable to the Brokers, all of which are payable by
Landlord pursuant to a separate agreement) and all costs, expenses and
liabilities in connection therewith, including, without limitation, reasonable
attorneys' fees and expenses, for any breach of the foregoing. Landlord hereby
indemnifies Tenant against and from any claims for any brokerage commissions,
including those payable to the Brokers, claimed or asserted by persons claiming
through or under Landlord, and all costs, expenses and liabilities in connection
therewith, including, without limitation, reasonable attorneys' fees and
expenses. The foregoing indemnifications shall survive the termination of this
Lease for any reason.
29. Assignment and Subleasing.
-------------------------
(a) Tenant may not assign, mortgage, pledge, encumber or otherwise
transfer this Lease, or any interest hereunder, or sublet the Demised Premises,
in whole or in part, without on each occasion first obtaining the prior express
written consent of Landlord, which consent shall not be unreasonably withheld,
delayed or conditioned. In making a determination to grant or withhold such
consent, Landlord shall be entitled to consider the creditworthiness of the
proposed assignee or sublessee, the nature of the use of the Demised Premises
contemplated by the proposed assignee or sublessee (to the extent such use
amends or alters the Permitted Use then in effect) and whether or not the
proposed use will materially increase wear and tear on the Demised Premises.
Landlord shall never be required to consent to any proposed use involving heavy
manufacturing or chemical processing. In addition, if the intended use by the
proposed assignee or sublessee involves in any way materially different amounts
or types of Hazardous Substances than the Hazardous Substances then being used
or stored by Tenant at the Demised Premises, in accordance with Section 16 of
this Lease, at the time of the proposed assignment or sublease, and if such
materially different or additional Hazardous Substances create, in the
reasonable
-16-
<PAGE>
judgment of Landlord a materially increased risk of Contamination at the
Demised Premises. Landlord shall be unconditionally entitled to withhold
consent of the proposed assignment or sublease in its absolute discretion.
Permitted subtenants or assignees shall become liable directly to Landlord for
all obligations of Tenant hereunder, without, however, relieving Tenant of any
of its liability hereunder unless agreed upon by the parties hereto in writing.
No such assignment, subletting, occupancy or collection shall be deemed the
acceptance of the assignee, tenant or occupant, as Tenant, or a release of
Tenant from the further performance by Tenant of Tenant's obligations under this
Lease unless agreed upon by the parties hereto in writing.
(b) Notwithstanding subsections (a), (c), (d), (e) or (g) of this
Section 29, provided that no Event of Default has occurred and is then
continuing, Tenant shall have the right, upon thirty (30) days prior written
notice to Landlord, (i) to sublet all or part of the Demised Premises to any
entity which is controlled by, under common control with, or which controls
Tenant (any of such entities being herein called a "Mohawk Affiliate"); or (ii)
to assign this Lease (x) to a Mohawk Affiliate or to (y) a successor corporation
into which or with which Tenant is merged or consolidated or which acquired
substantially all of Tenant's assets and property, provided that, with respect
to an assignment pursuant to (ii)(y), such successor corporation assumes
substantially all of the obligations and liabilities of Tenant and, after such
merger, shall have total assets and stockholder equity at least equal to the
total assets and stockholder equity of Tenant immediately prior to the merger,
as determined by generally accepted accounting principles. With respect to any
assignment, Tenant shall provide in its notice to Landlord such information as
may be reasonably required by Landlord to determine that the requirements of
this subsection (b) have been satisfied. The terms "controls", "controlled by"
or "under common control with", as used in this subsection (b), shall mean the
ownership of a direct or indirect majority interest.
(c) If Tenant should desire to assign this Lease or sublet the Demised
Premises (or any part thereof), Tenant shall give Landlord written notice no
later than thirty (30) days in advance of the proposed effective date of any
proposed assignment or sublease, specifying (i) the name and business of the
proposed assignee or sublessee, (ii) a detailed description of the intended use
of the Demised Premises by the proposed assignee or sublessee, with particular
detail regarding any Hazardous Substances which will be used in any manner at
the Demised Premises; (iii) the amount and location of the space within the
Demised Premises proposed to be so subleased, (iv) the proposed effective date
and duration of the assignment or subletting, and (v) the proposed rent or
consideration to be paid to Tenant by such assignee or sublessee. Tenant shall
promptly supply Landlord with financial statements and other information as
Landlord may reasonably request to evaluate the proposed assignment or
sublease.
(d) Landlord shall have a period of fifteen (15) days following receipt
of such notice and other information requested by Landlord within which to
notify Tenant in writing that Landlord elects: (i) to permit Tenant to assign or
sublet such space; or (ii) to refuse to consent to Tenant's assignment or
subleasing of such space and to continue this Lease in full force and effect as
to the entire Demised Premises, any such refusal shall state with reasonable
specificity the reasons for the refusal. If Landlord should fail to notify
Tenant in writing of such election within the aforesaid fifteen (15) day period.
Landlord shall be deemed to have consented to such assignment or sublease.
Tenant agrees to reimburse Landlord for reasonable legal fees and any other
reasonable costs actually incurred by Landlord in connection with any requested
assignment or subletting (but in no event more than $1,000.00 per request).
Tenant shall deliver to Landlord copies of all documents executed in connection
with any permitted assignment or subletting, which documents shall be in form
and substance reasonably satisfactory to Landlord and which shall require such
assignee to assume performance of all terms of this Lease on Tenant's part to be
performed. No acceptance by Landlord of any rent or any other sum of money from
any assignee, sublessee or other category of transferee shall be deemed to
constitute Landlord's consent to any assignment, sublease, or transfer.
(e) Any attempted assignment or sublease by Tenant in violation of the
terms and provisions of this Section 29 shall be void and such act shall
constitute a material breach of this Lease. In no event shall any assignment,
subletting or transfer, whether or not with Landlord's consent, relieve Tenant
of its primary liability under this Lease for the entire Term, and Tenant shall
in no way be released from the full and complete performance of all the terms
hereof unless otherwise agreed by the parties hereto in writing. If Landlord
takes possession of the Demised Premises before the expiration of the Term of
this Lease due to an Event of Default by Tenant, Landlord shall have the right,
at its option to take over any sublease of the Demised Premises or any portion
thereof and such subtenant shall attorn to Landlord, as its landlord, under all
the terms and obligations of such sublease occurring from and after such date,
but excluding previous acts, omissions, negligence or defaults of Tenant and any
repair or obligation in excess of available net insurance proceeds or
condemnation award.
(f) Landlord shall have the right to sell, transfer, assign, pledge, and
convey all or any part of the Demised Premises and any and all of Landlord's
rights under this Lease. In the event Landlord assigns or otherwise conveys its
rights under this Lease, Landlord shall be entirely freed and released from any
obligations accruing thereafter under this Lease, and Tenant agrees to look
solely to Landlord's successor in interest for performance of such obligations.
(g) If Tenant transfers or assigns this Lease or sublets the Demised
Premises in whole or in part to any permitted assignee or sublessee, Landlord
shall be entitled to receive, as Additional Rent, one hundred percent (100%) of
any "Rental Profit" (as hereinafter defined) received by Tenant. The
-17-
<PAGE>
term "Rental Profit" shall mean the amount calculated on a per square foot basis
and not on an aggregate or cumulative basis, by which (i) the total rental and
other consideration of any nature whatsoever and however characterized paid or
delivered to Tenant (but expressly excluding any amounts ultimately payable
under the terms of this Lease to third parties, including without limitation,
Real Estate Taxes, utility costs and maintenance expenses) by an assignee of the
interest of Tenant or sublessee of all or any part of the Demised Premises, for
the purpose of compensating Tenant directly or indirectly for the assignment or
sublease, exceeds (ii) the Monthly Base Rent Installments paid by Tenant to
Landlord pursuant to this Lease, provided, however, that Landlord shall not be
entitled to receive any Rental Profit until Tenant has received an amount of
Rental Profit equal to the sum of (x) the actual, out-of-pocket cost of
leasehold improvements installed by Tenant at its expense specifically for and
as an inducement to the assignee or sublessee (subject to the limitation
hereinafter specified), plus (y) any other reasonable, documented expenses
actually paid by Tenant to a third party or reasonably incurred by Tenant in
connection with the assignment of subleting, including, without limitation,
reasonable attorneys' fees and expenses and brokerage commissions (but expressly
excluding any overhead or other internally charged expenses of Tenant, or any
amounts paid for tenant improvements, free rent or other lease concessions given
as an inducement to the assignee or sublessee which materially exceed in the
aggregate the tenant improvements, free rent or other lease concessions given in
aggregate on the basis of then prevailing market conditions for a comparable
sublease or assignment) (the sum of (x) and (y) shall collectively constitute
"Rental Expenses"). By way of example, if Landlord grants the required written
consent to a sublease by Tenant of 10,000 square feet of the Demised Premises
and the total rental and other consideration received by Tenant for the sublease
equals a per annum rate of $3.98 per square foot and the per annum rate per
square foot for the Annual Base Rent then payable by Tenant is $3.78 per square
foot, the Rental Profit would be 20 cents per square foot and Landlord would be
entitled to received 100% of such Rental Profit concurrently with receipt of
each payment by the sublessee to Tenant, provided that Rental Profit would be
retained by Tenant until Tenant had fully recovered the amount of its Rental
Expenses. Landlord shall be entitled to receive payment of its share of Rental
Profit as and when payments are received by Tenant.
30. Termination or Expiration.
--------------------------
(a) No termination of this Lease prior to the normal ending thereof, by
lapse of time or otherwise, shall affect Landlord's right to collect rent for
the period prior to termination thereof.
(b) At the expiration of earlier termination of the Term of this Lease,
Tenant shall surrender the Demised Premises and all improvements, alterations
and additions thereto, and keys therefor to Landlord, clean and neat, and in
the same condition as at the Lease Commitment Date, excepting normal wear and
tear, condemnation and casualty other than that required to be insured against
by Tenant hereunder.
(c) If Tenant remains in possession of the Demised Premises after
expiration of the Term, without Landlord's acquiescence and without any express
agreement of the parties, Tenant shall be a tenant-at-sufferance at the greater
of (i) one hundred fifty percent (150%) of the then current fair market base
rental value of the Demised Premises or (ii) one hundred fifty percent (150%) of
the Base Rent in effect at the end of the Term. Tenant shall also continue to
pay all other Additional Rent due hereunder, and there shall be no renewal of
this Lease by operation of law. In addition to the foregoing, Tenant shall be
liable for all damages, direct and consequential, incurred by Landlord as a
result of such holdover. No receipt of money by Landlord from Tenant after the
termination of this Lease or Tenant's right of possession of the Demised
Premises shall reinstate, continue or extend the Term or Tenant's right of
possession.
31. [INTENTIONALLY OMITTED]
32. Late Payments. In the event any installment of rent, inclusive of
-------------
Base Rent, or Additional Rent or other sums due hereunder, if any, is not paid
(i) within five (5) days after Tenant's receipt of written notice of such
failure to pay on the first occasion during any twelve (12) month period, or
(ii) as and when due with respect to any subsequent late payments in any twelve
(12) month period, Tenant shall pay an administrative fee equal to five percent
(5%) of such past due amount, plus interest on the amount past due at the lesser
of (i) the maximum interest rate allowed by law or (ii) a rate of fifteen
percent (15%) per annum (the "Interest Rate") to defray the additional expenses
incurred by Landlord in processing such payment.
33. Rules and Regulations. Tenant agrees to abide by the rules and
---------------------
regulations set forth on Exhibit E attached hereto, as well as other rules and
---------
regulations reasonably promulgated by Landlord from time to time, so long as
such rules and regulations are uniformly enforced against all tenants of
Landlord in the building.
34. Quiet Enjoyment. So long as Tenant has not committed an Event of
---------------
Default hereunder, Landlord agrees that Tenant shall have the right to quietly
use and enjoy the Demised Premises for the Term.
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<PAGE>
35. Miscellaneous
-------------
(a) The parties hereto hereby covenant and agree that Landlord shall
receive the Base Rent, Additional Rent and all other sums payable by Tenant
hereinabove provided as net income from the Demised Premises, without any
abatement (except as set forth in Section 20 and Section 21), reduction. set-
off. counterclaim, defense or deduction whatsoever.
(b) If any clause or provision of this Lease is determined to be
illegal, invalid or unenforceable under present or future laws effective during
the Term, then and in that event, it is the intention of the parties hereto that
the remainder of this Lease shall not be affected thereby, and that in lieu of
such illegal, invalid or unenforceable clause or provision there shall be
substituted a clause or provision as similar in terms to such illegal, invalid
or unenforceable clause or provision as may be possible and be legal, valid and
enforceable.
(c) All rights, powers, and privileges conferred hereunder upon the
parties hereto shall be cumulative, but not restrictive to those given by law.
(d) TIME IS OF THE ESSENCE OF THIS LEASE.
(e) No failure of Landlord or Tenant to exercise any power given
Landlord or Tenant hereunder, or to insist upon strict compliance by Landlord or
Tenant with its obligations hereunder. and no custom or practice of the parties
at variance with the terms hereof shall constitute a waiver of Landlord's or
Tenant's rights to demand exact compliance with the terms hereof.
(f) This Lease contains the entire agreement of the parties hereto as to
the subject matter of this Lease and no representations, inducements, promises
or agreements, oral or otherwise, between the parties not embodied herein shall
be of any force and effect. The masculine (or neuter) pronoun, singular number
shall include the masculine, feminine and neuter gender and the singular and
plural number.
(g) This contract shall create the relationship of landlord and tenant
between Landlord and Tenant; no estate shall pass out of Landlord; Tenant has a
usufruct, not subject to levy and sale, and not assignable by Tenant except as
expressly set forth herein.
(h) Under no circumstances shall Tenant have the right to record this
Lease or a memorandum thereof.
(i) The captions of this Lease are for convenience only and are not a
part of this Lease, and do not in any way define, limit, describe or amplify the
terms or provisions of this Lease or the scope or intent thereof.
(j) This Lease may be executed in multiple counterparts, each of which
shall constitute an original, but all of which taken together shall constitute
one and the same agreement.
(k) This Lease shall be interpreted under the laws of the State where
the Demised Premises are located.
(l) The parties acknowledge that this Lease is the result of
negotiations between the parties, and in construing any ambiguity hereunder no
presumption shall be made in favor of either party. No inference shall be made
from any item which has been stricken from this Lease other than the deletion of
such item.
36. Lease Date. For purposes of this Lease, the term "Lease Date" shall mean
----------
the later date upon which this Lease is signed by Landlord and Tenant.
37. Authority. If Tenant is not a natural person, Tenant shall cause its
---------
corporate secretary or general partner, as applicable, to execute the
certificate attached hereto as Exhibit F. Tenant is authorized by all required
---------
corporate or partnership action to enter into this Lease and the individual(s)
signing this Lease on behalf of Tenant are each authorized to bind Tenant to its
terms.
38. No Offer Until Executed. The submission of this Lease to Tenant for
-----------------------
examination or consideration does not constitute an offer to lease the Demised
Premises and this Lease shall become effective, if at all, only upon the
execution and delivery thereof by Landlord and Tenant.
39. Special Stipulations. The Special Stipulations attached hereto as
--------------------
Exhibit G, are incorporated herein and made a part hereof, and to the extent of
- ---------
any conflict between the foregoing provisions and the Special Stipulations, the
Special Stipulations shall govern and control.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have hereunto set their hands
under seals, the day and year first above written.
LANDLORD:
Date: February 18, 1999 INDUSTRLAL DEVELOPMENTS INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Timothy J. Gunter
----------------------------------------
Name: Timothy J. Gunter
Title: Secretary
Attest: /s/ Daniel L. Webb
------------------------------------
Name: Daniel L. Webb
Title: Assistant Secretary
[CORPORATE SEAL)
TENANT:
Date: February 18, 1999 ALADDIN MANUFACTURING CORPORATION
By: /s/ Salvatore J. Perillo
----------------------------------------
Name: Salvatore J. Perillo
Title: Assistant Secretary
Attest: /s/ John D. Shift
------------------------------------
Name: John D. Shift
Title: Vice President-Finance
and Assistant Secretary
[CORPORATE SEAL)
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<PAGE>
ATTESTATION
Landlord - Corporation:
- ----------------------
STATE OF GEORGIA
COUNTY OF FULTON
BEFORE ME, a Notary Public in and for said County, personally appeared
Timothy J. Gunter and Daniel L. Webb, known to me to be the person(s) who, as
Secretary and Assistant Secretary, respectively, of INDUSTRIAL DEVELOPMENTS
INTERNATIONAL, INC., the corporation which executed the foregoing instrument in
its capacity as Landlord, signed the same, and acknowledged to me that they did
so sign said instrument in the name and upon behalf of said corporation as
officers of said corporation, that the same is their free act and deed as such
officers, respectively, and they were duly authorized thereunto by its board of
directors; and that the seal affixed to said instrument is the corporate seal of
said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed my
official seal, this 15th day of March, 1999.
/s/ Charlotte Robinson
------------------------------
Notary Public
My Commission Expires: 10-06-01
Tenant - Corporation:
STATE OF GEORGIA
COUNTY OF GORDON
BEFORE ME, a Notary Public in and for said County, personally appeared
Salvatore J. Perillo and John D. Swift, known to me to be the person(s)
who, as Assistant Secretary and Vice-President Finance and Assistant Secretary,
respectively, of ALADDIN MANUFACTURING CORPORATION, the corporation which
executed the foregoing instrument in its capacity as Tenant, signed the same,
and acknowledged to me that they did so sign said instrument in the name and
upon behalf of said corporation as officers of said corporation, that the same
is their free act and deed as such officers, respectively, and they were duly
authorized thereunto by its board of directors; and that the seal affixed to
said instrument is the corporate seal of said corporation.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name, and affixed
my official seal, this 18th day of February, 1999.
/s/ Elaine Busbee
-----------------------
Notary Public
My Commission Expires: Notary Public, Paulding County, Georgia
My Commission Expires Nov. 3, 2001
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<PAGE>
EXHIBIT A
[CHART TO EXHIBIT A - PROJECT INFORMATION
MOHAWK INDUSTRIES INC., BOLINGBROOK CORP. CENTER
APPEARS HERE]
[GRAPH OF MOHAWK INDUSTRIES, INC.
WAREHOUSE SPACE]
MOHAWK INDUSTRIES INC.
BOLINGBROOK CORPORATE CENTER I
BOLINGBROOK CORPORATE CENTER
BOLINGBROOK, IL
PROJECT INFORMATION
- -------------------
LAND 16.31 AC
BUILDING 352,338 SF
F.A.R. .496
TYPICAL BAY SIZE 40'x 46'
CLEAR HEIGHT 30'-0'
MOHAWK INDUSTRIES INC.
- ----------------------
SPACE SIZE 201,679 SF
OFFICE 10,045 SF
WAREHOUSE 191,634 SF
% SPRINKLER/ELEC. ROOM 280 SF
TOTAL 201,959 SF
DOCKS 29 TRUCK DOCKS
CAR PARKING 102 CAR PARKING
DRIVE-IN DOOR
<PAGE>
EXHIBIT B
Prevailing Market Rate
For purposes of this Lease, the phrase "Prevailing Market Rate" shall mean
the prevailing market rate as of the first day of the First Renewal Term or as
of the first day of the Second Renewal Term, as applicable, for base minimum
rental calculated on a per square foot basis for leases covering space
comparable to the Demised Premises within buildings comparable to the Building
located in the I-55 Corridor Area within Will County, Illinois, including the
Villages of Lemont, Woodridge, Bolingbrook & Romeoville, market area
(hereinafter referred to as the "Market Area").
The Prevailing Market Rate shall be determined by an appraisal procedure
as follows:
In the event that Tenant notifies Landlord that Tenant elects to extend the
Term for either or both of the First Renewal Term and the Second Renewal Term in
accordance with Section 3.1 of this Lease. Landlord and Tenant shall negotiate
in good faith for a period of thirty (30) calendar days after the giving of the
applicable written notice from Tenant to reach mutual agreement regarding the
Prevailing Market Rate. Each of Landlord and Tenant shall submit to the other
during such thirty (30) day period at least one written proposal for the
Prevailing Market Rate. If Landlord and Tenant are unable to reach agreement
during the thirty (30) day period, each of Landlord and Tenant shall, by written
notice to the other within ten (10) business days after expiration of the thirty
(30) day period, select a real estate appraiser. For a period of ten (10)
business days after designation of the second appraiser, the two appraisers so
designated shall attempt to reach mutual agreement regarding the Prevailing
Market Rate. The appraisers must give appropriate consideration to all economic
terms, length of lease term, size, location and quality of premises being leased
and other generally acceptable terms and conditions for the lease of the
building in question.
If the two appraisers are unable to reach agreement, each of the two
appraisers shall, not later than the twentieth (20th) business day following the
designation of the second appraiser, render a separate written determination
of the Prevailing Market Rate. The two appraisers shall also select a third
appraiser prior to the end of the period when their separate appraisals must be
rendered. Within twenty (20) business days after the appointment of the third
appraiser, the third appraiser shall render a written determination of the
Prevailing Market Rate. From the three appraisals, the appraisal which is the
farthest from the median appraisal shall be disregarded and the average of the
remaining two appraisals shall conclusively constitute the Prevailing Market
Rate. All appraisers selected in accordance with this paragraph shall have at
least ten years experience in the commercial leasing market in the Market Area
and shall be members of the American Institute of Real Estate Appraisers or
similar professional organization. If either Landlord or Tenant fails or refuses
to select an appraiser, the other appraiser shall alone determine the Prevailing
Market Rate. Landlord and Tenant agree that they shall be bound by the
determination of Prevailing Market Rate pursuant to this paragraph. Landlord
shall bear the fee and expenses of its appraiser; Tenant shall bear the fee and
expense of its appraiser; and Landlord and Tenant shall share equally the fee
and expenses of the third appraiser, if any.
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EXHIBIT C
December 8, 1998
Revised: January 20, 1999
Revised: March 4, 1999
OUTLINE SPECIFICATION
Mohawk Industries, Inc. (Aladdin Division)
1.0 GENERAL REQUIREMENTS
--------------------
1.1 Intent: This outline specification has been developed based upon the
information provided by Grubb & Ellis. This specification outlines the
scope of work for the complete design and construction of a 352,338 square
foot office/warehouse facility with a 201,959 SF demised premises for
Mohawk Industries, Inc. to be located in Bolingbrook Corporate Center,
Bolingbrook, Illinois. Design and construction shall include site work,
landscaping and full preparation of certified, final working drawings
comprised of Architectural, Structural, Civil, Electrical, Mechanical,
Plumbing, Fire Sprinkler, Landscaping and a corresponding specification.
These drawings shall be submitted for approval to Tenant and used to obtain
a permit and complete construction.
The square footage of this facility is as follows:
Total Building Mohawk Industries Demised Premises
-------------- ----------------------------------
To Suit Office 10,045 SF Office
352,338 SF Warehouse 191,914 SF Warehouse
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352,338 SF Total 201,959 SF Total
Site Area: + 16.31 Acres
-
Parking: Provided - 102 Car Parking Stalls
Trailer Storage: Provided - 25 Trailer Storage Stalls
1.2 Warranty: All construction will carry a standard one (1) year warranty. Any
additional warranties such as equipment and roof warranties will be passed
through to Tenant.
1.3 Accessibility: All design and construction shall conform to the Americans
with Disabilities Act (ADA) and State Accessibility Requirements.
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1.4 Approvals: All designs, materials, equipment and finishes including, but
---
not limited to, plumbing, electric, fire sprinkler, HVAC, brick, mortar,
glass, flashing, roof screens, stains, floor finishes, wall finishes,
paint, washroom partitions, doors, hardware and acoustic ceiling tile,
shall be approved by IDI and Tenant, in writing, prior to installation.
2.0 SITE DEVELOPMENT
----------------
2.1 Grading and Earthwork: Work necessary to excavate, backfill and fine grade
the entire site is included. This shall include required preparation to
complete the foundations on the site, the floor slab subgrade, the parking
and truck maneuvering subgrades and good positive drainage away from the
building. Tree removal required for parking and building construction shall
be included.
Earthwork within the construction areas shall be observed, tested and
approved by an independent soils engineer. All fill areas shall be
compacted and all concrete footings and foundations designed according to
the recommendations of a qualified soils engineer.
Areas outside the building structure shall be cut and filled to appropriate
grades. Fill work in these areas shall be with suitable material of
adequate bearing. Any excess soil generated in the grading operation shall
be used to construct undulating decorative landscaped berms. Any excess
soil remaining after construction shall be removed from the site and park.
2.2 Exterior Concrete, Sidewalks, Curbs and Truck Apron: Work necessary to
furnish and install all of the exterior concrete work will be provided.
Exterior concrete shall be broom-finished. Sidewalks will be 5" thick or 4"
granular fill and aprons and trailer storage will be 8" thick on 6"
granular fill. Included are concrete curb and gutter, concrete sidewalks up
to the entrance, a concrete transformer pad, and concrete aprons at street
entrances, and 65' adjacent to the overhead doors at trailer storage areas.
All exterior concrete work shall be constructed from a 4,000 psi, air
entrained concrete mixture. The concrete shall be properly jointed for
thermal movements, and shall be placed on properly compacted material.
2.3 Bituminous Paving and Striping: Work necessary to furnish and install all
bituminous parking lots and driveways as shown on the scope drawings shall
be provided.
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All bituminous paving will be constructed to conform to Highway Department
Specifications. Areas designated for auto traffic shall receive a 3" thick
bituminous mat over an 8" base. Areas designated for semi-truck traffic
shall be constructed with a 4" bituminous mat over a 10" base. Both
bituminous mats shall be installed in two (2) lifts.
All paved areas will be bounded by B6:12 concrete curb and gutter.
2.4 Telephone Gas and Electric Utilities: Service entrances shall be
coordinated with the telephone, gas and electric companies. Participation
by Tenant shall be required for execution of the documents. Gas, electric
and phone charges will be paid by contractor until Tenant takes occupancy.
All meters will be read on that date and billing names changed.
2.5 Water Service: Water service from the main located in the right-of-way
shall be provided. The water main to the building will be sized as required
for the domestic services within the building and for the interior fire
protection systems. Yard hydrants will be located around the facility per
the requirements of the local fire district.
2.6 Sanitary Sewerage: A 6" sanitary sewer line from the proposed building to
the sanitary main located in the right-of-way shall be provided.
2.7 Storm Sewerage: An on-site storm sewer system with catch basins and
manholes shall be connected to the street storm sewer system.
2.8 Lawns and Landscaping: A complete landscaping program will be installed
including seed, sod, trees, shrubs, plantings and lawn sprinkler.
2.9 Exterior Lighting: Exterior lighting for the project will be located to
provide light in the parking areas, dock area and at every building
entrance.
3.0 BUILDING STRUCTURES AND EXTERIOR ENVELOPE
-----------------------------------------
3.1 The general construction of this facility shall be steel columns, beams and
steel bar joists carrying a metal roof deck. Bay size in the warehouse is
approximately 40' x 48' with the exception of the staging bays which are
40' x 60'.
The building insulation values shall consist of the following:
Roof R = 12.0
Walls R = 15.0
Insulated Glass R = 2.0
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3.2 Building Exterior: The warehouse wall system will be constructed of load
bearing, insulated precast. The precast will be stained with a five (5)
year masonry stain to accent the office design. The office facade will be
precast and glass. Glass area will be "punched" windows extending from top
of sill (+3'-0") to ceiling. Glass will be tinted, insulated units set in
thermally broken, anodized aluminum frames.
3.3 Roofing: Shall consist of a 45 mil single-ply rubber roof system installed
----------------------
over a 2" loose laid poly-isocyanurate insulation providing a minimum
R-value of 12.0 and properly covered with a stone ballast. All roof top
-------------
mechanical equipment shall be properly flashed and equipped with an
insulated curb of no less than 12".
Metal roof deck shall be 1 1/2", 22 gauge, off-white primed steel deck. All
---------
roof areas shall slope to interior roof drains which will be connected to
the underground storm sewer. All roof edge facias shall be prefinished clad
metal. Other flashings shall be galvanized metal and painted.
One (1) 4' x 8' double dome skylight/smoke vent will be installed in every
other bay to provide natural light and provide for smoke evacuation.
Warranty: Ten (10) year labor and material warranty issued by Manufacturer
will be provided.
3.4 Building Clear Heights: The clear height in the office area will be 9' (or
to suit) to the underside of the acoustical tile. The clear height will be
30' to the underside of the bar joist. No pipe, equipment or fixtures will
be placed below the bottom chord of the bar joists without specific written
permission from IDI and Tenant.
3.5 The demised premises will be separated by a full height wall. The wall
will be concrete block to 10'-0" AFF and 5/8" gypsum board applied to
3-5/8" thick, 25 gauge metal studs spaced at 24" o.c. above that to the
underside of the roof deck.
4.0 INTERIOR FINISHES
-----------------
Office build-out will be provided from an allowance of $40.00/SF
($400,000.00) to include all items except exterior shell, and floor slab.
The standards to be utilized in the construction of the office will be as
follows unless specifically noted:
. The office floor will be a 4" slab on 2" granular.
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. Carpet will be direct glue down with 2 1/2" vinyl base.
. Vinyl tile will be 1/8" composition tile as manufactured by Armstrong.
. Quarry tile will be 6" x 6" thin set tile with quarry tile base. Ceramic
tile will be 2" x 2" ceramic mosaic tile as manufactured by American
Oleon.
. Walls: Unless indicated otherwise, the interior walls shall be
constructed with one (1) layer of 5/8" gypsum wall board applied to each
side of 3-5/8" thick, 25 gauge metal stud framing members spaced at 24"
o.c. Interior partitions shall extend from the floor to finished ceiling
except around the washrooms, conference room and Manager's office where
the walls shall penetrate the ceiling grid system and run to 3' above the
ceiling with sound attenuation blankets. On walls where paint is
specified, two (2) coats of flat latex will be applied.
. The demising wall between the warehouse and office will be concrete block
to 10'-0" AFF and 5/8" gypsum board applied to 3-5/8" thick, 25 gauge
metal studs spaced at 24" o.c. above that to the underside of the roof
deck. The warehouse side of the office demising wall shall be taped,
sanded and painted with two (2) coats of flat latex.
. Base Materials: All vinyl base adjacent to carpeted arcs shall be a
2 1/2" straight base. Quarry and ceramic tile base shall have coved
profile at floor.
. Ceilings: Acoustical ceiling tile shall be 2' x 4' lay-in panels with a
random perforated pattern. All wall trim and column trim shall match the
white painted steel 2' x 4' exposed suspension grid system. The ceiling
grid system shall be continuous throughout the space.
. Wood Doors: Interior office doors shall be 3' x 7', solid core, with a
stained, sealed and varnished red oak veneer. All office doors will be
set in painted hollow metal frames.
. Hollow Metal Doors and Frames: All hollow metal doors shall be insulated
and painted and set in painted hollow metal frames.
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. Finish Hardware: All door hardware shall be lever type as manufactured by
Schlage, Yale, Corbin or an equal commercial grade with its function
appropriate for its intended usage. A complete keying system allowing
doors to be keyed alike within a given area and tied into a building
master and grand master system shall be provided. Tenant will be
responsible for re-keying of all exterior doors prior to occupancy.
. Washrooms: All washroom partitions shall be ceiling hung, metal, with a
baked-on enamel finish.
. Each washroom shall receive soap dispensers, a recessed paper towel
cabinet, a recessed trash receptacle and a mirror. The women's restroom
shall receive sanitary napkin disposals in each stall. The washrooms
shall each receive a plastic laminate vanity for recessed sinks.
. Plumbing: A complete plumbing system shall be designed and installed for
all fixtures as required by the office build-out allowance. This shall
consist of all necessary sanitary waste, vent and hot and cold water
piping systems. All fixtures will be wall hung, flush valve type.
. Heating/Cooling: The office will be heated and air conditioned by means
of commercial roof top gas-fired heating and electrical cooling units per
the requirements of the office build-out allowance. The conference room
and lunch area will have ceiling exhaust fans and all restrooms will have
direct exhaust. Winter design will be 70 (degrees) F. inside at -10
(degrees) F. outside air temperature. Summer design will be 73 (degrees)
F. inside at 93 (degrees) F. dry bulb outside temperature. All office
units will have seven (7) day programmable thermostats and units over 5
ton capacity will have economizer cycles. All office roof-top mechanical
equipment will be screened from view.
. Lighting: 2' x 4' three (3) lamp lay-in troffer with steel hinged and
latched door and parabolic lens designed for seventy (70) foot-candles
at 30" above the floor as required by the office build-out allowance.
. Power: Each private office will receive two (2) duplex receptacles and
one (1) phone outlet. Restrooms and lunchroom will have one (1)
countertop GFI outlet each. Lunch area will have two (2) duplex
receptacles spaced on wall for vending machines. Large general
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purpose rooms will have one (1) duplex outlet on each wall and one (1)
phone outlet.
. Office lobby with a quarry tile floor.
. An aluminum sill at all window areas.
5.0 FLOOR - All proposed building floor slabs will be concrete slab-on-grade.
-----
Warehouse floor will be a 7" slab on a 3" stone base and 3,500 psi
concrete. Slabs will be troweled smooth and receive a burnished finish.
Slabs shall meet the following floor flatness/levelness specifications:
Ff35/Fl25.
6.0 DOCK AREA EQUIPMENT AND OVERHEAD DOORS - (Twenty-nine (29) Exterior Truck
--------------------------------------
Docks, one (1) Drive-in Door).
Dock Equipment - Twenty-nine (29) 6' x 8' mechanically operated 30,000-
pound dock levelers with safety drop, full range toe-guards, and weather
seal.
Overhead Doors - Twenty-nine (29) 9' x 10' and one (1) 12' x 14' exterior
doors shall be prefinished, metal panel type, insulated, weather stripped
and complete with lockset hardware and two (2) windows per door (Therma-
core or Therma-span solid filled doors). All door tracks to be protected by
rail guards. Drive-in door will be equipped with a push-button motor
operator. All other doors will be manual. Each door will have a dock seal
and light.
7.0 MECHANICAL
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7.1 Plumbing: An interior roof drainage system shall be provided and connected
to the exterior storm system. Roof drains and cleanouts shall be Josam,
Smith, Wade, Zurn or equal. All drain heads and horizontal runs will be
insulated to prevent condensation.
7.2 Heating, Ventilating and Air Conditioning: The work shall include the
design and installation of the following:
Warehouse Area: The warehouse area will be heated by a roof mounted,
--------------
direct-fired positive pressure unit. Winter design will be 65 (degrees) F.
inside at - 15 (degrees) F. outside air temperature.
7.3 Fire Protection System: A complete ESFR fire protection sprinkler system
shall be provided for the warehouse and dock areas designed in accordance
with NFPA, to allow rack or piled storage of product to a height of 30'
without the need for in-rack sprinklers. The system shall include a fire
department connection at the front
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of the building and all necessary pipes, valves, smoke detectors, strobes,
alarms and fire bells as required by the municipality. Any specific
insurance company requirement should be forwarded to IDI for review as soon
as possible.
The office areas shall be provided with a fire protection sprinkler system
designed for light hazard densities in accordance with NFPA 13.
Semi-recessed, chrome plated sprinkler heads shall be provided for the
office areas and brass sprinkler heads shall be furnished in the warehouse
and dock area. Warehouse sprinkler heads will be 75 psi ESFR heads.
8.0 ELECTRICAL
----------
8.1 Power Distribution: Included in this proposal is a complete building power
distribution system from an 800 amp, 277/480 volt, 3-phase, 4-wire,
pad-mounted transformer to power and lighting panels, switches, and/or
circuit breakers throughout the building; to supply heating, ventilating,
air-conditioning, lighting convenience outlets, and the other building
components identified in this proposal requiring electrical connections.
All components and devices to be industrial grade.
8.2 Lighting: All lighting systems shall be designed and installed using the
fixture types outlined below, high power factor ballasts and single phase
circuits. Lighting shall be controlled by wall switches in the office and
circuit breaker design for switch-on in the warehouse areas. Contractor to
verify color of switches, receptacles and wall plates prior to
installation.
In general, the lighting systems shall be as follows:
A. Warehouse - Metal Halide fixtures designed for twenty-five (25) foot-
candles initial average at 30" above the floor in a general lighting
pattern (quantity provided 200). All foot-candle measurements will be
within +/- 25% of the overall average specified. Fixtures will be hung
from the top chord of the bar joists and suspended between them.
Warehouse to include a night light system with quartz restrike.
B. Accent Lighting - Wall or soffit lighting at all building entrances.
C. Exit Light and Emergency Battery Pack Type Fixtures - Provided where
required by code. Emergency battery pack type fixtures to
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[IDI Logo]
be wired to building electrical system and batteries to be "trickle"
charged.
D. Parking Lot Lighting - Provided by a combination of pole and wall
mounted "shoe box" type high pressure sodium fixtures. Poles to be
tapered round spun, tapered aluminum and fixtures to have anodized
aluminum heads. The fixtures will turn-on by photo cell and turn-off by
time clock.
E. Fifteen (15) 35-amp duplexes for block beaters will be provided. One
outlet per pair of doors.
Warehouse will have one (1) quadplex between each pair of overhead doors.
9.0 EXCLUDED ITEMS
--------------
The following items shall be specifically excluded from this proposal:
A. Furniture and office furnishings including demountable partitions.
B. Building security, paging or phone systems.
C. Time clocks, lockers, dumpster, dumpster screen, conveying
system, fire extinguishers, storage racks or in-rack sprinklers.
D. Power distribution to, and electrical or mechanical hook-up of,
Tenant's equipment.
10.0 MISCELLANEOUS ITEMS INCLUDED
----------------------------
A. Fire department knox box.
B. Fire alarm control panel with required horns, bells, strobes and pull
stations.
C. Full height glass entry door.
D. One (1) roof access ladder and hatch.
E. All necessary permits and approvals.
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11.0 ALLOWANCE SUMMARY
-----------------
11.1 Cash Allowance: The following cash allowances are included in this
specification. Cash allowances include all applicable tax, freight, design,
materials, installation, supervision, overhead, profit, etc., unless
otherwise noted, incurred by IDI to provide specific work. Overruns or
credits within any specific allowance area may be applied against the total
of the entire allowance fund. Tenant will be allowed to use any final cash
allowance fund balance for additional items in the building. Additions
shall be handled as a Change to the Lease and will carry a 12% fee for IDI.
A. Tenant Improvement/Office $400,000.00
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EXHIBIT D
---------
SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
"Agreement") is made as of the __ day of __________, 199_ between ____________,
a ______________ (hereinafter called "Mortgagee"), which has an office at
_____________________ (Attn:____________________), ___________________________,
a __________________ corporation (hereinafter called "Landlord"), which has an
office at __________ and ___________ , a ____________ corporation (hereinafter
called "Tenant"), which has an office at ____________.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Tenant has entered into that certain Lease ("Lease") dated
___________________________, 199_ with Landlord, as Landlord, which Lease
demises certain premises (the "Premises") located on the real property described
on Exhibit A attached hereto and made a part hereof (the "Property');
WHEREAS, Mortgagee has agreed to make a loan to Landlord in the face
principal amount of $ __________, to be secured by a Mortgage and Security
Agreement (herein, together with all amendments, modifications, extensions,
renewals, consolidations and replacements thereof now existing or hereafter
entered into, collectively called the "Mortgage") on the Property; and
WHEREAS, Mortgagee, Landlord and Tenant have reached certain agreements
regarding the Lease and the Mortgage hereinafter set forth in this Agreement.
NOW, THEREFORE, in consideration of the sum of ________ Dollars
($_____) in hand paid by Mortgagee to Tenant and other valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
1. In accordance with and subject to all the provisions of this
Agreement, the Lease is and shall be subject and subordinate to the Mortgage, to
the full extent of any and all amounts from time to time secured thereby and
interest thereon.
2. Tenant, for itself and its successors and assigns, agrees that it
will attorn to and recognize any purchaser of the Property at a foreclosure sale
under the Mortgage or any transferee who acquires the Property by deed in lieu
of foreclosure or otherwise, and the successors and assigns of such purchaser or
transferee, as its landlord for the unexpired balance (and any extensions or
renewals, whether previously, at that time or thereafter exercised by Tenant) of
the term of the Lease, subject to and in accordance with the terms and
conditions set forth in the Lease. Mortgagee agrees that Tenant will not be
joined in any proceeding or action to foreclose the Mortgage unless Tenant is a
necessary party to such proceeding or action.
3. Mortgagee, for itself and its successors and assigns, and for any
purchaser at a foreclosure sale under the Mortgage, any transferee who acquires
the Property by deed in lieu of foreclosure or otherwise, and the successors and
assigns of such purchaser or transferee (herein, Mortgagee and each such other
party is called a "New Landlord"), hereby covenants and agrees with Tenant that
in the event Mortgagee shall commence any proceedings to foreclose the Mortgage
for any reason whatsoever or in the event any other New Landlord shall succeed
to the interest of Landlord by foreclosure, deed in lieu thereof or otherwise,
that: (a) the Lease shall, in accordance with its terms, remain in full force
and effect as a direct lease between Mortgagee or other New Landlord (as the
case may be), and Tenant, with the same force and effect as if originally
entered into with Mortgagee, or such other New Landlord (as the case may be);
and (b) Tenant's possession of the Premises and Tenant's rights and privileges
under the Lease shall not be diminished, interfered with or disturbed by such
Mortgagee or such other New Landlord by such foreclosure under the Mortgage or
by any such attempt to foreclose or to succeed to the interests of Landlord by
foreclosure, deed in lieu thereof or otherwise; provided that the rights of
possession of Tenant are subject to all the terms of the Lease.
4. Without the prior written consent of Mortgagee, Landlord will have
no right or power to (a) enter into any agreement amending or terminating the
Lease or (b) cancel the term of, or surrender, the Lease, or (c) waive or
release Tenant from any obligation of Tenant under the Lease; provided that
regarding only any proposed amendment of the Lease which does not reduce the
amount of rental payable under the Lease by Tenant, relieve Tenant of any
material obligation under the Lease, materially increase the responsibilities of
Landlord or otherwise materially impair or reduce the economic value of the
Lease to Mortgagee, Mortgagee agrees not unreasonably to withhold or delay its
consent. Mortgagee shall approve or disapprove of such actions within thirty
(30) days of request thereof, and if
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notice of disapproval is not received within said time deadline. Mortgagee is
deemed to have approved thereof. If Mortgagee disapproves same, it shall state
with specificity the reasons for such disapproval.
5. The Tenant hereby agrees to provide Mortgagee with a copy of any
written notice given by Tenant to Landlord of any default under the Lease by the
Landlord (such copy to Mortgagee to be given simultaneously with the giving of
the notice to Landlord) and to allow Mortgagee the same right and opportunity to
remedy or cure such default as may be available to Landlord under the Lease
prior to exercising any right or remedy of the Tenant under the Lease.
Notwithstanding the foregoing, Tenant agrees that Mortgagee shall have no
obligation to remedy or cure any such default.
6. In the event that Mortgagee or any other New Landlord shall succeed
to the interest of Landlord under the Lease, Tenant agrees that Mortgagee or
such other New Landlord shall not be: (i) subject to any credits, offsets
(except as may be expressly provided to the contrary in the Lease), defenses,
claims or counterclaims which Tenant might have against any prior landlord
(including Landlord) (ii) bound by any rent or additional rent which Tenant
shall have paid more than one month in advance to any prior landlord (including
Landlord), or (iii) bound by any amendment or modification to the Lease, after
the effective date hereof, or waiver of any provision of the Lease, which has
not been consented to in writing by Mortgagee or deemed approved hereunder.
