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UNITED STATES 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 FISCAL YEAR ENDED DECEMBER 26, 1998.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the transition period from to
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Commission File No.: 0-22684
UNIVERSAL FOREST PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
MICHIGAN 38-1465835
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2801 E. BELTLINE, N.E., GRAND RAPIDS, MICHIGAN 49525
(Address of principal executive offices) (Zip Code)
(616) 364-6161
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class Name of each exchange on which registered
NONE
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Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
(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:
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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. [ ]
As of March 1, 1999, 20,715,500 shares of the registrant's common stock, no par
value, were outstanding. The aggregate market value of the common stock held by
non-affiliates of the registrant (i.e., excluding shares held by executive
officers, directors, and control persons as defined in Rule 405, 17 CFR 230.405)
on that date was $248,981,932 computed at the closing price of $20.125 on that
date.
Documents incorporated by reference:
(1) Certain portions of the Company's Annual Report to Shareholders for the
fiscal year ended December 26, 1998 are incorporated by reference into
Part II of this Report.
(2) Certain portions of the Company's Proxy Statement for its 1999 Annual
Meeting of Shareholders are incorporated by reference into Part III of
this Report.
Exhibit Index located on page E-1.
Page 1 of 18
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ANNUAL REPORT ON FORM 10-K
DECEMBER 26, 1998
TABLE OF CONTENTS
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PAGE
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PART I
Item 1. Business. 3
Item 2. Properties. 11
Item 3. Legal Proceedings. 11
Item 4. Submission of Matters to a Vote of Security Holders. 11
PART II
Item 5. Market for the Registrant's Common Equity and Related 14
Shareholder Matters.
Item 6. Selected Financial Data. 14
Item 7. Management's Discussion and Analysis of Financial 14
Condition and Results of Operations.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. 14
Item 8. Financial Statements and Supplemental Data. 14
Item 9. Changes in and Disagreements with Accountants on 15
Accounting and Financial Disclosure.
PART III
Item 10. Directors and Executive Officers of the Registrant. 15
Item 11. Executive Compensation. 15
Item 12. Security Ownership of Certain Beneficial Owners 15
and Management.
Item 13. Certain Relationships and Related Transactions. 15
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports 15
on Form 8-K.
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PART I
ITEM 1. BUSINESS.
(A) GENERAL DEVELOPMENT OF THE BUSINESS.
Universal Forest Products(R), Inc., and its wholly-owned and
majority-owned subsidiaries and affiliates ("the Company") manufactures, treats
and distributes lumber products for the do-it-yourself (DIY), manufactured
housing, industrial and site-built construction markets. The Company currently
operates 66 manufacturing and treating facilities throughout the United States,
Canada and Mexico.
Universal Forest Products(R), Inc. was organized as a Michigan
corporation in 1955. The Company's business originally consisted of purchasing
lumber in carload lots from primary producers and reselling those carloads
mostly to manufacturers of mobile and modular homes, without any intermediate
handling. In the early 1970's, producers of manufactured housing were
experiencing supply and inventory difficulties as a result of the deterioration
of railroad service and rapidly increasing interest rates. The Company's
management recognized these customer-experienced problems as an opportunity. As
a result, the Company developed a "component yard" concept that featured
distribution facilities with manufacturing capabilities located on major rail
routes in close proximity to its clustered manufactured housing customers.
Carload shipments of lumber were received at these regional facilities where the
material was either broken down and shipped to customers without further
processing, or manufactured to the customer's specifications before shipment to
the customer by truck. The component yard concept helped the Company's customers
reduce materials management problems, control their inventory and labor costs
and conserve capital. As the component yard concept evolved, the Company began
to manufacture roof trusses for its manufactured housing customers. The Company
believes it was the first truss supplier to employ a full-time staff of
engineers who assist customers with truss designs, help obtain various building
code approvals for these designs and facilitate the development of new products
and manufacturing techniques. As consequence, the Company's sales to the
manufactured housing industry grew rapidly through the 1970's and 1980's. Today,
the Company is the largest manufacturer of roof trusses for manufactured homes
in the nation.
In order to further enhance growth opportunities, the Company entered the
wood preservation business in 1979. The Company utilizes a pressure-treatment
process for protecting wood from damage by insects and fungi in outdoor
applications. The expansion into this product line led to the manufacture of a
variety of products, primarily for landscaping, deck and fence construction.
These products were originally sold to conventional lumberyards and small
lumberyard chains. When the warehouse-format mass merchandisers such as Home
Depot became strong retail outlets for the DIY market in the late 1980's, the
Company was well positioned to capture the business of these retailers. By
virtue of the geographic dispersal of its regional facilities and its prior
experience with the flexibility required for the delivery of mixed truckloads of
products on a just-in-time basis, the Company possessed the abilities demanded
by the DIY retailers. The Company has grown to become the number one supplier of
lumber related products to the DIY market.
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In the mid-1980's, management began to recognize opportunities in the
industrial market. The Company manufactures pallets, crating stock and specialty
packaging for large industrial manufacturers and agricultural customers. These
products may be manufactured from the by-product of other manufactured products,
providing the Company with a profitable way of expanding its business while
increasing its raw material yields. In 1998, the Company completed the following
business acquisitions to expand its market presence:
- - On April 14, 1998, a subsidiary of the Company acquired substantially all of
the assets and assumed certain liabilities of Atlantic General Packaging,
Inc. ("AGP"), a manufacturer of specialty wood packaging products. AGP
operates one facility in Warrenton, North Carolina. The total purchase price
for the net assets of AGP was comprised of cash totaling approximately $1.0
million, a note payable of $857,000, and 57,950 shares of the Company's
common stock. AGP had net sales in fiscal 1997 totaling $4 million.
- - On June 4, 1998, a subsidiary of the Company acquired substantially all of
the assets of Industrial Lumber Company, Inc. ("ILC"), a distributor of low
grade cut lumber for packaging. The total purchase price for the net assets
of ILC was comprised of cash totaling approximately $3.0 million and notes
payable totaling $2.2 million. ILC had net sales in fiscal 1997 totaling $15
million.
Beginning in December of 1997, the Company added another market to its
business, the site-built construction market, through five strategic business
acquisitions. The Company acquired manufacturers of engineered wood products,
which consist of roof and floor trusses, wall panels and I-joists. The customer
base of these manufacturers consists of large, multi-tract builders, small
volume custom builders, national home center customers and retail lumberyards.
As a result of these business acquisitions, the Company has become the largest
manufacturer of engineered trusses and wall panels in the nation. Each of the
Company's business acquisitions are discussed below.
- - On December 22, 1997, a subsidiary of the Company completed a merger with
Consolidated Building Components, Inc. ("CBC"), a manufacturer of engineered
trusses, wall panels and other products for commercial and residential
builders and producers of manufactured homes. CBC operates two plants in
Northwest Pennsylvania. The Company issued approximately 398,000 shares of
its common stock in exchange for all of the stock of CBC. This transaction
has been accounted for as a pooling of interests; therefore, financial
statements for 1996 and prior years were restated to reflect this merger. CBC
had net sales in fiscal 1997 totaling $24 million.
- - On December 29, 1997, a partnership of the Company acquired substantially all
of the assets of Structural Lumber Products, Inc. ("SLP"), a manufacturer of
engineered trusses and wall panels for residential builders. SLP operates
plants in San Antonio, Austin and Dallas, Texas. The total purchase price of
the transaction was $18.5 million. SLP had net sales in fiscal 1997 totaling
$22 million.
- - On March 30, 1998, a subsidiary of the Company acquired 100% of the
outstanding shares of privately held Shoffner Industries, Inc. ("Shoffner")
in exchange for $41.1 million in cash and 3 million shares of the Company's
common stock. Shoffner is a manufacturer of engineered trusses
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for commercial and residential builders and had 14 facilities in 7 states at
the time of the acquisition. Shoffner had net sales in fiscal 1997 totaling
$90 million.
- - On April 20, 1998, a subsidiary of the Company acquired substantially all of
the assets and assumed certain liabilities of Advanced Component Systems,
Inc. ("ACS"), a manufacturer of engineered trusses for commercial and
residential builders. ACS operates one facility in Lafayette, Colorado. The
total purchase price of ACS was $27 million. ACS had net sales in fiscal 1997
totaling $39 million.
- - On November 4, 1998, a subsidiary of the Company acquired 59% of the
outstanding shares of Nascor, Inc. ("Nascor"), located in Calgary, Alberta.
Nascor manufactures engineered trusses, I-joists and pre-insulated wall
panels for commercial and residential builders. In addition, Nascor conducts
licensing activities associated with its I-joist technology. The total
purchase price for the shares was $2.8 million. Nascor had sales and
licensing revenues totaling $13 million in 1998.
In addition, on December 18, 1998, a subsidiary of the Company acquired
45% of the outstanding shares of Pino Exporta S.A. de C.V., which subsequently
changed its name to Pinelli Universal S. de R.L. de C.V. ("Pinelli"). Pinelli is
located in Durango, Mexico, where it manufactures moulding and millwork products
for customers in the United States. The total purchase price for the minority
interest was $3.0 million. In addition, the Company will provide a revolving
credit facility to Pinelli totaling up to $5.0 million. The Company advanced
$3.2 million to Pinelli on December 18, 1998. The Company has accounted for this
investment using the equity method.
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The information required by this item is incorporated by reference from
Footnote O of the Consolidated Financial Statements included in the Company's
Annual Report to Shareholders for the fiscal year ended December 26, 1998.
(C) NARRATIVE DESCRIPTION OF BUSINESS.
The Company presently manufactures, treats and distributes lumber
products for the DIY, manufactured housing, industrial and site-built
construction markets. Each of these markets is discussed in the paragraphs which
follow. The Company also sells lumber products to the wholesale market, but
management is not emphasizing this business in its growth objectives.
DIY MARKET. The customers comprising this market are primarily national
home center retailers, chain lumberyards and contractor oriented lumberyards.
The Company is currently selling to over 1,900 customers in this market. One
customer, The Home Depot, Inc., accounted for approximately 20%, 18% and 15% of
the Company's total net sales for fiscal 1998, 1997 and 1996, respectively.
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National customers in this market are serviced by the Company's sales
staff in each region and are assisted by personnel from the Company's
headquarters. Generally, terms of sale are established for annual periods, and
orders are thereafter placed with the Company's regional facilities in
accordance with the pre-established terms.
The Company currently supplies customers in this market from over 50 of
its locations. These regional facilities are able to supply customers with mixed
truckloads of products which can be delivered to customers with rapid turnaround
from order receipt. Freight costs are a factor in the ability to competitively
service this market, especially with treated wood products because of their
heavier weight. The proximity of the Company's regional facilities to the
various outlets of these customers is a significant advantage when negotiating
annual sales programs.
The products offered to customers in this market include dimension lumber
(both preserved and unpreserved) and various "value-added products," some of
which are sold under the Company's trademarks. Treated lumber is sold under the
Company's PRO-WOOD(R) trademark. Value-added products, described in the
following paragraph, may be preserved by pressure-treatment or unpreserved.
Products in the Deck Necessities(R) group consist of decking, balusters,
spindles, decorative posts, handrails, stair risers, stringers and treads. The
Fence Fundamentals(TM) group of products includes various styles of fences, such
as solid, picket and shadowbox, as well as gates, posts and other components.
Products in the Outdoor Essentials(TM) group consist of various home and garden
and landscaping items. Large volumes of lattice are sold by the Company under
its Lattice Basics(TM) trademark for use as skirting on decks, trellises and
various outdoor home improvement projects. The Storage Solutions(TM) product
line consists primarily of storage building frames and trusses. In 1998, the
Company sold all of the inventory, machinery and equipment relating to its
YardLine(R) storage structure product.
The Company also sells engineered wood products to this market as a
result of recent business acquisitions. These products include engineered
trusses, wall panels and I-joists. Depending upon regional practices and builder
preferences, the Company may sell these products through retailers or directly
to builders (see Site-Built Construction below).
The Company knows of no competitor that currently manufactures, treats
and distributes a full line of both value-added and commodity products on a
national basis. The Company faces competition on individual products from
several different producers, but the majority of these competitors tend to be
regional in their efforts and/or do not offer a full line of outdoor lumber
products. The Company also faces increased competition in this market from
certain national vendor mills with wood preservation facilities in certain
regions. The Company believes the breadth of its product offering, its
geographic dispersion and proximity of its plants to core customers, its
purchasing expertise, and its service capabilities provide significant
competitive advantages in this market. As this industry continues to
consolidate, the Company believes it is well-positioned to capture additional
market share.
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MANUFACTURED HOUSING MARKET. The customers comprising the manufactured
housing market are producers of mobile, modular and prefabricated homes and
recreational vehicles. The Company is currently selling to over 200 customers in
this market.
Products sold to customers in this market consist primarily of roof
trusses, lumber cut and shaped to the customer's specification, plywood,
particle board, and dimension lumber, all intended for use in the construction
of manufactured housing. Sales are made by personnel located at each regional
facility based on customer orders. The Company's engineering and support staff
of approximately 15 persons acts as a sales support resource to assist the
customer with truss designs, obtaining various building code approvals for the
designs, and aiding in the development of new products and manufacturing
processes.
While no competitor operates in as widely dispersed geographic area as
the Company, it does face vigorous competition from suppliers in many geographic
regions. The Company estimates that it produces over 65% of the HUD Code roof
trusses supplied to this market based on data published by the Manufactured
Housing Institute. The Company's principal competitive advantages include its
product knowledge, the capacity to supply all of the customer's lumber
requirements, the ability to deliver engineering support services, the proximity
of its regional facilities to core customers and its ability to provide national
sales programs to certain customers. In addition, the Company's financial
resources enable it to carry a sufficient inventory of raw materials to minimize
turnaround time from receipt of an order to delivery of the product.
INDUSTRIAL MARKET. The Company defines its industrial market as
industrial manufacturers and agricultural customers who use pallets, crates, and
wooden boxes for packaging, shipping and material handling purposes. The Company
has increased its emphasis on this market in recent years and currently sells to
over 1,400 customers in this market. Many of the products sold to this market
may be produced from the by-product of other manufactured products, thereby
allowing the Company to increase its raw material yields while expanding its
business. Competition is fragmented and includes virtually every supplier of
lumber convenient to the customer. The Company intends to continue to service
this market with its regional sales personnel and to emphasize service and
reliability as competitive strengths. It also plans to continue to increase its
market share through internal expansion utilizing technology acquired from AGP
and strategic business acquisitions.
SITE-BUILT CONSTRUCTION MARKET. The Company entered the site-built
construction market through five strategic business acquisitions completed since
December of 1997. The businesses acquired are discussed herein under the section
"General Development of the Business."
The customers comprising this market are primarily large-volume,
multitract builders/ developers and smaller custom builders. The Company is
currently selling to over 1,600 customers in this market. Customers are serviced
by the Company's sales, engineering and design personnel in each region.
Generally, terms of sale and pricing are determined based on quotes for each
specific job order.
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The Company currently supplies customers in this market from 20
facilities located in 10 different states. These facilities manufacture various
engineered wood products used to frame a conventional site-built project,
including roof and floor trusses, wall panels and I-joists. Freight costs are a
factor in the ability to competitively service this market due to the space
requirements of these products on each truckload.
The Company knows of no competitor that manufactures and distributes a
complete line of engineered wood products on a national basis. Competition in
this market is fragmented as local regulatory requirements and product
preferences have resulted in a regional operating focus. The Company's objective
is to continue to grow its manufacturing capacity for this market while
developing a national presence. Management expects to face competition from
various companies attempting to complete the same strategy. The Company believes
its primary competitive advantages relate to its product knowledge, the
engineering and design capabilities of its regional staff, its product quality
and timeliness of delivery.
WOOD PRESERVATION TREATMENT. The Company is the largest producer of
preservative-treated lumber in the nation based on data published by the
Building Products Digest. The Company operates 17 treatment facilities in 12
different states, with capacity to process over one billion board feet annually.
The process for preserving wood utilized by the Company involves the
application of a Chromated Copper Arsenate (CCA) solution under pressure. This
process originated in India over sixty years ago as a means for protecting
timbers utilized in the construction of mine shafts and tunnels. The basic
process is no longer protected by any U.S. patent, and is widely used by
numerous producers of treated lumber. The process consists of mixing the
chemicals with water and impregnating the wood by alternating vacuum and
pressure in specially designed pressure chambers. Thereafter, the CCA becomes a
permanent component of the wood. The preservative in the wood acts as both an
insecticide and a fungicide, thereby effectively eliminating the two principal
causes of wood deterioration that exist in North America. The Company has
developed and implemented numerous refinements to the basic CCA treatment
process, and considers its process to be "state of the art."
In order to alleviate environmental concerns, in the mid-1980's the
Company began installing monitoring wells at all of its treating facilities
where groundwater contamination was a potential problem. Quality assurance
personnel from the Company's headquarters perform audits, including soil and
groundwater sampling at least semi-annually to assure that the treating process
is being performed in accordance with the Company's stringent standards for both
environmental safety and product quality.
At the time the monitoring wells were installed at the Company's Granger,
Indiana facility in 1986, chromium was discovered in the groundwater in excess
of the EPA limit for drinking water at one end of the Company's property.
Subsequent testing also revealed surface water and soil contamination in excess
of EPA limits in three other areas of the plant. The Company initiated a
voluntary remediation program. The extent of contamination was defined and a
remediation plan
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was designed and implemented. This contamination was successfully remediated,
and the Company is currently conducting confirmatory sampling in accordance with
its agreement with the State of Indiana.
In 1991, the Company discovered chromium in the groundwater in excess of
the EPA drinking water limit in connection with the replacement of a treating
facility previously purchased in Union City, Georgia. A groundwater recovery
program in which large volumes of groundwater are pumped from the wells for use
in the Company's treatment process has corrected this problem.
The Company acquired several facilities from Chesapeake Corporation in
October 1993. Based on the agreements between the Company and Chesapeake
Corporation, the environmental conditions existing at the Elizabeth City, NC,
Stockertown, PA and North East, MD sites are the responsibility of the Company.
Environmental conditions consist of limited soil and/or groundwater
contamination of CCA components. Similarly, the Company purchased a treating
facility in Schertz, TX with limited soil contamination in December 1998. The
nature and extent of each of these conditions does not require immediate action.
If these sites are closed, some remedial action such as soil treatment and/or
removal may be required. Estimates of probable costs have been prepared for each
of these sites.
The Company has accrued for costs of remediation of all of its sites
totaling approximately $2.3 million at December 26, 1998. Except for the
situations described above, the Company is not aware of any material
environmental problems affecting its properties.
SEASONAL INFLUENCES. The Company's manufactured housing and site-built
construction markets are affected by seasonal influences in the northern states
during the winter months when installation and construction is more difficult.
The activities in the DIY market have substantial seasonal impacts. The
demand for many of the Company's DIY products is highest during the period of
April to August. Accordingly, its sales to the DIY market tend to be greater
during the second and third quarters. The Company builds its inventory of
finished goods throughout the winter and spring to support this sales peak.
Restraints on production capacity made this a necessary practice which
potentially exposed the Company to greater adverse effects of changes in
economic and industry trends. Since 1995, inventory management initiatives and
supply programs with vendors have been used to reduce the exposure to adverse
changes in the commodity lumber market, and decrease demands on cash resources.
SUPPLIERS. The Company is one of the largest domestic buyer of solid sawn
lumber from primary producers (lumber mills). It uses primarily southern yellow
pine in its pressure-treating operations, which it obtains from mills located
through the states comprising the sun belt. Other species used by the Company
include "spruce-pine-fir," from Ontario, Quebec, British Columbia, and Alberta,
Canada; hemlock, Douglas fir and cedar from the Pacific Northwest; inland
species of Ponderosa pine; and Brazilian pine. There are numerous primary
producers for all varieties used by the Company, and the Company is not
dependent on any particular source of supply. The Company's financial resources,
in combination with its strong sales network and ability to remanufacture
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lumber, enable it to purchase a large percentage of a primary producer's output
(as opposed to only those dimensions or grades in immediate need), thereby
lowering its average cost of raw materials. Management believes this represents
a significant competitive advantage.
INTELLECTUAL PROPERTY. The Company owns a patent relating to automated
equipment for the manufacture of lattice, a tie-down strap patent related to
truss components, and a patent on machinery used in the production of joint
compound and wall texture. In addition, it owns four registered trademarks:
PRO-WOOD(R) relating to the preservative-treated wood products; Deck
Necessities(R) relating to the deck component products; the name Universal
Forest Products(R); and a pine tree logo. The Company has applied for an
additional registered trademark related to its ProFence(TM) products. In
addition, it claims common law trademark rights to several other trademarks of
lesser importance. While it believes its patent and trademark rights are
valuable, the loss of its patent or any trademark would not have a material
adverse impact on the competitive position of the Company.
RESEARCH AND DEVELOPMENT. Research and development efforts by the Company
generally fall into four categories: engineering and testing of new truss
designs; design and development of wood treatment systems and manufacturing
processes; design and development of machinery and tooling of various wood
shaping devices; and development of new products. Although important to the
Company's competitive strengths and growth, the dollar amount of research and
development expenditures has not typically been material to the Company.
However, in 1998, the Company spent approximately $2.8 million associated with
development of a new product. The Company is continuing its research activities
with respect to this product.
EMPLOYEES. At March 1, 1999, the Company employed approximately 4,400
persons. No Company employees are represented by a labor union, except for a
small facility located in Lerma, Mexico with approximately 20 employees. The
Company has never experienced a work stoppage due to a labor dispute, and
believes its relations with employees are good.
BACKLOG. Due to the nature of the Company's DIY, manufactured housing and
industrial businesses, backlog information is not meaningful. The maximum time
between receipt of a firm order and shipment does not usually exceed a few days.
Therefore, the Company would not normally have a backlog of unfilled orders in a
material amount. The relationships with its major customers are such that it is
either the exclusive supplier of certain products and/or certain geographic
areas, or the designated source for a specified portion of the customer's
requirements. In such cases, either the Company is able to forecast the
customer's requirements or the customer may provide an estimate of its future
needs. In neither case, however, will the Company receive firm orders until just
prior to the anticipated delivery dates for the products in question.
At March 1, 1999, backlog orders associated with the site-built
construction business, a new market for the Company, approximated $15.9 million,
representing approximately five weeks production. The Company believes the
relatively short time period associated with its backlog, in certain regions,
provides a significant competitive advantage.
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(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
The dominant portion of the Company's operations and sales occur in the
United States. Separate financial information about foreign and domestic
operations and export sales is incorporated by reference from Footnote O of the
Consolidated Financial Statements presented under Item 8 herein.
ITEM 2. PROPERTIES.
The Company's headquarters are located on a ten acre site adjacent to a
main thoroughfare in suburban Grand Rapids, Michigan. The headquarters building
consists of several one and two story structures of wood construction containing
approximately 49,000 square feet of office space.
The Company currently has 72 facilities at 63 locations. These facilities
are located in 23 U.S. states, two Canadian provinces, and two Mexican states,
and are involved in either the manufacture, preservative treatment, or
distribution of lumber products, or a combination of these activities. These
facilities are generally of steel frame and aluminum construction and situated
on fenced sites ranging in size from 7 acres to 48 acres. Depending upon
function and location, these facilities typically utilize office space between
1,500 and 5,000 square feet, manufacturing space between 10,000 and 105,000
square feet, treating space between 25,000 and 300,000 square feet, and covered
storage ranging from 10,000 to 100,000 square feet.
The Company owns all of its properties, free from any significant
mortgage or other encumbrance, except for 12 regional facilities which are
leased. The Company believes that all of these operating facilities are adequate
in capacity and condition to service existing customer locations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not involved in any pending legal proceedings other than
routine litigation incidental to the ordinary conduct of its business, none of
which would result in a material impact on the Company, individually or in the
aggregate, in the event of an adverse outcome.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal year 1998.
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ADDITIONAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT.
The following table lists the names, ages and positions of all of the
Company's executive officers as of March 1, 1999. Executive officers are elected
annually by the Board of Directors at the first meeting of the Board following
the annual meeting of shareholders.
<TABLE>
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Name Age Position
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<S> <C> <C>
Peter F. Secchia 61 Chairman of the Board, Universal Forest Products, Inc.
William G. Currie 51 Chief Executive Officer and President, Universal Forest Products, Inc.
James H. Ward 55 President, Universal Forest Products Eastern Division, Inc.
Michael B. Glenn 47 President, Universal Forest Products Western Division, Inc.
Robert K. Hill 51 Exec. Vice Pres. Operations, Universal Forest Products Western Division, Inc.
Robert D. Coleman 44 Exec. Vice Pres. Manufacturing, Universal Forest Products, Inc.
Philip E. Rogers 48 Exec. Vice Pres. National Sales and Marketing, Universal Forest Products, Inc.
Matthew J. Missad 38 Executive Vice President and Secretary, Universal Forest Products, Inc.
Elizabeth A. Nickels 36 Chief Financial Officer and Treasurer, Universal Forest Products, Inc.
Carroll M. Shoffner 66 Chairman, Shoffner Industries, L.L.C.
Gary A. Wright 51 President, Shoffner Industries, L.L.C.
Eric S. Maxey 40 Vice President of Administration, Universal Forest Products, Inc.
Jeff A. Higgs 44 Vice President, Universal Forest Products Western Division, Inc.
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</TABLE>
Peter F. Secchia, Chairman of the Board of Directors, began his service
with the Company in 1962 and has been a director of the Company since 1967. Mr.
Secchia served as President, Chief Executive Officer, and Chairman of the
Company from 1971 until 1989, when he was appointed U.S. Ambassador to Italy.
Mr. Secchia completed his tenure as Ambassador on January 20, 1993, when he
rejoined the Company as Chairman of the Board.
William G. Currie, the Chief Executive Officer and President of the
Company, joined the Company in 1971. From 1983 to 1990, Mr. Currie was President
of Universal Forest Products, Inc. and he was the President and Chief Executive
Officer of The Universal Companies, Inc. from 1989 until the merger to form the
Company in 1993.
James H. Ward joined the Company in 1972 as a regional salesman. From
1979 to 1987, he served as Vice President of the Company's Southern operations.
He was elected to Senior Vice President in June of 1987. Effective December 1,
1997, Mr. Ward became the President of the Universal Forest Products Eastern
Division.
Michael B. Glenn has been employed by the Company since 1974. In June of
1989, Mr. Glenn was elected Senior Vice President of the Company's Southwest
operations. From September 1983 to June 1989, Mr. Glenn was Vice President of
those operations. Effective December 1, 1997, Mr. Glenn became the President of
the Universal Forest Products Western Division.
Robert K. Hill has been with the Company since 1986. In March of 1993, he
was elected Senior Vice President of the Company's Far West operations. From
1989 to 1993, he served as Vice
12
<PAGE> 13
President of those operations. Effective December 1, 1997, Mr. Hill became the
Executive Vice President of Operations of the Universal Forest Products Western
Division.
Robert D. Coleman, an employee of the Company since 1979, served as
Senior Vice President of the Company's Midwest operations from September 1, 1993
until December of 1997. From 1986 to 1993 he served as Vice President of the
Company's Atlantic Division. On December 1, 1997, Mr. Coleman became the
Executive Vice President of Manufacturing of the Universal Forest Products
Eastern Division. On January 1, 1999, Mr. Coleman was named the Executive Vice
President of Manufacturing for Universal Forest Products, Inc.
Philip E. Rogers, an employee of the Company since 1989, served as Vice
President of Operations for the Universal Forest Products Southwest Company
until November of 1997. At that time, Mr. Rogers became the Vice President of
Sales, National Accounts Retail. Effective January 1, 1999, Mr. Rogers was
promoted to Executive Vice President of National Sales and Marketing for
Universal Forest Products, Inc.
Matthew J. Missad has been employed by the Company since 1985. Mr. Missad
has served as General Counsel and Secretary since December 1, 1987, and Vice
President Corporate Compliance since August 1989. In February 1996, Mr. Missad
was promoted to Executive Vice President.
Elizabeth A. Nickels, CPA, joined the Company in July of 1993 as Chief
Financial Officer and Treasurer. From 1990 to 1993, Ms. Nickels served as Vice
President of Operations of The Waypointe Companies, Inc., a company involved in
construction, engineering, software design, and marketing. From 1986 to 1990,
Ms. Nickels served as Controller of Riebel Development Corporation. In February
1996, Ms. Nickels was promoted to Executive Vice President of Finance and
Administration.
Carroll M. Shoffner, has been affiliated with the Company since March 30,
1998, at which time the Company acquired Shoffner Industries, Inc., with whom he
had been employed since 1964. Mr. Shoffner serves as Chairman of Shoffner
Industries, L.L.C., and is a member of the Board of Directors of Universal
Forest Products, Inc.
Gary A. Wright, has been affiliated with the Company since March 30, 1998
at which time the Company acquired Shoffner Industries, Inc., with whom he had
been employed since 1978. Mr. Wright serves as President of Shoffner Industries,
L.L.C.
Eric S. Maxey, an employee of the Company since 1991, has served as Vice
President of Administration since 1992. Prior to that time and since 1984, he
served as Controller.
Jeff A. Higgs, has been an employee of the Company since April 20, 1998,
at which time the Company acquired the assets of Advanced Component Systems,
Inc. Mr. Higgs serves as a Vice President of Operations for the Universal Forest
Products Western Division, Inc.
13
<PAGE> 14
PART II
The following information items in this Part II, which are contained in
the Registrant's Annual Report to Shareholders for the fiscal year ended
December 26, 1998, are specifically incorporated by reference into this Form
10-K Report. Selected portions of the Registrant's Annual Report to Shareholders
for the fiscal year ended December 26, 1998 are filed as Exhibit 13 with this
Form 10-K Report.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS.
The information required by this Item is incorporated by reference from
the Company's Annual Report to Shareholders for the fiscal year ended December
26, 1998, under the caption "Price Range of Common Stock and Dividends."
ITEM 6. SELECTED FINANCIAL DATA.
The information required by this Item is incorporated by reference from
the Company's Annual Report to Shareholders for the fiscal year ended December
26, 1998, under the caption "Five Year Summary of Selected Financial Data."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information required by this Item is incorporated by reference from
the Company's Annual Report to Shareholders for the fiscal year ended December
26, 1998, under the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this Item is incorporated by reference from
the Company's Annual Report to Shareholders for the fiscal year ended December
26, 1998, under the following captions:
- "Independent Auditors' Report"
- "Consolidated Balance Sheets"
- "Consolidated Statements of Earnings"
- "Consolidated Statements of Shareholders' Equity"
- "Consolidated Statements of Cash Flows"
- "Notes to Consolidated Financial Statements"
14
<PAGE> 15
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to executive officers is included in this report in
the last Section of Part I under the Caption "Executive Officers of the
Registrant." Information relating to directors and compliance with Section 16(a)
of the Securities and Exchange Act of 1934 is incorporated by reference to the
Company's definitive Proxy Statement for the 1999 Annual Meeting of
Shareholders, as filed with the Commission, under the captions "Election of
Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance."
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation is incorporated by
reference to the Company's definitive Proxy Statement for the 1999 Annual
Meeting of Shareholders under the caption "Executive Compensation," excluding
information under the captions "Compensation Committee Report" and "Stock
Performance Graph."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information relating to security ownership of certain beneficial owners
and management is incorporated by reference to the Company's definitive Proxy
Statement for the 1999 Annual Meeting of Shareholders under the captions
"Ownership of Common Stock" and "Securities Ownership of Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS.
Information relating to certain relationships and related party
transactions is incorporated by reference to the Company's definitive Proxy
Statement for the 1999 Annual Meeting of Shareholders under the caption
"Election of Directors."
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements. The following Independent Auditors' Report and
Consolidated Financial Statements are incorporated by reference, under Item 8 of
this report, from the Company's Annual Report to Shareholders for the fiscal
year ended December 26, 1998:
15
<PAGE> 16
- Independent Auditors' Report
- Consolidated Balance Sheets as of December 26, 1998 and
December 27, 1997
- Consolidated Statements of Earnings for the Years
Ended December 26, 1998, December 27, 1997 and December
28, 1996
- Consolidated Statements of Shareholders' Equity for the Years
Ended December 26, 1998, December 27, 1997 and December
28, 1996
- Consolidated Statements of Cash Flows for the Years Ended
December 26, 1998, December 27, 1997 and December 28,
1996
- Notes to Consolidated Financial Statements
2. Financial Statement Schedules. All schedules required by this Form
10-K Report have been omitted because they were inapplicable, included in the
Consolidated Financial Statements or Notes to Consolidated Financial Statements,
or otherwise not required under instructions contained in Regulation S-X.
3. Exhibits. Reference is made to the Exhibit Index which is found on
pages E-1 through E-4 of this Form 10-K Report.
(b) No reports on Form 8-K were filed in the fourth quarter of 1998.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934 the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Dated: March 25, 1999 UNIVERSAL FOREST PRODUCTS, INC.
By: /s/ PETER F. SECCHIA
------------------------------------------------
PETER F. SECCHIA, CHAIRMAN OF THE BOARD
and
/s/ WILLIAM G. CURRIE
------------------------------------------------
WILLIAM G. CURRIE, PRESIDENT AND CHIEF EXECUTIVE
OFFICER
and
/s/ ELIZABETH A. NICKELS
------------------------------------------------
ELIZABETH A. NICKELS, CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
17
<PAGE> 18
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on this 25th day of March, 1999, by the following
persons on behalf of the Company and in the capacities indicated.
Each Director of the Company whose signature appears below hereby
appoints Matthew J. Missad and Elizabeth A. Nickels, and each of them
individually, as his attorney-in-fact to sign in his name and on his behalf as a
Director of the Company, and to file with the Commission any and all amendments
to this report on Form 10-K to the same extent and with the same effect as if
done personally.
/s/ PETER F. SECCHIA /s/ JOHN W. GARSIDE
- ------------------------------------ ------------------------------------
PETER F. SECCHIA, DIRECTOR JOHN W. GARSIDE, DIRECTOR
/s/ WILLIAM G. CURRIE /s/ PHILIP M. NOVELL
- ------------------------------------ ------------------------------------
WILLIAM G. CURRIE, DIRECTOR PHILIP M. NOVELL, DIRECTOR
/s/ RICHARD M. DEVOS /s/ LOUIS A. SMITH
- ------------------------------------ ------------------------------------
RICHARD M. DEVOS, DIRECTOR LOUIS A. SMITH, DIRECTOR
/s/ JOHN C. CANEPA /s/ CARROLL M. SHOFFNER
- ------------------------------------ ------------------------------------
JOHN C. CANEPA, DIRECTOR CARROLL M. SHOFFNER, DIRECTOR
18
<PAGE> 19
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2 An Agreement to acquire the Wood Treating Operations of Chesapeake
Corporation was filed as Exhibit 2 to a Registration Statement on
Form S-1 (No. 33-69474) and the same is incorporated herein by
reference.
2(a) A Lease Termination Agreement with Chesapeake Corporation dated
July 20, 1995 was filed as Exhibit 2(a) to a Form 10-Q Quarterly
Report for the quarter period ended July 1, 1995, and the same is
incorporated herein by reference.
2(b) Agreement and Plan of Reorganization dated as of March 30, 1998,
by and among Universal Forest Products, Inc., UFP Acquisition
Corp. II, Shoffner Industries, Inc. and the Shareholders of
Shoffner Industries, Inc., together with the Annexes thereto, was
filed as Exhibit 2.1 to a Form 8-K Report dated March 30, 1998,
and the same is incorporated herein by reference.
2(c) Purchase Agreement dated as of February 18, 1998, by and among
Universal Forest Products Southwest Company, Inc., Advanced
Component Systems, Inc., T.F. Investments, L.L.C., and F.T.G.
Leasing, Inc., was filed as Exhibit 2.1 to a Form 8-K Report dated
April 20, 1998, and the same is incorporated herein by reference.
3(a) Registrant's Articles of Incorporation were filed as Exhibit 3(a)
to a Registration Statement on Form S-1 (No. 33-69474) and the
same is incorporated herein by reference.
3(b) Registrant's Bylaws were filed as Exhibit 3(b) to a Registration
Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference.
4(a) Specimen form of Stock Certificate for Common Stock was filed as
Exhibit 4(a) to a Registration Statement on Form S-1 (No.
33-69474) and the same is incorporated herein by reference.
4(b)(1) Loan Agreement with Old Kent Bank and Trust Company dated April
18, 1988 was filed as Exhibit 4(b)(1) to a Registration Statement
on Form S-1 (No. 33-69474) and the same is incorporated herein by
reference.
4(b)(2) Business Loan Agreement with Michigan National Bank dated August
17, 1988, as amended was filed as Exhibit 4(b)(2) to a
Registration Statement on Form S-1 (No. 33- 69474) and the same is
incorporated herein by reference.
4(b)(3) Series A, Senior Unsecured Note Agreement dated May 5, 1994, was
filed as Exhibit 4(b)(3) to a Form 10-Q Quarterly Report for the
quarter period ended March 26, 1994, and the same is incorporated
herein by reference.
E-1
<PAGE> 20
EXHIBIT NO. DESCRIPTION
- ----------- -----------
4(b)(4) First Amendment to Note Agreement dated November 13, 1998,
relating to Series A, Senior Unsecured Note Agreement dated May 5,
1994.
10(a) Redemption Agreement with Peter F. Secchia, dated August 26, 1993,
was filed as Exhibit 10(a) to a Registration Statement on Form S-1
(No. 33-69474) and the same is incorporated herein by reference.
10(b) Form of Indemnity Agreement entered into between the Registrant
and each of its directors was filed as Exhibit 10(b) to a
Registration Statement on Form S-1 (No. 33- 69474) and the same is
incorporated herein by reference.
10(c)(1) Lease guarantee dated April 26, 1978, given by Registrant on
behalf of Universal Restaurants, Inc. to Hol-Steak, Inc. was filed
as Exhibit 10(c)(1) to a Registration Statement on Form S-1 (No.
33-69474) and the same is incorporated herein by reference.
10(c)(2) Lease guarantee, dated March 10, 1978, given by Registrant on
behalf of Universal Restaurants, Inc. to Jackson Properties was
filed as Exhibit 10(c)(2) to a Registration Statement on Form S-1
(No. 33-69474) and the same is incorporated herein by reference.
10(c)(3) Lease guarantee, dated November 15, 1977, by Registrant on behalf
of Great Lakes Steak Company of Ann Arbor, Inc. to William C. and
Sally A. Martin was filed as Exhibit 10(c)(3) to a Registration
Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference.
10(c)(4) Lease guarantee, dated March 10, 1978, by Registrant on behalf of
Universal Restaurants, Inc. to Forbes/Cohen Properties was filed
as Exhibit 10(c)(4) to a Registration Statement on Form S-1 (No.
33-69474) and the same is incorporated herein by reference.
10(c)(5) Lease guarantee, dated April 26, 1978, by Registrant on behalf of
Universal Restaurants, Inc. to Dorr D. and Nettie R. Granger was
filed as Exhibit 10(c)(5) to a Registration Statement on Form S-1
(No. 33-69474) and the same is incorporated herein by reference.
