SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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 0-20450
SWING-N-SLIDE CORP.
(Exact name of registrant as specified in its charter)
Delaware 36-3808989
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
1212 Barberry Drive 53545
Janesville, WI (Zip code)
(Address of principal executive offices)
Registrant's telephone number including area code (608) 755-4777
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
N/A None
Securities registered pursuant to Section 12(g) of the Act:
Common stock,
par value $.01 per share
Title of class
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 this Form 10-K. [ ]
The aggregate market value of the voting stock held by nonaffiliates as of
March 24, 1997 was $ 9,967,192 (excludes shares held by directors and
officers of registrant). This is based on the closing price of the common
stock on the AMEX - American Stock Exchange.
At March 24, 1997, there were 7,091,405 shares of common stock
outstanding.
Part III incorporates information by reference from the Proxy Statement
for the annual meeting of stockholders to be held on May 21, 1997.
<PAGE>
PART I
Item 1 - Business
General
Swing-N-Slide is the leading designer, manufacturer and marketer of do-it-
yourself, wooden home playground equipment sold through home center,
building supply and hardware stores. The Company's primary product lines
are wooden swing set kits, wooden climbing unit kits, plastic slides and
related accessories. The Company's products are sold through more than
8,000 home center, building supply and hardware stores, including
substantially all Payless Cashways, Lowe's, 84 Lumber and Menards stores,
and some HWI and Ace Hardware stores.
Swing-N-Slide was incorporated in Delaware on January 10, 1992, and on
January 31 of that year its wholly-owned subsidiary Newco, Inc., a
Wisconsin corporation ("Newco"), incorporated on November 27, 1991,
acquired substantially all of the assets and business (the "Acquisition")
of a predecessor company. Swing-N-Slide and Newco are sometimes referred
to herein as the "Company."
The Company's swing set and climbing unit kits each contain a well-
illustrated assembly plan, hardware, certain accessories and a bill of
materials. The Company does not sell the standard-sized lumber, nails and
tools required to construct its basic do-it-yourself kits. Instead, the
same retailers which carry the Company's products benefit from the sale of
these items, particularly lumber. The Company estimates that the sale of
its swing set and climbing unit kits results in incremental sales of
lumber of approximately one-half to two times the retailers' cost for the
kits. Retailers typically sell the Company's kits and the required lumber
for a package price. Slides and accessories are sold separately.
The number of outlets which carry the Swing-N-Slide/R/ product line has
increased from approximately 1,600 in 1989 to over 8,000 in 1996. The
Company's customers currently include 17 of the top 25 home center chains
in the U.S.
On March 13, 1997, Newco acquired all of the issued and outstanding shares
of capital stock of GameTime, Inc., an Alabama corporation ("GameTime").
Immediately following the acquisition on March 13, 1997, GameTime was
merged into Newco. GameTime, located in Fort Payne, Alabama, was
principally involved in the design, manufacture, sale and distribution of
commercial (institutional) outdoor park and playground equipment, site
amenities and related products. The systems are sold directly to schools,
parks and municipalities by a network of independent representatives. For
more information about the GameTime acquisition, see Swing-N-Slide's
Current Report on Form 8-K dated March 13, 1997.
Products and Markets
The Company offers a broad line of wooden swing set and climbing unit
kits, plastic slides and accessories for home playground use. The
Company's kits contain well-illustrated instructions to simplify
construction by do-it-yourself consumers. The Company's kits do not
require complex cuts or special tools, and only one of its kits require
cement for stability. The Company's kits are specifically designed to be
assembled by the consumer, and most of its kits can be combined with each
other and the Company's high density polyethylene slides. The Company
estimates that its swing set kits generally can be assembled by two adults
in approximately two to four hours depending on the kit. Its climbing
units generally can be assembled by two adults in six to twelve hours,
depending on the size of the unit.
The following table presents the Company's estimated net sales by product
lines as a percentage of the Company's total net sales for each of the
periods shown:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1994 December 31, 1995 December 31, 1996
Net Percent Net Percent Net Percent
Sales of Total Sales of Total Sales of Total
(dollar amounts in thousands)
<S> <C> <C> <C> <C> <C> <C>
Swing sets...................... $ 6,884 13% $ 6,761 15% $ 5,842 14%
Climbing units.................. 7,962 15 4,661 10 3,332 8
Slides.......................... 18,448 36 15,497 34 13,729 33
Accessories..................... 12,905 25 12,003 27 11,081 26
Fabrication and other........... 5,617 11 6,155 14 7,888 19
------ --- ------- --- ------- ---
Total net sales.............. $51,816 100% $45,077 100% $41,872 100%
====== === ======= === ======= ===
</TABLE>
Consumer Playground Systems
Swing Sets:
The swing set kits manufactured and sold by the Company include an
assembly plan, swing hangers, chains and seats, rings, brackets, and
hardware in an attractive box that illustrates and lists the lumber, nails
and tools required to complete the kit. The Company currently sells four
basic designs of swing set kits. These include the Pioneer/TM/ kit, the
Scout/TM/, the Mustang/TM/, and the Competitor/TM/. The Competitor/TM/
combines a swing set and climbing unit into one activity center. All of
these kits, except the Scout/TM/, can accommodate one or more of the
various slides offered by the Company.
The Company believes that the majority of its customers price the swing
set kits and lumber required to complete the kits together as a complete
package. The Company estimates that home center and building supply chains
generally sell these kits, for between $110 and $265 with lumber, but
excluding the slide. The Company believes that retailers sell comparable
metal swing sets without a slide for between $70 and $90 and with a slide
for between $160 and $180. The Company believes that pre-cut wooden kits
which include a slide sell for approximately $450.
Climbing Units:
The climbing unit kits manufactured and sold by the Company consist of an
assembly plan, climbing rope, climbing ladder, tarp, fasteners and
assembly hardware and a bill of materials packaged in an attractive box
that illustrates and lists the lumber, tools, and nails required to
complete the kits. The Company currently manufactures and sells eight
basic designs of climbing units. These include the Eagles Nest/R/, the Sky
Fort/R/, Twin Towers/R/, which features two climbing towers that are
joined by the Tower Tunnel/R/, the Jolly Roger/TM/, the Covered Wagon/R/,
the Star Tower/TM/, the Playdeck/TM/ and the Sandcastle/TM/. All of the
climbing unit kits can accommodate one or more of the various slides
manufactured by the Company.
The Company believes that custom climbing units which are installed by
third parties generally cost more than $2,000. As with the swing set kits,
the Company's customers typically advertise and sell the climbing unit
kits and the lumber required to complete the kit as a package. The Company
estimates that the average retail prices at home center and building
supply chains for its climbing unit kits range between $250 and $950,
including the lumber required to complete the kits, but excluding the
slides.
Slides:
The Company designs and manufactures high density polyethylene slides for
use on both its swing sets and climbing units. In addition, the slides are
readily adaptable for use on pre-cut, do-it-yourself and custom climbing
units produced by other manufacturers. The Company currently sells only
its high density polyethylene Cool Wave Slides/R/, Turbo Tube Slides/R/,
Side Winder Slides/R/, Twister Tube Slides and Wiggle Wave Slides/TM/. The
Company's slides are available in a variety of color with yellow and teal
being the most popular.
All of the Company's climbing unit kits and most of its swing set kits are
specially designed to incorporate the Cool Wave Slides/R/, Side Winder
Slide/R/, Wiggle Wave Slide/TM/, Twister Tube Slide/TM/, or the Turbo Tube
Slide/R/. The Company believes that its high density polyethylene slides
are superior to metal slides because they are longer, come in a variety of
colors, do not become as hot in the sun as metal slides and do not rust.
The Company estimates that its Side Winder Slides/R/, Wiggle Wave
Slide/TM/ and Cool Wave Slides/R/, which are sold with the necessary
mounting hardware, are sold by home center and building supply chains at
average prices ranging from $55 to $120 and its Twister Tube Slide/TM/ and
Turbo Tube Slide/R/ are sold at average prices ranging from $175 to $400.
Accessories:
The Company sells a broad line of accessories which complement its swing
set and climbing unit kits. Examples of accessories include swing seats,
metal and wood swing hangers, climbing ropes, ladders, nets, merry-go-
rounds and replacement tarps. Both the Company's swing set and climbing
unit kits include between one and four open spots that the consumer can
customize with various accessories. Therefore, a significant portion of
the Company's accessories are sold in connection with the purchase of a
swing set or climbing unit kit and as upgrades or replacement parts for
the Company's growing base of installed kits. The Company also believes
that a portion of its accessories are sold as replacement parts for wooden
and metal gym sets produced by other manufacturers.
The Company has a successful history of introducing new accessories to
complement its kits. Since fiscal year 1988, the Company's accessory line
has grown from eleven individual items, to over thirty items currently.
The Company estimates that retail prices charged by home center and
building supply chains for accessory items range from $0.60 for a swing
hanger to $90 for a merry-go-round with the average retail price of an
accessory in the price range of $10 to $20.
Pre-Cut:
The Company began selling in 1996 a line of four pre-cut incense cedar
backyard playground kits. These kits include all required cut, drilled and
sanded lumber, hardware, certain accessories and an easy to follow
assembly plan. High density polyethylene slides are included in three of
the four kits. These kits sell for between $399 and $749.
Commercial Playground Systems
In 1994, the Company introduced the new product category of Tuff Kids/TM/
commercial playground systems. This is a complete playground system
targeted at small to medium-size applications such as day care centers,
churches, campgrounds and schools. Installation options for Tuff Kids/TM/
commercial playgrounds range from do-it-yourself to full installation by a
contractor. The Tuff Kids/TM/ line is sold through the same distribution
channels as the Company's home playground equipment. There are five basic
models of the Tuff Kids/TM/ commercial units. By using a modular approach,
future expandability becomes simplified. Also, three different commercial
slides as well as thirteen accessories are available to complement the
Tuff Kids/TM/ line. For 1996, the Tuff Kids/TM/ swing set was introduced.
The Company estimates that home centers and building supply chains
generally sell the basic unit of the Tuff Kids/TM/ playground systems for
between $2,700 and $3,000 including lumber and the largest unit of the
Tuff Kids/TM/ playground system sells for between $10,000 and $12,000
including lumber.
As mentioned below, on March 13, 1997, Newco acquired the stock and
business of GameTime, a leading manufacturer of commercial playground
equipment, with net sales in 1996 of $48.9 million.
Fabrication and Other Products
The Company manufactures several component parts for the Swing-N-Slide
kits and accessories and also designs and manufactures custom fabricated
metal parts for a small group of original equipment manufacturer (O.E.M.)
customers primarily based in Wisconsin. Sales to six customers consume
substantially all of the available production capacity not used for the
manufacture of the Company's swing sets and climbing units. The Company's
fabrication operations produce its EZ Frame Brace/R/ and EZ Frame
Bracket/R/ and provide flexible and timely design and redesign of
subcomponents and prototypes and special tooling for manufacture and use
by the Company and its subcontractors. The Company's sales to O.E.M.
customers enable it to cost-effectively maintain a core of full-time,
highly-skilled workers despite the seasonal nature of the Company's
primary business.
In 1996, the Company also began manufacturing and selling the Shape
Plastics/TM/ product line of window well covers, composters and utility
tubs. The Shape Plastics/TM/ product line is sold through home center
stores. The Company estimates that the window well covers sell at retail
for prices ranging from $5 to $80 and the composters prices range from $49
to $99.
Customers
Because the Company's products are designed for the do-it-yourself
consumer, and because its kits require lumber, almost all of the Company's
sales are made to home center and building supply retailers such as
Payless Cashways, Lowe's, 84 Lumber and Menards and hardware stores which
carry lumber such as HWI and Ace Hardware Stores. The total number of
retail outlets which carry the Company's Swing-N-Slide/R/ product line has
increased from approximately 1,600 outlets in 1989 to 2,400 in 1990 to
4,900 in 1991 and to over 8,000 as of December 31, 1996. The Company's
customers currently include 17 of the top 25 home center chains in the
U.S.
Due to the increasingly competitive nature of the home playground
equipment market, approximately 300 retail outlets that carried the
Company's Swing-N-Slide/R/ product line during 1994 chose to switch to a
competitor for the 1995 and 1996 selling seasons. The Company expects the
market for home playground equipment to remain highly competitive. Each
year customer programs are negotiated for the upcoming selling season.
One customer, Lowe's, accounted for 22 percent of net sales in 1996. Sales
to another customer, Menards, were 16 percent of net sales in 1996. The
Company's top five customers accounted for 60 percent of total net sales
in 1996. The loss of significant customers, such as Lowe's or Menards, or
a significant decline in the amount of business from such customers, could
have a material adverse effect on the Company.
Manufacture and Assembly
All of the Company's consumer products are assembled and packaged at the
Company's 132,000 square foot facility located in Janesville, Wisconsin.
This plant, originally constructed in 1989 with a 44,000 square foot
addition in 1990 and a 66,000 square foot addition in 1992, was designed
specifically to assemble, package and warehouse the Swing-N-Slide/R/
product line. This facility and the Company's production processes are
designed to promote maximum production flexibility. The plant has
multiple production lines which enable the Company to produce varying
quantities of products or change production runs depending on customer
demand. The Company believes that its facilities will be sufficient for at
least the next twenty-four months.
The Company typically enters into annual purchase agreements with
suppliers of major subcomponents such as fasteners, polyethylene, swing
set chains and hooks. Annual requirements for the following calendar year
are estimated during the fall and winter months, and the Company commits
to purchase agreed upon amounts, plus or minus 20 percent, at agreed upon
prices. These purchase agreements usually extend from January 1 to
December 31. Management believes that alternate sources of supply are
readily available for substantially all raw materials and components. The
Company believes that it currently has an adequate supply of raw materials
and components. Imports represent an insignificant portion of the
Company's raw materials.
Manufacturing of subcomponents of consumer products and products sold to
O.E.M. customers is conducted in a separate building, approximately one-
half block away from the Company's main facility. Equipment located in
this facility cuts, welds, shapes and paints certain subcomponents of the
Company's consumer products, particularly its EZ Frame Brace/R/ and EZ
Frame Bracket/R/ and other steel brackets, braces, and clamps used in the
swing set and climbing unit kits. The Company also cuts, shapes, welds,
and paints a wide variety of customized parts for a small group of O.E.M.
customers. Engineering and manufacturing support are all performed by the
Company based upon specifications prepared by these O.E.M. customers. The
primary raw materials used in these operations include steel and paint,
both of which are in adequate supply.
Competition
The market for home playground equipment is highly competitive and the
Company faces competition from manufacturers of metal swing sets and pre-
cut and custom built wood kits. Hedstrom Corporation is a major
manufacturer and marketer of metal gym sets, plastic and metal slides and
accessories. Hedstrom Corporation also manufactures and sells a competing
line of wooden swing set and climbing unit kits. Several other
manufacturers also manufacture and market kit products which are similar
to the Company's kits. The Company competes on the basis of design, a
complete merchandising program, quality, timeliness of delivery, service,
price, packaging and brand name recognition. The Company believes that its
design capabilities, complete merchandising program and reputation for
delivery enable it to compete effectively. The Company believes that its
reputation as a pioneer in the market has also been an important factor in
its competitiveness. Although there are no significant technological or
manufacturing barriers to entry into the home playground equipment
business, factors such as brand recognition, the Company's established
relationships with its home center and building supply retailers and
quality assurance may discourage new competitors from entering the
business.
Since assembly of the Company's kits requires lumber, retail prices of the
complete kit package with lumber vary with the price of lumber which has
shown volatility over the past few years. A substantial increase in lumber
prices could cause the Company's products to have less market acceptance
or result in significant price erosion which would have a material adverse
effect on the Company's profitability. In addition, because almost all of
the Company's sales are made to retailers which appeal to do-it-yourself
consumers, changes in economic activity which impact these retailers may
also have an impact on the Company's sales.
Seasonality and Backlog
The Company's sales pattern is highly seasonal and the bulk of the
Company's sales take place during the spring and early summer months, the
peak selling season. During fiscal years 1994, 1995 and 1996 approximately
80 percent, 74 percent and 69 percent, respectively, of the Company's net
sales occurred between January 1 and June 30. The Company's backlog as of
any given date is not a meaningful measure because, even during peak
periods, orders are generally filled within three business days from
receipt of the order.
Typically, indebtedness under the Company's revolving credit facility
increases during the first quarter, primarily as a result of increased
working capital needs to meet the seasonal increase in production. The
Company offers a first order dating program to its major customers which
results in March and April being the peak months for borrowing. Payments
for initial orders placed between January 1 and March 31 are typically due
during April.
Trade Names and Trademarks
The Company uses numerous trademarks and trade names in its business.
While the Company believes that the products and services underlying such
trade names and trademarks are of importance to the Company and that such
trademarks and trade names as a whole are of material importance to the
Company's business in which they are used, none, besides Swing-N-Slide/R/,
individually is material to the Company's business.
Regulation
The Company's products are designed and tested to meet the safety
guidelines of the American Society for Testing and Materials (ASTM) for
home playground equipment. The Company utilizes third-party testing
agencies as well as conducting in-house testing to ensure that they comply
with the ASTM guidelines. These test results kept on file by the Company.
The Company is subject to the environmental laws and regulations of the
United States and the State of Wisconsin as well as local ordinances. The
Company has established procedures for maintaining environmental law
compliance, including procedures for the disposal of limited quantities of
hazardous waste, with United States Environmental Protection Agency
("EPA") licensed haulers and recyclers. The Company also incurs on-going
costs in monitoring compliance with environmental laws and in connection
with disposal of waste materials. Environmental laws imposed by the EPA
and state officials nationwide are becoming more stringent and may result
in higher costs for the Company and its competitors. Costs for
environmental compliance and waste disposal have not been material to the
Company in the past.
In general, the Company has not experienced difficulty complying with
governmental regulations, and compliance has not had a material effect on
the Company's business.
Employees
At December 31, 1996, the Company had 214 full-time employees consisting
of four sales and marketing employees, 50 in administration and 160
engaged in manufacturing and assembling. During peak production seasons,
such as March, the Company hires approximately 90 additional temporary
employees for manufacture and assembly. None of the full-time or temporary
employees are represented by a union. The Company has never suffered a
work stoppage or slowdown.
GameTime, Inc.
On March 13, 1997, Newco acquired all the issued and outstanding shares of
capital stock of GameTime. Immediately following the acquisition, GameTime
was merged into Newco. Except as otherwise specifically noted, this 1996
Annual Report on Form 10-K for Swing-N-Slide does not incorporate the
GameTime acquisition or GameTime's business and financial information.
Following is a brief, supplemental discussion of the business of GameTime.
For more information on GameTime and the GameTime acquisition, see Swing-
N-Slide's Current Report on Form 8-K dated March 13, 1997.
GameTime was a leading manufacturer of commercial (institutional) outdoor
park and playground equipment in the United States. For the year ended
December 31, 1996, GameTime had net sales of approximately $48.9 million.
GameTime's primary product offerings consist of plastic and metal
playground systems which are custom manufactured using pre-designed
components. GameTime supplies customized playground systems to city and
county governments; nursery, elementary and middle schools; and building
contractors. GameTime's products contain many proprietary components, such
as MegaLoc/R/, a clamp designed to maximize strength and to minimize
injury due to installation error, and MetalFlake/TM/, a plastic which
contains metal components.
GameTime is one of four major manufacturers of commercial playground
equipment. Its largest three competitors are Miracle Recreation Equipment
Co., Landscape Structures, Inc., and Little Tikes Commercial Play Systems,
Inc., a unit of Rubbermaid, Inc. GameTime competes on the basis of product
design, price, safety representative design systems, and unique product
characteristics.
Nearly all of GameTime's sales are conducted through a network of
independent sales representatives. GameTime's sales representatives have
access to CAD/CAM software which allows the customer to design in color
and price a 3 dimensional playground system on-site. GameTime's sales are
subject to mild seasonality, with revenues peaking between June and August
and reaching lows in January and February.
GameTime owned a 206,000 square foot manufacturing facility, a 25,000
square foot rotational molding testing facility, and approximately 10,000
square feet of office and ancillary space. All of these facilities are
located on a 78-acre parcel of land in Fort Payne, Alabama which was owned
by GameTime. The foregoing property is now owned by the Company, and is
subject to a mortgage securing the Company's indebtedness to its senior
lenders. In addition, GameTime, and now the Company, leases a 3.5 acre
parcel of land in Crystal Springs, Georgia on which a wood-processing
facility is located.
As of November 14, 1996, GameTime had 313 full time employees, of which 48
were salaried and 265 were hourly. GameTime also employed up to 60
temporary workers on a seasonal basis. The Company has retained
substantially all of GameTime's employees.
Item 2 - Properties
The Company's manufacturing and distribution facilities and corporate
offices are located in Janesville, Wisconsin. The facilities consist of an
approximately 132,000 square foot building and a 30,000 square foot
building on approximately twenty-six acres. All land and facilities are
owned by the Company. Substantially all the Company's owned real property
is mortgaged to its senior lenders.
The Company has a non-cancelable operating lease of an approximately
92,000 square foot building through 2002 to provide additional warehouse
space. In addition, the Company leases approximately 25,000 square feet
of warehouse space pursuant to a year-to-year lease (commencing March 1,
1997), and leases approximately 20,000 square feet of warehouse space
pursuant to a month-to-month lease. These facilities are located in
Janesville, Wisconsin, and are expected to provide sufficient storage
space for an adequate supply of the Company's products to meet demand.
For information on the property acquired in the GameTime acquisition, see
Item 1 above.
Item 3 - Legal Proceedings
Swing-N-Slide has been named as a defendant in a class action pending in
the Court of Chancery of the State of Delaware, New Castle County entitled
Robert Barbieri v. Swing-N-Slide Corp., Thomas R. Baer, Richard G.
Mueller, Andrew W. Code, James M. Dodson, Peter M. Gotsch, Terence S.
Malone, Henry B. Pearsall and Brian P. Simmons, GreenGrass Holdings and
GreenGrass Management, LLC, Case No. 14239, filed April 14, 1995. The
complaint alleges that Swing-N-Slide's purchase of 3.6 million of
outstanding shares of common stock, which was completed in January 1995,
was the result of a deceptive and manipulative plan on the part of the
individual defendants to enrich themselves, and further challenges on
similar grounds the February, 1996, purchase by Swing-N-Slide's majority
shareholder, GreenGrass Holdings, of approximately 3.6 million shares of
Swing-N-Slide's common stock and other securities pursuant to a tender
offer. The plaintiffs were granted certification of the two classes of
stockholders consisting of all stockholders other than the defendants at
November 14, 1994, or at March 15, 1995. The relief sought includes the
imposition of a constructive trust on all proceeds of the repurchase
received by the defendants as well as various non-monetary forms of
relief. The parties have conducted discovery. The Company believes it has
substantial defenses to all the claims and that resolution of the claims
should not have any material adverse effect on the financial condition or
results of operations of the Company.