7. Each notice, demand or other communication in connection with this
Agreement shall be in writing and shall be deemed to be given to and served upon
the addressee thereof on the earlier of (i) actual delivery to such addressee at
its address set out above or (ii) the third business day after the deposit
thereof in the United States mails, registered or certified mail, return receipt
requested, first-class postage prepaid, addressed to such addressee at its
address set out above. By notice complying with this section, any party may
from time to time designate a different address in the continental United
States as its address for the purpose of the receipt of notice hereunder.
8. This Agreement shall be binding upon and shall inure to the benefit
of the parties hereto, and their respective successors and assigns.
9. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Illinois.
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EXHIBIT E
Rules And Regulations
These Rules and Regulations have been adopted by Landlord for the mutual benefit
and protection of all the tenants of the Building in order to insure the safety,
care and cleanliness of the Building and the preservation of order therein.
1. The sidewalks shall not be obstructed or used for any purpose other than
ingress and egress. No tenant and no employees of any tenant shall go upon the
roof of the Building without the consent of Landlord.
2. No awnings or other projections shall be attached to the outside walls of
the Building.
3. The plumbing fixtures shall not be used for any purpose other than those
for which they were constructed, and no sweepings, rubbish, rags or other
substances, including Hazardous Substances, shall be thrown therein.
4. No tenant shall cause or permit any objectionable or offensive odors to
be emitted from the Demised Premises.
5. The Demised Premises shall not be used for lodging or sleeping or for any
immoral or illegal purposes.
6. No tenant shall make, or permit to be made any unseemly or disturbing
noises, sounds or vibrations or disturb or interfere with tenants of this or
neighboring buildings or premises or those having business with them.
7. Each tenant must, upon the termination of this tenancy, return to the
Landlord all keys of stores, offices, and rooms, either furnished to, or
otherwise procured by, such tenant, and in the event of the loss of any keys so
furnished, such tenant shall pay to the Landlord the cost of replacing the same
or of changing the lock or locks opened by such lost key if Landlord shall deem
it necessary to make such change.
8. Canvassing, soliciting and peddling in the Building and the Project are
prohibited and each tenant shall cooperate to prevent such activity.
9. Landlord will direct electricians as to where and how telephone or
telegraph wires are to be introduced. No boring or cutting for wires or
stringing of wires will be allowed without written consent of Landlord. The
location of telephones, call boxes and other office equipment affixed to the
Demised Premiss shall be subject to the approval of Landlord.
10. Parking spaces associated with the Building are intended for the
exclusive use of passenger automobiles. Except for intermittent deliveries, no
vehicles other than passenger automobiles may be parked in a parking space
without the express written permission of Landlord. Trucks and tractor trailers
may only be parked at designated areas of the Building. Trucks and tractor
trailers shall not block access to the Building.
11. No tenant shall use any area within the Project for storage purposes
other than the interior of the Demised Premises.
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EXHIBIT F
CERTIFICATE OF AUTHORITY
CORPORATION
The undersigned, Secretary of Aladdin Manufacturing Corporation ("Tenant"),
hereby certifies as follows to INDUSTRIAL DEVELOPMENTS INTERNATIONAL, INC., a
Delaware corporation ("Landlord"), in connection with Tenant's proposed lease of
premises in Inventory Facility No. 1, at Bolingbrook Corporate Center,
Bolingbrook, Illinois (the "Premises"):
1. Tenant is duly organized, validly existing and in good standing under
the laws of the State of __________________, and duly qualified to do business
in the State of Illinois.
2. That the following named persons, acting individually, are each
authorized and empowered to negotiate and execute, on behalf of Tenant, a lease
of the Premises and that the signature opposite the name of each individual is
an authentic signature:
- ----------------------- ---------------------- ----------------------
(name) (title) (signature)
- ----------------------- ---------------------- ----------------------
(name) (title) (signature)
- ----------------------- ---------------------- ----------------------
(name) (title) (signature)
3. That the foregoing authority was conferred upon the person(s) named
above by the Board of Directors of Tenant, at a duly convened meeting held
_____________, 19__.
---------------------------
Secretary
[CORPORATE SEAL]
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EXHIBIT G
The following Special Stipulations are hereby incorporated into and made a
part of the foregoing Lease ("this Lease") and, to the extent of any conflict
between these Special Stipulations and all other provisions of this Lease, these
Special Stipulations shall govern and control.
1. Right of First Offer. So long as this Lease is in full force and effect and
---------------------
no Event of Default has occurred and is then continuing, and no facts or
circumstances then exist which, with the giving of notice or the passage of
time, or both, would constitute an Event of Default. Landlord hereby grants to
Tenant a right of first offer (the "Right of First Offer") to expand the Demised
Premises to include any space in the Building which directly adjoins the Demised
Premises and becomes vacant from time to time (the "Offer Space"), subject to
the following terms and conditions. The term "directly adjoins", as used in the
preceding sentence, shall mean space which actually adjoins the Demised
Premises. By way of example, the Demised Premises contains approximately 201,850
square feet, located at one end of the Building, leaving approximately 150,488
square feet in the remainder of the Building. Assuming, for the purposes of this
example only, that no other tenants occupied any other portion of the Building,
a lease by Landlord of approximately 10,000 square feet at the opposite end of
the Building from the Demised Premises (thereby leaving approximately 10,000
square feet of space directly adjoining the Demised Premises) would not be
subject to the Right of First Offer and would not constitute Offer Space.
(a) The term of the Right of First Offer shall commence on the Lease
Commencement Date and continue throughout the initial Term (the "First Offer
Period").
(b) Subject to the other terms of this Right of First Offer, after any part
of the Offer Space has or will "become available" (as defined herein) for
leasing by the Landlord, Landlord shall not, during the term of the Right of
First Offer, lease to another tenant such available portion of the Offer Space
(the "Available Offer Space") without first offering Tenant the right to lease
such Available Offer Space, subject to the following conditions:
(i) Space shall be deemed to "become available" when Landlord desires
to offer vacant space in the Building for lease or a lease for any tenant in the
Building from time to time of all or a portion of the Offer Space expires or is
otherwise terminated.
(ii) Notwithstanding item (i) of this subparagraph b, Offer Space shall
not be deemed to "become available" if the space is assigned or subleased by the
then-current tenant of the space; or re-let by the then-current tenant of the
space by renewal, extension, or renegotiation.
(c) Consistent with subparagraph b. above, Landlord shall not lease any
Available Offer Space to another tenant unless and until Landlord has first
offered the Available Offer Space to Tenant in writing (the "Offer"). The Offer
shall contain (i) a description of the Available Offer Space (which description
shall include the square footage amount and location of such Available Offer
Space) and an attached floor plan that will show the Available Offer Space; (ii)
the date on which Landlord expects the Available Offer Space to become
available; (iii) the increase in the Base Rent which would occur upon
incorporating the Available Offer Space into this Lease; and (iv) the increase
in Tenant's Operating Expense Percentage which would occur upon incorporating
the Available Offer Space into this Lease. Upon receipt of the Offer, Tenant
shall have the right, for a period of ten (10) calendar days after receipt of
the Offer, to exercise the Right of First Offer by giving Landlord written
notice that Tenant desires to lease the Offer Space at the base rent and upon
the special terms and conditions as are contained in the Offer. If the term of
the Offer Space expires after the Expiration Date of the Term, the Term of this
Lease shall be extended to be coterminous with the term of the Offer Space and
the Annual Base Rent per square foot for the Demised Premises during said
extension shall be based upon the greater of (i) the base rent per square foot
for the Offer Space or (ii) the Annual Base Rent per square foot of the Demised
Premises for the last year of the Term.
(d) If, within such ten (10)-day period, Tenant exercises the Right of
First Offer, then Landlord and Tenant shall amend the Lease to include the Offer
Space so that the Offer Space shall thereafter be governed by the terms and
conditions of this Lease as modified by the terms and conditions of the Offer.
(e) If, within such ten (10)-day period, Tenant declines or fails to
exercise the Right of First Offer, Landlord shall then have the right to lease
the Offer Space in portions or in its entirety to a third party, unrelated to
and unaffiliated with Landlord, at any time without regard to the restrictions
in this Right of First Offer and on whatever terms and conditions Landlord may
decide in its sole discretion, provided the base rent, additional rent, any
monetary allowances and any rent concessions are not substantially more
favorable to such tenant than those set forth in the Offer, without again
complying with all the provisions of this Right of First Offer. Any base rent
which is at least ninety percent (90%) of the base rent specified in the Offer
will conclusively be deemed to be as favorable as the base rent specified in the
Offer.
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(f) If Landlord desires to lease the Offer Space at a base rent
substantially less than the base rent set forth in the Offer, or if Landlord
desires to materially alter or modify the special terms and conditions of the
Offer, if any, Landlord shall be required to present the altered or modified
Offer to Tenant pursuant to this Right of First Offer, in the same manner that
the original Offer was submitted to Tenant.
(g) With respect to any portion of the Building which is leased from time
to time during the Term (subject to compliance by Landlord with this Special
Stipulation 1) and which, if vacant, would constitute Offer Space, this Right of
First Offer shall be subordinate to any extension or renewal options contained
in any such lease. Further, if at the end of the term of any such lease, the
tenant thereunder desires to remain in its space, Landlord shall be entitled to
renew the lease and this Right of First Offer shall be subject and subordinate
to such renewal.
(h) This Right of First Offer is personal to ALADDIN MANUFACTURING
CORPORATION, and shall become null and void upon the occurrence of an assignment
of the Lease or a sublet of all or a part of the Demised Premises.
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EXHIBIT 10.13
WAREHOUSE LEASE
THIS WAREHOUSE LEASE (herein this "Lease") is made and entered into as of
October 15, 1999, by and between Seneca G&H, L.L.C., a Florida limited liability
company, having an address at 2901 SW 8th Street, Suite 204, Miami, Florida
33135 ("Landlord") and ALADDIN MANUFACTURING CORPORATION, a Delaware
corporation, with its home office located at 160 South Industrial Boulevard,
Calhoun, Georgia 30701 ("Tenant").
ARTICLE I
---------
DEMISE OF PREMISES
1.1 Premises. For and in consideration of the covenants and agreements
--------
contained herein and other valuable consideration, Landlord hereby leases to
Tenant the hereinafter defined "Premises" being approximately 186,537 square
feet of gross leasable area, measured from the outside of exterior walls and
from the midpoint of demising walls, ("GLA") in a warehouse building to be
constructed containing approximately 256,592 square feet of GLA (the "Building")
located on a parcel of land located in Pembroke Park, Florida, and more fully
described and/or depicted on Exhibit "A-1" attached hereto and incorporated by
-------------
reference herein ("Land"), together with the non-exclusive right to use the
easements and appurtenances thereto being Common Areas. The portion of the
Building and the Land being leased to Tenant hereunder is sometimes referred to
as the "Premises".) The Premises are depicted as the crosshatched area on
Exhibit "A-2" hereto (the "Site Plan"). The Premises shall include exclusive use
- -------------
of approximately 48 loading docks and associated truck aprons in the leased
Premises, parking spaces for Tenant's employees, customers, contractors, agents,
invitees and licensees as depicted in Exhibit "A-3", and non-exclusive rights
of access, ingress and egress over the driveways and other access ways on the
Land and Park. If the Premises constitute the entire Building, then references
to the Building shall be deemed to be the Premises, and Tenant shall have
exclusive use of any and all loading docks, truck wells, compactor pads and
similar appurtenances to the Building and those other areas depicted on Exhibit
"A-2" as being for Tenant's exclusive use, as well as the non-exclusive use of
the Common Areas (hereinafter defined).
ARTICLE II
----------
APPROVALS; TENANT IMPROVEMENTS; SPECIFICATIONS/ACCESS
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2.1 Approvals. Landlord shall be solely responsible, at Landlord's cost and
---------
expense, for obtaining and maintaining all permits, approvals, zoning,
variances or other matters (collectively, the "Approvals") that may be required
by the applicable governmental agencies, bureau departments or any other
governmental entity (a "Governmental Authority") for the use and operation of
the Premises for warehouse, light industrial and freight movement use (excluding
occupational licenses and other licenses required for Tenant's particular use of
the Premises). Tenant shall cooperate with Landlord in Landlord's obtaining of
the Approvals. Landlord warrants and represents that such use is allowed by law
as of the date hereof.
2.2 Tenant Improvements. No later than the hereinafter defined Commencement
-------------------
Date, Landlord shall complete the work to the Premises described in Exhibit "B"
-----------
hereto ("Landlord's Improvements") and shall deliver the Premises to Tenant on
the Commencement Date with all of the Tenant Improvements, as described therein,
substantially completed and with a permanent or temporary certificate of
occupancy for Tenant's use, operation and occupancy thereof. Landlord warrants
and represents that as of the Commencement Date, the Building will be in good
condition and repair and structurally sound [which condition includes, without
limitation, that the roof will be leak-free and not in need, or in imminent
need, of repair and that the plumbing, electrical, heating, ventilation and
air-conditioning ("HVAC") systems will be in good operating condition and repair
and not in need, or imminent need, of repair]. Landlord shall maintain the
Building and the Land as provided for in Article IX below.
2.3 Premises Specifications/Access. Landlord warrants and represents that
------------------------------
(i) the Premises have a height clearance of no less than twenty four (24) feet,
(ii) the Premises have truck loading facilities as shown on the Site Plan and
including forty-eight (48) dock high doors, (iii) there is access to the
Premises over the Common Areas (hereinafter defined) to publicly dedicated (and
accepted) right-of-way, (iv) the office shown on the Site Plan shall be heated
and air conditioned pursuant to Landlord's Work, (v) the Premises shall include
men's and women's restrooms and (vi) the warehouse lighting shall be as set
forth in Exhibit "B" or, if not therein set forth, then as
-----------
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heretofore agreed to by Landlord and Tenant and shall be in good working order
and repair as of the Commencement Date.
ARTICLE III
-----------
LEASE TERM
3.1 Initial Term. The initial term (herein sometimes referred to as the
------------
"Initial Term") of this Lease shall commence on the earlier of: (A) one hundred
and eighty (180) days following the latter of (i) the full execution and
delivery of this Lease, (ii) obtaining approval of all necessary plans and
specifications for the intended improvements, including the tenant improvements,
and (iii) obtaining of all necessary permits for the construction of the
intended improvements, including the tenant improvements, or (B) the date on
--
which Landlord delivers to Tenant a certificate of substantial completion issued
by Landlord's architect, together with a permanent or temporary certificate of
occupancy confirming that the Premises are substantially complete and available
for occupancy, except only punchlist items that Landlord shall complete within
thirty days thereafter (subject to availability of materials) (the "Commencement
Date"). Notwithstanding anything herein to the contrary, the Commencement Date
shall not be prior to August 1, 2000. The Initial Term shall terminate at the
end of the last day of the tenth (10th) Lease Year.
For purposes of this Lease, the term "Lease Year" shall mean each 12-month
period commencing on the Commencement Date or the anniversary date thereof. If
the Commencement Date does not fall on the first day of a month, the first Lease
Year shall consist of the partial month in which the Commencement Date occurs
and the twelve (12) consecutive months immediately following said partial month.
If for any reason Landlord cannot deliver possession of the Premises to Tenant
on the Commencement Date, Landlord shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease, but in such
case Tenant shall not be obligated to pay rent or any other charges hereunder
until Landlord has delivered possession of the Premises to Tenant in accordance
with Section 2.2 above. In the event that Landlord has not delivered the
Premises to Tenant within thirty (30) days after the Commencement Date, the Base
Rent and CAM Costs that would otherwise be due from Tenant will abate for the
number of such delay day(s) after said thirty day period; Landlord shall deliver
the Premises to Tenant as required herein as expeditiously as reasonably
possible.
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Landlord agrees to provide Tenant with at least ten (10) business days advance
written notice of the date on which Landlord anticipates completion of the
Premises and the obtaining of the applicable certificate of occupancy. If the
Premises are ready for occupancy prior to the Commencement Date, then Tenant may
enter upon the Premises to install its trade fixtures, telephone systems,
computer systems and for other purposes allowed by this Lease other than the
operation of its business, subject to all of the terms and conditions hereof,
except that Tenant shall not, until the Commencement Date has occurred, have any
obligation to pay Base Rent or Tenant's Share of CAM Costs or Real Estate Taxes,
as hereinafter provided for.
Tenant shall have two (2) successive year options (each such option being
herein sometimes referred to as an "Extension Option") to extend the term of
this Lease for five (5) Lease Years (each such five (5) year term being herein
sometimes referred to as an "Extension Term"), exercisable by the delivery of
written notice to Landlord by Tenant not less than 9 months prior to the
expiration of the then-current Initial Term or Extension Term, as the case may
be; provided, however, that, if Tenant shall fail to give any such notice within
the aforesaid time limit, Tenant's right to exercise any Extension Option shall
nevertheless continue until thirty (30) days after Landlord shall have given
Tenant notice of Landlord's election to terminate such option, and Tenant may
exercise such option at any time until the expiration of said thirty (30) day
period, but under no circumstances may Tenant exercise any such option during
the last sixty (60) days of the then current Initial Term or Extension Term. If
the Extension Options (or any of them) are duly exercised, the term of this
Lease shall be automatically extended for the applicable Extension Term, upon
all of the same terms, conditions and covenants as set forth in Exhibit "C",
without the requirement of any further instrument to evidence such extension.
3.2 Reversion to Landlord. On or before the last day of the Term, Tenant
---------------------
shall peaceably surrender and yield up to Landlord the Premises. Tenant shall
have the express right to remove and to allow any subtenants to remove any of
their trade fixtures and personal property; provided, however, that the Premises
shall be left in the condition existing on the Commencement Date ordinary wear
and tear excepted.
ARTICLE IV
----------
6
<PAGE>
RENT
4.1 Base Rent. Tenant covenants and agrees to pay Landlord at the above
---------
referenced address, or such other place as Landlord shall designate in writing,
Base Rent and all Florida Sales Taxes due under this Lease, in advance, without
demand, set off or deduction, except as expressly provided for herein, in equal
monthly installments, on the first day of each and every calendar month during
the Term from and after the Commencement Date, as is set forth on the Rent
Schedule attached as Exhibit "C" hereto. The parties acknowledge and agree that
-----------
the initial Base Rent is based on five dollars and twenty cents ($5.20) per
square foot of GLA per year; the Base Rent, as adjusted during the Initial Term,
is set forth in Exhibit "C" hereto. Within the first ninety (90) days after the
-----------
Commencement Date, Tenant may cause the Premises to be measured by a qualified
engineer or architect acceptable to Landlord and, if the GLA of the Premises as
properly calculated by such engineer or architect is less than 186,537 square
feet, then the Base Rent shall be adjusted accordingly. If Tenant does not cause
the Premises to be measured, pursuant to the foregoing, within the first ninety
90 days after the Commencement Date, then the Premises shall be deemed to
contain 186,537 square feet of GLA. Landlord covenants and agrees to make good
faith efforts to cause the Premises to contain 186,537 square feet of GLA.
4.2 Late Charges. If Tenant is delinquent in any monthly installment of
------------
Base Rent, Tenant shall pay to Landlord on demand a late charge equal to 5
percent of such delinquent sum. The provision for such late charge shall be in
addition to all of Landlord's other rights and remedies hereunder or at law and
shall not be construed as a penalty.
ARTICLE V
---------
TAXES
5.1 Real Estate Taxes
-----------------
(a) During each month of the Initial Term and any Extension Term(s), on
the same date that Base Rent is due, Tenant shall pay Landlord an amount equal
to 1/12 of the annual cost, as estimated by Landlord from time to time, of
Tenant's Share of real estate taxes and assessments for betterments and
improvements that are levied or assessed by any lawful authority
7
<PAGE>
on the Premises ("Real Estate Taxes"). Landlord shall pay all Real Estate Taxes
that are levied or assessed by any lawful authority on the Premises and
Landlord's other real property within the same tax parcel prior to the date same
become overdue. Landlord shall take the maximum benefit of any law allowing Real
Estate Taxes to be paid in installments, and in such event only the amount
actually paid by Landlord during the applicable tax year shall be included in
Real Estate Taxes for purposes of this Article. Landlord agrees to pay all Real
Estate Taxes prior to the last date that the same may be paid without penalty or
interest, or if a discount shall be available for early payment, prior to the
last day that such discount is available. Without cost to Tenant, Landlord shall
bear all interest, penalties, late charges and lost discount amounts incurred as
a result of Landlord's failure to timely pay any installment of Real Estate
Taxes. The Real Estate Taxes for any tax year shall mean such amounts as shall
be finally determined to be the Real Estate Taxes payable during such tax year
less any abatements, refunds or rebates made thereof. The parties shall make
appropriate adjustments to previous amounts received by Landlord from Tenant on
account of any abatements, refunds, rebates, or increases in Real Estate Taxes,
immediately following the determination of the amount of such abatements,
refunds, rebates, or increases. Prior to the Commencement Date, Landlord shall
pay all Real Estate Taxes before they become overdue.
(b) Real Estate Taxes to be paid by Tenant shall not include the following:
(i) income, intangible, franchise, capital stock, estate or inheritance taxes or
taxes substituted for or in lieu of the foregoing exclusions; (ii) any taxes or
any assessment for special improvements to the Land or the Building, including
but not limited to the widening of exterior roads, the installation of or hook
up to sewer lines, sanitary and storm drainage systems and other utility lines
and installations, provided that such assessment is made prior to the date
hereof and do not benefit Tenant; (iii) taxes gross receipts or revenues of
Landlord from the Premises or other portions of the Building, except for the
Florida Rent Sales Tax (which shall be paid by Tenant); or (iv) impact fees.
5.2 Proration of Taxes
------------------
(a) Tenant shall pay Landlord, within fifteen (15) days following
Landlord's written request and invoicing, for any amount by which the Tenant's
Share of Real Estate Taxes actually
8
<PAGE>
exceeds the sum previously paid by Tenant to Landlord for the payment of such
Real Estate Taxes. Said invoice shall be accompanied by a computation of the
amount payable.
(b) If the term of this Lease shall terminate on any date other than the
last day of a tax fiscal period, the amount payable by Tenant during the tax
fiscal period in which such termination occurs shall be prorated on the basis
which the number of days from the commencement of said tax fiscal period to and
including said termination date bears to the number of days in the fiscal
period. A similar proration shall be made for the tax fiscal period in which the
Commencement Date occurs.
(c) As used in this Article V, the term Tenant's "Share" shall mean a
fraction, the numerator of which shall be the floor area of the Premises and the
denominator of which shall be equal to the aggregate of the floor area of all
buildings on the tax parcel on which the Building is located. Tenant shall pay
the estimated Tenant's Share of Real Estate Taxes monthly, together with its
payments of estimate CAM Costs (hereinafter defined), with adjustments to be
made promptly after actual Real Estate Tax Costs are known.
(d) The GLA of the Building will be approximately 256,592 square feet and
(B) the GLA of the Park will be approximately 1,520,000 square feet, therefore,
Tenant's Share of the Building will be approximately is 72.70% and Tenant's
Share of the Park will be approximately 12.27%.
9
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ARTICLE VI
----------
COMMON AREAS
6.1 Definition. "Common Areas" (or "Common Area") shall mean all
----------
exterior/outdoor areas, space, installations and equipment on the Land [and
elsewhere in the business park (the "Park") of which the Land is a part, if the
Land is part of a larger business park] for the common use and benefit of the
tenants of the Park, their employees, agents, licensees, customers and other
invitees, including without limitation parking areas, exits, entrances, access
roads, driveways, sidewalks, retaining walls, loading platforms and ramps, and
landscaped areas, as such Common Areas are depicted in the Site Plan (which Site
Plan may be amended by Landlord from time to time). The parties acknowledge
that, at this time, there are no indoor common areas on the Land or elsewhere in
the Park. If the Land is not part of a larger business park, then the term
"Park" shall refer only to the Land. Landlord shall be responsible, at
Landlord's sole cost and expense, be responsible for the initial construction
and installation of the Common Areas in good and workmanlike manner and in
compliance with all governmental requirements.
6.2 Use of Common Areas. Landlord hereby grants to Tenant, its licensees,
-------------------
subtenants, concessionaires, successors and assigns, and its and their
employees, agents, licensees, customers, and invitees the non-exclusive right
and privilege to use the Common Areas during the term hereof and any extensions
of same, continuously and without interruption, in common with other tenants of
the Park. Landlord shall make no material change to the Common Areas that would
have a materially adverse impact on Tenant's operations.
6.3 Parking. Landlord shall maintain on the Land at least the minimum
-------
number of parking spaces required by applicable governmental rules, regulations
and ordinances without variance (other than variances granted prior to the date
hereof). Landlord shall provide all parking without the imposition of any
parking charge.
6.4 Operation and Maintenance. Landlord, as a component of CAM Costs of
-------------------------
which Tenant is responsible for Tenant's Share, agrees to be responsible for the
operation, maintenance, repair, and associated administration of the Common Area
in good
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condition and repair and in a clean condition, which responsibilities shall
include but not be limited to sweeping of the parking area and sidewalks;
arrangements for the limited removal of trash generated by the offices within
the Building and trash and obstructions caused by inclement weather, lighting of
the Common Area; retention of security personnel to the extent the Landlord and
Tenant reasonably agree such to be appropriate; limited fire protection; paving
of the parking area; and repair and maintenance of all Common Area improvements.
6.5 CAM Costs. Tenant shall be responsible to pay its CAM Share of all
---------
costs incurred by Landlord in operating and maintaining the Premises, the
Building, and the Common Area, which costs shall include, without limitation
those relating to management, administration, insurance, real estate taxes and
assessments, maintenance expenditures, etc. ("CAM Costs"). CAM Costs shall not
include any Capital Expenditure, except for the amortized portion of any Capital
Expenditure reasonably made for the general benefit of all tenants of the
Building, which amortization shall be made over the estimated actual useful life
of the improvement in question. As used herein, the term "Capital Expenditure"
shall mean those expenditures which in accordance with generally accepted
accounting principles are capitalized as opposed to being accounted for as
expenses. As used in this Article VI, the term "CAM Share" shall mean a
fraction, the numerator of which shall be the number of square feet of GLA
(which shall be measured from the outside of exterior walls and from the
midpoint of demising walls) in the Premises and the denominator of which shall
be equal to the aggregate of the GLA of all buildings then existing in the Park;
Tenant's CAM Share shall be published to Tenant periodically. CAM Costs shall be
billed monthly. Estimated CAM Costs for the first Lease Year shall be based on
Landlord's good faith estimate that Tenant's CAM Share of CAM Costs, together
with Tenant's Share of Real Estate Taxes, will total $1.20 per square foot of
GLA for the entire first Lease Year. Landlord has calculated said estimate in
good faith.
In addition to the foregoing, CAM Costs shall not include (i) expenses
incurred in leasing space, such as legal expenses, brokerage commissions or
advertising or promotional expenses, (ii) interest and amortization under
mortgages or any other secured or unsecured loan payable by Landlord, (iii)
expenses separately reimbursed by any other tenants of the Park
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(excluding reimbursements to Landlord for such tenants' prorata share of CAM
Costs), (iv) financing and refinancing costs, including fees paid by Landlord to
obtain financing or refinancing such as origination fees and brokerage
commissions, (v) non-cash depreciation, (vi) costs incurred in connection with
the enforcement of leases, including attorneys' fees or other costs and expenses
incurred in connection with summary proceedings to dispossess any other tenant
in the Park, (vii) any expenses associated with any special requirements of a
particular tenant other than Tenant, (viii) any costs attributable to the
original design or construction of the Premises, Building or Park (or any
portion thereof), (ix) any costs associated with Y2K computer (and related)
problems, (x) any Improvement except for a hereinafter defined Permitted
Expenditure, (xi) any costs, fines, interest, penalties, legal fees or other
expenses associated with violations by Landlord of any law, rule or other
governmental requirement or with respect to late payment for utilities, taxes or
any other service or product (except if caused by Tenant) or (xii) the cost of
maintaining, repairing or replacing the roof, foundation and/or structural walls
of the Premises (unless same have been damaged by Tenant's actions or
inactions), Building or any other Building in the Park. For the purposes of this
Lease, a "Permitted Expenditure" shall be Improvements made to the Building or
lift station which are (a) primarily for the purpose of reducing operating
expense costs or otherwise improving the operating efficiency of the Building or
(b) required to comply with (A) any laws, rules or regulations of any
governmental authority newly enacted after the date hereof or (B) any changes
after the date hereof in the interpretation or enforcement of the existing laws,
rules or regulations of any governmental authority. The cost of such
Improvements shall be amortized over a period of not less than the useful life
thereof and not more than ten (10) years and shall, at Landlord's option,
include interest at the lesser of (yy) ten percent (10%) per annum or (zz) two
percent over the prime rate of interest then in effect for NationsBank, N.A. The
portion of the annual amortized cost to be included in CAM Costs in any calendar
year with respect to a capital improvement which is intended to reduce expenses
or improve the operating efficiency of the Building shall equal such annual
amortized cost.
At least sixty (60) days prior to the commencement of the second Lease Year
and every Lease Year thereafter, Landlord shall deliver to Tenant a written
estimate of Landlord's
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<PAGE>
projected CAM Costs for the forthcoming Lease Year. Within ninety (90) days
after the expiration of each calendar year Landlord shall furnish Tenant a
certified statement showing the CAM Costs broken down in reasonable detail,
showing the items included therein, and the manner of the computation of
Tenant's CAM Share for such payment and the payments made by Tenant with respect
to such year. If Tenant's aggregate payments for such costs with respect to such
year are greater than Tenant's CAM Share of such costs, Tenant shall receive a
credit for the excess against Base Rent and other payments from Tenant next
becoming due to Landlord (or refunded to Tenant, if the Term has expired); if
said payments are less than said CAM Share, Tenant shall pay to Landlord the
difference within thirty (30) days thereafter.
Landlord shall retain its records relating to the CAM Costs at Landlord's
principal office or that of the management company managing the Park, and upon
reasonable prior notice to Landlord and the management company, Tenant shall
have the right to inspect all of Landlord's records relating to such costs.
Appropriate adjustments shall be made for errors in the computation of such
costs revealed by such audit or inspection. If any audit by Tenant indicates an
overcharge in the amount of Tenant's CAM Share by more than five percent (5%),
the reasonable cost of such audit shall be paid on demand by Landlord to Tenant;
otherwise the expenses of Tenant's audit shall be borne by Tenant and Tenant
must reimburse Landlord for the costs charged by the management company with
respect to such audit. Landlord shall retain its CAM Costs records for at least
thirty-six (36) months after the expiration of each calendar year.
ARTICLE VII
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UTILITIES
7.1 Utilities. Landlord shall design the Building pursuant to the plans and
---------
specifications such that the applicable utility companies may provide
electricity, gas, telephone, sewerage and other utilities to the Premises, in
sufficient quantities to serve Tenant's needs for the use contemplated
hereunder. Landlord shall install, at Landlord's expense, all utility meters
necessary for measuring the consumption of utilities serving the Premises and
Tenant shall pay the applicable utility companies or governmental agencies for
all such utilities consumed on the Premises.
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ARTICLE VIII
------------
USE AND ASSIGNMENT
8.1 Use. The Premises may be used for warehousing, distribution, light
---
industrial uses and uses incidental thereto and, with Landlord's consent (which
shall not be unreasonably withheld or delayed), any other lawful purpose.
8.2 Assignment and Subletting. Tenant shall have the right to assign this
-------------------------
Lease, or to sublet all or any portion of the Premises to any party controlling,
controlled by or under common control with Tenant, any entity with which Tenant
is merged or consolidated or to any party that purchases all or substantially
all of Tenant's assets in the geographical region where the Premises are
located, provided that subsequent to such subletting or assignment Tenant
remains liable for the payment and performance of Tenant's obligations under
this Lease and, in the case of any assignment, the assignee assumes Tenant's
obligations under this Lease. Any other assignment or subletting shall require
Landlord's prior written consent, which consent shall not be unreasonably
withheld or delayed. Notwithstanding anything herein to the contrary, Tenant
shall not assign or sublet any, or all, of the Premises to any tenant (or
affiliate thereof) leasing space in the Park or to any entity (or affiliate
thereof) with which Landlord has discussed the prospect of leasing space in the
Park, unless Tenant obtains Landlord's prior written consent which shall be at
Landlord's sole and absolute discretion. No subletting or assignment shall
(i) release Tenant from liability hereunder or (ii) release the guarantor of
Tenant's performance under this Lease from liability under the applicable
guaranty agreement.
ARTICLE IX
----------
MAINTENANCE; ALTERATIONS; FIXTURES
9.1 Landlord's Repairs. In addition to Landlord's obligations as set forth
------------------
in Articles II and VI hereof, Landlord shall maintain in good repair the walls,
foundations, roof, gutters, downspouts, exterior and all structural portions of
the Building, and all plumbing, electrical, sewage and heating, ventilating and
air conditioning ("HVAC") lines and ducts in or passing through the Premises
that serve other tenants in the Building or that are located outside the
Premises but that serve the Premises. Landlord shall in addition make such
repairs,
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replacements or modifications of building structure or component systems as are
required by law as of the Commencement Date, regulation or ordinance pertaining
to the Premises which are not due or attributable to Tenant's specific manner
of operating in the Premises. In making any repairs hereunder, Landlord shall
not unreasonably interfere with Tenant's normal operations in the Premises.
9.2 Tenant's Repairs. Subject to the provisions of Section 9.1
----------------
hereinabove and Landlord's warranty and representation that the Premises and all
the systems therein will be in good condition and repair as of the Commencement
Date, Tenant shall be responsible for interior, non-structural repairs to the
Premises including, without limitation, the repair of component systems serving
only the Premises, entries, doors, windows, fire sprinklers, fire protection
systems, etc., unless any such repairs or replacements are necessitated by
Landlord's failure to promptly perform its obligations hereunder, by damage
caused by the wrongful acts or negligence of Landlord, its employees, agents and
contractors, or by damage by fire or other casualty for which Landlord is
responsible for repairing pursuant to this Lease. In light of the substantial
costs of replacing any portions of the Premises' HVAC system, the parties hereby
agree that in the event such system requires any replacement during the last
five (5) years of the Initial Term, Landlord shall reimburse Tenant on the
expiration or earlier termination of this Lease for the unamortized portion of
such expense based on the date of installation of such equipment and the useful
life of such equipment, provided that such equipment is not user specific or
that such equipment is not replaced as a result of damage caused by Tenant's
actions or inactions.
9.3 Alterations. Tenant shall have the right to make such alterations to
-----------
the Premises as Tenant shall from time to time deem necessary for the operation
of Tenant's business provided that (i) Tenant shall first obtain Landlord's
prior written consent, (ii) Tenant shall perform such work at Tenant's sole
expense, (iii) such alterations shall not impair the structural integrity or
diminish the value of the Premises, and (iv) Tenant provides Landlord with AS
Built plans for such alterations and agrees to remove same, at Landlord's
request, upon expiration or termination of this Lease. Landlord shall execute
all necessary instruments required to obtain licenses and permits to make such
alterations from the applicable governmental authorities. All
15
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alterations, additions and improvements made by Tenant to the Premises
("betterments and improvements") remaining in the Premises after the expiration
or other termination hereof shall become the property of Landlord upon the
termination of this Lease without any compensation to Tenant and shall be
surrendered at such time as a part of the Premises.
9.4 Liens. Each party hereto shall promptly pay when due the entire cost
-----
of all work done by it to the Premises and shall keep the Premises free of liens
for labor or materials. Should mechanics', materialmen's or other liens be filed
against the Premises by reason of the acts of either party hereto, such party
shall cause the lien to be canceled and discharged of record by bond or
otherwise within thirty (30) days of receiving actual notice of such lien.
9.5 Trade Fixtures. Any trade fixtures, furniture and equipment that
--------------
Tenant installs in the Premises at its expense prior to or during the Term
hereof shall remain Tenant's property, and may be removed by Tenant, as long as
Tenant repairs any damage to the Premises caused by such removal and Tenant is
not in default under this Lease.
ARTICLE X
---------
INSURANCE
10.1 Landlord's Insurance. Landlord shall at all times maintain general
--------------------
commercial liability insurance covering the Park, including but not limited to
the Common Areas thereof against claims for personal injury and damage to
property naming Tenant as an additional insured under a policy, with minimum
limits of $1,000,000 for personal injury or death per person, $5,000,000 per
occurrence and not less than $500,000 for property damage or a single limit
policy in the minimum amount of $5,000,000. In addition, Landlord shall carry
and maintain all-risk (Special Form) property insurance, covering the Building
for the full replacement cost thereof. Landlord shall also maintain Workers'
Compensation or similar insurance to the extent required by law. Throughout
Landlord's construction and thereafter throughout the term of this Lease,
Landlord shall maintain liability insurance in amounts reasonably acceptable to
Tenant.
10.2 Tenant's Insurance. Tenant shall maintain a policy of general
------------------
commercial liability covering the Premises with minimum
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limits of $1,000,000 for personal injury or death per person, $5,000,000 per
occurrence and not less than $500,000 for property damage or a single limit
policy in the minimum amount of $5,000,000. Tenant shall keep in force Workers'
Compensation or similar insurance to the extent required by law. Notwithstanding
anything to the contrary contained herein, as long as Tenant's net worth (or the
net worth of any party guaranteeing Tenant's obligations under this Section
10.2) is at least $100,000,000.00, Tenant shall have the right to self insure
part or all of any of the aforesaid insurance coverages in its sole discretion.
In the event that Tenant elects to self insure all or any part of any risk that
would be insured under the policies and limits described above, and an event
occurs where insurance proceeds would have been available but for the election
to self insure, Tenant shall make funds available to the same extent that they
would have been available had such insurance policy been carried by a third
party insurance company; in addition, Tenant shall indemnify Landlord and hold
Landlord harmless from any losses attributed to Tenant's failure to timely make
all such funds available. Notwithstanding the foregoing provisions permitting
Tenant's self insurance, in the event that, at any time, Landlord's lender(s)
and/or the Park insurance provider(s) require that Tenant obtain the requisite
insurance from a third party insurance company, Tenant shall do so.
10.3 Insurance Certificates. All of the foregoing insurance policies
----------------------
referred to or described in Sections 10.1 and 10.2 above shall be written with
companies licensed to do business in the state in which the Premises are located
with a financial rating of VIII or better and a policyholder's rating of A- or
better in the latest edition of Best's Rating Guide on Property and Casualty
--------------------------------------------
Insurance Companies and shall provide that the other party hereto shall be given
- -------------------
a minimum of ten (10) days' written notice by any such insurance company prior
to the cancellation, termination or alteration of the terms or limits of such
coverage. Each party shall deliver to the other party hereto the foregoing
insurance policies or certificates thereof at or prior to the date that same are
required to be in effect and evidence of all renewals or replacements of same
not less than ten (10) days prior to the expiration date of such policies. All
such policies may be maintained under a blanket insurance policy of Landlord or
Tenant.
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10.4 Mutual Release and Waiver of Subrogation. Landlord and Tenant hereby
----------------------------------------
release each other and anyone claiming through or under the other by way of
subrogation or otherwise from any and all liability for any loss of or damage to
property, whether caused by the negligence or fault of the other party to the
extent of the property insurance required to be carried by the waiving party
hereunder. In addition, Landlord and Tenant shall cause each insurance policy
carried by them insuring any of the improvements on the Land or the contents
thereof, to be written to provide that the insurer waives all rights of recovery
by way of subrogation against the other party hereto (and any mortgagee of such
party) in connection with any loss or damage covered by the policy. If no
responsible and qualified insurer will provide a waiver of subrogation without
extra charge or premium, then the insuring party shall inform the other party
that such additional charge or premium is required and said other party may
elect to (a) pay such extra charge or premium or (b) waive the requirement for
the waiver of subrogation (in which case the waivers of claim set forth herein
shall be ineffective to the extent that same would void, invalidate or otherwise
vitiate any insurance coverage). In case such waiver cannot be obtained, even at
an additional cost, then item (b) in the immediately preceding sentence shall
become effective. Any liability insurance coverage carried by either party
hereto shall name the other party and, upon request, any lender of such other
party as additional insured thereunder and each party hereby waives claims
arising from the other party's negligence to the extent of such insurance
coverage.
10.5 Mutual Indemnification. Tenant and Landlord agree to indemnify and
----------------------
hold each other harmless from and against any and all claims, damages or causes
of action for damages brought on account of injury to any person or persons or
property, or loss of life, arising out of (i) the failure to comply with its
obligations hereunder by Landlord or Tenant, respectively, or (ii) the use,
operation or maintenance of the Premises by Tenant or by the use, operation or
maintenance of the remainder of the Building and other improvements on the Land
by Landlord, except for matters arising from the gross negligence or willful
misconduct of the party seeking indemnification. Notwithstanding any other
provisions set forth herein, the parties hereby agree that in the event of any
damage to a party, including all personal and property damages and losses to a
party's employees or invitees, each party shall resort to any and all insurance
coverage available prior to asserting any
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claim or demand against the other party or its assets. No insurer is meant to be
a third party or other beneficiary of any provision contained in this Lease.
ARTICLE XI
----------
DAMAGE OR DESTRUCTION
11.1 Damage and Destruction. Except as otherwise provided herein, if the
----------------------
Premises are damaged by fire or other casualty, the damage shall be promptly
repaired by Landlord to the extent of the insurance proceeds available therefor,
plus any deductible maintained with respect to Landlord's property insurance.
Until repairs to the Premises are completed by Landlord, rent and all other
amounts payable by Tenant hereunder shall be abated in proportion to the part of
the Premises, if any, which is unusable by Tenant in the conduct of its
business. If: (a) the Premises is damaged to the extent of more than fifty
percent (50%) of the replacement cost thereof; or (b) the Park or the Building
is damaged by fire or other insured casualty to the extent of thirty-five
percent (35%) or more of the replacement cost thereof; or (c) any damage to the
Premises cannot be repaired within one hundred twenty (120) days of the date of
such damage; or (d) the Premises is materially damaged or destroyed during the
last eighteen (18) months of the term hereof; then Landlord may terminate this
Lease by written notice to Tenant given within thirty (30) days after the
occurrence of the casualty, time being of the essence, subject to Tenant's right
to exercise an Extension Option as to item (d). Landlord's repair of the
Premises shall not include any of Tenant's trade fixtures or other personal
property or any of Tenant's betterments or improvements to the Premises.
If (a) the Premises is materially damaged or destroyed during the last
eighteen (18) months of the term hereof or (b) any damage to the Premises cannot
be repaired within one hundred twenty (120) days of the date of such damage;
then Landlord may terminate this Lease by written notice to Tenant, given within
thirty (30) days after the occurrence of the casualty, unless Tenant exercises
an Extension Option(s) the term of which is no less than 80% of the economic
life of the tenant improvements to be constructed. In addition, in the event
that the Premises is
19
<PAGE>
materially damaged or destroyed during the last eighteen (18) months of the term
hereof and such damage cannot be repaired within one hundred twenty (120) days
of the date of such damage; then Tenant may terminate this Lease by written
notice to Landlord, given within thirty (30) days after the occurrence of the
casualty, provided, that (i) upon expiration of said one hundred twenty day
period and during the delay period, Landlord is unable to provide Tenant with
additional temporary space in the Park of approximately the same size as the
portion of the Premises that are being restored and (ii) Landlord is unable to
complete the restoration within a reasonable period of time following said one
hundred twenty day period.
11.3 Termination. In the event of any termination of this Lease as the
-----------
result of the provisions of this ARTICLE XI, the parties, effective as of such
termination, shall be released, each to the other, from all liability and
obligations thereafter arising under this Lease.