10(d)(1) Lease between Registrant and its Employee Profit Sharing and
Retirement Trust Fund as lessor regarding Registrant's Shakopee,
Minnesota facility was filed as Exhibit 10(d)(1) to a Registration
Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference.
10(d)(2) Lease between Registrant and McIntosh Lumber Co. as lessor
regarding Registrant's Huntington Beach, California facility was
filed as Exhibit 10(d)(2) to a Registration Statement on Form S-1
(No. 33-69474) and the same is incorporated herein by reference.
E-2
<PAGE> 21
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10(d)(3) Sublease between Registrant and the Community Development
Authority of the City of Moreno Valley regarding Registrant's
Moreno Valley, California facility, with main lease attached was
filed as Exhibit 10(d)(3) to a Registration Statement on Form S-1
(No. 33- 69474) and the same is incorporated herein by reference.
10(d)(4) Lease between Registrant and Germania-Sykes as lessor regarding
land adjacent to Registrant's Moreno Valley facility was filed as
Exhibit 10(d)(4) to a Registration Statement on Form S-1 (No.
33-69474) and the same is incorporated herein by reference.
10(d)(5) Lease between Registrant and Niagara Industrial Mall, Inc. as
lessor regarding Registrant's Niagara, Ontario facility, as
amended was filed as Exhibit 10(d)(5) to a Registration Statement
on Form S-1 (No. 33-69474) and the same is incorporated herein by
reference.
*10(e)(1) Form of Executive Stock Option Agreement was filed as Exhibit
10(e)(1) to a Registration Statement on Form S-1 (No. 33-69474)
and the same is incorporated herein by reference.
*10(e)(2) Form of Officers' Stock Option Agreement was filed as Exhibit
10(e)(2) to a Registration Statement on Form S-1 (No. 33-69474)
and the same is incorporated herein by reference.
*10(f) Salaried Employee Bonus Plan was filed as Exhibit 10(f) to a
Registration Statement on Form S-1 (No. 33-69474) and the same is
incorporated herein by reference.
10(g)(1) Term Loan Agreement between Registrant and NBD Bank, N.A. dated
December 1, 1992, was filed as Exhibit 10(g)(1) to a Registration
Statement on Form S-1 (No. 33- 69474) and the same is incorporated
herein by reference.
10(g)(2) Promissory Note with Old Kent Bank and Trust Company, dated
September 1, 1993, was filed as Exhibit 10(g)(2) to a Registration
Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference.
10(g)(3) Installment Business Loan Note with NBD Bank, N.A. dated December
1, 1992, was filed as Exhibit 10(g)(3) to a Registration Statement
on Form S-1 (No. 33-69474) and the same is incorporated herein by
reference.
10(g)(4) Business Loan Agreement with Michigan National Bank executed April
14, 1987, was filed as Exhibit 10(g)(4) to a Registration
Statement on Form S-1 (No. 33-69474) and the same is incorporated
herein by reference.
E-3
<PAGE> 22
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10(g)(5) Promissory Note with NBD Bank, N.A., dated January 20, 1994, was
filed as Exhibit 10(g)(5) to a Form 10-K Annual Report for the
year ended December 25, 1993, and the same is incorporated herein
by reference.
10(g)(6) Promissory Note with Old Kent Bank and Trust Company, dated
January 24, 1994, was filed as Exhibit 10(g)(6) to a Form 10-K
Annual Report for the year ended December 25, 1993, and the same
is incorporated herein by reference.
10(g)(7) Promissory Note with Michigan National Bank, dated January 27,
1994, was filed as Exhibit 10(g)(7) to a Form 10-K Annual Report
for the year ended December 25, 1993, and the same is incorporated
herein by reference.
10(g)(8) Promissory Note with Comerica Bank, dated February 14, 1994, was
filed as Exhibit 10(g)(8) to a Form 10-K Annual Report for the
year ended December 25, 1993, and the same is incorporated herein
by reference.
10(h)(1) Land Contract Agreement dated May 26, 1994, was filed as Exhibit
10(h)(1) to a Form 10-Q Quarterly Report for the quarter period
ended June 25, 1994, and the same is incorporated herein by
reference.
10(i)(1) Revolving Credit Agreement dated November 13, 1998.
10(j)(1) Series 1998-A, Senior Note Agreement dated December 21, 1998.
13 Selected portions of the Company's Annual Report to Shareholders
for the fiscal year ended December 26, 1998.
21 List of Registrant's subsidiaries.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
- -----------------------
*Indicates a compensatory arrangement.
E-4
<PAGE> 1
EXHIBIT 4(b)(4)
UNIVERSAL FOREST PRODUCTS, INC.
-----------------------------------
FIRST AMENDMENT
Dated as of November 13, 1998
to
NOTE AGREEMENTS
Dated as of May 1, 1994
-----------------------------------
Re: $40,000,000 7.15% Senior Notes
Due May 5, 2004
<PAGE> 2
FIRST AMENDMENT TO NOTE AGREEMENTS
THIS FIRST AMENDMENT dated as of November 13, 1998 (this "First
Amendment") to the Note Agreements each dated as of May 1, 1994 is between
UNIVERSAL FOREST PRODUCTS, INC., a Michigan corporation (the "Company"), and
each of the institutions which is a signatory to this First Amendment
(collectively, the "Noteholders").
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into
separate and several Note Agreements each dated as of May 1, 1994 (collectively,
the "Note Agreements"). The Company has heretofore issued the $40,000,000 7.15%
Senior Notes Due May 5, 2004 (the "Notes") dated May 5, 1994 pursuant to the
Note Agreements.
B. The Company and the Noteholders now desire to amend the Note
Agreements in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreements unless herein defined or the context
shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this First Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of this First Amendment set forth in
Section 3.1 hereof, and in consideration of good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Noteholders do hereby agree as follows:
SECTION 1. AMENDMENTS.
Section 1.1. Section 5.3 of the Note Agreements shall be and is hereby
amended in its entirety to read as follows:
"Section 5.3. Taxes, Claims for Labor and Materials;
Compliance with Laws. (a) The Company will promptly pay and
discharge, and will cause each Subsidiary promptly to pay and
discharge, all lawful taxes, assessments and governmental charges or
levies imposed upon the Company or such Subsidiary, respectively, or
upon or in respect of all or any part of the property or business of
the Company or such Subsidiary, all trade accounts payable in
accordance with usual and customary business terms, and all claims for
work, labor or materials, which if unpaid might become a Lien upon any
property of the Company or such Subsidiary; provided that the Company
or such Subsidiary shall not be required to pay any such tax,
assessment, charge, levy, account payable or claim if (1) the
validity, applicability or amount thereof is being contested in good
faith by appropriate actions or proceedings which will prevent the
forfeiture or sale of any property of the Company or such Subsidiary or
any material interference with the use thereof by the Company or such
Subsidiary, and (2) the Company or such Subsidiary shall set aside on
its books, reserves deemed by it to be adequate with respect thereto,
or (3) to the extent that failure to pay any
<PAGE> 3
of the foregoing or comply with any of the foregoing relates solely to
Subsidiaries which are not Wholly-owned Subsidiaries of the Company or
Guarantors and if all such non Wholly-owned Subsidiaries do not, if
considered in the aggregate as a single Subsidiary, constitute a
Significant Subsidiary and such failure could not materially and
adversely affect the properties, business, prospects, profits or
condition (financial or otherwise) of the Company or of the Company and
its Subsidiaries, taken as a whole (but the Company shall provide
notice to the holders of the Notes of the occurrence of any such
failure to comply or failure to pay described in this provision).
(b) The Company will promptly comply and will cause each
Subsidiary to promptly comply with all laws, ordinances or governmental
rules and regulations to which it is subject, including, without
limitation, the Occupational Safety and Health Act of 1970, as amended,
ERISA and all Environmental Laws, the violation of which could
materially and adversely affect the properties, business, prospects,
profits or condition (financial or otherwise) of the Company or of the
Company and its Subsidiaries, taken as a whole, or would result in any
Lien not permitted under Section 5.9, provided that the foregoing does
not apply to Subsidiaries which are not Wholly-owned Subsidiaries of
the Company or Guarantors if all such non Wholly-owned Subsidiaries do
not, if considered in the aggregate as a single Subsidiary, constitute
a Significant Subsidiary."
Section 1.2. Section 5.6 of the Note Agreements shall be and is hereby
amended in its entirety to read as follows:
"Section 5.6. Consolidated Net Worth. The
Company will at all times keep and maintain Consolidated Net Worth at
an amount not less than the sum of (a) $155,000,000, plus
(b) 50% of Consolidated Net Earnings for the fiscal quarter of
the Company ending in December, 1998 and each fiscal year of the
Company ending thereafter, provided that if such Consolidated Net
Earnings of the Company is negative for the fiscal quarter ending in
December, 1998 or any fiscal year thereafter, as the case may be, the
amount added for such fiscal quarter or year shall be zero and it shall
not reduce the amount added for any other fiscal year, and plus 100% of
the net proceeds from the sale or other transfer of any capital stock
of the Company."
Section 1.3. Section 5.7 of the Note Agreements shall be and is hereby
amended in its entirety to read as follows:
"The Company will at all times keep and maintain the ratio of
Consolidated Net Earnings Available for Fixed Charges for any four of
the immediately preceding five fiscal quarters (taken as a single
accounting period) to Consolidated Fixed Charges for such period at not
less than 1.75 to 1.00.
For purposes of calculations under this Section 5.7,
Consolidated Net Earnings Available for Fixed Charges and Consolidated
Fixed Charges shall be adjusted for the period in respect of which any
such calculation is being made to give effect to (i) the audited "net
earnings" (determined in a manner consistent with the definition of
"Consolidated Net Earnings"
<PAGE> 4
contained in this Agreement) of any business entity acquired by the
Company or any Subsidiary (the "Acquired Business") and (ii) all
Indebtedness incurred by the Company or any Subsidiary in connection
with such acquisition, and shall be computed as if the Acquired
Business had been a Subsidiary throughout the period and all
Indebtedness incurred in connection with such acquisition had been
incurred at the beginning of such period in respect of which such
calculation is being made. In the case of any business entity acquired
during the twelve calendar month period immediately preceding the date
of any determination hereunder whose financial records are not, and are
not required to be in accordance with applicable laws, rules and
regulations, audited by the Company's independent public accountants at
the time of the acquisition thereof, the Company shall base such
determination upon the Company's internally audited net earnings of
such business entity for the immediately preceding fiscal year or the
net earnings of such business entity as audited by such business
entity's independent auditors for the immediately preceding fiscal
year."
Section 1.4. Section 5.8 of the Note Agreements shall be and is hereby
mended in its entirety to read as follows:
"Section 5.8. Limitations on Current Debt and Funded Debt. (a)
The Company will not permit or suffer the Adjusted Leveraged Ratio to
be greater than 0.60 to 1.0 at any time.
(b) The Company will not, and will not permit any Subsidiary
to, create, assume, guarantee or otherwise incur or any in manner be or
become liable in respect of (1) any Current Debt or Funded Debt of the
Company or any Subsidiary secured by Liens permitted by Section
5.9(A)(8), or (2) any other Current Debt or Funded Debt of a Subsidiary
(other than Qualified Current Debt and Qualified Funded Debt of a
Subsidiary Guarantor), or (3) any Attributable Indebtedness of Sale and
Leaseback Transactions of the Company or any Subsidiary, unless at the
time of creation, issuance, assumption, guarantee or incurrence thereof
and after giving effect thereto and to the application of the proceeds
thereof, the sum of (A) Current Debt and Funded Debt of the Company and
its Subsidiaries secured by Liens permitted by Section 5.9(A)(8), plus
(without duplication) (B) Current Debt and Funded Debt of Subsidiaries
(other than Qualified Current Debt and Qualified Funded Debt of
Subsidiary Guarantors) and (C) Attributable Indebtedness of Sale and
Leaseback Transactions of the Company and its Subsidiaries would not
exceed 15% of Consolidated Net Worth.
(c) Any Person which becomes a Subsidiary after the date
hereof shall for all purposes of this Section 5.8 be deemed to have
created, assumed or incurred at the time it becomes a Subsidiary all
Current Debt and Funded Debt of such Person existing immediately after
it becomes a Subsidiary."
Section 1.5. Section 5.9 of the Note Agreements is hereby amended
as follows:
(a) "and" at the end of clause (8) of Section 5.9(a) is
hereby deleted;
(b) the "period" at the end of clause (9) of Section 5.9
(a) is hereby deleted and a comma is substituted therefor; and
(c) a new clause (10) is hereby added to read as follows:
"(10) the Liens of any Stock Pledge Agreements."
<PAGE> 5
Section 1.6. Section 5.10(b)(1) of the Note Agreements shall be amended
in its entirely to read as follows:
"(1) the sale, lease, transfer or other disposition of assets of a
Subsidiary to the Company or a Wholly-owned Subsidiary, or of the Company to a
Wholly-owned Subsidiary; or"
Section 1.7. Section 5.10(c)(3) of the Note Agreements shall be and is
hereby amended by deleting therefrom ", except that such prohibition against any
such sale or other disposition to an Affiliate shall not be deemed or construed
to apply to the sale of the Subsidiary Stock of Universal Development and Real
Estate, Inc., a Michigan corporation, to its employees who, after giving
effect to such sale, shall no longer be employees of the Company or any of its
other Subsidiaries".
Section 1.8. Section 5.11 of the Note Agreements shall be and is hereby
amended in its entirety to read as follows:
"Section 5.11. Guaranties. The Company will not, and will not
permit any Subsidiary to, become or be liable in respect of any
Guaranty except Guaranties by the Company which are limited in amount
to a stated maximum dollar exposure or which constitute Guaranties of
obligations incurred by any Subsidiary in compliance with the
provisions of this Agreement; provided that nothing contained in this
Section 5.11 shall be deemed or construed to prohibit any Subsidiary
from executing and delivering the Subsidiary Note Guaranty or joining
the same as contemplated by Section 3.1(f) of the First Amendment and
Section 5.17, respectively, or from executing and delivering any
Subsidiary Bank Guaranty; provided that in each such case each
beneficiary of any such Guaranty shall have entered into and become a
party to the Intercreditor Agreement."
Section 1.9. The following shall be added as a new Section 5.17 to the
Note Agreements:
"Section 5.17.Guaranty by Subsidiaries. (a) Subject to
clause (b) of this SS.5.17, the Company will cause each Subsidiary
which delivers a Guaranty after the Closing Date to concurrently enter
into a Subsidiary Note Guaranty and within three Business Days
thereafter shall deliver to each of the holders of the Notes the
following items:
(1) an executed counterpart of the Subsidiary Note
Guaranty or a joinder agreement pursuant to which such
Subsidiary becomes a party to the Subsidiary Note Guaranty;
(2) a certificate signed by an authorized officer of
such Subsidiary making representations and warranties to the
effect of those contained in Paragraphs 2, 10, 12 and
17 of Exhibit B to the Note Agreements, but with respect to
such Subsidiary and the Subsidiary Note Guaranty;
(3) such documents and evidence with respect to such
Subsidiary as the Requisite Holders may reasonably request in
order to establish the existence and good standing of such
Subsidiary and the authorization of the transactions
contemplated by the Subsidiary Note Guaranty; and
(4) an opinion of counsel satisfactory to the
Requisite Holders to the effect that the Subsidiary Note
Guaranty or the joinder agreement pursuant to which
<PAGE> 6
such Subsidiary has become a party to the Subsidiary Note
Guaranty, as the case may be, has been duly authorized,
executed and delivered and constitutes the legal, valid and
binding contract and agreement of such Subsidiary enforceable
in accordance with its terms, except as an enforcement of such
terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general
equitable principles.
(b) Notwithstanding the requirements of clause (a) of this
Section 5.17, the Company shall not be required to comply therewith if,
but only if, the Company can create or incur the Indebtedness evidenced
by any Guaranty entered into by a Subsidiary within the limitations of
Section 5.8(b).
(c) Nothing contained in this Section 5.17 shall be deemed or
construed to otherwise permit a Subsidiary of the Company to create,
assume, guarantee or otherwise incur or in any manner be or become
liable in respect of any Current Debt or Funded Debt which is not
otherwise within the limitations of Section 5.8 and the other
applicable provisions of this Agreement."
Section 1.10. The following shall be added as a new Section 5.18 to the Note
Agreements:
"Section 5.18. Stock Pledge Agreement. If the Company
shall enter into any stock pledge agreement (each, a "Stock Pledge
Agreement") pursuant to which the Company shall grant to the Collateral
Agent or any other Institutional Holder a pledge of and security
interest in the capital stock of any Subsidiary, then and in such
event, the Company shall concurrently with the execution and delivery
of such Stock Pledge Agreement deliver to each of the holders of the
Notes the following items:
(a) an executed counterpart of the Stock Pledge
Agreement;
(b) a certificate signed by an executive officer
of the Company making representations and warranties to the
effect of those contained in Paragraphs 2, 10, 12 and 17 of
Exhibit B to the Note Agreements, but with respect to such
Stock Pledge Agreement and to the effect that such Stock
Pledge Agreement constitutes a first and prior perfected
security interest in the capital stock which is the subject of
such Stock Pledge Agreement free and clear of all Liens of
creditors of the Company, other than the Lien of such Stock
Pledge Agreement;
(c) such modifications, amendments or supplements to
the Intercreditor Agreement as may be deemed necessary by the
Requisite Holders to confirm that any proceeds realized from
the enforcement by the Collateral Agent or such other
Institutional Holder of its rights pursuant to such Stock
Pledge Agreement as pledgee of such capital stock shall be
applied in accordance with the terms and provisions of the
Intercreditor Agreement; and
(d) an opinion of counsel satisfactory to the
Requisite Holders to the effect that (1) such Stock
Pledge Agreement has been duly authorized, executed and
delivered and constitutes the legal, valid and binding
contract and agreement of the Company enforceable in
accordance with its terms, except as an enforcement of such
terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and
<PAGE> 7
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles and (2) such
Stock Pledge Agreement creates a valid and perfected first and
prior security interest in and pledge of the capital stock of
the Subsidiary which is the subject of such Stock Pledge
Agreement."
Section 1.11. Sections 6.1(f), (g), (i), (j), (k) and (l) of the Note
Agreements shall be and are hereby amended in their entirety to read as follows:
"(f) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on any Indebtedness for borrowed money
(other than the Notes) of the Company or any Subsidiary aggregating in
excess of $3,000,000 and such default shall continue beyond the period
of grace, if any, allowed with respect thereto; provided, that an Event
of Default shall not be deemed to have occurred under this Section 6(f)
if any of the foregoing events occur only with respect to Subsidiaries
which are not Wholly-owned Subsidiaries of the Company or Guarantors
and if all such non-Wholly-owned Subsidiaries do not, if considered in
the aggregate as a single Subsidiary, constitute a Significant
Subsidiary; or
(g) Default or the happening of any event shall occur under
any indenture, agreement or other instrument under which any
Indebtedness for borrowed money (other than the Notes) of the Company
or any Subsidiary aggregating in excess of $3,000,000 is outstanding
and such default or event shall result in the acceleration of the
maturity of any Indebtedness for borrowed money of the Company or any
Subsidiary outstanding thereunder; provided, that an Event of Default
shall not be deemed to have occurred under this Section 6(g) if any of
the foregoing events occur only with respect to Subsidiaries which are
not Wholly-owned Subsidiaries of the Company or Guarantors and if all
such non-Wholly-owned Subsidiaries do not, if considered in the
aggregate as a single Subsidiary, constitute a Significant Subsidiary;
or
(i) Final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 (net of insurance proceeds to the
extent the insurer has acknowledged liability with respect thereto) is
or are outstanding against the Company or any Subsidiary or against any
property or assets of either and any one of such judgments has remained
unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a
period of 45 days from the date of its entry, provided, that an Event
of Default shall not be deemed to have occurred under this Section 6(i)
if any of the foregoing events occur only with respect to Subsidiaries
which are not Wholly-owned Subsidiaries of the Company or Guarantors
and if all such non-Wholly-owned Subsidiaries do not, if considered in
the aggregate as a single Subsidiary, constitute a Significant
Subsidiary; or
(j) A custodian, liquidator, trustee or receiver is appointed
for the Company or any Subsidiary or for the major part of the property
of either and is not discharged within 30 days after such appointment,
provided, that an Event of Default shall not be deemed to have occurred
under this of Section 6(j) if any of the foregoing events occur only
with respect to Subsidiaries which are not Wholly-owned Subsidiaries of
the Company or Guarantors and if all such non-Wholly-owned Subsidiaries
do not, if considered in the aggregate as a single Subsidiary,
constitute a Significant Subsidiary; or
(k) The Company or any Subsidiary becomes insolvent or
bankrupt, is generally
<PAGE> 8
not paying its debts as they become due or makes an assignment for the
benefit of creditors, or the Company or any Subsidiary applies for or
consents to the appointment of a custodian, liquidator, trustee or
receiver for the Company or such Subsidiary or for the major part of
the property of either, provided, that an Event of Default shall not be
deemed to have occurred under this Section 6(k) if any of the foregoing
events occur only with respect to Subsidiaries which are not
Wholly-owned Subsidiaries of the Company or Guarantors and if all such
non-Wholly-owned Subsidiaries do not, if considered in the aggregate as
a single Subsidiary, constitute a Significant Subsidiary; or
(l) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Subsidiary and, if instituted against the
Company or any Subsidiary, are consented to or are not dismissed within
60 days after such institution, provided, that an Event of Default
shall not be deemed to have occurred under this Section 6(l) if any of
the foregoing events occur only with respect to Subsidiaries which are
not Wholly-owned Subsidiaries of the Company or Guarantors and if all
such non-Wholly-owned Subsidiaries do not, if considered in the
aggregate as a single Subsidiary, constitute a Significant Subsidiary;
or"
Section 1.12. The following shall be added as a new Section 6.1(m) to
the Note Agreements:
"6.1(m) For any reason the Subsidiary Note Guaranty or any
Stock Pledge Agreement shall cease to be in full force and effect for
any reason whatsoever, including, without limitation, a determination
by any governmental body or court that any of such agreements is
invalid, void or unenforceable or any Person which is a party thereto
shall contest or deny in writing the validity or enforceability of any
of its obligations under any such agreement."
Section 1.13. Section 6.3 of the Note Agreements shall be and is
hereby amended by adding the words "or paragraph (m)," after the word
"inclusive," in the second sentence of said Section 6.3.
Section 1.14. Section 6.4 of the Note agreements shall be and is
hereby amended by adding the words "or paragraph (m)," after the word
"inclusive," in said Section 6.4.
Section 1.15. The definitions in Section 8.1 of the Note
Agreements of the terms "Chesapeake Transaction", "Consolidated Adjusted Net
Worth", "Indebtedness", "Person", "SFAS 106", "SFAS 106 Adjustment" and "SFAS
Transition Obligation" shall be and are hereby
deleted in their entirety.
Section 1.16. The following terms and definitions shall be added
as new defined terms in alphabetical order to Section 8.1 of the Note
Agreements:
"Adjusted Leverage Ratio" shall mean, as of any date, the
ratio of (a) the Total Seasonally Adjusted Debt as of such date to (b)
the Total Adjusted Capitalization as of such date.
<PAGE> 9
"Bank Credit Agreement" shall mean the $175,000,000 Revolving
Credit Agreement dated November 13, 1998 by and among the Company,
various lenders party thereto from time to time and NBD Bank, as Agent.
"Banks" or "the Banks" shall mean the Banks party to the Bank
Credit Agreement.
"Collateral Agent" shall mean NBD Bank, in its role as
Collateral Agent under the Intercreditor Agreement.
"Consolidated Net Worth" shall mean, as of any date, the
amount of any capital stock, paid in capital and similar equity
accounts plus (or minus in the case of a deficit) the capital surplus
and retained earnings of the Company and the Subsidiaries and the
amount of any foreign currency translation adjustment account shown as
a capital account of the Company and its Subsidiaries, all on a
consolidated basis in accordance with GAAP.
"Contingent Liabilities" of any Person shall mean, as of any
date, all obligations of such Person or of others for which such Person
is contingently liable, as obligor, guarantor, surety or in any other
capacity, or in respect of which obligations such Person assures a
creditor against loss or agrees to take any action to prevent any such
loss (other than endorsements of negotiable instruments for collection
in the ordinary course of business), including without limitation all
reimbursement obligations of such Person in respect of any letters of
credit, surety bonds or similar obligations and all obligations of such
Person to advance funds to, or to purchase assets, property or services
from, any other Person in order to maintain the financial condition of
such other Person.
"Financial Contract" of a Person shall mean (a) any
exchangetraded or overthecounter futures, forward, swap or option
contract or other financial instrument with similar characteristics, or
(b) any agreements, devices or arrangements providing for payments
related to fluctuations of interest rates, exchange rates or forward
rates, including, but not limited to, interest rate exchange
agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate
options.
"First Amendment" shall mean the First Amendment to this
Agreement dated as of November 13, 1998.
"Indebtedness" of any Person shall mean, as of any date, (a)
all obligations of such Person for borrowed money, (b) all obligations
of such Person as lessee under any Capitalized Lease, (c) the unpaid
purchase price for goods, property or services acquired by such Person,
except for accounts payable and other accrued liabilities arising in
the ordinary course of business which are not materially past due, (d)
all obligations of such Person to purchase goods, property or services
where payment therefor is required regardless of whether delivery of
such goods or property or the performance of such services is ever made
or tendered (generally referred to as "take or pay contracts"), other
than obligations incurred in the ordinary course of business, (e) all
obligations of such Person in respect of any Financial Contract (valued
in an amount equal to the highest termination payment, if any, that
would be payable by such Person upon termination for any reason on the
date of determination), (f) to the extent not included in the
foregoing, obligations and liabilities which would be classified as
part of Total Debt, and (g) all obligations of others similar in
character to those described in clauses (a) through (f) of this
definition for which such Person is contingently liable, as obligor,
guarantor, surety or in any other capacity, or in respect of which
obligations such Person assures a creditor against loss or agrees to
take any action to
<PAGE> 10
prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business),
including without limitation all reimbursement obligations of such
Person in respect of letters of credit, surety bonds or similar
obligations and all obligations of such Person to advance funds to, or
to purchase assets, property or services from, any other Person in
order to maintain the financial condition of such other Person.
"Intercreditor Agreement" shall mean the Intercreditor
Agreement dated as of November 13, 1998 by and among the Noteholders,
the Banks and the Collateral Agent.
"Person" shall include an individual, a corporation, a limited
liability company, an association, a partnership, a trust or estate, a
joint stock company, an unincorporated organization, a joint venture, a
trade or business (whether or not incorporated), a government (foreign
or domestic) and any agency or political subdivision thereof, or any
other entity.
"Qualified Current Debt" and "Qualified Funded Debt" shall
mean Current Debt or Funded Debt, as the case may, of a Guarantor which
is a party to the Subsidiary Note Guaranty on the Closing Date or any
Person who has become a party to the Subsidiary Note Guaranty after the
Closing Date in accordance with Section 5.17; provided that the obligee
of such Current Debt or Funded Debt shall have entered into the
Intercreditor Agreement.
"Significant Subsidiary" shall mean any one or more
Subsidiaries which, if considered in the aggregate as a single
Subsidiary, would comprise 10% or more of the total assets of the
Company and its Subsidiaries on a consolidated basis.
"Subsidiary Bank Guaranty" shall mean any Guaranty of any
Subsidiary of the Company with respect to the payment of sums due and
owing under the Bank Credit Agreement.
"Subsidiary Note Guaranty" shall mean any Guaranty of any
Subsidiary of the Company with respect to the payment of the Notes and
all other sums due and owing by the Company under this Agreement, which
Guaranty shall be in the form attached to the First Amendment as
Exhibit B.
"Stock Pledge Agreement" shall have the meaning set forth in
Section 5.18.
"Total Adjusted Capitalization" shall mean, as of any date,
the sum of Consolidated Net Worth and Total Seasonally Adjusted Debt
as of such date.
"Total Debt" as of any date, shall mean, without duplication,
all of the following for the Company and its Subsidiaries on a
consolidated basis: (a) all Indebtedness for borrowed money and similar
monetary obligations evidenced by bonds, notes, debentures,
acceptances, Capitalized Lease obligations or otherwise, (b) all
liabilities secured by any Lien existing on property owned or acquired
by the Company or any Subsidiary subject thereto, whether or not the
liability secured thereby shall have been assumed, (c) all
reimbursement obligations under outstanding letters of credit, bankers'
acceptances or similar instruments in respect of drafts which (i) may
be presented or (ii) have been presented and have not yet been paid and
are not included in clause (a) above, and (d) all guarantees and other
Contingent Liabilities relating to indebtedness, obligations or
liabilities of the type described in the foregoing clauses (a), (b) and
(c).
"Total Seasonally Adjusted Debt" shall mean, as of the end of
any fiscal quarter of the Company, the following appropriate amount for
such fiscal quarter end: (a) for any fiscal quarter ending in March or
June, 85% of Total Debt as of the end of such fiscal quarter, and (b)
for any fiscal quarter ending in September or December, 115% of Total
Debt as of the end of such fiscal quarter.
<PAGE> 11
Section 1.17. The definition of "Company Control Group" in Section 8.1
of the Note Agreements is hereby amended in its entirety to read as follows:
"Company Control Group" shall mean all, or any combination of,
any one or more of the individuals comprising Current Management and
who, as of the date of any determination hereof: (a) is employed on a
full-time basis by the Company as a director or officer of the Company,
and (b) has been so employed for at least three years preceding such
date of determination, except Gary Wright who shall in any event be
deemed to be a member of the Company Control Group for so long as he is
employed on a full-time basis by the Company as a director or officer."
Section 1.18. The definition of "Consolidated Total Capitalization" in
Section 8.1 of the Note Agreements shall be and is hereby amended by
substituting the phrase "Consolidated Net Worth" for the phrase "Consolidated
Adjusted Net Worth" as such phrase appears therein.
Section 1.19. The definition of "Current Management" in Section 8.1 of
the Note Agreements is hereby amended in its entirety to read as follows:
"Current Management" shall mean Peter F. Secchia, William G.
Currie, Matthew Missad, Gary Wright, James H. Ward, Michael B. Glenn
and Elizabeth A. Bowman, whether in case of each of the foregoing, such
Person owns capital stock of the Company directly or beneficially.
Section 1.20. The definition of "Funded Debt" in Section 8.1 of the
Note Agreements is hereby amended in its entirety to read as follows:
"Funded Debt" of any Person shall mean (a) all Indebtedness of
such Person for borrowed money or which has been incurred in connection
with the acquisition of assets in each case having a final maturity of
one or more than one year from the date of origin thereof (or which is
renewable or extendible at the option of the obligor for a period or
periods more than one year from the date of origin), including all
payments in respect thereof that are required to be made within one
year from the date of any determination of Funded Debt, whether or not
the obligation to make such payments shall constitute a current
liability of the obligor under GAAP, (b)all Capitalized Rentals of such
Person, (c) all Guaranties by such Person of Funded Debt of others, and
(d) if, during the 365-day period immediately preceding the date of any
determination of Funded Debt of such Person, there shall not have been
a period of at least 30 consecutive days during which Indebtedness of
such Person outstanding under all revolving credit or similar
agreements are equal to zero, then, and in such an event, an amount
equal to the highest aggregate amount of all such Indebtedness
outstanding during any period of 30 consecutive days selected by such
Person during such preceding 365-day period.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
<PAGE> 12
Section 2.1. To induce the Noteholders to execute and deliver
this First Amendment (which representations shall survive the execution and
delivery of this First Amendment), the Company represents and warrants to the
Noteholders that:
(a) this First Amendment has been duly authorized, executed
and delivered by it and this First Amendment constitutes the legal,
valid and binding obligation, contract and agreement of the Company
enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws or equitable principles relating to or
limiting creditors' rights generally;
(b) the Note Agreements, as amended by this First Amendment,
constitute the legal, valid and binding obligations, contracts and
agreements of the Company enforceable against it in accordance with
their respective terms, except as enforcement may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles relating to or limiting creditors' rights
generally;
(c) the execution, delivery and performance by the Company of
this First Amendment (i) has been duly authorized by all
requisite corporate action and, if required, shareholder action,
(ii) does not require the consent or approval of any
governmental or regulatory body or agency, and (iii) will not
(A) violate (1) any provision of law, statute, rule or
regulation or its certificate of incorporation or bylaws, (2)
any order of any court or any rule, regulation or order of any other
agency or government binding upon it, or (3) any provision of
any material indenture, agreement or other instrument to which it is a
party or by which its properties or assets are or may be bound, or
(B) result in a breach or constitute (alone or with due notice
or lapse of time or both) a default under any indenture, agreement or
other instrument referred to in clause (iii)(A)(3) of this
Section 2.1(c);
(d) as of the date hereof and after giving effect to this
First Amendment, no Default or Event of Default has occurred which is
continuing; and
(e) all the representations and warranties contained in
Section 3.1 of the Note Agreements and Exhibit B thereto are
true and correct in all material respects with the same force and
effect as if made by the Company on and as of the date hereof.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS FIRST AMENDMENT.
Section 3.1. This First Amendment shall not become effective
until, and shall become effective when, each and every one of the following
conditions shall have been satisfied:
(a) executed counterparts of this First Amendment, duly
executed by the Company and the holders of at least 66-2/3% of the
outstanding principal of the Notes, shall have been delivered to the
Noteholders;
(b) the Noteholders shall have received evidence satisfactory
to them that the Company has entered into the Bank Credit Agreement in
the form annexed hereto as Exhibit A (the "Bank Credit
Agreement");
(c) the Noteholders shall have received a copy of the
resolutions of the Board of Directors of the Company certified by its
Secretary or an Assistant Secretary authorizing the execution, delivery
and performance (i) by the Company of this First Amendment,
(ii) by the Company of the Bank Credit Agreement, and (iii) by
each of the Company's Subsidiaries which has entered into the
Subsidiary Note Guaranty;
(d) the representations and warranties of the Company set
forth in Section 2 hereof are
<PAGE> 13
true and correct on and with respect to the date hereof;
(e) the Noteholders shall have received the favorable opinion
of counsel to the Company as to the matters set forth in Sections 2.1
(A), 2.1(b) and 2.1(c) hereof, which opinion shall be in form and
substance satisfactory to the Noteholders;
(f) the Noteholders shall have received the Subsidiary Note
Guaranty in the form annexed hereto as Exhibit B from each
Subsidiary which is concurrently delivering a Subsidiary Bank Guaranty;
(g) the Noteholders shall have received a certificate signed
by an authorized officer of each such Subsidiary making representations
and warranties to the effect of those contained in Sections 2.1(A),
2.1(b) and 2.1(c), but with respect to such Subsidiary and the
Subsidiary Note Guaranty, as applicable;
(h) the Noteholders shall have received such documents and
evidence with respect to each such Subsidiary as any holder of the
Notes may reasonably request in order to establish the existence and
good standing of any such Subsidiary and the authorization of the
transactions contemplated by the Subsidiary Note Guaranty;
(i) the Noteholders shall have received an opinion of counsel
to each Subsidiary which is a party to the Subsidiary Note Guaranty
satisfactory to the Noteholders to the effect that the Subsidiary Note
Guaranty has been duly authorized, executed and delivered and
constitutes the legal, valid and binding contract and agreement of each
Subsidiary which is a party thereto, enforceable in accordance with its
terms, except as an enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles; and
(j) the Noteholders, the Banks and the Collateral Agent shall
have entered into the Intercreditor Agreement in the form annexed
hereto as Exhibit C.
Upon receipt of all of the foregoing, this First Amendment shall become
effective.
SECTION 4. PAYMENT OF NOTEHOLDERS' COUNSEL FEES AND EXPENSES.
Section 4.1. The Company agrees to pay upon demand, the
reasonable fees and expenses of Chapman and Cutler, counsel to the Noteholders,
in connection with the negotiation, preparation, approval, execution and
delivery of this First Amendment.
SECTION 5. MISCELLANEOUS.
Section 5.1. This First Amendment shall be construed in
connection with and as part of each of the Note Agreements, and except as
modified and expressly amended by this First Amendment, all terms, conditions
and covenants contained in the Note Agreements and the Notes are hereby ratified
and shall be and remain in full force and effect.
Section 5.2. Any and all notices, requests, certificates and
other instruments executed and delivered after the execution and delivery of
this First Amendment may refer to the Note Agreements without making specific
reference to this First Amendment but nevertheless all such references shall
include this First Amendment unless the context otherwise requires.
Section 5.3. The descriptive headings of the various Sections or parts
of this First
<PAGE> 14
Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
Section 5.4. This First Amendment shall be governed by and
construed in accordance with New York law.
[Intentionally Blank]
Section 5.5. The execution hereof by you shall constitute a
contract between us for the uses and purposes hereinabove set forth, and this
First Amendment may be executed in any number of counterparts, each executed
counterpart constituting an original, but all together only one agreement.
UNIVERSAL FOREST PRODUCTS, INC.
By:
-------------------------------------
Its:
------------------------------------
Accepted and Agreed to:
[VARIATION]
By:
-------------------------------------
Its:
------------------------------------
<PAGE> 15
[BANK CREDIT AGREEMENT]
EXHIBIT A
<PAGE> 16
[FORM OF GUARANTY]
EXHIBIT B
<PAGE> 17
[FORM OF INTERCREDITOR AGREEMENT]
EXHIBIT C
<PAGE> 1
EXHIBIT 10(i)
THIS CREDIT AGREEMENT, dated as of November 13, 1998 (as amended or
modified from time to time, this "Agreement"), is by and among Universal Forest
Products, Inc., a Michigan corporation (the "Company") the lenders party hereto
from time to time (the "Lenders") and NBD Bank, a Michigan banking corporation,
as agent for the Lenders (in such capacity, the "Agent").
INTRODUCTION
The Company desires to obtain a revolving credit facility, including
letters of credit, in the aggregate principal amount of $175,000,000, in order
to provide funds for its general corporate purposes, and the Lenders are willing
to establish such a credit facility in favor of the Company on the terms and
conditions herein set forth.
In consideration of the premises and of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Certain Definitions. As used herein the following terms shall
have the following respective meanings:
"Absolute Rate Bid-Option Loan" shall mean a Loan which pursuant to the
applicable Notice of Bid- Option Loan is made at the Bid-Option Absolute Rate.
"Acquisition" shall mean any transaction, or any series of related
transactions, consummated on or after the date of this Agreement, by which the
Company or any of its Subsidiaries directly or indirectly (i) acquires any going
business or all or substantially all of the assets of any firm, corporation,
partnership, limited liability company or other business entity or other Person,
or division thereof, whether through purchase of assets, merger or otherwise or
(ii) acquires (in one transaction or as the most recent transaction in a series
of transactions) at least a majority (in number of votes) of the Capital Stock
of any Person.
"Advance" shall mean any Loan and any Letter of Credit Advance.