There is also a case pending in Rock County, Wisconsin Circuit Court
entitled Sirota v. Swing-N-Slide Corp., Case No. 95-CV-726, filed November
17, 1995. This is a derivative action by Sirota on behalf of himself and
Swing-N-Slide against directors Thomas R. Baer, Richard G. Mueller, Andrew
W. Code, James D. Dodson, Peter M. Gotsch, Terence M. Malone, Henry B.
Pearsall and Brian P. Simmons, as well as Newco, Inc. and CHS. The
complaint raises allegations similar to those in the Barbieri action, to
wit, that the defendants breached their fiduciary duties to the
stockholders and Swing-N-Slide as a result of the self-tender offer in
November 1994, but alleges that the breaches damaged Swing-N-Slide, as a
whole, as opposed to individual stockholders. On January 17, 1997, the
parties tentatively agreed to a settlement which is subject to court
approval. The Company does not believe the results of the suit or
settlement will have a material adverse effect on the financial condition
or results of operations of the Company.
Due to the nature of its business, the Company, at any particular time, is
subject to a number of product liability claims for personal injuries
allegedly relating to its products. The Company has to date been
successful in defending or settling such claims. Thus far, no such claims
have resulted in any material payments on account of defending or settling
such claims. The Company's products are designed to meet applicable ASTM
guidelines. However, sales of the Company's products have increased and
several of the Company's products are new and, therefore, the claims
experience with such products cannot be predicted. Because of the
foregoing factors, there can be no assurance that the Company will not be
subject to material liabilities on account of product liability claims in
the future.
The Company currently maintains an occurrence based product liability
insurance policy with coverage of up to $2.0 million per occurrence and in
the aggregate with a deductible of $50,000 per occurrence. In addition,
the Company maintains an additional $50.0 million per occurrence and in
the aggregate of excess occurrence based coverage for product liability
claims with a deductible of $10,000 per occurrence.
In addition to product liability proceedings, the Company has, from time
to time, become a party to other claims and lawsuits in the ordinary
course of business. The Company believes that such claims and lawsuits to
which the Company is currently a party will not have a material adverse
effect on the financial condition or results of operations of the Company.
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of the Company's security holders
during the last quarter of the year ended December 31, 1996.
Part II
Item 5 - Market for the Registrant's Common Equity and
Related Stockholder Matters
Common Stock Prices and Dividends
Swing-N-Slide's stock has been traded on the American Stock Exchange
(AMEX) since August 10, 1995, under the symbol "SWG". From July 6, 1995 to
August 9, 1995, the stock was traded on the over-the-counter market and
prior to July 6, 1995, the stock was traded on The Nasdaq Stock Market.
Set forth below for the calendar quarters indicated are the high and low
bid information and closing prices, as applicable.
1995 1996
HIGH LOW HIGH LOW
1st Quarter.......... 8-7/8 3-3/4 5-9/16 3-1/2
2nd Quarter.......... 5-1/4 3-1/4 4-1/8 3-7/16
3rd Quarter.......... 4-13/16 3-5/8 3-1/2 2-1/2
4th Quarter.......... 4-15/16 3-1/2 3-3/8 2-5/8
As of March 24, 1997, there were 68 record holders and approximately 1,000
beneficial owners of Swing-N-Slide's common stock.
There have been no dividends paid to stockholders since the inception of
Swing-N-Slide in January, 1992. Under the terms of the current credit
agreements, Swing-N-Slide and Newco are generally prohibited from paying
dividends to stockholders.
Options to purchase 5,000 shares of Common Stock of the Company at an
exercise price of $4.00 per share were granted to 4 directors on April 26,
1996. Section 4(2) of the Securities Act of 1933, as amended, was relied
upon for exemption from registration with respect to such option grants
based upon the fact that they were made to officers and directors in a
non-public offering.
For additional information relating to sales of unregistered securities,
see "Liquidity and Capital Resources" above. Section 4(2) of the
Securities Act of 1933, as amended, was relied upon for exemption from
registration with respect to such sales based upon the fact that they were
made to institutional investors in a non-public offering.
Item 6 - Selected Financial Data
<TABLE>
<CAPTION>
Predecessor(1) Company
Year Ended Year Ended Year Ended Year Ended Year Ended
December 31, 1992 December 31, December 31, December 31, December 31,
To Jan. 31, From Feb. 1, 1993 1994 1995 1996
(in thousands, except per share amounts)
Statement of operations data:
<S> <C> <C> <C> <C> <C> <C>
Net sales......................... $ 3,951 $42,345 $51,074 $51,816 $45,077 $41,872
Gross profit...................... 2,229 22,058 26,769 25,500 21,902 20,544
Operating income.................. 1,405 11,038 13,786 7,909 11,131 9,618
Income before income taxes
and extraordinary item........... 1,391 3,942 12,569 7,378 6,727 3,050
Extraordinary item (net
of tax benefit) - (922) - - - -
Net income ....................... 1,391 1,274 7,962 4,591 4,127 1,570
Pro forma income taxes
(2).............................. 545 - - - - -
Pro forma net income (2).......... 846 - - - - -
Per common share:
Income before extraordinary
item............................. $ 0.28 $ 0.83 $ 0.48 $ 0.67 $0.26
Extraordinary item................ (0.12) - - - -
Net income........................ 0.16 0.83 0.48 0.67 0.26
Balance sheet data (at
period end):
Working capital(deficit).......... $ ( 277) $ 2,332 $(4,783) $2,178 $ (81) $(1,525)
Total assets...................... 46,548 46,679 44,330 47,610 44,585 46,264
Total debt(3)..................... 45,745 19,720 9,909 7,588 41,738 41,498
Total stockholders' equity
(deficit)(4)..................... (3,627) 22,872 30,834 35,425 (796) 789
(1) Swing-N-Slide was formed in January 1992 and acquired substantially all of the assets and business of a predecessor
company on January 31, 1992.
(2) The predecessor company elected to be treated as an S Corporation for income tax purposes and accordingly did not
pay federal or state income taxes. The pro forma information has been computed as if the predecessor company were
subject to federal and state income taxes for such periods, based on the tax laws in effect during the respective
periods.
(3) Includes revolving loan and current and long-term portions of debt and capital leases.
(4) Net of historical stockholder distributions for the predecessor company.
</TABLE>
Item 7- Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following is a comparison of the results of operations of the Company
for the year ended December 31, 1996, with the results of operations for
the year ended December 31, 1995, and of the results of operations for the
year ended December 31, 1995, with the results of operations for the year
ended December 31, 1994.
Results of Operations:
The following table shows, for the periods indicated, information derived
from the consolidated statements of income of the Company expressed as a
percentage of net sales for such period.
As a Percentage of Net Sales
Year ended Year ended Year ended
December 31, December 31, December 31,
1994 1995 1996
Net sales 100.0% 100.0% 100.0%
Cost of goods sold 50.8 51.4 50.9
---- ---- ----
Gross profit 49.2 48.6 49.1
Operating expenses:
Selling 13.9 11.8 11.9
General and administrative 9.1 9.8 11.3
Amortization of intangible
assets 10.9 2.3 2.9
---- ---- ----
Total operating
expenses 33.9 23.9 26.1
---- ---- ----
Operating income 15.3 24.7 23.0
Income before income taxes 14.2 14.9 7.3
Year ended December 31, 1996, compared to the year ended December 31,
1995.
Net Sales. Net sales decreased by $3.2 million, or 7.1 percent, for the
year ended December 31, 1996 as compared to the year ended December 31,
1995. Sales of the core product line (swing sets, slides, accessories and
climbing units) were down 12.7 percent for the year ended December 31,
1996 as compared to the same period a year ago. The sales decline is
primarily attributable to the continued trend of retailers carrying less
inventory, industry consolidation and competition in the market.
Gross Profit. Gross profit decreased $1.4 million, or 6.2 percent, but
increased as a percentage of net sales to 49.1 percent for the year ended
December 31, 1996, as compared to 48.6 percent for the year ended December
31, 1995. The primary reasons for the increase in gross profit margin were
lower high density polyethylene costs and improved manufacturing
efficiencies which more than offset the negative impact of the allocation
of fixed overhead costs to lower sales volume.
Selling Expenses. Selling and marketing expenses decreased $0.3 million,
or 5.8 percent, but increased slightly as a percentage of net sales to
11.9 percent for the year ended December 31, 1996, as compared to 11.8
percent for the same period a year ago. The dollar decrease is mainly due
to a decrease in commission expense ($0.2 million) and a decrease in
display building costs ($0.1 million).
General and Administrative Expenses. General and administrative expenses
increased $0.3 million, or 6.7 percent, and increased as a percentage of
net sales to 11.3 percent for the year ended December 31, 1996 as compared
to 9.8 percent for the year ended December 31, 1995. The primary reason
for the dollar increase is the payment of a management consulting services
fee ($0.3 million) to certain members of GreenGrass Capital LLC in 1996
pursuant to an annual management agreement the Company entered into in
1996.
Amortization of Intangible Assets. Amortization of financing fees,
goodwill and other intangibles was $1.2 million for the year ended
December 31, 1996 as compared to $1.1 million for the same period in 1995.
Additional amortization resulted from the financing fees associated with
the issuance of 10% Convertible Subordinated Debentures in 1996. For 1997,
the Company will have additional amortization of the goodwill and
financing fees resulting from the March 13, 1997, GameTime acquisition.
Other Expenses and Income. Interest expense decreased $0.4 million to $3.9
million for the year ended December 31, 1996, as compared to 1995. This
decrease is primarily due to the pay down of $5.0 million on the Company's
term note in 1995 and the pay down of $6.5 million of the Company's term
note in the first two quarters of 1996 ($0.8 million). However, this
decrease was partially offset by the interest on the 10% Convertible
Subordinated Debentures that were issued in 1996 ($0.4 million).
Other expenses increased from $92,000 to $2.6 million for the year ended
December 31, 1996. Included in other expenses are the fees and expenses
paid by the Company related to the tender offer by GreenGrass Holdings on
February 16, 1996 ($2.6 million). See "Liquidity and Capital Resources"
below.
Income Taxes. Income taxes for the year ended December 31, 1996, were at
an effective rate of 48.5 percent. This differs from the effective rate of
38.7 percent in 1995 because certain costs related to the tender offer
completed on February 16, 1996 are not deductible for tax purposes.
Year ended December 31, 1995, compared to the year ended December 31,
1994.
Net Sales. Net sales decreased by $6.7 million, or 13.0 percent, for the
year ended December 31, 1995, as compared to the year ended December 31,
1994. Sales of the core product line (swing set, slides, accessories and
climbing units) were down 15.8 percent for the twelve months ended
December 31, 1995, compared to the same period in 1994. Competitive
pricing on the Cool Wave Slide, the loss of 300 retail outlets to
competition and retailers' increased focus on controlling inventory levels
all contributed to the sales decrease.
Gross Profit. Gross profit decreased $3.6 million, or 14.1 percent, and
decreased as a percentage of net sales to 48.6 percent for the year ended
December 31, 1995, as compared to 49.2 percent for the same period in
1994. The primary reasons for the decrease in gross profit were higher
high density polyethylene costs, reduced slide pricing, an increase in the
percentage of custom metal fabrication sales which carry a lower margin
than the core product lines, and the impact of the allocation of fixed
overhead costs to lower sales volume. These negative factors were
partially offset by changes implemented in 1995 which reduced indirect
labor costs and improved manufacturing efficiencies.
Selling Expenses. Selling and marketing expenses decreased $1.9 million,
or 26.5 percent, and decreased as a percentage of net sales to 11.8
percent for the year ended December 31, 1995 as compared to 13.9 percent
in 1994. This decrease is primarily due to a reduction in advertising and
promotion costs ($1.5 million) and a decrease in commission expense ($0.4
million).
General and Administrative Expenses. General and administrative expenses
decreased $0.3 million, or 7.0 percent, but increased as a percentage of
net sales to 9.8 percent for the year ended December 31, 1995, as compared
to 9.1 percent for the same period in 1994. The dollar decrease is mainly
due to a decrease in worker's compensation costs ($0.1 million) and a
decrease in the costs related to being a publicly-held company ($0.1
million).
Amortization of Intangible Assets. Amortization of financing fees,
goodwill and other intangibles was $1.1 million in the year ended December
31, 1995, as compared to $5.6 million for the same period in 1994. In the
fourth quarter of 1994, the remaining net book value of the noncompetition
agreements were written off. In 1994, amortization costs included $4.9
million related to the non competition agreements.
Other Expenses and Income. Interest expense increased $3.8 million to $4.3
million for the year ended December 31, 1995, as compared to 1994. This
increase is due to the interest on the debt that was incurred in
connection with the Company's purchase of 3.6 million shares of its common
stock at a price of $11.00 per share on January 19, 1995.
Liquidity and Capital Resources:
On January 4, 1996, the Company entered into an agreement with GreenGrass
Holdings, a Delaware general partnership ("GreenGrass Holdings"), of which
one of the partners is a group of the Company's senior management,
pursuant to which GreenGrass Holdings commenced a tender offer for up to
3,510,000 shares of common stock of the Company at a purchase price of
$6.50 per share. This tender offer was completed on February 16, 1996. The
agreement also provided that GreenGrass Holdings would invest additional
funds through the purchase of the Company's newly authorized convertible
debentures. On February 16, 1996, GreenGrass Holdings invested $4.3
million through the purchase of 10 percent Convertible Subordinated
Debentures. The debentures are convertible at the rate of one share of
common stock for each $4.80 principal amount of debentures. On April 25,
1996, GreenGrass Holdings invested an additional $0.7 million through the
purchase of additional debentures pursuant to the original agreement. The
proceeds from issuance of debentures on February 16, 1996, were used to
pay down approximately $1.7 million of the Company's term loan and to pay
fees associated with the tender offer and issuance of the debentures. The
proceeds from the issuance of debentures on April 25, 1996, were used to
pay down $0.7 million of the Company's term loan.
The Company's primary sources of working capital for 1996 were cash flows
from operations and borrowings under the credit agreement entered into on
January 19, 1995. Borrowings under the revolving loan facility were
limited to specified percentages of inventories, and accounts receivable,
not to exceed $10.0 million. Under such credit agreement, interest on
borrowings was payable quarterly, at either (i) the greater of 1.5 percent
over the bank's prime rate or 2.0 percent over the federal funds rate, or
(ii) 2.75 percent over the LIBOR rate, at the Company's option. The
Company was subject to an annual commitment fee of 0.5 percent of the
daily unused portion of the commitment. The borrowings under the credit
agreement were secured by substantially all of the assets of the Company.
The Company was subject to certain restrictive covenants which included,
among other things, restrictions on the payments of dividends or issuance
of capital stock and a limitation on additional indebtedness. As discussed
in more detail below, the Company refinanced this indebtedness effective
March 13, 1997.
Accounts receivable increased $1.1 million in 1996 from the prior year to
$5.6 million. This increase was due to increased sales of $1.5 million in
the last quarter of 1996 as compared to that same time period in 1995.
The Company made capital expenditures totalling approximately $0.4 million
for the year ended December 31, 1996. The Company expects that its level
of total capital expenditures for existing lines of business for 1997 will
be similar to 1996.
As previously mentioned, on March 13, 1997, Newco acquired all of the
issued and outstanding shares of capital stock of GameTime for $27.0
million and the assumption of GameTime indebtedness of approximately $13.4
million. Immediately following the acquisition, GameTime was merged with
and into Newco. To provide financing for this acquisition, to refinance
certain indebtedness of Swing-N-Slide, Newco and GameTime, and to provide
funds for working capital purposes, Swing-N-Slide and Newco entered into
certain definitive agreements referenced below.
On March 13, 1997, a group of banks led by Fleet National Bank provided
Newco with a $69.5 million senior secured credit facility. The facility
consists of (a) a $20.0 million revolving credit facility (of which $12.7
million was drawn on March 13, 1997); (b) a $45.0 million Term Loan A
facility; and (c) a $4.5 million Term Loan B facility. The entire facility
is guaranteed by Swing-N-Slide, and secured by a first priority mortgage
or security interest in all of Newco's tangible and intangible assets, as
well as a pledge of 100% of the outstanding shares of Newco common stock.
In addition, Newco is subject to certain restrictive covenants which
include, among other things, restrictions on the payment of dividends or
issuance of capital stock and a limitation on additional indebtedness.
Borrowings under the revolving loan facility are limited to specified
percentages of inventories and accounts receivable, not to exceed $20.0
million. The interest rate on the revolving credit facility is either (i)
.75 to 1.50% over the prime rate, or (ii) 2.00 to 2.75% over LIBOR, with
the precise rate depending upon Newco's debt-to-cash flow ratio. The
revolving credit facility matures on March 13, 2003. Up to $1.0 million of
the revolving credit facility is available for the issuance of letters of
credit.
The Term Loan A facility bears interest at the same rates as the revolving
credit facility. The principal portion of the Term Loan A facility must be
repaid quarterly beginning June 30, 1997, in amounts of between $500,000
and $2.9 million, with the final quarterly installment due December 31,
2002. Newco is also required to make annual prepayments on the Term Loan A
facility of between 50% and 75% of its excess cash flow.
The Term Loan B facility bears interest at either 2% over the prime rate
or 3.25% over LIBOR. The Term Loan B facility matures June 30, 2003, but
must be prepaid quarterly beginning June 30, 1997, in amounts of between
$16,667 and $33,334.
On March 13, 1997, Swing-N-Slide and Newco entered into Securities
Purchase Agreements with Massachusetts Mutual Life Insurance Company and
certain of its affiliates, pursuant to which Swing-N-Slide sold warrants
(the "MassMutual Warrants") evidencing rights to purchase an aggregate of
592,177 shares of its Class A Common Stock (subject to adjustment), and
Newco sold its 12% Senior Subordinated Notes due March 13, 2005 (the
"MassMutual Notes"), in the aggregate principal amount of $12,500,000. The
MassMutual Warrants are exercisable at any time during the period
commencing March 13, 1997, and terminating on the later of March 13, 2003,
or the date upon which all of the MassMutual Notes have been paid in full,
at an exercise price of $.001 per share (subject to adjustment).
On March 13, 1997, Swing-N-Slide entered into an Investment Agreement with
GreenGrass Holdings pursuant to which Swing-N-Slide sold to GreenGrass
Holdings 1,087,405 shares of its Common Stock for an aggregate purchase
price of $5,000,000, or a per share purchase price of $4.5981 (subject to
adjustment), and sold its Junior Subordinated Bridge Note in the principal
amount of $2,500,000, due not later than December 31, 1997 (subject to
prepayment), bearing interest at a rate of 13.5% per annum, to be paid by
the issuance of shares of Swing-N-Slide's Common Stock and accompanied by
ten-year warrants to purchase 50,000 shares of such stock, at a per share
purchase price of $4.5981 (subject to adjustment).
For further information regarding the financing transactions entered into
by Swing-N-Slide and Newco on March 13, 1997, refer to Swing-N-Slide's
Current Report on Form 8-K dated March 13, 1997.
Item 8 - Financial Statements and Supplementary Data
Index to Financial Statements:
Swing-N-Slide Corp.:
Report of Independent Auditors
Consolidated Balance Sheet at December 31, 1995
and 1996
For the years ended December 31, 1994, 1995 and 1996:
- Consolidated Statement of Income
- Consolidated Statement of Stockholders' Equity
- Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors and Stockholders
Swing-N-Slide Corp.
We have audited the accompanying consolidated balance sheets of Swing-N-
Slide Corp. (the Company) as of December 31, 1995 and 1996, and the
related consolidated statements of income, stockholders' equity (deficit)
and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedules
listed in the Index at Item 14(a). These financial statements and
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the
Company at December 31, 1995 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial statements
taken as a whole, present fairly in all material respects the information
set forth therein.
Milwaukee, Wisconsin
January 30, 1997 ERNST & YOUNG LLP
<PAGE>
Swing-N-Slide Corp.
Consolidated Balance Sheets
December 31
1995 1996
(In Thousands)
Assets
Current assets:
Cash $ 7 $ 1
Accounts receivable, less allowance
for doubtful accounts of $91 and $98 4,569 5,637
Other receivables 165 550
Inventories 6,405 7,235
Prepaid expenses 967 1,654
Deferred income taxes 50 -
------- -------
Total current assets 12,163 15,077
Property, plant and equipment, net 6,302 5,524
Deferred financing costs, net of
accumulated amortization of $425 and
$914 1,504 2,478
Patent cost, net of accumulated
amortization of $136 and $253 1,264 1,147
Deferred income taxes 1,030 560
Goodwill, net of accumulated
amortization of $2,429 and $3,048 22,322 21,478
------ ------
$44,585 $46,264
====== ======
Liabilities and stockholders' equity
(deficit)
Current liabilities:
Revolving loan $1,700 $5,625
Accounts payable 2,252 2,711
Accrued income taxes 49 1
Accrued expenses 1,342 1,155
Deferred income taxes - 110
Current portion of long-term debt 6,901 7,000
------ ------
Total current liabilities 12,244 16,602
Long-term debt, net of current portion 33,137 23,550
Convertible subordinated debentures
payable to stockholder - 5,323
Commitments and contingent liability
(Notes 3 and 9)
Stockholders' equity (deficit):
Preferred stock, $.01 par value,
5,000,000 shares authorized, no
shares issued or outstanding - -
Common stock, $.01 par value,
25,000,000 shares authorized,
9,600,000 and 9,604,000 shares issued 96 96
Class B common stock, $.01 par
value, 1,750,000 shares authorized,
no shares issued or outstanding - -
Additional paid-in capital 27,631 27,646
Excess purchase price over predecessor
basis (5,627) (5,627)
Retained earnings 17,452 19,022
Cost of 3,600,000 shares of common
stock in treasury (40,348) (40,348)
------ ------
Total stockholders' equity (deficit) (796) 789
------ ------
$44,585 $46,264
====== ======
See accompanying notes.
<PAGE>
Swing-N-Slide Corp.
Consolidated Statements of Income
Year ended December 31
1994 1995 1996
(In Thousands, Except Per Share
Data)
Net sales $51,816 $45,077 $41,872
Cost of goods sold 26,316 23,175 21,328
------- ------- -------
Gross profit 25,500 21,902 20,544
Operating expenses:
Selling 7,207 5,296 4,991
General and
administrative 4,750 4,416 4,710
Amortization of
intangible assets 5,634 1,059 1,225
------- ------- -------
17,591 10,771 10,926
------- ------- -------
Operating income 7,909 11,131 9,618
Other expense:
Interest expense 529 4,312 3,931
Other, net 2 92 2,637
------- ------- -------
Total other expense 531 4,404 6,568
------- ------- -------
Income before income taxes 7,378 6,727 3,050
Provision (credit) for
income taxes:
Current 3,857 1,745 625
Deferred (1,295) 630 630
Benefit applied to reduce
goodwill 225 225 225
------- ------- -------
2,787 2,600 1,480
------- ------- -------
Net income $4,591 $4,127 $1,570
======= ======= =======
Net income per share $.48 $.67 $.26
======= ======= =======
Weighted average number of
common shares outstanding 9,600 6,178 6,004
See accompanying notes.
<PAGE>
Swing-N-Slide Corp.