ARTICLE XII
-----------
EMINENT DOMAIN
12.1 Condemnation. If after the execution of this Lease and prior to the
------------
expiration of the term hereof, the whole (or substantially the whole) of the
Premises shall be taken under power of eminent domain by any public or private
authority, or conveyed by Landlord to said authority in lieu of such taking,
then this Lease and the term hereof shall cease and terminate as of the date of
such taking, subject, however, to the right of Tenant, at its election, to
continue to occupy the Premises, subject to the terms and provisions of this
Lease, for all or such part, as Tenant may determine, of the period between the
date of such taking and the date when possession of the Premises shall be taken
by the taking authority and any unearned rent or other charges, if any, paid in
advance, shall be refunded to Tenant.
12.2 Termination Right. If, after the execution of this Lease and prior to
-----------------
the expiration of the term hereof, any taking under the power of eminent domain
by a public or private authority or any conveyance by Landlord in lieu thereof,
shall result in a taking of more than 20% of the total square footage of the
Premises and Landlord is unable to deliver alternate space within the Park
similar in size to the portion of the Premises taken, then Tenant may, at its
election, terminate this
20
<PAGE>
Lease by giving Landlord notice of the exercise of Tenant's election within
ninety (90) days after the date when possession of the Premises shall be taken
by the appropriating authority, time being of the essence
12.3 Rent Abatement. In the event of a taking in respect of which Tenant
--------------
shall not have the right to elect to terminate this Lease or, having such right,
shall not elect to terminate this Lease, this Lease and the term thereof shall
continue in full force and effect and Tenant shall be entitled to a
proportionate reduction of the rent and any other charges payable by Tenant
hereunder, based on the square footage of the Premises taken under the power of
eminent and the total square footage of the Premises prior to such taking.
12.4 Award. All compensation awarded for any taking, whether for the whole
-----
or a portion of the Premises, shall belong to Landlord; provided that Tenant
shall be entitled to any award made, whether to Landlord or to Tenant, for the
unamortized cost of Tenant's betterments and improvements installed at Tenant's
Cost, moving expenses and the value of Tenant's trade fixtures and further
provided that Tenant may apply for and receive an award for the loss of Tenant's
leasehold estate so long as such award in no way diminishes any award to
Landlord or to any mortgagee of Landlord with respect to Landlord's remainder.
12.5 Termination. In the event of any termination of this Lease as the
-----------
result of the provisions of this ARTICLE XII, the parties, effective as of such
termination, shall be released, each to the other, from all liability and
obligations thereafter arising under this Lease.
ARTICLE XIII
------------
ENVIRONMENTAL MATTERS
13.1 Environmental Remediation. To the best of Landlord's knowledge,
-------------------------
Landlord shall deliver the Premises to Tenant on the Commencement Date free of
all Hazardous Substances (hereinafter defined) to the extent necessary to be in
compliance with all environmental and other laws related to health and safety
and so as to allow Tenant to operate in the Premises for its intended use
hereunder without impairment, interruption, interference, liability or
additional cost or expense with respect to any Hazardous Substance.
21
<PAGE>
"Hazardous Substances" for purposes of this Lease shall be interpreted
broadly to include, but not be limited to, any material or substance that is
defined or classified under federal, state, or local laws as: (a) a "hazardous
substance" pursuant to section 101 of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. (S)1321(14), section 311 of the
Federal Water Pollution Control Act, 33 U.S.C. (S)1321, as now or hereafter
amended; (b) a "hazardous waste" pursuant to section 1004 or section 3001 of the
Resource Conservation and Recovery Act, 42 U.S.C. (S)6903, 6921, as now or
hereafter amended; (c) a toxic pollutant under section 307(a)(1) of the Federal
Water Pollution Control Act, 33 U.S.C. (S)1317(a)(1); (d) a "hazardous air
pollutant" under section 112 of the Clean Air Act, 42 U.S.C. (S)7412, as now or
hereafter amended; (e) a "hazardous material" under the Hazardous Materials
Transportation Uniform Safety Act of 1990, 49 U.S.C. App. (S)1802(4), as now or
hereafter amended; (f) toxic or hazardous pursuant to regulations promulgated
now or hereafter under the aforementioned laws; or (g) presenting a risk to
human health or the environment under other applicable federal, state or local
laws, ordinances, or regulations, as now or as may be passed or promulgated in
the future (all of the foregoing laws, ordinances, regulations and other
governmental strictures and guidelines pertaining to the environment, health and
safety being herein sometimes referred to as the "Environmental Requirements").
"Hazardous Substances" specifically include, but are not limited to, asbestos,
polychlorinated biphenyls ("PCBs"), radioactive substances, petroleum and
petroleum-based derivatives, hydrocarbons and urea formaldehyde.
13.2 Tenant Covenant and Indemnity. Tenant shall not cause or permit the
-----------------------------
storage, use, escape, disposal or release of Hazardous Substances in any manner
not in compliance with the Environmental Requirements; provided, however, that
nothing herein shall prevent Hazardous Substances to be brought onto the
Premises in the ordinary course of Tenant's business, as long as such presence
is in compliance with the Environmental Requirements. Tenant shall indemnify and
hold harmless Landlord against and from any liability, claim of liability,
claims, suits, costs, expenses, causes of action, personal liability and
property damage (including without limitation Landlord's attorney's fees)
arising out of a breach by Tenant of its covenant in the preceding sentence. The
foregoing covenants and indemnities shall survive the expiration or earlier
termination of this Lease; provided, however, that Tenant shall not be
22
<PAGE>
required to indemnify Landlord from any matter arising from Landlord's gross
negligence or willful misconduct.
13.3 Landlord Covenant and Indemnity. Landlord shall not cause or permit
-------------------------------
the storage, use, escape, disposal or release of Hazardous Substances in, on or
with respect to the Land in any manner not in compliance with the Environmental
Requirements provided, however, that nothing herein shall prevent Hazardous
Substances to be brought onto the Land in the ordinary course of Landlord's
business or the businesses of Landlord's other Tenants, as long as such presence
is in compliance with the Environmental Requirements. Landlord shall indemnify
and hold Tenant harmless against and from any liability, claim of liability,
claims, suits, costs, expenses, causes of action, personal liability and
property damage (including without limitation reasonable attorney's fees)
arising out of a breach by Landlord of its covenant in the preceding sentence.
Further, Landlord shall indemnify and hold Tenant harmless against and from any
liability, claim of liability, claims, suits, costs, expenses, causes of action,
personal liability and property damage (including without limitation reasonable
attorney's fees) arising out of a breach by Landlord of its representations,
warranties and covenants in Section 13.1 above. The foregoing covenants and
indemnities in this Section 13.3 shall survive the expiration or earlier
termination of this Lease; provided, however, that Landlord shall not be
required to indemnify Tenant from any matter arising from Tenant's gross
negligence or willful misconduct. Landlord shall not be liable to Tenant under
this Section 13.3 with respect to the acts of other tenants of Landlord, unless
same results from Landlord's gross negligence or willful misconduct; provided,
however, that if any Hazardous Substances brought onto the Land by such other
tenants materially adversely affects the ability to use the Premises for the use
contemplated hereunder, then Tenant may terminate this Lease by written notice
to Landlord, unless Landlord agrees to promptly abate such interference.
ARTICLE XIV
-----------
DEFAULT
14.1 Remedies Upon Tenant's Default. In the event Tenant shall at any time
------------------------------
be in default in the payment of rent or other charges herein required to be paid
by Tenant or in the observance or performance of any of the other covenants and
23
<PAGE>
agreements required to be performed and observed by Tenant hereunder and any
such default shall continue for a period of ten (10) days following the date
such payment was due for monetary obligations and thirty (30) days after written
notice to Tenant for all other obligations (or if such default is incapable of
being cured in a reasonable manner within thirty (30) days then if Tenant has
not commenced to cure the same within said thirty (30) day period and thereafter
diligently prosecutes the same to completion), then Landlord shall be entitled
at its election, to exercise concurrently or successively, any one or more of
the following rights:
(a) to bring suit for the collection of the rent or other amounts for which
Tenant may be in default, or for the performance of any other covenant or
agreement devolving upon Tenant, all without entering into possession or
terminating this Lease;
(b) to re-enter the Premises with process of law and take possession
thereof, without thereby terminating this Lease, and thereupon Landlord may
expel all persons and remove all property therefrom, without becoming liable
to prosecution therefor, and relet the Premises and receive the rent
therefrom, applying the same first to the payment of the reasonable expenses
of such re-entry and the reasonable cost of such reletting, and then to the
payment of the monthly rental accruing hereunder, the balance, if any, to be
paid to Tenant. Tenant shall remain liable for any deficiency after such
application.
(c) to terminate this Lease, re-enter the Premises and take possession
thereof. In the event Landlord shall elect to terminate this Lease, as
aforesaid, all rights and obligations of Landlord, and of any permitted
successors or assigns, shall cease and terminate, except that Landlord shall
have and retain full right to sue for and collect all rents and other amounts
for the payment of which Tenant shall then be in default, and all damages to
Landlord by reason of any such breach, and Tenant shall surrender and deliver
up the Premises to Landlord and upon any default by Tenant in so doing,
Landlord shall have the right to recover possession by summary proceedings or
otherwise and to apply for the appointment of a receiver and for other
ancillary relief in such action, and Landlord shall again
24
<PAGE>
have and enjoy the Premises, fully and completely, as if this Lease had never
been made.
In addition to Landlord's other remedies hereunder, if Tenant defaults in
the performance of any obligation imposed on it by this Lease and does not cure
such default within twenty (20) days after written notice from Landlord
specifying the default (or does not within said period commence and diligently
proceed to cure such default), Landlord, without waiver of or prejudice to any
other right or remedy it may have, shall have the right, at any time thereafter,
to cure such default for the account of the Tenant, and Tenant shall reimburse
Landlord upon invoice for any amount paid and any expense or contractual
liability so incurred. In the event of emergencies, or where necessary to
prevent injury to persons or damage to property or to mitigate damages, Landlord
may cure a default by Tenant before the expiration of the waiting period, but
after giving such written or oral notice to Tenant as is practical under all of
the circumstances. If Tenant fails to reimburse Landlord within ten (10) days
after receipt of invoice, then Tenant shall also pay to Landlord interest
thereon at the hereinafter defined Default Rate from date of disbursement.
14.2 Remedies Upon Landlord's Default. In the event that Landlord shall at
--------------------------------
any time be in default in the observance or performance of any of the covenants
and agreements required to be performed and observed by Landlord hereunder and
any such default shall continue for a period of thirty (30) calendar days after
written notice to Landlord (or if such default is incapable of being cured in a
reasonable manner within thirty (30) calendar days then if Landlord has not
commenced to cure the same within said thirty (30) calendar day period and
thereafter diligently prosecutes the same to completion) and Landlord shall not
thereafter cure such default, Tenant shall be entitled at its election, to bring
suit for the collection of any amounts for which Landlord may be in default, or
for the performance of any other covenant or agreement devolving upon Landlord,
in addition to all remedies otherwise provided in this Lease and otherwise
available in law or equity under the laws of the United States or the State or
Commonwealth in which the Premises are located.
In addition to all of Tenant's other remedies hereunder, if Landlord
defaults in the performance of any obligation imposed on it by this Lease
pertaining exclusively to the Premises and
25
<PAGE>
not to any other part of the Park, and does not cure such default within twenty
(20) days after written notice from Tenant specifying the default (or does not
within said period commence and diligently proceed to cure such default),
Tenant, without waiver of or prejudice to any other right or remedy it may have,
shall have the right, at any time thereafter, to cure such default for the
account of the Landlord, and Landlord shall reimburse Tenant upon invoice for
any amount paid and any expense or contractual liability so incurred. If
Landlord fails to reimburse Tenant within ten (10) days after invoice, then
Tenant shall have the right to offset the amount due thereunder, together with
interest at the Default Rate (as defined in Section 14.3 hereinbelow) from the
date of disbursement against all rent and other charges due from Tenant to
Landlord under this Lease until Tenant has been completely reimbursed for its
expenses. In the event of emergencies, or where necessary to prevent injury to
persons or damage to property or to mitigate damages, Tenant may cure a default
by Landlord before the expiration of the waiting period, but after giving such
written or oral notice to Landlord as is practical under all of the
circumstances.
14.3 Attorneys' Fees; Remedies. In the event that either Landlord or
-------------------------
Tenant commences any suit for the collection of any amounts for which the other
may be in default or for the performance of any other covenant or agreement
hereunder, the other party shall pay all reasonable attorneys' fees and other
expenses incurred by the prevailing party enforcing such obligations and/or
collecting such amounts, plus interest thereon at the highest legal rate not to
exceed eighteen (18%) percent per annum (the "Default Rate"). All remedies of
Landlord and/or Tenant herein created or remedies otherwise existing at law or
equity are cumulative and the exercise of one or more rights or remedies shall
not be taken to exclude or waive the right to the exercise of any other. All
such rights and remedies may be exercised and enforced concurrently and whenever
and as often as Landlord and/or Tenant shall, as applicable, deem necessary. In
addition, Tenant shall be responsible for all reasonable attorneys' fees and
other expenses incurred by Landlord in enforcing or seeking to enforce this
Lease as a result of a default hereunder by Tenant.
26
<PAGE>
ARTICLE XV
----------
QUIET ENJOYMENT; LANDLORD'S AND TENANT'S REPRESENTATIONS AND WARRANTIES
15.1 Covenants and Warranties. Landlord covenants and warrants that
------------------------
Landlord has good right and full power to let and lease the Premises and to
enter into the agreements contained herein. Landlord agrees that, if and as long
as Tenant is not in default after the applicable grace periods and any notice
required under the terms hereof, Tenant shall quietly and peaceably hold,
possess and enjoy the Premises for the full term of this Lease without any
hindrance or molestation by Landlord or its agents or employees, and Landlord
shall defend the use and occupancy of the same by Tenant against the lawful
claims of all persons whomsoever, except with respect to such matters of title
as affect the Premises as of the date hereof, pursuant to the title search
attached hereto as Exhibit "D" (the "Permitted Exceptions"). Landlord shall
-----------
execute and deliver such affidavits, certificates and other documents as may be
reasonably requested by Tenant or Tenant's title insurance company to permit
Tenant to obtain a title policy issued by the Title Company insuring Tenant's
leasehold interest on the Premises in an amount reasonably satisfactory to
Tenant, subject only to the Permitted Exceptions. Landlord covenants, warrants
and represents that such matters of title, either individually or in the
aggregate, do not and shall not materially interfere with Tenant's use of the
Premises contemplated hereunder.
15.2 Landlord's Representations and Warranties. Landlord makes the
-----------------------------------------
following representations, warranties and covenants to Tenant:
(a) Landlord has complete and full authority to execute this Lease subject
to the provisions hereof.
(b) To Landlord's knowledge and belief, neither the entering into of this
Lease nor the consummation of the transaction contemplated hereby will
constitute or result in a violation or breach by Landlord of any judgment,
order, writ, injunction or decree issued against or imposed upon it, or will
result in a violation of any applicable law, order, rule or regulation of any
governmental authority.
27
<PAGE>
(c) Landlord has no knowledge of, nor has Landlord received any notice of,
any actual or threatened action, litigation, or proceeding by any
organization, person, individual or governmental agency (including
governmental actions under condemnation authority or proceedings similar
thereto) against the Land, the Building or Landlord, nor has any such
organization, person, individual or governmental agency communicated to
Landlord anything which Landlord believes to be a threat of any such action,
litigation or proceeding.
(d) The parties executing this Lease on behalf of Landlord have the power
and authority to make the provisions hereof the legal, valid and binding
obligations of Landlord.
15.3 Tenant's Representations and Warranties. Tenant makes the following
---------------------------------------
representations, warranties and covenants to Landlord:
(a) Tenant has complete and full authority to execute this Lease subject to
the provisions hereof.
(b) To Tenant's knowledge and belief, neither the entering into of this
Lease nor the consummation of the transaction contemplated hereby will
constitute or result in a violation or breach by Tenant of any judgment,
order, writ, injunction or decree issued against or imposed upon it, or will
result in a violation of any applicable law, order, rule or regulation of any
governmental authority.
(c) The parties executing this Lease on behalf of Tenant have the power and
authority to make the provisions hereof the legal, valid and binding
obligations of Tenant.
28
<PAGE>
ARTICLE XVI
-----------
SUBORDINATION
16.1 Subordination and Attornment. This Lease shall be subordinate to the
----------------------------
lien of any present or future mortgage upon the Premises; on the condition,
however, that the holder of any present or future mortgage upon the Premises
(the "Mortgagee") shall enter into a subordination, non-disturbance and
attornment agreement ("SNDA") with Tenant, on Mortgagee's form of SNDA
agreement, providing that in the event of foreclosure or other action or
exercise of rights taken under the mortgage by Mortgagee, this Lease and all of
the rights of Tenant hereunder shall not be disturbed, but shall continue in
full force and effect. As used herein, "mortgage" shall include mortgages, deeds
of trust, deeds to secure debt or other similar financing instruments. Landlord
shall provide Tenant with the SNDA for any mortgage now affecting the Premises
prior to the Commencement Date.
ARTICLE XVII
------------
TRANSFERS BY AND LIABILITY OF LANDLORD
17.1 Transfers of Landlord's Interest. No transfer or sale of Landlord's
--------------------------------
interest in the Premises or hereunder shall release Landlord from any of its
obligations or duties hereunder prior thereto. Notwithstanding the foregoing,
Landlord shall be released of any ongoing obligations hereunder from and after
the date of such transfer upon the assumption of all such obligations and duties
by the transferee of Landlord.
17.2 Landlord's Liability. Landlord's liability for its obligations
--------------------
hereunder with respect to any monetary payment shall be limited to Landlord's
interest in the Park and the Building and other buildings and improvements
thereon, including without limitation the rents, insurance proceeds, sales
proceeds and condemnation awards therefrom.
ARTICLE XVIII
-------------
MISCELLANEOUS
18.1 Holding Over. In the event of Tenant's continued occupancy of the
------------
Premises after the expiration of the term of this Lease or any renewal or
extension thereof, or any earlier termination provided or permitted by this
Lease, with the
29
<PAGE>
consent of Landlord such tenancy shall be from month-to-month at double the Base
Rent in effect on the termination date, computed on a monthly basis for each
month or part thereof during such holding over, and such continued occupancy
shall not defeat Landlord's right to possession of the Premises. All other
covenants, provisions, obligations and conditions of this Lease shall remain in
full force and effect during such month-to-month tenancy, except that the legal
rights of the parties shall be governed by the principles of a month-to-month
tenancy, including without limitation termination or change in rent upon thirty
(30) days notice.
18.2 Non-Waiver of Default. No acquiescence by either party to any default
---------------------
by the other party hereunder shall operate as a waiver of its rights with
respect to any other breach or default, whether of the same or any other
covenant or condition.
18.3 Recording. Neither this Lease nor any memorandum thereof may be
---------
recorded in the public records of Broward County, Florida.
18.4 Notice. Any notice or consent required to be given by or on behalf of
------
any party hereto to any other party shall be in writing and sent by facsimile
with written confirmation of transmittal, mailed by registered or certified
mail/return receipt requested, or sent by air courier or expedited mail service
or personal delivery, addressed as follows:
If to Tenant: Aladdin Manufacturing Corporation
160 South Industrial Boulevard
Calhoun, Georgia 30701
Att: Salvatore J. Perillo, Esq.
Facsimile: 1-706-624-2483
With a copy to: Robert Adrian, Regional Manager
Aladdin Manufacturing Corporation
1320 NW 163rd Street
Miami, Florida 33169
Facsimile: (305) 620-7341
If to Landlord: Seneca G&H, L.L.C.
2901 SW 8th Street
30
<PAGE>
Suite 204
Miami, Florida 33135
Attention: Jose R. Boschetti and
Charles R. Abele, Jr.
Facsimile: (305) 541-1314
With a copy to: Ricardo L. Fraga, Esq.
Greenberg Traurig, P.A.
1221 Brickell Avenue
Suite 2100
Miami, Florida 33131
Facsimile: (305) 579-0717
or at such other address as may be specified from time to time in writing. All
such notices hereunder shall be deemed to have been given on the date of
delivery or the date marked on the return receipt unless delivery is refused or
cannot be made, in which case the date of postmark shall be deemed the date
notice has been given.
18.5 Successors and Assigns. All covenants, promises, conditions,
----------------------
representations, and agreements herein contained shall be binding upon, apply,
and inure to the parties hereto and their respective heirs, executors,
administrators, successors, and permitted assigns.
18.6 Time is of the Essence. Time is of the essence hereof.
----------------------
18.7 Partial Invalidity. If any provision of this Lease or the application
------------------
thereof to any person or circumstance shall to any extent be held invalid, then
the remainder of this Lease or the application of such provision to persons or
circumstances other than those as to which it is held invalid shall not be
affected thereby, and each provision of this Lease shall be valid and enforced
to the fullest extent permitted by law.
18.8 Interpretation. In interpreting this Lease in its entirety, the
--------------
printed provisions of this Lease and any additions written or typed thereon
shall be given equal weight, and there shall be no inference, by operation of
law or otherwise, that any provision of this Lease shall be construed against
either party hereto. This Lease constitutes the complete agreement of Landlord
and Tenant with respect to the subject matter hereof. No representations,
inducements, promises or agreements, oral or
31
<PAGE>
written, have been made by Landlord or Tenant, or anyone acting on behalf of
Landlord or Tenant, which are not contained herein, and any prior agreements,
promises, negotiations, or representations are superseded by this Lease. This
Lease may not be amended except by an instrument in writing signed by both
parties hereto.
18.9 Headings, Captions and References. The section captions contained in
---------------------------------
this Lease are for convenience only and do not in any way limit or amplify any
term or provision hereof. The use of the terms "hereof," "hereunder" and
"herein" shall refer to this Lease as a whole, inclusive of the Exhibits
(including the Agreement), except when noted otherwise. The use of the masculine
or neuter genders herein shall include the masculine, feminine and neuter
genders and the singular form shall include the plural when the context so
requires.
18.10 Brokerage Commissions. Landlord and Tenant each warrants and
---------------------
represents to the other that there are no brokers, finders fees or any real
estate commissions due to any broker, agent or other party in connection with
the negotiation or execution of this Lease or on behalf of either of them except
for William Webb & Associates, Inc. and Cushman & Wakefield of Florida, Inc.
(collectively "Broker"), which shall be paid a commission by Landlord pursuant
to a separate agreement. Under no circumstances shall Tenant be obliged to make
any payment to Broker. Landlord and Tenant hereby agree to indemnify and hold
the other harmless from and against any and all costs, expenses, liabilities,
causes of action, claims or suits by any party for compensation, commissions,
fees or other sums (including without limitation reasonable attorney's fees)
claimed to be due or owing with respect to the representation of Landlord or
Tenant as applicable, in effecting this Lease. William Webb & Associates
represented Tenant. Cushman & Wakefield represented Landlord.
18.11 Time. Whenever the last day for the exercise of any privilege or the
----
discharge of any duty hereunder shall fall upon a Saturday, Sunday or any public
or legal holiday, the party having such privilege or duty shall have until 5:00
p.m. on the next succeeding business day to exercise such privilege or to
discharge such duty.
18.12 Estoppel Certificate. Either party agrees that within fifteen (15)
--------------------
days following request therefor by the other
32
<PAGE>
party to execute and deliver to the requesting party a statement, certifying to
its actual knowledge (a) whether or not this Lease is in full force and effect,
(b) the date of commencement and termination of the term of this Lease, (c) the
date to which rental and all other charges hereunder are paid currently without
any offset or defense thereto (or stating any such offset or defense), (d) the
amount of rental and all other charges hereunder, if any, paid in advance, (e)
whether or not this Lease has been modified and, if so, identifying the
modifications, (f) that there are no uncured defaults by the other party or
describing the claimed defaults and (g) such other matters as the requesting
party shall reasonably request. Nothing in any such estoppel statement shall be
deemed to modify or amend this Lease.
18.13 Governing Law. This Lease shall be construed under the laws of the
-------------
State of Florida.
18.14 Force Majeure. In the event that either party shall be delayed or
-------------
hindered in, or prevented from, the performance of any work, service, or other
act required under this Lease to be performed by the party (other than monetary
obligations) and such delay or hindrance is due to strikes, lockouts, acts of
God, governmental restrictions, enemy act, civil commotion, unavoidable fire or
other casualty, or other causes of a like nature beyond the reasonable control
of the party so delayed or hindered (a "Force Majeure Event"), then performance
of such work, service, or other act shall be excused for the period of such
delay and the period for the performance of such work, service, or other act
shall be extended for a period equivalent to the period of such delay. Lack of
financial resources on the part of either party shall not be a Force Majeure
Event.
18.15 Radon Gas. RADON IS A NATURALLY OCCURRING RADIOACTIVE GAS THAT, WHEN
----------
IT HAS ACCUMULATED IN A BUILDING IN SUFFICIENT QUANTITIES, MAY PRESENT HEALTH
RISKS TO PERSONS WHO ARE EXPOSED TO IT OVER TIME. LEVELS OF RADON THAT EXCEED
FEDERAL AND STATE GUIDELINES HAVE BEEN FOUND IN BUILDINGS IN FLORIDA. ADDITIONAL
INFORMATION REGARDING RADON TESTING MAY BE OBTAINED FROM YOUR COUNTY PUBLIC
HEALTH UNIT. [NOTE: THIS PARAGRAPH IS PROVIDED FOR INFORMATIONAL PURPOSES
PURSUANT TO FLORIDA STATUTES.]
18.16 Special Stipulations. If any Schedule of Special Stipulations is
--------------------
attached hereto and if there is any conflict
33
<PAGE>
with the provisions hereof, then the Special Stipulations shall govern and
control.
18.17 Guaranty. At the time that this Lease is executed by Tenant, Tenant
--------
shall procure that Tenant's parent company (Mohawk Industries, Inc.) executes
and delivers Landlord's form of unconditional guaranty in favor of Landlord,
unconditionally guarantying the payment and performance of all of Tenant's
obligations under this Lease, as same may be amended by mutual written agreement
executed by Landlord and Tenant.
18.18 Signs. Tenant shall not make any changes to the exterior of the
-----
Premises, install any exterior lights, decorations, balloons, flags, pennants,
banners, or painting, or erect or install any signs, windows or door lettering,
placards, decorations, or advertising media of any type which can be viewed from
the exterior of the Premises, without Landlord's prior written consent.
18.19 Access. Landlord and its agents, representatives, and contractors may
------
enter the Premises at any reasonable time to inspect the Premises and to make
such repairs as may be required or permitted pursuant to this Lease and for any
other business purpose. Landlord and Landlord's representatives may enter the
Premises during business hours for the purpose of showing the Premises to
prospective purchasers and, during the last year of the Initial Term or any
Extension Term, to prospective tenants, provided, that such showings do not
materially interfere with Tenant's business and further provided, that Landlord
gives Tenant at least 24 hours prior notice of such showings. Landlord may erect
a suitable sign on the Premises stating the Premises are available to let or
that the Project is available for sale. Landlord may grant easements, make
public dedications, designate common areas and create restrictions on or about
the Premises, provided that no such easement, dedication, designation or
restriction materially interferes with Tenant's use or occupancy of the
Premises. At Landlord's request, Tenant shall execute such instruments as may be
necessary for such easements, dedications or restrictions.
18.20 Waiver of Jury Trial. TENANT AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY
--------------------
JURY OR TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN
CONTRACT, TORT, OR OTHERWISE, BETWEEN LANDLORD AND TENANT ARISING OUT OF THIS
LEASE OR ANY OTHER INSTRUMENT, DOCUMENT, OR AGREEMENT EXECUTED OR
34
<PAGE>
DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED HERETO.
18.21 Net Lease. Landlord and Tenant acknowledge and agree that this Lease
---------
is a net lease. In this regard, except as specifically provided herein, Tenant
shall be responsible and shall pay Base Rent, Florida Sales Taxes pertaining to
the Premises, and any and all costs, expenses and charges of any nature or kind
whatsoever relating to the operation, maintenance, repair, associated
administration of the Premises, or Tenant's use and occupation of the Premises.
In addition, Tenant shall be responsible for its proportionate share of said
charges with respect to the Common Areas.
18.22 Rules and Regulations. Tenant shall, at all times during the Initial
---------------------
Terms and any extensions thereof, comply with all reasonable rules and
regulations at any time or from time to time established by Landlord covering
use of the Premises, the Building, and the Park. The current rules and
regulations are attached hereto. In the event of any conflict between said
rules and regulations and other provisions of this Lease, the other terms and
provisions of this Lease shall control. Landlord shall not have any liability or
obligation for the breach of any rules or regulations by other tenants in the
Park. Landlord agrees not to establish and enforce any changes in the Rules and
Regulations of the Park that would have a materially adverse effect on Tenant's
operation of the Premises as anticipated under this Lease.
18.23 Constituent Documents. Within five (5) days following Tenant's
---------------------
execution of this Lease, Tenant shall provide Landlord with an original
certificate of good standing for Tenant and Guarantor from their State of
formation; said certificate to be dated within thirty days of the date on which
same is delivered to Landlord. In addition, within said five (5) days, Tenant
shall also provide Landlord with a copy of its corporate resolutions and that of
Guarantor authorizing Tenant to enter into the Lease and Guarantor to guarantee
Tenant's obligations hereunder respectively and authorizing the individual
signing the Lease and Guarantee on behalf of Tenant and Guarantor respectively
to do so.
18.24 First Offer of Adjacent Space. During the term of this Lease,
-----------------------------
provided that Tenant is not, and has not been, in default under the Lease,
Landlord shall provide Tenant with
35
<PAGE>
written notice of any available space adjacent to the Premises in the Building.
Tenant shall have a right of first offer to lease such available adjacent
space on substantially the same terms and conditions provided in this Lease. The
terms and conditions of the new lease for such adjacent space shall be the same
as those of this Lease except that (i) base rent under such lease during the
first year thereof shall be equal to the rent then in effect under this Lease,
subject to annual adjustments pursuant to this Lease, (ii) the term of such
lease shall be for at least five years, (iii) Tenant shall accept delivery of
such space in its then AS IS condition, and (iv) such lease shall not provide
for a tenant improvement allowance. In the event that Tenant does not elect to
exercise said right of first offer, in writing, within fifteen (15) days
following Landlord's notice of such available adjacent space, Tenant shall be
deemed to have waived such right with regard to such available adjacent space at
that time, however, such waiver shall not affect Tenant's right of first offer
with regard to such adjacent space in the event that it subsequently becomes
available again during the term of this Lease. In addition, during the term of
this Lease, in the event that Tenant desires to lease all of the Building space
adjacent to the Premises (which adjacent space consists of an aggregate of
approximately 70,055 square feet), and such space is occupied by other
tenant(s), Landlord shall exercise diligent efforts to negotiate with such
tenant(s) to have same relocated to other available space in the Park, provided,
that same is at no cost to Landlord. Tenant shall bear all costs associated with
such relocation and shall accept such space in its then AS IS condition.
18.25 Rules and Regulations. With respect to this Lease, the following
---------------------
provision of paragraph 15 of the Rules and Regulations, shall be deemed to be
deleted:
"The Tenant shall furnish the Landlord, upon request, with the current license
numbers of all vehicles owned or used by the Tenant or its employees or agents
and the Tenant thereafter shall notify the Landlord of any changes in such
numbers within five (5) days after the occurrence thereof."
18.26 Credit for Unused Tenant Improvement Allowance: In the event that
----------------------------------------------
the TI Cost is less than the Tenant Improvement Allowance ($786,132.99),
Landlord agrees to reduce the Base Rent by 1 cent per square foot for each whole
increment of $11,000.00 in cost savings, however, in no event shall the
36
<PAGE>
Base Rent ever be less than $5.00 per square foot. In the event that Tenant
elects to utilize all or part of the above credit, a new rent schedule which is
now exhibit "C" in the lease Agreement will be created and executed by the
parties at the time of the rent commencement.
IN WITNESS WHEREOF this Lease has been executed as a sealed instrument as
of the day and year first above written.
LANDLORD:
Witnesses: SENECA G&H, L.L.C.,
a Florida limited liability company
/s/ Robert W. Adrian By: /s/ Charles Roabele, Jr.
- ----------------------------- -----------------------------------
Name: Robert W. Adrian Name: Charles Roabele, Jr.
----------------------------------
/s/ William C. Webb III Title: Member
- ----------------------------- ---------------------------------
William C. Webb III (SEAL)
TENANT:
Witnesses: ALADDIN MANUFACTURING CORPORATION,
a Delaware corporation
/s/ Elaine Busbee By: /s/ Salvatore J. Perillo
- ----------------------------- -----------------------------------
Name: Elaine Busbee Name: Salvatore J. Perillo
----------------------------------
/s/ Misty Young Title: Senior Counsel
- ----------------------------- ---------------------------------
Name: Misty Young (CORPORATE SEAL)
37
<PAGE>
LIST OF EXHIBITS
Exhibit "A-1" Legal Description of Land
- -------------
Exhibit "A-2" Site Plan
- -------------
Exhibit "A-3" Parking Area
- -------------
Exhibit "B" Landlord's Improvements
- -----------
Exhibit "C" Rent Schedule
- -----------
Exhibit "D" Permitted Exceptions
- -----------
38
<PAGE>
EXHIBIT "A-l"
LEGAL DESCRIPTION OF LAND
[To be provided by Landlord]
<PAGE>
EXHIBIT "A-1"
"SKETCH OF LAND"
[ARTWORK]
<PAGE>
EXHIBIT "A-2"
"SITE PLAN"
[ARTWORK]
<PAGE>
EXHIBIT "A-3"
"PARKING AREA AND PREMISES"
[ARTWORK]
<PAGE>
EXHIBIT "B"
-----------
LANDLORD'S IMPROVEMENTS
(WORK LETTER)
Section B.1 Force and Effect. The provisions of this Exhibit: "B" shall
----------------
have the same force and effect as if this Exhibit "B" were within the body of
the Lease. However, in the event that there are any contradiction(s) between the
other terms or conditions of this Lease and this Exhibit "B", the terms of this
Exhibit "B" shall prevail.
Section B.2 Plans and Specifications. Landlord agrees, at Landlord's sole
------------------------
cost and expense (subject to reimbursement from Tenant as set forth below if
costs exceed the Tenant Allowance), to perform the work ("Landlord's Work")
required to complete the Tenant improvements described on Schedule B-1 hereto
-------------
(the "Tenant Improvements"). If the Tenant Improvements have not yet been agreed
to, then the plans and specifications (the "Plans and Specifications") therefor
shall be agreed upon as described on Schedule B-1. Landlord's Work shall be
------------
completed and the Tenant Improvements installed and constructed in a good and
workmanlike manner, with new materials, according to sound engineering practice
and in compliance with law.
Section B.3 Tenant Allowance and Tenant Contribution. The Tenant
----------------------------------------
Improvement Allowance shall be $786,132.99. In addition, for the purposes of
this Work Letter, Landlord's costs shall only include costs of the Tenant
Improvements and shall not include any costs for the base Building, the Common
Areas or other aspects of the Park, all of which shall be constructed by
Landlord at Landlord's sole cost and expense.
In the event that the cost for the Tenant Improvements (the "TI Cost") will
result in a cost in excess of the Tenant Improvement Allowance (such excess is
hereinafter defined as the "Tenant Costs"), then Tenant may elect to revise the
Plans and Specifications to reduce or eliminate such increase in costs;
nevertheless, Tenant shall be solely responsible for the Tenant Costs.
Notwithstanding anything herein to the contrary, to the extent Landlord incurs
costs and expenses for matters attributable to Landlord's negligence or
misconduct, Landlord shall pay all such costs, expenses and fees and all such
costs, expenses and fees shall be excluded from the cost of Landlord's Work for
the purposes of this Lease. Landlord shall also pay all of the following costs,
fees and expenses, which costs, fees
1
<PAGE>
and expenses shall also be excluded from the cost of Landlord's Work for the
purposes of this Lease: (i) finance charges, (ii) architectural and engineering
fees (excluding revision fees) (iii) the costs of any studies and reports,
(including, but not limited to, soils and geology reports), (iv) the costs of
any work with respect to the Premises, Building or the Park, other than for the
Tenant Improvements, (v) any internal or direct administrative or supervisory
costs incurred by Landlord for Landlord's staff, (vi) the cost of any building
or other permit required for the base building, and (vii) costs and expenses of
any plan check or similar fee and standard building permits and fees attributed
to the base building, all of which Landlord shall pay at Landlord's cost and
expense (and not as part of the Tenant Allowance).
Section B.4 Commencement and Completion of Construction. Landlord shall
-------------------------------------------
commence and substantially complete construction of the Landlord's Work in
accordance with the Plans and Specifications with due diligence no later than
the date provided for in the construction schedule subject only to force
majeure.
"Substantial Completion" shall mean that a certificate of occupancy or a
temporary certificate of occupancy has been obtained for the Premises and that
Landlord's Work is sufficiently complete so as to allow Tenant to occupy the
Premises for the use and purposes intended without unreasonable disturbance or
interruption; provided that Landlord, its employees, agents, and contractors,
shall be allowed to enter upon the Premises at any reasonable time(s) following
substantial completion as necessary to complete any unfinished details pursuant
to a punchlist to be prepared by Tenant and delivered to Landlord within thirty
(30) days following the date of substantial completion.
Section B.5 Bid List. Prior to commencement of Landlord's construction of
--------
the Tenant Improvements, Landlord and Tenant shall have agreed in writing to a
list of up to three general contractors who shall be designated as the parties
from whom bids will be sought to construct the Premises ("Bid List"), which list
shall be incorporated herein and attached hereto as Schedule "B-3" (the "Bid
--------------
List"). Each of such contractors shall be reasonably acceptable to both Landlord
and Tenant and shall have substantial experience in the general construction
industry in the area where the Park is located in connection with similar such
projects and shall base their bids on the form of
2
<PAGE>
construction contract provided to such contractors. Upon agreement as to the
Plans and Specifications, Landlord shall submit same to the parties on the Bid
List for their respective bids, and upon receipt of such bids, Landlord shall
deliver to Tenant copies thereof. Unless Tenant shall otherwise designate, the
lowest bidder shall be awarded the construction contract for Landlord's Work.
Tenant shall have the right to designate the contractor to which the general
construction contract is to be awarded, however, in such event, Tenant shall
guaranty such contractor's timely completion and delivery of the work contracted
for. Tenant shall have access to all of the information available in connection
with the bids submitted in accordance with this Section B.5. Landlord shall
notify Tenant prior to opening sealed bids and Tenant shall have the right to be
present when such bids are opened. Notwithstanding anything herein to the
contrary, Landlord may provide the bid that Landlord and Tenant have otherwise
agreed to accept (the "Pending Approved Bid") to the base Building contractor
and, in the event that the Base building contractor bids or revises its prior
bid to match, or be less than the Pending Approved Bid, Landlord shall be
entitled to select the base Building contractor's bid, in lieu of the Pending
Approved Bid.
Section B.6 Delivery of Possession of the Premises. Landlord shall deliver
--------------------------------------
possession of the Premises to Tenant with the Tenant Improvements substantially
completed and a permanent or temporary Certificate of Occupancy for the
Premises no later than the Commencement Date. As of the Commencement Date,
Landlord shall have completed the Common Areas necessary for the operation of
the Premises for the use contemplated hereunder (i.e. roads providing access to
and from the Premises, parking for the Premises, and utilities to the Premises).
Section B.7 Delays. Notwithstanding anything herein to the contrary, the
------
Base Rent under the Lease shall be abated one day for each day the Commencement
Date is delayed (excluding force majeure delays) by Landlord's failure to
complete the Tenant Improvements (but not to the extent the delay is caused by
Tenant and not in the event that Tenant designates the contractor to which the
contract was awarded). This provision is not intended to limit Tenant's rights
and remedies specified in the Lease, including, without limitation, those rights
specified in this Work Letter.
Section B.8 Workmanlike Manner, Information to Tenant. Landlord agrees to
-----------------------------------------
ensure that all work to be done by Landlord
3
<PAGE>
on the Premises is performed in a good and workmanlike manner. During the course
of Landlord's construction, Landlord shall keep Tenant apprised of the progress
of same, shall provide copies of existing reports and other documents relating
to same upon request and shall permit Tenant to make such inspections and audits
as Tenant may deem reasonably necessary or appropriate.
Section B.9 Tenant Delays. Tenant shall be responsible for any delay
-------------
(including associated costs) in the substantial completion of the Premises
resulting from any of the following causes:
(i) Tenant's failure to pay any portion of Tenant's Costs, as
hereinafter defined, when due; or
(ii) Tenant's specification of special materials or finishes, or
special installations, which special items cannot be delivered or completed
within Landlord's construction schedule (subject to Landlord's obligation to
give Tenant prior notice of same at the time of such specification); or
(iii) any change in the space plan and/or the plans and specifications
caused by Tenant, even though Landlord may approve such change (Landlord agrees
to estimate the delay to be caused by a change order, provided Tenant expressly
requests such estimate at the time it requests a change order); or
(iv) any other delay in substantial completion of the Tenant
Improvements directly attributable to the negligent or willful acts or omissions
of Tenant, its employees, or agents.
If any delay caused by Tenant results in or contributes to a delay in
substantial completion of the Premises, then substantial completion shall be
deemed to have occurred as of the date Landlord would have otherwise achieved
substantial completion, but for Tenant's delay. Landlord will specify in writing
to Tenant the Tenant delay(s) which resulted in or contributed to a delay in
substantial completion of the Premises.
Section B.10 Tenant Costs. To the extent that the plans and specifications
------------
reflect the scope of work described by the space plan, then Landlord, at its
expense not to exceed the Tenant Improvement Allowance set forth above, shall
cause the
4
<PAGE>
construction of the Tenant Improvements, using Landlord's building-standard
methods and materials as modified by Tenant's pre-approved modifications to
plans and specifications. To the extent that the revised construction budget
exceeds the Tenant Improvement Allowance any such excess will be at Tenants
expense ("Tenant's Costs"). Tenant's Costs shall be paid to Landlord as follows:
(i) Prior to commencement of construction of the Tenant Improvements,
Tenant shall pay Landlord an amount equal to fifty (50%) percent of the Tenant's
Costs, as such amount is then determined by reference to the construction
budget.
(ii) When fifty (50%) of the Tenant Improvements are complete in
accordance with the plans and specifications (as verified in writing by
Landlord's architect), Tenant shall pay Landlord an amount equal to the
remaining unpaid balance of Tenant's Costs as such amount can then be reasonably
determined by Landlord based on available information.
(iii) Within ten (10) days following Landlord's submittal to Tenant
of a final accounting of Tenant's Costs, Tenant shall pay Landlord the then
remaining balance of Tenant's Costs, or Landlord shall reimburse Tenant as to
any excess amounts previously paid, as the case may be.
Tenant's Costs represent a reimbursement of monies expended by Landlord on
Tenant's behalf. Payment when due shall be a condition to Landlord's continued
performance under this Work Letter. Any delay in construction of the Tenant
Improvements or in Tenant taking occupancy of the Premises resulting from
Tenant's failure to make any Tenant's Costs payments when due shall be Tenant's
responsibility. Tenant's failure to pay any portion of Tenant's Costs when due
shall constitute a default under the Lease (subject to any applicable notice
requirements or grace periods).