"Adjusted Leverage Ratio" shall mean, as of any date, the ratio of (a)
the Total Seasonally Adjusted Debt as of such date to (b) the Total Adjusted
Capitalization as of such date.
"Affiliate" when used with respect to any Person shall mean any other
Person which, directly or indirectly, controls or is controlled by or is under
common control with such Person. For purposes of this definition "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with") with respect to any Person, shall mean possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person, whether through the ownership of voting
Capital Stock
<PAGE> 2
or by contract or otherwise. A Person shall be deemed to control another Person
if the controlling Person owns 10% or more of any class of Voting Stock of the
controlled Person.
"Applicable Lending Office" shall mean, with respect to any Advance
made by any Lender or with respect to such Lender's Commitment, the office or
branch of such Lender or of any Affiliate of such Lender located at the address
specified as the applicable lending office for such Lender set forth next to the
name of such Lender in the signature pages hereof or any other office or branch
or Affiliate of such Lender or of any Affiliate of such Lender hereafter
selected and notified to the Company and the Agent by such Lender.
"Applicable Margin" shall mean, with respect to any Eurodollar Rate
Syndicated Loan, Letter of Credit fee under Section 2.5(b)(i) and facility fee
under Section 2.5(a), as the case may be, the applicable percentage set forth in
the applicable table below based upon the Adjusted Leverage Ratio, as adjusted
on the date 50 days after the end of each fiscal quarter of the Company and
shall remain in effect until the next change to be effected pursuant to this
definition, based upon the Adjusted Leverage Ratio as of the last day of the
most recently ended fiscal quarter; provided, however, until the Applicable
Margin is adjusted for the first time based on the Adjusted Leverage Ratio as of
the end of the first fiscal quarter ending after the Effective Date, the
Applicable Margin shall be based on an Adjusted Leverage Ratio greater than or
equal to 0.4 to 1.0 but less than 0.5 to 1.0:
<TABLE>
<CAPTION>
APPLICABLE MARGIN
- ------------------------------------------------------------------------------------------------------------
Level Adjusted Leverage Ratio Eurodollar Rate Syndicated Facility Fee
Loan and Letter of Credit Fee
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
I <0.4 to 1.0 25 basis points 15 basis points
- ------------------------------------------------------------------------------------------------------------
II >0.4 to 1.0 but <0.5 to 1.0 32.5 basis points 17.5 basis points
-
- ------------------------------------------------------------------------------------------------------------
III >0.5 to 1.0 but <0.55 to 1.0 47.5 basis points 20.0 basis points
-
- ------------------------------------------------------------------------------------------------------------
IV >0.55 to 1.0 65 basis points 22.5 basis points
-
- ---------- --------------------------------- ------------------------------------ --------------------------
</TABLE>
"Arranger" shall mean First Chicago Capital Markets, Inc., a Delaware
corporation, and its successors.
"Bid-Option Absolute Rate" shall mean, with respect to any Absolute
Rate Bid-Option Loan, the Bid- Option Absolute Rate, as defined in Section
2.2(d)(ii)(E), that is offered for such Loan.
"Bid-Option Auction" shall mean a solicitation of Bid-Option Quotes
setting forth Bid-Option Absolute Rates or Bid-Option Eurodollar Rate Margins,
as the case may be, pursuant to Section 2.2(b).
"Bid-Option Eurodollar Rate" shall mean the sum of (a) the Bid-Option
Eurodollar Rate Margin plus (b) the Eurodollar Base Rate.
"Bid-Option Eurodollar Rate Margin" shall mean, with respect to any
Eurodollar Rate Bid-Option Loan, the Bid-Option Eurodollar Rate Margin, as
defined in Section 2.2(d)(ii)(F), that is offered for such Loan.
<PAGE> 3
"Bid-Option Interest Period" shall mean (a) with respect to each
Eurodollar Rate Bid-Option Borrowing, the Eurodollar Rate Interest Period
applicable thereto, and (b) with respect to each Absolute Rate Bid-Option
Borrowing, the period commencing on the date of such Borrowing and ending on the
date elected by the Company in the applicable Notice of Borrowing, which date
shall be not less than one month and not more than twelve months after the date
of such Bid-Option Loan; provided that:
(i) any such Interest Period that would
otherwise end on a day that is not a Business Day shall be
extended to the next succeeding Business day; and
(ii) no such Interest Period that would end
after the Termination Date shall be permitted.
"Bid-Option Loan" shall mean a Loan which is made by a Lender pursuant
to a Bid-Option Auction.
"Bid-Option Note" shall mean a promissory note of the Company in
substantially the form of Exhibit A hereto evidencing the obligation of the
Company to repay Bid-Option Loans, as amended or modified from time to time and
together with any promissory note or notes issued in exchange or replacement
therefor.
"Bid-Option Percentage" shall mean, with respect to any Lender, the
percentage of the aggregate outstanding principal amount of the Bid-Option Loans
of all the Lenders represented by the outstanding principal amount of the
Bid-Option Loans of such Lender.
"Bid-Option Quote" shall mean an offer by a Lender to make a Bid-Option
Loan in accordance with Section 2.2(d).
"Bid-Option Quote Request" shall mean a Bid-Option Quote Request in the
form referred to in Section 2.2(b).
"Borrowing" shall mean the aggregation of Advances made to the Company,
or continuations and conversions of such Advances, made pursuant to Article II
on a single date and for a single Interest Period. A Borrowing may be referred
to for purposes of this Agreement by reference to the type of Loan comprising
the relating Borrowing, e.g., a "Floating Rate Borrowing" if such Loans are
Floating Rate Loans, a "Eurodollar Rate Syndicated Borrowing" if such Loans are
Eurodollar Rate Syndicated Loans, an "Absolute Rate Bid-Option Borrowing" if
such Loans are Absolute Rate Bid-Option Loans, or a "Eurodollar Rate Bid-Option
Borrowing" if such Loans are Eurodollar Rate Bid-Option Loans. Floating Rate
Borrowings and Eurodollar Rate Syndicated Borrowings may be similarly
collectively referred to as "Syndicated Borrowings", and Absolute Rate
Bid-Option Borrowings and Eurodollar Rate Bid-Option Borrowings may be
collectively referred to as "Bid-Option Borrowings".
"Business Day" shall mean a day other than a Saturday, Sunday or other
day on which the Agent is not open to the public for carrying on substantially
all of its banking functions.
<PAGE> 4
"Capital Lease" of any Person shall mean any lease which, in accordance
with Generally Accepted Accounting Principles, is or should be capitalized on
the books of such Person.
"Capital Stock" shall mean (i) in the case of any corporation, all
capital stock and any securities exchangeable for or convertible into capital
stock and any warrants, rights or other options to purchase or otherwise acquire
capital stock or such securities or any other form of equity securities, (ii) in
the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock, (iii) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited) and (iv) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distribution of assets of, the issuing
Person.
"Cash Equivalent" shall mean (i) cash in Dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof having maturities of not
more than six months from the date of acquisition, (iii) marketable direct
obligations issued by any state of the United States of America or any political
subdivision of any such state or any public instrumentality thereof maturing
within one year from the date of acquisition thereof and, at the time of
acquisition, having one of the two highest ratings obtainable from either S&P or
Moody's, (iv) certificates of deposit and eurodollar time deposits with
maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any Lender or with any domestic commercial bank
having capital and surplus in excess of $250,000,000 and a Keefe Bank Watch
Rating of "B" or better, (v) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (ii),
(iii) and (iv) above entered into with any financial institution meeting the
qualifications specified in clause (iv) above, (vi) commercial paper having one
of the two highest ratings obtained from Moody's or S&P and in each case
maturing within six months after the date of acquisition and (vii) investments
in money market funds which invest substantially all their assets in securities
of the type described in clauses (i) through (vi) above.
"Change of Control" shall mean (i) the acquisition by any Person, or
two or more Persons acting in concert, of beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 20% or more of the outstanding shares of
voting Capital Stock of the Company, other than any such acquisition by Peter
Secchia, Carroll M. Shoffner or any Person wholly owned and controlled, free and
clear of any Liens, by Peter Secchia and/or Carroll M. Shoffner; (ii) any Person
or two or more Persons acting in concert shall have acquired, by contract or
otherwise, or shall have entered into a contract or arrangement that, upon
consummation, will result in its or their acquisition of the power to exercise,
directly or indirectly, a controlling influence over the management or policies
of the Company; (iii) Continuing Directors shall cease to constitute at least a
majority of the directors constituting the board of directors of the Company; or
(iv) the occurrence of any "Change of Control" or similar term as defined in any
agreement or instrument relating to the Senior Note Debt.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations thereunder.
"Commitment" shall mean, with respect to each Lender, the commitment of
each such Lender to make Syndicated Loans and to participate in Letter of Credit
Advances made through the Agent pursuant to Section
<PAGE> 5
2.1, in amounts not exceeding in aggregate principal amount outstanding at any
time the respective commitment amount for each such Lender set forth for such
Lender on Schedule 1 hereto or otherwise established pursuant to Section 8.6, as
such amounts may be reduced from time to time pursuant to Section 2.4.
"Consolidated" or "consolidated" shall mean, when used with reference
to any financial term in this Agreement, the aggregate for two or more Persons
of the amounts signified by such term for all such Persons determined on a
consolidated basis in accordance with Generally Accepted Accounting Principles.
"Contingent Liabilities" of any Person shall mean, as of any date, all
obligations of such Person or of others for which such Person is contingently
liable, as obligor, guarantor, surety or in any other capacity, or in respect of
which obligations such Person assures a creditor against loss or agrees to take
any action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business), including
without limitation all reimbursement obligations of such Person in respect of
any letters of credit, surety bonds or similar obligations and all obligations
of such Person to advance funds to, or to purchase assets, property or services
from, any other Person in order to maintain the financial condition of such
other Person.
"Continuing Directors" shall mean as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Effective Date or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Default" shall mean any of the events or conditions described in
Section 6.1 which will become an Event of Default with notice or lapse of time
or both.
"Defaulting Lender" shall mean any Lender that fails to make available
to the Agent such Lender's Loans required to be made hereunder or shall have not
made a payment required to be made to the Agent hereunder. Once a Lender becomes
a Defaulting Lender, such Lender shall continue as a Defaulting Lender until
such time as such Defaulting Lender makes available to the Agent the amount of
such Defaulting Lender's Loans and all other amounts required to be paid to the
Agent pursuant to this Agreement.
"Disqualified Stock" shall mean any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at
the option of the holder thereof, in whole or in part.
"Dollars" and "$" shall mean the lawful money of the United States of
America.
"Domestic Subsidiary" shall mean each present and future Subsidiary of
the Company which is not a Foreign Subsidiary.
"EBIT" shall mean, for any period, Net Income for such period plus all
amounts deducted in determining such Net Income on account of (a) Total Interest
Expense and (b) income taxes, all as determined for the Company and its
Subsidiaries on a consolidated basis in accordance with Generally Accepted
Accounting Principles.
<PAGE> 6
"Effective Date" shall mean the effective date specified in the final
paragraph of this Agreement.
"Environmental Laws" at any date shall mean all provisions of law,
statute, ordinances, rules, regulations, judgments, writs, injunctions, decrees,
orders, awards and standards which are applicable to the Company or any
Subsidiary and promulgated by the government of the United States of America or
any foreign government or by any state, province, municipality or other
political subdivision thereof or therein or by any court, agency,
instrumentality, regulatory authority or commission of any of the foregoing
concerning the protection of, or regulating the discharge of substances into,
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations thereunder.
"ERISA Affiliate" shall mean, with respect to any Person, any trade or
business (whether or not incorporated) which, together with such Person or any
Subsidiary of such Person, would be treated as a single employer under Section
414 of the Code.
"Eurodollar Base Rate" applicable to any Eurodollar Interest Period
shall mean, the rate per annum obtained by dividing (a) the per annum rate of
interest determined by the Agent at which deposits in Dollars for such
Eurodollar Interest Period and in an aggregate amount comparable to (i) in the
case of Eurodollar Rate Syndicated Loans, the amount of the related Eurodollar
Rate Syndicated Loan to be made by the Agent in its capacity as a Lender
hereunder and (ii) in the case of Eurodollar Rate Bid-Option Loans, the
aggregate amount of the Eurodollar Rate Bid-Option Borrowing set forth in the
related Bid-Option Quote Request, are offered to the Agent by other prime banks
in the applicable interbank market selected by the Agent in its reasonable
discretion, at approximately 11:00 a.m. London time, on the second Eurodollar
Business Day prior to the first day of such Eurodollar Interest Period by (b) an
amount equal to one minus the stated maximum rate (expressed as a decimal) of
all reserve requirements including, without limitation, any marginal, emergency,
supplemental, special or other reserves, that is specified on the first day of
such Eurodollar Interest Period by the Board of Governors of the Federal Reserve
System (or any successor agency thereto) or any other governmental authority
(including any nation or government, any political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government) having jurisdiction with respect
thereto, for determining the maximum reserve requirement with respect to
eurocurrency funding (currently referred to as "Eurodollar liabilities" in
Regulation D of such Board) maintained by a member bank of such System or
otherwise with respect to determining reserves or similar amounts; all as
conclusively determined by the Agent, absent manifest error, such sum to be
rounded up, if necessary, to the nearest whole multiple of one sixteenth of one
percent (1/16 of 1%).
"Eurodollar Business Day" shall mean, with respect to any Eurodollar
Rate Loan, a day which is both a Business Day and a day on which dealings in
Dollar deposits are carried out in the relevant interbank market.
"Eurodollar Interest Period" shall mean, with respect to any Eurodollar
Rate Syndicated Loan, the period commencing on the day such Eurodollar Rate
Syndicated Loan is made or converted to a Eurodollar Rate Syndicated Loan and
ending on the date one, two, three or six months thereafter, as the Company may
elect under Section 2.6 or 2.9, and each subsequent period commencing on the
last day of the immediately preceding
<PAGE> 7
Eurodollar Interest Period and ending on the date one, two, three or six months
thereafter, as the Company may elect under Section 2.6 or 2.9, and with respect
to any Eurodollar Rate Bid-Option Loan, the period commencing on the date of
such Eurodollar Rate Bid-Option Loan and ending on a date between one month and
twelve months thereafter, as the Company may elect in the Notice of Bid-Option
Loan, provided, however, that (a) any Eurodollar Interest Period which commences
on the last Eurodollar Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Eurodollar Business Day of the appropriate
subsequent calendar month, (b) each Eurodollar Interest Period which would
otherwise end on a day which is not a Eurodollar Business Day shall end on the
next succeeding Eurodollar Business Day or, if such next succeeding Eurodollar
Business Day falls in the next succeeding calendar month, on the next preceding
Eurodollar Business Day, and (c) no Eurodollar Interest Period which would end
after the Termination Date shall be permitted.
"Eurodollar Rate Loan" shall mean any Eurodollar Rate Bid-Option Loan
or Eurodollar Rate Syndicated Loan.
"Eurodollar Rate Bid-Option Loan" shall mean a Bid-Option Loan which
pursuant to the applicable Notice of Bid-Option Loan is made at the Bid-Option
Eurodollar Rate.
"Eurodollar Rate Syndicated Loan" shall mean any Syndicated Loan which
bears interest at the Syndicated Eurodollar Rate.
"Event of Default" shall mean any of the events or conditions described
in Section 6.1.
"Federal Funds Rate" shall mean, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Detroit
time) on such day on such transactions received by the Agent from three Federal
funds brokers of recognized standing selected by the Agent in its sole
discretion.
"Financial Contract" of a Person shall mean (i) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, or (ii) any agreements, devices or
arrangements providing for payments related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to, interest rate
exchange agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate options.
"Fixed Rate Loan" shall mean any Eurodollar Rate Syndicated Loan or any
Bid-Option Loan.
"Floating Rate" shall mean the per annum rate equal to the greater of
(i) the Prime Rate or (ii) the Federal Funds Rate plus 1/2%, in each case as in
effect from time to time, which Floating Rate shall change simultaneously with
any change in such Prime Rate or Federal Funds Rate, as the case may be.
<PAGE> 8
"Floating Rate Loan" shall mean any Syndicated Loan which bears
interest at the Floating Rate.
"Foreign Subsidiary" shall mean any Subsidiary incorporated or formed
in any jurisdiction other than any State of the United States of America.
"Generally Accepted Accounting Principles" shall mean generally
accepted accounting principles in effect from time to time and applied on a
basis consistent with that reflected in the financial statements referred to in
Section 4.6.
"Guaranties" shall mean the guaranties entered into by each of the
Guarantors for the benefit of the Agent and the Lenders pursuant to Section
5.1(f) in substantially the form of Exhibit B hereto, as amended or modified
from time to time.
"Guarantor" shall mean each present and future Domestic Subsidiary of
the Company which is required to execute a Guaranty pursuant to this Agreement
and each Person otherwise entering into a Guaranty from time to time.
"Indebtedness" of any Person shall mean, as of any date, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person as lessee under any Capital Lease, (c) the unpaid purchase price for
goods, property or services acquired by such Person, except for accounts payable
and other accrued liabilities arising in the ordinary course of business which
are not materially past due, (d) all obligations of such Person to purchase
goods, property or services where payment therefor is required regardless of
whether delivery of such goods or property or the performance of such services
is ever made or tendered (generally referred to as "take or pay contracts"),
other than obligations incurred in the ordinary course of business, (e) all
obligations of such Person in respect of any Financial Contract (valued in an
amount equal to the highest termination payment, if any, that would be payable
by such Person upon termination for any reason on the date of determination),
(f) to the extent not included in the foregoing, obligations and liabilities
which would be classified as part of Total Debt, and (g) all obligations of
others similar in character to those described in clauses (a) through (f) of
this definition for which such Person is contingently liable, as obligor,
guarantor, surety or in any other capacity, or in respect of which obligations
such Person assures a creditor against loss or agrees to take any action to
prevent any such loss (other than endorsements of negotiable instruments for
collection in the ordinary course of business), including without limitation all
reimbursement obligations of such Person in respect of letters of credit, surety
bonds or similar obligations and all obligations of such Person to advance funds
to, or to purchase assets, property or services from, any other Person in order
to maintain the financial condition of such other Person.
"Intercreditor Agreement" shall mean, collectively, each intercreditor
or similar agreement executed at any time among the Lenders, the Agent, the
Senior Note Holders and such other parties thereto as agreed to by the Required
Lenders, the Agent and the requisite number of Senior Note Holders, as amended
or modified from time to time, under which agreement(s) the Lenders, the Agent
and the Senior Note Holders agree to share equally and ratably in any proceeds
realized from the enforcement of any guarantees from any Subsidiaries of the
Company and any pledges of any Capital Stock of any Foreign Subsidiaries which
guarantee or secure, as the case may be, the Lender Obligations or the Senior
Note Debt, provided that each such Intercreditor Agreement shall be in form and
substance acceptable to the Required Lenders and the Agent.
<PAGE> 9
"Interest Coverage Ratio" shall mean, as of the last day of any fiscal
quarter of the Company, the ratio of (a) EBIT to (b) Total Interest Expense, in
each case as calculated for the four consecutive fiscal quarters then ending,
all as determined in accordance with Generally Accepted Accounting Principles.
"Interest Payment Date" shall mean (a) with respect to any Eurodollar
Rate Loan or Bid-Option Loan, the last day of each Interest Period with respect
to such Eurodollar Rate Loan or Bid-Option Loan and, in the case of any Interest
Period exceeding three months, those days that occur during such Interest Period
at intervals of three months after the first day of such Interest Period, and
(b) in all other cases, the last Business Day of each March, June, September and
December occurring after the date hereof, commencing with the first such
Business Day occurring after the date of this Agreement.
"Interest Period" shall mean any Eurodollar Interest Period or
Bid-Option Interest Period.
"Invitation for Bid-Option Quotes" shall mean an invitation for
Bid-Option Quotes in the form referred to in Section 2.2(c).
"Lender Obligations" shall mean all indebtedness, obligations and
liabilities, whether now owing or hereafter arising, direct, indirect,
contingent or otherwise, of the Company to the Agent or any Lender pursuant to
the Loan Documents.
"Letter of Credit" shall mean a standby letter of credit having a
stated expiry date not later than one year from the issuance thereof and in no
event after the fifth Business Day before the Termination Date issued by the
Agent on behalf of the Lenders for the account of the Company under an
application and related documentation acceptable to the Agent requiring, among
other things, immediate reimbursement by the Company to the Agent in respect of
all drafts or other demand for payment honored thereunder and all expenses paid
or incurred by the Agent relative thereto.
"Letter of Credit Advance" shall mean any issuance of a Letter of
Credit under Section 2.6 made pursuant to Section 2.1 in which each Lender
acquires a pro rata risk participation pursuant to Section 2.6(e).
"Letter of Credit Documents" shall have the meaning ascribed thereto in
Section 3.3(b).
"Lien" shall mean any pledge, assignment, deed of trust, hypothecation,
mortgage, security interest, conditional sale or title retaining contract, or
any other type of lien, charge, encumbrance or other similar claim or right.
"Loan" shall mean any Syndicated Loan, Swingline Loan or any Bid-Option
Loan, as the context may require.
"Loan Documents" shall mean this Agreement, the Notes, the Letter of
Credit Documents, the Guaranties, the Pledge Agreements, the Intercreditor
Agreement, any Rate Hedging Agreements between the Company or any of its
Subsidiaries and any Lender and any other agreement, instrument or document
executed at any time in connection with this Agreement.
<PAGE> 10
"Material Adverse Effect" shall mean (i) a material adverse effect on
the property, business, operations, financial condition, liabilities, prospects
or capitalization of the Company and its Subsidiaries, taken as a whole or (ii)
a material adverse effect on the ability of the Company or any Guarantor to
perform its obligations under the Loan Documents.
"Moody's" shall mean Moody's Investors Service, Inc.
"Multiemployer Plan" shall mean any "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA or Section 414(f) of the Code.
"Net Income" shall mean, for any period, the net income (or loss) of
the Company and its Subsidiaries on a consolidated basis for such period taken
as a single accounting period, determined in accordance with Generally Accepted
Accounting Principles; provided that in determining Net Income there shall be
excluded, without duplication: (a) the income of any Person (other than a
Subsidiary of the Company) in which any Person other than the Company or any of
its Subsidiaries has a joint interest or partnership interest or other ownership
interest, except to the extent of the amount of dividends or other distributions
actually paid to the Company or any of its Subsidiaries by such Person during
such period, (b) the loss of any Person (other than a Subsidiary of the Company)
in which any Person other than the Company or any of its Subsidiaries has a
joint interest or partnership interest or other ownership interest, except to
the extent such loss is funded by the Company or any of its Subsidiaries during
such period, (c) the income of any Person accrued prior to the date it becomes a
Subsidiary of the Company or is merged into or consolidated with the Company or
any of its Subsidiaries or that Person's assets are acquired by the Company or
any of its Subsidiaries, (d) the proceeds of any insurance policy, other than
proceeds of business interruption insurance to the extent included in net income
under Generally Accepted Accounting Principles and not excluded by any other
exclusion under this definition of Net Income, (e) gains or non-cash losses from
the sale, exchange, transfer or other disposition of property or assets not in
the ordinary course of business of the Company and its Subsidiaries and any
other income of the Company and its Subsidiaries which is not from their
continuing operations, and related tax effects in accordance with Generally
Accepted Accounting Principles, (f) any other extraordinary or non-recurring
gains or non-cash losses of the Company or its Subsidiaries, and related tax
effects in accordance with Generally Accepted Accounting Principles, and (g) the
income of any Subsidiary of the Company to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that income
is not at the time permitted by operation of the terms of its charter or of any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary.
"Net Worth" shall mean, as of any date, the amount of any capital
stock, paid in capital and similar equity accounts plus (or minus in the case of
a deficit) the capital surplus and retained earnings of the Company and the
Subsidiaries and the amount of any foreign currency translation adjustment
account shown as a capital account of the Company and its Subsidiaries, all on a
consolidated basis in accordance with Generally Accepted Accounting Principles.
"Notes" shall mean the Revolving Credit Notes, the Swingline Loan Note
and the Bid-Option Notes.
"Notice of Bid-Option Loan" shall have the meaning set forth in Section
2.2(f).
<PAGE> 11
"Obligors" shall mean the Company and the Guarantors.
"Overdue Rate" shall mean (a) in respect of principal of Floating Rate
Loans, a rate per annum that is equal to the sum of two percent (2%) per annum
plus the Floating Rate, (b) in respect of principal of Fixed Rate Loans, a rate
per annum that is equal to the sum of two percent (2%) per annum plus the per
annum rate in effect thereon until the end of the then current Interest Period
for such Loan and, thereafter, a rate per annum that is equal to the sum of two
percent (2%) per annum plus the Floating Rate, and (c) in respect of other
amounts payable by the Company hereunder (other than interest), a per annum rate
that is equal to the sum of two percent (2%) per annum plus the Floating Rate.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Permitted Liens" shall mean Liens permitted by Section 5.2(d) hereof.
"Person" shall include an individual, a corporation, a limited
liability company, an association, a partnership, a trust or estate, a joint
stock company, an unincorporated organization, a joint venture, a trade or
business (whether or not incorporated), a government (foreign or domestic) and
any agency or political subdivision thereof, or any other entity.
"Plan" shall mean, with respect to any Person, any pension plan (other
than a Multiemployer Plan) subject to Title IV of ERISA or to the minimum
funding standards of Section 412 of the Code which has been established or
maintained by such Person, any Subsidiary of such Person or any ERISA Affiliate,
or by any other Person if such Person, any Subsidiary of such Person or any
ERISA Affiliate could have liability with respect to such pension plan.
"Pledge Agreements" shall mean each pledge agreement entered into by
the Company or any of its Subsidiaries at any time for the benefit of the Agent
and the Lenders pursuant to this Agreement, in form and substance satisfactory
to the Agent, under which any of the Capital Stock of any Foreign Subsidiary is
pledged to the Agent for the benefit of the Agent and the Lenders and subject to
any Intercreditor Agreement, as amended or modified from time to time.
"Prime Rate" shall mean the per annum rate announced by the Agent from
time to time as its "prime rate" (it being acknowledged that such announced rate
may not necessarily be the lowest rate charged by the Agent to any of its
customers), which Prime Rate shall change simultaneously with any change in such
announced rate.
"Prohibited Transaction" shall mean any non-exempt transaction
involving any Plan which is proscribed by Section 406 of ERISA or Section 4975
of the Code.
"Rate Hedging Agreement" shall mean an agreement, device or arrangement
providing for payments which are related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to,
dollar-denominated or cross-currency interest rate exchange agreements, forward
currency
<PAGE> 12
exchange agreements, interest rate cap or collar protection agreements, forward
rate currency or interest rate options, puts and warrants.
"Reportable Event" shall mean a reportable event as described in
Section 4043(b) of ERISA including those events as to which the thirty (30) day
notice period is waived under Part 2615 of the regulations promulgated by the
PBGC under ERISA.
"Required Lenders" shall mean Lenders at least 51% of the aggregate
Commitments then outstanding (or at least 51% of the Advances if the Commitments
have been terminated).
"Revolving Credit Advance" shall mean any Syndicated Loan and any
Letter of Credit Advance.
"Revolving Credit Note" shall mean any promissory note of the Company
evidencing the Syndicated Loans, in substantially the form annexed hereto as
Exhibit C, as amended or modified from time to time and together with any
promissory note or notes issued in exchange or replacement therefor.
"S&P" shall mean Standard and Poor's Ratings Services, a division of
The McGraw Hill Companies, Inc.
"Senior Note Debt" shall mean the Indebtedness permitted under Section
5.2(j)(vi).
"Senior Note Holders" shall mean the holders of the Senior Note Debt.
"Significant Subsidiary" shall mean any one or more Subsidiaries which,
if considered in the aggregate as a single Subsidiary, would comprise 10% or
more of the total assets of the Company and its Subsidiaries on a consolidated
basis.
"Subsidiary" of any Person shall mean any other Person (whether now
existing or hereafter organized or acquired) in which (other than directors'
qualifying shares required by law) at least a majority of the Capital Stock of
each class having ordinary voting power or analogous rights (other than Capital
Stock which have such power or right only by reason of the happening of a
contingency), at the time as of which any determination is being made, are
owned, beneficially and of record, by such Person or by one or more of the other
Subsidiaries of such Person or by any combination thereof. Unless otherwise
specified, reference to "Subsidiary" shall mean a Subsidiary of the Company.
"Swingline Facility" shall have the meaning specified in Section
2.1(b).
"Swingline Loan" shall mean any loan evidenced by a Swingline Note and
made by the Agent to the Company pursuant to Section 2.1(b).
"Swingline Note" shall mean any promissory note of the Company
evidencing the Swingline Loans in substantially the form of Exhibit D hereto, as
amended or modified from time to time and together with any promissory note or
notes issued in exchange or replacement therefor.
"Syndicated Advance" shall mean any Syndicated Loan or any Letter of
Credit Advance.
<PAGE> 13
"Syndicated Eurodollar Rate" shall mean, with respect to any Eurodollar
Rate Syndicated Loan for any Eurodollar Rate Interest Period or portion thereof,
the per annum rate that is equal to the sum of (a) the Applicable Margin, plus
(b) the Eurodollar Base Rate; which Syndicated Eurodollar Rate shall change
simultaneously with any change in such Applicable Margin.
"Syndicated Loan" shall mean any borrowing under Section 2.6 evidenced
by the Revolving Credit Notes and made pursuant to Section 2.1.
"Termination Date" shall mean the earlier to occur of (a) the date five
years after the date hereof and (b) the date on which the Commitments shall be
terminated pursuant to Section 2.4 or 6.2.
"Total Adjusted Capitalization" shall mean, as of any date, the sum of
Net Worth and Total Seasonally Adjusted Debt as of such date.
"Total Debt" as of any date, shall mean, without duplication, all of
the following for the Company and its Subsidiaries on a consolidated basis: (a)
all Indebtedness for borrowed money and similar monetary obligations evidenced
by bonds, notes, debentures, acceptances, Capital Lease obligations or
otherwise, (b) all liabilities secured by any Lien existing on property owned or
acquired by the Company or any Subsidiary subject thereto, whether or not the
liability secured thereby shall have been assumed; (c) all reimbursement
obligations under outstanding letters of credit, bankers' acceptances or similar
instruments in respect of drafts which (i) may be presented or (ii) have been
presented and have not yet been paid and are not included in clause (a) above;
and (d) all guarantees and other Contingent Liabilities relating to
indebtedness, obligations or liabilities of the type described in the foregoing
clauses (a), (b) and (c).
"Total Interest Expense" shall mean, for any period, total interest and
related expense (including, without limitation, that portion of any Capital
Lease obligation attributable to interest expense in conformity with Generally
Accepted Accounting Principles, amortization of debt discount, all capitalized
interest, the interest portion of any deferred payment obligations, all
commissions, discounts and other fees and charges owed with respect to letter of
credit and bankers acceptance financing, the net costs and net payments under
any interest rate hedging, cap or similar agreement or arrangement, prepayment
charges, agency fees, administrative fees, commitment fees and capitalized
transaction costs allocated to interest expense) paid, payable or accrued during
such period, without duplication for any other period, with respect to all
outstanding Indebtedness of the Company and its Subsidiaries, all as determined
for the Company and its Subsidiaries on a consolidated basis for such period in
accordance with Generally Accepted Accounting Principles.
"Total Seasonally Adjusted Debt" shall mean, as of the end of any
fiscal quarter of the Company, the following appropriate amount for such fiscal
quarter end: (a) for any fiscal quarter ending in March or June, 85% of Total
Debt as of the end of such fiscal quarter, and (b) for any fiscal quarter ending
in September or December, 115% of Total Debt as of the end of such fiscal
quarter.
"Transferee" shall have the meaning specified in Section 8.6(i).
"Unfunded Benefit Liabilities" shall mean, with respect to any Plan as
of any date, the amount of the unfunded benefit liabilities determined in
accordance with Section 4001(a)(18) of ERISA.
<PAGE> 14
"Year 2000 Issues" shall mean anticipated costs, problems and
uncertainties associated with the inability of certain computer applications to
effectively handle data including dates on and after January 1, 2000, as such
inability affects the business, operations and financial condition of the
Company and its Subsidiaries and of the Company and its Subsidiaries' material
customers, suppliers and vendors.
"Year 2000 Program" is defined in Section 4.18.
1.2 Other Definitions; Rules of Construction. As used herein, the
terms "Agent", "Lenders", "Company", and "this Agreement" shall have the
respective meanings ascribed thereto in the introductory paragraph of this
Agreement. Such terms, together with the other terms defined in Section 1.1,
shall include both the singular and the plural forms thereof and shall be
construed accordingly. Use of the terms "herein", "hereof", and "hereunder"
shall be deemed references to this Agreement in its entirety and not to the
Section or clause in which such term appears. References to "Sections" and
"subsections" shall be to Sections and subsections, respectively, of this
Agreement unless otherwise specifically provided.
1.3 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all
accounting terms used herein shall be interpreted, and all financial statements
and certificates and reports as to financial matters required to be delivered to
the Lenders hereunder shall (unless otherwise disclosed to the Lenders in
writing at the time of delivery thereof in the manner described in subsection
(b) below) be prepared, in accordance with Generally Accepted Accounting
Principles (subject, in the case of financial statements which are not fiscal
year end statements, to the absence of footnotes and year-end audit
adjustments); provided that, if the Company notifies the Agent that it wishes to
amend any covenant in Article V to eliminate the effect of any change in
Generally Accepted Accounting Principles (or if the Agent notifies the Company
that the Required Lenders wish to amend Article V for such purpose), then the
Company's compliance with such covenants shall be determined on the basis of
Generally Accepted Accounting Principles in effect immediately before the
relevant change in Generally Accepted Accounting Principles became effective
until either such notice is withdrawn or such covenant or any such defined term
is amended in a manner satisfactory to the Company and the Required Lenders.
Except as otherwise expressly provided herein, all references to a time of day
shall be references to Detroit, Michigan time. Notwithstanding anything herein,
in any financial statements of the Company or in Generally Accepted Accounting
Principles to the contrary, for purposes of calculating and determining
compliance with the financial covenants in Sections 5.2(a), (b) and (c),
including defined terms used therein, any Acquisitions made by the Company or
any of its Subsidiaries including through mergers or consolidations and
including any related financing transactions, during the period for which such
financial covenants were calculated shall be deemed to have occurred on the
first day of the relevant period for which such financial covenants were
calculated on a pro forma basis acceptable to the Agent.
(b) The Company shall deliver to the Lenders at the same time
as the delivery of any annual or quarterly financial statement under Section
5.1(d) hereof (i) a description in reasonable detail of any material variation
between the application or other modification of accounting principles employed
in the preparation of such statement and the application or other modification
of accounting principles employed in the preparation of the immediately prior
annual or quarterly financial statements as to which no objection has been made
in accordance with the last sentence of subsection (a) above and (ii) reasonable
estimates of the difference between such statements arising as a consequence
thereof.
<PAGE> 15
(c) To enable the ready and consistent determination of
compliance with the covenants set forth in Section 5.2 hereof, the Company will
not change the last day of its fiscal year from the last Saturday of December of
each year, or the last days of the first three fiscal quarters in each of its
fiscal years from the last Saturday in March, June and September of each year,
respectively.
ARTICLE II.
THE COMMITMENTS, THE SWINGLINE FACILITY AND THE ADVANCES
2.1 Commitments of the Lenders and the Swingline Facility. (a)
Each Lender agrees, for itself only, subject to the terms and conditions of this
Agreement, to make Syndicated Loans to the Company pursuant to Section 2.6 and
Section 3.3 and to participate in Letter of Credit Advances to the Company
pursuant to Section 2.6 from time to time from and including the Effective Date
to but excluding the Termination Date not to exceed in aggregate principal
amount at any time outstanding the amount of its respective Commitment as of the
date any such Syndicated Advance is made; provided, however, that the aggregate
principal amount of Letter of Credit Advances outstanding at any time shall not
exceed $10,000,000.
(b) Swingline Loans. (i) The Company may request the Agent to
make, and the Agent may, in its sole discretion, make Swingline Loans to the
Company from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an aggregate principal amount not
to exceed at any time the lesser of (A) $15,000,000 (the "Swingline Facility")
and (B) the aggregate amount of Syndicated Advances that could be but is not
borrowed as of such date. Each Lender's Commitment shall be deemed utilized by
an amount equal to such Lender's pro rata share (based on such Lender's
Commitment) of each Swingline Loan for purposes of determining the amount of
Syndicated Advances required to be made by such Lender. Swingline Loans shall
bear interest at a rate agreed to by the Agent and the Company, provided that
Swingline Loans shall bear interest at the rate applicable to Floating Rate
Loans at any time the Swingline Loans are refunded by Floating Rate Loans or the
Lenders are required to purchase participations therein under Section
2.1(b)(iii). Within the limits of the Swingline Facility, so long as the Agent,
in its sole discretion, elects to make Swingline Loans, the Company may borrow
and reborrow under this Section 2.1(b)(i).
(ii) The Agent may at any time in its sole and
absolute discretion require that any Swingline Loan be refunded by a Floating
Rate Borrowing from the Lenders, and upon written notice thereof by the Agent to
such Lenders and the Company, the Company shall be deemed to have requested a
Floating Rate Borrowing in an amount equal to the amount of such Swingline Loan,
and such Floating Rate Borrowing shall be made to refund such Swing Line Loan.
Each such Lender shall be absolutely and unconditionally obligated to fund its
pro rata share (based on such Lender's Commitment) of such Floating Rate
Borrowing or, if applicable, purchase a participating interest in the Swingline
Loans pursuant to Section 2.1(b)(iii) and such obligation shall not be affected
by any circumstance, including, without limitation, (A) any set-off,
counterclaim, recoupment, defense or other right which such Lender has or may
have against the Agent, or the Company or any of its Subsidiaries or anyone else
for any reason whatsoever; (B) the occurrence or continuance of a Default or an
Event of Default, subject to Section 2.1(b)(iii); (C) any
<PAGE> 16
Material Adverse Effect; (D) any breach of any Loan Document by any other
Lender, the Company or any Guarantor; or (E) any other circumstance, happening
or event whatsoever, whether or not similar to any of the foregoing (including
without limitation the Company's failure to satisfy any conditions contained in
Article II or any other provision of this Agreement).
(iii) If Floating Rate Loans may not be made by the
Lenders as described in Section 2.1(b)(ii) due to any Event of Default pursuant
to Section 6.1(i) or if the Lenders are otherwise legally prohibited from making
Floating Rate Loans, then effective on the date each such Floating Rate Loan
would otherwise have been made, each Lender severally agrees that it shall
unconditionally and irrevocably, without regard to the occurrence of any Default
or Event of Default or any other circumstances, in lieu of deemed disbursement
of Loans, to the extent of such Lender's Commitment, purchase a participating
interest in the Swingline Loans by paying its participation percentage thereof.