<TABLE>
Consolidated Statements of Stockholders' Equity (Deficit)
<CAPTION>
Excess Purchase
Additional Price Over
Common Paid-In Predecessor Retained Treasury
Stock Capital Basis Earnings Stock Total
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $96 $27,631 $(5,627) $ 8,734 $ - $ 30,834
-
Net income - - 4,591 - 4,591
------ ------- ------- ------- ------- -------
Balance at December 31, 1994 96 27,631 (5,627) 13,325 - 35,425
Purchase of common stock for
treasury - - - - (40,348) (40,348)
-
Net income - - 4,127 - 4,127
------- -------- -------- -------- --------- -------
Balance at December 31, 1995 96 27,631 (5,627) 17,452 (40,348) (796)
Exercise of stock options - 15 - - - 15
- - - 1,570 - 1,570
Net income
------- -------- -------- -------- --------- -------
Balance at December 31, 1996 $96 $27,646 $(5,627) $19,022 $(40,348) $ 789
======= ======== ======== ======== ========= =======
</TABLE>
See accompanying notes.
<PAGE>
Swing-N-Slide Corp.
Consolidated Statements of Cash Flows
Year ended December 31
1994 1995 1996
(In Thousands)
Operating activities
Net income $4,591 $4,127 $1,570
Adjustments to reconcile net
income to net cash provided by
operating activities:
Deferred income taxes (1,295) 630 630
Benefit applied to reduce
goodwill 225 225 225
Depreciation 1,134 1,279 1,219
Amortization 5,634 1,059 1,225
Interest converted to convertible
subordinated debentures - - 323
Other 7 29 7
Changes in operating assets and
liabilities:
Accounts receivable (1,461) (87) (1,068)
Other receivables 36 45 (385)
Refundable income taxes (356) 564 -
Inventories (3,468) 1,853 (830)
Prepaid expenses (489) (258) (687)
Accounts payable 744 (623) 459
Accrued income taxes - 49 (48)
Accrued expenses 266 (380) (187)
------ ------- -------
Net cash provided by operating
activities 5,568 8,512 2,453
Investing activities
Purchase of property, plant and
equipment (1,591) (669) (448)
Purchase of patent (1,400) - -
Other (155) - -
------ ------- ------
Net cash used in investing
activities (3,146) (669) (448)
Financing activities
Net change in revolving loan 2,800 (5,750) 3,925
Issuance of long-term debt - 45,000 -
Payments of long-term debt (5,121) (5,100) (9,488)
Issuance of convertible
subordinated debentures - - 5,000
Debt issuance costs incurred (100) (1,645) (1,463)
Proceeds from exercise of stock
options - - 15
Purchase of treasury stock - (40,348) -
------ ------ -------
Net cash used in financing
activities (2,421) (7,843) (2,011)
------ ------ -------
Net increase (decrease) in cash 1 - (6)
Cash at beginning of year 6 7 7
------ ------ -------
Cash at end of year $ 7 $ 7 $ 1
====== ====== =======
Supplemental disclosure of cash
flows information -
Cash paid during the year for:
Interest $529 $4,313 $3,513
Income taxes, net of refunds
received 4,214 1,132 661
See accompanying notes.
<PAGE>
Swing-N-Slide Corp.
Notes to Consolidated Financial Statements
December 31, 1996
1. Significant Accounting Policies
Consolidation
Swing-N-Slide Corp.'s (the Company) consolidated financial statements
include the accounts of Swing-N-Slide Corp. and its wholly owned
subsidiary, Newco, Inc. (Newco).
Nature of Business
The Company operates in one business segment of designing and
manufacturing outdoor playground equipment for the consumer market. Its
primary product lines, kits for wooden swing sets and climbing units,
plastic slides and related accessories, are sold nationwide through home
improvement retail centers. The Company performs periodic credit
evaluations of its customers and generally does not require collateral.
Revenue Recognition
Revenue is recognized when product is shipped to customers.
Inventories
Inventories are valued at the lower of cost or market using the first-in,
first-out (FIFO) method.
Property, Plant and Equipment
Additions to property, plant and equipment are recorded at cost.
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets for financial reporting purposes and under
accelerated methods for income tax purposes.
Deferred Financing Costs
Costs incurred to obtain long-term financing are amortized on a straight-
line basis over the term of the related debt.
Goodwill
The excess of the cost of acquisition over the fair value of net assets
acquired (goodwill) is amortized on a straight-line basis over 40 years.
The carrying value of goodwill will be reviewed if the facts and
circumstances suggest that it may be impaired. If this review indicates
that goodwill will not be recoverable, as determined based on the
undiscounted cash flows of the Company over the remaining amortization
period, the Company would reduce the carrying value of the goodwill by the
estimated shortfall of cash flows.
Income Taxes
Deferred income taxes reflect the impact of temporary differences between
the amount of assets and liabilities recognized for financial reporting
purposes and such amounts recognized for income tax purposes.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying
consolidated financial statements and notes. Actual results could differ
from those estimates.
Net Income Per Share
Net income per share is computed by dividing net income by the weighted
average number of common shares outstanding. The dilutive effect of shares
issuable under stock compensation plans is not significant. For 1996, the
conversion of the convertible subordinated debentures would have been
antidilutive.
2. Balance Sheet Detail
Inventories consist of the following:
December 31
1995 1996
(In Thousands)
Finished goods and work in process $2,137 $3,109
Raw materials 4,268 4,126
------ ------
$6,405 $7,235
====== ======
Property, plant and equipment consist of the following:
December 31
1995 1996
Land $ 253 $ 253
Buildings 3,117 3,122
Shop equipment 5,726 6,175
Office equipment 623 654
Vehicles 2 2
----- ------
9,721 10,206
Less accumulated depreciation 3,599 4,814
----- ------
6,122 5,392
Construction in progress 180 132
------ -------
$6,302 $ 5,524
====== =======
3. Revolving Loan, Long-Term Debt, Convertible Subordinated Debentures and
Lease Commitments
Long-term debt and convertible subordinated debentures consist of the
following:
December 31
1995 1996
(In Thousands)
Term loan $40,000 $30,550
10 % convertible subordinated debentures
payable to stockholder - 5,323
Other 38 -
------ ------
Total long-term debt 40,038 35,873
Less amounts due within one year 6,901 7,000
------ ------
$33,137 $28,873
====== ======
On January 19, 1995, in connection with the purchase of shares of common
stock, the Company's operating subsidiary, Newco, entered into a credit
agreement (Credit Agreement) covering a revolving loan facility and term
loan facility, whereby Newco may borrow up to an aggregate of $10,000,000
and $45,000,000, respectively. The revolving loan facility is effective
until January 19, 2001. Borrowings under the term loan facility are due in
twelve semiannual amounts through December 31, 2000. In addition,
mandatory prepayments are required based on excess cash flow, as defined,
and proceeds from sales of equity, sales of assets, or issuance of debt.
Voluntary prepayments are permitted at any time without penalty.
Borrowings under the revolving loan facility are limited to specified
percentages of inventories and accounts receivable, not to exceed
$10,000,000. Under the Credit Agreement, interest on borrowings is payable
quarterly at LIBOR plus 2.75% or the greater of the bank's prime rate
(8.25% at December 31, 1996) plus 1.5% or the federal funds rate plus
2.0%, at the Company's option. The Company is subject to an annual
commitment fee of 0.5% of the daily unused portion of the commitment.
The borrowings under the Credit Agreement are secured by substantially all
assets of Newco. The Company is subject to certain restrictive covenants
which include, among other things, restrictions on the payment of
dividends or issuance of capital stock and a limitation on additional
indebtedness.
The weighted average interest rate on the revolving loan facility at
December 31, 1995 and 1996, is 10.0% and 9.5%, respectively.
On January 4, 1996, the Company entered into an agreement with GreenGrass
Holdings, an unrelated general partnership of which one of the general
partners is a group of the Company's senior management, pursuant to which
the general partnership commenced a tender offer for up to 3,510,000
shares of common stock of the Company at a purchase price of $6.50 per
share. The tender offer was completed on February 16, 1996. The agreement
also provided that GreenGrass Holdings would purchase the Company's newly
authorized 10% convertible subordinated debentures, maturing in 2004. The
proceeds from the issuance of the debentures was used to pay down
approximately $2.5 million of the Company's borrowings under its term loan
and to pay fees associated with the tender offer and the issuance of the
debentures. The debentures are convertible into shares of common stock of
the Company at the rate of $4.80 of the face amount of the debentures for
each share of common stock. Interest on the debentures is payable semi-
annually. Through February 15, 1999, at the option of the Company,
interest on the debentures may be paid in the form of additional
debentures. The debentures are unsecured.
Future maturities of long-term debt, including the convertible
subordinated debentures, at December 31, 1996, are as follows (in
thousands):
1997 $ 7,000
1998 8,000
1999 9,000
2000 6,550
Thereafter 5,323
------
$35,873
======
Future minimum payments under a noncancelable operating lease total
$1,908,000 and are due as follows: 1997-$282,000; 1998-$291,000; 1999-
$299,000; 2000-$308,000; 2001-$318,000 and thereafter-$410,000. Rent
expense, including payments under operating leases, was $301,000, $221,000
and $480,000 in 1994, 1995 and 1996, respectively.
4. Income Taxes
Deferred income taxes consist of the following:
December 31
1995 1996
(In Thousands)
Deferred tax assets:
Noncompete agreement basis
difference (Note 7) $2,276 $2,070
Inventory basis difference 18 30
Property, plant and equipment basis
differences - 54
Accrued liabilities not currently
deductible for tax 241 158
Other 34 38
------ -------
2,569 2,350
Deferred tax liabilities:
Goodwill basis difference 1,243 1,560
Prepaid expenses currently
deductible for tax 246 340
------ -------
1,489 1,900
------ -------
Net deferred tax asset $1,080 $ 450
====== =======
The components of the provision for income taxes consist of the following:
Year ended December 31
1994 1995 1996
(In Thousands)
Current:
Federal $ 3,360 $1,578 $ 576
497 167 49
------ ------ ------
State 3,857 1,745 625
Deferred:
Federal (1,144) 556 556
State (151) 74 74
------ ------ ------
(1,295) 630 630
Benefit applied to reduce
goodwill 225 225 225
------ ------ ------
$ 2,787 $2,600 $1,480
====== ====== ======
The provision for income taxes differs from the amount computed by
applying the federal statutory rate of 34% to income before income taxes
as follows:
Year ended December 31
1994 1995 1996
(In Thousands)
Taxes at statutory rate $2,509 $2,287 $1,037
State income taxes, net of
federal benefit 328 212 107
Nondeductible expenses related
to tender offer (Note 3) - - 281
Other (50) 101 55
------ ------ ------
$2,787 $2,600 $1,480
====== ====== ======
5. 401(k) Plan
The Company sponsors a 401(k) "employee savings plan" which covers
employees who have completed six months of service and are at least 21
years old. The plan requires Company contributions of 50% of each
participant's deferral, not to exceed 4% of the participant's eligible
income. The Company expensed $173,000, $157,000 and $169,000,
respectively, in connection with this plan in 1994, 1995 and 1996.
6. Stock Options
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," (APB 25) and related
interpretations in accounting for its stock options because, as discussed
below, the alternative fair value accounting provided for under Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-
Based Compensation," requires use of option valuation models that were not
developed for use in valuing stock options. Under APB 25, because the
exercise price of the stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recognized.
Effective April 1, 1996, the Company adopted a new Incentive Stock Plan,
which reserved 1,200,000 shares of common stock for granting of
nonqualified and incentive stock options to key employees and directors.
In addition, the Company has a Stock Program which has terminated except
as to outstanding options.
Any incentive stock option that is granted under the plan may not be
granted at a price less than the fair market value of the stock on the
date of grant. Nonqualified stock options may be granted at the exercise
price established by a committee, which may be less than, equal to or
greater than the fair market value of the stock on the date of grant.
Options expire no more than ten years from date of grant. For employees,
option vesting provisions are determined at the date of grant by the
compensation committee of the Board of Directors. Each independent
director receives an annual fully vested option for 5,000 shares of common
stock at a purchase price equal to the fair market value of the stock on
the date of grant.
At December 31, 1995 and 1996, there were 251,780 and 1,165,000 shares
available for grant, respectively. Changes in option shares are as
follows:
Year ended December 31
1994 1995 1996
Outstanding at beginning of
year 70,310 150,000 258,220
Granted:
1994-$5.38 to $10.88 per
share 79,690 - -
1995-$3.63 to $5.91 per
share - 121,680 -
1996-$3.70 to $4.67 per
share; weighted average
price of $3.80 per share - - 239,284
Exercised -$3.63 per share - - (4,000)
Canceled or expired - (13,460) (171,070)
------- -------- --------
Outstanding at end of year
(1996-$3.63 to $10.88 per
share; weighted average price
of $4.24 per share) 150,000 258,220 322,434
======= ======= =======
Exercisable at December 31,
1996 302,434
=======
The weighted average remaining contractual life of the outstanding options
is 8.9 years.
Pro forma information regarding net income and net income per share is
required by SFAS No. 123, which also requires that the information be
determined as if the Company has accounted for its stock options granted
subsequent to December 31, 1994 under the fair value method of SFAS No.
123. The fair value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following assumptions:
risk-free interest rate of 6.4%, dividend yield of 0%, volatility factor
of the expected market price of the Company's common stock of .43, and
expected life of the option of 7 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's stock options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value of its
stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.
The Company's pro forma information follows:
Year ended December 31
1995 1996
(In Thousands,
Except Per Share Data)
Pro forma net income $4,071 $ 994
===== =====
Pro forma net income per share $ .66 $ .17
===== =====
Because SFAS No. 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect will not be fully reflected until
1997.
7. Related-Party Transactions
During the fourth quarter of 1994, the Company recorded a charge to
operations of $3,333,000 resulting from the write-off of the remaining net
book value of noncompetition agreements with certain stockholders. The
markets in which the Company operates have become increasingly competitive
and the Company believed the key knowledge and relationships these
stockholders possessed had been developed by its competitors.
The Company has entered into a management consulting agreement with
certain members of GreenGrass Capital LLC, a stockholder, pursuant to
which these members provide management consulting services and receive an
annual fee of $300,000. Fees of $263,000 were expensed by the Company
during 1996 pursuant to this agreement.
8. Major Customers
Sales to one customer were 13%, 16% and 22% of net sales during 1994,
1995 and 1996, respectively. Accounts receivable from this customer
represented 41% and 28% of accounts receivable at December 31, 1995 and
1996, respectively. Sales to another customer were 11% and 16% of net
sales during 1995 and 1996, respectively. Accounts receivable from this
customer were not significant at December 31, 1995 and represented 29% of
accounts receivable at December 31, 1996 .
9. Contingent Liability
The Company has been named as a defendant in the proceeding Robert
Barbieri v. Swing-N-Slide Corp., Thomas R. Baer, Richard G. Mueller,
Andrew W. Code, James D. Dodson, Peter M. Gotsch, Terence S. Malone, Henry
B. Pearsall, Brian P. Simmons, GreenGrass Holdings and GreenGrass
Management LLC. The complaint alleges that the Company's purchase of 3.6
million outstanding shares of common stock, which was completed in January
1995, was the result of a deceptive and manipulative plan on the part of
the individual defendants to enrich themselves. The plaintiff also
challenges on similar grounds the purchase by GreenGrass Holdings of
approximately 3.6 million shares of common stock pursuant to a tender
offer in February 1996. The plaintiff was granted certification of two
classes of stockholders consisting of all stockholders other than the
defendants at November 14, 1994 or at March 15, 1995. The relief sought
includes the imposition of a constructive trust on all proceeds of the
repurchase received by the defendants as well as various nonmonetary forms
of relief. The parties have conducted discovery. The Company believes it
has substantial defenses to all the claims and that resolution of the
claims should not have any material adverse effect on the financial
condition or results of operations of the Company.
The Company has also been named as a defendant in Sirota v. Swing-N-Slide
Corp. This is a derivative action by Sirota on behalf of himself and
Swing-N-Slide Corp. against Thomas R. Baer, Richard G. Mueller, Andrew W.
Code, James D. Dodson, Peter M. Gotsch, Terence S. Malone, Henry B.
Pearsall, Brian P. Simmons, Newco, and Code, Hennessy & Simmons Limited
Partnership. The complaint raises allegations similar to those in the
Barbieri action, to wit, that the defendants breached their fiduciary
duties to the stockholders and the Company as a result of the tender offer
completed in January 1995, but alleges that the breaches damaged the
Company, as a whole, as opposed to individual stockholders. On January 17,
1997, the parties tentatively agreed to a settlement which is subject to
court approval. The Company does not believe the results of the suit or
settlement will have a material adverse effect on the financial condition
or results of operations of the Company.
10. Subsequent Event
On January 21, 1997, the Company entered into a definitive agreement to
acquire all the outstanding shares of capital stock of Game Time, Inc. for
$27,000,000 plus assumption of indebtedness. The Company intends to
refinance its existing indebtedness to finance the transaction.
Game Time, Inc., located in Fort Payne, Alabama, manufactures modular and
customized commercial outdoor playground equipment. The systems are sold
directly to schools, parks, and municipalities by a network of independent
representatives. For the year ended December 31, 1996, Game Time, Inc.
reported net sales of approximately $49,000,000.
The acquisition is subject to certain conditions, including satisfactory
completion of due diligence and acceptable financing, and is expected to
be completed by February 28, 1997.
11. Quarterly Results of Operations (Unaudited)
1995
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
(In Thousands, Except Per Share Data)
Net sales $13,863 $19,643 $6,763 $4,808
Gross profit 6,604 10,301 3,014 1,983
Net income (loss) 1,233 3,218 60 (384)
Net income (loss) per
share .18 .54 .01 (.06)
1996
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
(In Thousands, Except Per Share Data)
Net sales $ 9,602 $19,213 $6,728 $6,329
Gross profit 5,019 10,367 2,622 2,536
Net income (loss) (1,151) 3,379 (198) (460)
Income (loss) per
share: (.19) .56 (.03) (.08)
Primary
Fully diluted (.19) .49 (.03) (.08)
<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
Information concerning directors is incorporated by reference from
the "Election of Directors" section of Swing-N-Slide's Proxy
Statement for the annual meeting of stockholders to be held on May
21, 1997 (the "Proxy Statement"), which Proxy Statement will be filed
within 120 days after the end of Swing-N-Slide's fiscal year.
Information concerning the executive officers will be included in
Exhibit A, "Executive Officers of Swing-N-Slide", to the Proxy
Statement. Information concerning compliance with Section 16(a) of
the Exchange Act is incorporated by reference from the "Section 16(a)
Beneficial Ownership Reporting Compliance" section of the Proxy
Statement.
Item 11 - Executive Compensation
Incorporated by reference from the "Executive Compensation" section
of the Proxy Statement.
Item 12 - Security Ownership of Certain Beneficial Owners and
Management.
Incorporated by reference from the "Ownership of Common Stock"
section of the Proxy Statement.
Item 13 - Certain Relationships and Related Transactions
Incorporated by reference from the "Executive Compensation" and
"Other Transactions and Certain Relationships" sections of the Proxy
Statement.
PART IV
Item 14 - Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
(a) Financial Statements and Financial Statement Schedules
The following consolidated financial statements are included in Item
8:
Swing-N-Slide Corp.:
Consolidated Balance Sheet at December 31, 1995
and 1996
For the years ended December 31, 1994, 1995 and 1996:
- Consolidated Statement of Income
- Consolidated Statement of Stockholders Equity
- Consolidated Statement of Cash Flows
Notes to Consolidated Financial Statements
The following consolidated financial statement schedules are included
in Item 14(d):
Schedule I - Condensed Financial Information of Registrant
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
consolidated financial statements or the notes thereto.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
(c) Exhibits
SWING-N-SLIDE CORP.
EXHIBIT INDEX TO FORM 10-K
For the Fiscal Year ended December 31, 1996
Exhibit
Number Exhibit
(2.1) Amended and Restated Stock Purchase Agreement, dated as of
March 13, 1997, by and among Newco, Inc., Game Time, Inc.
and Ross D. Siragusa, Jr., John R. Siragusa and Richard D.
Siragusa.(1)
(2.2) Articles of Merger Merging Game Time, Inc. With and Into
Newco, Inc., dated as of March 13, 1997.(2)
(3.1) Amended and Restated Certificate of Incorporation of Swing-
N-Slide Corp.(3)
(3.2) Amended and Restated By-laws of Swing-N-Slide Corp.
(4.1) Credit Agreement, dated as of March 13, 1997, among Swing-
N-Slide Corp., Newco, Inc., the Lenders party thereto and
Fleet National Bank, as lender and agent, together with the
notes related thereto.(4)
(4.2) Securities Purchase Agreement, dated as of March 13, 1997,
among Swing-N-Slide Corp., Newco, Inc. and Massachusetts
Mutual Life Insurance Company, together with the notes and
warrants related thereto.(5)
(4.3) Securities Purchase Agreement, dated as of March 13, 1997,
among Swing-N-Slide Corp., Newco, Inc. and MassMutual
Corporate Investors, together with the note and warrant
related thereto.(6)
(4.4) Securities Purchase Agreement, dated as of March 13, 1997,
among Swing-N-Slide Corp., Newco, Inc. and MassMutual
Participation Investors, together with the note and warrant
related thereto.(7)
(4.5) Securities Purchase Agreement, dated as of March 13, 1997,
among Swing-N-Slide Corp., Newco, Inc. and MassMutual
Corporate Value Partners Limited, together with the note
and warrant related thereto.(8)
(4.6) 10% Convertible Subordinated Debenture due 2004, dated
February 16, 1996, in the original principal amount of
$4,300,000 issued by Swing-N-Slide Corp. to GreenGrass
Holdings.(9)
(4.7) 10% Convertible Subordinated Debenture due 2004, dated
April 25, 1996, in the original principal amount of
$700,000 issued by Swing-N-Slide Corp. to GreenGrass
Holdings.(10)
(4.8) Swing-N-Slide Corp. Bridge Note, dated as of March 13,
1997, in the principal amount of $2,500,000.(11)
(4.9) Warrant No. 1 for the Purchase of Common Stock of Swing-N-
Slide Corp., dated as of March 13, 1997.(12)
(4.10) Amended and Restated Registration Rights Agreement, dated
as of March 13, 1997, between Swing-N-Slide Corp. and
GreenGrass Holdings.(13)
(10.1) Investment Agreement, dated as of March 13, 1997, between
Swing-N-Slide Corp. and GreenGrass Holdings.(14)
(10.2) Lease dated October 13, 1995, between Hovde Development,
Inc., lessor, and Swing-N-Slide Corp., lessee.
(10.3) Lease dated November 1, 1993, between HUFCOR, INC., lessor,
and Newco, Inc., lessee, as amended.
(10.4) Swing-N-Slide Corp. 1996 Incentive Stock Plan.(15)
(10.5) Management Consulting Agreement dated as of February 16,
1996, by and among Newco, Inc., Swing-N-Slide Corp.,
Glencoe Investment Corporation and Desai Capital Management
Incorporated.