5
<PAGE>
EXHIBIT "C"
RENT SCHEDULE MOHAWK
TENANT MOHAWK INDUSTRIES
SQUARE FOOTAGE 186,537
ANNUAL INFLATOR ("A") 3.00%
ANNUAL INFLATOR ("B") 2.00%
ANNUAL INFLATOR ("C")
RATE PER SF $5.20
ANNUAL MONTHLY
BASE RENT BASE RENT
YEAR 1 $5.20 $ 969,992.40 $ 80,832.70
YEAR 2 $5.36 $ 999,092.17 $ 83,257.68
YEAR 3 $5.52 $l,029,064.94 $ 85,755.41
YEAR 4 $5.63 $1,049,646.24 $ 87,470.52
YEAR 5 $5.74 $1,070,639.16 $ 89,219.93
YEAR 6 $5.85 $1,092,051.94 $ 91,004.33
YEAR 7 $5.97 $1,113,892.98 $ 92,824.42
YEAR 8 $6.09 $1,136,170.84 $ 94,680.90
YEAR 9 $6.21 $1,158,894.26 $ 96,574.52
YEAR 10 $6.21 $1,158,894.26 $ 96,574.52
OPTION YEARS IF APPLICABLE
YEAR 11 6.21 $1,158,894.26 $ 96,574.52
YEAR 12 6.40 $1,193,661.09 $ 99,471.76
YEAR 13 6.59 $1,229,470.92 $102,455.91
YEAR 14 6.79 $1,266,355.05 $105,529.59
YEAR 15 6.79 $1,266,355.05 $105,529.59
YEAR 16 6.99 $1,304,345.70 $108,695.47
YEAR 17 7.20 $1,343,476.07 $111,956.34
YEAR 18 7.42 $1,383,780.35 $115,315.03
YEAR 19 7.64 $1,425,293.76 $118,774.48
YEAR 20 7.87 $1,468,052.58 $122,337.71
<PAGE>
EXHIBIT "D"
PERMITTED EXCEPTIONS
[To be provided by Landlord]
<PAGE>
SENECA INDUSTRIAL PARK
----------------------
RULES AND REGULATIONS
---------------------
1. Security. The Landlord may from time to time adopt appropriate systems
---------
and procedures for the security or safety of the Building, any persons
occupying, using, or entering the same, or any equipment, furnishings, or
contents thereof, and the Tenant shall comply with the Landlord's reasonable
requirements relative thereto.
2. Return of Keys. At the end of the Term, the Tenant shall promptly return
---------------
to the Landlord all keys for the Building and Premises which are in the
possession of the Tenant. In the event any Tenant fails to return keys, Landlord
may retain S50.00 of Tenant's security deposit for locksmith work and
administration.
3. Repair, Maintenance, Alterations, and Improvements. The Tenant shall
---------------------------------------------------
carry out Tenant's repair, maintenance, alterations, and improvements in the
Premises only during times agreed to in advance by the Landlord and in a manner
which will not interfere with the rights of other tenants in the Building.
4. Water Fixtures. The Tenant shall not use water fixtures for any purpose
---------------
for which they are not intended, nor shall water be wasted by tampering with
such fixtures. Any cost or damage resulting from such misuse by the Tenant shall
be paid for by the Tenant.
5. Personal Use of Premises. The Premises shall not be used or permitted
-------------------------
to be used for residential, lodging, or sleeping purposes or for the storage of
personal effects or property not required for business purposes.
6. Heavy Articles. The Tenant shall not place in or move about the Premises
---------------
without the Landlord's prior written consent any safe or other heavy article
which in the Landlord's reasonable opinion may damage the Building, and the
Landlord may designate the location of any such heavy articles in the Premises.
7. Bicyles, Animals. The Tenant shall not bring any animals or birds into
-----------------
the Building, and shall not permit bicycles or other vehicles inside or on the
sidewalks outside the Building except in areas designated from time to time by
the Landlord for such purposes.
8. Deliveries. The Tenant shall ensure that deliveries of supplies,
-----------
fixtures, equipment, furnishings, wares, and merchandise to the Premises are
made through such entrances, elevators, and corridors and at such times as may
from time to time be designated by the Landlord, and shall promptly pay or cause
to be paid to the Landlord the cost of repairing any damage in the Building
caused by any person making improper deliveries.
9. Solicitations. The Landlord reserves the right to restrict or prohibit
--------------
canvassing, soliciting, or peddling in the Building.
10. Food and Beverages. Only persons approved from time to time by the
-------------------
Landlord may prepare, solicit orders for, sell, serve, or distribute foods or
beverages in the Building, or use the Common Areas for any such purpose. Except
with the Landlord's prior written consent and in accordance with arrangements
approved by the Landlord, the Tenant shall not permit on the Premises the use of
equipment for dispensing food or beverages or for the preparation, solicitation
of orders for, sale, serving, or distribution of food or beverages.
11. Refuse. The Tenant shall place all refuse in proper receptacles
-------
provided by the Tenant at its expense in the Premises or in receptacles (if any)
provided by the Landlord for the Building, and shall keep sidewalks and
driveways outside the Building, and lobbies, corridors, stairwells, ducts, and
shafts of the Building, free of all refuse.
<PAGE>
12. Obstructions. The Tenant shall not obstruct or place anything in or
------------
on the sidewalks or driveways outside the Building or in the lobbies, corridors,
stairwells, or other Common Areas, or use such locations for any purpose except
access to and exit from the Premises without the Landlord's prior written
consent. The Landlord may remove at the Tenants expense any such obstruction or
thing caused or placed by the Tenant (and unauthorized by the Landlord) without
notice or obligation to the Tenant.
13. Proper Conduct. The Tenant shall not conduct itself in any manner which
--------------
is inconsistent with the character of the Building as a first quality building
or which will impair the comfort and convenience of other tenants in the
Building.
14. Employees, Agents and Invitees. In these Rules and Regulations,
------------------------------
"Tenant" includes the employees, agents, invitees and licensees of the Tenant
and others permitted by the Tenant to use or occupy the Premises.
15. Parking. If the Landlord designates tenant parking areas for the
-------
Building, the Tenant shall park its vehicles and cause its employees and agents
to park their vehicles only in such designated parking areas. The Tenant shall
furnish the Landlord, upon request, with the current license numbers of all
vehicles owned or used by the Tenant or its employees or agents and the Tenant
thereafter shall notify the Landlord of any changes in such numbers within five
(5) days after the occurrence thereof. In the event of failure of the Tenant or
its employees or agents to park their vehicles in such designated parking areas,
the Tenant shall forthwith on demand pay to the Landlord the sum of Twenty and
No/100 ($20.00) Dollars per day per each car so parked. Landlord may itself or
through any agent designated for such purpose, make, administer, and enforce
additional rules and regulations regarding parking by tenants and by their
employees or agents, including, without limitation, rules and regulations
permitting the Landlord or such agent to move any vehicles improperly parked to
the designated tenant or employee parking areas. No disabled vehicle shall be
left in the parking areas of the Building for more than 24 hours.
<PAGE>
GUARANTY OF LEASE
THIS GUARANTY OF LEASE is made as of October 15, 1999, by Mohawk
Industries, Inc., a Delaware corporation (the "Guarantor") in favor of Seneca
G&H, L.L.C., a Florida limited liability company (the "Landlord").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Aladdin Manufacturing Corporation, a Delaware corporation (the
"Tenant"), desires to lease from Landlord the premises more particularly
described in Exhibit "A" attached hereto (the "Premises");
WHEREAS, Guarantor and Tenant have requested Landlord as lessor to enter
into a lease agreement with Tenant as lessee dated as of the date hereof (the
"Lease") for the demise of the Premises to Tenant for a term of years more
particularly described therein; and
WHEREAS, Landlord has declined to enter into the Lease unless Guarantor
unconditionally guarantees the Lease in the manner hereinafter set forth.
NOW, THEREFORE, to induce Landlord to enter into the Lease, the undersigned
Guarantor hereby agrees as follows:
1. Guarantor unconditionally guarantees to Landlord the Tenant's full and
punctual performance and observance of all terms, covenants and conditions
contained in the Lease on Tenant's part to be kept, performed or observed.
Guarantor waives notice of any breach or default by Tenant. If, at any time,
default shall be made by Tenant in the performance or observance of any of the
terms, covenants or conditions contained in the Lease on Tenant's part to be
kept, performed or observed, Guarantor will keep, perform and observe the same,
as the case may be, in place and stead of Tenant.
2. Landlord may waive any of the terms or conditions of the Lease, or give
any consent to any manner or thing relating to the Lease, or grant any
indulgences or extensions of time to Tenant, all without notice to Guarantor and
without releasing the obligations of Guarantor hereunder.
3. The obligations of Guarantor hereunder shall not be released or
diminished by: (a) Landlord's receipt, application or release of security given
for the performance and observance of covenants and conditions contained in the
Lease on Tenant's part to be performed or observed; nor (b) any reletting of the
Premises or any related action taken by Landlord in accordance with the terms of
the Lease; nor (c) any modification or renewal or extension of the Lease or any
change in the size or location of the Premises agreed to by Tenant, but in case
of any such modification or change, the liability of Guarantor shall be deemed
modified in accordance with the terms of any such modification of the Lease or
change in the Premises.
4. The liability of Guarantor hereunder shall not be affected in any way
by: (a) the release or discharge of Tenant in any insolvency, receivership,
bankruptcy or other proceedings; nor (b) the impairment, limitation or
modification of the liability of Tenant or the estate of Tenant in bankruptcy,
or of any remedy for the enforcement of Tenant's liability under the Lease,
resulting from the operation of any present or future provision of the United
States Bankruptcy Code or other statute or from any decision in any court; nor
(c) the rejection or disaffirmance of the Lease in any
<PAGE>
such proceedings; nor (d) the assignment or transfer of the Lease by Tenant; nor
(e) any subletting of all or any part of the Premises, with or without the
consent of Landlord; or (f) any disability or other defense of Tenant; nor (g)
the cessation of the liability of Tenant from any cause whatsoever.
5. No payments or acts of performance by Guarantor under this Guaranty
shall in any way or at any time entitle Guarantor to any right, claim or cause
of action against Tenant, or to any right, title or interest in or to Tenant's
rights under the Lease or any rights of Landlord, and Guarantor hereby waives,
for the benefit of Landlord and Tenant, any and all such rights which Guarantor
might otherwise have had in the absence of this waiver and which would have
otherwise entitled Guarantor to be a "creditor" of Tenant under the provisions
of the U.S. Bankruptcy Code (Title 11, U.S. Code) or any other bankruptcy or
insolvency law.
6. Guarantor and Landlord hereby voluntarily, knowingly and intentionally
WAIVE ANY AND ALL RIGHTS TO TRIAL BY JURY in any legal action or proceeding
arising under or in connection with this Guaranty or the Lease or concerning the
Premises or pertaining to any transaction related to or contemplated in the
Lease, regardless of whether such action or proceeding concerns any contractual
or tortious or other claim. Guarantor acknowledges that this waiver of jury
trial is a material inducement to Landlord in accepting this Guaranty, that
Landlord would not have accepted this Guaranty without this jury trial waiver,
and that Guarantor has been represented by an attorney or has had an opportunity
to consult with an attorney regarding this Guaranty and understands the legal
effect of this jury trial waiver.
7. In any action or proceeding brought in connection with the Lease or this
instrument: (a) Landlord shall be entitled to recover Landlord's costs and
expenses, including reasonable attorney's fees; (b) Guarantor submits to the
jurisdiction of the state and federal courts in the State of Florida; (c) the
venue of any such action or proceeding may at Landlord's option be laid in
Miami-Dade County, Florida or the county in which the Premises are located, and
Guarantor waives any claim that the same is an inconvenient forum; (d) Guarantor
agrees that service of process may be made by delivery of the same to Robert
Adrian, Regional Manager, Mohawk Industries, Inc., 1320 NW 163rd Street, Miami,
Florida 33169 (with copy to Mohawk Industries, Inc., 160 South Industrial
Boulevard, Calhoun Georgia 30701, Attention: Salvatore J. Perillo Tel. 1-800-
241-4494 Ext. 2660 Fax 1-706-624-2483), or such other agent as Guarantor may
designate from time to time by written notice to Landlord; and (e) Guarantor
waives the right to interpose any set-off or non-compulsory counterclaim, or to
plead laches or any statute of limitation as a defense, or (to the extent the
same may be lawfully waived). The foregoing shall not be deemed to limit
Landlord's right to effect service of process in any other lawful manner or to
bring any such action or proceeding in any other forum permitted by law.
8. This instrument is a continuing guaranty and shall apply to the Lease,
to any extension or renewal thereof and to any holdover term following the
original term or any such extension or renewal.
9. This instrument may not be changed, modified, discharged or terminated
orally or in any manner other than by an agreement in writing signed by
Guarantor and Landlord.
10. This instrument shall be binding upon Guarantor and Guarantor's heirs,
personal representatives, successors and assigns, and this instrument shall
inure to the benefit of Landlord and Landlord's successors and assigns.
-2-
<PAGE>
WITNESS the due execution hereof as of the date first written above.
Signed, sealed and delivered in the GUARANTOR:
presence of:
MOHAWK INDUSTRIES, INC., a Delaware
/s/ Misty Young corporation
- -----------------------
Print Name: Misty Young By: /s/ Salvatore J. Perillo
---------------------------------
Print Name: Salvatore J. Perillo
/s/ Amy Watson Title: General Counsel
- -----------------------
Print name: Amy Watson [CORPORATE SEAL]
STATE OF GEORGIA )
) SS:
COUNTY OF GORDON )
The foregoing instrument was acknowledged before me this 18th day of
October, 1999 by Salvatore J. Perillo, as general counsel of Mohawk Industries,
Inc., a Delaware corporation, on behalf of the corporation.
/s/ Elaine Busbee
------------------------------------------------
Notary Public, State of Georgia
[NOTARIAL SEAL]
My commission expires:
Notary Public, Paulding County, Georgia
My Commission Expires Nov. 3, 2001
-3-
<PAGE>
ADDENDUM TO LEASE AGREEMENT
---------------------------
THIS ADDENDUM (this "Addendum") is made as of the 15th day of October,
1999, by and between Seneca G&H, L.L.C., a Florida limited liability company,
having an address at 2901 SW 8th Street, Suite 204, Miami, Florida 33135
("Landlord") and ALADDIN MANUFACTURING - CORPORATION, a Delaware corporation,
with its home office located at 160 South Industrial Boulevard, Calhoun, Georgia
30701 ("Tenant").
W H E R E A S:
- - - - - - -
A. Landlord and Tenant are the parties to that certain Warehouse Lease
dated of even date herewith (the "Lease"), with respect to certain real
property located in Broward County, Florida, more particularly described in the
Lease.
B. The parties desire to amend the Lease in certain respects as more
particularly set forth below.
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Miscellaneous.
-------------
(a) This Addendum shall be deemed part of, but shall take precedence
over and supersede any provisions to the contrary contained in the Lease.
(b) All initial capitalized terms used in this Addendum shall have the
same meaning as set forth in the Lease unless otherwise provided.
(c) Except as specifically modified hereby, all of the provisions of
the Lease which are not in conflict with the terms of this Addendum shall remain
in full force and effect.
2. Within thirty (30) days following the effective date of this Addendum
(the first day on which both of the parties hereto have executed this Addendum),
Tenant shall have the right to increase the square footage of the Premises, by
written notice of its General Counsel, up to a maximum of 256,592 square feet of
GLA on the terms and conditions contained in the Lease, provided that: (i) the
Premises either (a) represent an expansion within the currently proposed
Building or (b) constitute the entire floor area of a newly designed Building,
(ii) during said thirty (30) days, Tenant provides Landlord with written notice
of its exercise of such right containing Tenant's desired square footage for the
Premises, (iii) the Base Rent, as subjected to increases over the Initial Term
and any Extension Term(s), is increased to reflect the additional square footage
desired by Tenant, (iv) Tenant's Proportionate Share of the Project is increased
to reflect the additional square footage desired by Tenant and Tenant's
Proportionate share of the Building is increased to reflect the additional
square footage desired by Tenant, (v) the design/dimensions of any new Building
desired by Tenant is
-1-
<PAGE>
such that, in Landlord's sole and absolute discretion, said Building as designed
can be feasibly utilized and marketed as a multi-tenant Building upon reversion
of Tenant's leasehold interest to Landlord, (vi) Tenant executes an addendum to
the Lease specifically setting forth the foregoing (i.e. the adjusted square
footage of the Premises, the adjusted Base Rent, the adjusted Tenant's
Proportionate Share of the Project, and the adjusted Tenant's Proportionate
Share of the Building), and (vii) Tenant procures the Guarantor's execution of
an addendum to the Guaranty, whereby the Guarantor acknowledges and agrees with
Tenant's execution of said Lease addendum.
IN WITNESS WHEREOF this Addendum has been executed as a sealed instrument
as of the day and year first above written.
LANDLORD:
---------
Witnesses: SENECA G&H, L.L.C.,
a Florida limited liability company
/s/ Robert W. Adrian By: /s/ Charles Roabele, Jr.
- ----------------------------- -----------------------------------
Name: Robert W. Adrian Name: Charles Roabele, Jr.
----------------------------------
Title: Member
---------------------------------
/s/ William C. Webb III Date: October 19, 1999
- ----------------------------- ----------------------------------
Name: William C. Webb III (SEAL)
TENANT:
-------
ALLADIN MANUFACTURING CORPORATION,
a Delaware corporation
/s/ Misty Young By: /s/ Salvatore J. Perillo
- ----------------------------- -----------------------------------
Name: Misty Young Name: Salvatore J. Perillo
----------------------------------
/s/ Amy Watson Title: Senior Counsel
- ----------------------------- ---------------------------------
Name: Amy Watson Date: October 19, 1999
----------------------------------
(CORPORATE SEAL)
-2-
<PAGE>
EXHIBIT 10.14
EX-CELL HOME FASHIONS, INC.
AND
ALADDIN MANUFACTURING CORPORATION
-------------------------------
LEASE AGREEMENT
-------------------------------
Dated as of December 3, 1999
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINITIONS...................................................... 1
ARTICLE II DEMISING CLAUSES AND RENTAL PROVISIONS........................... 3
Section 2.1. Demise of Facility........................................... 3
Section 2.2. Duration of Lease Term....................................... 3
Section 2.3. Rent......................................................... 3
ARTICLE III MAINTENANCE, USE, MODIFICATIONS, TAXES AND INSURANCE............. 5
Section 3.1. Maintenance, Use, and Modifications of Facility by Tenant.... 5
Section 3.2. Installation of Tenant-Owned Equipment....................... 8
Section 3.3. Taxes, Assessments and Utility Charges....................... 9
Section 3.4. Insurance Required........................................... 10
Section 3.5. Additional Provisions Respecting Insurance................... 10
Section 3.6. Right of Landlord to Pay Insurance Premiums and Other Charges 13
ARTICLE IV DAMAGE, DESTRUCTION AND CONDEMNATION............................. 13
Section 4.1. Damage or Destruction........................................ 13
Section 4.2. Condemnation................................................. 15
ARTICLE V SPECIAL COVENANTS................................................ 17
Section 5.1. No Warranty of Condition or Suitability Landlord............. 17
Section 5.2. Hold Harmless Provisions..................................... 18
Section 5.3. Landlord's Repairs........................................... 18
Section 5.4. Responsibility for the Sprinkler System...................... 19
Section 5.5. Right to Inspect the Facility and the Equipment.............. 19
Section 5.6. Good Standing in the State................................... 19
Section 5.7. Agreement to Provide Information............................. 19
Section 5.8. Books of Record and Account; Financial Statements............ 19
Section 5.9. Compliance with orders....................................... 20
Section 5.10. Discharge of Liens and Encumbrances.......................... 20
</TABLE>
i
<PAGE>
Table of Contents
-----------------
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI ASSIGNMENT AND SUBLEASING; MORTGAGE AND PLEDGE OF INTEREST...... 21
Section 6.1. Assignment and Subleasing.................................... 21
ARTICLE VII EVENTS OF DEFAULT AND REMEDIES................................... 22
Section 7.1. Events of Default Defined.................................... 22
Section 7.2. Remedies on Default.......................................... 24
Section 7.3. Remedies Cumulative.......................................... 25
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses................ 26
ARTICLE VIII RENEWAL OPTION................................................... 26
Section 8.1. Tenant's Renewal Option...................................... 26
ARTICLE IX PURCHASE OPTION.................................................. 27
Section 9.1. Facility Purchase Option..................................... 27
ARTICLE X RIGHT OF FIRST REFUSAL........................................... 30
Section 10.1. Right of First Refusal....................................... 30
ARTICLE XI MISCELLANEOUS.................................................... 32
Section 11.1. Surrender of Facility........................................ 32
Section 11.2. Notices...................................................... 32
Section 11.3. Binding Effect............................................... 33
Section 11.4. Severability................................................. 33
Section 11.5. Amendments, Changes and Modifications........................ 33
Section 11.6. Execution of Counterparts.................................... 33
Section 11.7. Applicable Law............................................... 33
Section 11.8. Table of Contents and Section Headings Not Controlling....... 33
Section 11.9. Estoppel Certificate......................................... 33
Section 11.10. Quiet Enjoyment.............................................. 34
Section 11.11. Security Deposit............................................. 34
Section 11.12. No Additional Waiver Implied By One Waiver................... 35
Section 11.13. Brokerage Agreement.......................................... 35
</TABLE>
ii
<PAGE>
THIS LEASE AGREEMENT, dated as of December 3, 1999, by and between EX-
CELL HOME FASHIONS, INC., a corporation organized and existing under the laws of
New York with an address at 295 Fifth Avenue, New York, New York 10016
("Landlord"), and ALADDIN MANUFACTURING CORPORATION, a corporation organized and
existing under the laws of Delaware with an address at 3090 Sugar Valley Road,
NW, Sugar Valley, GA 30746 ("Tenant"),
W I T N E S S E T H
-------------------
WHEREAS, Landlord desires to lease the real property described on
Exhibit A hereto, the existing building and other improvements thereon and the
Equipment (as hereinafter defined), and Tenant desires to hire such real
property, existing building and other improvements thereon and Equipment from
Landlord, upon the terms and conditions set forth in this Lease Agreement;
NOW THEREFORE, in consideration of the premises and the mutual
covenants and agreements of the parties hereto herein contained, the parties
hereto hereby covenant and agree as follows:
ARTICLE I
DEFINITIONS
The following words and terms as used in this Lease Agreement shall
have the following meanings:
"Landlord" means Ex-Cell Home Fashions, Inc., a corporation duly
----------
organized and existing under the laws of New York.
"Landlord's Plant" means Landlord's existing plant located on the Land
------------------
located in Bentonville, Arkansas.
1
<PAGE>
"Condemnation" means the taking of title to, or the use of, property
--------------
under the exercise of the power of eminent domain by any governmental entity or
other Person acting under governmental authority.
"Equipment" means all machinery, equipment and other personal property
-----------
located at the Facility, except the computer equipment, checking stations, and
all equipment in the office areas.
"Facility" means the Land together with the Landlord's Plant
----------
(consisting of approximately 134,067 square feet), less the Storage Area.
"Land" means the interest in real estate leased pursuant to this Lease
------
Agreement as more particularly described on Exhibit A attached hereto.
"Lease Term" means the duration of the leasehold estate created by
------------
this Lease Agreement as specified in Section 2.2 hereof.
"Storage Area" means that area of the Plant identified on Exhibit B
--------------
attached hereto and consisting of approximately 3,600 square feet.
"Permitted Encumbrances" means (i) this Lease Agreement, (ii) utility,
------------------------
access and other easements and rights of way, restrictions and exceptions that
do not materially impair the utility or the value of the property affected
thereby for the purposes for which it is intended, (iii) mechanics',
materialmen's, warehousemen's, carriers' and other similar liens to the extent
permitted by this Lease Agreement hereof and (iv) liens for taxes at the time
not delinquent.
"Person" means an individual, partnership, corporation, trust or
--------
unincorporated organization, and a government or agency or political subdivision
thereof.
"Structural Repairs" means any repair that involves the substantial
--------------------
repair, renovation or restoration of a structural component of the Facility.
2
<PAGE>
"Tenant" means Aladdin Manufacturing Corporation, a corporation duly
--------
organized under the laws of Delaware.
ARTICLE II
DEMISING CLAUSES AND RENTAL PROVISIONS
Section 2.1. Demise of Facility. Landlord hereby demises and leases the
------------------
Facility and the Equipment to Tenant and Tenant hereby hires and leases the
Facility and the Equipment from Landlord upon the terms and conditions of this
Lease Agreement.
Section 2.2. Duration of Lease Term. The Lease Term shall commence on
----------------------
December 3, 1999 (the "Term Commencement Date"), and end on December 31, 2002
(the "Expiration Date"), unless sooner terminated in accordance with the
provisions hereof.
Section 2.3. Rent. (a) Tenant shall pay to Landlord rent during the
-----
Lease Term at the rate of (i) Eighteen Cents per square foot per month or Two
Hundred Eighty-One Thousand Eight Hundred and Eight Dollars and 72/100
($281,808.72) per annum, payable in equal monthly installments of Twenty-Three
Thousand Four Hundred Eighty-Four Dollars and 06/100 ($23,484.06) for the
Facility (the "Fixed Rent"), and (ii) Thirty-six Thousand Dollars ($36,000.00)
per annum, payable in equal monthly installments of Three Thousand Dollars
($3000.00) (the "Equipment Rent"). Both Fixed Rent and Equipment Rent are
payable in advance on the first day of each month during such period.
(b) It is the intention of the parties that this is a gross lease,
without responsibility or cost to Tenant, except as expressly set out in this
Lease Agreement.
(c) Tenant agrees to make the payments of Fixed Rent and Equipment
Rent, without any further notice, in lawful money of the United States of
America as, at the time of payment, shall be legal tender for the payment of
public and private debts. In the event Tenant shall fail to timely make any
payment required in this Section 2.3, Tenant shall pay the same
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together with interest thereon at the rate equal to the then higher of (i)
fifteen per centum (15%) or (ii) the prime rate as published in The Wall Street
Journal on the date such payments were due plus eight and one-half per centum
(8.5%) per annum, in either case as calculated from the date on which such
payment was due until the date on which such payment is made.
(c) In the event Tenant exercises its option for the Extended Term under
Article 8 of this Lease Agreement, Landlord shall have the right to increase the
base rent for the Extended Term in direct proportion to the three year aggregate
of the annual percentage increase in the level of the Consumer Price Index, All
Items, U.S. City Average, All Urban Consumers (1982-1984=100), published by the
Bureau of Labor Statistics, U.S. Department of Labor (the "B.L.S. Index"), as
published during the preceding three years.
It is understood that the B.L.S. Index is now being published monthly
by the Bureau of Labor Statistics of the U.S. Department of Labor. Should said
Bureau of Labor Statistics change the manner of computing the B.L.S. Index, the
Bureau shall be requested to furnish a conversion factor designed to adjust the
B.L.S. Index to the one previously in use, and adjustment to the new Index shall
be made on the basis of such conversion factor. Should the publication of a
B.L.S. Index be discontinued by said Bureau of Labor Statistics, then such other
index as may be published by such Bureau most nearly approaching said
discontinued B.L.S. Index shall be used in making the adjustments herein
provided. Should said Bureau discontinue the publication of any index
approximating the B.L.S. Index, then such index as may be published by another
United States Governmental Agency as most nearly approximates the B.L.S. Index
shall govern and be substituted as the index to be used, subject to the
application of an appropriate conversion factor to be furnished by the
Governmental Agency publishing the adopted index. If such Governmental Agency
will not furnish such conversion factor, then the
4
<PAGE>
parties shall agree upon a conversion factor, or a new index, and in the event
an agreement cannot be reached as to such conversion factor or such new index,
then the selection of a new index approximating as nearly as can be the B.L.S.
Index shall be determined by arbitration in accordance with the Rules of the
American Arbitration Association and the index selected in such arbitration
shall be binding upon the parties hereto.
ARTICLE III
MAINTENANCE, USE, MODIFICATIONS, TAXES AND INSURANCE
Section 3.1. Maintenance, Use, and Modifications of Facility by Tenant.
---------------------------------------------------------
(a) Tenant agrees that during the Lease Term it will at its own expense (i)
keep the Facility and the Equipment in a safe condition; (ii) make all necessary
nonstructural repairs and replacements to the Facility and the Equipment
(whether ordinary or extraordinary, foreseen or unforeseen), which repairs and
replacements shall be of a quality or class equal to the original work or
construction; and (iii) make all Structural Repairs necessitated by or arising
out of any act, failure to act or negligence of Tenant. Tenant shall use and
operate the Facility and the Equipment for the manufacturing, assembling,
warehousing and wholesale distribution of pillow filling and other pillow
filling products and for other uses reasonably related to the business of
assembling, warehousing and the wholesale distribution of pillow filling and for
no other purpose, unless Landlord consents in writing to other uses. If
Landlord consents to a different use, and such use is lawful, Tenant shall be
responsible for any additional costs associated with such different use,
including, but not limited to insurance costs. Landlord shall deliver the
Facility to Tenant clean and free of debris on the Term Commencement Date and
warrants to Tenant that all aspects of the building to be maintained and
repaired by Tenant shall be in good operating condition and repair as of the
Term Commencement Date.
5
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(b) In the event that Tenant shall at any time during the term of
this Lease receive a notice, order, or violation to the effect that Tenant's use
and operation of the Facility for the manufacturing, assembling, warehousing and
wholesale distribution of pillow filling and other pillow filling products is
not permitted in the Facility under the provisions of the zoning code of the
Town of Bentonville as existing as of the date of this Lease Agreement (the
"Zoning Code"), then Tenant shall promptly give notice thereof to Landlord.
Following receipt of such notice from Tenant, Landlord shall have a period of
180 days in order to obtain a variance, special exception, or otherwise cure or
dismiss the notice, violation or order. During such 180 day period Landlord
agrees to use good faith efforts to cure or remove such notice, violation or
order and Tenant agrees to cooperate with Landlord (by joining in applications,
supplying information, attending hearings and otherwise as may be necessary).
If Landlord does not notify Tenant within such 180 day period that Landlord has
cured or removed, or has arranged to cure or remove, such notice, violation or
order, then Tenant shall have a right to terminate this Lease by notice to
Landlord within 10 days following the end of such 180 day period, which notice
shall specify a date for such termination which shall be not less than 30 days
following the date of Tenant's notice. In such event, the date set forth in
Tenant's notice shall be substituted for the Expiration Date provided for herein
and the Tenant shall vacate and surrender the Facility on such Expiration Date
in accordance with the terms of this Lease Agreement. Notwithstanding the
foregoing, Tenant shall not have the right to terminate this Lease Agreement
pursuant to this paragraph if the notice, order or violation arises as a result
of Tenant's breach or violation of any law, rule or regulation other than the
Zoning Code. Provided that Landlord has complied with its obligations pursuant
to this paragraph, Tenant's right to terminate this Lease Agreement pursuant to
this paragraph because Tenant's use and operation of the Facility for the
purposes provided for
6
<PAGE>
in this paragraph is not permitted by the Zoning Code shall be Tenant's sole
remedy and Tenant hereby waives, and releases Landlord with respect to, any and
all other claims for damages, equitable relief or otherwise.
(c) Any structural additions, modifications or improvements to the
Facility or any part thereof made by Tenant must be in accordance with plans and
specifications approved in writing in advance by Landlord, which consent shall
not be unreasonably withheld or delayed. Tenant shall pay to Landlord as
additional rent within 20 days after demand therefor: (i) Landlord's reasonable
expenses incurred as a result of having the plans, specifications, work-in-
progress and as-built plans reviewed by an architect or engineer and (ii)
reasonable attorneys' fees and expenses arising in connection with any such
structural additions, modifications or improvements to the Facility. All such
structural additions, modifications or improvements so made by Tenant shall
become a part of the Facility and shall remain upon and be surrendered with the
Facility at the end of the Lease Term.
(d) Tenant shall use the Equipment in a careful and proper manner and
shall comply with and conform to all national, state, municipal, police and
other laws, ordinances and regulations in anywise relating to the possession,
use or maintenance of the equipment. If at any time during the term hereof
Landlord supplies Tenant with labels, plates or other markings stating that the
equipment is owned by Landlord, Tenant shall affix and keep the same upon a
prominent place on the equipment.
(e) If Tenant fails after ten days notice to proceed with due
diligence to make repairs or replacements which Tenant is required to make
hereunder, the same may be made by Landlord at the expense of Tenant, and the
expenses thereof incurred by Landlord shall be
7
<PAGE>
collectible as Additional Rent and payable by Tenant within 20 days following
rendition of a bill or statement therefor.
(f) All repairs and replacements shall be done in a good and
workmanlike manner and shall at all times comply with laws, rules, ordinances,
orders, codes and regulations of governmental, quasi-governmental and regulatory
authorities, and all requirements of insurance carriers issuing policies
covering the Facility and the Equipment and the Board of Fire Underwriters.
(g) Tenant agrees that it will not, either directly or indirectly,
use any contractors and/or labor and/or materials if the use of such contractors
and/or labor and/or materials would or will create any difficulty with other
contractors and/or labor engaged by Tenant or Landlord or others in the
maintenance and/or operation of any part of the Facility or the Equipment.
Tenant shall, before making any repairs or replacements, at its sole cost and
expense, obtain all permits, approvals and certificates required by any
governmental or quasi-governmental bodies and (upon completion) certificates of
final approval and shall deliver promptly duplicates of all such permits,
approvals and certificates to Landlord, and Tenant agrees to carry, and will
cause Tenant's contractors and sub-contractors to carry such workers'
compensation, builder's risk, general liability, personal and property damage
insurance as Landlord may reasonably require.
Section 3.2. Installation of Tenant-Owned Equipment. Tenant from time to
--------------------------------------
time may install its own machinery, equipment or other personal property in the
Facility (which may be attached or affixed to the Facility), and such machinery,
equipment or other personal property shall not become, or be deemed to become, a
part of the Facility. Tenant from time to time may remove or permit the removal
of such machinery, equipment and other personal property from
8
<PAGE>
the Facility, provided that any such removal of such machinery, equipment or
other personal property shall not adversely affect the structural integrity of
the Facility or impair the overall operating efficiency of the Facility and
provided further that if any damage is occasioned to the Facility by such
removal, Tenant agrees to promptly repair such damage at its own expense.
Section 3.3. Taxes, Assessments and Utility Charges. Tenant agrees to pay,
--------------------------------------
(i) all taxes and governmental charges of any kind whatsoever which may at any
time be assessed or levied against or with- respect to the Facility and any
machinery, equipment or other property installed or brought by Landlord or
Tenant therein or thereon and the employees of Tenant or Landlord located at or
assigned to the Facility, including without limiting the generality of the
foregoing any sales or use taxes and any taxes levied upon or with respect to
the income or revenues of Tenant from the Facility, (ii) all utility and other
charges, including, without limitation, "service charges", incurred or imposed
for the operation, maintenance, use, occupancy, upkeep and improvement of the
Facility, and (iii) all assessments and charges of any kind whatsoever made by
any governmental body for public improvements.
Taxes and governmental charges shall be deemed to exclude any payments
in lieu of, addition to, or in partial or complete substitution for real estate
related taxes, including, without limitation, (i) taxes, assessments, levies,
impositions or charges (special or otherwise) wholly or partially as a capital
levy or otherwise on the rents received from the Facility, (ii) taxes,
assessments, levies, impositions, or charges (special or otherwise) measured by,
or based in whole or in part upon the Facility and imposed upon the Landlord,
(iii) license fees measured by the rent payable by the tenants in the Facility
to the Landlord, and (iv) such other additional or substitute taxes,
assessments, levies, impositions, or charges (special or otherwise).
9
<PAGE>
Section 3.4. Insurance Required. At all times throughout the Lease Term,
------------------
Tenant shall maintain insurance, except general facility insurance, against such
risks and for such amounts as are customarily insured against by businesses
operating facilities of like size and type as the Facility in the manner and for
the purposes for which the Facility will be operated by Tenant under this Lease
Agreement, paying, as the same become due and payable, all premiums in respect
thereto, including, but not necessarily limited to:
(a) business interruption insurance or rent insurance, sufficient to
cover unabated rent payments in the event of a casualty.
(b) worker's compensation insurance, disability benefits insurance,
and each other form of insurance which Landlord or Tenant is required by law to
provide, covering loss resulting from injury, sickness, disability or death of
employees of Landlord or Tenant who are located at or assigned to the Facility;
and
(c) insurance protecting Landlord and Tenant against loss or losses
from liabilities imposed by law or assumed in any written contract and arising
from personal injury and death or damage to the property of others caused by any
accident or occurrence with limits of not less than $5,000,000 per accident or
occurrence on account of personal injury, including death resulting therefrom
and damage to the property of others.
(d) Tenant shall keep the Equipment insured against all risks of loss
or damage from every cause whatsoever for not less than the full replacement
value thereof as determined by Landlord and shall carry public liability and
property damage insurance covering the Equipment.
Section 3.5. Additional Provisions Respecting Insurance. (a) All
------------------------------------------
insurance required by this Article shall be procured and maintained with
responsible insurance companies which are (i)
10
<PAGE>
financially-sound and generally-recognized and with a Best's rating of A or
better, (ii) approved by Landlord and (iii) authorized to write such insurance
in the State of Arkansas. The insurance coverage shall be of a type and scope
and in the amounts as shall be acceptable to Landlord. Such insurance may not
be written with deductible amounts in excess of such deductible amounts as
Landlord may have agreed to in advance. All policies evidencing such insurance
shall provide for payment of losses to Landlord and Tenant, as their respective
interests may appear.
(b) All policies of insurance required by this Article, or a
certificate or certificates of the insurers that such insurance is in force and
effect, or other evidence of such insurance satisfactory to Landlord, shall be
deposited with Landlord prior to Tenant's taking possession of the Facility and
the Equipment. Tenant shall deliver to Landlord on or before the first day of
each calendar year thereafter certificates dated not earlier than the
immediately preceding November 1 reciting that there is in full force and effect
with a term covering at least the next succeeding calendar year, insurance in
the amounts and of the types required by this Article. Prior to expiration of
any such policy, Tenant shall furnish Landlord satisfactory evidence that the
policy has been renewed or replaced.
(c) All policies of insurance procured by Tenant shall contain
endorsements providing that (i) such policies may not be materially changed,
amended, reduced, cancelled (including for nonpayment of premium) or allowed to
lapse with respect to the Landlord except after 60 days' prior notice from the
insurance company to each, sent by registered or certified mail, return receipt
requested to the addresses and in the manner then provided in this Lease
Agreement for notices; and (ii) Tenant shall be solely responsible for the
payment of all premiums under such policies and the Landlord shall have no
obligation for the payment thereof notwithstanding that the Landlord is or may
be named as an insured. Any endorsements to any
11
<PAGE>
such policies shall be so deposited with the Landlord upon issuance thereof and
each renewal or replacement of a policy shall be so deposited with the Landlord
at least 20 days prior to the expiration of such policy.
(d) Tenant shall not take out separate insurance concurrent in form
or contributing in the event of loss with that required (or which may reasonably
be required) pursuant to this Section to be furnished by Tenant unless Landlord
are included therein as an insured, with all losses payable thereunder as
provided in this Section. Tenant shall immediately notify the Landlord of the
taking out of any such separate insurance and shall deliver the policy or
policies as herein provided.
(e) Tenant shall use its best efforts to include in each of its
insurance policies (and, with respect to any equipment in the Facility leased by
Tenant, in the insurance policies covering such equipment carried by Tenant or
the lessors of such equipment) covering loss, damage or destruction by fire or
other insured casualty, a waiver of the insurer's right of subrogation against
the Landlord, or if such waiver should be unobtainable or unenforceable (i) an
express agreement that such policy shall not be invalidated if the insured
waives or has waived before the casualty the right of recovery against any party
responsible for a casualty covered by the policy, or (ii) any other form of
permission for the release of the Landlord.
(f) Tenant agrees to permit any representatives of insurance
companies insuring the Facility or insuring any items required by this Lease
Agreement to inspect the Facility pursuant to Section 5.5 of this Lease
Agreement. Tenant further agrees to comply with any and all recommendations
made by such representatives in connection with inspections of the Facility.
12
<PAGE>
Section 3.6. Right of Landlord to Pay Insurance Premiums and Other Charges.
-------------------------------------------------------------
If Tenant fails (i) to maintain any insurance required to be maintained by this
Article or (ii) to make any other payment required to be made by it under this
Lease Agreement, Landlord may pay such premium for such insurance, or make such
other payment. No such payment by Landlord shall affect or impair any rights of
Landlord hereunder arising in consequence of such failure by Tenant. Tenant
shall reimburse the Landlord for any amount so paid by Landlord pursuant to this
Section, together with interest thereon at the rate provided for in Section
2.3(c).
ARTICLE IV
DAMAGE, DESTRUCTION AND CONDEMNATION
Section 4.1. Damage or Destruction. (a) If the Facility shall be damaged
---------------------
or destroyed (in whole or in part) at any time during the Lease Term:
(i) Landlord shall have no obligation to Tenant to replace, repair
of restore the Facility, except if caused by Landlord's willful misconduct;
(ii) there shall be no abatement or reduction in the Fixed Rent or
Equipment Rent, except if caused by Landlord's willful misconduct;
(iii) Tenant shall promptly give written notice of such damage or
destruction to Landlord, and
(iv) Tenant shall promptly replace, repair, rebuild or restore the
Facility to substantially the same condition and value as an operating
entity as existed prior to such damage or destruction, in accordance with
plans and specifications approved in writing in advance by Landlord;
provided, however, that if by reason of the extent of such damage or
-------- -------
destruction the provisions of section 4.1(b) hereof are applicable, Tenant
shall not commence such replacement, repair, rebuilding or restoration
until (i) Landlord notifies Tenant that Landlord does not intend to give
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to Tenant the notice of termination provided for under Section 4.1(b)
hereof or (ii) the time for the Landlord to give the notice of termination
provided for in Section 4.1(b) lapses. Landlord will make available to
Tenant so much of the net proceeds of the insurance maintained under
Article III hereof as is necessary to pay the costs of such replacement,
repair, rebuilding or restoration of the Facility, such proceeds to be made
available only after actual receipt thereof by Landlord and as the work
progresses, subject, however, to customary retainages and submission to
------- -------
Landlord of customary documentation to establish the percentage of
completion and the absence of liens.
(v) In the event the net proceeds of such insurance are not
sufficient to pay in full the costs of such replacement, repair, rebuilding
or restoration, Tenant shall nonetheless complete the work thereof and pay
from its own moneys that portion of the costs thereof in excess of such
insurance proceeds.
(vi) All such replacements, repairs, rebuilding or restoration made
pursuant to this Section 4.1, whether or not requiring the expenditure of
Tenant's own money, shall automatically become a part of the Facility and
be subject to this Lease Agreement as if the same were specifically
described herein.
(vii) Any balance of such insurance proceeds remaining after payment
of all the costs of such replacement, repair, rebuilding or restoration
returned to Landlord.
(viii) Tenant shall be entitled to the proceeds of any insurance or
portion thereof made for damage to any property which, at the time of such
damage, is not part of the Facility and is owned by Tenant.
14
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(b) Notwithstanding the provisions of Section 4.1(a) above, if more
than 30% of the monetary value of the Facility (exclusive of excavations and
foundations) as reasonably determined by Landlord shall be damaged or destroyed
and in Landlord's judgment it is not practicable or desirable to replace,
repair, rebuild or restore the Facility, Landlord shall have the right to
terminate this Lease Agreement and the leasehold estate created hereby by notice
in writing given to Tenant within 30 days after the date of such damage or
destruction, in which case (i) this Lease Agreement and the leasehold estate
created hereby shall terminate as of the date such notice is given; (ii) all
Fixed Rent, additional rent, and other rents, taxes and charges hereunder shall
be prorated and paid to the date of such termination; and (iii) all of the
proceeds of insurance with respect to such damage or destruction shall be paid
to Landlord and Tenant shall have no claim thereto.
(c) Tenant hereby assumes and shall bear the entire risk of loss and
damage to the Equipment from any and every cause whatsoever. No loss or damage
to the equipment or any part thereof shall impair any obligation of lessee under
this Lease Agreement which shall continue in full force and effect, except if
caused by Landlord's willful misconduct.