Each such Lender will immediately transfer to the Agent, in same day funds, the
amount of its participation. After such payment to the Agent, each Lender shall
share on a pro rata basis (calculated by reference to its Commitment) in any
interest which accrues thereon and in all repayments thereof. If and to the
extent that any such Lender shall not have so made the amount of such
participating interest available to the Agent, such Lender and the Company
severally agree to pay to the Agent forthwith on demand such amount together
with interest thereon, for each day from the date of demand by the Agent until
the date such amount is paid to the Agent, at (A) in the case of the Company,
the interest rate specified above and (B) in the case of such Lender, the
Federal Funds Rate for the first five days after the date of demand by the Agent
and thereafter at the interest rate specified above.
2.2 Bid-Option Loans.
(a) The Bid-Option. From the Effective Date to but excluding
the Termination Date, the Company may, as set forth in this Section 2.2, request
the Lenders to make offers to make Bid-Option Loans to the Company.
Notwithstanding anything herein to the contrary, no more than five requests for
Bid-Option Loans in the aggregate may be requested by the Company in any month.
Each Lender may, but shall have no obligation to, make such offers and the
Company may, but shall have no obligation to, accept any such offers, in the
manner set forth in this Section 2.2; furthermore, each Lender may limit the
aggregate amount of Bid-Option Loans when quoting rates for more than one
Bid-Option Interest Period in any Bid-Option Quote, provided that such
limitation shall not be less than the minimum amounts required hereunder for
Bid-Option Loans and the Company may choose among the Bid-Option Loans if such
limitation is imposed; provided, that the aggregate outstanding principal amount
of Bid-Option Loans shall not at any time exceed the lesser of (i) excess of (A)
the aggregate amount of the Commitments over (B) the sum of the aggregate
outstanding principal amount of Syndicated Advances and Swingline Loans or (ii)
$75,000,000;
(b) Bid-Option Quote Request. When the Company wishes to
request offers to make Bid- Option Loans under this Section 2.2, it shall
transmit to the Agent by telex or telecopy a Bid-Option Quote Request
substantially in the form of Exhibit E hereto so as to be received no later than
11:00 a.m. Detroit time (i) on the Business Day next preceding the date of the
Loan proposed therein, in the case of a Bid-Option Auction for Absolute Rate
Bid-Option Loans, or (ii) the fourth Business Day next preceding the date of the
Loan proposed therein, in the case of a Bid-Option Auction for Eurodollar Rate
Bid-Option Loans specifying:
<PAGE> 17
(A) the proposed date of the Bid-Option Loan, which shall
be a Business Day;
(B) the aggregate amount of such Bid-Option Loan, which
shall be a minimum of $3,000,000 or a larger multiple of $1,000,000;
(C) whether the Borrowing is to be an Absolute Rate
Bid-Option Borrowing or a Eurodollar Rate Bid-Option Borrowing; and
(D) the duration of the Interest Period applicable
thereto, subject to the provisions of the definition of Interest Period.
The Company may request offers to make Bid-Option Loans for more than one
Bid-Option Interest Period in a single Bid-Option Quote Request.
(c) Invitation for Bid-Option Quotes. Promptly upon receipt of
a Bid-Option Quote Request, the Agent shall send to the Lenders by telecopy (or
telephone promptly confirmed by telecopy) an Invitation for Bid-Option Quotes
substantially in the form of Exhibit F hereto, which shall constitute an
invitation by the Company to each such Lender to submit Bid-Option Quotes
offering to make the Bid-Option Loans to which such Bid-Option Quote Request
relates in accordance with this Section 2.2.
(d) Submission and Contents of Bid-Option Quotes. (i) Each
Lender may submit a Bid- Option Quote containing an offer or offers to make
Bid-Option Loans in response to any Invitation for Bid- Option Quotes. Each
Bid-Option Quote must comply with the requirements of this subsection (d) and
must be submitted to the Agent by telecopy (or by telephone promptly confirmed
by telecopy) at its office referred to in Section 8.2 not later than (A) 9:00
a.m. Detroit time on the proposed date of the Borrowing, in the case of a Bid-
Option Auction for Absolute Rate Bid-Option Loans, or (B) 9:00 a.m. Detroit time
on the third Business Day prior to the proposed date of the Borrowing, in the
case of a Bid-Option Auction for Eurodollar Rate Bid-Option Loans; provided that
Bid-Option Quotes submitted by the Agent (or any Affiliate of the Agent) in the
capacity of a Lender may be submitted, and may only be submitted, if the Agent
or such Affiliate notifies the Company of the terms of the offer or offers
contained therein not later than (A) 8:45 a.m. Detroit time on the proposed date
of such Borrowing, in the case of a Bid-Option Auction for Absolute Rate
Bid-Option Loans or (B) 8:45 a.m. Detroit time on the third Business Day prior
to the proposed date of the Borrowing, in the case of a Bid-Option Auction for
Eurodollar Rate Bid-Option Loans. Subject to Section 3.8 and Article VI, any
Bid-Option Quote so made shall be irrevocable except with the written consent of
the Agent given on the instructions of the Company.
(ii) Each Bid-Option Quote shall be in
substantially the form of Exhibit G hereto, but may be submitted to the Agent by
telephone with prompt confirmation by delivery to the Agent of such written
Bid-Option Quote, and shall in any case specify:
(A) the proposed date of the Borrowing;
(B) the principal amount of the Bid-Option Loan
for which each such offer is being made, which principal amount (x) must be in a
minimum of $3,000,000 or a larger multiple of
<PAGE> 18
$1,000,000, and (y) may not exceed the principal amount of the Bid-Option Loans
for which offers were requested;
(C) whether the Bid-Option Loans for which
the offers are made are
Absolute Rate Bid-Option Loans or Eurodollar Rate Bid-Option Loans, which must
match the type of Borrowing stated in the related Invitation for Bid-Option
Quotes;
(D) the Interest Period(s) for which each
such Bid-Option Absolute Rate
or Bid-Option Eurodollar Rate Margin, as the case may be, is offered;
(E) in the case of a Bid-Option Auction for
Absolute Rate Bid-Option
Loans, the rate of interest per annum (rounded to the nearest 1/1000 of 1%) (the
"Bid-Option Absolute Rate") offered for each such Bid-Option Loan;
(F) in the case of a Bid-Option Auction for
Eurodollar Rate Bid-Option
Loans, the applicable margin, which may be positive or negative (the "Bid-Option
Eurodollar Rate Margin") expressed as a percentage (rounded to the nearest
1/1000 of 1%), offered for each such Bid-Option Loan; and
(G) the identity of the quoting Lender.
(iii) Any Bid-Option Quote shall be disregarded if
it:
(A) is not substantially in the form of
Exhibit G hereto (or submitted by telephone to the Agent with prompt written
confirmation to follow) or does not specify all of the information required by
clause (ii) of this subsection (d);
(B) contains qualifying, conditional or
similar language;
(C) proposes terms other than or in addition
to those set forth in the applicable Invitation for Bid-Option Quotes; or
(D) arrives after the time set forth in
Section 2.2(d)(i);
provided that a Bid-Option Quote shall not be disregarded pursuant to clause (B)
or (C) above solely because it contains an indication that an allocation that
might otherwise be made to it pursuant to Section 2.2(g) would be unacceptable.
The Agent shall notify the Company of any disregarded Bid-Option Quote.
(e) Notice to Company. The Agent shall promptly notify the
Company of the terms of any Bid-Option Quote submitted by a Lender that is in
accordance with Section 2.2(d). Any Bid-Option Quote not made in accordance with
Section 2.2(d) shall be disregarded by the Agent. The Agent's notice to the
Company shall specify (i) the aggregate principal amount of Bid-Option Loans for
which offers have been received for each Bid-Option Interest Period specified in
the related Bid-Option Quote Request, and (ii) the respective principal amounts
and respective Bid-Option Absolute Rates or Bid-Option Eurodollar Rate Margins,
as the case may be, so offered.
<PAGE> 19
(f) Acceptance and Notice by Company. Not later than 11:00
a.m. Detroit time on (i) the proposed date of a Borrowing, in the case of a
Bid-Option Auction for Absolute Rate Bid-Option Loans or (ii) the third Business
Day prior to the proposed date of the Borrowing, in the case of a Bid-Option
Borrowing for Eurodollar Rate Bid-Option Loans, the Company shall notify the
Agent of its acceptance or non-acceptance of the offers so notified to it
pursuant to subsection (e) of this Section and the Agent shall, promptly upon
receiving such notice from the Company, notify each Lender whose Bid-Option
Quote has been accepted. In the case of acceptance, such notice (a "Notice of
Bid-Option Loan") shall specify the aggregate principal amount of offers for the
applicable Interest Period(s) that have been accepted. The Company may accept
any Bid-Option Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Bid-Option
Loan may not exceed the applicable amount set forth in the related Bid-Option
Quote Request for the applicable Bid-Option Interest Period;
(ii) the principal amount of each Bid-Option Loan must
be $3,000,000 or a larger multiple of $1,000,000;
(iii) acceptance of offers may only be made on the
basis of ascending Bid-Option Absolute Rates or Bid-Option Eurodollar Rate
Margins, as the case may be; and
(iv) the Company may not accept any offer that is
described in Section 2.2(d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) Allocation by Agent. If offers are made by two or more
Lenders with the same Bid- Option Absolute Rates or Bid-Option Eurodollar Rate
Margins, as the case may be, for a greater aggregate principal amount than the
amount in respect of which offers are accepted for the related Interest Period,
the principal amount of Bid-Option Loans in respect of which such offers are
accepted shall be allocated by the Agent among such Lenders as nearly as
possible (in such multiples, not greater than $100,000, as the Agent may deem
appropriate) in proportion to the aggregate principal amount of such offers.
Determinations by the Agent of the amounts of Bid-Option Loans shall be
conclusive in the absence of manifest error.
2.3 Effect on Commitments. Notwithstanding anything in this
Agreement to the contrary, the sum of the aggregate principal amount of all
Syndicated Loans plus all Letter of Credit Advances (being the maximum amount
available to be drawn under the related Letters of Credit plus the amount of any
draws under Letters of Credit that have not been reimbursed), all Swingline
Loans and all Bid-Option Loans shall not at any time exceed the aggregate amount
of the Commitments of all Lenders. Each Lender's obligation to make its pro rata
portion of any subsequently requested Syndicated Loan or Letter of Credit
Advance shall not be affected by the making by such Lender of a Bid-Option Loan,
and the Lender which has outstanding Bid-Option Loans may be obligated to exceed
its Commitment, provided that, as stated above, the aggregate principal amount
of all Syndicated Loans, all Letters of Credit Advances and all Bid-Option Loans
shall not at any time exceed the aggregate amount of the Commitments of all
Lenders. .
<PAGE> 20
2.4 Termination and Reduction of Commitments. (a) The Company shall
have the right to terminate or reduce the Commitments at any time and from time
to time at its option, provided that (i) the Company shall give three days'
prior written notice of such termination or reduction to the Agent specifying
the amount and effective date thereof, (ii) each partial reduction of the
Commitments shall be in a minimum amount of $5,000,000 and in an integral
multiple of $1,000,000 thereafter and shall reduce the Commitments of all of the
Lenders proportionately in accordance with the respective commitment amounts for
each such Lender set forth in the signature pages hereof next to the name of
each such Lender, (iii) no such termination or reduction shall be permitted with
respect to any portion of the Commitments as to which a request for a Borrowing
pursuant to Section 2.6 is then pending and (iv) the Commitments may not be
terminated if any Advances are then outstanding and may not be reduced below the
principal amount of Advances then outstanding.
The Commitments or any portion thereof terminated or reduced pursuant
to this Section 2.4(a), whether optional or mandatory, may not be reinstated.
The Company shall immediately prepay the Loans to the extent they exceed the
reduced aggregate Commitments pursuant hereto, and any reduction hereunder shall
reduce the Commitment amount of each Lender proportionately in accordance with
the respective Commitment amounts for each such Lender set forth on the
signature pages hereof next to the name of each such Lender.
(b) For purposes of this Agreement, a Letter of Credit Advance (i)
shall be deemed outstanding in an amount equal to the sum of the maximum amount
available to be drawn under the related Letter of Credit on or after the date of
determination and on or before the stated expiry date thereof plus the amount of
any draws under such Letter of Credit that have not been reimbursed as provided
in Section 3.3 and (ii) shall be deemed outstanding at all times on and before
such stated expiry date or such earlier date on which all amounts available to
be drawn under such Letter of Credit have been fully drawn, and thereafter until
all related reimbursement obligations have been paid pursuant to Section 3.3. As
provided in Section 3.3, upon each payment made by the Agent in respect of any
draft or other demand for payment under any Letter of Credit, the amount of any
Letter of Credit Advance outstanding immediately prior to such payment shall be
automatically reduced by the amount of each Syndicated Loan deemed advanced in
respect of the related reimbursement obligation of the Company.
2.5 Fees. (a) The Company agrees to pay to the Lenders a facility fee
on the amount of the Commitments, whether used or unused, for the period from
the Effective Date to but excluding the Termination Date, at a rate equal to the
Applicable Margin per annum. Accrued facility fees shall be payable quarterly in
arrears on the last Business Day of each March, June, September and December,
commencing on the first such Business Day occurring after the date of this
Agreement, and on the Termination Date.
(b) The Company agrees (i) to pay to the Lenders a fee at a rate
equal to the Applicable Margin per annum, on the maximum amount available to be
drawn from time to time under each Letter of Credit for the period from and
including the date of issuance of such Letter of Credit to and including the
termination of such Letter of Credit, which fees shall be payable quarterly in
arrears on the last Business Day of each March, June, September and December and
on the Termination Date, based upon the Applicable Margin at the time each such
quarterly installment is paid, and (ii) to pay an additional fee to the Agent
for its own account computed at the rate of 0.125% per annum of such maximum
amount for such period, which fees shall be payable quarterly in arrears on the
last Business Day of each March, June, September and December and on the
Termination Date. The Company further agrees to pay to the Agent, on demand,
such other customary administrative fees, charges
<PAGE> 21
and expenses of the Agent in respect of the issuance, negotiation, acceptance,
amendment, transfer and payment of such Letter of Credit or otherwise payable
pursuant to the application and related documentation under which such Letter of
Credit is issued.
(c) The Company agrees to pay to the Agent such fees for its
services as Agent under this Agreement in such amounts as may from time to time
be agreed upon by the Company and the Agent.
2.6 Disbursement of Syndicated Advances. (a) The Company shall give the
Agent notice of its request for each Syndicated Advance in substantially the
form of Exhibit H hereto not later than 10:00 a.m. Detroit time (i) three
Eurodollar Business Days prior to the date such Advance is requested to be made
if such Borrowing is to be made as a Eurodollar Rate Syndicated Loan denominated
in Dollars, (ii) two Business Days prior to the date any Letter of Credit
Advance is requested to be made and (iii) on the date such Syndicated Loan is
requested to be made in all other cases, which notice shall specify whether a
Eurodollar Rate Syndicated Loan, Floating Rate Loan or a Letter of Credit
Advance is requested and, in the case of each requested Eurodollar Rate
Syndicated Loan, the Interest Period to be initially applicable to such Loan.
The Company shall give the Agent notice of its request for each Swingline Loan
in such form requested by the Agent not later than 11:00 a.m. Detroit time on
the same Business Day such Swingline Loan is requested to be made. The Agent, on
the same day any such notice is given, shall provide notice of each such
requested Syndicated Loan to each Lender. Subject to the terms and conditions of
this Agreement, the proceeds of each such requested Syndicated Loan and
Swingline Loan shall be made available to the Company by depositing the proceeds
thereof, in immediately available funds, in an account maintained and designated
by the Company at the principal office of the Agent. Subject to the terms and
conditions of this Agreement, the Agent shall, on the date any Letter of Credit
Advance is requested to be made, issue the related Letter of Credit on behalf of
the Lenders for the account of the Company. Notwithstanding anything herein to
the contrary, the Agent may decline to issue any requested Letter of Credit on
the basis that the beneficiary, the purpose of issuance or the terms or the
conditions of drawing are unacceptable to it based upon any legal, policy or
ethical concerns in its reasonable discretion.
(b) Each Lender, on the date any Syndicated Loan is requested to be
made, shall make its pro rata share of such Syndicated Loan available in
immediately available funds for disbursement to the Company pursuant to the
terms and conditions of this Agreement at the principal office of the Agent.
Unless the Agent shall have received notice from any Lender prior to the date
such Syndicated Loan is requested to be made under this Section 2.6 that such
Lender will not make available to the Agent such Lender's pro rata portion of
such Loan, the Agent may assume that such Lender has made such portion available
to the Agent on the date such Loan is requested to be made in accordance with
this Section 2.6. If and to the extent such Lender shall not have so made such
pro rata portion available to the Agent, the Agent may (but shall not be
obligated to) make such amount available to the Company, and such Lender agrees
to pay to the Agent forthwith on demand such amount together with interest
thereon, for each day from the date such amount is made available to the Company
by the Agent until the date such amount is repaid to the Agent, at a rate per
annum equal to the Federal Funds Rate then in effect. If such Lender shall pay
such amount to the Agent together with interest, such amount so paid shall
constitute a Syndicated Loan by such Lender as part of the related Borrowing for
purposes of this Agreement. The failure of any Lender to make its pro rata
portion of any such Borrowing available to the Agent shall not relieve any other
Lender of its obligation to make available its pro rata portion of such Loan on
the date such Loan is requested to be made, but no Lender shall be responsible
for failure of any other Lender to make such pro rata portion available to the
Agent on the date of any such Loan.
<PAGE> 22
(c) All Syndicated Loans shall be evidenced by the Revolving
Credit Notes and all Swingline Loans shall be evidenced by the Swingline Note,
and all such Loans shall be due and payable and bear interest as provided in
Article III. Each Lender is hereby authorized by the Company to record on the
schedule attached to the Notes, or in its books and records, the date, amount
and type of each Loan and the duration of the related Interest Period (if
applicable), the amount of each payment or prepayment of principal thereon, and
the other information provided for on such schedule, which schedule or books and
records, as the case may be, shall constitute prima facie evidence of the
information so recorded, provided, however, that failure of any Lender to
record, or any error in recording, any such information shall not relieve the
Company of its obligation to repay the outstanding principal amount of the
Loans, all accrued interest thereon and other amounts payable with respect
thereto in accordance with the terms of the Notes and this Agreement. Subject to
the terms and conditions of this Agreement, the Company may borrow Syndicated
Loans and Swingline Loans under this Section 2.6 and under Section 3.3, prepay
Syndicated Loans and Swingline Loans pursuant to Section 3.1 and reborrow
Syndicated Loans and Swingline Loans under this Section 2.6 and under Section
3.3.
(d) All Bid-Option Loans shall be disbursed directly by the
Lender making such BidOption Loan to the Company by 1:30 p.m. Detroit time on
the date such Bid-Option Loan is requested to be made via wire transfer in
immediately available funds to NBD Bank, 611 Woodward Avenue, Detroit, Michigan
48226, ABA Number 072000326, Reference: Universal Forest Products, Inc. confirm
to Agency Administration, or as otherwise directed by the Company.
(e) Nothing in this Agreement shall be construed to require or
authorize any Lender to issue any Letter of Credit, it being recognized that the
Agent has the sole obligation under this Agreement to issue Letters of Credit on
behalf of the Lenders, and the Commitment of each Lender with respect to Letter
of Credit Advances is expressly conditioned upon the Agent's performance of such
obligations. Upon such issuance by the Agent, each Lender shall automatically
acquire a pro rata risk participation interest in such Letter of Credit Advance
based on the amount of its respective Commitment. If the Agent shall honor a
draft or other demand for payment presented or made under any Letter of Credit,
the Agent shall provide notice thereof to each Lender on the date such draft or
demand is honored unless the Company shall have satisfied its reimbursement
obligation under Section 3.3 by payment to the Agent on such date. Each Lender,
on such date, shall make its pro rata share of the amount paid by the Agent
available in immediately available funds at the principal office of the Agent
for the account of the Agent. If and to the extent such Lender shall not have
made such pro rata portion available to the Agent, such Lender and the Company
severally agree to pay to the Agent forthwith on demand such amount together
with interest thereon, for each day from the date such amount was paid by the
Agent until such amount is so made available to the Agent at a per annum rate
equal to the Federal Funds Rate. If such Lender shall pay such amount to the
Agent together with such interest, such amount so paid shall constitute a
Syndicated Loan by such Lender as part of the Revolving Credit Borrowing
disbursed in respect of the reimbursement obligation of the Company under
Section 3.3 for purposes of this Agreement. The failure of any Lender to make
its pro rata portion of any such amount paid by the Agent available to the Agent
shall not relieve any other Lender of its obligation to make available its pro
rata portion of such amount, but no Lender shall be responsible for failure of
any other Lender to make such pro rata portion available to the Agent.
<PAGE> 23
2.7 Conditions for First Disbursement. The obligation of each Lender to
make its first Advance hereunder is subject to receipt by each Lender and the
Agent of the following documents and completion of the following matters, in
form and substance reasonably satisfactory to the Agent:
(a) Charter Documents. Certificates of recent date of the
appropriate authority or official of each Obligor's respective state of
organization listing all charter documents of each Obligor, on file in that
office and certifying as to the good standing and corporate existence of such
Obligor, together with copies of such charter documents of such Obligor,
certified as of a recent date by such authority or official and certified as
true and correct as of the Effective Date by a duly authorized officer of such
Obligor, respectively;
(b) By-Laws and Corporate Authorizations. Copies of the by-laws of
each Obligor together with all authorizing resolutions and evidence of other
corporate and other action taken by such Obligor to authorize the execution,
delivery and performance by each Obligor of the Loan Documents to which it is a
party and the consummation by each Obligor of the transactions contemplated
hereby or thereby, certified as true and correct as of the Effective Date by a
duly authorized officer of each Obligor, respectively;
(c) Incumbency Certificate. Certificates of incumbency of each
Obligor containing, and attesting to the genuineness of, the signatures of those
officers authorized to act on behalf of each Obligor in connection with the Loan
Documents to which it is a party and the consummation by each Obligor of the
transactions contemplated hereby, certified as true and correct as of the
Effective Date by a duly authorized officer of each Obligor;
(d) Legal Opinion. The favorable written opinion of counsel for
the Obligors in the form of Exhibit I attached hereto;
(e) Consents, Approvals, Etc. Copies of all governmental and
nongovernmental consents, approvals, authorizations, declarations, registrations
or filings, if any, required on the part of the Obligors in connection with the
execution, delivery and performance of the Loan Documents or the transactions
contemplated hereby or as a condition to the legality, validity or
enforceability of the Loan Documents, certified as true and correct and in full
force and effect as of the Effective Date by a duly authorized officer of the
Obligors, or, if none are required, a certificate of such officer(s) to that
effect;
(f) Other Loan Documents. Executed copies of each of the Notes, the
Guaranties and Pledge Agreements, executed by each party thereto, together with
all original stock certificates, stock powers, legal opinions and other
documents required by the Agent in connection therewith; and
(g) Miscellaneous. Such other certificates and documents as may be
reasonably requested by the Agent.
2.8 Further Conditions for Disbursement. The obligation of each Lender
to make any Advance (including its first Advance), or any continuation or
conversion under Section 2.9, is further subject to the satisfaction of the
following conditions precedent:
<PAGE> 24
(a) The representations and warranties contained in Article IV
hereof and in any other Loan Document shall be true and correct in all material
respects on and as of the date such Advance is made, continued or converted
(both before and after such Advance is made, continued or converted) as if such
representations and warranties were made on and as of such date; and
(b) No Event of Default and no Default shall exist or shall have
occurred and be continuing on the date such Advance is made, continued or
converted (whether before or after such Advance is made, continued or
converted);
(c) In the case of any Letter of Credit Advance, at least two
Business Days prior to the date such Letter of Credit is to be issued, the
Company shall have delivered to the Agent an application for the related Letter
of Credit and other related documentation requested by and acceptable to the
Agent appropriately completed and duly executed on behalf of the Company.
The Company shall be deemed to have made a representation and warranty to the
Lenders at the time of the making of, and the continuation or conversion of,
each Advance to the effects set forth in clauses (a) and (b) of this Section
2.8. For purposes of this Section 2.8, the representations and warranties
contained in Section 4.6 hereof shall be deemed made with respect to the most
recent financial statements delivered pursuant to Section 5.1(d)(iii).
2.9 Subsequent Elections as to Borrowings. The Company may elect (a)
to continue a Eurodollar Rate Syndicated Borrowing of one type, or a portion
thereof, as a Eurodollar Rate Syndicated Borrowing of the then existing type, or
(b) may elect to convert a Eurodollar Rate Syndicated Borrowing, or a portion
thereof, to a Eurodollar Rate Syndicated Borrowing of another type or (c) elect
to convert a Floating Rate Borrowing, or a portion thereof, to a Eurodollar Rate
Syndicated Borrowing, in each case by giving notice thereof to the Agent (with
sufficient executed copies for each Lender) in substantially the form of Exhibit
J hereto not later than 10:00 a.m. Detroit time (i) three Eurodollar Business
Days prior to the date any such continuation of or conversion to a Eurodollar
Rate Syndicated Borrowing is to be effective, and (ii) the date such
continuation or conversion is to be effective in all other cases, provided that
an outstanding Eurodollar Rate Syndicated Borrowing may only be converted on the
last day of the then current Interest Period with respect to such Borrowing
unless the Company has paid break funding costs as set forth in Section 3.9, and
provided, further, if a continuation of a Borrowing as, or a conversion of a
Borrowing to, a Eurodollar Rate Syndicated Borrowing is requested, such notice
shall also specify the Interest Period to be applicable thereto upon such
continuation or conversion. The Agent, on the day any such notice is given,
shall provide notice of such election to the Lenders. If the Company shall not
timely deliver such a notice with respect to any outstanding Eurodollar Rate
Syndicated Borrowing, the Company shall be deemed to have elected to convert
such Eurodollar Rate Syndicated Borrowing to a Floating Rate Borrowing on the
last day of the then current Interest Period with respect to such Borrowing.
2.10 Limitation of Requests and Elections. Notwithstanding any other
provision of this Agreement to the contrary, if, upon receiving a request for a
Eurodollar Rate Syndicated Borrowing pursuant to Section 2.6, or a request for a
continuation of a Eurodollar Rate Syndicated Borrowing as a Eurodollar Rate
Syndicated Borrowing of the then existing type, or a request for conversion of a
Eurodollar Rate Syndicated Borrowing of one type to a Eurodollar Rate Syndicated
Borrowing of another type, or a request for a conversion of a Floating Rate
Borrowing to a Eurodollar Rate Syndicated Borrowing pursuant to Section 2.9, (a)
in the case of any
<PAGE> 25
Eurodollar Rate Syndicated Borrowing, deposits in Dollars for periods comparable
to the Interest Period elected by the Company are not available to any Lender in
the relevant interbank or secondary market and such Lender has provided to the
Agent and the Company a certificate prepared in good faith to that effect, or
(b) any Lender reasonably determines that the Eurodollar Base Rate will not
adequately and fairly reflect the cost to such Lender of making, funding or
maintaining the related Eurodollar Rate Syndicated Loan and such Lender has
provided to the Agent and the Company a certificate prepared in good faith to
that effect, or (c) by reason of national or international financial, political
or economic conditions or by reason of any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect, or the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Lender
with any directive of such authority (whether or not having the force of law),
including without limitation exchange controls, it is impracticable, unlawful or
impossible for any Lender (i) to make or fund the relevant Eurodollar Rate
Syndicated Borrowing or (ii) to continue such Eurodollar Rate Syndicated
Borrowing as a Eurodollar Rate Syndicated Borrowing of the then existing type or
(iii) to convert a Loan to such a Eurodollar Rate Syndicated Loan, and such
Lender has provided to the Agent and the Company a certificate prepared in good
faith to that effect, then, notwithstanding any other provision herein, (A) the
Commitment of such Lender to make or continue Eurodollar Rate Syndicated
Borrowings or to convert Floating Rate Loans to Eurodollar Rate Syndicated Loans
shall forthwith be canceled until such time as such Lender shall no longer be
subject to such circumstances preventing it from making or maintaining the
affected Loans, and (B) such Lender's Loans then outstanding as Eurodollar Rate
Syndicated Loans, if any, shall be converted automatically to Floating Rate
Loans on the respective last days of the then current Interest Periods with
respect thereto or within such earlier period as may be required by law. If any
such conversion of a Eurodollar Rate Syndicated Loan occurs on a day which is
not the last day of the then current Interest Period with respect thereto, the
Company shall pay to such Lender such amounts, if any, as may be required under
Section 3.9.
2.11 Minimum Amounts; Limitation on Number of Borrowings. Except for
(a) Borrowings and conversions thereof which exhaust the entire remaining amount
of the Commitments, and (b) conversions or payments required pursuant to Section
3.1(b) or Section 3.8, each Syndicated Advance and each continuation or
conversion pursuant to Section 2.9 and each prepayment thereof shall be in a
minimum amount of $3,000,000 and in integral multiples of $1,000,000 or such
lesser amount agreed to by the Agent.
2.12 Notes. The Company agrees that, upon the request of the Agent or
any Lender, the Company will execute and deliver to such Lender Notes for such
Lender, provided that the delivery of such Notes shall not be a condition
precedent to the making of any Advances.
2.13 Security and Collateral To secure or guarantee the payment when
due of all Lender Indebtedness, the Company shall execute and deliver, or cause
to be executed and delivered, to the Lenders and the Agent Loan Documents
granting the following, subject to any Intercreditor Agreement:
(a) Pledges, pursuant to Pledge Agreements, of 65% of the present
and future Capital Stock of certain present and future Foreign Subsidiaries and
Guaranties of certain present and future Domestic Subsidiaries such that, at all
times, the Domestic Subsidiaries which are not Guarantors and the Foreign
Subsidiaries that do not have 65% of their Capital Stock pledged pursuant to
Pledge Agreements do not, if considered in the aggregate as a single Subsidiary,
constitute a Significant Subsidiary; and
(b) All other security and collateral described in the Pledge
Agreements.
<PAGE> 26
ARTICLE III.
PAYMENTS AND PREPAYMENTS
3.1 Principal Payments. (a) Unless earlier payment is required
under this Agreement, the Company shall pay to the Lenders on the Termination
Date the entire outstanding principal amount of the Syndicated Loans.
(b) Unless earlier payment is required under this Agreement, the
Company shall, on the maturity date of any Bid-Option Loan, pay to the Lender
providing such Bid-Option Loan the outstanding principal amount of such Loan.
(c) The Company may at any time and from time to time prepay all or
a portion of the Loans without premium in the case of Syndicated Loans, provided
that (i) the Company may not prepay any portion of any Loan as to which an
election for continuation of or conversion to a Eurodollar Rate Syndicated Loan
is pending pursuant to Section 2.9, and (ii) unless earlier payment is required
under this Agreement or unless the Company pays all amounts required pursuant to
Section 3.9, any Eurodollar Rate Syndicated Loan or Bid-Option Loan may only be
prepaid on the last day of the then current Interest Period with respect to such
Loan.
3.2 Interest Payments. The Company shall pay interest to the Lenders on
the unpaid principal amount of each Loan (other than Bid-Option Loans, for which
the interest shall be payable directly to the Lender providing such Bid-Option
Loan as described in clauses (b) and (c) below), for the period commencing on
the date such Loan is made until such Loan is paid in full, on each Interest
Payment Date and at maturity (whether at stated maturity, by acceleration or
otherwise), and thereafter on demand, at the following rates per annum:
(a) With respect to Syndicated Loans:
(i) During such periods that such Loan is a Floating Rate
Loan, the Floating Rate.
(ii) During such periods that such Loan is a Eurodollar Rate
Syndicated Loan, the Syndicated Eurodollar Rate applicable to such Loan for each
related Eurodollar Interest Period.
(b) With respect to Absolute Rate Bid-Option Loans, the Bid-Option
Absolute Rate quoted for such Loan by the Lender making such Loan.
(c) With respect to each Eurodollar Rate Bid-Option Loan, the
Bid-Option Eurodollar Rate.
(d) With respect to Swingline Loans, the rate agreed to by the
Agent and the Company, provided that Swingline Loans shall bear interest at the
rate applicable to Floating Rate Loans at any time the Swingline Loans are
refunded by Floating Rate Loans or the Lenders are required to purchase
participations therein under Section 2.1(b)(iii).
<PAGE> 27
Notwithstanding the foregoing paragraphs (a) through (d), the Company shall pay
interest on demand at the Overdue Rate on the outstanding principal amount of
any Loan and any other amount payable by the Company hereunder (other than
interest) upon the occurrence and during the continuance of any Event of
Default.
3.3 Letter of Credit Reimbursement Payments. (a)(i) The Company agrees
to pay to the Lenders, on the day on which the Agent shall honor a draft or
other demand for payment presented or made under any Letter of Credit, an amount
equal to the amount paid by the Agent in respect of such draft or other demand
under such Letter of Credit and all expenses paid or incurred by the Agent
relative thereto. Unless the Company shall have made such payment to the Lenders
on such day, upon each such payment by the Agent, the Agent shall be deemed to
have disbursed to the Company for whose benefit the Letter of Credit was issued,
and the Company shall be deemed to have elected to satisfy its reimbursement
obligation by, a Syndicated Loan bearing interest at the Floating Rate for the
account of the Lenders in an amount equal to the amount so paid by the Agent in
respect of such draft or other demand under such Letter of Credit. Such
Syndicated Loan shall be disbursed notwithstanding any failure to satisfy any
conditions for disbursement of any Loan set forth in Article II hereof and, to
the extent of the Syndicated Loan so disbursed, the reimbursement obligation of
the Company under this Section 3.3 shall be deemed satisfied; provided, however,
that nothing in this Section 3.3 shall be deemed to constitute a waiver of any
Default or Event of Default caused by the failure to the conditions for
disbursement or otherwise.
(ii) If, for any reason (including without limitation as a
result of the occurrence of an Event of Default with respect to the Company
pursuant to Section 6.1(i)), Floating Rate Loans may not be made by the Lenders
as described in Section 3.3(a)(i), then (A) the Company agrees that each
reimbursement amount not paid pursuant to the first sentence of Section
3.3(a)(i) shall bear interest, payable on demand by the Agent, at the interest
rate then applicable to Floating Rate Loans, and (B) effective on the date each
such Floating Rate Loan would otherwise have been made, each Lender severally
agrees that it shall unconditionally and irrevocably, without regard to the
occurrence of any Default or Event of Default, in lieu of deemed disbursement of
loans, to the extent of such Lender's Commitment, purchase a participating
interest in each reimbursement amount. Each Lender will immediately transfer to
the Agent, in same day funds, the amount of its participation. Each Lender shall
share on a pro rata basis (calculated by reference to its Commitment) in any
interest which accrues thereon and in all repayments thereof. If and to the
extent that any Lender shall not have so made the amount of such participating
interest available to the Agent, such Lender and the Company severally agree to
pay to the Agent forthwith on demand such amount together with interest thereon,
for each day from the date of demand by the Agent until the date such amount is
paid to the Agent, at (x) in the case of the Company, the interest rate then
applicable to Floating Rate Loans and (y) in the case of such Lender, the
Federal Funds Rate.
(b) The reimbursement obligation of the Company under this Section
3.3 shall be absolute, unconditional and irrevocable and shall remain in full
force and effect until all obligations of the Company to the Lenders hereunder
shall have been satisfied, and such obligations of the Company shall not be
affected, modified or impaired upon the happening of any event, including
without limitation, any of the following, whether or not with notice to, or the
consent of, the Company:
(i) Any lack of validity or enforceability of any Letter
of Credit or any documentation relating to any Letter of Credit or to any
transaction related in any way to such Letter of Credit (the "Letter of Credit
Documents");
<PAGE> 28
(ii) Any amendment, modification, waiver,
consent, or any substitution, exchange or release of or failure to perfect any
interest in collateral or security, with respect to any of the Letter of Credit
Documents;
(iii) The existence of any claim, setoff, defense
or other right which the Company may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Persons or entities for whom any
such beneficiary or any such transferee may be acting), the Agent or any Lender
or any other Person or entity, whether in connection with any of the Letter of
Credit Documents, the transactions contemplated herein or therein or any
unrelated transactions;
(iv) Any draft or other statement or document
presented under any Letter of Credit proving to be forged, fraudulent, invalid
or insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) Payment by the Agent to the beneficiary
under any Letter of Credit against presentation of documents which do not comply
with the terms of the Letter of Credit, including failure of any documents to
bear any reference or adequate reference to such Letter of Credit;
(vi) Any failure, omission, delay or lack on the
part of the Agent or any Lender or any party to any of the Letter of Credit
Documents to enforce, assert or exercise any right, power or remedy conferred
upon the Agent, any Lender or any such party under this Agreement or any of the
Letter of Credit Documents, or any other acts or omissions on the part of the
Agent, any Lender or any such party;
(vii) Any other event or circumstance that would,
in the absence of this clause, result in the release or discharge by operation
of law or otherwise of the Company from the performance or observance of any
obligation, covenant or agreement contained in this Section 3.3.
No setoff, counterclaim, reduction or diminution of any obligation or any
defense of any kind or nature which the Company has or may have against the
beneficiary of any Letter of Credit shall be available hereunder to the Company
against the Agent or any Lender. Nothing in this Section 3.3 shall limit the
liability, if any, of the Lenders to the Company pursuant to Section 8.5.
3.4 Payment Method. (a) All payments to be made by the Company
hereunder will be made to the Agent at its principal office for the account of
the Lenders in Dollars and in immediately available, freely transferable,
cleared funds not later than 1:00 p.m. (Detroit time) on the date on which such
payment shall be due. Payments received after 1:00 p.m. at the place for payment
shall be deemed to be payments made prior to 1:00 p.m. at the place for payment
on the next succeeding Business Day. The Company hereby authorizes the Agent to
charge its account with the Agent in order to cause timely payment of amounts
due hereunder to be made (subject to sufficient funds being available in such
account for that purpose).
(b) At the time of making each such payment, the Company
shall, subject to the other terms and conditions of this Agreement, specify to
the Agent that Borrowing or other obligation of the Company hereunder to which
such payment is to be applied. In the event that the Company fails to so specify
the relevant
<PAGE> 29
obligation or if an Event of Default shall have occurred and be continuing, the
Agent may apply such payments as it may determine in its sole discretion to
obligations of the Company to the Lenders arising under the Loan Documents.
(c) On the day such payments are deemed received, the Agent shall
remit to the Lenders their pro rata shares of such payments in immediately
available funds, to the Lenders at their respective address in the United States
specified for notices pursuant to Section 8.2. Such pro rata shares shall be
determined with respect to each such Lender, (A) in the case of payments of
principal and interest on any Borrowing, by the ratio which the outstanding
principal balance of its Loan included in such Borrowing bears to the
outstanding principal balance of the Loans of all of the Lenders included in
such Borrowing and (B) in the case of fees paid pursuant to Section 2.5 and
other amounts payable hereunder (other than the Agent's fees payable pursuant to
Section 2.5(d) and amounts payable to any Lender under Section 2.6 or 3.7) by
the ratio which the Commitment of such Lender bears to the Commitments of all
the Lenders.