(10.6) Acquisition consulting agreement relating to GameTime
transaction dated as of September 6, 1996, by and among
Swing-N-Slide Corp., Glencoe Investment Corporation and
Desai Capital Management Incorporated.
(21) Subsidiaries of Swing-N-Slide Corp.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
________________________________________
(1) Incorporated by reference to Exhibit 2.1 of Swing-N-Slide Corp.'s
Current Report on Form 8-K dated March 13, 1997 (SEC File Number 0-
20450).
(2) Incorporated by reference to Exhibit 2.2 of Swing-N-Slide Corp.'s
Current Report on Form 8-K dated March 13, 1997 (SEC File Number 0-
20450).
(3) Incorporated by reference to Swing-N-Slide Corp.'s Registration
Statement on Form S-8 (Registration No. 33-48735).
(4) Incorporated by reference to Exhibits 4.1 through 4.10 of Swing-N-
Slide Corp.'s Current Report on Form 8-K dated March 13, 1997 (SEC
File Number 0-20450).
(5) Incorporated by reference to Exhibits 4.11, 4.15, 4.16, 4.20, and
4.21 of Swing-N-Slide Corp.'s Current Report on Form 8-K dated March
13, 1997 (SEC File Number 0-20450).
(6) Incorporated by reference to Exhibits 4.12, 4.17 and 4.22 of Swing-N-
Slide Corp.'s Current Report on Form 8-K dated March 13, 1997 (SEC
File Number 0-20450).
(7) Incorporated by reference to Exhibits 4.13, 4.18 and 4.23 of Swing-N-
Slide Corp.'s Current Report on Form 8-K dated March 13, 1997 (SEC
File Number 0-20450).
(8) Incorporated by reference to Exhibits 4.14, 4.19 and 4.24 of Swing-N-
Slide Corp.'s Current Report on Form 8-K dated March 13, 1997 (SEC
File Number 0-20450).
(9) Incorporated by reference to Exhibit 10.(i)(1) of Swing-N-Slide
Corp.'s Registration Statement on Form S-2 (Registration No. 333-
3907).
(10) Incorporated by reference to Exhibit 10.(i)(2) of Swing-N-Slide
Corp.'s Registration Statement on Form S-2 (Registration No. 333-
3907).
(11) Incorporated by reference to Exhibit 4.26 of Swing-N-Slide Corp.'s
Current Report on Form 8-K dated March 13, 1997 (SEC File Number 0-
20450).
(12) Incorporated by reference to Exhibit 4.27 of Swing-N-Slide Corp.'s
Current Report on Form 8-K dated March 13, 1997 (SEC File Number 0-
20450).
(13) Incorporated by reference to Exhibit 4.28 of Swing-N-Slide Corp.'s
Current Report on Form 8-K dated March 13, 1997 (SEC File Number 0-
20450).
(14) Incorporated by reference to Exhibit 4.25 of Swing-N-Slide Corp.'s
Current Report on Form 8-K dated March 13, 1997 (SEC File Number 0-
20450).
(15) Incorporated by reference to Exhibit 10(iii)(A)(1) of Swing-N-Slide
Corp.'s Registration Statement on Form S-2 (Registration No. 333-
3907).
<PAGE>
(d) Financial Statement Schedules
Schedule I
Swing-N-Slide Corp.
Condensed Financial Information of Registrant
Years Ended December 31, 1994, 1995 and 1996
Swing-N-Slide Corp. (Parent Company)
Condensed Balance Sheet
December 31
1995 1996
(In Thousands)
Investment in, and amounts due from, wholly
owned subsidiary $34,395 $36,113
------ ------
Total assets $34,395 $36,113
====== ======
Current liabilities $ 570 $ 34
Amounts due to wholly owned subsidiary 34,621 29,967
Convertible subordinated debentures payable
to stockholder - 5,323
Stockholders' equity (deficit):
Common stock 96 96
Cost of 3,600,000 shares of common stock
in treasury (40,348) (40,348)
Other stockholders' equity 39,456 41,041
------ ------
(796) 789
------ ------
Total liabilities and stockholders' equity $34,395 $36,113
====== ======
Condensed Statement of Income
Year Ended December 31
1994 1995 1996
(In Thousands)
Management fees from
wholly owned subsidiary $2,100 $2,100 $2,200
Costs and expenses:
Administrative expense 521 432 503
Interest expense - - 437
Other expense - - 1,488
------ ------ ------
521 432 2,428
------ ------ ------
Income (loss) before income taxes
and equity in net income of
subsidiary 1,579 1,668 (228)
Provision (credit) for income taxes 540 570 (80)
Equity in net income of subsidiary 3,552 3,029 1,718
------ ------ ------
Net income $4,591 $4,127 $1,570
====== ====== ======
Condensed Statement of Cash Flows
Year Ended December 31
1994 1995 1996
(In Thousands)
Operating activities:
Net income $4,591 $4,127 $1,570
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Equity in net income of subsidiary (3,552) (3,029) (1,718)
Interest converted to convertible
subordinated debentures - - 323
Increase (decrease) in current
liabilities 168 34,651 (5,190)
------ ------ -------
Net cash provided by (used in)
operating activities 1,207 35,749 (5,015)
Net cash provided by (used in)
investing activities (1,207) 4,599 -
Financing activities:
Purchase of treasury stock - (40,348) -
Issuance of convertible
subordinated debentures - - 5,000
Proceeds from exercise of
stock options - - 15
------ ------- ------
Net cash provided by (used in)
financing activities -
(40,348) 5,015
------ ------- ------
Net increase in cash - - -
Cash at beginning of year - - -
------ ------ ------
Cash at end of year $ - $ - $ -
====== ====== ======
<PAGE>
Schedule II
Swing-N-Slide Corp.
Valuation and Qualifying Accounts
Years Ended December 31, 1994, 1995 and 1996
Balance at Balance at
Beginning End of
Description of Year Additions Deductions/1 Year
(In Thousands)
Allowance for doubtful
accounts:
Year ended December 31,
1994 $125 $150 $200 $ 75
=== === === ===
Year ended December 31,
1995 $ 75 $ 25 $ 9 $ 91
=== === === ===
Year ended December 31,
1996 $ 91 $ 10 $ 3 $ 98
=== === === ===
-----------
1/ Uncollectible accounts written of, net of recoveries.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on behalf
of the undersigned, thereunto duly authorized.
SWING-N-SLIDE CORP. Date
By /s/ Richard G. Mueller 3-28-97
Richard G. Mueller
Chairman, President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name and Title Signature Date
RICHARD G. MUELLER /s/ Richard G. Mueller 3-28-97
Chairman of the Board Richard G. Mueller
of Directors, President
and Chief Executive Officer
RICHARD E. RUEGGER /s/ Richard E. Ruegger 3-28-97
Vice President-Finance, Richard E. Ruegger
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
DAVID S. EVANS /s/ David S. Evans 3-28-97
Director David S. Evans
GEORGE N. HERRERA /s/ George N. Herrera 3-28-97
Director George N. Herrera
TIMOTHY R. KELLEHER /s/ Timothy R. Kelleher 3-28-97
Director Timothy R. Kelleher
TERENCE S. MALONE /s/ Terence S. Malone 3-28-97
Director Terence S. Malone
GARY A. MASSEL /s/ Gary A. Massel 3-28-97
Director Gary A. Massel
CAROLINE L. WILLIAMS /s/ Caroline L. Williams 3-28-97
Director Caroline L. Williams
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(3.2) Amended and Restated By-laws of Swing-N-Slide Corp.
(10.2) Lease dated October 13, 1995, between Hovde Development,
Inc., lessor, and Swing-N-Slide Corp., lessee.
(10.3) Lease dated November 1, 1993, between HUFCOR, INC., lessor,
and Newco, Inc., lessee, as amended.
(10.5) Management Consulting Agreement dated as of February 16,
1996, by and among Newco, Inc., Swing-N-Slide Corp.,
Glencoe Investment Corporation and Desai Capital Management
Incorporated.
(10.6) Acquisition consulting agreement relating to GameTime
transaction dated as of September 6, 1996, by and among
Swing-N-Slide Corp., Glencoe Investment Corporation and
Desai Capital Management Incorporated.
(21) Subsidiaries of Swing-N-Slide Corp.
(23) Consent of Ernst & Young LLP.
(27) Financial Data Schedule.
AMENDED AND RESTATED BY-LAWS
OF
SWING-N-SLIDE CORP.
INDEX
ARTICLE I
OFFICES AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1. Delaware Office . . . . . . . . . . . . . . . . . 1
SECTION 1.2. Other Offices . . . . . . . . . . . . . . . . . . 1
SECTION 1.3. Books and Records . . . . . . . . . . . . . . . . 1
ARTICLE II
STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2.1. Annual Meeting . . . . . . . . . . . . . . . . . 1
SECTION 2.2. Special Meeting . . . . . . . . . . . . . . . . . 1
SECTION 2.3. Place of Meeting . . . . . . . . . . . . . . . . 1
SECTION 2.4. Notice of Meeting . . . . . . . . . . . . . . . . 1
SECTION 2.5. Quorum and Adjournment . . . . . . . . . . . . . 2
SECTION 2.6. Proxies . . . . . . . . . . . . . . . . . . . . . 2
SECTION 2.7. Notice of Stockholder Business and Nominations . 2
(A) Annual Meetings of Stockholders . . . . . . 2
(B) General . . . . . . . . . . . . . . . . . . 3
SECTION 2.8. Procedure for Election of Directors . . . . . . . 4
SECTION 2.9. Inspectors of Elections . . . . . . . . . . . . . 4
(A) Appointment . . . . . . . . . . . . . . . . 4
(B) Duties . . . . . . . . . . . . . . . . . . . 4
ARTICLE III
BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . 4
SECTION 3.1. General Powers . . . . . . . . . . . . . . . . . 4
SECTION 3.2. Number, Election and Tenure . . . . . . . . . . . 4
SECTION 3.3. Regular Meetings . . . . . . . . . . . . . . . . 5
SECTION 3.4. Special Meetings . . . . . . . . . . . . . . . . 5
SECTION 3.5. Notice . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.6. Quorum . . . . . . . . . . . . . . . . . . . . . 5
SECTION 3.7. Action by Written Consent . . . . . . . . . . . . 5
SECTION 3.8. Vacancies . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.9. Audit Committee . . . . . . . . . . . . . . . . . 6
SECTION 3.10. Compensation Committee . . . . . . . . . . . . . 6
SECTION 3.11. Appointment of Other Committees . . . . . . . . . 6
SECTION 3.12. Jurisdiction . . . . . . . . . . . . . . . . . . 6
SECTION 3.13. Reports . . . . . . . . . . . . . . . . . . . . . 6
SECTION 3.14. Resignation . . . . . . . . . . . . . . . . . . . 6
SECTION 3.15. Executive Committee . . . . . . . . . . . . . . . 7
ARTICLE IV
OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 4.1. Elected Officers . . . . . . . . . . . . . . . . 7
SECTION 4.2. Election and Term of Office . . . . . . . . . . . 7
SECTION 4.3. Chairman of the Board . . . . . . . . . . . . . . 7
SECTION 4.4. Chief Executive Officer . . . . . . . . . . . . . 8
SECTION 4.5. The President . . . . . . . . . . . . . . . . . . 8
SECTION 4.6. The Vice Presidents . . . . . . . . . . . . . . . 8
SECTION 4.7. The Assistant Vice Presidents . . . . . . . . . . 8
SECTION 4.8. The Chief Financial Officer . . . . . . . . . . . 8
SECTION 4.9. The Treasurer . . . . . . . . . . . . . . . . . . 9
SECTION 4.10. The Assistant Treasurers . . . . . . . . . . . . 9
SECTION 4.11. The Secretary . . . . . . . . . . . . . . . . . . 9
SECTION 4.12. The Assistant Secretaries . . . . . . . . . . . . 9
SECTION 4.13. Removal . . . . . . . . . . . . . . . . . . . . . 9
SECTION 4.14. Vacancies . . . . . . . . . . . . . . . . . . . . 9
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS . . . . . . . . . . . . . . . . . . 10
SECTION 5.1. Stock Certificates and Transfers . . . . . . . . . 10
SECTION 5.2. Signatures on Certificates . . . . . . . . . . . . 10
ARTICLE VI
MISCELLANEOUS PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.1. Fiscal Year . . . . . . . . . . . . . . . . . . . 10
SECTION 6.2. Dividends . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.3. Seal . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.4. Waiver of Notice . . . . . . . . . . . . . . . . . 10
SECTION 6.5. Audits . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 6.6. Resignations . . . . . . . . . . . . . . . . . . . 11
SECTION 6.7. Indemnification and Insurance . . . . . . . . . . 11
ARTICLE VII
AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. Delaware Office. The registered office of the
Corporation in the State of Delaware shall be located in the City of
Dover, County of Kent, and the name and address of its registered agent is
32 Loockerman Square, Suite L-100, Dover, Delaware 19901.
SECTION 1.2. Other Offices. The Corporation may have such other
offices, either within or without the State of Delaware, as the Board of
Directors may designate or as the business of the Corporation may from
time to time require.
SECTION 1.3. Books and Records. The books and records of the
Corporation may be kept outside the State of Delaware at such place or
places as may from time to time be designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. Annual Meeting. The annual meeting of the
stockholders of the Corporation shall be held at times designated by the
Board of Directors and at such place as may be fixed from time to time by
the Board of Directors, either within or without the State of Delaware.
Any previously scheduled annual meeting of the stockholders may be
postponed by resolution of the Board of Directors upon public notice given
prior to the date previously scheduled for such annual meeting of
stockholders. Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at an annual or special
meeting of stockholders of the Corporation and may not be effected by a
consent in writing by such stockholders.
SECTION 2.2. Special Meeting. Except as otherwise required by law
and subject to the right of holders of any class or series of stock having
a preference over the Corporation's Common Stock as to dividends or upon
liquidation, dissolution, or winding up of the Corporation (the "Preferred
Stock"), special meetings of the stockholders may be called by, but only
by (i) the Chairman of the Board or the President of the Corporation, (ii)
by the Board of Directors pursuant to a resolution adopted by a majority
of the whole board (the "Whole Board") or (iii) holders or a majority of
shares of Common Stock of the Corporation.
SECTION 2.3. Place of Meeting. The Board of Directors may
designate the place of meeting for any annual meeting or for any special
meeting of the stockholders called by the Board of Directors. If no
designation is made by the Board of Directors, or if a special meeting is
otherwise called, the place of meeting shall be the principal office of
the Corporation.
SECTION 2.4. Notice of Meeting. Written or printed notice, stating
the place, day and hour of the meeting and the purpose for which the
meeting is called, shall be delivered not less than ten (10) days nor more
than sixty (60) days before the date of the meeting, either personally or
by mail, to each stockholder of record entitled to vote at such meeting.
If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail with postage thereon prepaid, addressed to the
stockholder at his address as it appears on the stock transfer books of
the Corporation. Such further notice shall be given as may be required by
law. Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting.
SECTION 2.5. Quorum and Adjournment. Except as otherwise provided
by law or by the Certificate of Incorporation, the holders of a majority
of the outstanding shares of the Corporation entitled to vote (the "Voting
Stock"), represented in person or by proxy, shall constitute a quorum at a
meeting of stockholders, except that when specified business is to be
voted on by a class or series voting as a class, the holders of a majority
of the shares of such class or series shall constitute a quorum of such
class or series for the transaction of such business. The chairman of the
meeting or a majority of the shares so represented may adjourn the meeting
from time to time, whether or not there is such a quorum. No notice of
the time and place of adjourned meetings need be given except as required
by law. The stockholders present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum.
SECTION 2.6. Proxies. At all meetings of stockholders, a
stockholder may vote by proxy executed in writing by the stockholder, or
by his duly authorized attorney in fact. Such proxy must be filed with
the Secretary of the Corporation or his representative at or before the
time of the meeting. No proxy shall be valid after eleven (11) months
from the date of its execution, unless the proxy shall otherwise provide.
SECTION 2.7. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders.
(1) Nominations of persons for election to the Board of
Directors of the Corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of
stockholders (a) pursuant to the Corporation's notice of meeting, (b)
by or at the direction of the Board of Directors or (c) by any
stockholder of the Corporation who was a stockholder of record at the
time of giving of notice provided for in this By-Law, who is entitled
to vote at the meeting and who complied with the notice procedures
set forth in this By-Law.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause
(c) of paragraph (A)(1) of this By-Law, the stockholder must have
given timely notice thereof in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered
to the Secretary at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the
first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from
such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the 90th day prior to such annual
meeting and not later than the close of business on the later of the
60th day prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such meeting is first
made. Such stockholder's notice shall set forth (a) as to each
person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that
is required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (including such person's written consent to
being named in the proxy statement as a nominee and to serving as a
director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description
of the business desired to be brought before the meeting, the reasons
for conducting such business at the meeting and any material interest
in such business of such stockholder and the beneficial owner, if
any, on whose behalf the proposal is made; and (c) as to the
stockholder giving the notice and the beneficial owner, if any, on
whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's
books, and of such beneficial owner and (ii) the class and number of
shares of the Corporation which are owned beneficially and of record
by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (A)(2) of this By-Law to the contrary, in the event that
the number of Directors to be elected to the Board of Directors of
the Corporation is increased and there is no public announcement
naming all of the nominees for Director or specifying the size of the
increased Board of Directors made by the Corporation at least 70 days
prior to the first anniversary of the preceding year's annual
meeting, a shareholder's notice required by this By-Law shall also be
considered timely, but only with respect to nominees for any new
positions created by such increase, if it shall be delivered to the
Secretary at the principal executive offices of the Corporation not
later than the close of business on the 10th day following the day on
which such public announcement is first made by the Corporation.
(B) General.
(1) Only such persons who are nominated in accordance with
the procedures set forth in this By-Law shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in
accordance with the procedures set forth in this By-Law. The
Chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the procedures set forth in
this By-Law and, if any proposed nomination or business is not in
compliance with this By-Law, to declare that such defective proposal
shall be disregarded.
(2) For purposes of this By-Law, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or
in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(3) Notwithstanding the foregoing provisions of this By-
Law, a stockholder shall also comply with all applicable requirements
of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this By-Law. Nothing in this By-
Law shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act.
SECTION 2.8. Procedure for Election of Directors. Election of
directors at all meetings of the stockholders at which directors are to be
elected shall be by ballot, and, except as otherwise set forth in any
Certificate of Designations with respect to the right of the holders of
any class or series of Preferred Stock to elect additional directors under
specified circumstances, a plurality of the votes cast thereat (?) shall
elect. Except as otherwise provided by law or the Certificate of
Incorporation, all matters other than the election of directors submitted
to the stockholders at any meeting shall be decided by a majority of the
votes cast with respect thereto.
SECTION 2.9. Inspectors of Elections.
(A) Appointment. The Corporation shall, in advance of any
meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who
fails to act. If no inspector or alternate is able to act at a meeting of
stockholders, the person presiding at the meeting shall appoint one or
more inspectors to act at the meeting. Each inspector, before entering
upon the discharge of his duties, shall take and sign an oath to
faithfully execute the duties of inspector with strict impartiality and
according to the best of his ability.
(B) Duties. The inspectors shall (1) ascertain the number of
shares outstanding and the voting power of each, (2) determine the shares
represented at a meeting and the validity of proxies and ballots, (3)
count all votes and ballots, (4) determine and retain for a reasonable
period a record of the disposition of any challenges made to any
determinations by the inspectors, and (5) certify their determination of
the number of shares represented at the meeting, and their count of all
votes and ballots.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of its Board of
Directors. In addition to the powers and authorities expressly conferred
upon the Board of Directors by these By-Laws, the Board of Directors may
exercise all such powers of the Corporation and do all such lawful acts
and things as are not by statute or by the Certificate of Incorporation or
by these By-Laws required to be exercised or done by the stockholders.
SECTION 3.2. Number, Election and Tenure. Subject to the rights of
the holders of any class or series of Preferred Stock to elect directors
under specified circumstances, the number of directors shall be fixed from
time to time exclusively pursuant to a resolution adopted by a majority of
the Whole Board. The Directors shall be (i) elected at the annual meeting
of the stockholders, except as provided in (ii) below, and each director
elected shall hold office until his or her successor shall have been duly
elected and qualified, and (iii) if authorized by a resolution of the
Board of Directors, elected to fill any vacancy on the Board of Directors
in accordance with the provisions of Section 3.8 of this Article III.
SECTION 3.3. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this By-Law immediately
after, and at the same place as, the Annual Meeting of Stockholders. The
Board of Directors may, by resolution, provide the time and place for the
holding of additional regular meetings without other notice than such
resolution.
SECTION 3.4. Special Meetings. Special meetings of the Board of
Directors shall be called at the request of the Chairman of the Board, the
President or a majority of the Board of Directors. The person or persons
authorized to call special meetings of the Board of Directors may fix the
place and time of the meetings.
SECTION 3.5. Notice. Notice of each special meeting shall be given
to each director at his business or residence in writing or by telegram or
by telecopy or by overnight delivery service. If mailed, such notice
shall be deemed adequately delivered when deposited in the United States
mails so addressed, with postage thereon prepaid, at least five (5) days
before such meeting. If by telegram, such notice shall be deemed
adequately delivered when the telegram is delivered to the telegraph
company at least twenty-four (24) hours before such meeting. If by
telecopy, the notice shall be deemed delivered as of the date and time
indicated on the receipt of transmission. If by overnight delivery
service (Federal Express or any other nationally recognized delivery
service), notice shall be deemed adequately delivered when delivered to
such service, properly addressed, at least 48 hours before such meeting.
Neither the business to be transacted at, nor the purpose of, any regular
or special meeting of the Board of Directors need be specified in the
notice of such meeting, except for amendments to these By-Laws, as
provided under Article VII. A meeting may be held at any time without
notice if all the directors are present or if those not present waive
notice of the meeting in writing, either before or after such meeting.
SECTION 3.6. Quorum. A whole number of directors equal to at least
a majority of the Whole Board shall constitute a quorum for the
transaction of business, but if at any meeting of the Board of Directors
there shall be less than a quorum present, a majority of the directors
present may adjourn the meeting from time to time without further notice.
The act of the majority of the directors present at a meeting at which a
quorum is present shall be the act of the Board of Directors. The
directors present at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
directors to leave less than a quorum.
SECTION 3.7. Action by Written Consent. Any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting, if all members of the
Board or committee, as the case may be, consent thereto in writing, and
the writing or writings are filed with the minutes of proceedings of the
Board or committee.
SECTION 3.8. Vacancies. Subject to the rights of the holders of
any class or series of Preferred Stock, and unless the Board of Directors
otherwise determines, vacancies resulting from death, resignation,
retirement, disqualification, removal from office or other cause, and
newly created directorships resulting from any increase in the authorized
number of directors, may be by the affirmative vote of a majority of the
remaining directors or the sole remaining director, though less than a
quorum of the Board of Directors, and each director so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which
the term of office of the class to which they have been elected expires
and until such director's successor shall have been duly elected and
qualified. No decrease in the number of authorized directors constituting
the Whole Board shall shorten the term of any incumbent director.