Section 4.2. Condemnation. (a) If at any time during the Lease Term any
-------------
part of title to, or the use of, the Land shall be taken by Condemnation but
such taking shall not (i) include the Plant or (ii) materially interfere with
the Tenant's use or operation of the Plant, then:
(i) Landlord shall have no obligation to Tenant to restore or
replace the Facility;
(ii) there shall be no abatement or reduction in the Fixed
Rent or Equipment Rent;
(iii) The entire proceeds of any award in Condemnation,
whether the Condemnation be of the whole or any part of the Facility,
shall belong solely to Landlord and Tenant hereby assigns all of its
rights in and to such award to
15
<PAGE>
Landlord. Landlord will make available to Tenant so much of the net
proceeds of such award as is necessary to pay the costs of such
restoration as may be necessary for the continued use and operation of
the Plant, such proceeds to be made available only after actual
receipt thereof by Landlord and as such restoration progresses,
subject, however, to customary retainages and submission to Landlord
------- -------
of customary documentation to establish the percentage of completion
and the absence of liens. Restoration of the Facility shall be in
accordance with plans and specifications approved in writing by
Landlord and on such other terms as shall be approved in writing by
Landlord.
(iv) The restorations to the Facility shall automatically become
part of the Facility and be subject to this Lease Agreement as if the
same were specifically described herein.
(v) Any balance of the proceeds of any Condemnation award
remaining after payment of all costs of such restoration shall be paid
to Landlord.
(b) Notwithstanding the provisions of Section 4.2(a) above, if at any
time during the Lease Term a part of the Plant or the Land beneath the Plant
shall be taken by Condemnation and as a result of such taking by Condemnation,
part of the Plant is no longer useable by Tenant, then, effective as of the date
of vesting of title, the Fixed Rent shall be abated in an amount apportioned
according to the area of the Facility so condemned or taken. If at any time
during the Lease Term a part of the Plant or the Land beneath the Plant shall be
taken by Condemnation and as a result of such taking by Condemnation Tenant's
use or operation of the Plant is materially impaired, then, effective as of the
date of vesting of title (i) this Lease Agreement and the leasehold estate
created hereby shall terminate, (ii) all Fixed Rent, additional
16
<PAGE>
rent and other rents, and charges herewith shall be prorated and paid to the
date of termination, and (iii) Landlord shall retain the full amount of any
Condemnation award and Tenant shall have no claim thereto.
(c) In the event the entire Facility shall be taken by Condemnation,
then, effective as of the date of vesting of title (i) this Lease Agreement and
the leasehold estate created hereby shall terminate, (ii) all Fixed Rent,
additional rent and other rents, and charges herewith shall be prorated and paid
to the date of termination, and (iii) Landlord shall retain the full amount of
any Condemnation award and Tenant shall have no claim thereto.
(d) Notwithstanding the provisions of Section 4.2(a) above, if more
than 30% of the monetary value of the Facility (exclusive of excavations and
foundations) shall be taken by Condemnation and in Landlord's reasonable
judgment it is not practicable or desirable to restore the Facility, Landlord
shall have the right to terminate this Lease Agreement and the leasehold estate
created hereby by notice in writing given to Tenant at least 90 days (or such
lesser time as may have been made available by such condemning authorities)
prior to the date possession of the Facility or the part thereof taken by
Condemnation is surrendered to the condemning authorities, in which case (i)
this Lease Agreement and the leasehold estate created hereby shall terminate as
of the date such possession is surrendered to the' condemning authorities; (ii)
all rents and other charges shall be prorated and paid to such date of
termination; and (iii) the entire Condemnation award shall be paid to Landlord
and Tenant shall have no claim thereto.
ARTICLE V
SPECIAL COVENANTS
Section 5.1. No Warranty of Condition or Suitability Landlord. Landlord
------------------------------------------------
makes no warranty, either express or implied, as to the condition, title,
design, operation, merchantability
17
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or fitness of the Facility or the Equipment or that they are or will be suitable
for Tenant's purposes or needs.
Section 5.2. Hold Harmless Provisions. Tenant hereby releases Landlord
------------------------
from, agrees that Landlord shall not be liable for, and agrees to indemnify and
hold Landlord harmless from and against, any and all (i) liability for loss or
damage to property or injury to or death of any and all persons that may be
occasioned by any cause whatsoever pertaining to the Facility or the Equipment
or arising by reason of or in connection with the occupation or the, use thereof
or the presence on, in or about the Facility or the Equipment, except if caused
by Landlord's willful misconduct, and (ii) liability arising from or expense
relating to the construction, renovation, equipping, owning and leasing of the
Facility, and all causes of action and attorneys' fees and any other expenses
incurred in defending any suits or actions which may arise as a result of any of
the foregoing, provided that any such losses, damages, liabilities or expenses
of Landlord are not incurred or do not result from the willful wrongdoing of
Landlord. Nothing contained herein shall inure to the benefit of any insurance
company or insurer by way of subrogation or otherwise.
Section 5.3. Landlord's Repairs. (a) Landlord agrees that, during the
------------------
Lease Term, it will make all necessary Structural Repairs to the Facility;
provided, however, that Tenant shall be responsible for those Structural Repairs
- -------- -------
caused by or arising out of any act, failure to act or negligence of Tenant.
(b) Landlord shall be responsible for the repairs necessary to
maintain: (i) the leak-free condition of the roof of the Plant for the Lease
Term; provided, however, that Tenant shall be responsible for those repairs
-------- -------
caused by or arising out of any act, failure to act or negligence of Tenant.
18
<PAGE>
Section 5.4. Responsibility for the Sprinkler System. Tenant agrees that
---------------------------------------
during the Lease Term it will at its own expense make all necessary repairs and
replacements to the sprinkler system (the "Sprinkler System"), in a timely
manner, and Tenant will provide Landlord with notice of such repairs and
replacements. Tenant further agrees that it will, throughout the Lease Term,
comply with all statutes, rules, regulations, permits, licenses, and
requirements of all federal, state, county, municipal and other governments,
which now or at any time hereafter may be applicable to the Sprinkler System.
Section 5.5. Right to Inspect the Facility and the Equipment. Landlord and
-----------------------------------------------
its respective duly authorized agents, including, but not limited to insurers,
shall have the right at all reasonable times to inspect the Facility.
Section 5.6. Good Standing in the State. Throughout the Lease Term, Tenant
--------------------------
shall continue to maintain its corporate existence and be in good standing in
the State of Arkansas.
Section 5.7. Agreement to Provide Information. Tenant agrees, on each
--------------------------------
anniversary of the Lease Commencement Date and whenever requested by Landlord,
to provide and certify or cause to be provided and certified financial
statements and such additional information concerning Tenant, its finances, its
banking relationships and other topics as Landlord from time to time reasonably
considers necessary or appropriate, including, without limitation, such
information as reasonably may be necessary to enable them or either of them to
make any reports required by law or governmental regulation. Tenant shall advise
Landlord of any change in Tenant's principal banking relationships.
Section 5.8. Books of Record and Account; Financial Statements. Tenant
-------------------------------------------------
agrees to maintain proper accounts, records and books in which full and correct
entries shall be made, in accordance with generally accepted accounting
principles, of all business and affairs of Tenant. Within 120 days after the
close of each fiscal year of Tenant during the Lease Term, Tenant shall
19
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furnish to Landlord a copy of Tenant's certified annual financial statements for
its immediately preceding fiscal year, audited by a firm of independent public
accountants of recognized standing, selected by Tenant.
Section 5.9. Compliance with orders. Ordinances, Etc. Tenant agrees
----------------------------------------
that it will, throughout the Lease Term, comply with all statutes, codes, laws,
acts, ordinances, orders, judgments, decrees, injunctions, rules, regulations,
permits, licenses, authorizations, directions and requirements of all federal,
state, county, municipal and other governments, departments, commissions,
boards, companies or associations insuring the premises, courts, authorities,
officials and officers, foreseen or unforeseen, ordinary or extraordinary, which
now or at any time hereafter may be applicable to the Facility or any part
thereof or the Equipment, or to any use, manner of use or condition of the
Facility or any part thereof or the Equipment, including, without limiting the
generality of the foregoing, all Arkansas State and Occupational Safety and
Health Act ("OSHA") regulations governing the pillow filling in plants.
Section 5.10. Discharge of Liens and Encumbrances. Tenant shall not
-----------------------------------
permit or create or suffer to be permitted or created any lien, except for
Permitted Encumbrances, upon the Facility or any part thereof or the Equipment
by reason of any labor, services or materials rendered or supplied or claimed to
be rendered or supplied with respect to the Facility or any part thereof or the
Equipment. If any such lien is filed against the Facility or the Equipment
(other than liens arising from acts or omissions of Landlord or judgments
against Landlord), Tenant shall discharge the same within thirty days of such
filing and at its own expense. If Tenant fails to discharge any such lien within
thirty days of filing, Landlord may discharge the same at the expense of Tenant
and Tenant shall pay as additional rent the expenses thereof incurred by
Landlord with interest thereon as herein provided.
20
<PAGE>
ARTICLE VI
ASSIGNMENT AND SUBLEASING; MORTGAGE
AND PLEDGE OF INTEREST
Section 6.1. Assignment and Subleasing. Tenant shall not assign this
--------------------------
Lease Agreement in whole or in part nor sublease the Facility or the Equipment
in part without the prior written consents of the Landlord, which consent shall
not be unreasonably withheld or delayed. In addition, Tenant may sublease the
Facility to one of its subsidiaries or divisions without Landlord's permission,
provided, however, Tenant shall provide Landlord with prior written notice of
- -------- -------
such sublease. Prior to requesting the approval of Landlord to an assignment or
subletting of the Facility, as hereinafter provided, Tenant shall advise
Landlord of (i) the name and address of the proposed subtenant or assignee; (ii)
the terms, conditions and consideration of the proposed subletting or
assignment; (iii) the nature and character of the business of the proposed
subtenant or assignee and of its proposed use of the Facility; and (iv) current
financial information and any other information as Landlord may reasonably
request with respect to the proposed subtenant or assignee. Tenant shall pay to
Landlord as additional rent, within twenty day after notice and demand therefor,
Landlord's reasonable attorneys' fee incurred as a result of having any proposal
reviewed or consent documented. In the case of an assignment, Landlord may
withhold its consent if the nature and character or the financial condition of
the proposed assignee is not equal to or better than that of Tenant. In the
event Tenant proposes to sublease more than 75% of the Facility for all or
substantially all of the duration of the Lease Term, Landlord may withhold its
consent and require that such transaction be structured as an assignment:
(1) No assignment or sublease shall relieve Tenant from primary
liability for any of its obligations hereunder;
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(2) The assignee or sublessee shall assume the obligations of Tenant
hereunder to the extent of the interest assigned or subleased;
(3) Tenant shall, within ten days after the delivery thereof, furnish
or cause to be furnished to the Landlord a true and complete copy of each such
assignment or sublease, as the case may be, and the instrument of assumption;
and
(4) Tenant shall pay to Landlord as additional rent, as and when paid
by any subtenant to Tenant, one-half of any rents, additional charges or other
consideration payable under the sublease to Tenant by the subtenant which is in
excess of the Fixed Rent accruing during the term of the sublease in respect of
the subleased space (at the rate per square foot payable by Tenant hereunder)
pursuant to the terms hereof.
ARTICLE VII
EVENTS OF DEFAULT AND REMEDIES
Section 7.1. Events of Default Defined. (a) The following shall be
-------------------------
"Events of Default" under this Lease Agreement and the term "Event of Default"
or "Default" shall mean, whenever they are used in this Lease Agreement, any one
or more of the following events:
(1) The failure by Tenant to pay the Fixed Rent and Equipment Rent
within five days of the date when due;
(2) The failure by Tenant to pay any additional rent within ten days
after notice and demand by Landlord to Tenant;
(3) The failure by Tenant to observe or perform any covenant,
condition or agreement hereunder on its part to be observed or performed (except
obligations referred to in
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Sections 7.1(a) (1) and (2) above) for a period of thirty days after written
notice, specifying such failure and requesting that it be remedied, given to
Tenant by Landlord;
(4) The filing by Tenant of a voluntary petition in bankruptcy, or
the failure by Tenant within sixty days to lift any execution, garnishment or
attachment of such consequence as will impair its ability to carry on its
operations at the Facility, or the commission by Tenant of any act of
bankruptcy, or the adjudication of Tenant as a bankrupt, or the assignment of
assets by Tenant for the benefit of its creditors, or the entry by Tenant into
an agreement of composition with its creditors, or the approval by a court of
competent jurisdiction of a petition applicable to Tenant in any proceeding for
its reorganization instituted under the provisions of any state or federal
bankruptcy or similar law, or appointment by order, judgment or decree of a
court of competent jurisdiction of a receiver of the whole or a substantial
portion of the properties of Tenant (unless such receiver is removed or
discharged within sixty days of the date of his qualification).
(b) Notwithstanding the provisions of Section 7.1(a), if by reason of
force majeure either party hereto shall be unable in whole or in part to carry
out its obligations under this Lease Agreement and if such party shall give
notice and full particulars of such force majeure in writing to the other party
within a reasonable time after the occurrence of the event or cause relied upon,
the obligations under this Lease Agreement of the party giving such notice, so
far as they are affected by such force majeure, shall be suspended during the
continuance of the inability, which shall include a reasonable time for the
removal of the effect thereof. The suspension of such obligations for such
period pursuant to this subsection (b) shall not be deemed an event of default
under this Section 7.1. Notwithstanding anything to the contrary in this
subsection (b), an event of force majeure shall not excuse, delay or in any way
diminish the
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obligations of Tenant to pay the Fixed Rent and Equipment Rent when due or to
provide the indemnity required by Section 5.2 hereof. The term "force majeure"
as used herein shall include, without limitation, acts of God, strikes, lockouts
or other industrial disturbances, acts of public enemies, orders of the State or
any of their departments, agencies, governmental subdivisions, or officials, or
any civil or military authority, insurrections, riots, epidemics, landslides,
lightning, earthquakes, fire, hurricanes, storms, floods, washouts,
disturbances, explosions, breakage or accident to machinery, transmission pipes
or canals, partial or entire failure of utilities, or any other cause or event
not reasonably within the control of the party claiming such inability. It is
agreed that the settlement of strikes, lockouts and other industrial
disturbances shall be entirely within the discretion of the party having
difficulty, and the party having difficulty shall not be required to settle any
strike, lockout and other industrial disturbances by acceding to the demands of
the opposing party or parties.
Section 7.2. Remedies on Default. (a) Whenever any Event of Default
-------------------
shall have occurred and be continuing, Landlord may take any one or more of the
following steps:
(1) Declare, by written notice to Tenant, to be immediately due and
payable, whereupon the same shall become immediately due and payable to the
extent permitted by law all unpaid installments of Fixed Rent or Equipment Rent.
(2) Re-enter and take possession of the Facility (without terminating
this Lease Agreement and without being liable for any prosecution or damages
therefor) and sublease the Facility for the account of Tenant, holding Tenant
liable for the amount, if any, by which the aggregate of the Fixed Rent payable
by Tenant hereunder exceeds the aggregate of the rents and other amounts
received from the sublessee under such sublease.
24
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(3) Terminate the Lease Term and this Lease Agreement and, without
being liable for any prosecution or damages therefor, exclude Tenant from
possession of the Facility and use its best efforts to lease the Facility to
another Person for the account of Tenant, holding Tenant liable for the amount,
if any, by which the aggregate of the Fixed Rent payable by Tenant hereunder
exceeds the aggregate of the rents and other amounts received from such other
Person under the new lease.
(4) Take any other action at law or in equity which may appear to
Landlord necessary or desirable to collect the payments then due or thereafter
to become due hereunder, to secure possession of the Facility, and to enforce
the obligations, agreements or covenants of Tenant under this Lease Agreement.
(b) In the event the Facility is subleased or leased to another
Person pursuant to Section 7.2 (a) (2) or (3) hereof, Landlord may (but shall be
under no obligation to) make such repairs or alterations in or to the Facility
and the Equipment as it may deem necessary or desirable for the implementation
of such sublease or lease and Tenant shall be liable and agrees to pay the costs
of such repairs or alterations and the expenses incidental to the effecting of
such sublease or lease, together with interest thereon at the rate herein
provided, notwithstanding that this Lease Agreement may have been terminated
pursuant to Section 7.2(a)(3) hereof.
Section 7.3. Remedies Cumulative. No remedy herein conferred upon or
-------------------
reserved to Landlord is intended to be exclusive of any other available remedy,
but each and every such remedy shall be cumulative and in addition to every
other remedy given under this Lease Agreement or now or hereafter existing at
law or in equity. No delay or omission to exercise any right or power accruing
upon any default shall impair any such right or power or shall be construed to
be a waiver thereof, but any such right and power may be exercised from time to
25
<PAGE>
time and as often as may be deemed expedient. In order to entitle Landlord to
exercise any remedy reserved to it in this Article, it shall not be necessary to
give any notice, other than such notice as may be herein expressly required in
this Lease Agreement.
Section 7.4. Agreement to Pay Attorneys' Fees and Expenses. In the
----------------------------------------------
event Tenant should default under any of the provisions of this Lease Agreement
and Landlord should employ attorneys or incur other expenses for the collection
of amounts payable hereunder or the enforcement of performance or observance of
any obligations or agreements on the part of Tenant herein contained, Tenant
shall, on demand therefor, pay to Landlord the reasonable fees of such attorneys
and such other expenses so incurred.
ARTICLE VIII
RENEWAL OPTION
Section 8.1. Tenant's Renewal Option. Tenant shall have the option, to
-----------------------
be exercised as hereinafter provided, to extend the term of this Lease Agreement
for succeeding periods of one year (each, an "Extended Term") upon the following
terms and conditions:
(A) That at the time of the exercise of such option and the
commencement of the Extended Term, Tenant shall not be in default in the
performance of any of the terms, covenants or conditions herein contained.
(B) That at the time of the exercise of such option and the
commencement of the Extended Term, the Tenant named herein or any permitted
assignee of Tenant shall be in actual occupancy of the entire Facility.
(C) Except as provided herein, that the extension shall be upon
terms, covenants and conditions as mutually agreed between the parties.
(E) Tenant shall exercise its right to extend the term of this lease
by notifying Landlord of Tenant's election to exercise such option not later
than six months prior to the
26
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Expiration Date or the end of any Renewal Term. Upon the giving of such notice,
this Lease Agreement shall be deemed extended for the specified period, subject
to the provisions of this Article, without execution of any further instrument.
In the event that Tenant exercises the option provided for in this Article, then
the term "Lease Term" as used herein shall be deemed to include the Extended
Term.
(F) Time shall be of the essence with respect to the exercise by
Tenant of the option set forth in this Article.
ARTICLE IX
PURCHASE OPTION
Section 9.1. Facility Purchase Option. (a) Provided that Tenant
-------------------------
shall (i) not be in default in the performance of any of the terms, covenants or
conditions herein contained on the date the option shall be exercised and on the
date title shall be transferred pursuant to this Article, and (ii) that Tenant
herein named, or any permitted assignee of Tenant shall be in occupancy of the
entire Facility the date the option shall be exercised and on the date title
shall be transferred pursuant to this Section, Tenant shall have the option to
purchase the Facility upon terms and subject to the conditions and at the
purchase price hereinafter set forth. Tenant shall exercise the option provided
for by first giving Landlord notice of its election to so exercise the option
(the "First Notice"). In the event Tenant gives such First Notice, then the
purchase price shall be determined as provided in paragraph (c) below. Once the
purchase price has been finally determined, then Tenant shall within 60 days of
such determination notify Landlord that Tenant is proceeding with the purchase
(the "Second Notice") and in such Second Notice set a date for closing which is
at least 30 days but not more than 45 days following the date of such Second
Notice. In the event that Tenant fails to give the Second Notice on a timely
basis, then (i) Tenant shall pay to Landlord within 10 days following Landlord's
demand therefor Landlord's
27
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appraisal costs and additional costs incurred in determining the purchase price
all costs and (which payment by Tenant to Landlord shall constitute additional
rent) and (ii) this Lease Agreement, including but not limited to Tenant's
rights pursuant to this Article, shall remain in full force and effect.
(b) The purchase price shall be the fair market value of the
Facility, excluding any leasehold improvements made by Tenant, determined as
follows:
(i) Within 20 days following the giving of the First Notice,
Landlord and Tenant shall each designate an appraiser who shall be an
M.A.I. in good standing having at least 10 years of experience in
appraising buildings in Benton County, Arkansas. The two appraisers so
chosen shall meet within 10 days after the second appraiser is appointed
and if, within 20 days after the second appraiser is appointed, the two
appraisers shall not agree upon a determination of the fair market value of
the Facility by 10% or less, then the Purchase Price shall be the amount
exactly in between the appraisers' determinations. If the two appraisers
shall not agree upon a determination of the fair market value of the
Facility by greater than 10%, they shall together appoint a third
appraiser. If said two appraisers cannot agree upon the appointment of a
third appraiser within 10 days after the expiration of such 20 day period,
then either party, on behalf of both, and on notice to the other may
request such appointment by the American Arbitration Association (or any
successor organization, or if no successor organization exists, a
comparable organization) in accordance with its then prevailing rules. If
the American Arbitration Association shall fail to appoint said third
appraiser within 10 days after such request is made, then either party may
apply, on notice to the
28
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other, to the state court in Benton County, Arkansas (or any other court
having jurisdiction and exercising functions similar to those now exercised
by the foregoing court) for the appointment of such third appraiser. Each
party shall pay the fees and expenses of the appraiser selected by it. The
fees and expenses of the third appraiser and all other expenses (not
including the attorney's fees, witness fees and similar expenses of the
parties which shall be borne separately by each of the parties) of the
arbitration shall be borne equally by the parties hereto. Such appraisers
shall, by majority thereof, appraise the Facility in order to determine the
fair market value thereof in accordance with generally accepted appraisal
methods as promulgated and endorsed by the American Institute of
Appraisers. It is the intention of the foregoing provisions that a final
determination as to the purchase price should be reached within 90 days
following the giving of the First Notice.
(ii) If the Tenant exercises its option to purchase the Facility
within two years of the Term Commencement Date, Fifty Percent (50%) of all Fixed
Rent paid at the time of the exercise of such option shall be credited towards
such purchase price.
(c) If Tenant shall have elected to purchase the Facility by delivery of
the Second Notice to Landlord, the parties hereto shall enter into a contract of
sale in substantially the same form as the standard form of commercial contract
of sale accepted in the State of Arkansas. Such contract of sale shall be dated
the date that a final determination of the purchase price is made and shall
provide for a closing sixty days after such date (subject to such reasonable
extensions as the parties shall reasonably determine to be necessary).
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<PAGE>
(d) In the event that (i) Tenant elects to purchase the Facility by
delivery of the Second Notice to Landlord; and (ii) the title to the Facility
fails to be transferred due to or arising out of any act, failure to act or
negligence of Tenant, then this Lease Agreement and all of its terms shall
remain in full force and effect for the then remaining balance of the Lease
Term.
Section 9.2 Equipment Purchase Option. Provided that Tenant shall (i) not
-------------------------
be in default in the performance of any of the terms, covenants or conditions
herein contained on the date the option shall be exercised and on the date title
shall be transferred pursuant to this Article, and (ii) that Tenant herein
named, or any permitted assignee of Tenant shall be in occupancy of the entire
Facility the date the option shall be exercised and on the date title shall be
transferred pursuant to this Section, Tenant shall have the option to purchase
the Equipment during the Lease Term for Seventy-Five Thousand Dollars
($75,000.00) (the "Purchase Option"). If the Purchase Option is exercised within
twelve months of the Term Commencement Date. One Hundred Percent (100%) of all
Equipment Rent paid at the time of the exercise of such option shall be credited
towards such purchase price.
ARTICLE X
RIGHT OF FIRST REFUSAL
Section 10.1. Right of First Refusal. Notwithstanding anything
----------------------
contained in Section 9.1 of this Lease Agreement, Landlord can sell, transfer,
or otherwise dispose of the Facility if Landlord complies with the requirements
set forth in this Section 10.1. Landlord shall not, during the Lease Term, sell,
transfer, or otherwise dispose of the Facility unless Landlord first shall have
received a bona fide offer for the purchase of the Facility and shall have
notified Tenant in writing of the names of the party or parties making the
offer, the price and the terms and conditions thereof. Tenant shall have the
prior right, at its option, for a period of 30 days following receipt by Tenant
of Landlord's notice of the offer, by notice to the Landlord of its
30
<PAGE>
intention to do so, to purchase the Facility, at the same price and upon the
same terms and conditions as are contained in such offer. In the event that
Tenant exercises its option to purchase, Tenant shall be obligated to pay the
purchase price or accept title to the premises in accordance with the provisions
of the offer and to close the transfer of title on the date provided for in such
offer, but in no event before the sixtieth day following the date of the giving
of such notice of exercise. If Tenant fails to exercise its right to purchase
the Facility, and for any reason Landlord shall not thereafter sell or convey
the Facility, to the party or parties making the offer at a price not less than
that contained in the offer and upon substantially the same terms and conditions
contained therein, the foregoing restriction against Landlord's sale or other
disposition of the Facility set forth in this Section shall continue in full
force and effect and Tenant's prior right to purchase shall apply with respect
to any new offer relating to the Facility received by Landlord, all as more
particularly provided above. If Tenant fails to exercise its right to purchase
the Facility, and Landlord thereafter sells or conveys the Facility to the party
or parties making the offer, this Lease Agreement will terminate and Tenant
shall have six months to vacate the Facility. The provisions of this Section
shall not apply to transfers of ownership interests in Landlord or to a transfer
to an entity within the corporate family or other entity to which substantially
all of Landlord's assets are transferred, or to any other change in the
beneficial ownership of Landlord. In the event that Tenant elects to purchase
the Facility pursuant to this Section and the title to the Facility fails to be
transferred due to or arising out of any act, failure to act or negligence of
Tenant, then in addition to any other rights or claims Landlord will have at
law, equity or otherwise, such failure will be considered an Event of Default
under this Lease Agreement.
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ARTICLE XI
MISCELLANEOUS
Section 11.1. Surrender of Facility. At the termination of the Lease
---------------------
Term Tenant shall surrender possession of the Facility peacefully and promptly
to Landlord in good repair and good order.
Section 11.2. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given if hand delivered or if sent by
registered or certified mail, return receipt requested, when deposited in the
mails, by first class postage prepaid, addressed as follows:
To Landlord: Ex-Cell Home Fashions, Inc.
295 Fifth Avenue
New York, New York 10016
Attention: Samuel Samelson, President
with a copy to: Ex-Cell Home Fashions, Inc.
P.O. Box 1879
Goldsboro, NC 27533
Attention: Jerry Bankhead,
V.P. of Manufacturing & Distribution
with a copy to: Glenoit Corporation
111 West 40th Street
New York, NY 10018
Attention: Dupuy Sears, Chief Financial Officer
with a copy to: Winston & Strawn
200 Park Avenue
New York, New York 10166
Attention: John C. Phelan, Esq.
To Tenant: Aladdin Manufacturing Corporation
c/o Mohawk Rug & Textiles Division
P.O. Box 130
3090 Sugar Valley Road, NW
Sugar Valley, GA 30746
with a copy to: Mohawk Industries, Inc.
160 South Industrial Blvd.
P.O. Box 12069
32
<PAGE>
Calhoun, GA 30703
Attention: Salvatore J. Perillo, General Counsel
Landlord and Tenant may, by notice given hereunder, designate any further or
different addresses to which subsequent notices and other communications shall
be sent.
Section 11.3. Binding Effect. This Lease Agreement shall inure to the
--------------
benefit of and shall be binding upon Landlord, Tenant and their respective
successors and permitted assigns.
Section 11.4. Severability. In the event any provision of this Lease
------------
Agreement shall be held invalid or unenforceable by any court of competent
jurisdiction, such holding shall not invalidate or render unenforceable any
other provision hereof.
Section 11.5. Amendments, Changes and Modifications. This Lease Agreement
-------------------------------------
may not be amended, changed, modified or altered except by a writing executed by
the parties.
Section 11.6. Execution of Counterparts. This Lease Agreement may be
-------------------------
executed in several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
Section 11.7. Applicable Law. This Lease Agreement shall be governed by
--------------
the laws of the State of Arkansas.
Section 11.8. Table of Contents and Section Headings Not Controlling.
------------------------------------------------------
The Table of Contents and the headings of the several sections in this Lease
Agreement have been prepared for convenience of reference only and shall not
control, affect the meaning or be taken as an interpretation of any provision of
this Lease Agreement.
Section 11.9. Estoppel Certificate. Tenant agrees at any time and from
--------------------
time to time to execute and deliver to the Landlord a statement (i) certifying
that this Lease Agreement is unmodified and in full force and effect (or, if
there have been modifications, that the same is in full force and effect as
modified and reciting such modifications) and whether any options
33
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granted to Tenant pursuant to the provisions of this Lease Agreement have been
exercised, (ii) certifying the dates to which the Fixed Rent and Additional Rent
have been paid and the amounts thereof, and (iii) stating whether or not, to the
best knowledge of Tenant, the Landlord is in default in performance of any of
its obligations under the Lease Agreement, and, if so, specifying each such
default of which Tenant may have knowledge, it being intended that any such
statement delivered pursuant hereto may be relied upon by others with whom the
Landlord may be dealing.
Section 11.10. Quiet Enjoyment. The Landlord covenants and agrees with
---------------
Tenant that upon Tenant paying the Fixed and, Additional Rent and observing and
performing all the terms, covenants and conditions, on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Facility.
Section 11.11. Security Deposit. Tenant has deposited with Landlord a sum
----------------
equal to one monthly installment of Fixed Rent, as security for the full and
punctual performance by Tenant of all of the terms of this Lease Agreement.
Landlord agrees to pay to Tenant, promptly following each anniversary of the
Term Commencement Date, interest on such security deposit at the rate of four
percent per annum. In the event Tenant defaults in the performance of any of the
terms of this Lease Agreement, Landlord may apply the whole or any part of the
security so deposited to the extent required for the payment of (i) any rent or
(ii) any sum which Landlord may expend or may be required to expend by reason of
Tenant's default including, without limitation, any damages or deficiency in the
reletting of the Facility, whether accruing before or after summary proceedings
or other re-entry by Landlord. Upon each such application, Tenant shall, on
demand, pay to Landlord the sum so applied which shall be added to the security
deposit so that the same shall be restored to the amount first set forth above.
if Tenant shall fully
34
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and punctually comply with all of the terms of this Lease Agreement, the amount
of the security deposit, without interest, shall be returned to Tenant after the
termination of this Lease Agreement and delivery of exclusive possession of the
Facility, Landlord shall have the right to transfer the security to the vendee
or lessee and Landlord shall ipso facto be released by Tenant from all liability
for the return of such security; and Tenant agrees to look solely to the new
landlord for the return of said security and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the security to a new
landlord. Tenant shall not assign or encumber or attempt to assign or encumber
the monies deposited herein as security and neither Landlord nor its successors
or assigns shall be bound by any such assignment, encumbrance, or attempted
assignment or encumbrance.
Section 11.12. No Additional Waiver Implied By One Waiver. In the event
------------------------------------------
any agreement contained herein should be breached by Tenant and thereafter
waived by Landlord, such waiver shall be limited to the particular breach so
waived and shall not be deemed to waive any other breach hereunder.
Section 11.13. Brokerage Agreement. Tenant represents and warrants to
-------------------
Landlord that no broker brought about this lease transaction, and that neither
Tenant nor its respective employees or agents had any conversations or other'
contract with any in regard to this lease transaction. Tenant acknowledges that
Landlord is entering into this lease in reliance upon the foregoing warranty and
representation. Tenant agrees to cooperate with Landlord and to provide
testimony in any action, or proceeding brought against Landlord based upon a
claim by a broker for a commission or other such payment in connection with this
lease transaction.
Section 11.14 Excluded Equipment. The pillow closing sewing machines
------------------
will be included in this Lease Agreement as Equipment for a period of one month
following the Term
35
<PAGE>
Commencement Date, at which time such pillow closing sewing machines shall no
longer be included as Equipment hereunder and shall, at Landlord's sole cost and
expense, be disassembled, properly packaged and shipped to Landlord at Ex-Cell
Home Fashions, Inc., P.O. Box 1879, Goldsboro, NC 27533, Attention: Jerry
Bankhead, V.P. of Manufacturing & Distribution.
Section 11.15 Storage Area. Landlord may, at its option, vacate the
------------
Storage Area currently excludes from the Initial Space (as hereinafter defined)
leased under the Lease Agreement, and lease such Storage Area to Tenant at an
annual rental rate per rentable square foot equal to the then payable fixed
annual base under this Lease Agreement and otherwise on the same terms and as
are set forth in this Lease Agreement.
(a) Landlord shall give Tenant a notice (the "Storage Area Notice")
not less than thirty days prior to the date Tenant would be required to accept
possession of same hereunder. The Storage Area Notice shall (i) indicate the
date on which the Storage Area shall become available and (ii) specify
Landlord's determination of the rent for the Storage Area. Tenant shall lease
the Storage Area at the fixed annual rent specified in the Storage Area Notice,
subject to adjustment as hereinafter provided, for a term commencing on the
"Storage Area Term Commencement Date" (as hereinafter defined) and continuing
for the balance of the Term on the terms and conditions hereinafter specified.
(b) This Lease Agreement shall automatically be amended to include
the Storage Area effective as of the Storage Area Term Commencement Date upon
the terms and conditions herein specified:
(i) Landlord hereby leases to Tenant and Tenant hereby rents
from Landlord the Storage Area on the terms and conditions hereinafter set forth
for a term (the
36
<PAGE>
"Storage Area Term") commencing on the date set forth in such Storage Area
Notice as the date the Storage Area was to become available, (the "Storage Area
Term Commencement Date") and ending on the expiration date of the term for the
space initially leased by Tenant hereunder (the "Initial Space")
(ii) The fixed annual base rent payable under this lease as the
same may have been increased from time to time pursuant to the terms of this
lease shall be further increased by an amount equal to rentable space feet of
the Storage Area multiplied by the fixed annual rent per rentable square foot
for such Storage Area specified in the Storage Area Notice.
(iii) Tenant will accept said Storage Area in its "as is"
condition on the Storage Area Term Commencement Date.
(c) Except as otherwise specifically provided in this Article, from
and after the Storage Area Term Commencement Date, all references in the lease
to the demised premises shall be deemed to apply to the Storage Area as well as
to the Initial Space and all of the terms, provisions and conditions of this
lease shall apply to the Storage Area with the same force and effect as if it
were leased to Tenant initially together with the Initial Space.
(d) Should the Storage Area Term Commencement Date for the Storage
Area fall on any day other than the first day of a month, then the fixed annual
rent attributable to the Storage Area shall be prorated on a per diem basis, and
Tenant agrees to pay the amount thereof for such partial month on the Storage
Area Term Commencement Date.
(e) In no event shall the fixed annual rent payable with respect to
the Storage Area on a per square foot basis determined as herein provided be
less than the fixed annual rent per square foot than being paid under this lease
for the Initial Space.
37
<PAGE>
(f) From and after the first day of the Storage Area Term, all
references in the lease to the demised premises shall be deemed to apply to the
Storage Area and Initial Space.
(g) Except as expressly permitted by this lease, Tenant shall not be
permitted to sublet or assign all or any part of the Storage Area.
(h) Except as otherwise specifically provided in this Article, all of
the terms, provisions and conditions of the lease shall apply to the Storage
Area with the same force and effect as if it were leased to Tenant initially
together with the Initial Space demised hereunder.
(i) The termination, cancellation or surrender of this lease as to
the entire demised premises shall terminate any rights of Tenant pursuant to
this Article.
Section 11.16 Personal Property. The Equipment is, and shall at all
-----------------
times be and remain, personal property notwithstanding that the Equipment or any
part thereof may now be, or hereafter become, in any matter affixed or attached
to, or imbedded in, or permanently resting upon, real property or any building
thereon, or attached in any manner to what is permanent as by means of cement,
plaster nails, bolts, screws or otherwise.
Section 11.17 Ownership. The Equipment is, and shall at all times be
---------
an remain, the sole and exclusive property of Landlord; and Tenant shall have no
right, title or interest therein or thereto except as expressly set forth in
this Lease Agreement.
38
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease
Agreement to be executed in their respective corporate names and their
respective corporate seals to be hereunto affixed and attested by their duly
authorized officers, all as of the date first above written.
EX-CELL HOME FASHIONS, INC.
By: /s/ Samuel Samelson
-------------------------
Name: Samuel Samelson
Title: President
ALADDIN MANUFACTURING CORPORATION
By: /s/ Salvatore J. Perillo
--------------------------
Name: Salvatore J. Perillo
Title: Asst Secretary
General Council
39
<PAGE>
EXHIBIT A
Description of Land
SURVEY FOR BEAR BRAND
- ---------------------
<PAGE>
EXHIBIT 10.15
FIFTH AMENDED AND RESTATED CREDIT AGREEMENT
dated as of
November 23, 1999
among
MOHAWK INDUSTRIES, INC.,
FIRST UNION NATIONAL BANK, as Agent,
SUNTRUST BANK, ATLANTA, as Agent,
and
WACHOVIA BANK, N.A., as Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE I
DEFINITIONS........................................................................ 1
SECTION 1.01. Definitions............................................................... 1
SECTION 1.02. Accounting Terms and Determinations....................................... 13
SECTION 1.03. References................................................................ 14
SECTION 1.04. Use of Defined Terms...................................................... 14
SECTION 1.05. Terminology............................................................... 14
ARTICLE II
THE CREDITS........................................................................ 14
SECTION 2.01. Commitments to Lend....................................................... 14
SECTION 2.02. Method of Borrowing....................................................... 14
SECTION 2.03. Notes..................................................................... 16
SECTION 2.04. Maturity of Loans......................................................... 16
SECTION 2.05. Interest Rates............................................................ 16
SECTION 2.06. Fees...................................................................... 18
SECTION 2.07. Optional Termination or Reduction of Commitments.......................... 19
SECTION 2.08. Mandatory Reduction and Termination of Commitments........................ 19
SECTION 2.09. Optional Prepayments...................................................... 19
SECTION 2.10. Mandatory Prepayments..................................................... 20
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
SECTION 2.11. General Provisions as to Payments........................................ 20
SECTION 2.12. Computation of Interest and Fees......................................... 20
SECTION 2.13. Letters of Credit........................................................ 20
SECTION 2.14. Guarantee of Reimbursement Obligations................................... 22
SECTION 2.15. Assignments of Loans under Original Credit Agreement; Effective Date..... 24
ARTICLE III
CONDITIONS TO BORROWINGS.......................................................... 25
SECTION 3.01. Conditions to Initial Borrowing.......................................... 25
SECTION 3.02. Conditions to All Borrowings............................................. 26
ARTICLE IV
REPRESENTATIONS AND WARRANTIES.................................................... 27
SECTION 4.01. Corporate Existence and Power............................................ 27
SECTION 4.02. Corporate and Governmental Authorization; No Contravention............... 27
SECTION 4.03. Binding Effect........................................................... 27
SECTION 4.04. Financial Information.................................................... 27
SECTION 4.05. No Litigation............................................................ 28
SECTION 4.06. Compliance with ERISA.................................................... 28
SECTION 4.07. Taxes.................................................................... 28
SECTION 4.08. Subsidiaries............................................................. 28
SECTION 4.09. Not an Investment Company................................................ 28
SECTION 4.10. Ownership of Property; Liens............................................. 28
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
SECTION 4.11. No Default.............................................................. 29
SECTION 4.12. Full Disclosure......................................................... 29
SECTION 4.13. Environmental Matters................................................... 29
SECTION 4.14. Capital Stock........................................................... 29
SECTION 4.15. Margin Stock............................................................ 30
SECTION 4.16. Insolvency.............................................................. 30
SECTION 4.17. Year 2000 Issues........................................................ 30
ARTICLE V
COVENANTS........................................................................ 30
SECTION 5.01. Information............................................................. 30
SECTION 5.02. Inspection of Property, Books and Records............................... 32
SECTION 5.03. Year 2000 Issues........................................................ 32
SECTION 5.04. Debt to Capitalization Ratio............................................ 33
SECTION 5.05. Debt to EBITDA Ratio.................................................... 33
SECTION 5.06. Restricted Payments..................................................... 33
SECTION 5.07. Investments............................................................. 33
SECTION 5.08. Negative Pledge......................................................... 33
SECTION 5.09. Maintenance of Existence................................................ 34
SECTION 5.10. Dissolution............................................................. 34
SECTION 5.11. Consolidations, Mergers and Sales of Assets............................. 35
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
SECTION 5.12. Use of Proceeds.......................................................... 35
SECTION 5.13. Compliance with Laws; Payment of Taxes................................... 35
SECTION 5.14. Insurance................................................................ 36
SECTION 5.15. Change in Fiscal Year.................................................... 36
SECTION 5.16. Maintenance of Property.................................................. 36
SECTION 5.17. Environmental Notices.................................................... 36
SECTION 5.18. Environmental Matters.................................................... 36
SECTION 5.19. Environmental Release.................................................... 36
SECTION 5.20. Debt of Subsidiaries..................................................... 36
ARTICLE VI
DEFAULTS.......................................................................... 37
SECTION 6.01. Events of Default........................................................ 37
ARTICLE VII
CHANGE IN CIRCUMSTANCES; COMPENSATION............................................. 39
SECTION 7.01. Basis for Determining Interest Rate Inadequate or Unfair................. 39
SECTION 7.02. Illegality............................................................... 40
SECTION 7.03. Increased Cost and Reduced Return........................................ 40
SECTION 7.04. Base Rate Loans Substituted for Euro-Dollar Loans........................ 42
SECTION 7.05. Compensation............................................................. 42
SECTION 7.06. Replacement of Banks..................................................... 43
</TABLE>
(iv)
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
ARTICLE VIII
MISCELLANEOUS..................................................................... 43
SECTION 8.01. Notices.................................................................. 43
SECTION 8.02. No Waivers............................................................... 43
SECTION 8.03. Expenses; Documentary Taxes.............................................. 44
SECTION 8.04. Indemnification.......................................................... 44
SECTION 8.05. Sharing of Setoffs....................................................... 44
SECTION 8.06. Amendments and Waivers................................................... 45
SECTION 8.07. No Margin Stock Collateral............................................... 45
SECTION 8.08. Successors and Assigns................................................... 45
SECTION 8.09. Confidentiality.......................................................... 47
SECTION 8.10. Representation by Banks.................................................. 47
SECTION 8.11. Obligations Several...................................................... 47
SECTION 8.12. Georgia Law.............................................................. 48
SECTION 8.13. Interpretation........................................................... 48
SECTION 8.14. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION............................ 48
SECTION 8.15. Counterparts............................................................. 48
</TABLE>
(v)
<PAGE>
EXHIBIT A Form of Note
EXHIBIT B Form of Opinion of Counsel for the Borrower
EXHIBIT C Form of Assignment and Acceptance
EXHIBIT D Form of Notice of Borrowing
EXHIBIT E Form of Compliance Certificate
Schedule 4.05 Litigation
Schedule 4.08 Subsidiaries
(vi)
<PAGE>
FIFTH AMENDED AND RESTATED CREDIT AGREEMENT
THIS FIFTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of November
23, 1999, among MOHAWK INDUSTRIES, INC., FIRST UNION NATIONAL BANK, SUNTRUST
BANK, ATLANTA, WACHOVIA BANK, N.A., and the other Banks from time to time party
hereto. This Agreement is an amendment and restatement of that certain Fourth
Amended and Restated Credit Agreement, dated as of January 28, 1999 (as amended
and in effect immediately prior to the date hereof, the "Original Credit
Agreement"; as amended and restated hereby, the "Agreement").