3.5 No Setoff or Deduction. Subject to Section 7.15, all payments of
principal of and interest on the Loans and other amounts payable by the Company
hereunder shall be made by the Company without setoff or counterclaim, and free
and clear of, and without deduction or withholding for, or on account of, any
present or future taxes, levies, imposts, duties, fees, assessments, or other
charges of whatever nature, imposed by any governmental authority, or by any
department, agency or other political subdivision or taxing authority, unless
required by applicable laws. If any such taxes, levies, imposts, duties, fees,
assessments, or other charges are required to be withheld from any amounts
payable hereunder with respect to any Advance, the amounts so payable shall be
increased to the extent necessary to yield to the payee thereof the interest or
any such other amounts payable hereunder at the rates and in the amounts
specified in this Agreement.
3.6 Payment on Non-Business Day; Payment Computations. Except as
otherwise provided in this Agreement to the contrary, whenever any installment
of principal of, or interest on, any Loan or any other amount due hereunder
becomes due and payable on a day which is not a Business Day, the maturity
thereof shall be extended to the next succeeding Business Day and, in the case
of any installment of principal, interest shall be payable thereon at the rate
per annum determined in accordance with this Agreement during such extension.
Computations of interest and other amounts due under this Agreement shall be
made on the basis of a year of 360 days for the actual number of days elapsed,
including the first day but excluding the last day of the relevant period.
3.7 Additional Costs. (a) If the adoption of or any change in any law,
treaty, rule or regulation (whether domestic or foreign) applicable to any
Lender or the Agent, or in any interpretation, application or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by any Lender or the Agent with any
directive of any such authority (whether or not having the force of law) made
subsequent to the Effective Date, shall (i) affect the basis of taxation of
payments to any Lender or the Agent of any amounts payable by the Company under
this Agreement (other than taxes imposed on the overall net income of the Lender
or the Agent, by the jurisdiction, or by any political subdivision or taxing
authority of any such jurisdiction, in which any Lender or the Agent, as the
case may be, has its principal office), or (ii) shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by any Lender or the
Agent, as the case may be, or (iii) shall impose any other condition with
respect to this Agreement, the Commitments, the Notes or the Advances,
<PAGE> 30
and the result of any of the foregoing is to increase the cost to any Lender or
the Agent, as the case may be, of making, funding or maintaining any Fixed Rate
Loan or to reduce the amount of any sum receivable by any Lender or the Agent,
thereon, then the Company shall pay to such Lender or the Agent, as the case may
be, from time to time, upon request by such Lender (with a copy of such request
to be provided to the Agent) or the Agent, additional amounts sufficient to
compensate such Lender or the Agent, as the case may be, for such increased cost
or reduced sum receivable to the extent, such Lender or the Agent, as the case
may be, is not compensated therefor in the computation of the interest rate
applicable to such Loan. Each Lender or the Agent, as the case may be, seeking
compensation hereunder shall deliver to the Company a statement setting forth
such increased cost or reduced sum receivable as such Lender or the Agent, as
the case may be, has calculated in good faith. Such statement as to the amount
of such increased cost or reduced sum receivable, prepared in good faith and in
reasonable detail by such Lender or the Agent, as the case may be, and submitted
by such Lender or the Agent, as the case may be, to the Company, shall be
conclusive and binding for all purposes absent manifest error in computation.
(b) If the adoption of or any change in any law, treaty, rule
or regulation (whether domestic or foreign) applicable to any Lender or the
Agent, but applicable to banks or financial institutions generally, or in any
interpretation or administration thereof by any governmental authority charged
with the interpretation, application or administration thereof, or compliance by
any Lender or the Agent with any directive of any such authority (whether or not
having the force of law), including any risk-based capital guidelines made
subsequent to the Effective Date, affects the amount of capital required or
expected to be maintained by such Lender or the Agent (or any corporation
controlling such Lender or the Agent) and such Lender or the Agent, as the case
may be, determines that the amount of such capital is increased by or based upon
the existence of such Lender's or the Agent's obligations hereunder and such
increase has the effect of reducing the rate of return on such Lender's or the
Agent's (or such controlling corporation's) capital as a consequence of such
obligations hereunder to a level below that which such Lender or the Agent (or
such controlling corporation) could have achieved but for such circumstances
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Lender or the Agent to be material, then the Company shall
pay to such Lender or the Agent, as the case may be, from time to time, upon
request by such Lender (with a copy of such request to be provided to the Agent)
or the Agent, additional amounts sufficient to compensate such Lender or the
Agent (or such controlling corporation) for any reduced rate of return which
such Lender or the Agent reasonably determines to be allocable to the existence
of such Lender's or the Agent's obligations hereunder. Each Lender or the Agent,
as the case may be, seeking compensation hereunder shall deliver to the Company
a statement setting forth such increased cost or reduced sum receivable as such
Lender or the Agent, as the case may be, has calculated in good faith. Such
statement as to the amount of such compensation, prepared in good faith and in
reasonable detail by such Lender or the Agent, as the case may be, and submitted
by such Lender or the Agent to the Company, shall be conclusive and binding for
all purposes absent manifest error in computation.
(c) Each Lender will promptly notify the Company and the Agent
of any event of which it has actual knowledge occurring after the date hereof
which will entitle to such Lender to compensation pursuant to this Section 3.7
and will designate a different Applicable Lending Office if such designation
will avoid the need for, or reduce the amount of, such compensation and will
not, in the judgment of such Lender, be otherwise disadvantageous to such Lender
or contrary to its policies.
<PAGE> 31
3.8 Illegality and Impossibility. In the event that any applicable
law, treaty, rule or regulation (whether domestic or foreign) now or hereafter
in effect and whether or not presently applicable to any Lender, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by any Lender
with any directive of such authority (whether or not having the force of law),
including without limitation exchange controls, shall make it unlawful or
impossible for any Lender to maintain any Fixed Rate Loan under this Agreement
or shall make it impracticable, unlawful or impossible for, or shall in any way
limit or impair the ability of, the Company to make or any Lender to receive any
payment under this Agreement at the place specified for payment hereunder, or to
freely convert any amount paid into Dollars at market rates of exchange or to
transfer any amount paid or so converted to the address of its principal office
specified in Section 8.2, the Company shall upon receipt of notice thereof from
such Lender, repay in full the then outstanding principal amount of each Fixed
Rate Loan so affected, together with all accrued interest thereon to the date of
payment and all amounts owing to such Lender under Section 3.9, (a) on the last
day of the then current Interest Period applicable to such Loan if such Lender
may lawfully continue to maintain such Loan to such day, or (b) immediately if
such Lender may not continue to maintain such Loan to such day.
3.9 Indemnification. If the Company makes any payment of principal
with respect to any Fixed Rate Loan on any other date than the last day of an
Interest Period applicable thereto (whether pursuant to Section 3.8 or Section
6.2 or otherwise), or if the Company fails to borrow or continue any Fixed Rate
Loan, or convert any Floating Rate Loan to a Fixed Rate Loan, after notice has
been given to the Lenders in accordance with Section 2.6 or 2.9, as applicable,
the Company shall reimburse each Lender on demand for any resulting net loss or
expense incurred by each such Lender after giving credit for any earnings or
other quantifiable financial benefit to such Lender from such Lender's
investment or other amounts prepaid or not reborrowed, including without
limitation any loss incurred in obtaining, liquidating or employing deposits
from third parties, whether or not such Lender shall have funded or committed to
fund such Loan. A statement as to the amount of such loss or expense, prepared
in good faith and in reasonable detail by such Lender and submitted by such
Lender to the Company, shall be conclusive and binding for all purposes absent
manifest error in computation. Calculation of all amounts payable to such Lender
under this Section 3.9 shall be made as though such Lender shall have actually
funded or committed to fund the relevant Fixed Rate Loan through the purchase of
an underlying deposit in an amount equal to the amount of such Loan and having a
maturity comparable to the related Interest Period; provided, however, that such
Lender may fund any Fixed Rate Loan in any manner it sees fit and the foregoing
assumption shall be utilized only for the purpose of calculation of amounts
payable under this Section 3.9.
3.10 Substitution of Lender. If (a) the obligation of any Lender to
make or maintain Eurodollar Rate Syndicated Loans has been suspended pursuant to
Section 3.8 or 2.10 when not all Lenders obligations have been suspended, (b)
any Lender has demanded compensation under Section 3.7 or (c) any Lender is a
Defaulting Lender, the Company shall have the right, if no Default or Event of
Default then exists, to replace such Lender (a "Replaced Lender") with one or
more other Lenders (collectively, the "Replacement Lender") acceptable to the
Agent, provided that (i) at the time of any replacement pursuant to this Section
3.10, the Replacement Lender shall enter into one or more Assignment and
Acceptances, pursuant to which the Replacement Lender shall acquire the
Commitments and outstanding Advances and other obligations of the Replaced
Lender and, in connection therewith, shall pay to the Replaced Lender in respect
thereof an amount equal to the sum of (A) the amount of principal of, and all
accrued interest on, all outstanding Loans of the Replaced Lender, (B) the
amount of all accrued, but theretofore unpaid, fees owing to the Replaced Lender
under Section 2.3 and (C) the amount
<PAGE> 32
which would be payable by the Company to the Replaced Lender pursuant to Section
3.9 if the Company prepaid at the time of such replacement all of the Loans of
such Replaced Lender outstanding at such time and (ii) all obligations of the
Company then owing to the Replaced Lender (other than those specifically
described in clause (i) above in respect of which the assignment purchase price
has been, or is concurrently being, paid) shall be paid in full to such Replaced
Lender concurrently with such replacement. Upon the execution of the respective
Assignment and Acceptances, the payment of amounts referred to in clauses (i)
and (ii) above and, if so requested by the Replacement Lender, delivery to the
Replacement Lender of the appropriate Note or Notes, if any, executed by the
Company, the Replacement Lender shall become a Lender hereunder and the Replaced
Lender shall cease to constitute a Lender hereunder. The provisions of this
Agreement (including without limitation Sections 3.9 and 8.5) shall continue to
govern the rights and obligations of a Replaced Lender with respect to any
Advances made or any other actions taken by such Lender while it was a Lender.
Nothing herein shall release any Defaulting Lender from any obligation it may
have to the Company, the Agent or any other Lender.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Agent and the Lenders that:
4.1 Corporate Existence and Power. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the state or
other political subdivision of its jurisdiction of incorporation or
organization, as the case may be, and is duly qualified to do business, and is
in good standing, in all additional jurisdictions where such qualification is
necessary under applicable law, except where the failure to be so qualified
would not have a Material Adverse Effect. The Company has all requisite
corporate and other power to own or lease the properties used in its business
and to carry on its business as now being conducted and as proposed to be
conducted, and to execute and deliver this Agreement and the other Loan
Documents to which it is a party and to engage in the transactions contemplated
by the Loan Documents.
4.2 Corporate Authority. The execution, delivery and performance by the
Company of the Loan Documents to which it is a party have been duly authorized
by all necessary corporate action and are not in contravention of any material
law, rule or regulation, or any judgment, decree, writ, injunction, order or
award of any arbitrator, court or governmental authority, or of the terms of the
Company's charter or by-laws, or of any material contract or undertaking to
which the Company is a party or by which the Company or its property is bound or
affected and do not result in the imposition of any Lien except for Permitted
Liens.
4.3 Binding Effect. The Loan Documents to which the Company is a party
are the legal, valid and binding obligations of the Company enforceable against
the Company in accordance with their respective terms; except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights and except that
the remedy of specific performance and injunctive and other forms of equitable
relief are subject to equitable defenses and to the discretion of the court
before which any proceedings may be brought.
4.4 Subsidiaries. Schedule 4.4 hereto correctly sets forth the
corporate name, jurisdiction of organization and ownership of each Subsidiary of
the Company. Each Subsidiary and each Person becoming a
<PAGE> 33
Subsidiary of the Company after the date hereof is and will be duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization and is and will be duly qualified to do business in each additional
jurisdiction where such qualification is or may be necessary under applicable
law, except where the failure to be so qualified would not have a Material
Adverse Effect. Each Subsidiary of the Company has and will have all requisite
corporate power to own or lease the properties used in its business and to carry
on its business as now being conducted and as proposed to be conducted. All
outstanding shares of Capital Stock of each Subsidiary of the Company have been
and will be validly issued and are and will be fully paid and nonassessable and,
except as otherwise indicated in Schedule 4.4 hereto or disclosed in writing to
the Agent from time to time, are and will be owned, beneficially and of record,
by the Company or another Subsidiary of the Company free and clear of any Liens.
4.5 Litigation. Except as set forth in Schedule 4.5 hereto, there is no
action, suit or proceeding pending or, to the best of the Company's knowledge,
threatened against or affecting the Company or any of its Subsidiaries before or
by any court, governmental authority or arbitrator, which is reasonably likely
to result either individually or collectively, in a Material Adverse Effect and,
to the best of the Company's knowledge, there is no basis for any such action,
suit or proceeding.
4.6 Financial Condition. The consolidated balance sheet of the Company
and its Subsidiaries and the consolidated statements of income, and cash flows
of the Company and its Subsidiaries for the fiscal year ended December 27, 1997
and reported on by Deloitte & Touche LLP, independent certified public
accountants, and the interim consolidated balance sheet and interim consolidated
statements of income and cash flows of the Company and its Subsidiaries, as of
or for the six month period ended on June 27, 1998, copies of which have been
furnished to the Lenders, fairly present, and the financial statements of the
Company and its Subsidiaries delivered pursuant to Section 5.1(d) will fairly
present the consolidated financial position of the Company and its Subsidiaries
as at the respective dates thereof, and the consolidated results of operations
of the Company and its Subsidiaries for the respective periods indicated, all in
accordance with Generally Accepted Accounting Principles consistently applied
(subject, in the case of said interim statements, to year-end audit
adjustments). There has been no Material Adverse Effect since the date of the
consolidated balance sheet of the Company delivered to the Lenders prior to the
Effective Date.
4.7 Use of Loans. The Company will use the proceeds of the Loans for
its working capital requirements and general corporate purposes. Neither the
Company nor any of its Subsidiaries extends or maintains, in the ordinary course
of business, credit for the purpose, whether immediate, incidental, or ultimate,
of buying or carrying margin stock (within the meaning of Regulations T, U or X
of the Board of Governors of the Federal Reserve System), and no part of the
proceeds will be used in violation of Regulations T, U or X or any other law or
regulation. After applying the proceeds of each Loan, such margin stock will not
constitute more than 25% of the value of the assets (either of the Company alone
or of the Company and its Subsidiaries on a consolidated basis) that are subject
to any provisions of this Agreement that may cause the Loans to be deemed
secured, directly or indirectly, by such margin stock.
4.8 Consents, Etc. Except for such consents, approvals, authorizations,
declarations, registrations or filings delivered by the Company pursuant to
Section 2.7(f), if any, each of which is in full force and effect, no consent,
approval or authorization of or declaration, registration or filing with any
governmental authority or any nongovernmental Person, including without
limitation any creditor, lessor or stockholder of the Company or
<PAGE> 34
Guarantor, is required on the part of the Company or Guarantor in connection
with the execution, delivery and performance of the Loan Documents, or the
transactions contemplated hereby or as a condition to the legality, validity or
enforceability of the Loan Documents. The Company and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective properties if failure to comply
therewith could reasonably be expected to have a Material Adverse Effect.
4.9 Taxes. The Company and its Subsidiaries have filed all material
tax returns (federal, state and local) required to be filed and have paid all
taxes shown thereon to be due, including interest and penalties, or have
established adequate financial reserves on their respective books and records
for payment thereof except where the failure to file such returns, pay such
taxes or establish such reserves would not have a Material Adverse Effect.
4.10 Title to Properties. Except as otherwise disclosed in the latest
balance sheet delivered pursuant to this Agreement, the Company or one or more
of its Subsidiaries have good and marketable fee simple title to all of the real
property, and a valid and indefeasible ownership interest in all of the other
properties and assets reflected in said balance sheet or subsequently acquired
by the Company or any such Subsidiary material to the business or financial
condition of the Company and its Subsidiaries taken as a whole, except for title
defects that do not have a Material Adverse Effect. All of such properties and
assets are free and clear of any Lien, except for Permitted Liens. The Company
and each of its Subsidiaries owns, or is licensed to use, all patents,
trademarks, trade names, service marks, copyrights, technology, know-how and
processes necessary for the conduct of its business as currently conducted and
as contemplated to be conducted (the "Intellectual Property"), and the use of
such Intellectual Property by the Company and each of its Subsidiaries does not
infringe on the rights of any Person. The Pledge Agreements grant a first
priority, perfected and enforceable lien and security interest on 65% of the
Capital Stock of certain Foreign Subsidiaries owned by the Company or any
Guarantor to the extent that 65% of the Capital Stock of such Foreign
Subsidiaries is required to be pledged by Section 2.13.
4.11 ERISA. The Company, its Subsidiaries, their ERISA Affiliates and
their respective Plans are in substantial compliance in all material respects
with those provisions of ERISA and of the Code which are applicable with respect
to any Plan. No Prohibited Transaction and no Reportable Event has occurred with
respect to any such Plan which would cause an Event of Default. Neither the
Company, any of its Subsidiaries nor any of their ERISA Affiliates is an
employer with respect to any Multiemployer Plan. The Company, its Subsidiaries
and their ERISA Affiliates have met the minimum funding requirements under ERISA
and the Code with respect to each of their respective Plans, if any, and have
not incurred any liability to the PBGC, other than premiums which are not yet
due and payable. The execution, delivery and performance of the Loan Documents
does not constitute a Prohibited Transaction. There is no material unfunded
benefit liability, determined in accordance with Section 4001(a)(18) of ERISA,
with respect to any Plan of the Company, its Subsidiaries or their ERISA
Affiliates.
4.12 Environmental and Safety Matters. Except as disclosed on Schedule
4.12 hereto, the Company and each Subsidiary of the Company is in substantial
compliance with all material federal, state and local laws, ordinances and
regulations relating to safety and industrial hygiene or to the environmental
condition, including
<PAGE> 35
without limitation all material Environmental Laws in jurisdictions in which the
Company or any such Subsidiary owns or operates, or has owned or operated, a
facility or site, or arranges or has arranged for disposal or treatment of
hazardous substances, solid waste, or other wastes, accepts or has accepted for
transport any hazardous substances, solid wastes or other wastes or holds or has
held any interest in real property or otherwise. No written demand, claim,
notice, suit, suit in equity, action, administrative action, investigation or
inquiry whether brought by any governmental authority, private Person or
otherwise, arising under, relating to or in connection with any Environmental
Laws is pending or, to the best of the Company's actual knowledge, threatened
against the Company or any such Subsidiary, any real property in which the
Company or any such Subsidiary holds or has held an interest or any past or
present operation of the Company or any such Subsidiary which could have a
Material Adverse Effect. As of the date hereof, except as disclosed in Schedule
4.12 hereto, neither the Company nor any Subsidiary of the Company (a) is the
subject of any federal or state investigation evaluating whether any remedial
action is needed to respond to a release of any toxic substances, radioactive
materials, hazardous wastes or related materials into the environment, or (b)
has received any notice of any toxic substances, radioactive materials,
hazardous waste or related materials in, or upon any of its properties in
violation of any Environmental Laws. As to the matters disclosed in Schedule
4.12 hereto, none could have a Material Adverse Effect. No release, threatened
release or disposal of hazardous waste, solid waste or other wastes is occurring
or has occurred on, under or to any real property in which the Company or any of
its Subsidiaries holds any interest or performs any of its operations, in
violation of any Environmental Law which could have a Material Adverse Effect.
4.13 Material Agreements. Neither the Company nor any Subsidiary is a
party to any agreement or instrument or subject to any charter or other
corporate restriction which could reasonably be expected to have a Material
Adverse Effect. Neither the Company nor any Subsidiary is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in (i) any agreement to which it is a party, which default
could reasonably be expected to have a Material Adverse Effect or (ii) any
agreement or instrument evidencing or governing Indebtedness.
4.14 Compliance With Laws. The Company and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective property except for any failure
to comply with any of the foregoing which could not reasonably be expected to
have a Material Adverse Effect.
4.15 Plan Assets; Prohibited Transactions. The Company is not an entity
deemed to hold "plan assets" within the meaning of 29 C.F.R. ss. 2510.3-101 of
an employee benefit plan (as defined in Section 3(3) of ERISA) which is subject
to Title I of ERISA or any plan (within the meaning of Section 4975 of the
Code), and neither the execution of this Agreement nor the making of Advances
hereunder gives rise to a Prohibited Transaction.
4.16 Investment Company Act. Neither the Company nor any Subsidiary is
an "investment company" or a company "controlled" by an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
<PAGE> 36
4.17 Public Utility Holding Company Act. Neither the Company nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
4.18 Year 2000. The Company has made a full and complete assessment of
the Year 2000 Issues and has a realistic and achievable program for remediating
the Year 2000 Issues on a timely basis (the "Year 2000 Program"). Based on such
assessment and on the Year 2000 Program the Company does not reasonably
anticipate that Year 2000 Issues will have a Material Adverse Effect.
ARTICLE V.
COVENANTS
5.1 Affirmative Covenants. The Company covenants and agrees that,
until the Termination Date and thereafter until irrevocable payment in full of
the principal of and accrued interest on the Advances and the performance of all
other obligations of the Obligors under the Loan Documents, unless the Required
Lenders shall otherwise consent in writing, it shall, and shall cause each of
its Subsidiaries to:
(a) Preservation of Corporate Existence, Etc. Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except to the extent permitted by Section 5.2(e) or 5.2(f),
and its qualification as a foreign corporation in good standing in each
jurisdiction in which such qualification is necessary under applicable law,
other than where failure to so qualify will not have a Material Adverse Effect.
(b) Compliance with Laws, Etc. Comply in all material respects
with all applicable laws, rules, regulations and orders of any governmental
authority, whether federal, state, local or foreign (including without
limitation ERISA, the Code and Environmental Laws), in effect from time to time,
and pay and discharge promptly when due all taxes, assessments and governmental
charges or levies imposed upon it or upon its income, revenues or property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise, which, if unpaid, might
give rise to Liens upon such properties or any portion thereof, except (i) to
the extent that payment of any of the foregoing is then being contested in good
faith by appropriate legal proceedings or (ii) to the extent that failure to pay
any of the foregoing or comply with any of the foregoing relates solely to
Subsidiaries which are not wholly-owned Subsidiaries of the Company or
Guarantors and if all such non wholly-owned Subsidiaries do not, if considered
in the aggregate as a single Subsidiary, constitute a Significant Subsidiary and
such failure could not have a Material Adverse Effect (but the Company shall
provide notice to the Agent of the occurrence of any such failure to comply or
failure to pay described in this proviso).
(c) Maintenance of Properties; Insurance. Maintain, preserve and
protect all property that is material to the conduct of the business of the
Company or any of its Subsidiaries and keep such property in good repair,
working order and condition and from time to time make, or cause to be made all
needful and proper repairs, renewals, additions, improvements and replacements
thereto necessary in order that the business carried on in connection therewith
may be properly conducted at all times in accordance with customary and prudent
<PAGE> 37
business practices for similar businesses; and, maintain in full force and
effect insurance with responsible and reputable insurance companies or
associations in such amounts, on such terms and covering such risks, as is
usually carried by companies engaged in similar businesses and owning similar
properties similarly situated and maintain in full force and effect public
liability insurance, insurance against claims for Personal injury or death or
property damage occurring in connection with any of its activities or any
properties owned, occupied or controlled by it, in such amount as it shall
reasonably deem necessary.
(d) Reporting Requirements. Furnish to the Lenders and
the Agent the following:
(i) Promptly and in any event within three
calendar days after becoming aware of the occurrence of (A) any Event of Default
or Default, or (B) the commencement of any material litigation against, by or
affecting the Company or any of its Subsidiaries, and any material developments
therein, together with a statement of the chief financial officer of the Company
setting forth details of such Event of Default or Default or such litigation and
the action which the Company or such Subsidiary, as the case may be, has taken
and proposes to take with respect thereto;
(ii) As soon as available and in any event within
45 days after the end of each of the first three fiscal quarters of each fiscal
year of the Company, the consolidated balance sheet of the Company and its
Subsidiaries as of the end of such quarter, and the related consolidated
statements of income and cash flow for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
date or period of the preceding fiscal year, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by the chief financial officer
of the Company as having been prepared in accordance with Generally Accepted
Accounting Principles, together with a certificate of the chief financial
officer of the Company stating (A) that no Event of Default or Default has
occurred and is continuing or, if an Event of Default or Default has occurred
and is continuing, a statement setting forth the details thereof and the action
which the Company has taken and proposes to take with respect thereto, and (B)
that a computation (which computation shall accompany such certificate and shall
be in reasonable detail) showing compliance with Section 5.2(a), (b), and (c);
(iii) As soon as available and in any event within
90 days after the end of each fiscal year of the Company, a copy of the
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such fiscal year and the related consolidated statements of income and cash flow
of the Company and its Subsidiaries for such fiscal year, with a customary audit
report of Deloitte & Touche LLP or other nationally recognized independent
certified public accountants selected by the Company, without qualifications
unacceptable to the Agent, together with a certificate of the chief financial
officer of the Company stating (A) that no Event of Default or Default has
occurred and is continuing or, if an Event of Default or Default has occurred
and is continuing, a statement setting forth the details thereof and the action
which the Company has taken and proposes to take with respect thereto, and (B)
that a computation (which computation shall accompany such certificate and shall
be in reasonable detail) showing compliance with Section 5.2(a), (b), and (c);
(iv) As soon as available and in any event within
90 days after the beginning of each fiscal year of the Company, a budget and
forecast for such fiscal year in form and substance reasonably satisfactory to
the Agent;
<PAGE> 38
(v) Promptly after the sending or filing thereof, copies
of all reports, proxy statements and financial statements which the Company
sends to or files with any of its security holders or any securities exchange or
the Securities and Exchange Commission or any successor agency thereof;
(vi) Promptly and in any event within 10 Business Days
after receiving or becoming aware thereof (A) a copy of any notice of intent to
terminate any Plan of the Company, its Subsidiaries or any ERISA Affiliate filed
with the PBGC, (B) a statement of the chief financial officer of the Company
setting forth the details of the occurrence of any Reportable Event with respect
to any such Plan, (C) a copy of any notice that the Company, any of its
Subsidiaries or any ERISA Affiliate may receive from the PBGC relating to the
intention of the PBGC to terminate any such Plan or to appoint a trustee to
administer any such Plan, (D) a copy of any notice of failure to make a required
installment or other payment within the meaning of Section 412(n) of the Code or
Section 302(f) of ERISA with respect to any such Plan, or (E) any management
letter or comparable analysis received by the Company from its auditors; and
(vii) Promptly, such other information respecting the
business, properties, operations or condition, financial or otherwise, of the
Company or any of its Subsidiaries as any Lender or the Agent may from time to
time reasonably request.
(e) Accounting; Access to Records, Books, Etc. Maintain a
system of accounting established and administered in accordance with sound
business practices to permit preparation of financial statements in accordance
with Generally Accepted Accounting Principles and to comply with the
requirements of this Agreement and, at any reasonable time and from time to time
with prior notice to the Company, permit any Lender or the Agent or any agents
or representatives thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of, the Company and
its Subsidiaries, and to discuss the affairs, finances and accounts of the
Company and its Subsidiaries with its directors, officers, employees and
independent auditors, provided that representatives of the Company selected by
the Company are present during any such visit or discussion, and by this
provision the Company does hereby authorize such Persons to discuss such
affairs, finances and accounts with any Lender or the Agent subject to the above
terms and conditions. The Company shall send a written notification to its
auditors informing them at each time the Company engages any auditors that it is
the primary intent of the Company for the auditors' accounting services to
benefit or influence the Lenders and the Agent.
(f) Guaranties and Pledge Agreements. Cause each Person that
is or becomes a Guarantor from time to time promptly to execute and deliver a
Guaranty to the Lenders and execute or cause the appropriate Guarantor to
execute, additional Pledge Agreements or amendments to existing Pledge
Agreements to grant the liens and security interests required under Section 2.13
hereof, in each case together with the other documentation relating to such
Guaranty or Pledge Agreement similar to that required to be delivered by or on
behalf of the Obligors under Section 2.7.
(g) Further Assurances. Will, and will cause each Guarantor
to, execute and deliver within 30 days after request therefor by the Required
Lenders or the Agent, all further instruments and documents and take all further
action that may be necessary or desirable, in order to give effect to, and to
aid in the exercise and enforcement of the rights and remedies of the Lenders
and the Agent under, the Loan Documents. In addition, the Company agrees to
deliver to the Agent and the Lenders from time to time upon the acquisition or
creation
<PAGE> 39
of any Subsidiary not listed in Schedule 4.4 hereto supplements to Schedule 4.4
such that such Schedule, together with such supplements, shall at all times
accurately reflect the information provided for thereon.
(h) Year 2000. Take, and cause each of its Subsidiaries to take,
all such actions as are reasonably necessary to successfully implement the Year
2000 Program and to assure that Year 2000 Issues will not have a Material
Adverse Effect. At the request of the Agent, the Company will provide a
description of the Year 2000 Program, together with any updates or progress
reports with respect thereto.
5.2 Negative Covenants. Until the Termination Date and thereafter until
irrevocable payment in full of the principal of and accrued interest on the
Advances, and the performance of all other obligations of the Obligors under
Loan Documents, the Company agrees that, unless the Required Lenders shall
otherwise consent in writing, it shall not, and shall not permit any of its
Subsidiaries to:
(a) Leverage Ratio. Permit or suffer the Adjusted Leverage Ratio
to be greater than 0.60 to 1.0 at any time.
(b) Interest Coverage Ratio. Permit or suffer the Interest
Coverage Ratio to be less than 2.5 to 1.0 as of the end of any fiscal quarter.
(c) Net Worth. Permit or suffer the Net Worth at any time to be
less than $155,0000,000, plus 50% of Consolidated net income of the Company and
its Subsidiaries for the fiscal quarter of the Company ending in December, 1998
and each fiscal year of the Company ending thereafter, provided that if such
Consolidated net income of the Company and its Subsidiaries is negative for the
fiscal quarter ending in December, 1998 or any fiscal year thereafter, as the
case may be, the amount added for such fiscal quarter or year shall be zero and
it shall not reduce the amount added for any other fiscal year, and plus 100% of
the net proceeds from the sale or other transfer of any Capital Stock of the
Company.
(d) Liens. Create, incur or suffer to exist any Lien on any of the
assets, rights, revenues or property, real, Personal or mixed, tangible or
intangible, whether now owned or hereafter acquired, of the Company or any of
its Subsidiaries, other than:
(i) Liens for taxes not delinquent or for taxes being
contested in good faith by appropriate proceedings and as to which adequate
financial reserves have been established on its books and records;
(ii) Liens (other than any Lien imposed by ERISA) created
and maintained in the ordinary course of business which are not material in the
aggregate, which would not have a Material Adverse Effect and which constitute
(A) pledges or deposits under worker's compensation laws, unemployment insurance
laws or similar legislation, (B) good faith deposits in connection with bids,
tenders, contracts or leases to which the Company or any of its Subsidiaries is
a party for a purpose other than borrowing money or obtaining credit, including
rent security deposits, (C) liens imposed by law, such as those of carriers,
warehousemen and mechanics, if payment of the obligation secured thereby is not
yet due, (D) Liens securing taxes, assessments or other governmental charges or
levies not yet subject to penalties for nonpayment, and (E) pledges or deposits
to
<PAGE> 40
secure public or statutory obligations of the Company or any of its
Subsidiaries, or surety, customs or appeal bonds to which the Company or any of
its Subsidiaries is a party;
(iii) Liens affecting real property which constitute minor
survey exceptions or defects or irregularities in title, minor encumbrances,
easements or reservations of, or rights of others for, rights of way, sewers,
electric lines, telegraph and telephone lines and other similar purposes, or
zoning or other restrictions as to the use of such real property, provided that
all of the foregoing, in the aggregate, do not at any time materially detract
from the value of said properties or materially impair their use in the
operation of the businesses of the Company and its Subsidiaries taken as a
whole;
(iv) Each Lien described in Schedule 5.2(d) hereto may be
suffered to exist upon the same terms as those existing on the date hereof,
including extensions, renewals and replacements thereof so long as such
extension, renewal or replacement does not increase the principal amount of the
Indebtedness secured or extend such Lien to any other property, assets, rights
or revenues;
(v) (A) any Lien on equipment to secure any rights granted
with respect to such equipment in connection with the provision of all or a part
of the purchase price of such equipment created contemporaneously with, or
within 180 days after such acquisition, or (B) any Lien in property existing in
such property at the time of acquisition thereof, whether or not the debt
secured thereby is assumed by the Company or a Subsidiary, (C) any Lien existing
in the property of a corporation at the time such corporation is merged into or
consolidated with the Company or a Subsidiary or at the time of a sale, lease,
or other disposition of the properties of a corporation or firm as an entirety
or substantially as an entirety to the Company or a Subsidiary, or (D) any Lien
on any other fixed assets of the Company or any of its Subsidiaries; provided,
in the case of (A), (B), (C) and (D), no such Liens shall exceed the fair market
value of the related property, not more than one such Lien shall encumber such
property at any one time and the aggregate outstanding Indebtedness secured by
all such Liens does not exceed an amount equal to 15% of Net Worth;
(vi) Liens granted by any Subsidiary in favor of the Company
or any other Subsidiary;
(vii) The interest or title of a lessor under any lease
otherwise permitted under this Agreement with respect to the property subject to
such lease to the extent performance of the obligations of the Company or its
Subsidiary thereunder is not delinquent; and
(viii) Liens on up to 65% of the present and future Capital
Stock of Foreign Subsidiaries to the extent required to be pledged under Section
2.13 hereof, provided that such Liens secure only the Lender Obligations and the
Senior Note Debt and are subject to an Intercreditor Agreement.
(e) Merger; Etc. Merge or consolidate or amalgamate with any
other Person or take any other action having a similar effect, provided,
however, (i) a Subsidiary of the Company may merge with the Company, provided
that the Company shall be the surviving corporation, (ii) a Subsidiary of the
Company may merge or consolidate with another Subsidiary of the Company, and
(iii) the Company or any Subsidiary may merge, consolidate or amalgamate with
any other Person in connection with an Acquisition, provided that such
<PAGE> 41
Acquisition is permitted by Section 5.2(h) and satisfies the conditions
described therein and the Company or such Subsidiary shall be the surviving
corporation.
(f) Disposition of Assets; Etc. Sell, lease, license,
transfer, assign or otherwise dispose of any material portion of its business,
assets, rights, revenues or property, real, personal or mixed, tangible or
intangible, whether in one or a series of transactions, other than inventory
sold in the ordinary course of business upon customary credit terms and sales of
scrap or obsolete material or equipment, provided, however, that this Section
5.2(f) shall not prohibit any such sale, lease, license, transfer, assignment or
other disposition if the aggregate book value (disregarding any write-downs of
such book value other than ordinary depreciation and amortization) of all of the
business, assets, rights, revenues and property disposed of after the date of
this Agreement shall be less than 10% of such aggregate book value of the
Consolidated total assets of the Company and its Subsidiaries as of the most
recently ended fiscal year, and if immediately after such transaction, no
Default or Event of Default shall exist or shall have occurred and be
continuing. Notwithstanding the foregoing, (i) any Subsidiary may sell, lease,
transfer or otherwise dispose of its assets to the Company or any Guarantor, and
(ii) the Company or any Subsidiary may sell, lease, transfer or otherwise
dispose of its assets in excess of the limitation set forth above so long as the
proceeds of such sale are used (x) to purchase other property of a similar
nature of at least equivalent value within 180 days of such sale or (y) to
prepay Advances and permanently reduce the Commitments by such amount.
(g) Nature of Business. Make or suffer any substantial change
in the nature of its business from that engaged in on the date hereof or engage
in any other businesses other than those in which it is engaged on the date
hereof, which are directly related to the businesses in which it is engaged in
on the date hereof or which are not material in the aggregate.
(h) Investments, Loans and Advances. Purchase or otherwise
acquire any Capital Stock of or other ownership interest in, or debt securities
of or other evidences of Indebtedness of, any other Person; nor acquire all or
any material portion of the assets of any Person; nor make any other
Acquisition; nor make any loan or advance of any of its funds or property or
make any other extension of credit to, or make any investment or acquire any
interest whatsoever in, any other Person; nor permit any Subsidiary to do any of
the foregoing; other than (i) extensions of trade credit made in the ordinary
course of business on customary credit terms and commission, travel, relocation
and similar advances made to officers and employees in the ordinary course of
business, (ii) investments, loans and advances in and to the Company or any
Guarantor, (iii) investments in Cash Equivalents, and (iv) Acquisitions,
provided each of the following conditions is satisfied: (A) there is no Default
or Event of Default either before or after such Acquisition, (B) the
representations and warranties contained in this Agreement shall be true and
correct as if made on and as of the date such Acquisition is consummated, both
before and after giving effect thereto, (C) if such Acquisition involves the
acquisition of Capital Stock, the consummation of such Acquisition has been
recommended by the board of directors and management of the target of such
Acquisition, and (D) if the total consideration, cash or non-cash, paid or
payable for such Acquisition is greater than $15,000,0000, prior to the
consummation of such Acquisition, the Company shall deliver a satisfactory pro
forma covenants compliance certificate to the Agent and the target of such
Acquisition is in the same line of business as the Company, (v) other
investments, loans and advances described on Schedule 5.2(h) hereto, and (vi)
other investments, loans and advances in aggregate outstanding amount not to
exceed an amount equal to 10% of Net Worth.
<PAGE> 42
(i) Negative Pledge Limitation. Enter into any agreement with
any Person other than the Agent and the Lenders pursuant hereto which prohibits
or limits the ability of the Company to create, incur, assume or suffer to exist
any Lien upon any of its assets, rights, revenues or property, real, Personal or
mixed, tangible or intangible, whether now owned or hereafter acquired, except
for Permitted Liens or other restrictions contained in security agreements
securing Indebtedness permitted hereby to the extent such provisions restrict
the transfer of the property subject to such security agreements.