SECTION 3.9. Audit Committee. The Board of Directors, immediately
following each annual meeting of stockholders and each special meeting of
the same at which majority of directors shall have been elected, shall
meet and appoint from its number by a majority vote of the Whole Board an
Audit Committee consisting of such number of members of the Board as from
time to time may be selected by the Board, all of the members of which
committee who shall be neither employees of, nor have substantial business
relations with, the Corporation. The Audit Committee shall make
recommendations to the Board regarding the independent auditors to be
nominated for election by the shareholders and review the independence of
such auditors, shall approve the scope of the annual audits and the audit
fee payable to the independent auditors and shall review such audit
results.
SECTION 3.10. Compensation Committee. The Board of Directors,
immediately following each annual meeting of stockholders and each special
meeting of the same in which the majority of directors shall have been
elected, shall meet and appoint from its number by a majority vote of the
Whole Board a Compensation Committee consisting of such number of members
of the Board as from time to time may be selected by the Board. The
Compensation Committee shall establish overall compensation of senior
executives and shall have the power to establish bonus and other
compensatory plans affecting them.
SECTION 3.11. Appointment of Other Committees. The Board of
Directors may from time to time create such other committees, with such
memberships, powers and duties, as shall be designated by the enabling
vote of the Whole Board. Except as otherwise provided by these By-Laws,
members of all committees shall be appointed by the Board from its number
by a majority vote of the Whole Board.
SECTION 3.12. Jurisdiction. The Board of Directors shall have full
power to settle any question as to the jurisdiction of any committee.
SECTION 3.13. Reports. The Board of Directors may require a report
from any committee at any time.
SECTION 3.14. Resignation. Any director may resign at any time.
Such resignation shall be in writing and delivered to the Chairman of the
Board or the Secretary of the Corporation, and shall take effect at the
time specified therein, and if no time shall be specified, at the time of
its receipt by the Chairman of the Board or the Secretary of the
Corporation, as the case may be. The acceptance of a resignation shall
not be necessary to make it effective.
SECTION 3.15. Executive Committee. The Board of Directors may
appoint an Executive Committee from their number. The Executive Committee
may make its own rules of procedure and shall meet where and as provided
by such rules, or by a resolution of the Board of Directors. A majority
shall constitute a quorum, and in every case the affirmative vote of a
majority of all the members of the Committee shall be required for the
adoption of any resolution. During the intervals between the meetings of
the Board of Directors, the Executive Committee may exercise all the
powers of the Board of Directors in the management and direction of the
business of the Corporation, in such manner as such Committee shall deem
best for the interest of the Corporation, in all cases in which specific
directions shall not have been given by the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 4.1. Elected Officers. The elected officers of the
Corporation shall be a Chairman of the Board of Directors, a Chief
Executive Officer, a Chief Financial Officer, a Secretary, a Treasurer and
such other officers as the Board of Directors from time to time may deem
proper. The Chairman of the Board of Directors shall be chosen from the
directors. All officers chosen by the Board of Directors shall each have
such powers and duties as generally pertain to their respective offices,
subject to the specific provisions of this ARTICLE IV. Such officers
shall also have such powers and duties as from time to time may be
conferred by the Board of Directors or by any Committee thereof.
SECTION 4.2. Election and Term of Office. The elected officers of
the Corporation shall be elected annually by the Board of Directors at the
regular meeting of the Board of Directors held after each annual meeting
of the stockholders. If the election of officers shall not be held at
such meeting such election shall be held as soon thereafter as convenient.
Each officer shall hold office until his successor shall have been duly
elected and shall have qualified or until his death or until he shall
resign, but any officer may be removed from office at any time by the
affirmative vote of a majority of the members of the Whole Board.
SECTION 4.3. Chairman of the Board. The Chairman of the Board
shall preside at all meetings of the stockholders and of the Board of
Directors. The Chairman of the Board shall perform all duties incidental
to his office which may be required by law and all such other duties as
are properly required of him by the Board of Directors. Except where by
law the signature of the President (if any) is required, the Chairman of
the Board shall possess the same power as the President to sign all
certificates, contracts, and other instruments of the Corporation which
may be authorized by the Board of Directors. He shall make reports to the
Board of Directors and the stockholders, and shall perform all such other
duties as are properly required of him by the Board of Directors. He
shall see that all orders and resolutions of the Board of Directors and of
any committee thereof are carried into effect.
SECTION 4.4. Chief Executive Officer. The Chief Executive Officer
shall be the chief executive officer of the corporation. He shall have
general and active management of the business of the corporation. He
shall have general and active management of the business of the
corporation, shall see to it that all resolutions and orders of the Board
of Directors and the Chairman of the Board are carried into effect, and in
connection therewith, shall be authorized to delegate to the President and
the other executive officers of the corporation such of his powers and
duties as the Chief Executive Officers at such times and in such manner as
he may deem to be advisable. In the absence or disability of the Chairman
of the Board, he shall preside at all meetings of the shareholders and the
directors.
SECTION 4.5. The President. The President, if an individual other
than the individual serving as the Chief Executive Officer, shall assist
the Chief Executive Officer in the management of the business of the
corporation and the implementation of resolutions of the Board of
Directors at such times and in such manner as the Chief Executive Officer
may deem to be advisable, and shall, in the absence or disability of the
Chief Executive Officer, exercise the powers and perform the duties of
Chief Executive Officer.
SECTION 4.6. The Vice Presidents. The Vice President, if any, or,
if there be more than one, the Vice Presidents, shall assist the President
in the management of the business of the corporation and the
implementation of resolutions and orders of the Board of Directors at such
times and in such manner as the Chief Executive Officer may deem to be
advisable. If there be more than one Vice President, the Board of
Directors may designate one of them as Executive Vice President, in which
case he shall be first in order of seniority after the President, and may
also grant to others such titles as shall be descriptive of their
respective functions or indicative of their relative seniority. The Vice
President, or, if there be more than one, the Vice Presidents in the order
of their seniority as indicated by their titles or as otherwise determined
by the Board of Directors, shall, in the absence or disability of the
President, exercise the powers and perform the duties of President; and he
or they shall have such other powers and duties as the Board of Directors
or the Chief Executive Officer may from time to time prescribe.
SECTION 4.7. The Assistant Vice Presidents. The Assistant Vice
President, if any, or, if there be more than one, the Assistant Vice
Presidents, shall perform such duties as the Board of Directors or the
Chief Executive Officer may from time to time prescribe.
SECTION 4.8. The Chief Financial Officer. The Chief Financial
Officer shall have the care and custody of the corporate funds, and other
valuable effects, including securities, and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the
corporation and shall deposit all moneys and other valuable effects in the
name and to the credit of the corporation in such depositories as may be
designated by the Board of Directors. The Chief Financial Officer shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, taking proper vouchers for such disbursements, and shall render
to the President and the Board of Directors, at meetings or whenever they
may require it, an account of all his transactions as Chief Financial
Officer and of the financial condition of the corporation. If required by
the Board of Directors, the Chief Financial Officer shall give the
corporation a bond for such term, in such sum and with such surety or
sureties as shall be satisfactory to the Board for the faithful
performance of the duties of his office and for the restoration to the
corporation, in case of his death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
corporation.
SECTION 4.9. The Treasurer. The Treasurer, if an individual other
than the individual serving as the Chief Financial Officer, shall assist
the Chief Financial Officer in the management of the books and financial
records of the corporation and in such manner as the Chief Financial
Officer may deem to be advisable, and shall, in the absence or disability
of the Chief Financial Officer, exercise the powers and perform the duties
of Chief Financial Officer.
SECTION 4.10. The Assistant Treasurers. The Assistant Treasurer, if
any, or, if there be more than one, the Assistant Treasurers, in the order
determined by the Board of Directors or by the Chief Executive Officer,
shall, in the absence or disability of the Treasurer, exercise the powers
and perform the duties of the Treasurer; and he or they shall perform such
other duties as the Board of Directors or the Chief Executive Officer may
from time to time prescribe.
SECTION 4.11. The Secretary. The Secretary shall attend all
meetings of the shareholders and of the Board of Directors and shall
record the minutes of all proceedings taken at such meetings, or maintain
all documents evidencing corporate actions taken by written consent of the
shareholders or of the Board of Directors, in a book to be kept for that
purpose; and he shall perform like duties for any committee of the Board
of Directors when required. He shall have the authority to certify the
By-Laws, resolutions of the shareholders and Board of Directors and
committees thereof, and other documents of the corporation as true and
correct copies thereof. He shall see to it that all notices of meetings
of the shareholders and of special meetings of the Board of Directors are
duly given in accordance with these By-Laws or as required by statute. He
shall be the custodian of the seal, if any, of the corporation, and, when
authorized by the Board of Directors, he shall cause the corporate seal,
if any, to be affixed to any document requiring it, and, when so affixed,
attested by his signature as secretary or by the signature of an assistant
secretary; and he shall perform such other duties as the board of
directors or the Chief Executive Officer may from time to time prescribe.
SECTION 4.12. The Assistant Secretaries. The Assistant Secretary,
if any, or, if there be more than one, the Assistant Secretaries, in the
order determined by the board of directors or by the Chief Executive
Officer, shall, in the absence or disability of the Secretary, exercise
the powers and perform the duties of the Secretary; and he or they shall
perform such other duties as the board of directors or the Chief Executive
Officer may from time to time prescribe.
SECTION 4.13. Removal. Any officer elected by the Board of
Directors may be removed by a majority of the members of the Whole Board
whenever, in their judgment, the best interests of the Corporation would
be served thereby. No elected officer shall have any contractual rights
against the Corporation for compensation by virtue of such election beyond
the date of the election of his successor, his death, his resignation or
his removal, whichever event shall first occur, except as otherwise
provided in an employment contract or under an employee deferred
compensation plan.
SECTION 4.14. Vacancies. A newly created office and a vacancy in
any office because of death, resignation, or removal may be filled by the
Board of Directors or the removal may be filled by the Board of Directors
for the unexpired portion of the term at any meeting of the Board of
Directors.
ARTICLE V
STOCK CERTIFICATES AND TRANSFERS
SECTION 5.1. Stock Certificates and Transfers. The interest of each
stockholder of the Corporation shall be evidenced by certificates for
shares of stock in such form as approved by the Board of Directors. The
shares of the stock of the Corporation shall be transferred on the books
of the Corporation by the holder thereof in person or by his attorney,
upon surrender for cancellation of certificates for the same number of
shares, with an assignment and power of transfer endorsed thereon or
attached thereto, duly executed, with such proof of the authenticity of
the signature as the Corporation or its agents may reasonably require.
SECTION 5.2. Signatures on Certificates. The certificates of stock
shall be signed, countersigned and registered in such manner as the Board
of Directors may by resolution prescribe, which resolution may permit all
or any of the signatures on such certificates to be in facsimile. In case
any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has caused to be such
officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as if he were such
officer, transfer agent or registrar at the date of issue.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. Fiscal Year. The fiscal year of the Corporation shall
begin on the first day of January and end on the thirty-first day of
December of each year.
SECTION 6.2. Dividends. The Board of Directors may from time to
time declare, and the Corporation may pay, dividends on its outstanding
shares in the manner and upon the terms and conditions provided by law and
its Certificate of Incorporation.
SECTION 6.3. Seal. The corporate seal may bear in the center the
emblem of some object, and shall have inscribed thereunder the words
"Corporate Seal" and around the margin thereof the words "Swing-N-Slide -
Delaware 1992."
SECTION 6.4. Waiver of Notice. Whenever any notice is required to
be given to any stockholder or director of the Corporation under the
provisions of the General Corporation Law of the State of Delaware (the
"GCL"), a waiver thereof in writing, signed by the person or persons
entitled to such notice, whether before or after the time stated therein,
shall be deemed equivalent to the giving of such notice. Neither the
business to be transacted at, nor the purpose of, any annual or special
meeting of the stockholders or the Board of Directors need be specified in
any waiver of notice or such meeting.
SECTION 6.5. Audits. The accounts, books and records of the
Corporation shall be audited upon the conclusion of each fiscal year by an
independent certified public accountant selected by the Board of
Directors, and it shall be the duty of the Board of Directors to cause
such audit to be made annually.
SECTION 6.6. Resignations. Any director or any officer, whether
elected or appointed, may resign at any time by serving written notice of
such resignation on the Chairman of the Board, the President, or the
Secretary, and such resignation shall be deemed to be effective as of the
close of business on the date said notice is received by the Chairman of
the Board, the President, or the Secretary. No formal action shall be
required of the Board of Directors or the stockholders to make any such
resignation effective.
SECTION 6.7. Indemnification and Insurance. All indemnification on
the part of the Corporation shall be as set forth in Article EIGHTH of the
Certificate of Incorporation of the Corporation.
ARTICLE VII
AMENDMENTS
The provisions of these By-Laws may be adopted, altered, amended or
repealed at any meeting of the Board of Directors or of the stockholders,
provided notice of the proposed change was given in the notice of the
meeting and, in the case of a meeting of the Board of Directors, in a
notice given not less than two days prior to the meeting (unless otherwise
waived); provided, however, that in case of amendments by stockholders,
notwithstanding any other provisions of these By-Laws or any provision of
law which might otherwise permit a lesser vote or no vote, but in addition
to any affirmative vote of the holders of any particular class or series
of Voting Stock required by Law, the Certificate of Incorporation, any
Preferred Stock Designation or these By-Laws, the affirmative vote of the
holders of at least fifty percent (50%) of all the then outstanding shares
of the Voting Stock, voting together as a single class, shall be required
to adopt, alter, amend or repeal any provision of the By-Laws.
Conformed Copy
LEASE
This Lease made this 13th day of October, 1995, by and between
HOVDE DEVELOPMENT, INC., and/or its successors and assigns (hereinafter
referred to as "Landlord"); and SWING-N-SLIDE CORP., whose principal place
of business is located at 1212 Barberry Drive, Janesville, Wisconsin 53545
(hereinafter referred to as "Tenant").
W I T N E S S E T H:
Landlord, for and in consideration of the covenants and
agreements hereinafter set forth, to be kept and performed by Tenant,
demises and leases to Tenant, and Tenant does hereby hire and rent from
Landlord, the Demised Premises hereinafter described, for the period, at
the rental and upon the terms and conditions set forth.
I. DESCRIPTION OF DEMISED PREMISES
1.1 The Demised Premises shall consist of approximately 92,000
square feet of space in a building upon certain land described on Exhibit
A attached hereto and made a part hereof. The 92,000 square feet of said
building (together with the docks/decking hereinafter described) is herein
referred to as the "Demised Premises" and is located at Wuthering Hills
Drive and Enterprise Drive in the City of Janesville, Wisconsin. The
Demised Premises are shown on the attached building layout marked
Exhibit B. Prior to the commencement date of this Lease (as hereinafter
defined), Landlord shall install and construct in or about the Demised
Premises the improvements described in Exhibit C (Landlord's Work),
attached. Said work includes the installation of a deck area of
approximately 2,000 square feet, located on two levels within the Demised
Premises. Completion of Landlord's Work, as set forth in such Exhibit C
shall be on or before March 15, 1996, unless the work be delayed at any
time by strike, lockouts, fire, unusual delay in transportation,
unavoidable casualties, delay in obtaining required permits, or any causes
beyond the contractor's or Landlord's control. It is agreed that for
purposes of this Lease, the "commencement date" shall be the first day of
the calendar month following substantial completion of Landlord's Work in
or about the Demised Premises.
1.1(a) Notwithstanding anything to the contrary contained
herein, this Lease shall not become effective unless and until the
Landlord has acquired fee simple title to the Demised Premises from the
City of Janesville, with the thirty (30) day period following the date of
execution of this Lease. If such title is not so obtained by that date,
then this Lease shall become null and void.
1.1(b) Construction of Improvements. Prior to the
commencement date of this Lease (as hereinafter defined), Landlord agrees
that it shall construct on the Premises a new building and appurtenances
for Tenant's use and occupancy, all in accordance with certain plans and
specifications attached hereto as Exhibit C. Said plans and
specifications are hereby approved by Landlord and Tenant and shall be
deemed incorporated into this Lease. Landlord, as soon as reasonably
practicable after the execution of this Lease, shall commence the
construction of the Premises and appurtenances and diligently prosecute to
completion the construction thereof, so that all thereof shall be ready
for use at the time of the commencement of the term of this Lease.
Landlord will construct the Premises in good and workmanlike manner and in
accordance with the aforesaid plans and specifications and will not
materially deviate from such plans and specifications without the prior
written consent of Tenant. Minor deviations from plans and specifications
shall be construed as substantial compliance with all plans and
specifications. All building and mechanical warranties will be assigned
by Landlord to Tenant.
1.2 Landlord agrees to allow Tenant, its agents and contractors
access to the building and to the Demised Premises as soon as reasonably
possible for the purpose of installing tenant or leasehold improvements.
In exercising such access rights, Tenant agrees that it will not
materially interfere with Landlord or Landlord's contractors or in any
manner impede the progress of Landlord's construction. Except as provided
for in Section 6.4 below, Tenant shall not create or permit to be created
or to remain, and will discharge, any lien (including, but not limited to,
the liens of mechanics, laborers or materialmen for work or materials
alleged to be done or furnished in connection with the Demised Premises),
encumbrance or other charge upon the land, the building or the Demised
Premises or any part thereof or upon Tenant's leasehold interest therein;
provided, that Tenant shall not be required to discharge any such liens,
encumbrances or charges as may be placed upon the land, the building or
the Demised Premises by the act of Landlord. Prior to commencement of
construction by Tenant, Tenant shall furnish Landlord with satisfactory
evidence of adequate worker's compensation insurance and public liability
insurance for bodily injury or death and property damage.
1.3 Tenant shall not install any material leasehold improvements or
commence any construction upon the Demised Premises without first
submitting to Landlord the plans and specifications therefor and obtaining
the Landlord's consent thereto, which consent shall not be unreasonably
withheld or delayed.
1.4 During the term of this Lease, Tenant shall have the exclusive
right to use, in conjunction with all other tenants of the land located in
Exhibit A, all common driveways and parking areas located thereon. Such
use shall be subject to such reasonable rules and regulations relating to
such use as the Landlord may from time to time promulgate; and all such
rules and regulations shall be in writing and shall become effective and
binding upon the Tenant upon delivery. Subject to reasonable regulation
as aforesaid, Landlord shall not subsequently eliminate or materially
restrict such uses of the common areas.
1.5 Tenant shall have the right to use all loading docks/decks
serving the Demised Premises; and shall repair and maintain the same
during the term of this Lease. Landlord shall have no responsibility or
obligation to repair or replace the same.
II. TERM OF LEASE
The term of this Lease shall be for a period of years described as
beginning on the "commencement date" established in Article I hereof, plus
seven (7) years thereafter. On or before the commencement date, Landlord
and Tenant shall execute a lease Addendum to this document, which shall
specify the actual commencement date.
III. RENEWAL PERIODS
3.1 The term of this Lease may be automatically renewed for no more
than three (3) successive five (5) year periods, upon the same terms and
conditions contained herein; except that the rental for the renewal
term(s) shall be as hereinafter provided in Article IV hereof. In order
to avoid any one of the automatic renewal terms, Tenant may notify
Landlord in writing of a desire to not so renew, which notice shall be
given not less than nine (9) months or more than six (6) months prior to
the expiration of the initial term of this Lease or the applicable renewal
thereof, as the case may be. Notwithstanding the foregoing, however, in
the event the Tenant shall be in default hereunder upon expiration of the
initial term hereunder or upon expiration of any renewal term, this Lease
shall not be renewed and Tenant shall vacate the Demised Premises as
otherwise provided for herein.
3.2 In the event the Tenant shall remain in possession of the
Demised Premises beyond the initial expiration date or any renewal term,
having notified Landlord of a desire to not renew this Lease as provided
for in Section 3.1 hereof, this Lease shall continue in full force and
effect during such period of occupancy; except that the tenancy shall be
on a month-to-month basis and except that the rental shall be the monthly
rent then in effect upon the stated expiration date, plus 50.0% thereof.
3.3 In the event of any holding over or in the event the Tenant has
renewed the term of this Lease, the Tenant shall accept the Demised
Premises in the condition in which the same then is; and Landlord shall
not be obligated to renovate, redecorate or reconstruct the Demised
Premises during the renewal period, except as provided elsewhere in this
agreement.
IV. RENTAL
4.1 Tenant agrees to pay to Landlord as a Base Rental for the use
and occupancy of the Demised Premises, the following annual rentals for
each "lease year." For purposes of this agreement, the term "first lease
year" shall mean the period of time commencing on the commencement date of
this Lease, and expiring one (1) year thereafter; and subsequent lease
years shall be succeeding annual periods. The Base Rental for the first
lease year is in the sum of $276,000.00, payable in equal monthly
installments of $23,000.00 per month, payable in advance, beginning on the
commencement date hereof and on the first day of each calendar month
thereafter during this lease term or any renewal thereof. Commencing with
the second lease year and each lease year thereafter during the term of
this Lease or any renewal thereof, the Base Rental for each such
succeeding lease year shall be increased as provided for in Section 4.2
hereof.
4.2 The Base Rental shall be periodically adjusted as provided for
in Section 4.1 hereof. Commencing with the second lease year and on the
commencement of each lease year thereafter during the remaining term(s) of
this Lease, the Base Rental shall be increased by the sum of three percent
(3%) (compounded) over the Base Rental in effect for the immediately
preceding lease year. The adjusted Base Rental shall then remain in
effect until the next succeeding adjustment. Under no circumstances shall
the adjusted Base Rental ever be less than the sum set forth in Section
4.1 hereof.
4.3 Tenant shall pay the Base Rental to Landlord for each lease
year, in equal monthly installments, in advance, on the first day of each
and every month during the term of this Lease, commencing on the
commencement date of this Lease, plus any excise, sales, use or privilege
tax or taxes, if any, levied on the rentals or the receipt thereof, except
Landlord's income tax. All rent shall be paid by Tenant to Landlord at
900 Shasta Drive, Madison, Wisconsin, 53704, c/o Glenn Hovde, or at such
other place as may be designated in writing by the Landlord.
4.4 Tenant may occupy the Demised Premises subsequent to the
substantial completion of Landlord's Work. In such event, the Tenant
shall pay to Landlord a rental for such period of occupancy prior to the
commencement date of this Lease in the sum of $767.00 per day for each day
(or any portion thereof) so occupied by Tenant. Such earlier occupancy
shall not change the commencement date or termination date of this Lease.
4.5 The rent provided for in this Lease shall be an absolute "net
net net" return to the Landlord for the term of this Lease, free of any
expenses or charges whatsoever with respect to the Demised Premises.
V. SERVICES AND FACILITIES
5.1 Tenant's Obligations. All installations, fixtures, leasehold
improvements, finishing and decorating on the Demised Premises not
provided to be done by Landlord in Article I of this Lease shall be
furnished and accomplished at the sole cost and expense of the Tenant.