The parties hereto agree that the Original Credit Agreement is hereby
amended, restated and superceded in its entirety as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this Section 1.01
-----------
shall, for all purposes of this Agreement and any amendment hereto (except as
herein otherwise expressly provided or unless the context otherwise requires),
have the meanings set forth herein:
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.05(c).
"Affected Bank" has the meaning set forth in Section 7.06.
"Affiliate" means (i) any Person that directly, or indirectly through
one or more intermediaries, controls the Borrower (a "Controlling Person"), (ii)
any Person (other than the Borrower or a Subsidiary) which is controlled by or
is under common control with a Controlling Person, or (iii) any Person (other
than a Subsidiary) of which the Borrower owns, directly or indirectly, 20% or
more of the common stock or equivalent equity interests. As used herein, the
term "control" means possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ownership of voting securities, by contract or otherwise.
"Agreement" means this Fifth Amended and Restated Credit Agreement,
together with all amendments and modifications hereto.
"Aladdin" means Aladdin Manufacturing Corporation, a Delaware
corporation.
<PAGE>
"Amortization" means for any period the sum of all amortization
expenses of the Borrower and its Consolidated Subsidiaries for such period, as
determined in accordance with GAAP.
"Applicant" means each Person which, as the initial applicant or a
Person that has assumed, pursuant to a written agreement in a form reasonably
acceptable to the Required Banks, the obligations of an applicant, is liable for
the reimbursement obligations with respect to a Letter of Credit.
"Applicable Margin" has the meaning set forth in Section 2.05(a).
"Approved Investment" means an Investment in compliance with the
Investment Guidelines.
"Asset Securitization" means the sale of accounts receivable and
related assets of a Person in connection with a bona fide asset securitization
program.
"Assignee" has the meaning set forth in Section 8.08(c).
"Assignment and Acceptance" means an Assignment and Acceptance
executed in accordance with Section 8.08(c) in the form of Exhibit C.
---------
"Authority" has the meaning set forth in Section 7.02.
"Banks" collectively means First Union, SunTrust, Wachovia, and the
other Banks from time to time party hereto.
"Base Rate" means that interest rate as denominated and publicly
announced by Wachovia from time to time as its "prime rate". The Base Rate is
but one of several interest rate bases used by Wachovia. Each of Wachovia,
First Union and SunTrust lends at interest rates above and below the Base Rate.
"Base Rate Loan" means a Loan to be made as a Base Rate Loan pursuant
to the applicable Notice of Borrowing, Section 2.02(f), or Article VII, as
applicable.
"Borrower" means Mohawk Industries, Inc., a Delaware corporation, and
its successors and assigns.
"Borrowing" means a borrowing hereunder consisting of Loans made to
the Borrower at the same time by the Banks pursuant to Article II. A Borrowing
is a "Base Rate Borrowing" if such Loans are Base Rate Loans or a "Euro-Dollar
Borrowing" if such Loans are Euro-Dollar Loans.
2
<PAGE>
"Capital Stock" means any nonredeemable capital stock of the Borrower
or any Consolidated Subsidiary (to the extent issued to a Person other than the
Borrower), whether common or preferred.
"Catoosa Co. IRB" means that issuance of certain bonds by The
Development Authority of Catoosa County, Georgia, pursuant to the terms and
conditions set forth in that certain Indenture of Trust dated as of November 1,
1991.
"CERCLA" means the Comprehensive Environmental Response Compensation
and Liability Act, 42 U.S.C. (S) 9601 et. seq. and its implementing regulations
and amendments.
"CERCLIS" means the Comprehensive Environmental Response Compensation
and Liability Inventory System established pursuant to CERCLA.
"Change of Law" shall have the meaning set forth in Section 7.02.
"Closing Date" means November 23, 1999.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor Federal tax code.
"Commitment" means, with respect to each Bank, the amount set forth
opposite the name of such Bank in the signature pages hereof as its Commitment,
or in the Assignment and Acceptance by which such Bank became a party hereto, as
such amount may be reduced from time to time pursuant to Sections 2.07 and 2.08.
"Compliance Certificate" has the meaning set forth in Section 5.01(c).
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
"Consolidated Interest Expense" for any period means interest, whether
expensed or capitalized, in respect of Debt of the Borrower or any of its
Consolidated Subsidiaries outstanding during such period.
"Consolidated Lease Expense" for any period means all rental payments,
paid or accrued during such period, of the Borrower and its Consolidated
Subsidiaries under all operating leases and rental agreements.
"Consolidated Net Income" means, for any period, the Net Income of the
Borrower and its Consolidated Subsidiaries for such period determined on a
consolidated basis, but excluding (i) extraordinary items and (ii) any equity
interests of the Borrower or any Subsidiary in the unremitted earnings of any
Person that is not a Subsidiary.
3
<PAGE>
"Consolidated Net Worth" means at any time Stockholder's Equity.
Notwithstanding the foregoing, the Banks hereby agree that the Financial
Accounting Standards Board Statement of Financial Accounting Standards No. 121
("FAS 121") relating to, among other things, the accounting for the impairment
of long-lived assets, and its effect upon the consolidated financial statements
of the Borrower as of and for the Fiscal Year ended December 31, 1996, shall be
disregarded for the purposes of determining Stockholders' Equity, provided that
any charge against income for the Fiscal Year ended December 31, 1996, resulting
from the impairment of long-lived assets not exceed $2,000,000. In addition, the
Banks agree that the effect of that certain non-recurring $4,000,000 charge,
incurred by Borrower during the fourth Fiscal Quarter of 1995 as a result of
income tax reimbursements made to certain executives of Borrower relating to
their exercise of certain stock options, shall be disregarded when determining
Stockholders' Equity.
"Consolidated Operating Profits" means, for any period, the Operating
Profits of the Borrower and its Consolidated Subsidiaries during such period.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which, in accordance with GAAP, would be consolidated
with those of the Borrower in its consolidated financial statements as of such
date.
"Consolidated Total Assets" means, at any time, (x) the total assets
of the Borrower and its Consolidated Subsidiaries, determined on a consolidated
basis, as set forth or reflected on the most recent consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries, prepared in accordance with
GAAP, plus (y) the accounts receivable balance reported as of the last day of
the calendar month most recently ended by the Borrower or a Subsidiary with
respect to an Asset Securitization.
"Consolidated Total Capital" means, at any time, the sum of the
following as of such time (i) Consolidated Net Worth, and (ii) Consolidated
Debt.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with the Borrower, are treated as a single
employer under Section 414 of the Code.
"Debt" of any Person means at any date, without duplication, all of
the following as of such date (i) all obligations of such Person for borrowed
money, (ii) all obligations of such Person evidenced by bonds, debentures, notes
or other similar instruments, (iii) all obligations of such Person to pay the
deferred purchase price of property or services, except trade accounts payable
arising in the ordinary course of business, (iv) all obligations of such Person
as lessee under capital leases, (v) all obligations of such Person to reimburse
any bank or other Person in respect of amounts payable under a banker's
acceptance, (vi) all Redeemable Preferred Stock of such Person (in the event
such Person is a corporation), (vii) all obligations of such Person to reimburse
any bank or other Person in respect of amounts paid under a letter of credit or
similar
4
<PAGE>
instrument, (viii) all Debt of others secured by a Lien on any asset of
such Person, whether or not such Debt is assumed by such Person, (ix) all Debt
of others Guaranteed by such Person, and (x) the total accounts receivable
reported as sold as of the last day of the calendar month most recently ended by
the Borrower or a Subsidiary with respect to an Asset Securitization. For all
purposes of this Agreement, the amount of a Person's Debt under a loan or lease
agreement between such Person and a governmental agency that has issued
industrial development bonds or similar instruments, the repayment of which is
secured by the payment obligations of such Person under such loan or lease
agreement, shall be equal to the aggregate principal amount of such bonds or
instruments outstanding at the time of determination less the amount of proceeds
of such bonds or instruments which at such time are on deposit with a trustee or
other fiduciary in a "construction" fund, or other similar fund which would be
available to such trustee or other fiduciary to repay the bonds or other
instruments if then due and payable.
"Debt to Capitalization Ratio" means the ratio of Consolidated Debt to
Consolidated Total Capital.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Default Rate" means, with respect to any Loan, on any day, the sum of
2% plus the then highest interest rate (including the Applicable Margin) which
may be applicable to any Loans hereunder, including, without limitation, under
Section 7.06, (irrespective of whether any such class of Loans are actually
outstanding hereunder).
"Depreciation" means for any period the sum of all depreciation
expenses of the Borrower and its Consolidated Subsidiaries for such period, as
determined in accordance with GAAP.
"Dividends" means for any period the sum of all dividends paid or
declared during such period in respect of any Capital Stock and Redeemable
Preferred Stock (other than dividends paid or payable in the form of additional
Capital Stock).
"Dollars" or "$" means dollars in lawful currency of the United States
of America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in Georgia are authorized by law to close.
"Environmental Authorizations" means all licenses, permits, orders,
approvals, notices, registrations or other legal prerequisites for conducting
the business of either the Borrower or any Subsidiary required by any
Environmental Requirement.
5
<PAGE>
"Environmental Authority" means any foreign, federal, state, local or
regional government that exercises any form of jurisdiction or authority under
any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments, decrees or
orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether pending or,
to the knowledge of the Borrower or any Subsidiary threatened, arising from and
in any way associated with any Environmental Requirements and which would have
or create a reasonable possibility of causing a Material Adverse Effect.
"Environmental Notices" means notice from any Environmental Authority
or by any other person or entity, of possible or alleged noncompliance with or
liability under any Environmental Requirement, including without limitation any
complaints, citations, demands or requests from any Environmental Authority or
from any other person or entity for correction of any, violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
"Environmental Proceedings" means any judicial or administrative
proceedings arising from or in any way associated with any Environmental
Requirement.
"Environmental Releases" means releases as defined in CERCLA or under
any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement relating to
health, safety or the environment and applicable to any of the Borrower, any
Subsidiary, or the Properties, including but not limited to any such requirement
under CERCLA or similar state legislation and all federal, state and local laws,
ordinances, regulations, orders, writs, decrees and common law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, or any successor law. Any reference to any provision
of ERISA shall also be deemed to be a reference to any successor provision or
provisions thereof.
"Euro-Dollar Business Day" means any Domestic Business Day on which
dealings in Dollar deposits are carried out in the London interbank market.
"Euro-Dollar Loan" means a Loan to be made as a Euro-Dollar Loan
pursuant to the applicable Notice of Borrowing.
6
<PAGE>
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.05(c).
"Event of Default" has the meaning set forth in Section 6.01.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the next higher 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (i) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (ii) if such rate is not so
published for any day, the Federal Funds Rate for such day shall be the average
rate charged to Wachovia on such day on such transactions, as determined by
Wachovia.
"First Union" means First Union National Bank, a national banking
association, and its successors and, as the context requires, its permitted
assigns.
"First Union Letter of Credit" means that certain irrevocable direct-
pay letter of credit issued by First Union, on behalf of Image Industries, Inc.,
as Applicant, dated as of September 17, 1997, designated as no. S130879, for the
benefit of Reliance Trust Company, as trustee under the Summerville City IRB.
"Fiscal Quarter" means any fiscal quarter of the Borrower.
"Fiscal Year" means any fiscal year of the Borrower.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with those which, in accordance with Section 1.02, are to be
used in making the calculations for purposes of determining compliance with the
terms of this Agreement.
"Galaxy" means Galaxy Carpet Mills, Inc., a Delaware corporation,
which corporation was liquidated into the Borrower as successor thereto.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by virtue
of partnership arrangements, by agreement to keep-well, to purchase assets,
goods, securities or services, to provide collateral security, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such Debt or
other obligation of the payment thereof or to protect such obligee against loss
in respect
7
<PAGE>
thereof (in whole or in part), provided that the term Guarantee shall not
--------
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hazardous Materials" includes, without limitation, (a) solid or
hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, 42 U.S.C. (S) 6901 et seq. and its implementing regulations and
amendments, or in any applicable state or local law or regulation, (b)
"hazardous substance", "pollutant", or "contaminant" as defined in CERCLA, or in
any applicable state or local law or regulation, (c) gasoline, or any other
petroleum product or by-product, including, crude oil or any fraction thereof
(d) toxic substances, as defined in the Toxic Substances Control Act of 1976, or
in any applicable state or local law or regulation or (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending on the
numerically corresponding day in the first, second, third or sixth month
thereafter, as the Borrower may elect in the applicable Notice of Borrowing;
provided that:
- --------
(a) any Interest Period (other than an Interest Period determined
pursuant to paragraph (c) below) which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in
another calendar month, in which case such Interest Period shall end on the
next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the appropriate subsequent calendar month) shall,
subject to paragraph (c) below, end on the last Euro-Dollar Business Day of
the appropriate subsequent calendar month; and
(c) any Interest Period which begins before the Termination Date and
would otherwise end after the Termination Date shall end on the Termination
Date.
(2) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
--------
(a) any Interest Period (other than an Interest Period determined
pursuant to paragraph (b) below) which would otherwise end on a day which
is not a Domestic Business Day shall be extended to the next succeeding
Domestic Business Day; and
(b) any Interest Period which begins before the Termination Date and
would otherwise end after the Termination Date shall end on the Termination
Date.
8
<PAGE>
"Investment" means any investment in any Person, whether by means of
purchase or acquisition of obligations or securities of such Person, capital
contribution to such Person, loan or advance to such Person, making of a time
deposit with such Person, Guarantee or assumption of any obligation of such
Person or otherwise.
"Investment Guidelines" means the guidelines for investment of funds
of the Borrower and the Subsidiaries as approved by the Board of Directors of
the Borrower or an authorized executive committee thereof and in effect on the
Closing Date, as modified or supplemented from time to time with the approval of
the Board of Directors of the Borrower or an authorized executive committee.
"Issuer" means either Wachovia or First Union in its capacity as
issuer of a Letter of Credit.
"LC Commitment Percentage" means, with respect to a Bank, the ratio,
expressed as a percentage, of (a) the amount of such Bank's Commitment to (b)
the aggregate amount of the Commitments of all Banks hereunder; provided,
however, that if at the time of determination the Commitments have terminated or
been reduced to zero, the "LC Commitment Percentage" of each Bank shall be the
LC Commitment Percentage of such Bank in effect immediately prior to such
termination or reduction.
"Lending Office" means, as to each Bank, its office located at its
address set forth on the signature pages hereof (or identified on the signature
pages hereof as its Lending Office) or such other office as such Bank may
hereafter designate as its Lending Office by notice to the Borrower.
"Letter of Credit Fee" means a letter of credit fee in an amount equal
to the Applicable Margin for Euro-Dollar Loans multiplied times the average
daily amount of the Letter of Credit Obligations, computed for the actual number
of days elapsed on the basis of a 360 day year.
"Letter of Credit Obligations" shall mean, at any time, the aggregate
unfunded amount of the outstanding Letters of Credit.
"Letter(s) of Credit" means (i) the Wachovia Letter of Credit, and,
(ii) the First Union Letter of Credit.
"Lien" means, with respect to any asset, any mortgage, deed to secure
debt, deed of trust, lien, pledge, charge, security interest, security title,
preferential arrangement, which has the practical effect of constituting a
security interest or encumbrance, or encumbrance or servitude of any kind in
respect of such asset to secure or assure payment of a Debt or a Guarantee,
whether by consensual agreement or by operation of statute or other law. For
the purposes of this Agreement, the Borrower or any Subsidiary shall be deemed
to own subject to a
9
<PAGE>
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan" means a Base Rate Loan or a Euro-Dollar Loan and "Loans" means
Base Rate Loans or Euro-Dollar Loans, or either or each of them, as the context
shall require.
"Loan Documents" means this Agreement, the Notes, and any other
document evidencing, relating to or securing the Loans, and any other document
or instrument delivered in connection with this Agreement, the Notes or the
Loans, as such documents and instruments may be amended or modified from time to
time.
"London Interbank Offered Rate" has the meaning set forth in Section
2.05(c).
"Margin Stock" means "margin stock" as defined in Regulations T, U or
X.
"Material Adverse Effect" means, with respect to any event, act,
condition or occurrence of whatever nature (including any adverse determination
in any litigation, arbitration, or governmental investigation or proceeding),
whether singly or in conjunction with any other event or events, act or acts,
condition or conditions, occurrence or occurrences, whether or not related, a
material adverse change in, or a material adverse effect upon, any of (a) the
financial condition, operations, business, properties or prospects of the
Borrower and its Consolidated Subsidiaries taken as a whole, (b) the rights and
remedies of the Banks under the Loan Documents, or the ability of the Borrower
to perform its obligations under the Loan Documents to which it is a party, as
applicable, or (c) the legality, validity or enforceability of any Loan
Document.
"Material Subsidiary" means, as of the date of any determination
thereof, any Subsidiary that either: (a) owns assets having a book value equal
to or greater than 5.0% of Consolidated Total Assets, or (b) had Net Income for
any prior period of four consecutive Fiscal Quarters equal to or greater than
5.0% of Consolidated Net Income for the same four Fiscal Quarter period.
"Multiemployer Plan" shall have the meaning set forth in Section
4001(a)(3) of ERISA.
"Net Income" means, as applied to any Person for any period, the
aggregate amount of net income of such Person, after taxes, for such period, as
determined in accordance with GAAP.
"Notes" means the promissory notes of the Borrower, substantially in
the form of Exhibit A, evidencing the obligation of the Borrower to repay the
---------
Loans, together with all amendments, consolidations, modifications, renewals,
and supplements thereto.
10
<PAGE>
"Notice of Borrowing" has the meaning set forth in Section 2.02.
"Operating Profits" means, as applied to any Person for any period,
the operating income of such Person for such period, as determined in accordance
with GAAP.
"Original Credit Agreement" has the meaning set forth in the preamble
to this Agreement.
"Participant" has the meaning set forth in Section 8.08(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Performance Pricing Determination Date" has the meaning set forth in
Section 2.05(a).
"Permitted Acquisition" means a non-hostile acquisition, however
structured, of all or substantially all of the assets of, or a majority of all
the issued and outstanding capital stock of, a Person in a Permitted Line or
Business.
"Permitted Line of Business" means the manufacturing, marketing and/or
distribution of commercial or home furnishings and floor coverings and other
reasonably related products and any "vertical integration" with respect thereto.
"Person" means an individual, a corporation, a partnership, an
unincorporated association, joint venture, limited liability company, a trust or
any other entity or organization, including, but not limited to, a government or
political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (i) maintained by a member of the
Controlled Group for employees of any member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
a member of the Controlled Group is then making or accruing an obligation to
make contributions or has within the preceding five plan years made
contributions.
"Properties" means all real property owned, leased or otherwise used
or occupied by the Borrower or any Subsidiary (including, without limitation,
the Borrower), wherever located.
"Redeemable Preferred Stock" of any Person means any preferred stock
issued by such Person which is at any time prior to the Termination Date either
(i) mandatorily redeemable
11
<PAGE>
(by sinking fund or similar payments or otherwise) or (ii) redeemable at the
option of the holder thereof.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation T" means Regulation T of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Regulation X" means Regulation X of the Board of Governors of the
Federal Reserve System, as in effect from time to time, together with all
official rulings and interpretations issued thereunder.
"Reimbursement Agreement" means each reimbursement agreement executed
and delivered by an Applicant with respect to a Letter of Credit, as amended
from time to time.
"Related Fund" means, with respect to any Bank, a special purpose
entity that purchases or participates in such Bank's loans and for which such
Bank is agent, advisor or manager for such special purpose entity.
"Replacement Bank" has the meaning set forth in Section 7.06.
"Required Banks" means at any time Banks having at least 70% of the
aggregate amount of the Commitments, or if the Commitments are no longer in
effect, holding at least 70% of the aggregate outstanding principal amount of
the Notes.
"Restricted Payment" means (i) any dividend or other distribution on
any shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment on account of the purchase,
redemption, retirement or acquisition of (a) any shares of the Borrower's
capital stock (except shares acquired upon the conversion thereof into other
shares of its capital stock) or (b) any option, warrant or other right to
acquire shares of the Borrower's capital stock.
"Stockholders' Equity" means, at any time, the stockholders' equity of
the Borrower and its Consolidated Subsidiaries, as set forth or reflected on the
most recent consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries prepared in accordance with GAAP, but excluding any Redeemable
--- ---------
Preferred Stock of the Borrower or any
12
<PAGE>
of its Consolidated Subsidiaries. Shareholders' equity generally would include,
but not be limited to, (i) the par or stated value of all outstanding Capital
Stock, (ii) capital surplus, (iii) retained earnings, and (iv) various
deductions such as (A) purchases of treasury stock, (B) valuation allowances,
(C) receivables due from an employee stock ownership plan, (D) employee stock
ownership plan debt guarantees, and (E) foreign currency translation
adjustments.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a majority of
the board of directors or other persons performing similar functions are at the
time directly or indirectly owned by the Borrower.
"Summerville City IRB" means that issuance of certain bonds by The
Development Authority of the City of Summerville, Georgia, pursuant to the terms
and conditions set forth in that certain Trust Indenture dated as of September
1, 1997.
"SunTrust" means SunTrust Bank, Atlanta, a Georgia state banking
corporation, and its successors and, as the context requires, its permitted
assigns.
"Termination Date" means January 28, 2004.
"Third Parties" means all lessees, sublessees, licensees and other
users of the Properties, excluding those users of the Properties in the ordinary
course of the Borrower's business and on a temporary basis.
"Transferee" has the meaning set forth in Section 8.08(d).
"Unused Commitment" means at any date, with respect to any Bank, an
amount equal to its Commitment less the aggregate outstanding principal amount
of its Loans.
"Wachovia" means Wachovia Bank, N.A., a national banking association,
and its successors and, as the context requires, its permitted assigns.
"Wachovia Letter of Credit" means that certain irrevocable direct-pay
letter of credit issued by Wachovia, on behalf of Aladdin, successor by merger
to Galaxy, as Applicant, dated as of January 13, 1995, designated with I.D.
Number LC870-007339, for the benefit of NationsBank of Georgia, N.A., as trustee
under the Industrial Revenue Bond referenced therein.
"Wholly Owned Subsidiary" means any Subsidiary all of the shares of
capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower
or a Consolidated Subsidiary.
"Year 2000 Issues" shall mean the actual and reasonably anticipated
costs, claims, losses, and liabilities associated with the inability of certain
computer applications to handle effectively data that includes dates on and
after January 1, 2000, as such inability in respect of the
13
<PAGE>
Borrower or any Subsidiary and in respect of their respective material
customers, suppliers and vendors affects the business, operations, and financial
condition of the Borrower or any Subsidiary.
SECTION 1.02. Accounting Terms and Determinations. Unless otherwise
-----------------------------------
specified herein, all terms of an accounting character used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Borrower's independent public accountants or otherwise
required by a change in GAAP) with the most recent audited consolidated
financial statements of the Borrower delivered to the Banks unless with respect
to any such change concurred in by the Borrower's independent public accountants
or required by GAAP, in determining compliance with any of the provisions of
any of the Loan Documents: (i) the Borrower shall have objected to determining
such compliance on such basis at the time of delivery of such financial
statements, or (ii) the Required Banks shall so object in writing within 30 days
after the delivery of such financial statements, in either of which events the
Banks and the Borrower shall negotiate in good faith to resolve any existing
disagreements regarding such calculations, provided, that if such disagreements
are not resolved within 30 days after receipt of a notice of objection, such
calculations shall be made on a basis consistent with those used in the
preparation of the latest financial statements as to which such objection shall
not have been made (which, if objection is made in respect of the first
financial statements delivered under Section 5.01, shall mean the financial
statements referred to in Section 4.04).
SECTION 1.03. References. Unless otherwise indicated, references in
----------
this Agreement to "Articles", "Exhibits", "Schedules", "Sections" and other
Subdivisions are references to Articles, exhibits, schedules, sections and other
subdivisions hereof.
SECTION 1.04. Use of Defined Terms. All terms defined in this
--------------------
Agreement shall have the same defined meanings when used in any of the other
Loan Documents, unless otherwise defined therein or unless the context shall
require otherwise.
SECTION 1.05. Terminology. All personal pronouns used in this
-----------
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders; the singular shall include the plural, and the plural
shall include the singular. Titles of Articles and Sections in this Agreement
are for convenience only, and neither limit nor amplify the provisions of this
Agreement.
14
<PAGE>
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. (a) Each Bank severally agrees, on
-------------------
the terms and conditions set forth herein, to make Loans to the Borrower from
time to time before the Termination Date; provided, that, immediately after
-------- ----
each such Loan is made, the aggregate outstanding principal amount of Loans by
such Bank shall not exceed the amount of its Commitment. Each Base Rate
Borrowing under this Section shall be in an aggregate principal amount of
$100,000 or any larger amount (except that any such Borrowing may be in the
aggregate amount of the Unused Commitments) and shall be made from the several
Banks ratably in proportion to their respective Commitments. Each Euro-Dollar
Borrowing under this Section shall be in an aggregate principal amount of
$2,000,000 or any larger multiple of $500,000 and shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, the Borrower may borrow under this Section, repay, reborrow,
and to the extent permitted by Section 2.09, prepay Loans, under this Section at
any time before the Termination Date. As of the date of this Agreement, the
outstanding Loans are due and owing in accordance with the terms hereof without
counterclaim, offset or other defense.
(b) Notwithstanding the foregoing Section 2.01(a), in no event shall
the principal amount of all Loans made by any Bank outstanding at any one time
exceed the total amount of such Bank's Commitment minus such Bank's pro rata
-----
share of the Letter of Credit Obligations (whether as issuer or participant).
SECTION 2.02. Method of Borrowing. (a) The Borrower shall give each
-------------------
Bank notice (a "Notice of Borrowing"), which shall be substantially in the form
of Exhibit D, on the same day for each Base Rate Borrowing but, in any case,
---------
prior to 12:00 P.M., and at least 3 Euro-Dollar Business Days before each Euro-
Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(ii) the aggregate amount of such Borrowing,
(iii) whether the Loans comprising such Borrowing are to be Base Rate
Loans or Euro-Dollar Loans, and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
(b) Upon receipt of a Notice of Borrowing by any Bank, such Notice of
Borrowing shall not thereafter be revocable.
15
<PAGE>
(c) Not later than 4:00 P.M. (Atlanta, Georgia time) on the date of
each Borrowing, each Bank shall (except as provided in paragraph (d) of this
Section) make available its ratable share of such Borrowing, in Federal or other
funds immediately available in Atlanta, Georgia, to the Borrower at such Bank's
Lending Office.
(d) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank, such
Bank shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the Borrower as
provided in paragraph (c) of this Section, or remitted by the Borrower to such
Bank as provided in Section 2.11, as the case may be.
(e) Notwithstanding anything to the contrary contained in this
Agreement, no Euro-Dollar Borrowing may be made if there shall have occurred a
Default or an Event of Default, which Default or Event of Default shall not have
been cured or waived.
(f) In the event that a Notice of Borrowing fails to specify whether
the Loans comprising such Borrowing are to be Base Rate Loans or Euro-Dollar
Loans, such Loans shall be made as Base Rate Loans. If the Borrower is
otherwise entitled under this Agreement to repay any Loans maturing at the end
of an Interest Period applicable thereto with the proceeds of a new Borrowing,
and the Borrower fails to repay such Loans using its own moneys and fails to
give a Notice of Borrowing in connection with such new Borrowing, a new
Borrowing shall be deemed to be made on the date such Loans mature in an amount
equal to the principal amount of the Loans so maturing, and the Loans comprising
such new Borrowing shall be Base Rate Loans.
(g) Notwithstanding anything to the contrary contained herein, there
shall not be more than 12 interest rates (including the Applicable Margins)
applicable to the Loans at any given time.
SECTION 2.03. Notes. (a) The Loans of each Bank shall be evidenced
-----
by a single Note made by the Borrower payable to the order of such Bank for the
account of its Lending Office in an amount equal to the original principal
amount of such Bank's Commitment.
(b) Each Bank shall record, and prior to any transfer of its Note
shall endorse on the schedule forming a part thereof appropriate notations to
evidence the date, amount and maturity of each Loan made by it, the date and
amount of each payment of principal made by the Borrower with respect thereto
and whether such Loan is a Base Rate Loan or Euro-Dollar Loan, and such schedule
shall constitute rebuttable presumptive evidence of the principal amount owing
and unpaid on such Bank's Note; provided that the failure of any Bank to make
--------
any such recordation or endorsement shall not affect the obligation of the
Borrower hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
16
<PAGE>
SECTION 2.04. Maturity of Loans. Each Loan included in any Borrowing
-----------------
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing (subject to
subsequent refundings thereof) and all Loans shall mature and be due and payable
in full (without further refundings thereof) on the applicable Termination Date.
SECTION 2.05. Interest Rates. (a) "Applicable Margin" means at all
--------------
times:
(i) -1.0% (negative) for all Base Rate Loans outstanding at any time
in an amount less than or equal to $10,000,000.00, and -0.25% (negative)
for all Base Rate Loans outstanding at any time in an amount greater than
$10,000,000.00 (provided, however, in no event shall the amount of (x) the
Applicable Margin for any Base Rate Loan plus the Base Rate, be less than
(y) the higher of (a) the Federal Funds Rate plus one-half of one percent,
or (b) the corresponding amount of the Applicable Margin for any Euro-
Dollar Loan plus the Adjusted London Interbank Offered Rate);
(ii) for the period commencing on the Closing Date to and including
the first Performance Pricing Determination Date, for each Euro-Dollar Loan
0.275%; and
(iii) from and after the first Performance Pricing Determination
Date, for each Euro-Dollar Loan, the percentage determined on each
Performance Pricing Determination Date by reference to the table set forth
below as to such type of Loan and the Debt to Capitalization Ratio for the
quarterly or annual period ending immediately prior to such Performance
Pricing Determination Date.
Debt to
Capitalization
Ratio Applicable Margin
-------------- -----------------
(greater than or equal to) 0.50 to 1.0 0.500%
(greater than or equal to) 0.45 to 1.0 but
(less than) 0.50 to 1.0 0.375%
(greater than or equal to) 0.40 to 1.0 but
(less than) 0.45 to 1.0 0.275%
(greater than or equal to) 0.30 to 1.0 but
(less than) 0.40 to 1.0 0.250%
(less than) 0.30 to 1.0 0.200%
17
<PAGE>
In determining interest for purposes of this Section 2.05 and fees for
purposes of Section 2.06, the Borrower and the Banks shall refer to the
Borrower's most recent consolidated quarterly and annual (as the case may be)
financial statements delivered pursuant to Section 5.01(a) or (b), as the case
may be. The "Performance Pricing Determination Date" is the date which is the
last date on which such financial statements are permitted to be delivered
pursuant to Section 5.01(a) or (b), as applicable. Any such required change in
interest and fees shall become effective on such Performance Pricing
Determination Date, and shall be in effect until the next Performance Pricing
Determination Date, provided that no fees or interest shall be decreased
--------
pursuant to this Section 2.05 or Section 2.06 if an Event of Default is in
existence on the Performance Pricing Determination Date.
(b) Each Base Rate Loan shall bear interest on the outstanding
principal amount thereof, for each day from the date such Loan is made until it
becomes due, at a rate per annum equal to the Base Rate for such day plus (or
minus) the Applicable Margin. Such interest shall be payable for each Interest
Period on the last day thereof. Any overdue principal of and, to the extent
permitted by applicable law, overdue interest on any Base Rate Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the Default Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for the Interest Period applicable thereto, at a rate
per annum equal to the sum of the Applicable Margin plus the applicable Adjusted
London Interbank Offered Rate for such Interest Period; provided that if any
--------
Euro-Dollar Loan shall, as a result of paragraph (1)(c) of the definition of
Interest Period, have an Interest Period of less than one month, such Euro-
Dollar Loan shall bear interest during such Interest Period at the rate
applicable to Base Rate Loans during such period. Such interest shall be
payable for each Interest Period on the last day thereof and, if such Interest
Period is longer than 3 months, at intervals of 3 months after the first day
thereof. Any overdue principal of and, to the extent permitted by law, overdue
interest on any Euro-Dollar Loan shall bear interest, payable on demand, for
each day until paid at a rate per annum equal to the Default Rate.
The "Adjusted London Interbank Offered Rate" applicable to any
Interest Period means a rate per annum equal to the quotient obtained (rounded
upwards, if necessary, to the next higher 1/100th of 1%) by dividing (i) the
applicable London Interbank Offered Rate for such Interest Period by (ii) 1.00
minus the Euro-Dollar Reserve Percentage.
The "London Interbank Offered Rate" applicable to any Euro-Dollar Loan
means for the Interest Period of such Euro-Dollar Loan, the rate per annum
determined on the basis of the offered rate for deposits in Dollars of amounts
equal or comparable to the principal amount of such Euro-Dollar Loan offered for
a term comparable to such Interest Period, which rates appear on Telerate Page
3750 effective as of 11:00 A.M., London time, 2 Euro-Dollar Business Days prior
to the first day of such Interest Period, provided that (i) if more than one
such offered rate appears on Telerate Page 3750, the "London Interbank Offered
Rate" will be the arithmetic average (rounded upward, if necessary, to the next
higher 1/100th of 1%) of such offered rates;
18
<PAGE>
(ii) if no such offered rates appear on such page, the "London Interbank Offered
Rate" for such Interest Period will be the arithmetic average (rounded upward,
if necessary, to the next higher 1/100th of 1%) of rates quoted by not less than
two major banks in New York City, selected by Wachovia, at approximately 10:00
A.M., New York City time, 2 Euro-Dollar Business Days prior to the first day of
such Interest Period, for deposits in Dollars offered to leading European banks
for a period comparable to such Interest Period in an amount comparable to the
principal amount of such Euro-Dollar Loan.
"Euro-Dollar Reserve Percentage" means, with respect to a given Bank,
for any day that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board of Governors of the Federal Reserve System (or
any successor) for determining the actual reserve requirement for such Bank in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents). The Adjusted London Interbank Offered Rate shall be adjusted
automatically on and as of the effective date of any change in the Euro-Dollar
Reserve Percentage.
(d) Wachovia shall determine the interest rates applicable to the
Loans hereunder. Wachovia shall give prompt notice to the Borrower and the other
Banks (by telephone or facsimile transmission) of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
SECTION 2.06. Fees. (a) The Borrower shall pay to each Bank, for the
----
ratable account of such Bank, a facility fee, calculated in the manner provided
in the last paragraph of Section 2.05(a)(iii), on the aggregate amount of such
Bank's Commitment (without taking into account the amount of the outstanding
Loans made by such Bank), at a rate per annum equal to: (i) for the period
commencing on the Closing Date to and including the first Performance Pricing
Determination Date, 0.20%; and (ii) from and after the first Performance
Pricing Determination Date, the percentage determined on each Performance
Pricing Determination Date by reference to the table set forth below and the
Debt to Capitalization Ratio for the quarterly or annual period ending
immediately prior to such Performance Pricing Determination Date:
Debt to
Capitalization
Ratio Facility Fee
-------------- ------------
(greater than or equal to) 0.45 to 1.0 0.25%
(greater than or equal to) 0.40 to 1.0 but
(less than) 0.45 to 1.0 0.20%
19
<PAGE>
(less than) 0.40 to 1.0 0.15%
Such facility fees shall accrue from and including the Closing Date to (but
excluding the Termination Date) and shall be payable on each December 31, March
31, June 30, and September 30 and on the Termination Date.
(b) The Borrower shall pay to each Bank the fees payable to such Bank
as mutually agreed in writing as of the Closing Date.
SECTION 2.07. Optional Termination or Reduction of Commitments. The
------------------------------------------------
Borrower may, upon at least 3 Domestic Business Days' notice to the Banks,
terminate at any time, or proportionately reduce the Unused Commitments from
time to time by an aggregate amount of at least $10,000,000. Upon a reduction
of the Unused Commitments, each Bank's Commitments shall be permanently and
ratably reduced.
SECTION 2.08. Mandatory Reduction and Termination of Commitments. The
--------------------------------------------------
Commitments shall terminate on the Termination Date and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable by
the Borrower on such date.
SECTION 2.09. Optional Prepayments. (a) The Borrower may, upon notice
--------------------
to the Banks on the same day, prepay any Base Rate Borrowing in whole at any
time, or from time to time in part in amounts aggregating at least $100,000 or
any larger amount, by paying the principal amount to be prepaid together with
accrued interest thereon to the date of prepayment.
(b) Subject to Section 7.05, the Borrower may, upon at least 2 Euro-
Dollar Business Days' notice to the Banks, prepay any Euro-Dollar Loan in whole
at any time, or from time to time in part, prior to the maturity thereof, in
amounts aggregating at least $1,000,000 or any larger multiple of $100,000, by
paying the principal amount to be prepaid together with accrued interest thereon
to the date of the prepayment.
(c) Upon any Bank's receipt of a notice of prepayment pursuant to this
Section, such notice shall not thereafter be revocable by the Borrower.
SECTION 2.10. Mandatory Prepayments. On each date on which the
---------------------
Commitments are reduced pursuant to Section 2.07 or Section 2.08, the Borrower
shall repay or prepay such principal amount of the outstanding Loans, if any
(together with interest accrued thereon), as may be necessary so that after such
payment the aggregate unpaid principal amount of the Loans does not exceed the
aggregate amount of the Commitments as then reduced.
SECTION 2.11. General Provisions as to Payments. (a) The Borrower
---------------------------------
shall make each payment of principal of, and interest on, each Bank's Loans and
of each Bank's fees hereunder, not later than 11:00 A.M. (Atlanta, Georgia time)
on the date when due, in Federal or other funds immediately available at the
place where payment is due, to such Bank at its address
20
<PAGE>
set forth on the signature pages hereof or at such other address as such Bank
may notify the Borrower in writing from time to time.
(b) Whenever any payment of principal of, or interest on, the Base
Rate Loans or of fees shall be due on a day which is not a Domestic Business
Day, the date for payment thereof shall be extended to the next succeeding
Domestic Business Day. Whenever any payment of principal of or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the next succeeding Euro-
Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day.
SECTION 2.12. Computation of Interest and Fees. Interest on Base Rate
--------------------------------
Loans shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day). Interest on Euro-Dollar Loans shall be computed on the basis of a year of
360 days and paid for the actual number of days elapsed, calculated as to each
Interest Period from and including the first day thereof to but excluding the
last day thereof. Any fees payable hereunder shall be computed on the basis of
a year of 360 days and paid for the actual number of days elapsed (including the
first day but excluding the last day).
SECTION 2.13. Letters of Credit. (a) Subject to the terms and
-----------------
conditions contained in this Agreement, with respect to the Letters of Credit,
the Borrower shall pay to the order of each Issuer the amount of the Letter of
Credit Fee payable with respect to its Letter of Credit (and such Issuer shall
pay to each other Bank such Bank's respective pro rata share thereof) (A) on the
first day of each Fiscal Quarter, (B) on the Termination Date and (C) if there
are any Letter of Credit Obligations on the Termination Date, on the first date
thereafter on which there are no Letter of Credit Obligations, in each case for
the previous period. Any payments made by the Issuers in honoring a draft or
other demand for payment presented in accordance with the terms of the Letters
of Credit shall be deemed to constitute a Borrowing of Base Rate Loans and which
shall be evidenced by the Notes. After the occurrence and during the
continuation of an Event of Default, or upon the termination of this Agreement,
to the extent of any Letter of Credit Obligations, the Issuers may, as separate
collateral security to be held by the Banks for reimbursement of amounts of the
Letter of Credit Obligations which are subsequently funded by an Issuer (and for
which the other Banks have purchased a participation therein as set forth
below), either (x) immediately advance the principal amount thereof as Loans,
and set aside the amounts so advanced as such collateral security, or (y) demand
from the Borrower cash collateral in an amount equal to 100% of such Letter of
Credit Obligations with respect to each Letter of Credit as such collateral
security. The Borrower hereby agrees that the Banks shall have a right of setoff
against and security interest in such collateral reserve. After a Letter of
Credit has been canceled and all Letter of Credit Obligations with respect to
such Letter of Credit have been satisfied, and the Issuer (or participant) has
been reimbursed all amounts funded by the Issuer with respect thereto, any
balance remaining in said collateral reserve with respect to such
21
<PAGE>
Letter of Credit may be applied to other unpaid obligations of the Borrower
hereunder, and, if none, shall be remitted to the Borrower.
(b) Purchase of Participations. Each Bank hereby irrevocably and
---------------------------
unconditionally purchases and receives from each Issuer, without recourse or
warranty, an undivided interest and participation, equal to the amount of such
Bank's LC Commitment Percentage in each Letter of Credit issued by such Issuer.
Each Bank acknowledges receipt of a copy of each Letter of Credit.
(c) Sharing of Letters of Credit Payments. In the event that an
--------------------------------------
Issuer makes any payment under a Letter of Credit issued by it for which the
Borrower shall not have repaid such amount to such Issuer pursuant to this
Section, such Issuer shall promptly notify the other Banks of such failure, and
each other Bank shall promptly and unconditionally pay to such Issuer the LC
Commitment Percentage of the amount of such payment in Dollars and in same day
funds. If an Issuer so notifies the other Banks prior to 10:00 A.M. (Atlanta,
Georgia time) on any Domestic Business Day, such other Banks shall make
available to such Issuer the LC Commitment Percentage of the amount of such
payment on such Domestic Business Day in same day funds. If and to the extent
any of such other Banks shall not have so made its LC Commitment Percentage of
the amount of such payment available to such Issuer, such other Bank agrees to
pay to such Issuer forthwith on demand such amount together with interest
thereon, for each day from the date such payment was first due until the date
such amount is paid to such Issuer at the Federal Funds Rate.
(d) Sharing of Reimbursement Obligation Payments. Whenever an Issuer
---------------------------------------------
receives a payment from the Borrower or any guarantor on account of Letter of
Credit Obligations owing in respect of a Letter of Credit issued by such Issuer
including any interest thereon, as to which such Issuer has received any
payments from the other Banks pursuant to this Section, such Issuer shall
promptly pay to each other Bank its participating interest therein, in Dollars
and in the kind of funds so received, an amount equal to such other Bank's LC
Commitment Percentage thereof. Each such payment shall be made by such Issuer on
the Domestic Business Day on which the funds are paid to such Person, if
received prior to 10:00 a.m. (Atlanta, Georgia time) on such Domestic Business
Day, and otherwise on the next succeeding Domestic Business Day. Each Bank
agrees that letter of credit fees (other than the Letter of Credit Fee) payable
under an Issuer's Reimbursement Agreement are solely for the account of such
Issuer, notwithstanding any provision contained herein to the contrary.
(e) Obligations Irrevocable. The obligations of each Bank to make
------------------------
payments to an Issuer with respect to a Letter of Credit shall be irrevocable,
not subject to any qualification or exception whatsoever and shall be made in
accordance with, but not subject to, the terms and conditions of this Agreement
under all circumstances, including, without limitation, any of the following
circumstances:
(i) any lack of validity or enforceability of this Agreement or
any of the other Loan Documents;
22
<PAGE>
(ii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against a beneficiary named in the
Letters of Credit or any transferee of the Letters of Credit (or any Person
for whom any such transferee may be acting), an Issuer, any Bank or any
other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions;
(iii) any draft, certificate or any other document presented
under a Letter of Credit proves to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(iv) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
(v) payment by an Issuer under a Letter of Credit proving to be
forged, fraudulent, invalid or insufficient in any respect or any statement
therein being untrue or inaccurate in any respect;
(vi) payment by an Issuer under a Letter of Credit against
presentation of any draft or certificate that does not comply with the
terms of such Letter of Credit, except payment resulting from the gross
negligence or willful misconduct of an Issuer; or
(vii) any other circumstances or happenings whatsoever, whether
or not similar to any of the foregoing, except circumstances or happenings
resulting from the gross negligence or willful misconduct of the Issuer.