(j) Indebtedness and Contingent Liabilities. Create, incur,
assume or in any manner become liable in respect of or suffer to exist, any
Indebtedness or Contingent Liabilities other than:
(i) the Lender Obligations;
(ii) The Indebtedness and Contingent Liabilities
described on Schedule 5.2(j) hereto, as amended, extended, supplemented or
otherwise modified from time to time, provided that no increase in the amount
thereof (as such amount is reduced from time to time) and no modification of the
terms thereof which are less favorable to the Company or any of its Subsidiaries
or more restrictive on the Company or any of its Subsidiaries in any material
manner shall be permitted;
(iii) Indebtedness of the Company or any Guarantor
owing to the Company or to any other Guarantor;
(iv) Indebtedness of the Company and/or any of its
Subsidiaries denominated in (A) Canadian dollars which do not exceed in
aggregate outstanding amount at any time an amount equal to the equivalent in
Dollars of $10,000,000 and (B) Mexican pesos which do not exceed in aggregate
outstanding amount at any time an amount equal to the equivalent in Dollars of
$5,000,000;
(v) Indebtedness under Rate Hedging Agreements,
provided that such Rate Hedging Agreements are entered into to hedge its own
exposure, and neither the Company nor any of its Subsidiaries shall enter into
any Financial Contracts for purposes of financial speculation;
(vi) Indebtedness in aggregate principal amount not to
exceed (A) $35,000,000 outstanding under the $40,000,000 7.5% Senior Notes due
May 5, 2004 issued by the Company pursuant to the Note Agreement among the
Company and the holders of such notes dated as of May 1, 1994, and (B) up to an
additional $100,000,000 pursuant to a private placement of senior long term debt
(with a final maturity after October 31, 2003) entered into after the Effective
Date, in each case as amended, extended supplemented or otherwise modified from
time to time, provided that no increase in the amount thereof (as such amount is
reduced from time to time) and no shortening of any of the maturities (whether
final or interim) shall be permitted; and
(vii) Other Indebtedness and Contingent Liabilities in
aggregate outstanding amount not to exceed an amount equal to 20% of Net Worth.
(k) Dividends and Other Restricted Payments Make, pay, declare
or authorize any dividend, payment or other distribution in respect of any class
of its Capital Stock or any dividend, payment or distribution in connection with
the redemption, purchase, retirement or other acquisition, directly or
<PAGE> 43
indirectly, of any shares of its Capital Stock if a Default or Event of Default
exists or would be caused thereby. The Company will not issue any Disqualified
Stock.
(l) Transactions with Affiliates. Make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliates (each of the foregoing, an
"Affiliate Transaction") unless such Affiliate Transaction is on terms that are
no less favorable to the Company or the relevant Subsidiary than those that
would have been obtained in a comparable transaction by the Company or such
Subsidiary with an unrelated Person.
5.3 Additional Covenants. If at any time the Company shall enter into
or be a party to any instrument or agreement, including all such instruments or
agreements in existence as of the date hereof and all such instruments or
agreements entered into after the date hereof, relating to or amending any
provisions applicable to any of its Indebtedness which in the aggregate,
together with any related Indebtedness, exceeds $10,000,000, which includes
covenants or defaults not substantially provided for in this Agreement or more
favorable to the lender or lenders thereunder than those provided for in this
Agreement, then the Company shall promptly so advise the Agent and the Lenders.
Thereupon, if the Agent or the Required Lenders shall request, upon notice to
the Company, the Agent and the Lenders shall enter into an amendment to this
Agreement or an additional agreement (as the Agent may request), providing for
substantially the same covenants and defaults as those provided for in such
instrument or agreement to the extent required and as may be selected by the
Agent.
ARTICLE VI.
DEFAULT
6.1 Events of Default. The occurrence of any one of the following
events or conditions shall be deemed an "Event of Default" hereunder unless
waived by the Required Lenders pursuant to Section 8.1:
(a) Nonpayment of Principal. The Company shall fail to pay
when due any principal of the Advances or any reimbursement obligation under
Section 3.3; or
(b) Nonpayment of Interest. The Company shall fail to pay when due
any interest or any fees or any other amount payable hereunder and such failure
shall remain unremedied for five Business Days; or
(c) Misrepresentation. Any representation or warranty made by the
Company or any Guarantor in this Agreement, any other Loan Document or any other
certificate, report, financial statement or other document furnished by or on
behalf of the Company or any Guarantor in connection with this Agreement shall
prove to have been incorrect in any material respect when made or deemed made;
or
(d) Certain Covenants. The Company shall fail to perform or observe
any term, covenant or agreement contained in Section 5.1(d)(i)(A) or 5.2 hereof;
or
<PAGE> 44
(e) Other Defaults. The Company or any Guarantor shall fail to
perform or observe any other term, covenant or agreement contained in this
Agreement or any other Loan Document, and any such failure shall remain
unremedied for 30 calendar days (or 10 days in the case of any failure to
perform or observe the covenants contained in Sections 5.2(d)(ii), (iii) or
(iv)) after notice thereof shall have been given to the Company or such
Guarantor, as the case may be, by the Agent; or
(f) Cross Default. The Company or any of its Subsidiaries shall
fail to pay any part of the principal of, the premium, if any, or the interest
on, or any other payment of money due under any of its Indebtedness (other than
Indebtedness hereunder), beyond any period of grace provided with respect
thereto, which individually or together with other such Indebtedness as to which
any such failure exists has an aggregate outstanding principal amount in excess
of $2,500,000; or if the Company or any of its Subsidiaries fails to perform or
observe any other term, covenant or agreement contained in any agreement,
document or instrument evidencing or securing any such Indebtedness having such
aggregate outstanding principal amount, or under which any such Indebtedness was
issued or created, beyond any period of grace, if any, provided with respect
thereto, or any other event shall occur or condition exist, the effect of which
failure to observe or perform or the occurrence of such event or condition is to
cause, or to permit the holder or holders of such Indebtedness to cause, such
Indebtedness to become due prior to its stated maturity or declared to be due
and payable or required to be prepaid or repurchased prior to the stated
maturity thereof; provided, however, that an Event of Default shall not be
deemed to have occurred under this Section 6.1(f) if any of the foregoing events
occurs only with respect to Subsidiaries which are not wholly owned Subsidiaries
of the Company or Guarantors and if all such non wholly owned Subsidiaries do
not, if considered in the aggregate as a single Subsidiary, constitute a
Significant Subsidiary but the Company shall provide notice to the Agent of the
occurrence of any such event described in this proviso; or
(g) Judgments. One or more judgments or orders for the payment of
money in an aggregate amount of $2,500,000 shall be rendered against the Company
or any of its Subsidiaries, or any other judgment or order (whether or not for
the payment of money) shall be rendered against or shall affect the Company or
any of its Subsidiaries which causes or could cause a Material Adverse Effect,
and either (i) such judgment or order shall have remained unsatisfied or
uninsured for a period of 30 days and the Company or such Subsidiary shall not
have taken action necessary to stay enforcement thereof by reason of pending
appeal or otherwise, prior to the expiration of the applicable period of
limitations for taking such action or, if such action shall have been taken, a
final order denying such stay shall have been rendered, or (ii) enforcement
proceedings shall have been commenced by any creditor upon any such judgment or
order; provided, however, that an Event of Default shall not be deemed to have
occurred under this Section 6.1(g) if any of the foregoing events occurs only
with respect to Subsidiaries which are not wholly owned Subsidiaries of the
Company or Guarantors and if all such non wholly owned Subsidiaries do not, if
considered in the aggregate as a single Subsidiary, constitute a Significant
Subsidiary; or
(h) ERISA. The occurrence of a Reportable Event that results in or
could result in liability in excess of $2,500,000 of the Company, any Subsidiary
of the Company or their ERISA Affiliates to the PBGC or to any Plan and such
Reportable Event is not corrected within thirty (30) days after the occurrence
thereof; or the occurrence of any Reportable Event which could constitute
grounds for termination of any Plan of the Company, its Subsidiaries or their
ERISA Affiliates by the PBGC or for the appointment by the appropriate United
States District Court of a trustee to administer any such Plan and such
Reportable Event is not corrected
<PAGE> 45
within thirty (30) days after the occurrence thereof; or the filing by the
Company, any Subsidiary of the Company or any of their ERISA Affiliates of a
notice of intent to terminate a Plan or the institution of other proceedings to
terminate a Plan; or the Company, any Subsidiary of the Company or any of their
ERISA Affiliates shall fail to pay when due any liability to the PBGC or to a
Plan; or the PBGC shall have instituted proceedings to terminate, or to cause a
trustee to be appointed to administer, any Plan of the Company, its Subsidiaries
or their ERISA Affiliates; or any Person engages in a Prohibited Transaction
with respect to any Plan which results in or could result in liability of the
Company, any Subsidiary of the Company, any of their ERISA Affiliates, any Plan
of the Company, its Subsidiaries or their ERISA Affiliates or fiduciary of any
such Plan; or failure by the Company, any Subsidiary of the Company or any of
their ERISA Affiliates to make a required installment or other payment to any
Plan within the meaning of Section 302(f) of ERISA or Section 412(n) of the Code
that results in or could result in liability in excess of $2,500,000 of the
Company, any Subsidiary of the Company or any of their ERISA Affiliates to the
PBGC or any Plan; or the withdrawal of the Company, any of its Subsidiaries or
any of their ERISA Affiliates from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(9a)(2) of ERISA; or the
Company, any of its Subsidiaries or any of their ERISA Affiliates becomes an
employer with respect to any Multiemployer Plan without the prior written
consent of the Required Lenders; provided, however, that this Section 6.1(h)
shall apply only to events or occurrences which, when aggregated with all other
events and occurrences described in this Section 6.1(h), could result in
liability to the Company or its Subsidiaries greater than $2,500,000; or
(i) Insolvency, Etc. The Company or any of its Subsidiaries
shall be dissolved or liquidated (or any judgment, order or decree therefor
shall be entered), or shall generally not pay its debts as they become due, or
shall admit in writing its inability to pay its debts generally, or shall make a
general assignment for the benefit of creditors, or shall institute, or there
shall be instituted against the Company or any of its Subsidiaries, any
proceeding or case seeking to adjudicate it a bankrupt or insolvent or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief or protection of debtors or seeking the
entry of an order for relief, or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
assets, rights, revenues or property, and, if such proceeding is instituted
against the Company or such Subsidiary and is being contested by the Company or
such Subsidiary, as the case may be, in good faith by appropriate proceedings,
such proceeding shall remain undismissed or unstayed for a period of 60 days; or
the Company or such Subsidiary shall take any action (corporate or other) to
authorize or further any of the actions described above in this subsection;
provided, however, that an Event of Default shall not be deemed to have occurred
under this Section 6.1(i) if any of the foregoing events occurs only with
respect to Subsidiaries which are not wholly owned Subsidiaries of the Company
or Guarantors and if all such non wholly owned Subsidiaries do not, if
considered in the aggregate as a single Subsidiary, constitute a Significant
Subsidiary; or
(j) Change of Control. The occurrence of any Change of
Control; or
(k) Guaranties. Any Guaranty shall fail to remain in full
force or effect or any action shall be taken to discontinue or to assert the
invalidity or unenforceability of any Guaranty, or any Guarantor shall fail to
comply with any of the terms or provisions of any Guaranty to which it is a
party, or any Guarantor shall deny that it has any further liability under any
Guaranty to which it is a party, or shall give notice to such effect; or
<PAGE> 46
(l) Pledge Agreements. Any Pledge Agreement shall for any
reason fail to create a valid and perfected first priority security interest in
any collateral purported to be covered thereby, or any Pledge Agreement shall
fail to remain in full force or effect or any action shall be taken to
discontinue or to assert the invalidity or unenforceability of any Pledge
Agreement, or any Obligor shall fail to comply with any of the terms or
provisions of any Pledge Agreement.
6.2 Remedies. (a) Upon the occurrence and during the continuance of any
Event of Default, the Agent upon being directed to do so by the Required
Lenders, shall by notice to the Company (i) terminate the Commitments or (ii)
declare the outstanding principal of, and accrued interest on, the Notes and
Advances and all other amounts owing under this Agreement to be immediately due
and payable, or (iii) demand immediate delivery of cash collateral, and the
Company agrees to deliver such cash collateral upon demand, in an amount equal
to the maximum amount that may be available to be drawn at any time prior to the
stated expiry of all outstanding Letters of Credit, or any one or more of the
foregoing, whereupon the Commitments shall terminate forthwith and all such
amounts, including cash collateral, shall become immediately due and payable,
provided that in the case of any event or condition described in Section 6.1(i)
with respect to the Company, the Commitments shall automatically terminate
forthwith and all such amounts, including cash collateral, shall automatically
become immediately due and payable without notice; in all cases without demand,
presentment, protest, diligence, notice of dishonor or other formality, all of
which are hereby expressly waived. Such cash collateral delivered in respect of
outstanding Letters of Credit shall be deposited in a special cash collateral
account to be held by the Agent as collateral security for the payment and
performance of the Company's obligations under this Agreement to the Lenders and
the Agent.
(b) The Agent upon being directed to do so by the Required Lenders,
shall, in addition to the remedies provided in Section 6.2(a), exercise and
enforce any and all other rights and remedies available to it or the Lenders,
whether arising under the Loan Documents or under applicable law, in any manner
deemed appropriate by the Agent, including suit in equity, action at law, or
other appropriate proceedings, whether for the specific performance (to the
extent permitted by law) of any covenant or agreement contained in the Loan
Documents or in aid of the exercise of any power granted in the Loan Documents.
(c) Upon the occurrence and during the continuance of any Event of
Default, each Lender may at any time and from time to time exercise any of its
rights of set off or bankers lien that it may possess by common law or statute
without prior notice to the Company, provided that each Lender may also set off
against any deposit whether or not it is then matured. Each Lender agrees to
promptly notify the Company after any such setoff and application, provided that
the failure to give such notice shall not effect the validity of such setoff and
application. The rights of such Lender under this Section 6.2(c) are in addition
to other rights and remedies which such Lender may have.
(d) All proceeds of any realization on the collateral pursuant to
the Pledge Agreements and any payments received by the Agent or any Lender
pursuant to the Guaranties subsequent to and during the continuance of any Event
of Default, subject to any Intercreditor Agreement, shall be allocated and
distributed by the Agent as follows:
(i) First, to the payment of all reasonable costs and
expenses, including
<PAGE> 47
without limitation all reasonable attorneys' fees, of the Agent in connection
with the enforcement of the Pledge Agreement and the Guaranties and otherwise
administering this Agreement;
(ii) Second, to the payment of all fees required to be paid
under any Loan Document including commitment fees, owing to the Lenders and
Agent pursuant to the Lender Indebtedness on a pro rata basis in accordance with
the Lender Indebtedness consisting of fees owing to the Lenders and Agent under
the Lender Indebtedness, for application to payment of such liabilities;
(iii) Third, to the Lenders and Agent on a pro rata basis in
accordance with the Lender Indebtedness consisting of interest owing to the
Lenders and Agent under the Lender Indebtedness, and obligations and liabilities
relating to Rate Hedging Agreements owing to the Lenders and the Agent under the
Lender Indebtedness for application to payment of such liabilities;
(iv) Fourth, to the Lenders and the Agent on a pro rata basis
in accordance with the Lender Indebtedness consisting of principal (including
without limitation any cash collateral for any outstanding Letters of Credit),
for application to payment of such liabilities;
(v) Fifth, to the payment of any and all other amounts owing
to the Lenders and the Agent and secured by the Pledge Agreements on a pro rata
basis in accordance with the total amount of such Indebtedness owing to each of
the Lenders and the Agent, for application to payment of such liabilities; and
(vi) Sixth, to the Company, its Subsidiaries or such other
Person as may be legally entitled thereto.
For the purposes of the above payments and distributions, the full amount of
Lender Indebtedness on account of any Letter of Credit then outstanding but not
drawn upon shall be deemed to be then due and owing. Amounts distributable to
the Lenders or Agent on account of such Lender Indebtedness under such Letters
of Credit shall be deposited in a separate collateral account in the name of and
under the control of the Agent and held by the Agent first as security for such
Letter of Credit Lender Indebtedness and then as security for all other Lender
Indebtedness and the amount so deposited shall be applied to the Letter of
Credit Lender Indebtedness at such times and to the extent that such Letter of
Credit Lender Indebtedness become absolute liabilities and if and to the extent
that the Letter of Credit Lender Indebtedness fail to become absolute Lender
Indebtedness because of the expiration or termination of the underlying Letters
of Credit without being drawn upon then such amounts shall be applied to the
remaining Lender Indebtedness in the order provided in this Section 6.2(d). The
Company hereby grants to the Agent, for the benefit of the Lenders and Agent, a
lien and security interest in all such funds deposited in such separate
collateral account, as security for all the Lender Indebtedness as set forth
above.
(e) Notwithstanding anything herein to the contrary, no
payments of principal, interest or fees delivered to the Agent for the account
of any Defaulting Lender shall be delivered by the Agent to such Defaulting
Lender. Instead, such payments shall, for so long as such Defaulting Lender
shall be a Defaulting Lender, be held by the Agent, and the Agent is hereby
authorized and directed by all parties hereto to hold such funds in escrow and
apply such funds as follows:
<PAGE> 48
(i) First, if applicable to any payments
due from such Defaulting Lender to the Agent, and
(ii) Second, Loans required to be made by
such Defaulting Lender on any borrowing date to the extent such Defaulting
Lender fails to make such Loans.
Notwithstanding the foregoing, upon the termination of all Commitments and the
payment and performance of all of the Advances and other obligations owing
hereunder (other than those owing to a Defaulting Lender), any funds then held
in escrow by the Agent pursuant to the preceding sentence shall be distributed
to each Defaulting Lender, pro rata in proportion to amounts that would be due
to each Defaulting Lender but for the fact that it is a Defaulting Lender.
ARTICLE VII.
THE AGENT AND THE LENDERS
7.1 Appointment; Nature of Relationship. NBD Bank is hereby appointed
by each of the Lenders as its contractual representative (herein referred to as
the "Agent") hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this Article
VII. Notwithstanding the use of the defined term "Agent," it is expressly
understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders'
contractual representative, the Agent (i) does not hereby assume any fiduciary
duties to any of the Lenders, (ii) is a "representative" of the Lenders within
the meaning of Section 9-105 of the Uniform Commercial Code and (iii) is acting
as an independent contractor, the rights and duties of which are limited to
those expressly set forth in this Agreement and the other Loan Documents. Each
of the Lenders hereby agrees to assert no claim against the Agent on any agency
theory or any other theory of liability for breach of fiduciary duty, all of
which claims each Lender hereby waives.
7.2 Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by the Agent.
7.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Company, the Lenders or any
Lender for any action taken or omitted to be taken by it or them hereunder or
under any other Loan Document or in connection herewith or therewith except to
the extent such action or inaction is determined in a final non-appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.
<PAGE> 49
7.4 No Responsibility for Loans, Recitals, etc. Neither the Agent nor
any of its directors, officers, agents or employees shall be responsible for or
have any duty to ascertain, inquire into, or verify (a) any statement, warranty
or representation made in connection with any Loan Document or any borrowing
hereunder; (b) the performance or observance of any of the covenants or
agreements of any obligor under any Loan Document, including, without
limitation, any agreement by an obligor to furnish information directly to each
Lender; (c) the satisfaction of any condition specified in Article II; (d) the
existence or possible existence of any Default or Event of Default; (e) the
validity, enforceability, effectiveness, sufficiency or genuineness of any Loan
Document or any other instrument or writing furnished in connection therewith;
(f) the value, sufficiency, creation, perfection or priority of any Lien in any
collateral security; or (g) the financial condition of the Company or any
Guarantor of any of the Lender Obligations or of any of the Company's or any
such Guarantor's respective Subsidiaries. The Agent shall have no duty to
disclose to the Lenders information that is not required to be furnished by the
Company to the Agent at such time, but is voluntarily furnished by the Company
to the Agent (either in its capacity as Agent or in its individual capacity).
7.5 Action on Instructions of Lenders. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, hereunder and under any
other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or refusing
to take any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata against any and
all liability, cost and expense that it may incur by reason of taking or
continuing to take any such action.
7.6 Employment of Agents and Counsel. The Agent may execute any of its
duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning the contractual arrangement between the Agent and the Lenders
and all matters pertaining to the Agent's duties hereunder and under any other
Loan Document.
7.7 Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any notice, consent, certificate, affidavit, letter, telegram, statement,
paper or document believed by it to be genuine and correct and to have been
signed or sent by the proper Person or Persons, and, in respect to legal
matters, upon the opinion of counsel selected by the Agent, which counsel may be
employees of the Agent.
7.8 Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to their
Commitments immediately prior to such termination) (i) for any amounts not
reimbursed by the Company for which the Agent is entitled to reimbursement by
the Company
<PAGE> 50
under the Loan Documents, (ii) for any other expenses incurred by the Agent on
behalf of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents (including, without
limitation, for any expenses incurred by the Agent in connection with any
dispute between the Agent and any Lender or between two or more of the Lenders)
and (iii) for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the Agent in
any way relating to or arising out of the Loan Documents or any other document
delivered in connection therewith or the transactions contemplated thereby
(including, without limitation, for any such amounts incurred by or asserted
against the Agent in connection with any dispute between the Agent and any
Lender or between two or more of the Lenders), or the enforcement of any of the
terms of the Loan Documents or of any such other documents, provided that no
Lender shall be liable for any of the foregoing to the extent any of the
foregoing is found in a final non-appealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the Agent. The obligations of the Lenders under this Section 7.8 shall survive
payment of the Lender Obligations and termination of this Agreement.
7.9 Notice of Default. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Default or Event of Default hereunder unless
the Agent has received written notice from a Lender or the Company referring to
this Agreement describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent receives such a
notice, the Agent shall give prompt notice thereof to the Lenders.
7.10 Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Loans as any Lender and may
exercise the same as though it were not the Agent, and the term "Lender" or
"Lenders" shall, at any time when the Agent is a Lender, unless the context
otherwise indicates, include the Agent in its individual capacity. The Agent and
its Affiliates may accept deposits from, lend money to, and generally engage in
any kind of trust, debt, equity or other transaction, in addition to those
contemplated by this Agreement or any other Loan Document, with the Company or
any of its Subsidiaries in which the Company or such Subsidiary is not
restricted hereby from engaging with any other Person.
7.11 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Company and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and without
reliance upon the Agent, the Arranger or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
7.12 Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Company, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of its
intention to resign. The Agent may be removed at any time with or without cause
by written notice
<PAGE> 51
received by the Agent from the Required Lenders, such removal to be effective on
the date specified by the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint, on behalf of the
Company and the Lenders, a successor Agent, provided that, if no Default or
Event of Default has occurred and is continuing, such appointment shall be made
in consultation with the Company. If no successor Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning Agent's
giving notice of its intention to resign, then the resigning Agent may appoint,
on behalf of the Company and the Lenders, a successor Agent. Notwithstanding the
previous sentence, the Agent may at any time without the consent of the Company
or any Lender, appoint any of its Affiliates which is a commercial bank as a
successor Agent hereunder. If the Agent has resigned or been removed and no
successor Agent has been appointed, the Lenders may perform all the duties of
the Agent hereunder and the Company shall make all payments in respect of the
Lender Obligations to the applicable Lender and for all other purposes shall
deal directly with the Lenders. No successor Agent shall be deemed to be
appointed hereunder until such successor Agent has accepted the appointment. Any
such successor Agent shall be a commercial bank having capital and retained
earnings of at least $100,000,000. Upon the acceptance of any appointment as
Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the resigning or removed Agent. Upon the effectiveness of the resignation or
removal of the Agent, the resigning or removed Agent shall be discharged from
its duties and obligations hereunder and under the Loan Documents. After the
effectiveness of the resignation or removal of an Agent, the provisions of this
Article VII shall continue in effect for the benefit of such Agent in respect of
any actions taken or omitted to be taken by it while it was acting as the Agent
hereunder and under the other Loan Documents. In the event that there is a
successor to the Agent by merger, or the Agent assigns its duties and
obligations to an Affiliate pursuant to this Section 7.12, then the term "Prime
Rate" as used in this Agreement shall mean the base rate, prime rate or other
analogous rate of the new Agent.
7.13 Delegation to Affiliates. The Company and the Lenders agree that
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate's directors, officers, agents
and employees) which performs duties in connection with this Agreement shall be
entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under the Loan Documents.
7.14 Sharing of Payments. The Lenders agree among themselves that, in
the event that any Lender shall obtain payment in respect of any Advance or any
other obligation owing to the Lenders under this Agreement through the exercise
of a right of set-off, banker's lien, counterclaim or otherwise in excess of its
ratable share of payments received by all of the Lenders on account of the
Advances and other obligations (or if no Advances are outstanding, ratably
according to the respective amounts of the Commitments), such Lender shall
promptly purchase from the other Lenders participations in such Advances and
other obligations in such amounts, and make such other adjustments from time to
time, as shall be equitable to the end that all of the Lenders share such
payment in accordance with such ratable shares. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of set-off, banker's lien, counterclaim or otherwise as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of
participations theretofore sold, return its share of that benefit to each Lender
whose payment shall have been rescinded or otherwise restored. The Company
agrees that any Lender so purchasing such a participation may, to the fullest
extent
<PAGE> 52
permitted by law, exercise all rights of payment, including set-off, banker's
lien or counterclaim, with respect to such participation as fully as if such
Lender were a holder of such Advance or other obligation in the amount of such
participation. The Lenders further agree among themselves that, in the event
that amounts received by the Lenders and the Agent hereunder are insufficient to
pay all such obligations or insufficient to pay all such obligations when due,
the fees and other amounts owing to the Agent in such capacity shall be paid
therefrom before payment of obligations owing to the Lenders under this
Agreement. Except as otherwise expressly provided in this Agreement, if any
Lender or the Agent shall fail to remit to the Agent or any other Lender an
amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this Agreement on the date when such amount is due, such payments
shall be made together with interest thereon for each date from the date such
amount is due until the date such amount is paid to the Agent or such other
Lender at a rate per annum equal to the rate at which borrowings are available
to the payee in its overnight federal funds market. It is further understood and
agreed among the Lenders and the Agent that if the Agent or any Lender shall
engage in any other transactions with the Company and shall have the benefit of
any collateral or security therefor which does not expressly secure the
obligations arising under this Agreement except by virtue of a so-called dragnet
clause or comparable provision, the Agent or such Lender shall be entitled to
apply any proceeds of such collateral or security first in respect of the
obligations arising in connection with such other transaction before application
to the obligations arising under this Agreement.
7.15 Withholding Tax Exemption Each Lender that is not organized and
incorporated under the laws of the United States or any State thereof agrees to
file with the Agent and the Company, in duplicate, (a) on or before the later of
(i) the Effective Date and (ii) the date such Lender becomes a Lender under this
Agreement and (b) thereafter, for each taxable year of such Lender (in the case
of a Form 4224) or for each third taxable year of such Lender (in the case of
any other form) during which interest or fees arising under this Agreement and
the Notes are received, unless not legally able to do so as a result of a change
in United States income tax enacted, or treaty promulgated, after the date
specified in the preceding clause (a), on or prior to the immediately following
due date of any payment by the Company hereunder, a properly completed and
executed copy of either Internal Revenue Service Form 4224 or Internal Revenue
Service Form 1001 and Internal Revenue Service Form W-8 or Internal Revenue
Service Form W-9 and any additional form necessary for claiming complete
exemption from United States withholding taxes (or such other form as is
required to claim complete exemption from Unites States withholding taxes), if
and as provided by the Code or other pronouncements of the United States
Internal Revenue Service, and such Lender warrants to the Company that the form
so filed will be true and complete; provided that such Lender's failure to
complete and execute such Form 4224 or Form 1001, or Form W-8 or Form W-9, as
the case may be, and any such additional form (or any successor form or forms)
shall not relieve the Company of any of its obligations under this Agreement,
except as otherwise provided in this Section 7.15.
7.16 Execution of Collateral Documents. The Lenders hereby empower and
authorize the Agent to execute and deliver to the Obligors on their behalf the
Pledge Agreements and all related documents or instruments as shall be necessary
or appropriate to effect the purposes of the Pledge Agreements. The Lenders
further empower and authorize the Agent to execute and deliver on their behalf
the Intercreditor Agreement and all related documents or instruments as shall be
necessary or appropriate to effect the purposes of the Intercreditor Agreement,
provided that the form of the Intercreditor Agreement has been approved by the
Required Lenders, and each Lender shall be bound by the terms and provisions of
the Intercreditor Agreement so executed by the Agent.
<PAGE> 53
7.17 Collateral Releases. The Lenders hereby empower and authorize the
Agent to execute and deliver to the Obligors on their behalf any agreements,
documents or instruments as shall be necessary or appropriate to effect any
releases of collateral which shall be permitted by the terms hereof, including
without limitation any collateral held under the Pledge Agreements which is
permitted to be sold under the terms of this Agreement, or of any other Loan
Document or which shall otherwise have been approved by the Required Lenders
(or, if required, all of the Lenders) in writing.
ARTICLE VIII.
MISCELLANEOUS
8.1 Amendments, Etc. (a) No amendment, modification, termination or
waiver of any provision of this Agreement nor any consent to any departure
therefrom shall be effective unless the same shall be in writing and signed by
the Company and the Required Lenders and, to the extent any rights or duties of
the Agent may be affected thereby, the Agent, provided, however, that no such
amendment, modification, termination, waiver or consent shall, without the
consent of the Agent and each Lender affected, (i) authorize or permit the
extension of time for, or any reduction of the amount of, any payment of the
principal of, or interest on, the Notes or any Letter of Credit reimbursement
obligation, or any fees or other amount payable hereunder, (ii) increase the
respective Commitment of any Lender or modify the provisions of this Section
regarding the taking of any action under this Section the definition of Required
Lenders, (iii) provide for the discharge of any Guarantor except as a result of
a transaction otherwise permitted by this Agreement, or (iv) provide for the
release of all or substantially all of the collateral subject to the Pledge
Agreements except as a result of a transaction otherwise permitted by this
Agreement.
(b) Any such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given.
(c) Notwithstanding anything herein to the contrary, no
Defaulting Lender shall be entitled to vote (whether to consent or to withhold
its consent) with respect to any amendment, modification, termination or waiver
of any provision of this Agreement or any departure therefrom or any direction
from the Lenders to the Agent, and, for purposes of determining the Required
Lenders at any time when any Lender is in default under this Agreement, the
Commitments and Advances of such defaulting Lenders shall be disregarded.
8.2 Notices. (a) Except as otherwise provided in Section 8.2(c)
hereof, all notices and other communications hereunder shall be sent to the
Company at 2801 East Beltline NE, Grand Rapids, Michigan 49505, Attention: Chief
Financial Officer, Facsimile No. 616-364-3136, to the Agent and the Lenders at
the respective addresses and numbers for notices set forth on the signatures
pages hereof, or to such other address as may be designated by the Company, the
Agent or any Lender by notice to the other parties hereto. All notices and other
communications shall be deemed to have been given at the time of actual delivery
thereof to such address, or if sent by certified or registered mail, postage
prepaid, to such address, on the third day after the date of mailing, or if
deposited prepaid with Federal Express or other nationally recognized overnight
delivery service prior to the deadline for next day delivery, on the Business
Day next following such deposit, provided, however, that notices to the Agent
shall not be effective until received.
<PAGE> 54
(b) Notices by the Company to the Agent with respect to
terminations or reductions of the Commitments pursuant to Section 2.4, requests
for Advances pursuant to Section 2.6, requests for continuations or conversions
of Loans pursuant to Section 2.9 and notices of prepayment pursuant to Section
3.1 shall be irrevocable and binding on the Company.
(c) Any notice to be given by the Company to the Agent pursuant to
Sections 2.6 or 2.9 and any notice to be given by the Agent or any Lender
hereunder, may be given by telephone, and all such notices given by the Company
must be immediately confirmed in writing in the manner provided in Section
8.2(a). Any such notice given by telephone shall be deemed effective upon
receipt thereof by the party to whom such notice is to be given.
8.3 No Waiver By Conduct; Remedies Cumulative. No course of dealing on
the part of the Agent or any Lender, nor any delay or failure on the part of the
Agent or any Lender in exercising any right, power or privilege hereunder shall
operate as a waiver of such right, power or privilege or otherwise prejudice the
Agent's or such Lender's rights and remedies hereunder; nor shall any single or
partial exercise thereof preclude any further exercise thereof or the exercise
of any other right, power or privilege. No right or remedy conferred upon or
reserved to the Agent or any Lender under this Agreement or the Loan Documents
is intended to be exclusive of any other right or remedy, and every right and
remedy shall be cumulative, and in addition to every other right or remedy
granted thereunder or now or hereafter existing under any applicable law. Every
right and remedy granted by the Loan Documents or by applicable law to the Agent
or any Lender may be exercised from time to time and as often as may be deemed
expedient by the Agent or any Lender and, unless contrary to the express
provisions of the Loan Documents, irrespective of the occurrence or continuance
of any Default or Event of Default.
8.4 Reliance on and Survival of Various Provisions. All terms,
covenants, agreements, representations and warranties of the Company or any
Guarantor made herein, in any Guaranty or in any certificate, report, financial
statement or other document furnished by or on behalf of the Company or any
Guarantor in connection with this Agreement shall be deemed to be material and
to have been relied upon by the Lenders, notwithstanding any investigation
heretofore or hereafter made by any Lender or on such Lender's behalf, and those
covenants and agreements of the Company set forth in Sections 3.7, 3.9 and 8.5
hereof shall survive the repayment in full of the Advances and the termination
of the Commitments for a period of one year from such repayment or termination.
8.5 Expenses. (a) The Company agrees to pay, or reimburse the Agent for
the payment of, on demand, (i) the reasonable fees and expenses of counsel to
the Agent, including without limitation the reasonable fees and expenses of
Dickinson Wright PLLC in connection with the preparation, execution, delivery
and administration of the Loan Documents and the consummation of the
transactions contemplated hereby, and in connection with advising the Agent as
to its rights and responsibilities with respect thereto, and in connection with
any amendments, waivers or consents in connection therewith, and (ii) all stamp
and other taxes and fees payable or determined to be payable in connection with
the execution, delivery, filing or recording of the Loan Documents and the
consummation of the transactions contemplated hereby, and any and all
liabilities with respect to or resulting from any delay in paying or omitting to
pay such taxes or fees, and (iii) all reasonable costs and expenses of the Agent
and any Lender (including without limitation reasonable fees and expenses of
counsel,
<PAGE> 55
including without limitation counsel who are employees of the Agent or any
Lender, and whether incurred through negotiations, legal proceedings or
otherwise) in connection with any Default or Event of Default or the enforcement
of, or the exercise or preservation of any rights under, the Loan Documents and
(iv) all reasonable costs and expenses of the Agent and the Lenders (including
reasonable fees and expenses of counsel) in connection with any action or
proceeding relating to a court order, injunction or other process or decree
restraining or seeking to restrain the Agent from paying any amount under, or
otherwise relating in any way to, any Letter of Credit and any and all costs and
expenses which any of them may incur relative to any payment under any Letter of
Credit.
(b) The Company hereby indemnifies and agrees to hold harmless
the Lenders and the Agent, and their respective officers, directors, employees,
agents and advisors, harmless from and against any and all claims, damages,
losses, liabilities, costs or expenses of any kind or nature whatsoever which
the Lenders or the Agent or any such Person may incur or which may be claimed
against any of them by reason of or in connection with any Letter of Credit, and
neither any Lender nor the Agent or any of their respective officers, directors,
employees or agents shall be liable or responsible for: (i) the use which may be
made of any Letter of Credit or for any acts or omissions of any beneficiary in
connection therewith; (ii) the validity, sufficiency or genuineness of documents
or of any endorsement thereon, even if such documents should in fact prove to be
in any or all respects invalid, insufficient, fraudulent or forged; (iii)
payment by the Agent to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of any Letter of
Credit, including failure of any documents to bear any reference or adequate
reference to such Letter of Credit; (iv) any error, omission, interruption or
delay in transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Letter of Credit; or (v) any other event or
circumstance whatsoever arising in connection with any Letter of Credit;
provided, however, that the Company shall not be required to indemnify the
Lenders and the Agent and such other Persons, and the Agent shall be liable to
the Company to the extent, but only to the extent, of any direct, as opposed to
consequential or incidental, damages suffered by the Company which were caused
by (A) the Agent's wrongful dishonor of any Letter of Credit after the
presentation to it by the beneficiary thereunder of a draft or other demand for
payment and other documentation strictly complying with the terms and conditions
of such Letter of Credit, to the extent, but only to the extent, that such
dishonor constitutes gross negligence or willful misconduct of the Agent as
determined by a final non-appealable order of a court of competent jurisdiction,
or (B) the Agent's payment to the beneficiary under any Letter of Credit against
presentation of documents which do not comply with the terms of the Letter of
Credit, to the extent, but only to the extent, that such payment constitutes
gross negligence or willful misconduct of the Agent as determined by a final
non-appealable order of a court of competent jurisdiction. It is understood that
in making any payment under a Letter of Credit the Agent will rely on documents
presented to it under such Letter of Credit as to any and all matters set forth
therein without further investigation and regardless of any notice or
information to the contrary, and such reliance and payment against documents
presented under a Letter of Credit substantially complying with the terms
thereof shall not be deemed gross negligence or willful misconduct of the Agent
in connection with such payment.
(c) The Company agrees to indemnify each Lender, the Agent and
each of their respective officers, directors, employees, agents and advisors
(collectively, the "Indemnified Parties") and hold each Indemnified Party
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind at any time, including, without limitation, the reasonable
fees and disbursements of counsel, which may be incurred by any Indemnified
Party in connection with any investigative, administrative or judicial
<PAGE> 56
proceeding (whether or not such Indemnified Party shall be designated a party
thereto) (collectively, the "Indemnified Liabilities") at any time relating to
(whether before or after the execution of this Agreement) any of the following:
(i) any actual or proposed use of the Advances
hereunder by the Company or any of its Subsidiaries or any transaction financed
or to be financed in whole or in part, directly or indirectly, with the proceeds
of any Advance;
(ii) the entering into and performance of this
Agreement and any other Loan Document by any of the Indemnified Parties
(including any action brought by or on behalf of the Company as the result of
any determination by any Lender not to make any Advance);
(iii) any investigation, litigation or proceeding
related to any Acquisition or proposed Acquisition by the Company or any of its
Subsidiaries of all or any portion of the stock or assets of any Person or to
the issuance of, or any other matter relating to, any Subordinated Debt, whether
or not any Indemnified Party is a party thereto;
(iv) any investigation, litigation or proceeding
related to any environmental cleanup, audit, compliance or other matter relating
to any release by the Company or any of its Subsidiaries of any hazardous
material or any violations of Environmental Laws; or
(v) the presence on or under, or the escape,
seepage, leakage, spillage, discharge, emission, discharging or releases from,
any real property owned or operated by the Company or any Subsidiary thereof of
any hazardous material (including any losses, liabilities, damages, injuries,
costs, expenses or claims asserted or arising under any Environmental Law),
regardless of whether caused by, or within the control of, the Company or such
Subsidiary, except for any such Indemnified Liabilities arising for the account
of a particular Indemnified Party by reason of the activities of the Indemnified
Party on the property of the Company conducted subsequent to a foreclosure on
such property by any Indemnified Party or by reason of the relevant Indemnified
Party's gross negligence or willful misconduct or breach of this Agreement, and
if and to the extent that the foregoing undertaking may be unenforceable for any
reason, the Company hereby agrees to make the maximum contribution to the
payment and satisfaction of each of the Indemnified Liabilities which is
permissible under applicable law. The Company shall be obligated to indemnify
the Indemnified Parties for all Indemnified Liabilities subject to and pursuant
to the foregoing provisions, regardless of whether the Company or any of its
Subsidiaries had knowledge of the facts and circumstances giving rise to such
Indemnified Liability.