5.2 Taxes. During the term of this Lease, Tenant shall pay as
additional rental, as they become due and payable, and before they become
delinquent, all real estate taxes and special assessments, levied against
the building and the lands described in Exhibit A. All such taxes and
assessments for the year in which this Lease is terminated shall be
prorated between Landlord and Tenant, as of the termination date, based on
the actual taxes and assessments if known or if not known, on the taxes
and assessments for the calendar year preceding the year within which this
Lease is terminated.
5.3 Repairs and Maintenance. During the term of this Lease, Tenant
shall at all times keep in good order and condition the Demised Premises
and the building in which the same are located, together with the
surrounding walkways and parking lots; and at its own cost and expense,
make all repairs and perform all required maintenance (including
structural and roof repairs) to the Demised Premises, the building
containing the same, and all equipment thereof, including, without
limitation, all pipes, ducts, conduits, plumbing, heating and air-
conditioning installations, wiring, gas and electrical fittings, and all
other equipment of every nature whatsoever (including, but not limited to,
the overhead doors). At the termination of this Lease, Tenant shall
deliver the Demised Premises and building to Landlord in good condition
and repair, allowance being made for ordinary wear and tear and
obsolescence. Tenant shall also be responsible for effectuating all
structural and roof repairs to the Demised Premises; and for all repairs,
maintenance and replacement of all driveways, parking lots, sidewalks or
other facilities serving the Demised Premises or the building in which the
same are located. Landlord agrees that it will assign all manufacturers'
or vendors' warranties on any equipment and any contractor(s)' warranties
relating to the Demised Premises, to Tenant; provided the same are
assignable and further provided that the assignments herein referred to
relate only to those items for which Tenant is responsible for the repair
and maintenance thereof.
5.4 Utility Charges and Personal Property Taxes. Tenant shall pay
all charges for electricity, gas, telephone, and other similar utility
charges furnished to the Demised Premises. Tenant shall pay, before they
become delinquent, all personal property taxes levied or assessed against
its property located in the Demised Premises, as well as any taxes levied
against its leasehold improvements referred to in Section 1.2 hereof.
Tenant shall be responsible for the payment of sewer and water charges for
such service to the Demised Premises.
5.5 Heating and Air Conditioning Repairs and Maintenance. Tenant
agrees to pay for all operating, maintenance and replacement costs, and
expenses in providing refrigerated air conditioning and heat to the
Demised Premises or any part thereof; and shall pay for all repairs and
maintenance (including replacement) of the heating and air conditioning
units located therein. Such heating and air conditioning units are the
property of Landlord and are to be provided as part of Landlord's Work.
5.6 Snow Removal and Grass Cutting. Tenant shall be responsible for
all grass cutting and snow removal on the premises described in Exhibit A.
5.7 Net Net Net Obligations. It is the intent of the parties hereto
that the Base Rentals provided for in Article IV be an absolutely net net
net return to Landlord. Therefore, Tenant shall be responsible for the
payment of any and all operation, maintenance and operating cost
associated with the operation, maintenance and repair of the Demised
Premises and the building containing the same.
VI. CONDITION AND USE OF PREMISES
6.1 Use - Compliance with Laws and Restrictions. Tenant shall have
the peaceful and quiet use of the Demised Premises for office and
warehouse purposes, without hindrance on the part of Landlord, and
Landlord shall warrant and defend Tenant in such peaceful and quiet use
against the lawful claims by any person claiming by, through or under
Landlord, so long as the Tenant is not in default hereunder. Tenant shall
comply with all present and future laws, ordinances, and regulations of
duly constituted public authorities now or hereafter in any manner
affecting the Demised Premises, the adjacent sidewalks and parking lots,
or any building thereon or the use thereof. Tenant shall have the right,
without cost or expense to Landlord, to contest the validity of laws,
ordinances, or regulations adversely affecting the use of the Demised
Premises; provided, however, that if the delay in complying with any such
law, ordinances, or regulations may result in subjecting Landlord to
criminal liability, such contest shall only be had with the consent of
Landlord.
6.2 Changes and Alterations by Tenant. Without the prior written
consent of Landlord, Tenant shall not make any structural alteration or
addition in or to the Demised Premises or to the building erected on the
lands described in Exhibit A. Tenant may make alterations which are not
structural in nature to the Demised Premises provided Landlord's consent
is first obtained and such consent shall not be unreasonably withheld.
All alterations, renewals, replacements, or improvements of and additions
to the Demised Premises or equipment on or appurtenant to the Demised
Premises made or provided by the Tenant shall, upon termination of this
Lease, be and become the property of Landlord, except for any trade
fixtures installed by Tenant and used in connection with the operation of
its business as provided for in Section 6.5 hereof.
6.3 Landlord's Right to Inspect and Repair. Landlord, its agents,
or other representatives, shall have the right to enter into or upon the
Demised Premises, or any part thereof, at all reasonable hours for the
purpose of examining the same, or making such repairs or alterations
therein that may be necessary for the safety and preservation thereof.
6.4 Mechanics' Liens. Tenant shall not permit any mechanics',
materialmen's, or similar liens to remain upon the Demised Premises for
labor or material 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 on the Demised Premises or at the direction or with
the consent of Tenant, whether such work was performed or materials
furnished before or after the commencement of the term of this Lease.
Tenant may, however (provided Tenant gives complete and adequate notice to
Landlord), contest the validity of any such lien or claim, and further
provided Tenant shall give to Landlord reasonable security to insure
payment and to prevent any sale, foreclosure, or forfeiture of the Demised
Premises by reason of such nonpayment, if required by Landlord. Upon a
final determination of the validity of any such lien or claim, Tenant
shall immediately pay any judgment or decree rendered against Tenant
and/or Landlord with all proper costs and charges and shall cause such
lien to be released of record without cost to Landlord, and thereupon
Landlord shall return the said security provided to be deposited with
Landlord.
6.5 Machinery, Apparatus, and Equipment. Tenant may at any time and
from time to time install on the Demised Premises such machinery,
apparatus, and equipment as it may desire for the purpose of its use of
the Demised Premises, and title to such machinery, apparatus, and
equipment, and any replacements thereof and additions thereto, shall
remain in Tenant, even though such machinery, apparatus, and equipment or
any thereof may be affixed to the Demised Premises in such manner as might
under applicable law cause the same to be regarded as part of the real
property. Upon the termination of this Lease for any cause, Tenant shall
have the right to remove any and all such machinery, apparatus, and
equipment, provided only that Tenant shall leave the Demised Premises in
an undamaged condition; except that any equipment stored on the premises
by the Tenant to replace equipment originally provided by the Landlord
shall not be removed and shall become the property of the Landlord.
VII. INSURANCE
7.1 Tenant to Provide Insurance. During the term of this Lease,
Tenant shall keep all of its personal property, furniture, fixtures,
leasehold improvements and equipment insured against loss or damage by
fire or other casualty; and Landlord shall have no responsibility or
objection in connection therewith.
7.2 Fire and Casualty Insurance. The Tenant shall insure the
building and improvements located on Exhibit A against loss or damage by
fire with extended coverage (including damage due to windstorm, hail,
explosion, riot, riot attending a strike, civil commotion, aircraft,
vehicles, and smoke), in an amount equal to the full replacement value
thereof. During the term of this Lease, Tenant shall also provide and
keep in force for the benefit of Tenant and Landlord policies in standard
form protecting Landlord and Tenant against any and all liability
occasioned by accident or disaster, such policies to be written by
insurance companies satisfactory to Landlord in such amounts as Landlord
may from time to time determine. The Landlord and Tenant shall be named
as the insured in all such policies. Tenant shall not violate or permit
to be violated any condition of any of said policies, and Tenant shall so
perform and satisfy the requirements of the companies writing such
policies that at all times companies of good standing reasonably
satisfactory to Landlord shall be willing to write such insurance.
7.3 Injury and Loss. Landlord shall not be responsible or liable
for any injury or death of Tenant or any person on or about the Demised
Premises, and Tenant agrees to indemnify and hold Landlord harmless
therefrom. Landlord shall not be liable for any damage to any property at
any time stored or kept in the Demised Premises from water, rain or snow,
which may leak, issue or flow from any part of the building in which the
Demised Premises are located. Landlord shall not be liable for any loss
or damage to Tenant resulting from negligence of any other tenants in the
said building.
7.4 Waiver.
A. Tenant agrees that any fire or liability insurance policy
carried by Tenant insuring Tenant's property located in or upon the
Demised Premises on the Tenant's operations thereof, shall contain a
provision whereby the insurance carrier waives any right of subrogation
against the Landlord.
B. Landlord hereby releases and waives any and all rights of
subrogation against Tenant which, in the absence of this release and
waiver, would arise in favor of any insurance company insuring Landlord
against loss by fire, extended coverage, casualty and loss of any other
type, resulting from damage to or destruction of the Demised Premises or
any portion thereof. The foregoing waiver of subrogation rights is
expressly conditioned upon the Tenant's being able to obtain in all
present and future policies of insurance, clauses which permit the insured
to release and waive the insurance company's right of subrogation. In the
event insurance with such subrogation waiver clause cannot be obtained by
Tenant, then Tenant shall give written notice thereof to Landlord, and
after the giving of such notice, the waiver hereinabove set forth shall be
considered withdrawn and ineffective.
VIII. DAMAGE OR DESTRUCTION
8.1 In the event the Demised Premises or the building in which the
same are located shall be partially destroyed by fire or other casualty,
the Tenant will, as soon as possible, repair or replace said building so
that Tenant may continue in occupancy. It is further agreed that the
rental herein required to be paid shall not abate during the period of
untenantability of the Demised Premises caused by such partial
destruction. Partial destruction under this paragraph is defined as
damage which will cost less than one-third (1/3) of the replacement cost
of the entire building to replace.
8.2 In the event the Demised Premises or the building in which the
same is located shall be damaged by fire or other casualty, and the cost
of repair and replacement shall cost more than one-third (1/3) of the cost
of the entire building to repair and replace, the rent payable hereunder
shall abate as of the date of the occurrence of said damage, and any
unearned rent paid or credited in advance shall be refunded. The Landlord
and Tenant shall each have the option of terminating this Lease by
delivering written notice to terminate to the other within forty-five (45)
days of the date of occurrence of said damage. If both parties elect not
to terminate the Lease, and such election shall be evidenced by a written
agreement within forty-five (45) days of the date of occurrence of said
damage, then Tenant shall with due diligence rebuild and replace said
building in substantially the same condition as it was in prior to such
destruction or damage, within one hundred eighty (180) days of said
notice; excepting therefrom any delays due to strikes, acts of God or any
other cause beyond the control of the Landlord; and the primary term under
this Lease shall then run for the balance of the term (extended by a
period of time equal to the date of occurrence of said damage to the date
of completion of said construction), and shall be subject thereafter to
all of the provisions of this Lease.
8.3 In the event of any repair, replacement or restoration of the
Demised Premises, the Tenant may limit such repair, replacement or
restoration to such as may reasonably be obtained by the application of
the proceeds of insurance covering such loss, so long as such repair,
replacement or restoration reasonably accommodates the Tenant's previous
use of the Demised Premises immediately prior to the destruction.
8.4 In the event the Demised Premises are not restored or repaired
as a result of any casualty or loss, all applicable insurance proceeds
shall be payable to Landlord, except for Tenant insurance proceeds per
Section 7.1.
IX. CONDEMNATION
In the event the Demised Premises or any part thereof shall be
condemned and taken for a public or quasi-public use, any award made to
compensate either Landlord or Tenant for their respective damage or loss
shall be paid to Landlord; except for any award or portion thereof
attributable to Tenant's loss of fixtures, business or relocation costs.
In the event only a part of the Demised Premises is condemned and taken,
Tenant, in accordance with plans and specifications reasonably acceptable
to the Landlord, shall promptly restore the remaining portion of the
Demised Premises so that it will constitute a complete architectural unit,
and upon completion of such work and upon payment of the award or
compensation, the Tenant shall be entitled to apply the proceeds of any
such award to payment of the cost of such restoration. There shall be no
abatement in rent or other adjustments under the circumstances. Tenant
may limit any such restoration and repair to that which can be obtained by
a reasonable application of the proceeds of such award. Upon any total
taking, Tenant's obligation to pay rent or to discharge any other
obligation hereunder, other than the payment of money then due and damages
arising out of any breach on the part of Tenant, shall cease except as
provided herein. If the lands and/or buildings condemned prevent the
Demised Premises from reasonably accommodating the uses thereof by Tenant,
this Lease shall then terminate at Tenant's option.
X. LANDLORD'S RIGHTS ON DEMISED PREMISES
Landlord shall have the right at any reasonable time to enter the
Demised Premises for the purpose of examination or any other purpose
Landlord may deem necessary for the protection of the rights of Landlord,
and to exhibit the Demised Premises for sale at reasonable times, and
during the last nine months of the term to place "FOR SALE" and/or "FOR
RENT" signs on such portions of the Demised Premises as Landlord may
determine.
XI. INDEMNIFICATION
11.1 Notwithstanding anything else contained in this agreement,
Tenant agrees to indemnify, defend and save Landlord harmless from and
against any and all claims, damages, costs and expenses, including
reasonable attorney fees, arising from (1) the conduct or management of
the business conducted by the Tenant on the Demised Promises, (2) any
breach or default in the performance of any of Tenant's obligations under
this Lease, and (3) any intentional tort or other negligence of the
Tenant, its agents, contractors or employees. In case any action or
proceeding be brought against Landlord by reason of any such claim,
Tenant, upon notice from Landlord, shall defend the same at Tenant's
expense using counsel satisfactory to Landlord. Nothing contained in this
Section 11.1, however, shall be deemed to be an indemnification against,
nor to relieve Landlord from responsibility (including reasonable attorney
fees) for, any accident, injury, damage, loss or cost caused by the
negligent or willful acts of Landlord, its contractors, employees, or
agents.
11.2 Waste. Tenant agrees that it will not suffer or permit waste to
be committed in or upon any portion of the Demised Premises during the
term of this Lease.
XII. DEFAULT AND MISCELLANEOUS
12.1 In the event Tenant fails to pay any rental due hereunder or
fails to keep and perform any of the other terms or conditions hereof,
time being of the essence, then fifteen (15) days after written notice of
default from Landlord, the Landlord may, if such default has not been
corrected, resort to any and all legal remedies or combination of remedies
which Landlord may desire to assert including, but not limited to, one or
more of the following:
(a) Lock the doors to the Demised Premises and exclude Tenant
therefrom;
(b) Retain or take possession of any property on the premises
pursuant to Landlord's lien;
(c) Enter the premises and remove all persons and property
therefrom;
(d) Declare the Lease at an end and terminate;
(e) Sue for rent due and to become due under the Lease and for
any damages sustained by Landlord;
(f) Continue the Lease in effect and relet the premises on such
terms and conditions as Landlord may deem advisable with
Tenant remaining liable for the monthly rent plus the
reasonable cost of obtaining possession of the premises and
of any repairs and alterations necessary to prepare the
premises for reletting, less the rentals received from such
reletting, if any.
No action of Landlord shall be construed as an election to terminate the
Lease unless notice of such intention be given to Tenant. In the event
Landlord pursues any of the specifically stated remedies, that the same
shall be without prejudice to any other rights or remedies Landlord may
have and without prejudice to Landlord's right to the past rent due or
future rent to accrue under the Lease.
12.2 Should Tenant be adjudicated as bankrupt or make an assignment
for the benefit of creditors, then, and in any such event, the Landlord
shall immediately have the right to cancel this Lease, to the extent
permitted by the bankruptcy laws. No trustee in bankruptcy, receiver or
other such person representing Tenant shall have any right to continue in
the place of the Tenant if the Landlord shall have given notice to the
Tenant or its representative that this Lease is terminated; and in such
event all of the other applicable provisions of this Article shall apply
as though the Lease had been terminated for other cause.
12.3 Both parties agree to pay all reasonable attorneys' fees and
other costs and expenses incurred by the prevailing party in any action in
enforcing any and all obligations under this Lease.
12.4 Any amount due from Tenant to Landlord hereunder not paid within
ten (10) days of written notice or demand therefor shall bear interest at
the rate of fifteen percent (15%) per annum, from the due date until paid,
unless otherwise specifically provided herein, but the payment of such
interest shall not excuse or cure any default by Tenant under this Lease.
12.5 If Landlord shall default in performing its obligations under
this Lease, Tenant shall give Landlord written notice of the deficiency,
and Landlord shall have fifteen (15) days to correct the same, and if not
corrected within said fifteen (15) days and such breach is a material
breach, (except as herein provided), Tenant may terminate this Lease or
take such other legal steps to which it may be entitled; except that if
such corrections cannot be completed within fifteen (15) days, Landlord
agrees that material progress to make such corrections shall continue
without interruption at all times; provided, however, that Tenant shall
not surrender or terminate this Lease by reason of any act or omission by
Landlord until Tenant shall have first given written notice to the holder
of any mortgage of record covering the Demised Premises of such act or
omission by Landlord and affording the holder of any mortgage an
opportunity to foreclose and remedy the situation as necessary.
12.6 The failure of Tenant or Landlord to perform any of the
agreements, covenants, or conditions hereof (other than the Payment of
rental by Tenant) by reason of war, riot, lockout, strike, casualty, or
act of God, or by reason of restrictions of regulations of any federal,
state, or local governmental authority, or other cause beyond Tenant's or
Landlord's control, whether similar or dissimilar to those above
enumerated, shall not be a default hereunder as long as such cause
continues.
12.7 The failure of Landlord to insist upon strict performance of any
of the terms, covenants, and conditions hereof to be performed by Tenant
or the failure to invoke any remedy in the event of a default by Tenant
shall not be deemed a waiver of any rights or remedies which Landlord may
have and shall not be deemed a waiver of any subsequent breach or default
by Tenant in any of such terms, covenants, and conditions of this Lease.
12.8 In the event of voluntary or involuntary bankruptcy on the part
of Tenant, or the appointment of a receiver for Tenant, or a voluntary
assignment to creditors by Tenant, or if this Lease shall by operation of
law devolve upon or pass to any person, firm, or corporation other than
Tenant, then and in each of said events, this Lease shall, at the option
of Landlord, be subject to cancellation forthwith.
12.9 Notices and demands under this Lease from one party to the other
shall be given or made by registered or certified mail, with return
receipt requested, addressed as follows:
TO LANDLORD: Hovde Development, Inc.
Attn: Mr. Glenn J. Hovde, President
900 Shasta Drive
Madison, WI 53704
TO TENANT: Swing-N-Slide Corp.
Attn: Richard G. Mueller, President
1212 Barberry Drive
Janesville, WI 53545
The date shown by the return receipt as the date on which said registered
or certified mail is received by the addressee shall be conclusively
deemed to be the date on which a notice is given or a demand made. The
above addresses may be changed at any time or from time to time by notice
given from one party to the other in the manner hereinabove provided. In
the event legal process is required to be served upon Landlord, it is
agreed that service of process upon Landlord's managing partner at the
address specified above shall be service of process upon Landlord.
12.10 Assignment - Subletting. Tenant shall not assign this
Lease or sublet the Demised Premises, in whole or in part, without the
prior written consent of Landlord first obtained, which shall not be
unreasonably withheld. Landlord shall, in writing, advise the Tenant
within thirty (30) days after the receipt by the Landlord of such
information relative to an assignee or sublessee as Tenant may provide to
the Landlord of Landlord's intent to give or withhold consent. The
failure of the Landlord to respond within such time limit shall constitute
the Landlord's consent to such assignment or subletting. In any event,
such assignment or subletting shall be without release of the Tenant from
all of the obligations of this Lease. In the event this Lease is assigned
or the premises sublet by the Tenant and the rent to be paid the assignee
or the sublessee is greater than the rent reserved in this Lease, Tenant
shall pay such greater amounts to the Landlord in monthly installments.
12.11 Miscellaneous. No waiver of any default by Tenant
hereunder shall be implied from any omission by Landlord to take any
action on account of such default if such default persists or is repeated
and no express waiver shall effect any default other than the default
specified in the express waiver and then only for the time and to the
extent therein stated. One or more waivers of any covenant, term, or
condition of this Lease by Landlord shall not be construed as a waiver of
a subsequent breach of the same covenant, term, or condition. The
invalidity or unenforceability of any provision hereof shall not affect or
impair any other provisions. The laws of the State of Wisconsin shall
govern the validity, performance, and enforcement of this Lease. The
headings of the sections herein are for convenience and do not define,
limit, or construe the contents thereof.
12.12 Signs. Tenant shall not put upon nor permit to be put upon
any part of the premises any signs, billboards, or advertisements which
whatever, without written consent of Landlord, which consent shall not be
unreasonably withheld.
XIII. SUBORDINATION AND ATTORNMENT
13.1 Landlord reserves the right to place liens and encumbrances on
the Demised Premises, superior in lien and effect to this Lease. This
Lease, at the option of the Landlord, shall be subject and subordinate to
any liens and encumbrances now or hereafter imposed by Landlord upon the
Demised Premises; and the Tenant agrees to execute and deliver upon demand
such instruments subordinating this Lease to any such lien or encumbrance
as shall be required by Landlord from time to time, except that any such
lien or encumbrance shall be subject to Tenant's right to quiet possession
hereunder so long as it is not in default hereunder.
13.2 In the event any proceedings are brought for the foreclosure of
any mortgage or any other lien covering the Demised Premises, Tenant will
attorn to the purchaser at foreclosure sale and recognize the purchaser as
the Landlord under this Lease. The purchaser by virtue of such
foreclosure shall be deemed to have assumed, as substitute Landlord, the
terms and conditions of this Lease until the resale or other disposition
of its interest by such purchaser. Such assumption, however, shall not be
deemed of itself an acknowledgement by the purchaser of the validity of
any then-existing claims of Tenant against the prior Landlord.
13.3 Tenant agrees to execute and deliver such further assurance and
other documents (including a new lease upon the same terms and conditions
as the within Lease) confirming the foregoing as such purchaser may
reasonably request. Tenant waives any right of election to terminate this
Lease because of any such foreclosure proceedings.
13.4 Tenant agrees, upon request by Landlord from time to time, to
execute agreements with the holder of any mortgage covering the Demised
Premises wherein Tenant agrees to waive any right of election to terminate
this Lease because of any foreclosure proceedings, to attorn to such
holder of any mortgage in accordance with Section 13.2 hereof, and not to
surrender or terminate this Lease by reason of any act or omission of
Landlord until Tenant shall have first given written notice to such holder
of any mortgage of record of such act or omission by Landlord and
affording the holder of any mortgage an opportunity to foreclose and
remedy the situation as necessary. In consideration of Tenant's executing
any such agreement, the holder of any mortgage shall therein agree that so
long as Tenant is not in default, (beyond any period given to cure such
default) in the performance of any of the terms, covenants, or conditions
of this Lease on the Tenant's part to be performed, the mortgagee will not
join Tenant as a party defendant in any action or proceeding for the
purpose of terminating Tenant's interest and estate under this Lease.
XIV. WAIVER AND SEPARABILITY
14.1 The consent of the Landlord in any instance to any variation of
the terms of this Lease or the receipt of rent with knowledge of any
breach shall not be deemed to be a waiver as to any breach of any covenant
or condition herein contained, nor shall any waiver be claimed as to any
provision of this Lease unless the same be in writing, signed by the
Landlord or the Landlord's authorized agent.