(f) Amendments to Letters of Credit and Reimbursement Agreements.
------------------------------------------------------------
Neither Issuer shall agree to an amendment or modification to its Reimbursement
Agreement or Letter of Credit unless the Required Banks have granted their prior
written consent thereto, which consent shall not be unreasonably withheld or
delayed.
SECTION 2.14. Guarantee of Reimbursement Obligations. The following
--------------------------------------
provisions of this Section 2.14 shall apply solely to each Reimbursement
Agreement for which the Borrower is not the Applicant.
(a) The Borrower hereby absolutely and unconditionally, guarantees the
due and punctual payment and performance of the Letter of Credit Obligations.
Upon failure by an Applicant to pay any such amount in accordance with the terms
of its Reimbursement Agreement, the Borrower agrees that it shall forthwith on
demand pay the amount not so paid at the place and in the manner specified in
the Reimbursement Agreement.
23
<PAGE>
(b) The obligations of the Borrower under this Section 2.14 shall be
unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by: (i) any
extension, renewal, settlement, compromise, waiver or release in respect of any
obligation of an Applicant under the Reimbursement Agreement, by operation of
law or otherwise or any obligation of any other guarantor of any of the Letter
of Credit Obligations; (ii) any modification or amendment of or supplement to
the Reimbursement Agreement; (iii) any release, nonperfection or invalidity of
any direct or indirect security for any obligation of an Applicant under the
Reimbursement Agreement, or any obligations of any other guarantor of any of the
Letter of Credit Obligations; (iv) any change in the corporate existence,
structure or ownership of an Applicant or any other guarantor of any of the
Letter of Credit Obligations, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting an Applicant, or any other guarantor of the
Letter of Credit Obligations, or its assets or any resulting release or
discharge of any obligation of an Applicant, or any other guarantor of any of
the Letter of Credit Obligations; (v) the existence of any claim, setoff or
other rights which the Borrower may have at any time against an Applicant, any
other guarantor of any of the Letter of Credit Obligations, any Bank or any
other Person, whether in connection herewith or any unrelated transactions,
provided that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim; (vi) any invalidity or
unenforceability relating to or against an Applicant, or any other guarantor of
any of the Letter of Credit Obligations, for any reason related to the
Reimbursement Agreement, or any other Guaranty, or any provision of applicable
law or regulation purporting to prohibit the payment of the Letter of Credit
Obligations by an Applicant, or any other guarantor of the Letter of Credit
Obligations; and (vii) any other act or omission to act or delay of any kind by
an Applicant, any other guarantor of the Letter of Credit Obligations, any Bank
or any other Person or any other circumstance whatsoever which might, but for
the provisions of this paragraph, constitute a legal or equitable discharge of
the Borrower's obligations hereunder, including without limitation, any failure,
omission, delay or inability on the part of any Bank to enforce, assert or
exercise any right power or remedy conferred on any Bank under the Reimbursement
Agreement or any other Loan Documents.
(c) The Borrower's obligations hereunder shall remain in full force
and effect until all Letter of Credit Obligations shall have been paid in full
and the relevant Reimbursement Agreement shall have terminated or expired. If
at any time any amount payable by an Applicant under a Reimbursement Agreement
or any other Loan Document is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of an Applicant or
otherwise, the Borrower's obligations hereunder with respect to such payment
shall be reinstated as though such payment had been due but not made at such
time.
(d) The Borrower irrevocably waives any requirement that at any time
any action be taken by any Person against an Applicant, any other guarantor of
the Letter of Credit Obligations, or any other Person.
SECTION 2.15. Assignments of Loans under Original Credit Agreement;
-----------------------------------------------------
Effective Date. (a) This Agreement shall become effective on December 15, 1999
- --------------
(the "Target
24
<PAGE>
Date"), upon compliance by the parties to this Agreement with the conditions
listed in clauses (i) and (ii) in this Section 2.15(a) below before 5:00 p.m.
Atlanta, Georgia, time on the Target Date and with the conditions set forth in
Sections 3.01 and 3.02 (the "Effective Date Conditions") (upon compliance with
the Effective Date Conditions on the Target Date, the Target Date shall be
referred to herein as the "Effective Date"):
(i) SunTrust shall have purchased from Wachovia and Wachovia shall
have assigned, as evidenced by SunTrust's Federal Funds wire transfer in an
amount equal to the Purchase Price in accordance with Wachovia's written
instructions, a 33.3333% interest in and to (terms in quotations in this
clause (i) have the meaning set forth in the Original Credit Agreement):
(A) Wachovia's rights and obligations under the Original Credit Agreement
(exclusive of accrued interest, fees and other amounts earned prior to the
Target Date); (B) the aggregate principal amount of Wachovia's total
"Commitments" equal to $225,000,000, which 33.3333% interest shall be
deemed to equal $75,000,000 (subject to reduction of the Commitments prior
to the Target Date); (C) Wachovia's outstanding "Tranche A Loans" and the
"Tranche A Note"; and (D) Wachovia's outstanding "Tranche B Loans" and the
"Tranche B Note"; and
(ii) SunTrust shall have purchased from First Union and First Union
shall have assigned, as evidenced by SunTrust's Federal Funds wire transfer
in an amount equal to the Purchase Price in accordance with First Union's
written instructions, a 33.3333% interest in and to (terms in quotations in
this clause (ii) have the meaning set forth in the Original Credit
Agreement): (A) First Union's rights and obligations under the Original
Credit Agreement (exclusive of accrued interest, fees and other amounts
earned prior to the Target Date); (B) the aggregate principal amount of
First Union's total "Commitments" equal to $225,000,000, which 33.3333%
interest shall be deemed to equal $75,000,000 (subject to reduction of the
Commitments prior to the Target Date); (C) First Union's outstanding
"Tranche A Loans" and the "Tranche A Note"; and (D) First Union's
outstanding "Tranche B Loans" and the "Tranche B Note."
(b) The parties to this Agreement agree that: (i) the interests in the
Original Credit Agreement and the "Notes" issued thereunder purchased by
SunTrust under Section 2.15(a) are evidenced by this Agreement and no other
instrument is necessary to evidence such purchased interests; (ii) the "Tranche
A Commitments" and "Tranche B Commitments" under the Original Credit Agreement
are hereby replaced in their entirety by the Commitments under this Agreement;
and (iii) the outstanding principal amount of the "Tranche A Loans" and "Tranche
B Loans" held by each Bank under the Original Credit Agreement are hereby
consolidated and shall be evidenced by the Note issued to each Bank in
accordance with the terms of this Agreement.
(c) The "Purchase Price" shall mean, with respect to each of Wachovia and
First Union, the principal amount of the outstanding "Loans" divided by three
under the Original Credit Agreement held by each of Wachovia and First Union on
the Target Date.
25
<PAGE>
(d) SunTrust acknowledges and agrees that neither Wachovia nor First Union
(i) has made any representation or warranty or assumed any responsibility with
respect to any statements, warranties or representations made in or in
connection with the Original Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Original
Credit Agreement or any other "Loan Documents" under the Original Credit
Agreement furnished pursuant thereto, other than that (A) it is the legal and
beneficial owner of its interests being purchased by SunTrust pursuant to
Section 2.15(a), (B) such interest is free and clear of any adverse claim, and
(C) its Purchase Price equals the aggregate outstanding principal amount of all
"Loans" under the Original Credit Agreement owed by the Borrower to it as of the
Target Date; and (ii) makes any representation or warranty or assumes any
responsibility with respect to the financial condition of the Borrower or the
performance or observance by the Borrower of any of its obligations under the
Original Credit Agreement or any other instrument or document furnished pursuant
thereto.
(e) Notwithstanding anything contained in this Agreement to the contrary,
in the event that the Effective Date Conditions are not satisfied on the Target
Date, the parties to this Agreement agree that: (i) the Effective Date shall not
have occurred, (ii) this Agreement and the Notes executed and delivered in
connection with this Agreement shall be null and void, and of no force or
effect, and (iii) the Original Credit Agreement and "Notes" issued in connection
therewith shall remain in full force and effect and the Borrower will be deemed
to have ratified and reaffirmed all terms, covenants, conditions and provisions
of the Original Credit Agreement and such "Notes."
ARTICLE III
CONDITIONS TO BORROWINGS
SECTION 3.01. Conditions to Initial Borrowing. The obligations of
-------------------------------
each Bank under this Agreement are subject to the satisfaction of the conditions
set forth in Section 3.02 and receipt by the Banks of the following (in
sufficient number of counterparts (except as to the Notes) for delivery of a
counterpart to each Bank):
(a) from each of the parties hereto a duly executed counterpart of
this Agreement;
(b) a duly executed Note by the Borrower for the account of each Bank
complying with the provisions of Section 2.03;
(c) an opinion of Alston & Bird LLP, counsel for the Borrower, dated
as of the Target Date, substantially in the form of Exhibit B;
---------
26
<PAGE>
(d) the Borrower's most recent audited consolidated financial
statements, including, without limitation, a balance sheet and income
statement and its most recent 10-K filed with the Securities and Exchange
Commission, in such form and substance satisfactory to the Banks in their
sole discretion;
(e) a certificate, dated as of the Target Date, signed by a principal
financial officer of the Borrower, to the effect that (i) no Default has
occurred and is continuing on the Target Date and (ii) the representations
and warranties of the Borrower contained in Article IV are true on and as
of the Target Date;
(f) all documents which any Bank may reasonably request relating to
the existence of the Borrower, the corporate authority for and the validity
of the Loan Documents to which the Borrower is a party, and any other
matters relevant thereto, all in form and substance satisfactory to the
Banks, including, without limitation, a certificate of incumbency of the
Borrower, signed by the Secretary or an Assistant Secretary of the
Borrower, certifying as to the names, true signatures and incumbency of the
officer or officers of the Borrower, authorized to execute and deliver the
Loan Documents, and certified copies of the following items as to the
Borrower: (i) its Certificate of Incorporation, (ii) its Bylaws, (iii) a
certificate of the Secretary of State of the State of Delaware as to the
good standing of the Borrower as a Delaware corporation, and (iv) the
action taken by its Board of Directors (or a duly authorized committee
thereof) authorizing its execution, delivery and performance of the Loan
Documents to which it is a party; and
(g) a Notice of Borrowing, if necessary.
SECTION 3.02. Conditions to All Borrowings. The obligation of each
----------------------------
Bank to make a Loan on the occasion of each Borrowing is subject to the
satisfaction of the following conditions:
(a) receipt by the Banks of a Notice of Borrowing;
(b) the fact that, immediately after such Borrowing, no Default shall
have occurred and be continuing;
(c) the fact that the representations and warranties contained in
Article IV of this Agreement shall be true on and as of the date of such
Borrowing except for changes permitted by this Agreement and except to the
extent they relate solely to an earlier date; and
(d) the fact that, immediately after such Borrowing, the sum of (x)
the aggregate outstanding principal amount of the Loans plus the Letter of
Credit Obligations of the Banks will not exceed (y) the amount of the
aggregate Commitments.
27
<PAGE>
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in
paragraphs (b), (c) and (d) of this Section.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower is a
-----------------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, is duly qualified to transact business
in every jurisdiction where, by the nature of its business, such qualification
is necessary and where failure to be so qualified could have or create a
reasonable possibility of causing a Material Adverse Effect, and has all
corporate powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 4.02. Corporate and Governmental Authorization; No
--------------------------------------------
Contravention. The execution, delivery and performance by the Borrower of this
- -------------
Agreement, the Notes and the other Loan Documents to which it is a party (i) are
within its corporate powers, (ii) have been duly authorized by all necessary
corporate action, (iii) require no action by or in respect of or filing with,
any governmental body, agency or official (other than routine filings with the
Securities and Exchange Commission), (iv) do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower or any of its Subsidiaries, and (v) do not result in the creation or
imposition of any Lien on any asset of the Borrower or any of its Subsidiaries.
SECTION 4.03. Binding Effect. This Agreement constitutes a valid and
--------------
binding agreement of the Borrower enforceable in accordance with its terms, and
the Notes and the other Loan Documents, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Borrower (provided that the Borrower is a party to any such Loan Document)
enforceable in accordance with their respective terms, provided that the
--------
enforceability hereof and thereof is subject in each case to general principles
of equity and to bankruptcy, insolvency and similar laws affecting the
enforcement of creditors' rights generally.
SECTION 4.04. Financial Information. (a) The consolidated balance
---------------------
sheet of the Borrower and its Consolidated Subsidiaries as of December 31, 1998,
and the related consolidated statements of income, shareholders' equity and cash
flows for the Fiscal Year then ended, reported on by KPMG LLP, copies of which
have been delivered to each of the Banks, and the unaudited consolidated
financial statements of the Borrower for the interim period ended
28
<PAGE>
September 30, 1999, copies of which have been delivered to each of the Banks,
fairly present in all material respects, in conformity with GAAP, the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such dates and their consolidated results of operations and
cash flows for such periods stated.
(b) Since December 31, 1998, there has been no event, act, condition
or occurrence having, or which could reasonably be expected to have a Material
Adverse Effect.
SECTION 4.05. No Litigation. Except as set forth on Schedule 4.05, as
-------------
of the date hereof, there is no action, suit or proceeding pending, or to the
knowledge of the Borrower threatened in writing, against or affecting the
Borrower or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which could reasonably be expected to have
a Material Adverse Effect.
SECTION 4.06. Compliance with ERISA. (a) The Borrower and each member
---------------------
of the Controlled Group have fulfilled their obligations under the minimum
funding standards of ERISA and the Code with respect to each Plan and are in
compliance with the presently applicable provisions of ERISA and the Code
(except where such noncompliance could not reasonably be expected to have a
Material Adverse Effect), and have not incurred any liability to the PBGC under
Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled Group is or
ever has been obligated to contribute to any Multiemployer Plan.
SECTION 4.07. Taxes. There have been filed on behalf of the Borrower
-----
and its Subsidiaries all Federal, state and local income, excise, property and
other tax returns which are required to be filed by them and all taxes due
pursuant to such returns or pursuant to any assessment received by or on behalf
of the Borrower or any Subsidiary have been paid or valid and effective
extensions therefor have been obtained. The charges, accruals and reserves on
the books of the Borrower and its Subsidiaries in respect of taxes or other
governmental charges are, in the opinion of the Borrower, adequate. United
States income tax returns of the Borrower and its Subsidiaries' have been
examined and closed through the Fiscal Year ended 1994.
SECTION 4.08. Subsidiaries. Each of the Borrower's Subsidiaries is
------------
duly organized or formed, validly existing and in good standing under the laws
of the jurisdiction of its creation and organization, and has all powers (by
virtue of its creation and organization) and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted. As of the date hereof, the Borrower has no Subsidiaries except for
those Subsidiaries listed on Schedule 4.08, which accurately sets forth each
such Subsidiary's complete name and jurisdiction of creation and organization.
SECTION 4.09. Not an Investment Company. The Borrower is not an
-------------------------
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
29
<PAGE>
SECTION 4.10. Ownership of Property; Liens. Each of the Borrower and
----------------------------
its Consolidated Subsidiaries has title to its properties sufficient for the
conduct of its business, and none of such property is subject to any Lien except
as permitted in Section 5.09.
SECTION 4.11. No Default. Neither the Borrower nor any of its
----------
Consolidated Subsidiaries is in default under or with respect to any agreement,
instrument or undertaking to which it is a party or by which it or any of its
property is bound which could reasonably be expected to have or cause a Material
Adverse Effect. No Default or Event of Default has occurred and is continuing.
SECTION 4.12. Full Disclosure. All information heretofore furnished
---------------
by the Borrower to any Bank for purposes of or in connection with this Agreement
or any transaction contemplated hereby is, and all such information hereafter
furnished by the Borrower to any Bank will be, true, accurate and complete in
every material respect or based on reasonable estimates on the date as of which
such information is stated or certified. The Borrower has disclosed to the
Banks in writing any and all facts which would have or create a reasonable
possibility of causing a Material Adverse Effect.
SECTION 4.13. Environmental Matters. To the best knowledge of the
---------------------
Borrower, after due inquiry (which does not necessarily mean the performance of
a phase I environmental audit), (a) neither the Borrower nor any Subsidiary is
subject to any Environmental Liability and (b) neither the Borrower nor any
Subsidiary has been designated as a potentially responsible party under CERCLA
or under any state statute similar to CERCLA. To the best knowledge of the
Borrower, after due inquiry (which does not necessarily mean the performance of
a phase I environmental audit), none of the Properties has been identified on
any current or proposed (i) National Priorities List under 40 C.F.R. Section
300, (ii) CERCLIS list or (iii) any list arising from a state statute similar to
CERCLA.
(b) To the best knowledge of the Borrower, after due inquiry (which
does not necessarily mean the performance of a phase I environmental audit), no
Hazardous Materials have been or are being used, produced, manufactured,
processed, treated, recycled, generated, stored, disposed of, managed or
otherwise handled at, or shipped or transported to or from the Properties or are
otherwise present at, on, in or under the Properties, or, to the best of the
knowledge of the Borrower, at or from any adjacent site or facility, except for
(i) Hazardous Materials, such as cleaning solvents, combustion enhancers,
pesticides and other materials used, produced, manufactured, processed, treated,
recycled, generated, stored, disposed of, managed, or otherwise handled in the
ordinary course of business in compliance with all applicable Environmental
Requirements, and (ii) Hazardous Materials with respect to which the presence
thereof, any required remediation with respect thereto, or the expenses, fines,
penalties and other costs relating thereto could not reasonably be expected to
have a Material Adverse Effect.
(c) Except for non-compliance which could not reasonably be expected
to have a Material Adverse Effect, the Borrower, and each of its Subsidiaries is
in compliance with
30
<PAGE>
all Environmental Requirements in connection with the operation of the
Properties and each of the Borrower's and its Subsidiary's respective
businesses.
SECTION 4.14. Capital Stock. All Capital Stock, debentures, bonds,
-------------
notes and all other securities of the Borrower and its Subsidiaries presently
issued and outstanding are validly and properly issued in accordance with all
applicable laws, including but not limited to, the "Blue Sky" laws of all
applicable states and the federal securities laws. At least a majority of the
issued shares of capital stock of each of the Borrower's other Subsidiaries, if
any, (other than Wholly Owned Subsidiaries) is owned by the Borrower free and
clear of any Lien or adverse claim.
SECTION 4.15. Margin Stock. Neither the Borrower nor any of its
------------
Subsidiaries is engaged principally, or as one of its important activities, in
the business of purchasing or carrying any Margin Stock, and no part of the
proceeds of any Loan will be used, except as permitted by Section 5.12, (a) to
purchase or carry any Margin Stock or (b) to extend credit to others for the
purpose of purchasing or carrying any Margin Stock.
SECTION 4.16. Insolvency. After giving effect to the execution and
----------
delivery of the Loan Documents and the making of the Loans under this
Agreement, the Borrower will not be "insolvent," within the meaning of such term
as used in O.C.G.A. (S) 18-2-22 or as defined in (S) 101 of Title 11 of the
United States Code, as amended from time to time, or be unable to pay its debts
generally as such debts become due, or have an unreasonably small capital to
engage in any business or transaction, whether current or contemplated.
SECTION 4.17. Year 2000 Issues. The Borrower and its Subsidiaries
----------------
(i) have initiated a comprehensive review of their computer programs to identify
the systems that could give rise to Year 2000 Issues as the same pertains to the
computer programs and systems of the Borrower and the Subsidiaries (but not
those of their third party customers, suppliers, or vendors), and are in the
process of reviewing their Year 2000 Issues exposure to third party customers,
suppliers and vendors, and evaluating the costs of modifications to program
logic control systems, (ii) have developed or are in the process of developing a
realistic and achievable program for remediating in all material respects all
currently known Year 2000 Issues on a timely basis as such Issues pertain to the
computer programs and systems of the Borrower and its Subsidiaries (but not
those of their third party customers, suppliers, or vendors), and (iii) based on
their review, consultants' reports, and all other information currently
available to them, do not reasonably anticipate that Year 2000 Issues will have
a Material Adverse Effect.
31
<PAGE>
ARTICLE V
COVENANTS
32
<PAGE>
The Borrower agrees that, so long as any Commitment shall remain in
effect, any Letter of Credit Obligations are outstanding or any amount payable
hereunder or under any Note remains unpaid:
SECTION 5.01. Information. The Borrower will deliver to each of the
-----------
Banks:
(a) as soon as available and in any event within 90 days after the end
of each Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of earnings, stockholders' equity and cash flows
for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, including the related unqualified
audit opinion issued by KPMG LLP or other independent public accountants of
nationally recognized standing, with such certification to be free of
exceptions and qualifications not acceptable to the Required Banks;
(b) as soon as available and in any event within 45 days after the end
of each Fiscal Quarter (other than the fourth Fiscal Quarter), a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter and the related
consolidated statements of earnings and statements of cash flows for such
quarter and for the portion of the Fiscal Year ended at the end of such
quarter, setting forth in each case in comparative form the figures for the
corresponding quarter and the corresponding portion of the previous Fiscal
Year, all certified (subject to normal year-end adjustments) as to fairness
of presentation, GAAP (except for the failure to provide footnotes thereto)
and consistency by the chief financial officer or the corporate controller
of the Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in paragraphs (a) and (b) above, a certificate,
substantially in the form of Exhibit E (a "Compliance Certificate"), of the
---------
chief financial officer, treasurer or the corporate controller of the
Borrower (i) setting forth in reasonable detail the calculations required
to establish whether the Borrower was in compliance with the requirements
of Sections 5.04, 5.05, and Section 5.08, on the date of such financial
statements and (ii) stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to take
with respect thereto;
(d) simultaneously with the delivery of each set of annual financial
statements referred to in paragraph (a) above, operations and cash flow
projections (indicating projected earnings and significant cash sources and
uses) prepared by the Borrower for the Fiscal Year following the Fiscal
Year reported on in such statements referred to in paragraph (a), in such
form and substance as is acceptable to the Required Banks, in their sole
discretion;
33
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(e) within 1 Domestic Business Day after the Borrower becomes aware of
the occurrence of any Default, telephonic notice to each of the Banks of
the occurrence of a Default (which telephonic notice shall set forth the
details thereof), followed, within 10 Domestic Business Days after the date
of such telephonic notice, with a certificate of the chief financial
officer or the treasurer of the Borrower setting forth the details thereof
and the action which the Borrower is taking or proposes to take with
respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Borrower generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and annual, quarterly or monthly reports
which the Borrower shall have filed with the Securities and Exchange
Commission;
(h) if and when any member of the Controlled Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA,
a copy of such notice; or (iii) receives notice from the PBGC under Title
IV of ERISA of an intent to terminate or appoint a trustee to administer
any Plan, a copy of such notice; and
(i) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries as any
Bank may reasonably request, including, without limitation, consolidating
balance sheets and statements of earnings of the Borrower and the
Borrower's Subsidiaries, in existence at such time, as at the end of any
fiscal period.
SECTION 5.02. Inspection of Property, Books and Records. The Borrower
-----------------------------------------
will (i) keep, and cause each Subsidiary to keep, proper books of record and
account in which full, true and correct entries in conformity with GAAP shall be
made of all dealings and transactions in relation to its business and
activities; and (ii) permit, and cause each Subsidiary to permit,
representatives of any Bank at such Bank's expense prior to the occurrence of a
Default and at the Borrower's expense after the occurrence of a Default to visit
and inspect any of their respective properties, to examine and make abstracts
from any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants. The Borrower agrees to cooperate and assist in
such visits and inspections, in each case upon reasonable notice, at such
reasonable times and as often as may reasonably be desired.
34
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SECTION 5.03. Year 2000 Issues. The Borrower shall take, and cause its
----------------
Subsidiaries to take, all actions reasonably necessary to assure that the Year
2000 Issues, as such Year 2000 Issues pertain to the computer programs and
systems of the Borrower and its Subsidiaries, will not have a Material Adverse
Effect. The Borrower and its Subsidiaries will use commercially reasonable
efforts to assure that their third-party customers, suppliers and vendors
develop and implement programs to remediate, in all material respects, all Year
2000 Issues reasonably anticipated by Borrower and its Subsidiaries to have a
Material Adverse Effect. Upon written request by the Banks, Borrower will
provide the Banks a written description of its program for assessing Year 2000
Issues, including updates and progress reports. The Borrower will advise the
Banks promptly of any reasonably anticipated Material Adverse Effect as a result
of Year 2000 Issues.
SECTION 5.04. Debt to Capitalization Ratio. The Debt to
----------------------------
Capitalization Ratio shall be less than 0.60 to 1.0 at the end of each Fiscal
Quarter.
SECTION 5.05. Debt to EBITDA Ratio. The ratio of the Borrower's (a)
--------------------
Consolidated Debt to (b) the sum of (i) Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) taxes on the Borrower's consolidated pre-
tax income, and (iv) Depreciation and Amortization shall not be greater than 3.5
to 1.0 at the end of each Fiscal Quarter. Clause (b) in this Section 5.05 shall
be calculated on a trailing 4 quarter basis as at the end of each such Fiscal
Quarter.
SECTION 5.06. Restricted Payments. The Borrower shall not declare or
-------------------
make any Restricted Payment unless, after giving effect thereto, no Default
shall exist.
SECTION 5.07. Investments. The Borrower will not, and will not permit
-----------
any of its Subsidiaries to, make or maintain any Investments except (a)
Investments in the Borrower or any Subsidiary, including without limitation,
advances or loans between or among the Borrower or any Subsidiary and loans and
advances to officers and employees of the Borrower or any Subsidiary in the
ordinary course of business; (b) Investments in Persons engaged in a Permitted
Line of Business (whether or not such Person is, or after giving effect to any
such Investment becomes, a Subsidiary); (c) Investments in Persons in connection
with Permitted Acquisitions; and (d) Investments in Approved Investments;
provided, however, during the existence of an Event of Default, neither the
Borrower nor any of its Subsidiaries may make any new Investments without the
prior written consent of the Required Banks.
SECTION 5.08. Negative Pledge. Neither the Borrower nor any of its
---------------
Subsidiaries will create, assume or suffer to exist any Lien on any asset now
owned or hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement in an aggregate principal amount
not exceeding $5,000,000;
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(b) any Lien existing on any asset of any Person at the time such
Person becomes a Consolidated Subsidiary and not created in contemplation
of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part of the cost of acquiring or
constructing such asset, provided that such Lien attaches to such asset
--------
concurrently with or within 18 months after the acquisition or completion
of construction thereof;
(d) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a
Consolidated Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Consolidated Subsidiary and not created in contemplation
of such acquisition;
(f) Liens securing Debt owing by any Subsidiary to the Borrower;
(g) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
paragraphs of this Section, provided that (i) such Debt is not secured by
--------
any additional assets, and (ii) the amount of such Debt secured by any such
Lien is not increased;
(h) Liens incidental to the conduct of its business or the ownership
of its assets which (i) do not secure Debt and (ii) do not in the aggregate
materially detract from the value of its assets or materially impair the
use thereof in the operation of its business;
(i) any Lien on Margin Stock;
(j) Liens in connection with an Asset Securitization permitted under
Section 5.11;
(k) Liens involuntarily imposed and being contested in good faith,
subject to the Borrower or such Subsidiary having established reasonable
reserves therefor to the extent required under GAAP;
(l) Liens against the assets of Aladdin (formerly owned by Galaxy)
under the Catoosa Co. IRB solely to the extent existing as of the date
hereof; and
(m) Liens against the assets of Aladdin (formerly owned by Image
Industries, Inc.) under the Summerville City IRB solely to the extent
existing as of the date of the Image Acquisition.
36
<PAGE>
provided that Liens permitted by the foregoing paragraphs (a) through (i) shall
- --------
at no time secure Debt in an aggregate amount exceeding the greater of (x)
$90,000,000 or (y) 15% of Consolidated Net Worth.
SECTION 5.09. Maintenance of Existence. Other than as permitted by
------------------------
Section 5.10 or 5.11, the Borrower shall, and shall cause each Subsidiary to,
maintain its corporate existence and carry on its business in a Permitted Line
of Business.
SECTION 5.10. Dissolution. Neither the Borrower nor any of its
-----------
Subsidiaries shall suffer or permit dissolution or liquidation either in whole
or in part or redeem or retire any shares of its own stock or that of any
Subsidiary, except through corporate reorganization to the extent permitted by
Section 5.11 or in connection with a Restricted Payment which is permitted
pursuant to Section 5.06.
SECTION 5.11. Consolidations, Mergers and Sales of Assets. The
-------------------------------------------
Borrower will not, nor will the Borrower permit any Subsidiary to, consolidate
or merge with or into, or sell, lease or otherwise transfer all or any
substantial part of its assets to, any other Person, provided that (a) the
--------
Borrower may merge with another Person if (i) such Person was organized under
the laws of the United States of America or one of its states, (ii) the Borrower
is the corporation surviving such merger and (iii) immediately after giving
effect to such merger, no Default shall have occurred and be continuing, (b)
Subsidiaries of the Borrower may merge with and into the Borrower, any other
Subsidiary, or any other Person if after giving effect thereto such other Person
would be a Subsidiary, (c) assets may be transferred from a Subsidiary to the
Borrower or another Subsidiary, (d) any Wholly-Owned Subsidiary may dissolve or
liquidate so long as the assets of such Subsidiary at the time of such
dissolution or liquidation are transferred to such Subsidiary's shareholder and
such shareholder assumes all of the liabilities of such Subsidiary at the time
of such dissolution or liquidation, (e) the Borrower and its Subsidiaries may
factor receivables, (f) the Borrower and its Subsidiaries may effect Asset
Securitizations, and (g) the foregoing limitation on the sale, lease or other
transfer of assets shall not prohibit, during any Fiscal Quarter, a transfer of
assets by the Borrower or any Subsidiary (in a single transaction or in a series
of related transactions) unless (x) the proceeds thereof are not reinvested
within 180 days thereafter in a Permitted Line of Business owned by the Borrower
or such Subsidiary or (y) the aggregate assets to be so transferred or utilized
in a business line or segment to be so discontinued, when combined with all
other assets transferred, and all other assets utilized in all other business
lines or segments discontinued, during such Fiscal Quarter and the immediately
preceding three Fiscal Quarters, constituted more than 20% of Consolidated Total
Assets at the end of the fourth Fiscal Quarter immediately preceding such Fiscal
Quarter.
SECTION 5.12. Use of Proceeds. The proceeds of the Loans shall be
---------------
used by the Borrower to provide for working capital, to finance capital
expenditures, to finance Investments permitted under Section 5.07, and for the
other general corporate purposes of the Borrower and its Subsidiaries. In no
event shall any portion of the proceeds of the Loans be used by the Borrower
(i) except for Permitted Acquisitions, in connection with any tender offer for,
or other
37
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acquisition of, stock of any corporation with a view towards obtaining
control of such other corporation, (ii) directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any Margin
Stock other than the common stock or other capital stock of the Borrower, or
(iii) for any purpose in violation of any applicable law or regulation.
SECTION 5.13. Compliance with Laws; Payment of Taxes. The Borrower
--------------------------------------
will, and will cause each of its Subsidiaries to, comply in all material
respects with applicable laws (including but not limited to ERISA), regulations
and similar requirements of governmental authorities (including but not limited
to PBGC), except where the necessity of such compliance is being contested in
good faith through appropriate proceedings or where noncompliance would not have
or create a reasonable possibility of causing a Material Adverse Effect. The
Borrower will, and will cause each of its Subsidiaries to, pay promptly when
due, giving regard for any extensions obtained, all taxes, assessments,
governmental charges, claims for labor, supplies, rent and other obligations
which, if unpaid, might become a lien against the property of either the
Borrower or any Subsidiary, except liabilities being contested in good faith and
against which, if requested by the Banks, either the Borrower or such Subsidiary
will set up reserves in accordance with GAAP.
SECTION 5.14. Insurance. The Borrower will maintain, and will cause
---------
each of its Subsidiaries to maintain (either in the name of the Borrower or in
such Subsidiary's own name), with financially sound and reputable insurance
companies, insurance on all its property in at least such amounts and against at
least such risks as are usually insured against in the same general area by
companies of established repute engaged in the same or similar business, subject
to the Borrower's right to self-insure with respect to loss or damage to
property in an amount reasonably acceptable to the Banks.
SECTION 5.15. Change in Fiscal Year. The Borrower shall give the
---------------------
Banks at least 30 day's prior written notice of any change in the determination
of its Fiscal Year.
SECTION 5.16. Maintenance of Property. Subject to the rights of the
-----------------------
Borrower or any Subsidiary to discontinue certain operations under Section 5.10
or 5.11, the Borrower shall, and shall cause each Subsidiary to, maintain all of
its properties and assets in good working order, ordinary wear and tear and
obsolescence excepted (excluding losses due to fully insured, subject to
commercially reasonable deductibles, casualties).
SECTION 5.17. Environmental Notices. The Borrower shall furnish to
---------------------
the Banks prompt written notice of all Environmental Liabilities, pending,
threatened or anticipated Environmental Proceedings, Environmental Notices,
Environmental Judgments and Orders, and Environmental Releases at, on, in, under
or in any way affecting the Properties or any adjacent property which would have
a Material Adverse Effect, and all facts, events, or conditions that could lead
to any of the foregoing.
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<PAGE>
SECTION 5.18. Environmental Matters. The Borrower will not, nor will
---------------------
it permit any Third Party to, use, produce, manufacture, process, treat,
recycle, generate, store, dispose of, manage at, or otherwise handle, or ship or
transport to or from the Properties any Hazardous Materials except for Hazardous
Materials such as cleaning solvents, combustion enhancers, pesticides and other
similar materials used, produced, manufactured, processed, treated, recycled,
generated, stored, disposed, managed, or otherwise handled in the ordinary
course of business in compliance with all applicable Environmental Requirements.
SECTION 5.19. Environmental Release. The Borrower agrees that upon
---------------------
the occurrence of an Environmental Release which would have a Material Adverse
Effect and which violates any Environmental Requirement it will promptly
investigate the extent of, and take appropriate action to remediate such
Environmental Release, whether or not ordered or otherwise directed to do so by
any Environmental Authority.
SECTION 5.20. Debt of Subsidiaries. The Borrower shall not permit any
--------------------
Subsidiary to incur any Debt except for (i) Debt owed by a Subsidiary to the
Borrower or another Subsidiary, (ii) Debt deemed incurred in connection with an
Asset Securitization permitted under Section 5.11; (iii) (A) Debt of
Subsidiaries arising in connection with the Summerville City IRB and the Catoosa
Co. IRB and incurrence of reimbursement obligations with respect to the Letters
of Credit and (B) other Debt of Subsidiaries arising in connection with the
issuance of bonds by governmental authorities so long as such Debt is supported
by a letter of credit issued by a financial institution for the benefit of the
Borrower and the Borrower is obligated to such financial institution under a
reimbursement agreement for the reimbursement of amounts drawn under such letter
of credit; and (iv) in addition to Debt incurred under clauses (i) through (iii)
of this Section, other Debt of Subsidiaries not exceeding in the aggregate
amount outstanding at any time 15% of Consolidated Net Worth.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
-----------------
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal or any
interest on any Loan or any fee or other amount payable hereunder within 5
Domestic Business Days after such principal, interest, fee or other amount
shall become due (except at maturity on the applicable Termination Date);
or
(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.02(ii), 5.03 through 5.12, inclusive, or 5.20; or
39
<PAGE>
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained or incorporated by reference in this Agreement (other
than those covered by paragraph (a) or (b) above) and such failure shall
not have been cured within 30 days after the earlier to occur of (i)
written notice thereof has been given to the Borrower by the Banks or (ii)
the Borrower otherwise becomes aware of any such failure; or
(d) any representation, warranty, certification or statement made by
the Borrower in Article IV of this Agreement or in any certificate,
financial statement or other document delivered pursuant to this Agreement
or any of the other Loan Documents shall prove to have been incorrect or
misleading in any material respect when made (or deemed made); or
(e) the Borrower or any Subsidiary shall fail to make any payment in
respect of Debt in excess of $25,000,000 in the aggregate outstanding
(other than the Notes or pursuant to any of the other Loan Documents) when
due or within any applicable grace period; or
(f) any event or condition shall occur which results in the
acceleration of the maturity of Debt in excess of $25,000,000 in the
aggregate outstanding of the Borrower or any Subsidiary (including, without
limitation, any "put" of such Debt to the Borrower or any Subsidiary) or
enables or, with the giving of notice or lapse of time or both, would
enable, the holders of such Debt or any Person acting on such holders'
behalf to accelerate the maturity thereof (including, without limitation,
any "put" of such Debt to the Borrower or any Subsidiary); or
(g) the Borrower or any Material Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing; or
(h) an involuntary case or other proceeding shall be commenced against
the Borrower or any Material Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
the Borrower or any Material Subsidiary under the federal bankruptcy laws
as now or hereafter in effect; or
40
<PAGE>
(i) the Borrower or any member of the Controlled Group shall fail to
pay when due any material amount which it shall have become liable to pay
to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to
terminate a Plan or Plans (other than pursuant to a standard termination)
shall be filed under Title IV of ERISA by the Borrower, any member of the
Controlled Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate or to cause a trustee to be appointed to administer any such
Plan or Plans or a proceeding shall be instituted by a fiduciary of any
such Plan or Plans to enforce Section 515 or 4219(c)(5) of ERISA and such
proceeding shall not have been dismissed within 30 days thereafter; or a
condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any such Plan or Plans must be
terminated; or
(j) one or more judgments or orders for the payment of money in an
aggregate amount in excess of $25,000,000 (exclusive of insurance coverage
if any insurer shall have acknowledged such coverage in writing) shall be
rendered against the Borrower or any Material Subsidiary and such judgment
or order shall continue unsatisfied and unstayed for a period of 30 days;
or
(k) one or more federal tax liens securing an aggregate amount in
excess of $5,000,000 shall be filed against the Borrower or any Material
Subsidiary under Section 6323 of the Code or a lien of the PBGC shall be
filed against the Borrower or any Material Subsidiary under Section 4068 of
ERISA and in either case such lien shall remain undischarged for a period
of 25 days after the date of filing; or
(l) (i) any Person or two or more Persons acting in concert shall have
acquired, after February 24, 1995, beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 30% or more of the outstanding shares
of the voting stock of the Borrower; or (ii) as of any date a majority of
the Board of Directors of the Borrower consists of individuals who were not
either (A) directors of the Borrower, as appropriate, as of the
corresponding date of the previous year, (B) selected or nominated to
become directors by the Board of Directors of the Borrower of which a
majority consisted of individuals described in clause (A), or (C) selected
or nominated to become directors by the Board of Directors of the Borrower
of which a majority consisted of individuals described in clause (A) and
individuals described in clause (B); or
(m) an "Event of Default" shall occur under any of the other Loan
Documents; or
(n) (i) any of the Loan Documents shall cease to be enforceable, or
(ii) the Borrower shall assert that any Loan Document shall cease to be
enforceable.
41
<PAGE>
then, and in every such event, the Required Banks may (i) by notice to the
Borrower terminate the Commitments or and they shall thereupon terminate, and
(ii) by notice to the Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower together with interest at the Default
Rate accruing on the principal amount thereof from and after the date of such
Event of Default; provided that if any Event of Default specified in paragraph
--------
(g) or (h) above occurs with respect to the Borrower, without any notice to the
Borrower or any other act by the Banks, the Commitments shall thereupon
terminate and the Notes (together with accrued interest thereon) shall become
immediately due and payable without presentment, demand, protest or other notice
of any kind, all of which are hereby waived by the Borrower together with
interest thereon at the Default Rate accruing on the principal amount thereof
from and after the date of such Event of Default. Notwithstanding the
foregoing, each of the Banks shall have available to it all other remedies at
law or equity.
ARTICLE VII
CHANGE IN CIRCUMSTANCES; COMPENSATION
SECTION 7.01. Basis for Determining Interest Rate Inadequate or
-------------------------------------------------
Unfair. If on or prior to the first day of any Interest Period:
(a) any Bank determines that deposits in Dollars (in the applicable
amounts) are not being offered in the relevant market for such Interest
Period, or
(b) any Bank determines that the London Interbank Offered Rate, as the
case may be, as determined by Wachovia will not adequately and fairly
reflect the cost to such Bank of funding the relevant Euro-Dollar Loan for
such Interest Period,
such Bank shall forthwith give notice thereof to the Borrower, whereupon until
such Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligations of such Bank to make any Euro-Dollar
Loan specified in such notice shall be suspended. Unless the Borrower notifies
such Bank at least 2 Domestic Business Days before the date of any Borrowing of
such Euro-Dollar Loan for which a Notice of Borrowing has previously been given
that it elects not to borrow on such date, such Borrowing shall instead be made
as a Base Rate Borrowing.
SECTION 7.02. Illegality. If, after the date hereof, the adoption of
----------
any applicable law, rule or regulation, or any change therein, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof (any such agency being referred to as an "Authority" and
any such event being referred to as a "Change of Law"), or compliance by any
42
<PAGE>
Bank (or its Lending Office) with any request or directive (whether or not
having the force of law) of any Authority shall make it unlawful or impossible
for any Bank (or its Lending Office) to make, maintain or fund its Euro-Dollar
Loans, such Bank shall forthwith give notice thereof to the Borrower, whereupon
until such Bank notifies the Borrower that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans, shall be suspended. Before giving any notice to the Borrower pursuant to
this Section, such Bank shall designate a different Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Bank, be otherwise materially disadvantageous to such Bank.
If such Bank shall determine that it may not lawfully continue to maintain and
fund any of its outstanding Euro-Dollar Loans to maturity and shall so specify
in such notice, the Borrower shall immediately prepay in full the then
outstanding principal amount of each Euro-Dollar Loan of such Bank, together
with accrued interest thereon. Concurrently with prepaying each such Euro-
Dollar Loan, the Borrower shall borrow a Base Rate Loan in an equal principal
amount from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks), and
such Bank shall make such a Base Rate Loan.
SECTION 7.03. Increased Cost and Reduced Return. (a) If after the
---------------------------------
date hereof, a Change of Law or compliance by any Bank (or its Lending Office)
with any request or directive (whether or not having the force of law) of any
Authority:
(i) shall subject any Bank (or its Lending Office) to any tax, duty or
other charge with respect to its Euro-Dollar Loans, its Note or its
obligation to make Euro-Dollar Loans, or shall change the basis of taxation
of payments to any Bank (or its Lending Office) of the principal of or
interest on its Euro-Dollar Loans or any other amounts due under this
Agreement in respect of its Euro-Dollar Loans or its obligation to make
Euro-Dollar Loans (except for changes in the rate of tax on the overall net
income of such Bank or its Lending Office imposed by the jurisdiction in
which such Bank's principal executive office or Lending Office is located);
or
(ii) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding with respect to any Euro-Dollar Loan any such
requirement included in an applicable Euro-Dollar Reserve Percentage)
against assets of, deposits with or for the account of, or credit extended
by, any Bank (or its Lending Office); or
(iii) shall impose on any Bank (or its Lending Office) or on the
United States market for certificates of deposit or the London interbank
market any other condition affecting its Euro-Dollar Loans, its Note or its
obligation to make Euro-Dollar Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Lending Office) of making or maintaining any Euro-Dollar Rate Loan, or to
reduce the amount of any sum
43
<PAGE>
received or receivable by such Bank (or its Lending Office) under this Agreement
or under its Note with respect thereto, by an amount deemed by such Bank to be
material, then, within 15 days after demand by such Bank, the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) If any Bank shall have determined that after the date hereof the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change therein, or any change in the interpretation or administration
thereof, or compliance by any Bank (or its Lending Office) with any request or
directive regarding capital adequacy (whether or not having the force of law) of
any Authority, has or would have the effect of reducing the rate of return on
such Bank's capital as a consequence of its obligations hereunder to a level
below that which such Bank could have achieved but for such adoption, change or
compliance (taking into consideration such Bank's policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank, the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank for
such reduction.