Provided that no Indemnified Party shall have the right to be
indemnified hereunder for its own gross negligence or willful misconduct as
determined by a final, non-appealable judgment of a court of competent
jurisdiction.
8.6 Successors and Assigns. (a) This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns, provided that the Company may not, without the prior consent of the
Lenders, assign its rights or obligations hereunder or under the Loan Documents
and the Lenders shall not be obligated to make any Advance hereunder to any
entity other than the Company.
<PAGE> 57
(b) Any Lender may sell to any financial institution or
institutions, and such financial institution or institutions may further sell, a
participation interest (undivided or divided) in, the Loans and such Lender's
rights and/or obligations under the Loan Documents, and to the extent of that
participation interest such participant or participants shall have the same
rights and benefits against the Company under Section 3.7, 3.9 and 6.2(c) as it
or they would have had if such participant or participants were the Lender
making the Loans to the Company hereunder, provided, however, that (i) such
Lender's obligations under this Agreement shall remain unmodified and fully
effective and enforceable against such Lender, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of its Notes and Advances
for all purposes of this Agreement, (iv) the Company, the Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, (v)
such Lender shall not grant to its participant (other than any participant which
is an Affiliate of such Lender) any rights to consent or withhold consent to any
action taken by such Lender or the Agent under this Agreement other than action
requiring the consent of all of the Lenders hereunder, and (vi) no participant
shall be entitled to receive any greater amount pursuant to Sections 3.7, 3.9 or
6.2(c) than the transferor Lender would have been entitled to receive in respect
of the amount of the participation transferred by such transferor Lender to such
participant had no such transfer occurred.
(c) The Agent from time to time in its sole discretion may
appoint agents for the purpose of servicing and administering this Agreement and
the transactions contemplated hereby and enforcing or exercising any rights or
remedies of the Agent provided under the Loan Documents or otherwise. In
furtherance of such agency, the Agent may from time to time direct that the
Company provide notices, reports and other documents contemplated by this
Agreement (or duplicates thereof) to such agent. The Company hereby consents to
the appointment of such agent and agrees to provide all such notices, reports
and other documents and to otherwise deal with such agent acting on behalf of
the Agent in the same manner as would be required if dealing with the Agent
itself.
(d) Each Lender may, with the prior consent of the Company
(which consent may not be unreasonably withheld or delayed and shall not be
required upon the occurrence and during the continuance of any Event of Default
or if such assignment is to another Lender or an Affiliate of a Lender) and the
Agent, assign to one or more banks or other entities all or a portion of its
rights and obligations under this Agreement (including, without limitation, all
or a portion of its Commitment, the Advances owing to it and the Note or Notes
held by it); provided, however, that (i) each such assignment shall be of a
uniform, and not a varying, percentage of all rights and obligations, (ii)
except in the case of an assignment of all of a Lender's rights and obligations
under this Agreement, (A) the amount of the Commitment of the assigning Lender
being assigned pursuant to each such assignment (determined as of the date of
the Assignment and Acceptance with respect to such assignment) shall in no event
be less than $5,000,000, and in integral multiples of $1,000,000 thereafter, or
such lesser amount as the Company and the Agent may consent to and (B) after
giving effect to each such assignment (unless the assignment is for the entire
amount of such Lender's Commitment), the amount of the Commitment of the
assigning Lender shall in no event be less than $5,000,000, (iii) the parties to
each such assignment shall execute and deliver to the Agent, for its acceptance
and recording in the Register, an Assignment and Acceptance in the form of
Exhibit L hereto (an "Assignment and Acceptance"), together with any Note or
Notes subject to such assignment and a processing and recordation fee of $3,500,
and (iv) any Lender may without the consent of the Company or the Agent, and
without paying any fee, assign or sell a participation interest to any Affiliate
of
<PAGE> 58
such Lender that is a bank or financial institution all or a portion of its
rights and obligations under this Agreement. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in such
Assignment and Acceptance, (x) the assignee thereunder shall be a party hereto
and, to the extent that rights and obligations hereunder have been assigned to
it pursuant to such Assignment and Acceptance, have the rights and obligations
of a Lender hereunder and (y) the Lender assignor thereunder shall, to the
extent that rights and obligations hereunder have been assigned by it pursuant
to such Assignment and Acceptance, relinquish its rights and be released from
its obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(e) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Company or the performance or observance by the Company of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.6 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Agent, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such powers and discretion under
this Agreement as are delegated to the Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto; and (vi) such
assignee agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement and the other Loan Documents are
required to be performed by it as a Lender.
(f) The Agent shall maintain at its address designated on the
signature pages hereof a copy of each Assignment and Acceptance delivered to and
accepted by it and a register for the recordation of the names and addresses of
the Lenders and the Commitment of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the Register
shall be conclusive and binding for all purposes, absent manifest error, and the
Company, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Company or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(g) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee, together with any Note or Notes subject
to such assignment, the Agent shall, if such Assignment and Acceptance has been
completed, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the Company. Within five Business Days after its receipt of such
notice, the Company, at its own expense, shall execute and deliver to the Agent
in
<PAGE> 59
exchange for the surrendered Note or Notes a new Note to the order of such
assignee in an amount equal to the Commitment assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
hereunder, a new Note to the order of the assigning Lender in an amount equal to
the Commitment retained by it hereunder. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal amount of such
surrendered Note or Notes, shall be dated the effective date of such Assignment
and Acceptance and shall otherwise be in substantially the form of Exhibit L
hereto.
(h) The Company shall not be liable for any costs or expenses of
any Lender in effectuating any participation or assignment under this Section
8.6.
(i) The Lenders may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.6, disclose to the assignee or participant or proposed assignee or participant
(each a "Transferee") any information relating to the Company or its
Subsidiaries; provided that each Transferee agrees to be bound by the terms of
Section 8.16.
(j) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in, or assign,
all or any portion of its rights under this Agreement (including, without
limitation, the Loans owing to it and the Note or Notes held by it) in favor of
any Federal Reserve Lender in accordance with Regulation A of the Board of
Governors of the Federal Reserve System; provided that such creation of a
security interest or assignment shall not release such Lender from its
obligations under this Agreement.
8.7 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
8.8 Governing Law. This Agreement is a contract made under, and shall
be governed by and construed in accordance with, the law of the State of
Michigan applicable to contracts made and to be performed entirely within such
State and without giving effect to choice of law principles of such State.
8.9 Table of Contents and Headings. The table of contents and the
headings of the various subdivisions hereof are for the convenience of reference
only and shall in no way modify any of the terms or provisions hereof.
8.10 Construction of Certain Provisions. If any provision of this
Agreement refers to any action to be taken by any Person, or which such Person
is prohibited from taking, such provision shall be applicable whether such
action is taken directly or indirectly by such Person, whether or not expressly
specified in such provision.
8.11 Integration and Severability. The Loan Documents embody the entire
agreement and understanding between the Company and the Agent and the Lenders,
and supersede all prior agreements and understandings, relating to the subject
matter hereof. In case any one or more of the obligations of the Company under
the Loan Documents shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
obligations of the Company shall not in any way be affected or impaired thereby,
<PAGE> 60
and such invalidity, illegality or unenforceability in one jurisdiction shall
not affect the validity, legality or enforceability of the obligations of the
Company under the Loan Documents in any other jurisdiction.
8.12 Independence of Covenants. All covenants hereunder shall be given
independent effect so that if a particular action or condition is not permitted
by any such covenant, the fact that it would be permitted by an exception to, or
would be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a Default or an Event of Default if such action is taken or
such condition exists.
8.13 Interest Rate Limitation. Notwithstanding any provisions of this
Agreement or the Notes, in no event shall the amount of interest paid or agreed
to be paid by the Company exceed an amount computed at the highest rate of
interest permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement or the Notes at the
time performance of such provision shall be due, shall involve exceeding the
interest rate limitation validly prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then, ipso facto, the obligations to be
fulfilled shall be reduced to an amount computed at the highest rate of interest
permissible under applicable law, and if for any reason whatsoever any Lender
shall ever receive as interest an amount which would be deemed unlawful under
such applicable law such interest shall be automatically applied to the payment
of principal of such Lender's Advances outstanding hereunder (whether or not
then due and payable) and not to the payment of interest, or shall be refunded
to the Company if such principal and all other obligations of the Company to
such Lender have been paid in full.
8.14 Acknowledgments. The Company hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other Loan Documents;
(b) none of the Agent or any Lender has any fiduciary
relationship with or duty to the Company arising out of or in connection with
this Agreement or any of the other Loan Documents, and the relationship between
the Agent and the Lenders, on the one hand, and the Company, on the other hand,
in connection herewith or therewith is solely that of debtor and creditor; and
(c) no joint venture is created hereby or by the other Loan
Documents or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Company and the Lenders.
8.15 Submission To Jurisdiction; Waivers. The Company hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents to which it
is a party, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of any United States federal
or Michigan state court sitting in Detroit, Michigan and appellate courts from
any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any
<PAGE> 61
such court or that such action or proceeding was brought in an inconvenient
court and agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage prepaid, to the
Company at the address specified in Section 8.2, or at such other address of
which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding referred to in
this subsection any special, exemplary, punitive or consequential damages.
8.16 Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Company pursuant to this Agreement in
confidence, except for disclosure (i) to its Affiliates and to other Lenders and
their respective Affiliates, (ii) to legal counsel, accountants, and other
professional advisors to such Lender or Affiliate or to a Transferee, (iii) to
regulatory officials, (iv) to any Person as requested pursuant to or as required
by law, regulation, or legal process, (v) to any Person in connection with any
legal proceeding to which such Lender is a party, (vi) to such Lenders' direct
or indirect contractual counterparties in swap agreements or to legal counsel,
accountants and other professional advisors to such counterparties, and (vii)
permitted by Section 8.6(i).
8.17 WAIVER OF JURY TRIAL. THE LENDERS AND THE AGENT AND THE COMPANY,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL,
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO
A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT
OR ANY RELATED INSTRUMENT OR AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS (WHETHER ORAL OR
WRITTEN) OR ACTIONS OF EITHER OF THEM. NEITHER ANY LENDER, THE AGENT NOR THE
COMPANY SHALL SEEK TO CONSOLIDATE, BY COUNTERCLAIM OR OTHERWISE, ANY SUCH ACTION
IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH A JURY
TRIAL CANNOT BE OR HAS NOT BEEN WAIVED. THESE PROVISIONS SHALL NOT BE DEEMED TO
HAVE BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY ANY PARTY HERETO EXCEPT BY
A WRITTEN INSTRUMENT EXECUTED BY SUCH PARTY.
<PAGE> 62
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
UNIVERSAL FOREST PRODUCTS, INC.
By: _____________________________
Its: ___________________________
<PAGE> 63
Address for Notices: NBD BANK, as a Lender and as Agent
611 Woodward Avenue By: _____________________________
Detroit, Michigan 48226
Attention: William Goodhue Its: ____________________________
Facsimile No.: (313) 225-2290
Telephone No.: (313) 225-2227
<PAGE> 64
Address for Notices: MICHIGAN NATIONAL BANK
77 Monroe Center, N.W. By: _____________________________
Grand Rapids, MI 49501
Attention: Donald Van Dine Its: ___________________________
Facsimile No.: (616) 451-7708
Telephone No.: (616) 451-7658
<PAGE> 65
Address for Notices: NATIONSBANK, N.A.
100 North Tryon Street, 8th Floor By: _____________________________
Charlotte, North Carolina 28269
Attention: Michael Colon Its: ___________________________
Facsimile No.: (704) 386-9835
Telephone No.: (704) 386-1264
<PAGE> 66
Address for Notices: COMERICA BANK
500 Woodward Avenue, 9TH Floor By: _____________________________
Detroit, Michigan 48226
Attention: Robert Porterfield Its: ___________________________
Facsimile No.: (313) 222-9514
Telephone No.: (313) 222-7802
<PAGE> 67
Address for Notices: NATIONAL CITY BANK
1001 South Worth, R-J40-4A By: _____________________________
Birmingham, MI 48009
Attention: Kenneth Ehrhardt Its: ___________________________
Facsimile No.: (248) 901-2034
Telephone No.: (248) 901-1402
<PAGE> 68
Address for Notices: FIRST UNION NATIONAL BANK
2200 West Main Street By: _____________________________
Durham, North Carolina 27705-4664
Attention: Bill Alfano Its: ___________________________
Facsimile No.: (919) 286-6134
Telephone No.: (919) 286-6150
with a copy to:
101 E. Raleigh Street
Siler City, North Carolina 27344
Attention: Shannon Townsend
Facsimile No.: (919) 663-2304
Telephone No.: (919) 663-5872
<PAGE> 69
Address for Notices: OLD KENT BANK
111 Lyon Street, N.W. By: _____________________________
Grand Rapids, MI 49503
Attention: Robert Jamula Its: __________________________
Facsimile No.: (616) 771-4641
Telephone No.: (616) 771-5516
<PAGE> 70
Address for Notices: BANK OF MONTREAL
115 South LaSalle Street, 12th Floor By: _____________________________
Chicago, Illinois 60603
Attention: Sheila Weimer Its: ___________________________
Facsimile No.: (312) 750-3702
Telephone No.: (312) 750-6044
<PAGE> 71
Address for Notices: WACHOVIA BANK, N.A.
191 Peachtree Street, N.E. By: _____________________________
Atlanta, Georgia 30303
Attention: Katie Proctor Its: ___________________________
Facsimile No.: (404) 332-6898
Telephone No.: (404) 332-4036
<PAGE> 1
EXHIBIT 10(j)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNIVERSAL FOREST PRODUCTS, INC.
NOTE AGREEMENT
Dated as of December 1, 1998
Re: $21,500,000 6.69% Series 1998A Senior Notes, Tranche A,
Due December 21, 2005
and
$59,500,000 6.98% Series 1998A Senior Notes, Tranche B,
Due December 21, 2008
and
$19,000,000 6.98% Series 1998A Senior Notes, Tranche C,
Due December 21, 2008
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT
Section 1.1. Description of Notes
Section 1.2. Commitment, Closing Dates
Section 1.3. Other Agreements
Section 1.4. Additional Series of Notes
Section 1.5. Initial Subsidiary Note Guaranty
SECTION 2. PREPAYMENT OF NOTES
Section 2.1. Required Prepayments
Section 2.2. Optional Prepayment with Premium
Section 2.3. Prepayment of Notes upon Change of Control
Section 2.4. Notice of Optional Prepayments
Section 2.5. Application of Prepayments
Section 2.6. Direct Payment
SECTION 3. REPRESENTATIONS
Section 3.1. Representations of the Company
Section 3.2. Representations of the Purchaser
SECTION 4. CLOSING CONDITIONS
Section 4.1. Conditions
Section 4.2. Waiver of Conditions
<PAGE> 3
Section 4.3. Conditions to Issuance of Additional Notes
SECTION 5. COMPANY COVENANTS
Section 5.1. Corporate Existence, Etc
Section 5.2. Insurance
Section 5.3. Taxes, Claims for Labor and Materials; Compliance
with Laws
Section 5.4. Maintenance, Etc
Section 5.5. Nature of Business
Section 5.6. Consolidated Net Worth
Section 5.7. Fixed Charges Coverage Ratio
Section 5.8. Limitations on Current Debt and Funded Debt
Section 5.9. Limitation on Liens
Section 5.10. Mergers, Consolidations and Sales of Assets
Section 5.11. Guaranties
Section 5.12. Notes to Rank Pari Passu
Section 5.13. Repurchase of Notes
Section 5.14. Transactions with Affiliates
Section 5.15. Termination of Pension Plans
Section 5.16. Reports; Rights of Inspection; Retention of
Consultants
Section 5.17. Guaranty by Subsidiaries
Section 5.18. Stock Pledge Agreement
Section 5.19. Designation of Subsidiaries
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR
<PAGE> 4
Section 6.1. Events of Default
Section 6.2. Notice to Holders
Section 6.3. Acceleration of Maturities
Section 6.4. Rescission of Acceleration
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS
Section 7.1. Consent Required
Section 7.2. Solicitation of Holders
Section 7.3. Effect of Amendment or Waiver
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS
Section 8.1. Definitions
Section 8.2. Accounting Principles
Section 8.3. Directly or Indirectly
SECTION 9. MISCELLANEOUS
Section 9.1. Registered Notes
Section 9.2. Exchange of Notes
Section 9.3. Loss, Theft, Etc. of Notes
Section 9.4. Expenses, Stamp Tax Indemnity
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative
Section 9.6. Notices
Section 9.7. Environmental Indemnity and Covenant Not to Sue
Section 9.8. Successors and Assigns
<PAGE> 5
Section 9.9. Survival of Covenants and Representations
Section 9.10. Severability
Section 9.11. Governing Law
Section 9.12. Submission to Jurisdiction
Section 9.13. Captions
Signatures
<PAGE> 6
ATTACHMENTS TO NOTE AGREEMENT:
<TABLE>
<S> <C> <C>
SCHEDULE I -- Names and Addresses of the Purchasers and Amounts of Commitments
SCHEDULE II -- Funded Debt; Liens Securing Funded Debt (including Capitalized Leases); Subsidiaries; and
Restricted Subsidiaries as of the first and second Closing Date
SCHEDULE III -- Environmental Obligations
EXHIBIT A-1 -- Form of 6.69% Series 1998A Senior Note, Tranche A, due December 21, 2005
EXHIBIT A-2 -- Form of 6.98% Series 1998A Senior Note, Tranche B, due December 21, 2008
EXHIBIT A-3 -- Form of 6.98% Series 1998A Senior Note, Tranche C, due December 21, 2008
Exhibit B-1 -- Form of Initial Subsidiary Note Guaranty
Exhibit B-2 -- Intercreditor Agreement
EXHIBIT C -- Representations and Warranties of the Company
EXHIBIT D -- Description of Special Counsel's Closing Opinion
EXHIBIT E -- Description of Closing Opinion of Counsel to the Company
EXHIBIT F -- Form of Supplement to Note Agreement
</TABLE>
<PAGE> 7
UNIVERSAL FOREST PRODUCTS, INC.
2801 EAST BELTLINE, N.E.
GRAND RAPIDS, MICHIGAN 49525
NOTE AGREEMENT
Re: $21,500,000 6.69% Series 1998A Senior Notes, Tranche A,
Due December 21, 2005
and
$59,500,000 6.98% Series 1998A Senior Notes, Tranche B,
Due December 21, 2008
and
$19,000,000 6.98% Series 1998A Senior Notes, Tranche C,
Due December 21, 2008
Dated as of
December 1, 1998
To the Purchaser named in Schedule I
hereto which is a signatory of this
Agreement
Ladies and Gentlemen:
The undersigned, Universal Forest Products, Inc., a Michigan
corporation (the "Company"), agrees with you as follows:
SECTION 1. DESCRIPTION OF NOTES AND COMMITMENT.
Section 1.1. Description of Notes. (a) The Company will authorize the
issue and sale of:
(i) $21,500,000 aggregate principal amount of its 6.69% Series
1998A Senior Notes, Tranche A (the "Tranche A Notes"), to be dated the
date of issue, to bear interest from such date at the rate of 6.69% per
annum, payable semiannually on the twenty-first day of June and
December in each year (commencing June 21, 1999) and at maturity and to
bear interest on overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest at
the Overdue Rate after the date due, whether by acceleration or
otherwise, until paid, to mature on December 21, 2005, and to be
substantially in the form attached hereto as Exhibit A-1; and
(ii) $59,500,000 aggregate principal amount of its 6.98% Series
1998A Senior Notes, Tranche B (the "Tranche B Notes"), to be dated the
date of issue, to bear interest from such date at the rate of 6.98% per
annum, payable semiannually on the twenty-first day of June and
December in each year (commencing June 21, 1999) and at maturity and to
bear interest on overdue principal (including any overdue required or
optional prepayment of principal) and premium, if any, and (to the
extent legally enforceable) on any overdue installment of interest at
the Overdue Rate after the date due, whether by acceleration or
otherwise, until paid, to mature on December 21, 2008, and to be
substantially in the form attached hereto as Exhibit A-2; and
-7-
<PAGE> 8
(iii) $19,000,000 aggregate principal amount of its 6.98% Series
1998A Senior Notes, Tranche C (the "Tranche C Notes"; and, together
with the Tranche A Notes and the Tranche B Notes, the "Series 1998A
Notes"), to be dated the date of issue, to bear interest from such date
at the rate of 6.98% per annum, payable semiannually on the
twenty-first day of June and December in each year (commencing June 21,
1999) and at maturity and to bear interest on overdue principal
(including any overdue required or optional prepayment of principal)
and premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest at the Overdue Rate after the date due,
whether by acceleration or otherwise, until paid, to mature on December
21, 2008, and to be substantially in the form attached hereto as
Exhibit A-3. The Series 1998A Notes, together with each series of
Additional Notes which may from time to time be issued pursuant to the
provisions of Section 1.4, are sometimes hereinafter collectively
referred to as the "Notes".
(b) Interest on the Series 1998A Notes shall be computed on the basis
of a 360 day year of twelve 30-day months. The Series 1998A Notes are not
subject to prepayment or redemption at the option of the Company prior to their
expressed maturity dates except on the terms and conditions and in the amounts
and with the premium, if any, set forth in Section 2. You and the other
purchasers named in Schedule I are hereinafter sometimes referred to as the
"Purchasers". The terms which are capitalized herein shall have the meanings set
forth in Section 8.1 unless the context shall otherwise require.
Section 1.2. Commitment, Closing Dates. Subject to the terms and
conditions hereof and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to you, and you
agree to purchase from the Company, the Series 1998A Notes in the principal
amount and of the tranche set forth opposite your name on Schedule I hereto at a
price of 100% of the principal amount thereof on the Closing Dates hereafter
mentioned.
Delivery of the Series 1998A Notes will be made at the offices of
Chapman and Cutler, 111 West Monroe Street, Chicago, Illinois 60603, against
payment therefor in Federal Reserve or other funds current and immediately
available at the principal office of Harris Bank, Chicago, Illinois, ABA#
071000288, Account Name: Universal Forest Products, Inc., Concentration Account,
Account No.: 4344743, in the amount of the purchase price at 10:00 A.M., Chicago
time, on the date or dates set forth opposite your name on Schedule I hereto,
the first of which shall occur on December 21, 1998 and the second of which
shall occur on February 4, 1999 (each a "Closing Date" and collectively, the
"Closing Dates"). The Notes delivered to you on the Closing Date will be
delivered to you in the form of a single registered Note of each tranche in the
form attached hereto as Exhibits A-1, A-2 and A-3, as the case may be, for the
full amount of your purchase (unless different denominations are specified by
you), registered in your name or in the name of such nominee as may be specified
in Schedule I attached hereto.
Section 1.3. Other Agreements. Simultaneously with the execution and
delivery of this Agreement, the Company is entering into similar agreements with
the other Purchasers under which such other Purchasers agree to purchase from
the Company the principal amount and the tranche of Series 1998A Notes set
opposite such Purchaser's name in Schedule I, and your obligation and the
obligations of the Company hereunder are subject to the execution and delivery
of the similar agreements by the other Purchasers. This Agreement and said
similar agreements with the other Purchasers, together with any Supplement, are
herein collectively referred to as the "Agreements". The obligations of each
Purchaser, and the obligations of the Additional Purchasers under the
Supplements, shall be several and not joint and no Purchaser shall be liable or
-8-
<PAGE> 9
responsible for the acts of any other Purchaser or have any obligation under any
Supplement or any liability to any Person for the performance or non-performance
by any Additional Purchaser thereunder.
Section 1.4. Additional Series of Notes. The Company may, from time to
time, in its sole discretion but subject to the terms hereof, issue and sell one
or more additional series of its unsecured promissory notes under the provisions
of this Agreement pursuant to a supplement (a "Supplement") substantially in the
form attached hereto as Exhibit F. Each additional series of Notes (the
"Additional Notes") issued pursuant to a Supplement shall be subject to the
following terms and conditions:
(i) each series of Additional Notes, when so issued, shall be
differentiated from all previous series by year and sequential
alphabetical designation inscribed thereon;
(ii) Additional Notes of the same series may consist of more than
one different and separate tranches and may differ with respect to
outstanding principal amounts, maturity dates, interest rates and
premiums, if any, and price and terms of redemption or payment prior to
maturity;
(iii) each series of Additional Notes shall be dated the date of
issue, bear interest at such rate or rates, mature on such date or
dates, be subject to such mandatory and optional prepayment on the
dates and at the premiums, if any, have such additional or different
conditions precedent to closing, such representations and warranties
and such additional covenants as shall be specified in the Supplement
under which such Additional Notes are issued;
(iv) each series of Additional Notes issued under this Agreement
shall be in substantially the form attached hereto as Exhibit 1 to
Exhibit F with such variations, omissions and insertions as are
necessary or permitted hereunder;
(v) the minimum principal amount of any Note issued under a
Supplement shall be $100,000, except as may be necessary to evidence
the outstanding amount of any Note originally issued in a denomination
of $100,000 or more;
(vi) all Additional Notes shall constitute Senior Funded Debt of
the Company and shall rank pari passu with all other outstanding Notes;
and
(vii) no Additional Notes shall be issued hereunder if at the time
of issuance thereof and after giving effect to the application of the
proceeds thereof, any Default or Event of Default shall have occurred
and be continuing.
Section 1.5. Initial Subsidiary Note Guaranty. The payment by the
Company of all amounts due in respect of the Notes and the performance by the
Company of its obligations under this Agreement will be absolutely and
unconditionally guaranteed by Universal Forest Products Properties Company,
Inc., Universal Forest Products Southern Company, Inc., Universal Forest
Products Eastern Company, Inc., Universal Forest Products Midwest Company, Inc.,
Universal Forest Products Southwest Company, Inc., Universal Forest Products Far
West Company, Inc., Shoffner Industries, Inc., Universal Forest Products Georgia
Limited Partnership, Universal Forest Products Indiana Limited Partnership,
Universal Forest Products Texas Limited Partnership, Universal Forest Products
Tennessee Limited Partnership, Universal Forest Products Holding Company, Inc.
and Universal Forest Products Reclamation Center, Inc. (individually, an
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"Initial Subsidiary Guarantor"; and, collectively, the "Initial Subsidiary
Guarantors") pursuant to a guaranty agreement (the "Initial Subsidiary Note
Guaranty") substantially in the form attached hereto as Exhibit B-1. Without
limiting the foregoing, enforcement of the rights and benefits in respect of the
Initial Subsidiary Note Guaranty will be subject to an Intercreditor Agreement
dated as of November 13, 1998 (the "Intercreditor Agreement") among the
Creditors (as defined therein) and NBD Bank, as Collateral Agent, and to be
joined by the Purchasers and any Additional Purchasers.
SECTION 2. PREPAYMENT OF NOTES.
Section 2.1. Required Prepayments. There shall be no required
prepayment of any tranche of the Series 1998A Notes prior to the stated maturity
thereof. Any Additional Notes shall be subject to required prepayment only as
set forth in the applicable Supplement.
Section 2.2. Optional Prepayment with Premium. (a) Upon compliance with
Section 2.4, the Company shall have the privilege, at any time and from time to
time, of prepaying any tranche of the Notes (subject to clause (b) of this
Section 2.2), either in whole or in part (but if in part then in a minimum
principal amount of $1,000,000), by payment of the principal amount of such
tranche, or portion thereof to be prepaid, and accrued interest thereon to the
date of such prepayment, together with a premium equal to the Make-Whole Amount,
determined as of two Business Days prior to the date of such prepayment pursuant
to this Section 2.2.
(b) The Tranche B Notes and the Tranche C Notes shall be considered one
tranche for the purpose of prepayments made pursuant to this Section 2.2.
Section 2.3. Prepayment of Notes upon Change of Control. (a)(1) In the
event that any Change of Control shall occur, the Company will give written
notice (the "Company Notice") of such fact in the manner provided in Section 9.6
to the holders of the Notes. The Company Notice shall be delivered promptly upon
receipt of such knowledge by the Company and in any event no later than three
Business Days following the occurrence of any Change of Control. The Company
Notice shall (1) describe the facts and circumstances of such Change of Control
in reasonable detail, (2) make reference to this Section 2.3 and the right of
the holders of the Notes to require prepayment of the Notes on the terms and
conditions provided for in this Section 2.3, (3) offer in writing to prepay the
outstanding Notes, together with accrued interest to the date of prepayment, and
a premium equal to the then applicable Make-Whole Amount, and (4) specify a date
for such prepayment (the "Change of Control Prepayment Date"), which Change of
Control Prepayment Date shall be not more than 90 days nor less than 30 days
following the date of such Company Notice. Each holder of the then outstanding
Notes shall have the right to accept such offer and require prepayment of the
Notes held by such holder in full by written notice to the Company (a
"Noteholder Notice") given not later than 20 days after receipt of the Company
Notice. A failure by a holder of Notes to respond to an offer to prepay made
pursuant to this Section 2.3(a) within such 20 day period shall be deemed to
constitute an acceptance of such offer by such holder. The Company shall on the
Change of Control Prepayment Date prepay in full all of the Notes held by
holders which have so accepted such offer of prepayment or which have failed in
writing to accept or reject such offer within such 20 day period. The prepayment
price of the Notes payable upon the occurrence of any Change of Control shall be
an amount equal to 100% of the outstanding principal amount of the Notes so to
be prepaid and accrued interest thereon to the date of such prepayment, together
with a premium equal to the then applicable Make-Whole Amount, determined as of
two Business Days prior to the date of such prepayment pursuant to this Section
2.3(a).
(2) Without limiting clause (1) of this Section 2.3(a), the Company
shall immediately after any
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Responsible Officer has knowledge of an event which in the judgment of such
Responsible Officer or the Board of Directors of the Company is reasonably
likely to occur which would constitute a Change of Control and in any event no
later than three Business Days thereafter, give written notice of such fact in
the manner provided in Section 9.6 to the holders of the Notes.
(b) Without limiting the foregoing, notwithstanding any failure on the
part of the Company to give the Company Notice required by Section 2.3(a), each
holder of the Notes shall have the right, by delivery of written notice to the
Company, to require the Company upon the occurrence of a Change of Control to
prepay, and the Company will prepay, such holder's Notes in full, together with
accrued interest thereon to the date of prepayment, and a premium equal to the
then applicable Make-Whole Amount. Notice of any required prepayment pursuant to
this Section 2.3(B) shall be delivered by any holder of the Notes which was
entitled to, but did not receive, such Company Notice to the Company at any time
after such holder has actual knowledge of such Change of Control. On the date
(the "Change of Control Delayed Prepayment Date") designated in such holder's
notice (which shall be not more than 90 days nor less than 30 days following the
date of such holder's notice), the Company shall prepay in full all of the Notes
held by such holder, together with accrued interest thereon to the date of
prepayment, and a premium equal to the then applicable Make-Whole Amount. If the
holder of any Note gives any notice pursuant to this Section 2.3(b), the Company
shall give a Company Notice within three Business Days of receipt of such notice
and identify the Change of Control Delayed Prepayment Date to all other holders
of the Notes and each of such other holders shall then and thereupon have the
right to accept the Company's offer to prepay the Notes held by such holder in
full and require prepayment of such Notes by delivery of a Noteholder Notice
within 20 days following receipt of such Company Notice; provided only that any
date for prepayment of such holder's Notes shall be the Change of Control
Delayed Prepayment Date. A failure by a holder of Notes to respond to an offer
to prepay made pursuant to this Section 2.3(b) within such 20 day period shall
be deemed to constitute an acceptance of such offer by such holder. On the
Change of Control Delayed Prepayment Date, the Company shall prepay in full the
Notes of each holder thereof which has accepted such offer of prepayment or
which has failed to accept or reject such offer within such 20 day period, in
any such case at a prepayment price equal to 100% of the outstanding principal
amount of the Notes so to be prepaid and accrued interest thereon to the date of
such prepayment, together with a premium equal to the then applicable Make-Whole
Amount, determined as of two Business Days prior to the date of such prepayment
pursuant to this Section 2.3(b).
Section 2.4. Notice of Optional Prepayments. The Company will give
notice of any prepayment of any tranche of the Notes pursuant to Section 2.2 to
each holder of such tranche of not less than 30 days nor more than 60 days
before the date fixed for such optional prepayment specifying (a) such date, (b)
the principal amount of the holder's Notes of such tranche to be prepaid on such
date, (c) that the Make-Whole Amount may be payable, (d) the date when such
Make-Whole Amount will be calculated, (e) the estimated Make-Whole Amount, and
(f) the accrued interest applicable to the prepayment. Such notice of prepayment
shall also certify all facts, if any, which are conditions precedent to any such
prepayment. Notice of prepayment having been so given, the aggregate principal
amount of the Notes specified in such notice, together with accrued interest
thereon and the Make-Whole Amount, if any, payable with respect to such tranche
shall become
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<PAGE> 12
due and payable on the prepayment date specified in said notice. Two Business
Days prior to the prepayment date specified in such notice, the Company shall
provide each holder of a Note of the tranche to be prepaid written notice of the
Make-Whole Amount, if any, payable in connection with such prepayment and,
whether or not any Make-Whole Amount is payable, a reasonably detailed
computation thereof.
Section 2.5. Application of Prepayments. All partial prepayments made
pursuant to Section 2.2 shall be applied on all outstanding Notes of the same
tranche ratably in accordance with the unpaid principal amounts thereof. All
partial prepayments made pursuant to Section 2.3 shall be applied only to the
Notes of the holders who have elected to participate in such prepayment.
Section 2.6. Direct Payment. Notwithstanding anything to the contrary
contained in this Agreement or the Notes, in the case of any Note owned by you
or your nominee or owned by any subsequent Institutional Holder which has given
written notice to the Company requesting that the provisions of this Section 2.6
shall apply, the Company will punctually pay when due the principal thereof,
interest thereon and Make-Whole Amount, if any, due with respect to said
principal, without any presentment thereof, directly to you, to your nominee or
to such subsequent Institutional Holder at your address or your nominee's
address set forth in Schedule I hereto (or Schedule I to any Supplement) or such
other address as you, your nominee or such subsequent Institutional Holder may
from time to time designate in writing to the Company or, if a bank account with
a United States bank is designated for you or your nominee on Schedule I hereto
(or Schedule I to any Supplement) or in any written notice to the Company from
you, from your nominee or from any such subsequent Institutional Holder, the
Company will make such payments in immediately available funds to such bank
account, no later than 11:00 a.m. Eastern Standard Time on the date due, marked
for attention as indicated, or in such other manner or to such other account in
any United States bank as you, your nominee or any such subsequent Institutional
Holder may from time to time direct in writing. If for any reason whatsoever the
Company does not make any such payment by such 11:00 a.m. transmittal time, such
payment shall be deemed to have been made on the next following Business Day and
such payment shall bear interest at the Overdue Rate.
SECTION 3. REPRESENTATIONS.
Section 3.1. Representations of the Company. The Company represents and
warrants that all representations and warranties set forth in Exhibit C are true
and correct as of the date hereof and are incorporated herein by reference with
the same force and effect as though herein set forth in full.
Section 3.2. Representations of the Purchaser. (a) You represent, and
in entering into this Agreement the Company understands, that you are acquiring
the Notes for the purpose of investment and not with a view to the distribution
thereof, and that you have no present intention of selling, negotiating or
otherwise disposing of the Notes, it being understood, however, that the
disposition of your property shall at all times be and remain within your
control.
(b) You further represent that either: (1) you are acquiring the Notes
with your "insurance company general account" within the meaning of Department
of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995)
and there is no employee benefit plan, treating as a single plan, all plans
maintained by the same employer or employee organization, with respect to which
the amount of the general account reserves and liabilities for all contracts
held by or on behalf of such plan, exceeds ten percent (10%) of the total
reserves and liabilities of such general account (exclusive of separate account
liabilities) plus surplus, as set
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<PAGE> 13
forth in the NAIC Annual Statement filed with your state of domicile; (2) no
part of such funds constitutes assets of an "employee benefit plan" within the
meaning of Section 3(3) of ERISA or a "plan" within the meaning of section
4975(e)(1) of the Code; or (3) all or a part of such funds constitute assets of
one or more separate accounts, trusts or a commingled pension trust maintained
by you, and you have disclosed to the Company the names of such employee benefit
plans whose assets in such separate account or accounts or pension trusts exceed
10% of the total assets or are expected to exceed 10% of the total assets of
such account or accounts or trusts as of the date of such purchase and the
Company has advised you in writing (and in making the representations set forth
in this clause (3) you are relying on such advice) that the Company is not a
party-in-interest nor are the Notes employer securities with respect to the
particular employee benefit plan disclosed to the Company by you as aforesaid
(for the purpose of this clause (3), all employee benefit plans maintained by
the same employer or employee organization are deemed to be a single plan). As
used in this Section 3.2(b), the terms "separate account", "party-in-interest",
"employer securities" and "employee benefit plan" shall have the respective
meanings assigned to them in ERISA.
SECTION 4. CLOSING CONDITIONS.
Section 4.1. Conditions. Your obligation to purchase the Notes on each
Closing Date shall be subject to the performance by the Company of its
agreements hereunder which by the terms hereof are to be performed at or prior
to the time of delivery of the Notes and to the following further conditions
precedent:
(a) Closing Certificates. (1) Concurrently with the delivery of
the Notes on each Closing Date, you shall have received a certificate
dated such Closing Date, signed by a Responsible Officer of the
Company, the truth and accuracy of which shall be a condition to your
obligation to purchase the Notes proposed to be sold to you and to the
effect that (i) the representations and warranties of the Company set
forth in Exhibit C hereto are true and correct on and with respect to
such Closing Date, (ii) the Company has performed all of its
obligations hereunder which are to be performed on or prior to such
Closing Date, and (iii) no Default or Event of Default has occurred and
is continuing; and
(2) You shall have received a certificate dated such Closing Date,
signed by an authorized officer of each of the Initial Subsidiary
Guarantors, the truth and accuracy of which shall be a condition to
your obligation to purchase the Notes proposed to be sold to you and to
the effect that (i) the representations and warranties of the Initial
Subsidiary Guarantors set forth in the Initial Subsidiary Note Guaranty
are true and correct on and with respect to such Closing Date, (ii)
each Initial Subsidiary Guarantor has performed all of its obligations
under the Initial Subsidiary Note Guaranty which are to be performed on
or prior to such Closing Date, and (iii) no Default or Event of Default
has occurred and is continuing.
(b) Initial Subsidiary Note Guaranty and Intercreditor Agreement.
(1) The Initial Subsidiary Note Guaranty shall have been duly executed
and delivered by the parties thereto to you and shall be in full force
and effect and you shall have received true, correct and complete
copies thereof; and
(2) You shall have joined the Intercreditor Agreement.