14.2 This Lease and any written addendum contains the entire
agreement between Landlord and Tenant.
14.3 If any term or provision of this Lease or any application hereof
shall be invalid or unenforceable, the remaining terms and provisions of
this Lease and any other application of such term or provision shall not
be affected thereby.
XV. TERMINATION
15.1 Upon the termination of this Lease for any reason, Tenant shall
deliver up and surrender to Landlord the Demised Premises in good
condition and repair, reasonable wear and tear and obsolescence excepted.
15.2 Upon termination of this Lease, Tenant, if not in default
hereunder, may take and remove from the Demised Premises all trade
fixtures and equipment placed or installed therein by Tenant, provided
that Tenant shall restore and repair any damage done to the Demised
Premises by such removal and provided that materials so glued or affixed
to floors, walls, ceilings, or structural parts of the Demised Premises as
are not susceptible of removal without damage to the Demised Premises
shall become the property of the Landlord upon termination. In no event
may Tenant remove any tenant improvements installed at the expense of
Landlord. Any items not removed by Tenant within thirty (30) days after
such termination shall, at the option of Landlord, become the property of
Landlord; but Tenant shall continue to pay rent until said space is
finally delivered to the Landlord.
XVI. ESTOPPEL CERTIFICATES
Each party agrees that from time to time upon written request of the
other party or the holder of any mortgage covering the Demised Premises,
the party requested so to do will execute, acknowledge and deliver to the
other party or to the mortgagee, as the case may be, a certificate
evidencing whether or not:
(a) This Lease is in full force and effect;
(b) This Lease has been modified or amended in any respect, and
submitting copies of such modifications or amendments, if
any; and
(c) There are any existing defaults under this Lease to the
knowledge of the Tenant or Landlord and specifying the
nature of such defaults, if any.
XVII. NO MERGERS
There shall be no merger of this Lease or of the leasehold estate
hereby created with the fee estate in the Demised Premises or any part
thereof by reason of the fact that the same person, firm, corporation or
other legal entity may acquire or hold, directly or indirectly, this Lease
or the leasehold estate hereby created or any interest in this Lease or in
such leasehold estate and the fee estate in the Demised Premises or any
interest in such fee estate.
XVIII. STORAGE OF MATERIALS AND REMOVAL THEREOF
Notwithstanding any other provisions contained in this Lease, Tenant
shall not utilize any part of the Demised Premises for the storage of
hazardous materials or toxic wastes as those terms are defined in
applicable federal, state and local rules and regulations including, but
not limited to, U.S. Federal Register, Vol. 52, #77. On or before the
termination of this Lease, Tenant agrees to remove all materials brought
to the Demised Premises at any time after the commencement date, and
agrees to pay to the Landlord the cost of removing any such materials in
the event Tenant fails to remove such materials and such materials are
removed by the Landlord.
XIX. PARTIES BOUND
This Lease and the provisions thereof shall be binding upon and shall
inure to the parties hereto and their respective successors and assigns;
it being understood, however, that nothing herein contained shall be
construed to affect, abridge, or modify in any manner the provisions of
Section 12.10 hereof.
XX. OPTION TO PURCHASE
20.1 During the term or this Lease and any and all extensions, the
Tenant shall have the right and option to purchase the Demised Premises,
the building comprising the same and the lands thereof, as set forth in
Exhibit A, in accordance with the terms and provisions set forth herein.
In order to exercise said Option, Tenant shall exercise it by giving
written notice to Landlord during the term of this Lease. Such notice
shall specifically advise the Landlord of Tenant's intent and election to
purchase the premises in accordance with the provisions of this Section
20.1. Upon the exercise of the Option, then in such event, the Landlord
shall provide to the Tenant, a commitment for title insurance, issued by a
title insurance company licensed to engage in business in the State of
Wisconsin, in an amount equal to the purchase price. Upon receipt of such
commitment, Tenant shall have ten (10) days to object to the same. If no
objection is made, then the Tenant shall be deemed to have accepted the
commitment. If an objection is made, Landlord will then have thirty (30)
days within which to cure any title defects so raised. Within thirty (30)
days following the date of the notice exercising the Option, the
transaction shall be closed. At the closing, the Tenant shall pay the
purchase price; and upon payment therefor, the Landlord shall convey the
Demised Premises, the land and building described in Exhibit A, to the
Tenant, free and clear of all liens and encumbrances, excepting any lien
or encumbrance created by the act or omission of the Tenant. Upon such
conveyance, this Lease shall terminate and be of no further force and
effect. Landlord shall be responsible for the payment of any and all real
estate transfer tax occasioned as a result of the sale of the property;
and there shall be no proration of taxes, insurance and other costs,
excepting rental payments which will be prorated to the date of
termination of the Lease. For purposes hereof, the purchase price shall
be determined pursuant to the following formula. The Base Rental in
effect for the lease year in which the closing shall occur, shall be
applied against the capitalization rate of ten percent (10%) to arrive at
the purchase price. For example, if the Base Rent in effect for the year
in question is in the sum of $300,000.00, said Base Rent would then be
divided by a factor of .10 to arrive at a purchase price of $3,000,000.00.
Notwithstanding anything to the contrary contained herein, the notice
exercising the Option shall be given at least six (6) months in advance of
the anticipated closing and the closing must occur on or before the
February 1st following the date of the notice.
IN WITNESS WHEREOF, the parties hereto have caused these presents to
be signed on their behalf by all on the day and year first written above.
IN THE PRESENCE OF: TENANT:
SWING-N-SLIDE CORP.
/s/ Kelly Richards By: /s/ Richard G. Mueller
Name: Richard G. Mueller
Title: President
IN THE PRESENCE OF: LANDLORD:
HOVDE DEVELOPMENT, INC.
_____________________ By: /s/ Glenn J. Hovde
Glenn J. Hovde, Landlord
<PAGE>
EXHIBIT A
The following described lands situated in the County of Rock, State
of Wisconsin, to-wit:
6 acres - Janesville, Wisconsin - corner of Enterprise Drive
(400') and Wuthering Hills Drive to be surveyed off from a 16.99
acre parcel being purchased from the City of Janesville.
Enterprise Drive is under construction and Wuthering Hills Drive
is to be constructed in 1996 by the City of Janesville at no
cost to the Tenant.
Tenant will have no special assessments for the construction of
Enterprise Drive being done in 1995 nor for Wuthering Hills
Drive being constructed in 1996 by the City of Janesville as a
part of their TIF District cost.
<PAGE>
EXHIBIT B
Building Layout
Those plans submitted October 12, 1995, and are a part of this
Lease.
<PAGE>
EXHIBIT C
Landlord's Work
Landlord's work includes those items in the building plans and
also set forth in the letter of intent.
90,000 sq. ft. metal building - 24' high at eaves
16 docks with 8 dock levelers
2000 sq. ft. office/bathroom/breakroom with HVAC
2000 sq. ft of deck above office/bathroom/breakroom sprinkled
+/- 6 acres of land subject to survey
Conformed Copy
LEASE
Dated: November 1, 1993
Landlord: HUFCOR, INC.
Tenant: NEWCO, INC.
Leased Premises: Approximately 45,000 square feet of floor area in
the building located at 2101 Kennedy Road,
Janesville, Wisconsin (the "Building") as shown
on Exhibit A attached hereto.
Use: Warehouse uses in connection with Tenant's
business together with limited production
operations in accordance with Paragraph 30 below.
Term: One year commencing November 1, 1993, and ending
October 31, 1994, unless extended in accordance
with Paragraph 20 below.
Rental: $11,849.00 per month
IT IS MUTUALLY AGREED AND UNDERSTOOD BETWEEN THE LANDLORD AND THE TENANT:
1. The Landlord hereby leases to the Tenant the leased
premises for the term and at the rental set forth above upon the
provisions herein contained, each of which shall be both covenants and
conditions, and the Landlord and the Tenant covenant and agree to be bound
by and perform each and every provision hereof to be performed by them.
2. The Tenant agrees to pay the rental in the amount above
prescribed in advance on or before the first day of each and every month
during the lease term at Landlord's address hereinafter set forth for the
giving of notice.
3. Tenant has examined the leased premises, knows the
condition thereof, and accepts the same in as is condition. No
representation or warranties as to the condition or repair of said
premises have been made by the Landlord or its agent prior to or at the
execution of this Lease that are not herein expressed. Landlord shall not
be required to recondition or rework the leased premises in any manner
whatsoever for Tenant's use.
4. Tenant shall, at its own cost and expense, comply promptly
and conform with all present and future laws, ordinances, rules,
requirements and regulations of the federal, state, county and city
governments and of any and all other governmental authorities or agencies
affecting the leased premises or its use and Tenant shall, at its own cost
and expense, make all additions, alterations or changes to the leased
premises or any portion thereof as may be required by any governmental
authority or agency and shall comply promptly with all present and future
orders, rules, rulings, regulations and directives of any governmental
authority or agency.
5. The leased premises shall be used for the purpose set forth
above and for no other purpose without the written consent of the Landlord
had and obtained. Nothing shall be done, used or suffered in or upon the
leased premises which shall invalidate any insurance or which shall
increase the rate of insurance thereon or disturb, annoy, or interfere
with the rights of any tenants or occupants of the building of which the
leased premises are a part or of neighboring property, or injure the
reputation of said building, or tend to do any of said things, and the
leased premises shall not be used for any unlawful purpose. Landlord does
not warrant or represent that the leased premises may be used for the
purpose set forth above.
6. The Landlord or its agents shall have access to the leased
premises for the following purposes: (a) to make repairs, alterations or
improvements, and (b) to display the same for sale, mortgage, or rental
purposes. The Tenant agrees that during the last thirty (30) days of the
term or any extended period thereof, it will permit the Landlord or its
agents to place a notice in the front of said premises which shall not
interfere with the Tenant's business, offering the same "For Sale" or "for
Rent," thereon without hindrance or molestation.
7. No alterations shall be made to the leased premises by the
Tenant except with the written consent of the Landlord first had and
obtained. In the event Landlord consents to any alterations by Tenant,
then the same must be made at Tenant's own cost and expense and in a good
workmanlike manner in accordance with the laws, ordinances and codes
relating thereto and free from any claim or claims for mechanics' liens.
Any improvements resulting from said alterations shall belong to and
become the property of the Landlord when so made.
8. Landlord shall not be liable for any damage occasioned by
failure to keep said premises in repair, and shall not be liable for any
damage done or occasioned by or from plumbing, gas, water, steam or other
pipes, or sewerage, or the bursting, leaking or running of any tank,
washstand, water closet, wastepipe, sprinkler system or other pipes or
equipment in, above, upon or about said premises, nor damage occasioned by
water, snow or ice being upon or coming through the roof, sky-light, trap
door or otherwise, or for any damage arising from acts or neglect of
Landlord or co-tenants or other occupants of the building or any part of
the leased premises. All personal property upon the leased premises shall
be at the risk of the Tenant only and Landlord shall not be liable for any
theft thereof or loss or damage thereto. Landlord shall not be liable for
any damage or injury done or occasioned to any person or persons on or
about the leased premises from any cause of happening whatsoever.
9. Tenant shall not (a) assign this Lease or any interest
under it; (b) sublet the leased premises or any part thereof; (c) allow
any transfer hereof or any lien upon Tenant's interest by operation of law
or otherwise; or (d) permit the use of occupancy of the leased premises or
any part thereof by anyone other than Tenant.
10. Tenant shall, at its own cost and expense, during the term
hereof, carry a policy of comprehensive general public liability insurance
naming the Landlord, any other parties in interest designated by Landlord,
and Tenant as the insureds of not less than $1,000,000.00 single limit.
Said policies shall contain a clause that the insurer will not cancel or
change the insurance without first giving the Landlord thirty (30) days
prior written notice. The insurance shall be with an insurance company
approved by the Landlord and copies of the paid-up policies evidencing
such insurance or a certificate of the insurer certifying to the insurance
of such policies shall be delivered to Landlord prior to commencement of
Tenant's occupancy or commencement of the lease term, whichever is sooner,
and, with respect to renewals, not less than thirty (30) days prior to the
expiration of such coverage.
11. Tenant shall and will keep and save the Landlord harmless
against all penalties, claims or demands of whatsoever nature that may be
made against it from and after the commencement of this Lease, arising
from or growing out of the use of the leased premises, including any
failure by the Tenant to keep, perform and observe each and every one of
the covenants, agreements and conditions herein contained on its part to
be kept, performed and observed. The foregoing indemnity shall include
all costs incurred by Landlord in the event any actions or proceedings are
brought against Landlord, including, but not limited to, attorneys' fees
incurred by Landlord.
12. Tenant shall not place or erect any signs on the premises
without prior written consent of the Landlord. In the event Landlord
consents to Tenant placing or erecting a sign or signs, such sign or signs
shall be in accordance with the laws and ordinances regulating the same,
and shall not interfere with other tenants in and about the premises. At
the end of the term, Tenant shall remove all signs so placed or erected
and repair any damage to the leased premises caused by reason of such
removal.
13. In case the leased premises of the Building shall be
partially or wholly destroyed by fire or by the elements, Landlord shall
have the option (a) to repair the same and abate a just or proportionate
part of the rent until the premises have been put in repair, or (b) to
terminate and cancel this Lease.
14. If the Building or leased premises or any part thereof
shall be condemned by any governmental agency or political subdivision, or
under threat of such condemnation, then and in that event, Landlord shall
have the option to terminate and cancel this Lease. In the event Landlord
does not terminate and cancel this Lease as aforesaid, then the same shall
remain in full force and effect and Tenant shall not be entitled to or
have any interest in any award or proceeds of sale in the event of a sale
in lieu of condemnation.
15. Tenant shall keep said premises in a clean tenantable
condition and shall not allow any garbage, rubbish, refuse, dirt, papers,
boxes or cardboard of any kind to accumulate in or about the leased
premises, or the building of which the leased premises are a part, and
Tenant shall, at its own cost and expense, cause said garbage, rubbish,
refuse, dirt, papers, boxes or cardboard to be promptly and continuously
removed from the leased premises.
16. [Intentionally omitted.]
17. No holding over by Tenant shall operate to renew or extend
this Lease without written consent of Landlord endorsed hereon, and Tenant
further agrees and covenants that at and upon the date of expiration of
the term herein, it will surrender and deliver up the leased premises to
Landlord in good repair and condition. Holding over in any event without
consent as aforesaid shall be construed to be that of month-to-month
tenant.
18. Should Tenant or any guarantor of this Lease be adjudged
bankrupt or insolvent under the laws of the United States or any stated or
make a general assignment or similar transfer for the benefit of
creditors; or should a receiver be appointed for Tenant or any guarantor
of this Lease, or should Tenant's estate hereunder or the estate of any
guarantor of this Lease be sequestered or taken under execution or other
legal process, this Lease and all of Tenant's right hereunder shall, at
Landlord's option, be terminated and forfeited immediately, and all
payment theretofore made hereunder by Tenant shall belong to and be
retained by Landlord, which shall have the right immediately to re-enter
and take possession of the leased premises.
19. If Tenant fails to pay rent when due or abandons the leased
premises or commits waste, or breaches any other of the terms, conditions,
covenants or provisions of this Lease, the Landlord may, at its option,
repossess the leased premises and/or terminate the tenancy created by this
Lease if Landlord gives Tenant notice requiring him to pay the rent,
repair the waste, or otherwise comply with this Lease on or before a date
at least five (5) days after the giving of the notice, and if Tenant fails
to comply with the notice. In the event of a breach of a covenant or
condition of this Lease which requires more than the payment of money to
cure and which cannot be cured within five (5) days, the Tenant is deemed
to be complying with the notice if, promptly upon the receipt of such
notice, Tenant immediately takes reasonable steps to cure the default and
proceeds thereafter continuously with reasonable diligence to cure the
default. Failure to send a notice shall not be construed as a waiver of
such breach or as to any subsequent breach. In the event Landlord
repossesses the premises as aforesaid, said repossession shall not affect
Tenant's liability for past rent due or future rent to accrue under this
Lease, but the same shall continue as if such repossession had not taken
place. The provisions herein shall be in addition and without prejudice
to any other fights and remedies Landlord may have.
20. The terms "Landlord" and "Tenant" when used herein shall be
taken to mean either singular or plural, masculine or feminine, as the
case may be, and the provisions of this instrument shall bind the parties
mutually and their respective heirs, executors, administrators, legal
representatives, successors and assigns.
21. No oral statement or prior written matter shall have any
force or effect. Tenant agrees that it is not relying on any
representations or agreements other than those contained in this Lease.
This agreement shall not be modified or cancelled except by writing
subscribed by all the parties.
22. If any term, covenant, condition or provision of this Lease
or the application thereof to any person or circumstance shall, at any
time or to any extent, be invalid or unenforceable, the remainder of this
Lease, or the application of such term or provision to persons or
circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term, covenant,
condition and provision of this Lease shall be valid and be enforced to
the fullest extent permitted by law.
23. This Lease shall, at the option of the holder or holders of
any mortgage or mortgages now or hereafter placed upon the demised
premises by Landlord, its successors and assigns, be subject and
subordinate to the lien of any such mortgage or mortgages and Tenant
covenants and agrees to execute and deliver upon demand such further
instruments subordinating this Lease, in accordance with the foregoing, to
the lien of any such mortgage or mortgages as shall be requested by the
Landlord or any mortgagees or proposed mortgagees and hereby irrevocably
appoints the Landlord the attorney-in-fact for the Tenant to execute and
deliver any such instrument or instruments for and in the same name of the
Tenant.
24. One or more waivers of any covenant or condition by
Landlord shall not be construed as a waiver of a subsequent breach of the
same convent or condition, and the consent or approval by Landlord to or
of any act by Tenant requiring Tenant's consent or approval shall not be
deemed to render unnecessary Landlord's consent or approval to or of any
subsequent similar act by Tenant. No breach of a covenant or condition of
this Lease shall be deemed to have been waived by Landlord, unless such
waiver be in writing signed by Landlord.
25. The covenant to pay rent is hereby declared to be an
independent covenant on the part of Tenant to be kept and performed and no
offset thereto shall be permitted or allowed except as specifically stated
in this Lease.
26. [Intentionally omitted.]
27. [Intentionally omitted.]
See Rider attached hereto and incorporated by reference herein for
additional provisions.
SIGNED AND SEALED as of the day and year first written above.
Landlord: HUFCOR, INC. Tenant: NEWCO, INC.
By: /s/ Frank R. Scott By: /s/ Richard E. Ruegger
Frank R. Scott Richard E. Ruegger
Its: Vice President Its: Vice President
Attest: /s/ Bernice Swenson Attest: /s/ Brian Zeilinger
Bernice Swenson Brian Zeilinger
Its: Assistant Secretary Its: Vice President
<PAGE>
RIDER TO LEASE DATED NOVEMBER 1, 1993
BY AND BETWEEN
HUFCOR, INC., LANDLORD,
AND
NEWCO, INC., TENANT
28. Tenant shall have the non-exclusive right to use the
parking lot of the Building for parking by Tenant, its employees, and
invitees, and Tenant shall also have the non-exclusive right to use the
hallways, sidewalks, restrooms and other common areas of the Building.
29. Tenant shall have the option to extend the term of this
Lease for one additional period of one (1) year commencing on November 1,
1994, and ending on October 31, 1995. The option may be exercised only by
Tenant giving Landlord written notice thereof which is received by
Landlord on or before August 1, 1994, time being of the essence; provided,
however, Tenant shall be entitled to exercise the option granted herein
and the term of this Lease shall, in fact, be extended by reason of such
exercise, only if this Lease is in full force and effect and Tenant is not
in default hereunder. In the event that the term of this Lease is in fact
extended pursuant to the foregoing, then any such extension shall be upon
all of the same terms and provisions contained in this Lease except the
rent may be increased by Landlord to reflect any increased costs incurred
by Landlord with respect to the leased premises. Landlord shall give
Tenant written notice of any increase in rent within fifteen (15) days
after receipt of Tenant's notice of exercise of an option and Tenant shall
have the right to revoke its exercise of such option by written notice to
Landlord which is received by Landlord within ten (10) days after receipt
of Landlord's notice of the increase in rent, time being of the essence,
in which event this Lease shall terminate at the end of the current term.
30. A portion of the leased premises which may be used for
limited production operations including welding, light assembly and
painting. No change in the amount of floor area devoted to any use shall
be made by Tenant or anyone occupying the leased premises without
Landlord's prior written consent.
31. Tenant shall, during the entire term of this Lease, comply
with all applicable federal, state and local environmental laws,
ordinances and all amendments thereto and rules and regulations
implementing the same, together with all common law requirements, which
relate to discharge, emissions, waste, nuisance, pollution control or the
environment as the same shall be in existence during the term hereof. All
of the foregoing laws, regulations and requirements are hereinafter
referred to as "Environmental Laws." Tenant shall obtain all
environmental licenses, permits, approvals, authorizations, exemptions,
classifications, certificates and registrations (hereinafter collectively
referred to as "Permits") and make all applicable filings required of
Tenant under the Environmental Laws required by Tenant to operate at the
leased premises. The permits and required filings shall be made available
for inspection and copying by Landlord at Tenant's offices upon reasonable
notice and during business hours. Tenant shall not cause or permit any
flammable explosive, oil, contaminant, radioactive material, hazardous
waste or material, toxic waste or material or any similar substance
(hereinafter collectively referred to as "Hazardous Substances") to be
brought upon, kept or used in or about the leased premises except for
small quantities of such substances as is necessary for Tenant's business
provided that Tenant shall handle, store, use and dispose of any such
Hazardous Substance in compliance with all applicable laws and in a manner
which is safe and does not contaminate the leased premises. Tenant agrees
to indemnify and hold Landlord harmless from any liability, claim or
injury, including attorneys' fees, arising out of Tenant's use,
manufacture, handling, storage, disposal or release of any Hazardous
Substances by Tenant, its agents and employees on, under or about the
leased premises, including, without limitation, the cost of any required
or necessary repair, remediation, clean-up or detoxification, or arising
from an actual or alleged violation of Environmental Laws in connection
with the occupancy of the leased premises by Tenant or any occupant of the
leased premises or the operation of Tenant's business on the leased
premises during the term of this Lease. The foregoing indemnification
shall survive the expiration of the term of this Lease.
32. Landlord shall maintain the roof, exterior walls and other
exterior and structural portions of the Building and its public and common
areas in good order, condition and repair. Landlord shall also maintain
the plumbing and electrical lines and facilities to the point of entry to
the leased premises. Tenant shall at all times during the Lease term make
all other necessary repairs and replacements to the leased premises and
the equipment located therein including but not limited to the doors,
windows, dock enclosures, dock levelers, heating and other equipment and
facilities servicing the leased premises, and Tenant shall be responsible
for the maintenance and repair of all plumbing and electrical fixtures,
equipment and facilities located within the leased premises which are not
the responsibility of Landlord as set forth above. Notwithstanding the
foregoing, provided that Tenant establishes and follows the usual and
customary preventive maintenance program for the heating units and
facilities servicing the leased premises and properly maintains such
heating units and facilities, Landlord shall be responsible for the
replacement of any such heating units and facilities when necessary. As
used herein, "replacement" means the substitution of an entire operating
unit of a fixture or equipment and not the component parts thereof.