(c) Each Bank will promptly notify the Borrower of any event of which
it has knowledge, occurring after the date hereof, which will entitle such Bank
to compensation pursuant to this Section and will designate a different Lending
Office if such designation will avoid the need for, or reduce the amount of,
such compensation and will not, in the judgment of such Bank, be otherwise
materially disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount or
amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
(d) The provisions of this Section 7.03 shall be applicable with
respect to any Participant, Assignee or other Transferee (unless the date of any
such assignment or transfer, a condition listed under Section 7.02 or 7.03
existed with respect to any such Participant, Assignee or other Transferee), and
any calculations required by such provisions shall be made based upon the
circumstances of such Participant, Assignee or other Transferee.
SECTION 7.04. Base Rate Loans Substituted for Euro-Dollar Loans. If
-------------------------------------------------
(i) the obligation of any Bank to make or maintain Euro-Dollar Loans has been
suspended pursuant to Section 7.02 or (ii) any Bank has demanded compensation
under Section 7.03, and the Borrower shall, by at least 5 Euro-Dollar Business
Days' prior notice to such Bank have elected that the provisions of this Section
shall apply to such Bank, then, unless and until such Bank notifies the Borrower
that the circumstances giving rise to such suspension or demand for compensation
no longer apply:
(a) all Loans which would otherwise be made by such Bank as Euro-
Dollar Loans, as the case may be, shall be made instead as Base Rate Loans;
provided, that
44
<PAGE>
interest and principal on such Loans shall be payable contemporaneously
with the related Euro-Dollar Loans of the other Bank), and
(b) after each of its Euro-Dollar Loan, has been repaid, all payments
of principal which would otherwise be applied to repay such Euro-Dollar
Loans shall be applied to repay its Base Rate Loans instead.
SECTION 7.05. Compensation. Upon the request of any Bank, the
------------
Borrower shall pay to such Bank such amount or amounts as shall compensate such
Bank for any loss, cost or expense actually incurred by such Bank and not
compensated pursuant to Section 7.03 as a result of:
(a) any payment or prepayment (pursuant to Section 2.09(b), Section
7.02 or otherwise) of a Euro-Dollar Loan on a date other than the last day of an
Interest Period for such Euro-Dollar Loan; or
(b) any failure by the Borrower to prepay a Euro-Dollar Loan on the
date for such prepayment specified in the relevant notice of prepayment
hereunder; or
(c) any failure by the Borrower to borrow a Euro-Dollar Loan on the
date for the Euro-Dollar Borrowing of which such Euro-Dollar Loan is a part
specified in the applicable Notice of Borrowing delivered pursuant to Section
2.02;
such compensation to include, without limitation, an amount equal to the excess,
if any, of (x) the amount of interest which would have accrued on the amount so
paid or prepaid or not prepaid or borrowed for the period from the date of such
payment, prepayment or failure to prepay or borrow to the last day of the then
current Interest Period for such Euro-Dollar Loan (or, in the case of a failure
to prepay or borrow, the Interest Period for such Euro-Dollar Loan which would
have commenced on the date of such failure to prepay or borrow) at the
applicable rate of interest for such Euro-Dollar Loan provided for herein over
(y) the amount of interest (as reasonably determined by such Bank) such Bank
would have paid on deposits in Dollars of comparable amounts having terms
comparable to such period placed with it by leading banks in the London
interbank market.
SECTION 7.06. Replacement of Banks. If any Bank (an "Affected Bank")
--------------------
makes demand for amounts owed under Section 7.03 (other than due to any change
in the Eurodollar Reserve Percentage), or gives notice under Section 7.01 or
7.02 that it can no longer participate in Euro-Dollar Loans, then in each case
the Borrower shall have the right, if no Default or Event of Default exists, and
subject to the terms and conditions set forth in Section 8.08(c), to designate
an Assignee (a "Replacement Bank") to purchase the Affected Bank's share of
outstanding Loans and all other obligations hereunder and to assume the Affected
Bank's obligations to the Borrower under this Agreement; provided, that, any
-------- ----
Replacement Bank must be reasonably acceptable to the Required Banks (and, in
any event, may not be an Affiliate of the Borrower).
45
<PAGE>
Subject to the foregoing, the Affected Bank agrees to assign without recourse to
the Replacement Bank its share of outstanding Loans and its Commitment, and to
delegate to the Replacement Bank its obligations to the Borrower under this
Agreement. Upon such sale and delegation by the Affected Bank and the purchase
and assumption by the Replacement Bank, and compliance with the provisions of
Section 8.08(c), the Affected Bank shall cease to be a "Bank" hereunder and the
Replacement Bank shall become a "Bank" under this Agreement; provided, however,
-------- -------
that any Affected Bank shall continue to be entitled to the indemnification
provisions contained elsewhere herein.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other communications
-------
to any party hereunder shall be in writing (including bank wire, telecopier or
similar writing) and shall be given to such party at its address or telecopier
number set forth on the signature pages hereof or such other address or
telecopier number as such party may hereafter specify for the purpose by notice
to each other party. Each such notice, request or other communication shall be
effective (i) if given by telecopier, when such telecopy is transmitted to the
telecopier number specified in this Section and the appropriate confirmation is
received, (ii) if given by mail, 72 hours after such communication is deposited
in the mails, certified or registered mail, with first class postage prepaid,
addressed as aforesaid or (iii) if given by any other means, when delivered at
the address specified in this Section; provided, that notices to the Banks under
Article II shall not be effective until received.
SECTION 8.02. No Waivers. No failure or delay by any Bank in
----------
exercising any right, power or privilege hereunder or under its Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 8.03. Expenses; Documentary Taxes. The Borrower shall pay (i)
---------------------------
all out-of-pocket expenses of the Banks, including reasonable fees and
disbursements actually incurred of special counsel for the Banks in connection
with the preparation of this Agreement and the other Loan Documents, any waiver
or consent hereunder or thereunder or any amendment hereof or thereof or any
Default or alleged Default hereunder or thereunder and (ii) if a Default occurs,
all out-of-pocket expenses incurred by any Bank, including reasonable fees and
disbursements of counsel, actually incurred in connection with such Default and
collection and other enforcement proceedings resulting therefrom, including out-
of-pocket expenses incurred in enforcing this Agreement and the other Loan
Documents. The Borrower shall indemnify each Bank against any transfer taxes,
documentary taxes, assessments or charges made by any Authority by reason of the
execution and delivery of this Agreement or the other Loan
46
<PAGE>
Documents but not by reason of any participation or assignment by the Banks,
their successors or assigns.
SECTION 8.04. Indemnification. The Borrower shall indemnify the Banks
---------------
and each affiliate thereof and their respective directors, officers, employees
and agents from, and hold each of them harmless against, any and all losses,
liabilities, claims or damages to which any of them may become subject, insofar
as such losses, liabilities, claims or damages arise out of or result from any
actual or proposed use by the Borrower of the proceeds of any extension of
credit by any Bank hereunder or breach by the Borrower of this Agreement or any
other Loan Document or from any investigation, litigation or other proceeding
(including any threatened investigation or proceeding) relating to the
foregoing, and the Borrower shall reimburse each Bank, and each affiliate
thereof and their respective directors, officers, employees and agents, upon
demand for any expenses (including, without limitation, legal fees) incurred in
connection with any such investigation or proceeding; but excluding any such
losses, liabilities, claims, damages or expenses incurred by reason of the gross
negligence or wilful misconduct of the Person to be indemnified.
SECTION 8.05. Sharing of Setoffs. Each Bank agrees that if it shall,
------------------
by exercising any right of setoff or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest owing with
respect to the Note held by it which is greater than the proportion received by
any other Bank in respect of the aggregate amount of all principal and interest
owing with respect to the Note held by such other Bank, the Bank receiving such
proportionately greater payment shall purchase such participations in the Notes
held by the other Banks owing to such other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Note held by the Bank owing to such other Banks
shall be shared by the Banks pro rata; provided that (i) nothing in this Section
--------
shall impair the right of any Bank to exercise any right of setoff or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of indebtedness of the Borrower other than its indebtedness under the
Notes, and (ii) if all or any portion of such payment received by the purchasing
Bank is thereafter recovered from such purchasing Bank, such purchase from such
other Banks shall be rescinded and such other Bank shall repay to the purchasing
Bank the purchase price of such participation to the extent of such recovery
together with an amount equal to such other Banks' ratable share (according to
the proportion of (x) the amount of such other Banks' required repayment to (y)
the total amount so recovered from the purchasing Bank) of any interest or other
amount paid or payable by the purchasing Bank in respect of the total amount so
recovered. The Borrower agrees, to the fullest extent it may effectively do so
under applicable law, that any holder of a participation in a Note, whether or
not acquired pursuant to the foregoing arrangements, may exercise rights of
setoff or counterclaim and other rights with respect to such participation as
fully as if such holder of a participation were a direct creditor of the
Borrower in the amount of such participation.
SECTION 8.06. Amendments and Waivers. (a) Any provision of this
----------------------
Agreement, the Notes or any other Loan Documents may be amended or waived if,
but only if, such
47
<PAGE>
amendment or waiver is in writing and is signed by the Borrower and the Required
Banks; provided that, no such amendment or waiver shall, unless signed by all
--------
Banks, (i) change the Commitments of any Bank or subject any Bank to any
additional obligation, (ii) change the principal of or decrease the rate of
interest on any Loan or decrease any fees hereunder, (iii) extend the date fixed
for any payment of principal of or interest on any Loan or any fees hereunder,
(iv) change the amount of principal, interest or fees due on any date fixed for
the payment thereof, (v) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement, (vi) change the manner of
application of any payments made under this Agreement or the Notes, (vii)
release or substitute all or any substantial part of the collateral (if any)
held as security for the Loans, or (viii) release any Guarantee (if any) given
to support payment of the Loans.
(b) The Borrower will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement unless each Bank shall be informed thereof by the Borrower and shall
be afforded an opportunity of considering the same and shall be supplied by the
Borrower with sufficient information to enable it to make an informed decision
with respect thereto. Executed or true and correct copies of any waiver or
consent effected pursuant to the provisions of this Agreement shall be delivered
by the Borrower to each Bank forthwith following the date on which the same
shall have been executed and delivered by the requisite percentage of Banks.
The Borrower will not, directly or indirectly, pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, to any Bank (in its capacity as such) as consideration for or as an
inducement to the entering into by such Bank of any waiver or amendment of any
of the terms and provisions of this Agreement unless such remuneration is
concurrently paid, on the same terms, ratably to each of the Banks.
SECTION 8.07. No Margin Stock Collateral. Each of the Banks
--------------------------
represents to the other Banks that it in good faith is not, directly or
indirectly (by negative pledge or otherwise), relying upon any Margin Stock as
collateral in the extension or maintenance of the credit provided for in this
Agreement.
SECTION 8.08. Successors and Assigns. (a) The provisions of this
----------------------
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement.
(b) Any Bank may at any time sell to one or more Persons (each a
"Participant") participating interests in any Loan owing to such Bank, its Note,
its Commitment hereunder or any other interest of such Bank hereunder. In the
event of any such sale by a Bank of a participating interest to a Participant,
such Bank's obligations under this Agreement shall remain unchanged, such Bank
shall remain solely responsible for the performance thereof, such Bank shall
remain the holder of any such Note for all purposes under this Agreement, and
the
48
<PAGE>
Borrower shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under this Agreement. In no event shall
a Bank that sells a participation be obligated to the Participant to take or
refrain from taking any action hereunder except that such Bank may agree that it
will not (except as provided below), without the consent of the Participant,
agree to (i) extend any date fixed for the payment of principal of or interest
on the related loan or loans, (ii) the change of the amount of any principal,
interest or fees due on any date fixed for the payment thereof with respect to
the related loan or loans, (iii) the change of the principal of the related loan
or loans, (iv) any decrease in the rate at which either interest is payable
thereon or (if the Participant is entitled to any part thereof) commitment fee
is payable hereunder from the rate at which the Participant is entitled to
receive interest or commitment fee (as the case may be) in respect of such
participation, (v) the release or substitution of all or any substantial part of
the collateral (if any) held as security for the Loans, or (vi) the release of
any Guarantee (if any) given to support payment of the Loans. Unless such
Participant is a Related Fund with respect to such Bank, each Bank selling a
participating interest in any Loan, Note, Commitment or other interest under
this Agreement shall, within 10 Domestic Business Days of such sale, provide the
Borrower and the other Banks with written notification stating that such sale
has occurred and identifying the Participant and the interest purchased by such
Participant. The Borrower agrees that each Participant shall be entitled to the
benefits of Article VII with respect to its participation in Loans outstanding
from time to time.
(c) Any Bank may at any time assign to one or more banks or financial
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such Assignee
shall assume all such rights and obligations, pursuant to an Assignment and
Acceptance in the form attached hereto as Exhibit C, executed by such Assignee
---------
and such transferor Bank; provided that (i) no interest may be sold by a Bank
pursuant to this paragraph (c) unless the Assignee shall agree to assume ratably
equivalent portions of the transferor Bank's Commitment, (ii) the amount of the
Commitment of the assigning Bank subject to such assignment (determined as of
the effective date of the assignment) shall be equal to $10,000,000 (or any
larger multiple of $1,000,000), and (iii) no interest may be sold by a Bank
pursuant to this paragraph (c) to any Assignee that is not then a Bank without
the consent of the Borrower, which shall not be unreasonably withheld or
delayed, and (iv) a Bank may not have more than 2 Assignees that are not then
Banks at any one time. Each Bank agrees to notify the other Banks of any
assignment hereunder. Upon (A) execution of the Assignment and Acceptance by
such transferor Bank, such Assignee, and the Borrower, (B) delivery of an
executed copy of the Assignment and Acceptance to the Borrower, and (C) payment
by such Assignee to such transferor Bank of an amount equal to the purchase
price agreed between such transferor Bank and such Assignee, such Assignee shall
for all purposes be a Bank party to this Agreement and shall have all the rights
and obligations of a Bank under this Agreement to the same extent as if it were
an original party hereto with a Commitment as set forth in such instrument of
assumption, and the transferor Bank shall be released from its obligations
hereunder to a corresponding extent, and no further consent or action by the
Borrower or the Banks shall be required. Upon the consummation of any transfer
to an Assignee pursuant to this
49
<PAGE>
paragraph (c), the transferor Bank and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to such Assignee.
(d) Subject to the provisions of Section 8.09, the Borrower authorizes
each Bank to disclose to any Participant, Assignee or other transferee (each a
"Transferee") and any prospective Transferee any and all financial information
in such Bank's possession concerning the Borrower which has been delivered to
such Bank by the Borrower pursuant to this Agreement or which has been delivered
to such Bank by the Borrower in connection with such Bank's credit evaluation
prior to entering into this Agreement.
(e) No Transferee shall be entitled to receive any greater payment
under Section 7.03 than the transferor Bank would have been entitled to receive
with respect to the rights transferred, unless such transfer is made with the
Borrower's prior written consent or by reason of the provisions of Section 7.02
or 7.03 requiring such Bank to designate a different Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 8.09. Confidentiality. Each Bank agrees to exercise its best
---------------
efforts to keep any information delivered or made available by the Borrower to
it which is clearly indicated to be confidential information, confidential from
any one other than persons employed or retained by such Bank who are or are
expected to become engaged in evaluating, approving, structuring or
administering the Loans; provided, however that nothing herein shall prevent any
-------- -------
Bank from disclosing such information (i) to any other Bank, (ii) upon the order
of any court or administrative agency, (iii) upon the request or demand of any
regulatory agency or authority having jurisdiction over such Bank, (iv) which
has been publicly disclosed, (v) to the extent reasonably required in connection
with any litigation to which any Bank or its respective Affiliates may be a
party, (vi) to the extent reasonably required in connection with the exercise of
any remedy hereunder, (vii) to such Bank's legal counsel and independent
auditors and (viii) to any actual or proposed Participant, Assignee or other
Transferee of all or part of its rights hereunder which has agreed in writing to
be bound by the provisions of this Section 8.09.
SECTION 8.10. Representation by Banks. Each Bank hereby represents
-----------------------
that it is a commercial lender or financial institution which makes Loans in the
ordinary course of its business and that it will make its Loans hereunder for
its own account in the ordinary course of such business; provided, however that,
-----------------
subject to Section 8.08, the disposition of the Note or Notes held by that Bank
shall at all times be within its exclusive control.
SECTION 8.11. Obligations Several. The obligations of each Bank
-------------------
hereunder are several, and no Bank shall be responsible for the obligations or
commitment of any other Bank hereunder. Nothing contained in this Agreement and
no action taken by Banks pursuant hereto shall be deemed to constitute the Banks
to be a partnership, an association, a joint venture or any other kind of
entity. The amounts payable at any time hereunder to each Bank shall be a
separate
50
<PAGE>
and independent debt, and each Bank shall be entitled to protect and
enforce its rights arising out of this Agreement or any other Loan Document,
subject to any restrictions requiring actions to be taken upon the consent of
the Required Banks, and it shall not be necessary for any other Bank to be
joined as an additional party in any proceeding for such purpose.
SECTION 8.12. Georgia Law. This Agreement and each Note shall be
-----------
construed in accordance with and governed by the law of the State of Georgia.
SECTION 8.13. Interpretation. No provision of this Agreement or any
--------------
of the other Loan Documents shall be construed against or interpreted to the
disadvantage of any party hereto by any court or other governmental or judicial
authority by reason of such party having or being deemed to have structured or
dictated such provision.
SECTION 8.14. WAIVER OF JURY TRIAL; CONSENT TO JURISDICTION. TO THE
---------------------------------------------
FULLEST EXTENT PERMITTED BY LAW, THE BORROWER (A) AND EACH OF THE BANKS
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, (B) SUBMITS TO THE NONEXCLUSIVE
PERSONAL JURISDICTION IN THE STATE OF GEORGIA, THE COURTS THEREOF AND THE UNITED
STATES DISTRICT COURTS SITTING THEREIN, FOR THE ENFORCEMENT OF THIS AGREEMENT,
THE NOTES AND THE OTHER LOAN DOCUMENTS, (C) WAIVES ANY AND ALL PERSONAL RIGHTS
UNDER THE LAW OF ANY JURISDICTION TO OBJECT ON ANY BASIS (INCLUDING, WITHOUT
LIMITATION, INCONVENIENCE OF FORUM) TO JURISDICTION OR VENUE WITHIN THE STATE OF
GEORGIA FOR THE PURPOSE OF LITIGATION TO ENFORCE THIS AGREEMENT, THE NOTES OR
THE OTHER LOAN DOCUMENTS, AND (D) AGREE THAT SERVICE OF PROCESS MAY BE MADE UPON
IT IN THE MANNER PRESCRIBED IN SECTION 8.01 FOR THE GIVING OF NOTICE TO THE
BORROWER. NOTHING HEREIN CONTAINED, HOWEVER, SHALL PREVENT THE BANKS FROM
BRINGING ANY ACTION OR EXERCISING ANY RIGHTS AGAINST ANY SECURITY AND AGAINST
THE BORROWER PERSONALLY, AND AGAINST ANY ASSETS OF THE BORROWER WITHIN ANY OTHER
STATE OR JURISDICTION.
SECTION 8.15. Counterparts. This Agreement may be signed in any
------------
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
51
<PAGE>
[signatures on the following pages]
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed, under seal, by their respective authorized officers as of the
day and year first above written.
MOHAWK INDUSTRIES, INC. (SEAL)
By:
--------------------------------------
Title:
160 South Industrial Boulevard
Calhoun, Georgia 30703-7002
Attention: Chief Financial Officer or Treasurer
Telecopier number: 706-625-3851
Confirmation number: 706-629-7721
53
<PAGE>
COMMITMENTS: WACHOVIA BANK, N.A. (SEAL)
- -----------
$150,000,000
By:
--------------------------------------
Title:
Lending Office
--------------
Wachovia Bank, N.A.
191 Peachtree Street, N.E.
Atlanta, Georgia 30303-1757
Attention: Lanny Nixon
Telecopier number: 404-332-5016
Confirmation number: 404-332-5920
54
<PAGE>
FIRST UNION NATIONAL BANK (SEAL)
$150,000,000
By:
---------------------------------------
Title:
Lending Office
--------------
First Union National Bank
301 South College St., DC-5
Charlotte, North Carolina 28288-0737
Attention: David Silander
Telecopier number: 704-374-4793
Confirmation number: 704-383-5124
55
<PAGE>
$150,000,000 SUNTRUST BANK, ATLANTA
By:
--------------------------------------
Title:
By:
--------------------------------------
Title:
Lending Office
--------------
SunTrust Bank, Atlanta
303 Peachtree Street, 3rd Floor
Atlanta, Georgia 30308
Telecopier number.: 404-575-2594
Confirmation number: 404-230-5099
Attention: Bradley J. Staples, Director
- -----------------
TOTAL COMMITMENTS:
$450,000,000
56
<PAGE>
Exhibit A
---------
NOTE
Atlanta, Georgia
As of November 23, 1999
For value received, MOHAWK INDUSTRIES, INC., a Delaware corporation
(the "Borrower"), promises to pay to the order of , (the
----------------
"Bank"), for the account of its Lending Office, the principal sum of
-----------
MILLION DOLLARS ($ ), or such lesser amount as shall equal the unpaid
------------
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below, on the dates and in the amounts provided in
the Credit Agreement. The Borrower promises to pay interest on the unpaid
principal amount of this Note on the dates and at the rate or rates provided for
in the Credit Agreement referred to below. Interest on any overdue principal of
and, to the extent permitted by law, overdue interest on the principal amount
hereof shall bear interest at the Default Rate, as provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of the Bank located at , or such other
----------------------
address as may be specified from time to time pursuant to the Credit Agreement.
All Loans made by the Bank, the respective maturities thereof, the
interest rates from time to time applicable thereto, and all repayments of the
principal thereof shall be recorded by the Bank and, prior to any transfer
hereof, endorsed by the Bank on the schedule attached hereto, or on a
continuation of such schedule attached to and made a part hereof; provided that
--------
the failure of the Bank to make any such recordation or endorsement shall not
affect the obligations of the Borrower hereunder or under the Credit Agreement.
This Note is one of the "Notes" referred to in the Fifth Amended and
Restated Credit Agreement of even date herewith among the Borrower, First Union
National Bank, SunTrust Bank, Atlanta, Wachovia Bank, N.A., and the other banks
from time to time party thereto (as the same may be amended and modified from
time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are
used herein with the same meanings. Reference is made to the Credit Agreement
for provisions for the optional and mandatory prepayment and the repayment
hereof and the acceleration of the maturity hereof.
57
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly
executed, under seal, by its duly authorized officer as of the day and year
first above written.
MOHAWK INDUSTRIES, INC. (SEAL)
By:
--------------------------
Title:
58
<PAGE>
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
------------------------------------------------
Date Base Rate or Amount of Amount of Maturity Date Notation
Euro-Dollar Loan Principal Made By
Loan Repaid
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
59
<PAGE>
Exhibit B
---------
OPINION OF
COUNSEL FOR THE BORROWER
------------------------
To be dated as of the Effective Date and in the form attached hereto.
60
<PAGE>
Exhibit C
---------
ASSIGNMENT AND ACCEPTANCE
-------------------------
Dated ____________ __,____
Reference is made to the Fifth Amended and Restated Credit Agreement
dated as of November 23, 1999 (together with all amendments and modifications
thereto, the "Credit Agreement") among Mohawk Industries, Inc., a Delaware
corporation (the "Borrower"), First Union National Bank, SunTrust Bank, Atlanta,
Wachovia Bank, N.A., and the other banks from time to time party thereto
(collectively, the "Banks"). Terms defined in the Credit Agreement are used
herein with the same meaning.
________________ (the "Assignor") and ________________________________________
(the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and the
Assignee hereby purchases and assumes from the Assignor, a ______% interest in
and to all of the Assignor's rights and obligations under the Credit Agreement
as of the Effective Date (as defined below) (including, without limitation, a
_____% interest (which on the Effective Date hereof is $_______________) in the
aggregate principal amount of the Assignor's Commitment and a ______ interest
(which on the Effective Date hereof is $_____________) in the Loans owing to the
Assignor and a __________ interest (which on the Effective Date hereof is
$__________) in the Note held by the Assignor (which on the Effective Date
hereof is $___________________).
2. The Assignor (i) makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of the Credit
Agreement or any other Loan Documents furnished pursuant thereto, other than
that it is the legal and beneficial owner of the interest being assigned by it
hereunder, that such interest is free and clear of any adverse claim and that as
of the date hereof the aggregate principal amount of the Assignor's Commitments
(without giving effect to assignments thereof which have not yet become
effective) is $_________________ and the aggregate outstanding principal amount
of all Loans owing to it (without giving effect to assignments thereof which
have not yet become effective) is $_________________; (ii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iii) requests that the
Borrower execute a new Note dated ________________, ____ in the principal amount
of $______________ payable to the order of the Assignee.
3. The Assignee (i) confirms that it has received a copy of the
Credit Agreement, together with copies of the financial statements referred to
in Section 4.04(a) thereof (or any more recent
61
<PAGE>
financial statements of the Borrower delivered pursuant to Section 5.01(a) or
(b) thereof) and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Assignor or any other Bank and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Agreement;
(iii) confirms that it is a bank or financial institution; (iv) agrees that it
will perform in accordance with their terms all of the obligations which by the
terms of the Credit Agreement are required to be performed by it as a Bank; (v)
specifies as its Lending Office (and address for notices) the office set forth
beneath its name on the signature pages hereof, (vi) represents and warrants
that the execution, delivery and performance of this Assignment and Acceptance
are within its corporate powers and have been duly authorized by all necessary
corporate action[, and (vii) attaches the forms prescribed by the Internal
Revenue Service of the United States certifying as to the Assignee's status for
purposes of determining exemption from United States withholding taxes with
respect to all payments to be made to the Assignee under the Credit Agreement
and the Notes or such other documents as are necessary to indicate that all such
payments are subject to such taxes at a rate reduced by an applicable tax
treaty].
4. The Effective Date for this Assignment and Acceptance shall be
_______________ (the "Effective Date").
5. From and after the Effective Date, (i) the Assignee shall be a
party to the Credit Agreement and, to the extent rights and obligations have
been transferred to it by this Assignment and Acceptance, have the rights and
obligations of a Bank thereunder and (ii) the Assignor shall, to the extent its
rights and obligations have been transferred to the Assignee by this Assignment
and Acceptance, relinquish its rights (other than under Section 7.03 of the
Credit Agreement) and be released from its obligations under the Credit
Agreement.
6. From and after the Effective Date, the Borrower shall make all
payments in respect of the interest assigned hereby to the Assignee. The
Assignor and Assignee shall make all appropriate adjustments in payments for
periods prior to such acceptance by the Borrower directly between themselves.
62
<PAGE>
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Georgia.
[NAME OF ASSIGNOR]
By:___________________________
Title:
[NAME OF ASSIGNEE]
By:___________________________
Title:
Lending Office:
[Address]
CONSENTED AND AGREED TO:
MOHAWK INDUSTRIES, INC.
By:_______________________
Title:
63
<PAGE>
Exhibit D
---------
NOTICE OF BORROWING
-------------------
_______________, _______
[Wachovia Bank, N.A.
191 Peachtree Street, N.W.
Atlanta, Georgia 30303-1757
Attention: SouthEast Corporate Loan Unit]
[First Union National Bank
999 Peachtree Street, 9th Floor
Atlanta, Georgia 30309
Attention: Donald Dalton]
[SunTrust Bank, Atlanta
303 Peachtree Street, 3rd Floor
Atlanta, Georgia 30308
Attention: Bradley J. Staples]
Re: Fifth Amended and Restated Credit Agreement (as amended and modified
from time to time, the "Credit Agreement") dated as of November 23,
1999 by and among MOHAWK INDUSTRIES, INC., FIRST UNION NATIONAL BANK,
SUNTRUST BANK, ATLANTA, WACHOVIA BANK, N.A., and the other Banks from
time to time party thereto.
Ladies and Gentlemen:
Unless otherwise defined herein, capitalized terms used herein shall have
the meanings attributable thereto in the Credit Agreement.
This Notice of Borrowing is delivered to you pursuant to Section 2.02 of
the Credit Agreement.
The Borrower hereby requests a [Euro-Dollar Borrowing] [Base Rate
Borrowing] in the aggregate principal amount of $___________ to be made on
______________, ______, and for interest to accrue thereon at the rate
established by the Credit Agreement for [Base Rate Loans] [Euro-Dollar Loans].
64
<PAGE>
[First Union] [SunTrust] [Wachovia] is hereby requested to fund $_____________
(33.3333%) of such Borrowing. [The duration of the Interest Period with respect
thereto shall be [1 month] [2 months] [3 months] [6 months].
The Borrower hereby represents and warrants that on the date the Borrowing
requested hereunder is made (both before and after giving effect to the making
of such and after giving effect to the application, directly or indirectly, of
the proceeds thereof):
(a) no Default has occurred and is continuing; and
(b) the representations and warranties of the Borrower contained in
Article IV of the Credit Agreement are true on and as of the date hereof
except for changes permitted by the Credit Agreement and except to the
extent that such representations and warranties relate solely to an earlier
date.
The Borrower has caused this Notice of Borrowing to be executed and
delivered by its duly authorized officer this _____ day of __________, ______.
MOHAWK INDUSTRIES, INC.
By:______________________
Title:
65
<PAGE>
Exhibit E
---------
COMPLIANCE CERTIFICATE
----------------------
Reference is made to the Fifth Amended and Restated Credit Agreement
dated as of November 23, 1999 (as modified and supplemented and in effect from
time to time, the "Credit Agreement") among Mohawk Industries, Inc., First Union
National Bank, SunTrust Bank, Atlanta, Wachovia Bank, N.A., and the other Banks
from time to time party thereto. Capitalized terms used herein shall have the
meanings ascribed thereto in the Credit Agreement.
Pursuant to Section 5.01(c) of the Credit Agreement, ________________,
the duly authorized ____________________________ of Mohawk Industries, Inc.
hereby certifies, on behalf of the Borrower, to the Banks that the information
contained in the Compliance Check List attached hereto is true, accurate and
complete as of ______________________, _____, and that no Defaults or Events of
Default exist.
By:___________________________
Title:
66
<PAGE>
COMPLIANCE CHECK LIST
(Mohawk Industries, Inc.)
--------------------------
________________________, __________
1. Debt to Capitalization Ratio (Section 5.04)
The Debt to Capitalization Ratio shall be less than 0.60 to 1.0 at the end
of each Fiscal Quarter.
(a) Consolidated Debt $ ____
(b) Consolidated Total Capital $ ____
Actual Ratio of (a) to (b) ____
Maximum Ratio (less than) 0.60 to 1.0
Applicable Margin ____ %*
Facility Fee ____ %*
2. Debt to EBITDA Ratio (Section 5.05)
The ratio of the Borrower's (a) Consolidated Debt to (b) the sum of (i)
Consolidated Net Income, (ii) Consolidated Interest Expense, (iii) taxes on
the Borrower's consolidated pre-tax income, and (iv) Depreciation and
Amortization shall not be greater than 3.5 to 1.0 at the end of each Fiscal
Quarter. Clause (b) in this Section 5.05 shall be calculated on a trailing
4 quarter basis as at the end of each such Fiscal Quarter.
(a) Consolidated Debt $ ____
(b) Consolidated Net Income $ ____
(c) Consolidated Interest Expense $ ____
(d) Taxes on the Borrower's
consolidated pre-tax income $ ____
(e) Depreciation $ ____
- ----------------------
* Subject to verification by the Banks.
67
<PAGE>
COMPLIANCE CHECKLIST
(Mohawk Industries, Inc.)
-------------
______, 199_
(f) Amortization $ ____
(e) The sum of (b) plus (c)
plus (d) plus (e) plus (f) $ ____
Actual Ratio of (a) to (e) ____
Maximum Ratio (less than) 3.5 to 1.0
3. Negative Pledge (Section 5.08)
Liens permitted under paragraphs (a)
through (i) $ ____
Limitation -- greater of (x)
$90,000,000 or (y) 15% of
Consolidated Net Worth $ ____
4. Calculations with respect to Asset Securitizations:
(a) Accounts receivable balance reported
as of the last day of the calendar month
most recently ended in such Fiscal Quarter
by the Borrower or a Subsidiary with respect
to an Asset Securitization $ ____________
(b) Total accounts receivable reported
as sold as of the last day of the calendar
month most recently ended in such Fiscal
Quarter by the Borrower or a Subsidiary
with respect to an Asset Securitization $ ____________
68
<PAGE>
Schedule 4.08
-------------
Subsidiaries
------------
Jurisdiction Holders of Equity
Name of Subsidiary of Formation Interest
Mohawk Carpet Corporation Delaware Borrower
World Carpets, Inc. Georgia Borrower
World Commercial Carpets, Inc. Georgia World Carpets, Inc.
Mohawk Servicing, Inc. Delaware Mohawk Carpet Corporation
Mohawk Factoring, Inc. Delaware Mohawk Carpet Corporation
Aladdin Manufacturing Corporation Delaware Mohawk Carpet Corporation
Mohawk International FSC, Inc. Barbados Mohawk Carpet Corporation
Mohawk Commercial, Inc. Delaware Mohawk Carpet Corporation
Mohawk Marketing, Inc. Georgia Aladdin Manufacturing
Corporation
Newmark & James, Inc. Georgia Aladdin Manufacturing
Corporation
Horizon Europe, Inc. Georgia Aladdin Manufacturing
Corporation
Delaware Valley Wool Scouring, Inc. Pennsylvania Aladdin Manufacturing
Corporation
Mohawk Mills, Inc. Delaware Aladdin Manufacturing
Corporation
American Weavers LLC Tennessee Aladdin Manufacturing
Corporation
Mohawk Marketing, Inc.
69
<PAGE>
EXHIBIT 10.35
SECOND AMENDMENT TO THE MOHAWK INDUSTRIES, INC.
1992 STOCK OPTION PLAN
THIS SECOND AMENDMENT, made as of the 17th day of February, 2000, by MOHAWK
INDUSTRIES, INC., a corporation duly organized and existing under the laws of
the State of Delaware (the "Company"):
W I T N E S S E T H:
WHEREAS, the Company has established the Mohawk Industries, Inc. 1992 Stock
Option Plan (the "Plan"); and
WHEREAS, the Board of Directors deems it advisable to amend the Plan as of
the effective date hereof;
NOW, THEREFORE, the Plan is hereby amended, effective as of the effective
date hereof, by substituting the following for Plan Section 5(g):
"(g) provide that, if an optionee dies or becomes disabled (as defined in
Code Section 22(e)(3)) while he or she is a director or employee of the Company
or a Subsidiary, as applicable, the Option shall become immediately vested and
exercisable in full and may be exercised by the optionee or by a legatee or
legatees of the optionee under his or her last will, or by his or her personal
representative or representatives, at any time until the first anniversary of
the optionee's death or disability or, if earlier, the expiration of the Option
term."
Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to this Second Amendment.
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be
executed as of the day and year first above written.
MOHAWK INDUSTRIES, INC.
By:
-----------------------------------
ATTEST:
By:
------------------------------
[CORPORATE SEAL]
<PAGE>
EXHIBIT 10.38
SECOND AMENDMENT TO THE MOHAWK INDUSTRIES, INC.
1992 MOHAWK-HORIZON STOCK OPTION PLAN
THIS SECOND AMENDMENT, made as of the 17th day of February, 2000, by MOHAWK
INDUSTRIES, INC., a corporation duly organized and existing under the laws of
the State of Delaware (the "Company"):
W I T N E S S E T H:
WHEREAS, the Company has established the Mohawk Industries, Inc. 1992
Mohawk-Horizon Stock Option Plan (the "Plan"); and
WHEREAS, the Board of Directors deems it advisable to amend the Plan as of
the effective date hereof;
NOW, THEREFORE, the Plan is hereby amended, effective as of the effective
date hereof, by substituting the following for Plan Section 5(g):
"(g) provide that, if an optionee dies or becomes disabled (as defined in
Code Section 22(e)(3)) while he or she is a director or employee of the Company
or a Subsidiary, as applicable, the Option shall become immediately vested and
exercisable in full and may be exercised by the optionee or by a legatee or
legatees of the optionee under his or her last will, or by his or her personal
representative or representatives, at any time until the first anniversary of
the optionee's death or disability or, if earlier, the expiration of the Option
term."
Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to this Second Amendment.
IN WITNESS WHEREOF, the Company has caused this Second Amendment to be
executed as of the day and year first above written.
MOHAWK INDUSTRIES, INC.
By:
-----------------------------------
ATTEST:
By:
-----------------------------
[CORPORATE SEAL]
<PAGE>
EXHIBIT 10.40
FIRST AMENDMENT TO THE MOHAWK INDUSTRIES, INC.
1993 STOCK OPTION PLAN
THIS FIRST AMENDMENT, made as of the 17th day of February, 2000, by MOHAWK
INDUSTRIES, INC., a corporation duly organized and existing under the laws of
the State of Delaware (the "Company"):
W I T N E S S E T H:
WHEREAS, the Company has established the Mohawk Industries, Inc. 1993 Stock
Option Plan (the "Plan"); and
WHEREAS, the Board of Directors deems it advisable to amend the Plan as of
the effective date hereof;
NOW, THEREFORE, the Plan is hereby amended, effective as of the effective
date hereof, by substituting the following for Plan Section 5(g):
"(g) provide that, if an optionee dies or becomes disabled (as defined in
Code Section 22(e)(3)) while he or she is a director or employee of the Company
or a Subsidiary, as applicable, the Option shall become immediately vested and
exercisable in full and may be exercised by the optionee or by a legatee or
legatees of the optionee under his or her last will, or by his or her personal
representative or representatives, at any time until the first anniversary of
the optionee's death or disability or, if earlier, the expiration of the Option
term."
Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to this First Amendment.
IN WITNESS WHEREOF, the Company has caused this First Amendment to be
executed as of the day and year first above written.
MOHAWK INDUSTRIES, INC.
By:
-----------------------------------
ATTEST:
By:
----------------------------
[CORPORATE SEAL]
<PAGE>
MOHAWK INDUSTRIES, INC. AND SUBSIDIARIES
EXHIBIT 11
Statement Re: Computation Of Per Share Earnings
(In thousands, except per share data)
Note: Earnings per share presented in the first table is in accordance with
Regulation S-K, Item 601(b)(11), while earnings per share on the
Company's consolidated statements of earnings presented in the second
table is in accordance with FAS No. 128.
<TABLE>
<CAPTION>
Years Ended December 31,
1999 1998 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Regulation S-K:
Net earnings....................................................... $ 157,239 115,254 79,563
================= ================= =================
Weighted-average common and dilutive potential common
shares outstanding:
Weighted-average common shares outstanding....................... 59,730 60,393 59,962
Add weighted-average dilutive potential common shares - options
to purchase common shares, net.................................. 619 741 491
Weighted-average common and dilutive potential common ----------------- ----------------- -----------------
shares outstanding............................................... 60,349 61,134 60,453
================= ================= =================
Basic earnings per share........................................... $ 2.63 1.91 1.33
================= ================= =================
Diluted earnings per share......................................... $ 2.61 1.89 1.32
================= ================= =================
FAS No. 128:
Net earnings....................................................... $ 157,239 115,254 79,563
================= ================= =================
Weighted-average common and dilutive potential common
shares outstanding:
Weighted-average common shares outstanding....................... 59,730 60,393 59,962
Add weighted-average dilutive potential common shares - options
to purchase common shares, net.................................. 619 741 491
Weighted-average common and dilutive potential common shares
----------------- ----------------- -----------------
outstanding...................................................... 60,349 61,134 60,453
================= ================= =================
Basic earnings per share........................................... $ 2.63 1.91 1.33
================= ================= =================
Diluted earnings per share......................................... $ 2.61 1.89 1.32
================= ================= =================
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Mohawk Carpet Corporation ..................................... Delaware
Aladdin Manufacturing Corporation ............................. Delaware
Durkan Patterned Carpets, Inc.................................. Georgia
Mohawk Commercial, Inc......................................... Delaware
Mohawk Factoring, Inc.......................................... Delaware
Mohawk Servicing, Inc.......................................... Delaware
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Mohawk Industries, Inc.:
We consent to incorporation by reference in the registration statements (No.
33-52070, No. 33-52544, No. 33-67282, No. 33-87998 and No. 333-23577) on Form S-
8 and the registration statements (No. 333-66061 and No. 333-77231) on Form S-3
of Mohawk Industries, Inc. and subsidiaries of our report dated February 11,
2000, relating to the consolidated balance sheets of Mohawk Industries, Inc. and
subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
years in the three-year period ended December 31, 1999, and all related
schedules, which report appears in the December 31, 1999, annual report on Form
10-K of Mohawk Industries, Inc.
KPMG LLP
Atlanta, Georgia
March 6, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 333-66061 and 333-77231) of Mohawk Industries, Inc.
of our report dated September 21, 1998 relating to the financial statements of
World Carpets, Inc., and its subsidiary which appears in this Form-10-K.
PricewaterhouseCoopers LLP
Atlanta, Georgia
March 3, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MOHAWK
INDUSTRIES INC., ANNUAL REPORT TO STOCKHOLDERS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1999. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 408,303
<ALLOWANCES> 70,479
<INVENTORY> 494,774
<CURRENT-ASSETS> 934,410
<PP&E> 1,139,660
<DEPRECIATION> 514,846
<TOTAL-ASSETS> 1,682,873
<CURRENT-LIABILITIES> 374,353
<BONDS> 562,104
0
0
<COMMON> 607
<OTHER-SE> 691,939
<TOTAL-LIABILITY-AND-EQUITY> 1,682,873
<SALES> 3,083,264
<TOTAL-REVENUES> 3,083,264
<CGS> 2,306,405
<TOTAL-COSTS> 2,306,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 15,804
<INTEREST-EXPENSE> 32,632
<INCOME-PRETAX> 259,899
<INCOME-TAX> 102,660
<INCOME-CONTINUING> 157,239
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 157,239
<EPS-BASIC> 2.63
<EPS-DILUTED> 2.61
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MOHAWK
INDUSTRIES INC., ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31,
1998. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,384
<SECURITIES> 0
<RECEIVABLES> 390,161
<ALLOWANCES> 58,233
<INVENTORY> 423,837
<CURRENT-ASSETS> 846,935
<PP&E> 883,908
<DEPRECIATION> 429,041
<TOTAL-ASSETS> 1,405,486
<CURRENT-LIABILITIES> 408,461
<BONDS> 332,665
0
0
<COMMON> 606
<OTHER-SE> 610,453
<TOTAL-LIABILITY-AND-EQUITY> 1,405,486
<SALES> 2,744,620
<TOTAL-REVENUES> 2,744,620
<CGS> 2,063,333
<TOTAL-COSTS> 2,063,333
<OTHER-EXPENSES> 20,600<F1>
<LOSS-PROVISION> 13,190
<INTEREST-EXPENSE> 31,023
<INCOME-PRETAX> 194,806
<INCOME-TAX> 79,552
<INCOME-CONTINUING> 115,254
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 115,254
<EPS-BASIC> 1.91
<EPS-DILUTED> 1.89
<FN>
<F1>NON RECURRING CHARGES OF $17,700 FOR ACQUISITION COSTS RELATED TO WORLD MERGER
AND $2,900 FOR CARRYING VALUE REDUCTION OF ASSETS HELD FOR SALE PURSUANT TO FAS
121.
</FN>
</TABLE>