Notwithstanding anything to the contrary contained in this Paragraph, if
any repair or replacement which Landlord is required to make hereunder
results from the fault or neglect of Tenant, its agents, employees or
invitees, then Tenant shall be responsible for the cost thereof. Landlord
may make any repairs, alterations or improvements which Landlord may deem
necessary for the preservation, safety or improvement of the Building.
Tenant shall give Landlord written notice of the need for repairs to the
leased premises which are the responsibility of Landlord under this Lease,
and Landlord shall be under no liability for damage or injury, however
caused, in the event of its failure to make such repairs unless it shall
have received such notice from Tenant and failed to commence such repairs
within a reasonable time after actual receipt of such notice.
33. Landlord shall provide gas for heating and electricity for
lighting the leased premises adequate for Tenant's warehouse uses.
Electricity for Tenant's current production operations in the leased
premises shall be billed on a monthly basis and paid by Tenant within ten
(10) days after receipt of such billing. In the event that Tenant uses
electricity in excess of that necessary for lighting purposes, Tenant
shall pay to Landlord the costs thereof as and when billed by Landlord.
Tenant shall, at its own cost and expense, pay for any other utility used
and consumed in or about the leased premises. In no event shall Landlord
be liable for an interruption or failure in the supply of any utility to
the leased premises.
34. Upon the termination of this Lease, by expiration or
otherwise, Tenant shall peaceably and quietly surrender the leased
premises in good order, condition and repair. All alterations, additions,
improvements and fixtures which may be made or installed by either
Landlord or Tenant upon the leased premises shall be the property of
Landlord and shall remain upon and be surrendered with the leased premises
as a part thereof, provided, however, all trade fixtures, equipment or
other unattached and movable personal property owned by Tenant (including
the radius backdrop installed by Tenant) may (and upon Landlord's request
shall) be removed from the leased premises by Tenant, provided that all
the terms and conditions of this Lease have been compiled with, and
provided, further, that Tenant shall promptly repair any and all damage
caused by such removal at Tenant's sole expense. If the leased premises
are not surrendered at the end of the term, Tenant shall indemnify
Landlord against loss or liability resulting from delay by Tenant in so
surrendering the leased premises, including, without limitation, any claim
made by any succeeding tenant founded on such delay. Tenant shall also
surrender all keys for the leased premises.
35. Tenant agrees to carry, at its expense, insurance against
fire, vandalism, malicious mischief and such other perils as are from time
to time included in a standard extended coverage endorsement, insuring
Tenant's trade fixtures, equipment and all other items of personal
property located at the leased premises, in an amount equal to the actual
replacement cost thereof. Tenant shall furnish Landlord with a
certificate evidencing such coverage.
36. Each party hereby expressly waives any right of recovery it
may have against the other party for loss to the leased premises or
Building or contents to either due to fire or any other peril covered by
insurance, including such losses as may be due to the negligence of such
other party, its agents or employees. Each party shall cause its
insurance carriers to consent to such waiver of all rights of subrogation
against the other party.
37. Any notice required or permitted under this Lease shall be
deemed sufficiently given or served if personally delivered or if sent by
certified mail, postage prepaid, return receipt requested as follows:
To Landlord: HUFCOR, Inc.
P. O. Box 591
1205 Norwood Road
Janesville, WI 53547
Attention: Mr. Frank R. Scott
To Tenant: NEWCO, Inc.
1212 Barberry Drive
Janesville, WI 53545
Either party may, by like notice at any time and from time to time,
designate a different address to which notices shall be sent.
38. Landlord shall be entitled to recover all costs and
expenses and attorney fees that may be incurred or paid in enforcing the
covenants and agreements of this Lease.
39. This Lease shall be interpreted and construed in accordance
with the laws of the State of Wisconsin.
40. The parties acknowledge that Tenant presently occupies the
leased premises under an existing month-to-month lease dated December 17,
1990, as amended. Landlord and Tenant agree that the term of such lease
shall be deemed terminated and cancelled effective as of October 31, 1993,
provided, however, Tenant shall remain liable for all liabilities and
claims in any way connected with or arising out of the use or occupancy of
the leased premises by Tenant up to and including such date.
<PAGE>
Exhibit A consists of graphic material that cannot be reproduced
in an electronic filing. The narrative description of the omitted
materials is as follows:
Exhibit A consists of a floor plan of the building
located at 2101 Kennedy Road, Janesville, Wisconsin,
which identifies the approximately 45,000 square feet
of floor area which is the subject of the Lease.
<PAGE>
Conformed Copy
FIRST AMENDMENT TO INDUSTRIAL FACILITY LEASE
HUFCOR INC. BUILDING
This first amendment, made and entered into this 25th day of October,
1994, by and between HUFCOR, Inc. (hereinafter referred to as "Lessor")
and NEWCO, Inc., a Wisconsin corporation (hereinafter referred to as
"Tenant"),
Whereas, the parties hereto entered into an industrial facility lease
(hereinafter referred to as the "Lease") with respective premises located
in the building at 2101 Kennedy Road in the City of Janesville, Rock
County, Wisconsin, which Lease is entitled "Lease" dated the first day of
November, 1993, and
Whereas, the parties hereto wish to amend such said Lease by
increasing the leased square footage by approximately 15,000 square feet
to a new total of approximately 60,000 square feet, by including the area
shown on the attached Exhibit "A" and adjusting the base rent accordingly.
Now, the parties agree as follows: the fixed monthly minimum rental
is increased from $11,849.00 to $15,911.00 per month for the period
November 1, 1994, through October 31, 1995.
The space is provided to Tenant on an "as is" basis. The increased
charges recited herein shall accrue and first be payable as of November 1,
1994. Except as otherwise provided above, all terms and conditions of the
Lease dated November 1, 1993, shall remain unchanged.
In witness hereof, Landlord and Tenant have signed and dated this
amendment.
TENANT: NEWCO, INC. LANDLORD: HUFCOR, INC.
By: /s/ Curt Cole By: /s/ James C. Landherr
Curt Cole James C. Landherr
V.P. Distribution V.P. Manufacturing
Attest: Attest:
/s/ Gregg A. Arneson /s/ Frank R. Scott
Gregg A. Arneson, Traffic/ Frank R. Scott, V.P. Finance
Shipping Manager
Date: October 25, 1994
<PAGE>
Exhibit A to First Amendment consists of graphic material that
cannot be reproduced in an electronic filing. The narrative description
of the omitted materials is as follows:
Exhibit A to First Amendment consists of a floor plan
of the building located at 2101 Kennedy Road,
Janesville, Wisconsin, which identifies the new total
of approximately 60,000 square feet of floor area
which is the subject of the Lease.
<PAGE>
Conformed Copy
THIRD AMENDMENT TO INDUSTRIAL FACILITY LEASE
HUFCOR, INC. BUILDING - 2101 KENNEDY ROAD
This third amendment, made and entered into this 21st day of March,
1996, by and between HUFCOR, Inc. (hereinafter referred to as "Lessor")
and NEWCO, Inc., a Wisconsin corporation (hereinafter referred to as
"Tenant"),
Whereas, the parties hereto entered into an industrial lease
(hereinafter referred to as the "Lease") with respective premises located
in the building at 2101 Kennedy Road in the City of Janesville, Rock
County, Wisconsin, which Lease is entitled "Lease" dated the first day of
November, 1993, and
Whereas, the parties hereto wish to amend such said Lease by
extending the term of the Lease as it relates to approximately 20,000
square feet as shown on Exhibit "A" and adjusting the base rent
accordingly.
Now, the parties agree to the following: the fixed monthly minimum
rental will be $5,500.00 per month effective March 1, 1996.
HUFCOR will not furnish any compressed air to the space leased by the
Tenant.
The space is provided to Tenant on an "as is" basis. The charges
recited herein shall accrue and first be payable as of March 1, 1996.
Except as otherwise provided above, all terms and conditions of the lease
dated November 1, 1993, shall remain unchanged.
In witness hereof, Landlord and Tenant have signed and dated this
amendment.
TENANT: NEWCO, INC. LANDLORD: HUFCOR, INC.
By: /s/ Curt Cole By: /s/ James C. Landherr
Curt Cole James C. Landherr
V.P. Distribution V.P. Manufacturing
Attest: Attest:
/s/ Richard E. Ruegger /s/ Frank R. Scott
Richard E. Ruegger, Frank R. Scott,
V.P. Finance V.P. Finance
Date: March 21, 1996
<PAGE>
Exhibit A to Third Amendment consists of graphic material that
cannot be reproduced in an electronic filing. The narrative description
of the omitted materials is as follows:
Exhibit A to Third Amendment consists of a floor plan
of the building located at 2101 Kennedy Road,
Janesville, Wisconsin, which identifies the
approximately 20,000 square feet of floor area with
respect to which the lease term is extended pursuant
to such Third Amendment.
CONFORMED COPY
MANAGEMENT CONSULTING AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of
the 16th day of February, 1996, by and between Newco Inc., a Wisconsin
corporation ("Newco"), and Swing-N-Slide Corp., a Delaware corporation
("SNSC") (collectively, the "Corporation"); and Glencoe Investment
Corporation, a Delaware corporation, and Desai Capital Management
Incorporated, a New York corporation, both principals of GreenGrass
Capital (collectively, the "Consultant").
W I T N E S S E T H :
WHEREAS, the Corporation is engaged in the business of
manufacturing and selling outdoor playground equipment; and
WHEREAS, the Consultant possesses expertise in financial and
management matters; and
WHEREAS, the Corporation desires to engage the Consultant to
provide certain consulting services described herein, and the Consultant
desires to provide such services, in accordance with the terms and subject
to the conditions set forth in the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. Engagement. The Corporation does hereby appoint and engage
the Consultant to provide the services described herein, and the
Corporation hereby agrees to provide such services, upon the terms and
subject to the conditions set forth in this Agreement.
2. Description of Services. During the term of this
Agreement, and any renewals or extensions hereof, the Consultant shall
provide the following services for and on behalf of the Corporation:
consult with respect to financial and management matters relating to the
ongoing business of the Corporation as and when needed; board of directors
and committee membership, attendance and participation (without standard
board compensation); management of external banking and financial affairs
of the Corporation in the ordinary course of business in conjunction with
senior executives of the Corporation; and, provide such other services as
may be reasonably requested by the Corporation relating to the ongoing
finances and management of the Corporation. The services covered under
this Agreement shall not include major extraordinary project tasks such as
substantial investment banking-type work that may be required in
connection with capital raising, mergers or acquisitions.
3. Term. Unless terminated as hereinafter provided, the term
of this Agreement shall commence on the date hereof and shall continue in
full force and effect for a period of one (1) year, and thereafter shall
be automatically renewed for successive one (1) year terms unless either
party shall notify the other at least sixty (60) days prior to the
expiration of the term, or any renewal or extension thereof, of its
intention not to renew this Agreement.
4. Consulting Fee. In consideration for the services the
Consultant shall provide the Corporation pursuant to this Agreement, the
Corporation shall pay to the Consultant a quarterly consulting fee of
Seventy-Five Thousand Dollars ($75,000.00), payable on or before the tenth
(10th) day of the month immediately following the end of each calendar
quarter.
5. Expenses. The Corporation shall pay, or promptly reimburse
upon request, the Consultant for all reasonable expenses paid or incurred
by the Consultant in connection with the performance of services
hereunder, upon presentation of expense statements, vouchers, or other
evidence of expense.
6. Independent Contractor. The Consultant shall act as an
independent contractor in the provision of services to the Corporation
pursuant to this Agreement. Neither the Consultant nor any of its
employees or agents are to be considered as employees of the Corporation
for any purpose, nor will they be entitled to any of the benefits the
Corporation may provide for its employees. Accordingly, the Consultant
shall be solely responsible for payment of all taxes arising out of its
activities, under this Agreement, including any and all applicable
federal, state, and local taxes.
7. Relationship of the Parties. It is expressly agreed by the
parties hereto that no agency relationship is, or shall be deemed to have
been, created by this Agreement, and except as expressly set forth in this
Agreement, no party shall by reason of this Agreement have the power or
authority to bind any other party contractually or otherwise.
8. Confidential Information. During the term of this
Agreement and at all times thereafter, the Consultant shall not take or
use, directly or indirectly, or otherwise disclose to anyone, any
Confidential Information (as hereinafter defined), except (i) as necessary
to carry out its obligations under this Agreement, (ii) as authorized in
writing by the Corporation, or (iii) as required by any court or
governmental agency. For purposes of this Section, "Confidential
Information" shall mean any and all ideas, innovations, conceptions,
inventions, developments, methods, techniques, specifications, equipment,
computer software and programs, notes, worksheets, customer and supplier
lists, data, financial information, and other information in any form that
concerns or relates to any aspect of the actual or contemplated business
of the Corporation.
9. Termination. Notwithstanding any provision contained
herein to the contrary, this Agreement may be terminated as follows:
(a) Upon written agreement of the parties;
(b) By the Corporation, by a majority vote of the
independent directors, after an annual review by the board
of directors of the services of the Consultant;
(c) By the Corporation, upon the bankruptcy or dissolution
of the Consultant; or
(d) By the nonbreaching party, in the event of a material
breach of this Agreement by the other party that shall
continue for a period of thirty (30) days after written
notice to such other party of such breach and election to
terminate.
10. Notices. All notices, requests, demands, and other
communications hereunder shall be deemed to have been duly given if
delivered by hand or mailed, return receipt requested, with postage
prepaid to the following addresses (or such other addresses with a copy to
such other persons as the parties shall designate in writing from time to
time):
(a) If to the Corporation, then to the following:
Swing-N-Slide Corp.
1212 Barberry Drive
Janesville, WI 53545
Attention: Richard Mueller
with a copy to:
Joseph P. Hildebrandt
Foley & Lardner
150 East Gilman Street
P.O. Box 1497
Madison, WI 53701-1497
(b) If to the Consultant, then to the following:
Glencoe Investment Corporation
311 South Wacker Drive, Suite 4990
Chicago, IL 60606
Attention: David S. Evans
and
Desai Capital Management Incorporated
540 Madison Avenue
New York, NY 10022
Attention: Timothy R. Kelleher
with a copy to:
Martin D. Mann
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202
11. Miscellaneous
(a) This Agreement shall represent the entire agreement of
the parties with respect to the subject matter contained herein, and shall
supersede any and all prior agreement, negotiations, understandings, or
representations with respect thereto. No amendment or modification of
this Agreement shall be binding unless in writing, signed by each of the
parties hereto.
(b) No party shall assign this Agreement or any rights
hereunder without the prior written consent of the other party hereto, and
any such attempt at assignment shall be null and void.
(c) No waiver of any provision of this Agreement shall be
valid unless it is in writing and signed by the party against which it is
sought to be enforced. No waiver of any provision of this Agreement may
at any time be deemed a waiver of any other provision of this Agreement at
such time, or a waiver of such or any other provisions at any other time.
(d) In the event any portion of this Agreement shall be
adjudicated invalid for any reason, the remainder of this Agreement shall
remain in full force and effect and shall be severed from the portion or
portions deemed invalid.
(e) This Agreement shall be binding upon, and shall insure
to the benefit of, the parties hereto and their respective heirs, personal
representatives, successors, and assigns.
(f) This Agreement shall be construed and interpreted in
accordance with the internal laws of the State of Wisconsin, without
regard to conflicts of laws principles.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first set forth above.
CORPORATION: CONSULTANT:
NEWCO, INC. GLENCOE INVESTMENT CORPORATION
By: /S/ Richard G. Mueller By: /S/ David S. Evans
Richard G. Mueller, President Name: David S. Evans
Title: President and CEO
SWING-N-SLIDE CORP. DESAI CAPITAL MANAGEMENT
INCORPORATED
By: /S/ Richard G. Mueller By: /S/ Frank J. Pados, Jr.
Richard G. Mueller, President Names: Frank J. Pados, Jr.
Title: Executive Vice President
CONFORMED COPY
September 6, 1996
Swing-N-Slide Corp.
1212 Barberry Drive
Janesville, WI 53545
Attention: Richard G. Mueller, President
and Chief Executive Officer
Gentlemen:
Glencoe Investment Corporation ("Glencoe") and Desai Capital
Management Incorporated ("Desai") are pleased to act as acquisition
advisers to Swing-N-Slide Corp. ("Company"). This letter agreement is to
confirm our understanding with respect to our engagement. In this regard,
Glencoe and Desai will provide, as determined in consultation with the
Company, (a) assistance to the Company to undertake certain purchases or
acquisitions including providing valuation advice, negotiating and
assisting with the due diligence process; (b) various financing techniques
and alternatives with regard to acquisition funding; (c) periodic analysis
of the Company's acquisition resources, investment objectives and capacity
to compete for acquisition opportunities; (d) periodic review of other
strategic restructuring alternatives which could provide long-term
benefits and enhance value to the Company shareholders; and (e) such other
acquisition services the Company and Glencoe and Desai may mutually agree
upon.
In furtherance of the general services referred to above,
Glencoe and Desai will advise the Company in connection with its currently
pending acquisitions named by the Company as Project Tiger and Project
Lion and with such other acquisitions as the board of directors of the
Company (the "Board") shall request that they act as acquisition advisors
under this agreement (the "Acquisitions"). Our services in connection
with the Acquisitions will include:
1. Detailed Due Diligence - extensive strategic, operational
and financial due diligence of Tiger and Lion and other acquisition
targets leading to a detailed report to be presented to the Board which
would fully assess these issues. Subject to oversight by the Board,
Glencoe and Desai will direct all aspects of the Acquisitions, some of
which will be performed by Company management, the Company's financial
agent and other third party advisors.
2. Analysis and Structuring of Transactions. Glencoe and
Desai will develop detailed financial models under various acquisition
structure alternatives to evaluate the potential Acquisitions. Glencoe
and Desai will prepare financial models for prospective lenders and equity
investors. Glencoe and Desai will provide the Board with a detailed
assessment of various strategic and structural alternatives for each
Acquisition and, on behalf of the Company, will negotiate principal
acquisition agreements.
3. Debt and Equity Corporate Financing. Glencoe and Desai, in
coordination with the Company and its other advisors, will prepare
detailed private placement memoranda for potential purchasers of Company
debt securities and equity securities necessary to finance the potential
Acquisitions. Glencoe and Desai will assist in identifying and qualifying
potential investors and negotiating the terms of the respective securities
purchase agreements.
As compensation for the Acquisition services to be provided by
Glencoe and Desai hereunder, the Company agrees to pay a fee equal to:
(i) 4.0% of the gross proceeds of new equity raised by the
Company for an Acquisition during the term of this agreement,
(ii) 1.125% of senior loan financing received by the
Company for an Acquisition during the term of this agreement,
including the refinancing of the Company's existing senior loan
obligations (less the amount of any fees paid to other placement
agents), and
(iii) 1.00% of the Transaction Value on an Acquisition
consummated by the Company or its subsidiaries during the term
of this agreement. The term "Transaction Value" means an amount
equal to (a) the aggregate of the fair market value of any
consideration paid by the Company or its subsidiaries or
securityholders, whether in cash, securities or other property,
in connection with the purchase of equity securities or assets
of, or the merger with, an entity which is not an affiliate of
the Company on the date hereof, plus (b) the amount of
obligations for borrowed money on the balance sheet of any such
acquired company immediately prior to such purchase.
In addition, the Company agrees to reimburse Glencoe and Desai,
upon request made from time to time, for their reasonable out-of-pocket
expenses incurred in connection with activities under this letter,
including the reasonable fees and disbursements of legal counsel and other
outside advisers engaged to assist in connection with the services
rendered hereunder.
These fees are in addition to the $75,000 quarterly management
fee currently paid by the Company to Glencoe and Desai.
The Company will furnish Glencoe and Desai with such information
as is appropriate to enable them to fulfill their obligations under this
letter agreement. Glencoe and Desai will enter into an appropriate
confidentiality agreement with respect to such information.
The Company agrees to indemnify Glencoe and Desai and their
respective affiliates and their respective directors, officers, employees,
agents and controlling persons from and against any and all losses,
claims, damages and liabilities, joint or several, to which Glencoe or
Desai may become subject under any applicable federal or state law or
otherwise related to or arising out of any transaction or matter
contemplated by this letter agreement or the engagement of Glencoe and
Desai pursuant hereto, and the performance of services contemplated by
this letter agreement, except to the extent caused by Glencoe's or Desai's
gross negligence or wilful misconduct. The Company will reimburse Glencoe
and Desai for all expenses (including reasonable counsel fees and
expenses) as they are incurred in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any
action or proceeding arising therefrom, whether or not Glencoe or Desai is
a party, and whether or not such claim, action or proceeding is initiated
or brought by or on behalf of the Company.
The Company acknowledges and agrees that Glencoe and Desai have
been retained solely to provide the advice or services set forth in this
agreement. Glencoe and Desai shall act as independent contractors, and
any duties arising out of their engagement hereunder shall be owed solely
to the Company.
This agreement shall not give rise to any express or implied
commitment by Glencoe or Desai to purchase or place any securities of or
loans to the Company. No waiver, amendment or other modification of this
agreement shall be effective unless it specifically refers in writing to
how this agreement is being changed and is signed by each party to be
bound thereby.
Glencoe and Desai will act for the Company as provided above
through the first anniversary of this letter, with an automatic one-year
renewal period on such anniversary and on each anniversary thereof, unless
this agreement shall have been terminated by either party on no less than
30 days written notice to the other party prior to such renewal date, it
being understood that the provisions relating to the confidential
treatment of information, the payment of fees and expenses,
indemnifications, the status of Glencoe and Desai as an independent
contractors and the limitation on to whom Glencoe and Desai shall owe any
duties will survive the term of this agreement.
Please confirm the foregoing sets forth our agreement by signing
and returning to Glencoe the duplicate copy of this letter agreement
enclosed herewith.
Very truly yours,
GLENCOE INVESTMENT CORPORATION
By: /S/ David S. Evans
David S. Evans
President
DESAI CAPITAL MANAGEMENT
By: /S/ Frank J. Pados, Jr.
Accepted and agreed as of the
date first written above.
SWING-N-SLIDE CORP.
By: /S/ Richard G. Mueller
Richard G. Mueller
President
Exhibit 21
Subsidiaries of Swing-N-Slide Corp.
The registrant has no parent but has the subsidiary listed below which is
included in the accompanying consolidated financial statements.
Newco, Inc. (Wisconsin Corporation) - Wholly owned.
Exhibit 23
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the Swing-N-Slide Corp. Stock Program of our
report dated January 30, 1997, with respect to the consolidated financial
statements and schedules of Swing-N-Slide Corp. included in the Annual
Report (Form 10-K) for the year ended December 31, 1996.
Milwaukee, Wisconsin ERNST & YOUNG LLP
March 25, 1997
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