(c) Legal Opinions. You shall have received from Chapman and
Cutler, who
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are acting as your special counsel in this transaction, and from
Varnum, Riddering, Schmidt & Howlett, counsel for the Company and the
Initial Subsidiary Guarantors, their respective opinions dated such
Closing Date, in form and substance satisfactory to you, and covering
the matters set forth in Exhibits D and E, respectively, hereto.
(d) Existence and Authority. On or prior to such Closing Date, you
shall have received, in form and substance reasonably satisfactory to
you and your special counsel, such documents and evidence with respect
to the Company and each of the Initial Subsidiary Guarantors as you may
reasonably request in order to establish the existence and good
standing of the Company and each of the Initial Subsidiary Guarantors
and the authorization of the transactions contemplated by this
Agreement and the Initial Subsidiary Note Guaranty.
(e) Related Transactions. The Company shall have consummated the
sale of the entire principal amount of the Notes scheduled to be sold
on such Closing Date pursuant to this Agreement and the other
agreements referred to in Section 1.3.
(f) Private Placement Numbers. On or prior to such Closing Date,
special counsel to the Purchasers shall have duly made the appropriate
filings with Standard & Poor's CUSIP Service Bureau, as agent for the
National Association of Insurance Commissioners, in order to obtain a
private placement number for each tranche of the series of Notes being
sold on such Closing Date.
(g) Funding Instructions. At least three Business Days prior to
such Closing Date, you shall have received written instructions
executed by a Responsible Officer of the Company directing the manner
of the payment of funds on such Closing Date and setting forth (1) the
name of the transferee bank, (2) such transferee bank's ABA number, (3)
the account name and number into which the purchase price for the Notes
is to be deposited, (4) the purchase price of the Notes to be purchased
by you, and (5) the name and telephone number of the account
representative responsible for verifying receipt of such funds.
(h) Special Counsel Fees. Concurrently with the delivery of the
Notes to you on such Closing Date, the reasonable charges and
disbursements of Chapman and Cutler, your special counsel, shall have
been paid by the Company to the extent reflected in a statement of such
counsel rendered to the Company at least one Business Day prior to such
Closing Date.
(i) Legality of Investment. The Notes to be purchased by you shall
be a legal investment for you under the laws of each jurisdiction to
which you may be subject (without resort to any so-called "basket
provisions" to such laws).
(j) Satisfactory Proceedings. All proceedings taken in connection
with the transactions contemplated by this Agreement and the Initial
Subsidiary Note Guaranty, and all documents necessary to the
consummation thereof, shall be satisfactory in form and substance to
you and your special counsel, and you shall have received a copy
(executed or certified as may be appropriate) of all legal documents or
proceedings taken in connection with the consummation of said
transactions.
Section 4.2. Waiver of Conditions. If on the Closing Date the Company
fails to tender to you the Notes to be issued to you on such date or if the
conditions specified in Section 4.1 have not been fulfilled, you may thereupon
elect to be relieved of all further obligations under this Agreement. Without
limiting the foregoing, if the conditions specified in Section 4.1 have not been
fulfilled, you may waive compliance by the Company with any such condition to
such extent as you may in your sole
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<PAGE> 15
discretion determine. Nothing in this Section 4.2 shall operate to relieve the
Company of any of its obligations hereunder or to waive any of your rights
against the Company.
Section 4.3. Conditions to Issuance of Additional Notes. The
obligations of the Additional Purchasers to purchase Additional Notes shall be
subject to the following conditions precedent, in addition to the conditions
specified in the Supplement pursuant to which such Additional Notes may be
issued:
(a) Compliance Certificate. A duly authorized Responsible Officer
shall execute and deliver to each Additional Purchaser an Officer's
Certificate dated the date of issue of such Additional Notes stating
that such officer has reviewed the provisions of this Agreement
(including any Supplements hereto) and setting forth the information
and computations (in sufficient detail) required in order to establish
whether the Company is in compliance with the requirements of
Sections 5.6, 5.7, 5.8, 5.9 and 5.10 on such date.
(b) Execution and Delivery of Supplement. The Company and each
such Additional Purchaser shall execute and deliver a Supplement
substantially in the form of Exhibit F hereto.
(c) Representations of Additional Purchasers. Each Additional
Purchaser shall have confirmed in the Supplement that the
representations set forth in Section 3 are true with respect to such
Additional Purchaser on and as of the date of issue of the Additional
Notes.
SECTION 5. COMPANY COVENANTS.
From and after the first Closing Date and continuing so long as
any amount remains unpaid on any Note:
Section 5.1. Corporate Existence, Etc. The Company will preserve and
keep in full force and effect, and will cause each Restricted Subsidiary to
preserve and keep in full force and effect, its corporate existence and all
licenses and permits necessary to the proper conduct of its business, if in the
case of any such license or permit, the failure to preserve and keep the same
could reasonably be expected to have a Material Adverse Effect, provided that
the foregoing shall not prevent any transaction permitted by Section 5.10.
Section 5.2. Insurance. The Company will maintain, and will cause each
Restricted Subsidiary to maintain, insurance coverage by financially sound and
reputable insurers and in such forms and amounts and against such risks as are
customary for corporations of established reputation engaged in the same or a
similar business and owning and operating similar properties; provided that
nothing contained in this Section 5.2 shall be deemed or construed to prohibit
the Company or any Restricted Subsidiary from self-insuring such risks as are
customary for corporations having a net worth (determined in accordance with
GAAP) comparable to the net worth of the Company or such Restricted Subsidiary,
as the case may be, and engaged in the same or a similar business and owning and
operating similar properties.
Section 5.3. Taxes, Claims for Labor and Materials; Compliance with
Laws. (a) The Company will promptly pay and discharge, and will cause each
Restricted Subsidiary promptly to pay and discharge, all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or such
Restricted Subsidiary, respectively, or upon or in respect of all or any part of
the property or business of the Company or such Restricted Subsidiary, all trade
accounts payable in accordance with usual and customary business terms, and all
claims for work, labor or
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materials, which if unpaid might become a Lien upon any property of the Company
or such Restricted Subsidiary; provided that the Company or such Restricted
Subsidiary shall not be required to pay or make a filing with regard to any such
tax, assessment, charge, levy, account payable or claim if (1)(i) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Company or such Restricted Subsidiary or any material interference with
the use thereof by the Company or such Restricted Subsidiary and (ii) the
Company or such Restricted Subsidiary shall set aside on its books, reserves
deemed by it to be adequate with respect thereto, or (2) the non-payment of any
such tax, assessment, charge, levy, account payable or claim could not
reasonably be expected to have a Material Adverse Effect, or (3) to the extent
that failure to pay any of the foregoing or comply with any of the foregoing
relates solely to Restricted Subsidiaries which are not Wholly-owned Restricted
Subsidiaries of the Company or Guarantors and if all such non Wholly-owned
Restricted Subsidiaries do not, if considered in the aggregate as a single
Restricted Subsidiary, constitute a Significant Restricted Subsidiary (but the
Company shall provide notice to the holders of the Notes of the occurrence of
any such failure to comply or failure to pay described in this proviso).
(b) The Company will promptly comply and will cause each Restricted
Subsidiary to promptly comply with all laws, ordinances or governmental rules
and regulations to which it is subject, including, without limitation, the
Occupational Safety and Health Act of 1970, as amended, ERISA and all
Environmental Laws, the violation of which could reasonably be expected to have
a Material Adverse Effect or would result in any Lien not permitted under
Section 5.9, provided that the foregoing does not apply to Restricted
Subsidiaries which are not Wholly-owned Restricted Subsidiaries of the Company
or Guarantors if all such non Wholly-owned Restricted Subsidiaries do not, if
considered in the aggregate as a single Restricted Subsidiary, constitute a
Significant Restricted Subsidiary.
Section 5.4. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Restricted Subsidiary to maintain, preserve and keep,
its properties which are used or useful in the conduct of its business (whether
owned in fee or a leasehold interest) in good repair and working order and from
time to time will make all necessary repairs, replacements, renewals and
additions so that at all times the efficiency and marketability thereof shall
not be materially impaired or materially degraded, if the failure to complete
any such repair, replacement, renewal or addition could reasonably be expected
to have a Material Adverse Effect.
Section 5.5. Nature of Business. Neither the Company nor any Restricted
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Company and its Restricted Subsidiaries would be substantially changed from
the general nature of the business engaged in by the Company and its Restricted
Subsidiaries on the date of this Agreement and described in the Offering
Materials.
Section 5.6. Consolidated Net Worth. The Company will at all times keep
and maintain Consolidated Net Worth at an amount not less than the sum of (a)
$155,000,000 plus (b) 50% of Consolidated Net Earnings for the fiscal quarter of
the Company ending in December, 1998 and each fiscal year of the Company ending
thereafter, provided that if such Consolidated Net Earnings of the Company is
negative for the fiscal quarter ending in December, 1998 or any fiscal year
thereafter, as the case may be, the amount added for such fiscal quarter or year
shall be zero and it shall not reduce the amount added for any other fiscal
year, and plus 100% of the net proceeds from the sale or other transfer of any
capital stock of the Company.
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Section 5.7. Fixed Charges Coverage Ratio. The Company will at all
times keep and maintain the ratio of Consolidated Net Earnings Available for
Fixed Charges for any four of the immediately preceding five fiscal quarters
(taken as a single accounting period) to Consolidated Fixed Charges for such
period at not less than 1.75 to 1.00.
For purposes of calculations under this Section 5.7, Consolidated Net
Earnings Available for Fixed Charges and Consolidated Fixed Charges shall be
adjusted for the period in respect of which any such calculation is being made
to give effect to (i) the audited "net earnings" (determined in a manner
consistent with the definition of "Consolidated Net Earnings" contained in this
Agreement) of any business entity acquired by the Company or any Restricted
Subsidiary (the "Acquired Business") and (ii) all Indebtedness incurred by the
Company or any Restricted Subsidiary in connection with such acquisition, and
shall be computed as if the Acquired Business had been a Restricted Subsidiary
throughout the period and all Indebtedness incurred in connection with such
acquisition had been incurred at the beginning of such period in respect of
which such calculation is being made. In the case of any business entity
acquired during the twelve calendar month period immediately preceding the date
of any determination hereunder whose financial records are not, and are not
required to be in accordance with applicable laws, rules and regulations,
audited by the Company's independent public accountants at the time of the
acquisition thereof, the Company shall base such determination upon the
Company's internally audited net earnings of such business entity for the
immediately preceding fiscal year or the net earnings of such business entity as
audited by such business entity's independent auditors for the immediately
preceding fiscal year.
Section 5.8. Limitations on Current Debt and Funded Debt. (a) The
Company will not permit or suffer the Adjusted Leveraged Ratio to be greater
than 0.60 to 1.0 at any time.
(b) The Company will not, and will not permit any Restricted Subsidiary
to, create, assume, guarantee or otherwise incur or any in manner be or become
liable in respect of (1) any Current Debt or Funded Debt of the Company or any
Restricted Subsidiary secured by Liens permitted by Section 5.9(A)(8), or (2)
any other Current Debt or Funded Debt of a Restricted Subsidiary (other than
Qualified Current Debt and Qualified Funded Debt of a Restricted Subsidiary
Guarantor), or (3) any Attributable Indebtedness of Sale and Leaseback
Transactions of the Company or any Restricted Subsidiary, unless at the time of
creation, issuance, assumption, guarantee or incurrence thereof and after giving
effect thereto and to the application of the proceeds thereof, the sum of (A)
Current Debt and Funded Debt of the Company and its Restricted Subsidiaries
secured by Liens permitted by Section 5.9(A)(8), plus (without duplication) (B)
Current Debt and Funded Debt of Restricted Subsidiaries (other than Qualified
Current Debt and Qualified Funded Debt of Restricted Subsidiary Guarantors) and
(C) Attributable Indebtedness of Sale and Leaseback Transactions of the Company
and its Restricted Subsidiaries would not exceed 15% of Consolidated Net Worth.
(c) Any Person which becomes a Restricted Subsidiary after the date
hereof shall for all purposes of this Section 5.8 be deemed to have created,
assumed or incurred at the time it becomes a Restricted Subsidiary all Current
Debt and Funded Debt of such Person existing immediately after it becomes a
Restricted Subsidiary.
Section 5.9. Limitation on Liens. (a) The Company will not, and will
not permit any
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Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist,
any Lien on its or their property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or transfer any property for
the purpose of subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or agree to acquire,
or permit any Restricted Subsidiary to acquire, any property or assets upon
conditional sales agreements or other title retention devices, except:
(1) Liens for property taxes and assessments or governmental charges or
levies and Liens securing claims or demands of mechanics and materialmen,
provided that payment thereof is not at the time required by Section 5.3 and the
existence of such Lien would not materially and adversely affect the properties,
business, profits, prospects or condition (financial or otherwise) of the
Company or of the Company and its Restricted Subsidiaries, taken as a whole;
(2) Liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or in respect
of which the Company or a Restricted Subsidiary shall at any time in good faith
be prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review shall have been
secured; provided that the existence of such Lien would not materially and
adversely affect the properties, business, prospects, profits or condition
(financial or otherwise) of the Company or of the Company and its Restricted
Subsidiaries, taken as a whole;
(3) Liens incidental to the conduct of business or the ownership of
properties and assets (including Liens in connection with worker's compensation,
unemployment insurance and other like laws, warehousemen's and attorneys' liens
and statutory landlords' liens) and Liens to secure the performance of bids,
tenders or trade contracts, or to secure statutory obligations, surety or appeal
bonds or other Liens of like general nature, in any such case incurred in the
ordinary course of business and not in connection with the borrowing of money,
which in any such case would not materially and adversely affect the properties,
business, prospects, profits or condition (financial or otherwise) of the
Company or of the Company and its Restricted Subsidiaries taken as a whole,
provided that any obligation so secured is not overdue or, if overdue, is being
contested in good faith by appropriate actions or proceedings;
(4) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other similar
purposes, or zoning or other restrictions as to the use of real properties,
which are necessary for the conduct of the activities of the Company and its
Restricted Subsidiaries or which customarily exist on properties of corporations
engaged in similar activities and similarly situated and which do not in any
event materially impair their use in the operation of the business of the
Company or of the Company and its Restricted Subsidiaries taken as a whole;
(5) Liens securing Indebtedness of a Restricted Subsidiary to the
Company or to a Wholly-owned Restricted Subsidiary;
(6) Liens existing as of the first Closing Date and described on
Schedule II hereto;
(7) Liens created or incurred after the first Closing Date given to
secure the payment of the purchase price, cost of improvement or cost of
construction of property or assets useful and intended to be used in carrying on
the business of the Company or a Restricted Subsidiary, including Liens existing
on such property or assets at the time of acquisition thereof or at the time of
acquisition or purchase by the Company or a
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Restricted Subsidiary of any business entity then owning such property or
assets, whether or not such existing Liens were given to secure the payment of
the purchase price of the property or assets to which they attach, provided that
(1) the Lien shall attach solely to the property or assets acquired, purchased,
improved or constructed, (2) such Lien shall have been created or incurred
within 120 days of the date of acquisition or purchase or of completion of such
improvement or construction, as the case may be, (3) at the time of acquisition
or purchase or the date of completion of such improvement or construction, as
the case may be, the aggregate amount remaining unpaid on all Indebtedness
secured by Liens on such property or assets, whether or not assumed by the
Company or a Restricted Subsidiary, shall not exceed the lesser of (i) the total
purchase price, cost of improvement or cost of construction, as the case may be,
or (ii) the fair market value at the time of acquisition or purchase or the date
of completion of the improvement or construction of such property or assets (as
determined in good faith by the Board of Directors of the Company) and (4) all
such Funded Debt shall have been incurred within the limitations provided in
Section 5.8(b);
(8) Liens created or incurred after the first Closing Date given to
secure Current Debt or Funded Debt of the Company and its Restricted
Subsidiaries, in addition to the Liens permitted by the preceding clauses (1)
through (7) of this Section 5.9(a), provided that all Current Debt and Funded
Debt secured by Liens created or incurred pursuant to this clause (8) shall have
been incurred within the limitations provided in Section 5.8(A) and (b);
(9) any extension, renewal or refunding of any Lien permitted by the
preceding clause (6) of this Section 5.9(a) in respect of the same property
theretofore subject to such Lien in connection with the extension, renewal or
refunding of the Indebtedness secured thereby; provided that (i) such extension,
renewal or refunding of Indebtedness shall be without increase in the principal
amount remaining unpaid as of the date of such extension, renewal or refunding,
(ii) such Lien shall attach solely to the same such property, and (iii) at the
time of such extension, renewal or refunding and after giving effect thereto, no
Default or Event of Default would exist; and
(10) Liens created by any Stock Pledge Agreements.
(b) In case any property, asset or income or profits therefrom is
subjected to a Lien in violation of this Section 5.9, the Company will make or
cause to be made provisions whereby the Notes will be secured equally and
ratably with all other obligations secured thereby, and in any case the Notes
shall have the benefit, to the full extent that, and with such priority as, the
holders may be entitled thereto under applicable law, of an equitable and
ratable Lien on such property, asset, income or profits securing the Notes. Such
violation of Section 5.9 shall constitute an Event of Default hereunder, whether
or not any such provision is made pursuant to this Section 5.9(b), unless such
Event of Default is waived by the Requisite Holders.
Section 5.10. Mergers, Consolidations and Sales of Assets. (a) The
Company will not, and will not permit any Restricted Subsidiary to, consolidate
with or be a party to a merger with any other corporation, or sell, lease or
otherwise dispose of all or substantially all of its assets;
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<PAGE> 20
provided that:
(1) any Restricted Subsidiary may merge or consolidate with or
into the Company or any Wholly-owned Restricted Subsidiary which is a
Domestic Restricted Subsidiary so long as in any merger or
consolidation involving the Company, the Company shall be the surviving
or continuing corporation;
(2) the Company may consolidate or merge with any other
corporation if (i) the corporation which results from such merger or
consolidation (the "surviving corporation") is organized under the laws
of any state of the United States or the District of Columbia, (ii) the
due and punctual payment of the principal of and premium, if any, and
interest on all of the Notes, according to their tenor, and the due and
punctual performance and observation of all of the covenants in the
Notes and this Agreement to be performed or observed by the Company are
expressly assumed in writing by the surviving corporation and the
surviving corporation shall furnish the holders of the Notes an opinion
of counsel satisfactory to such holders to the effect that the
instrument of assumption has been duly authorized, executed and
delivered and constitutes the legal, valid and binding contract and
agreement of the surviving corporation enforceable in accordance with
its terms, except as enforcement of such terms may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles, and (iii) at the time of such consolidation or
merger and immediately after giving effect thereto, (A) no Default or
Event of Default would exist and (B) the surviving corporation would be
permitted by the provisions of Section 5.8(A) and (b) to incur at least
$1.00 of additional Funded Debt;
(3) the Company may sell or otherwise dispose of all or
substantially all of its assets (other than stock and Indebtedness of a
Restricted Subsidiary, which may only be sold or otherwise disposed of
pursuant to Section 5.10(c)) to any Person for consideration which
represents the fair market value (as determined in good faith by the
Board of Directors of the Company, a copy of which determination
certified by the Secretary or an Assistant Secretary of the Company
shall have been furnished to the holders of the Notes) at the time of
such sale or other disposition if (i) the acquiring Person is a
corporation organized under the laws of any state of the United States
or the District of Columbia, (ii) the due and punctual payment of the
principal of and premium, if any, and interest on all the Notes,
according to their tenor, and the due and punctual performance and
observance of all of the covenants in the Notes and in this Agreement
to be performed or observed by the Company are expressly assumed in
writing by the acquiring corporation and the acquiring corporation
shall furnish the holders of the Notes an opinion of counsel
satisfactory to such holders to the effect that the instrument of
assumption has been duly authorized, executed and delivered and
constitutes the legal, valid and binding contract and agreement of such
acquiring corporation enforceable in accordance with its terms, except
as enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles, and
(iii) at the time of such sale or disposition and immediately after
giving effect thereto, (A) no Default or Event of Default would exist
and (B) the acquiring corporation would be permitted by the provisions
of Section 5.8(b) to incur at least $1.00 of additional Funded Debt.
(b) Notwithstanding any of the provisions of Section 5.10(A)(3), the
Company will not, and will
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<PAGE> 21
not permit any Restricted Subsidiary to, sell, lease, transfer, abandon or
otherwise dispose of assets (except assets sold in the ordinary course of
business for fair market value); provided that the foregoing restrictions do not
apply to:
(1) the sale, lease, transfer or other disposition of assets of a
Restricted Subsidiary to the Company or a Wholly-owned Restricted
Subsidiary or of the Company to a Wholly-Owned Restricted Subsidiary;
or
(2) the sale of such assets for cash or other property to a Person
or Persons other than an Affiliate if all of the following conditions
are met:
(i) such assets (valued at net book value) do not,
together with all other assets of the Company and its
Subsidiaries previously disposed of during the same fiscal
year (other than in the ordinary course of business), exceed
10% of Consolidated Total Assets, and such assets (valued at
net book value) do not, together with all other assets of the
Company and its Restricted Subsidiaries previously disposed
of during the period from the date of this Agreement to and
including the date of the sale of such assets (other than in
the ordinary course of business), exceed 25% of Consolidated
Total Assets, in each such case determined as of the end of
the immediately preceding fiscal quarter;
(ii) in the opinion of the Board of Directors of the
Company if the aggregate sale price of such assets is
$1,000,000 or more and in the opinion of a Responsible
Officer of the Company if the aggregate sale price of such
assets is less than $1,000,000, the sale is for fair value
and is in the best interests of the Company; and
(iii) immediately prior to and immediately after the
consummation of the transaction and after giving effect
thereto, (A) no Default or Event of Default would exist, and
(B) the Company would be permitted by the provisions of
Section 5.8(b) to incur at least $1.00 of additional Funded
Debt;
provided, however, that for purposes of the foregoing calculation,
there shall not be included any assets the proceeds of which were or
are applied within twelve months of the date of sale of such assets to
either (A) the acquisition of property or assets useful and intended to
be used in the operation of the Company and its Restricted Subsidiaries
as described in Section 5.5 and similar in nature to the assets so sold
and the purchase price of which is at least equal to that of the
property or assets so disposed of or (B) the prepayment at any
applicable prepayment premium, on a pro rata basis, of Senior
Indebtedness (including, without limitation, the Notes) of the Company
ranking pari passu with the Notes. It is understood and agreed by the
Company that any such proceeds paid and applied to the prepayment of
the Notes as hereinabove provided shall be prepaid as and to the extent
provided in Section 2.2.
Computations pursuant to this Section 5.10(b) shall include
dispositions made pursuant to Section 5.10(c) and computations pursuant to
Section 5.10(c) shall include dispositions made pursuant to this Section
5.10(b).
(c) The Company will not, and will not permit any Restricted Subsidiary
to, sell, pledge or otherwise dispose of any shares of the stock (including as
"stock" for the purposes of this Section any options or warrants to purchase
stock or other Securities exchangeable for or
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<PAGE> 22
convertible into stock) of a Restricted Subsidiary (said stock, options,
warrants and other Securities herein called "Restricted Subsidiary Stock") or
any Indebtedness of any Restricted Subsidiary, nor will any Restricted
Subsidiary issue, sell, pledge or otherwise dispose of any shares of its own
Restricted Subsidiary Stock, provided that the foregoing restrictions do not
apply to:
(1) the issue of directors qualifying shares; or
(2) the issue of Restricted Subsidiary Stock to the Company; or
(3) the sale or other disposition at one time to a Person
(other than directly or indirectly to an Affiliate) of the entire
Investment of the Company and its Restricted Subsidiaries in any
Restricted Subsidiary, provided that any sale or other disposition
pursuant to this clause (3) of Section 5.10(c) must satisfy all of the
following conditions:
(i) the assets (valued at the higher of net book value
or fair market value) of such Restricted Subsidiary do not,
together with all other assets of the Company and its
Restricted Subsidiaries previously disposed of during the
same fiscal year (other than in the ordinary course of
business), exceed 10% of Consolidated Total Assets, and the
assets (valued at the higher of net book value or fair market
value) of such Restricted Subsidiary do not, together with
all other assets of the Company and its Restricted
Subsidiaries previously disposed of during the period from
the date of this Agreement to and including the date of the
sale of such assets (other than in the ordinary course of
business), exceed 25% of Consolidated Total Assets, in each
such case determined as of the end of the immediately
preceding fiscal quarter;
(ii) in the opinion of the Company's Board of Directors,
the sale is for fair value and is in the best interests of
the Company;
(iii) immediately after the consummation of the
transaction and after giving effect thereto, such Restricted
Subsidiary shall have no Indebtedness of or continuing
Investment in the capital stock of the Company or of any
Restricted Subsidiary and any such Indebtedness or Investment
shall have been discharged or acquired, as the case may be,
by the Company or a Restricted Subsidiary; and
(iv) immediately prior to and immediately after the
consummation of the transaction and after giving effect
thereto, (A) no Default or Event of Default would exist, and
(B) the Company would be permitted by the provisions of
Section 5.8(b) to incur at least $1.00 of additional Funded
Debt;
provided, however, that for purposes of the foregoing calculation,
there shall not be included any assets the proceeds of which were or
are applied within twelve months of the date of sale of such assets to
either (A) the acquisition of property or assets useful and intended to
be used in the operation of the Company and its Restricted Subsidiaries
as described in Section 5.5 and similar in nature to the assets so sold
and the purchase price of which is at least equal to that of the
property or assets so disposed of or (B) the prepayment at any
applicable prepayment premium, on a pro rata basis, of Senior
Indebtedness (including, without limitation, the Notes) of the Company
ranking pari passu with the Notes. It is understood and agreed by the
Company that any such proceeds paid and applied to the prepayment of
the Notes as hereinabove provided shall be prepaid as and to the extent
provided Section 2.2.
Computations pursuant to this Section 5.10(c) shall include
dispositions made pursuant to Section 5.10(b)
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<PAGE> 23
and computations pursuant to Section 5.10(b) shall include dispositions made
pursuant to thiS Section 5.10(c).
Section 5.11. Guaranties. The Company will not, and will not permit any
Restricted Subsidiary to, become or be liable in respect of any Guaranty except
Guaranties by the Company which are limited in amount to a stated maximum dollar
exposure or which constitute Guaranties of obligations incurred by any
Restricted Subsidiary in compliance with the provisions of this Agreement;
provided that nothing contained in this Section 5.11 shall be deemed or
construed to prohibit any Restricted Subsidiary from executing and delivering
any Subsidiary Note Guaranty or joining the Initial Subsidiary Note Guaranty, as
the case may be, as contemplated by Sections Section 1.5 and Section 5.17,
respectively, or from executing and delivering any Subsidiary Bank Guaranty;
provided that in each such case each beneficiary of any such Guaranty shall have
entered into and become a party to the Intercreditor Agreement.
Section 5.12. Notes to Rank Pari Passu. The Company will keep and
maintain the Notes and all other obligations outstanding at any time under this
Agreement as direct obligations of the Company ranking pari passu as against the
assets of the Company with all other present and future unsecured Senior
Indebtedness of the Company.
Section 5.13. Repurchase of Notes. Neither the Company nor any
Restricted Subsidiary or Affiliate, directly or indirectly, may repurchase or
make any offer to repurchase any Notes.
Section 5.14. Transactions with Affiliates. The Company will not, and
will not permit any Restricted Subsidiary to, enter into or be a party to any
transaction or arrangement with any Affiliate (including, without limitation,
the purchase from, sale to or exchange of property with, or the rendering of any
service by or for, any Affiliate), except in the ordinary course of and pursuant
to the reasonable requirements of the Company's or such Restricted Subsidiary's
business and upon fair and reasonable terms no less favorable to the Company or
such Restricted Subsidiary than would obtain in a comparable arm's-length
transaction with a Person other than an Affiliate; provided that nothing
contained in this Section 5.14 shall be deemed or construed to prohibit the
Company from making Investments in Officer Notes; provided that the aggregate
principal amount of all such Officer Notes at any one time outstanding shall not
exceed $1,500,000 and the aggregate principal amount of all Officer Notes due
and owing from any one officer of the Company at any one time outstanding shall
not exceed $100,000.
Section 5.15. Termination of Pension Plans. The Company will not and
will not permit any Restricted Subsidiary to withdraw from any Multiemployer
Plan or permit any employee benefit plan maintained by it to be terminated if
such withdrawal or termination could result in withdrawal liability (as
described in Part 1 of Subtitle E of Title IV of ERISA) or the imposition of a
Lien on any property of the Company or any Restricted Subsidiary pursuant to
Section 4068 of ERISA.
Section 5.16. Reports; Rights of Inspection; Retention of Consultants.
(a) Reports. The Company will keep, and will cause each Restricted Subsidiary to
keep, proper books of record and account in which full and correct entries will
be made of all dealings or transactions of, or in relation to, the business and
affairs of the Company or such Restricted Subsidiary, in accordance with GAAP
consistently applied (except for changes disclosed in the financial statements
furnished to you pursuant to this Section 5.16(a) and concurred in by the
independent public accountants referred to in Section 5.16(A)(2)), and will
furnish to you so long as you are the holder of any Note and to each other
Institutional Holder of the then outstanding Notes (in duplicate if so specified
below or
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<PAGE> 24
otherwise requested):
(1) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except
the last) of each fiscal year, copies of:
(i) a consolidated balance sheet of the Company and its
Subsidiaries as of the close of such quarterly fiscal period,
setting forth in comparative form the consolidated figures for the
fiscal year then most recently ended,
(ii) a consolidated statement of earnings of the Company and
its Subsidiaries for such quarterly fiscal period and for the
portion of the fiscal year ending with such quarterly fiscal
period, in each case setting forth in comparative form the
consolidated figures for the corresponding periods of the
preceding fiscal year, and
(iii) a consolidated statement of cash flows and shareholder's
equity of the Company and its Subsidiaries for the portion of the
fiscal year ending with such quarterly fiscal period, setting
forth in comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct by an
authorized financial officer of the Company, provided that delivery
within the time period specified above of copies of the Company's
Quarterly Report on Form 10 Q prepared in compliance with the
requirements therefor and filed with the Securities and Exchange
Commission shall be deemed to satisfy the requirements of this
Section 5.16(A)(1);
(2) Annual Statements. As soon as available and in any event
within 90 days after the close of each fiscal year of the Company,
copies of:
(i) a consolidated balance sheet of the Company and its
Subsidiaries as of the close of such fiscal year, and
(ii) consolidated statements of earnings, shareholders' equity
and cash flows of the Company and its Subsidiaries for such fiscal
year,
in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and accompanied
by a report thereon of a firm of independent public accountants of
recognized national standing selected by the Company to the effect that
the consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Company and its
Subsidiaries as of the end of the fiscal year being reported on and the
consolidated results of the operations and cash flows for said year in
conformity with GAAP and that the examination of such accountants in
connection with such financial statements has been conducted in
accordance with generally accepted auditing standards and included such
tests of the accounting records and such other auditing procedures as
said accountants deemed necessary in the circumstances, provided that
the delivery within the time period specified above of the Company's
Annual Report on Form 10K for such fiscal year (together with the
Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountant's certificate described in
paragraph (7) below, shall be deemed to satisfy the requirements of
this Section 5.16(A)(2);
3) Audit Reports. Promptly upon receipt thereof, one copy of
each interim or special audit made by independent accountants of the
books of the Company or any Restricted Subsidiary and any management
letter received from such accountants; provided
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<PAGE> 25
that nothing contained in this clause (3) shall be deemed or construed
to require the Company or any Restricted Subsidiary to furnish to any
holder of the Notes any interim or special audit made by any internal
accountant employed by the Company or any Restricted Subsidiary;
(4) SEC and Other Reports. A copy of any SEC filing by the Company
containing information of a financial nature and of any press release
of the Company generally made available to stockholders of the Company
concerning a Material development, in each case to be delivered
promptly after becoming available;
(5) ERISA Reports. Promptly upon the occurrence thereof, written
notice of (i) a Reportable Event with respect to any Plan; (ii) the
institution of any steps by the Company, any ERISA Affiliate, the PBGC
or any other Person to terminate any Plan; (iii) the institution of any
steps by the Company or any ERISA Affiliate to withdraw from any Plan;
(iv) a non-exempt "prohibited transaction" within the meaning of
Section 406 of ERISA in connection with any Plan; (v) any material
increase in the contingent liability of the Company or any Restricted
Subsidiary with respect to any post-retirement welfare liability; or
(vi) the taking of any action by, or the threatening of the taking of
any action by, the Internal Revenue Service, the Department of Labor or
the PBGC with respect to any of the foregoing;
(6) Officer's Certificates. Within the periods provided in
paragraphs (1) and (2) above, a certificate of a senior financial
officer of the Company stating that such officer has reviewed the
provisions of this Agreement and setting forth: (i) the information and
computations (in sufficient detail) required in order to establish
whether the Company was in compliance with the requirements of Section
5.6 through Section 5.10 at the end of the period covered by the
financial statements then being furnished, including, without
limitation, computations (in sufficient detail) required in order to
establish whether the Company was in compliance with the provisions of
Section 5.7 at the end of each calendar month during the fiscal quarter
then ended, and (ii) whether there existed as of the date of such
financial statements and whether, to the best of such officer's
knowledge, there exists on the date of the certificate or existed at
any time during the period covered by such financial statements any
Default or Event of Default and, if any such condition or event exists
on the date of the certificate, specifying the nature and period of
existence thereof and the action the Company is taking and proposes to
take with respect thereto;
(7) Accountants' Certificates. Within the period provided in
paragraph (2) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they
have reviewed this Agreement and the officer's certificate delivered in
accordance with paragraph (6) above for the quarterly fiscal period
ending on the last day of the immediately preceding fiscal year, and
stating further whether, in making their audit and reviewing such
officer's certificate, such accountants have become aware of any
Default or Event of Default under any of the terms or provisions of
this Agreement insofar as any such terms or provisions pertain to or
involve accounting matters or determinations, and if any such condition
or event then exists, specifying the nature and period of existence
thereof;
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<PAGE> 26
(8) Requested Information. With reasonable promptness, such other
data and information as you or any such Institutional Holder may
reasonably request;
(9) Unrestricted Subsidiaries. In the event that Unrestricted
Subsidiaries account for more than 10% of the consolidated total assets
of the Company and its Subsidiaries, or more than 10% of the
consolidated revenue of the Company and its Subsidiaries, then each set
of financial information delivered pursuant to paragraphs (1) and (2)
of this Section 5.16(A) shall be accompanied by unaudited financial
statements for all Unrestricted Subsidiaries of the Company taken as a
group, together with consolidating statements reflecting eliminations
or adjustments required to reconcile such group statements to the
consolidated financial statements of the Company and its Subsidiaries;
and
(10) Supplements. In the event that more than one series of Notes
is issued under this Agreement, within 10 Business Days after the
execution and delivery thereof, a copy of any Supplement.
(b) Rights of Inspection. Without limiting the foregoing, the Company
will permit you, so long as you are the holder of any Note, and each
Institutional Holder of the then outstanding Notes (or such Persons as either
you or such Institutional Holder may designate), to visit and inspect, under the
Company's guidance, any of the properties of the Company or any Restricted
Subsidiary, to examine all of their books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss their respective
affairs, finances and accounts with their respective officers, employees, and
independent public accountants (and by this provision the Company authorizes
said accountants to discuss with you the finances and affairs of the Company and
its Restricted Subsidiaries), all at such reasonable times and as often as may
be reasonably requested. Any visitation shall be at the sole expense of you or
such Institutional Holder, unless a Default or Event of Default shall have
occurred and be continuing or the holder of any Note or of any other evidence of
Indebtedness of the Company or any Restricted Subsidiary gives any written
notice or takes any other action with respect to a claimed default, in which
case, any such visitation or inspection shall be at the sole expense of the
Company.
(c) Retention of Consultants. If a Default or an Event of Default has
occurred and is continuing, the Requisite Holders may request that the Company,
at the sole cost and expense of the Company, retain a business, financial,
pension or environmental consultant to review and analyze the reports required
to be made by the Company pursuant to this Section 5.16 or to inspect the books
of account, records, reports and other papers and the properties, operations and
administration of the Company or any Restricted Subsidiary, and to submit
written reports of such review, analysis or inspection to the holders of the
Notes, and the Company agrees within fifteen (15) Business Days of such request
to appoint a consultant which in the reasonable judgment of a Responsible
Officer of the Company is qualified to complete such review and analysis and
which consultant shall be reasonably acceptable to the Requisite Holders. The
Company agrees that the Requisite Holders may, at the sole cost and expense of
the Company, retain at any time a business, financial, pension or environmental
consultant to review and analyze the reports required to be made by the Company
pursuant to this Section 5.16 or to inspect the books of account, records,
reports and other papers and the properties, operations and administration of
the Company and any Restricted Subsidiary and to submit written reports of such
review, analysis or inspection to the holders of the Notes. The Company agrees
to give prompt written notice of any such request by the Requisite Holders to
each of the other holders of the Notes and to furnish a copy of each such
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<PAGE> 27
written report to each of the holders of the Notes.
Section 5.17. Guaranty by Subsidiaries. (a) Subject to clause (b) of
this Section 5.17, the Company will cause each Subsidiary which delivers a
Guaranty after the first Closing Date to concurrently enter into a Subsidiary
Note Guaranty, and within three Business Days thereafter shall deliver to each
of the holders of the Notes the following items:
(1) an executed counterpart of the Subsidiary Note Guaranty or a
joinder agreement pursuant to which such Subsidiary becomes a party to
the Subsidiary Note Guaranty;
(2) a certificate signed by an executive officer of such
Subsidiary making representations and warranties to the effect of those
contained in Sections 2, 10, 12 and 17 of Exhibit C to the Note
Agreements, but with respect to such Subsidiary and the Subsidiary Note
Guaranty;
(3) such documents and evidence with respect to such Subsidiary as
the Requisite Holders may reasonably request in order to establish the
existence and good standing of such Subsidiary and the authorization of
the transactions contemplated by the Subsidiary Note Guaranty; and
(4) an opinion of counsel satisfactory to the Requisite Holders to
the effect that the Subsidiary Note Guaranty or the joinder agreement
pursuant to which such Subsidiary has become a party to the Initial
Subsidiary Note Guaranty, as the case may be, has been duly authorized,
executed and delivered and constitutes the legal, valid and binding
contract and agreement of such Subsidiary enforceable in accordance
with its terms, except as an enforcement of such terms may be limited
by bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
(b) Notwithstanding the requirements of clause (a) of this Section
5.17, the Company shall not be required to comply therewith if, but only if,
the Company can create or incur the Indebtedness evidenced by any Guaranty
entered into by a Subsidiary within the limitations of Section 5.8(a) AND
(b).
(c) Nothing contained in this Section 5.17 shall be deemed or construed
to otherwise permit a Subsidiary of the Company to create, assume, guaranty
or otherwise incur or in any manner be or become liable in respect of any
Current Debt or Funded Debt which is not otherwise within the limitations of
Section 5.8 and the other applicable provisions of this Agreement.
Section 5.18. Stock Pledge Agreement. If the Company shall enter into a
stock pledge agreement in form and substance satisfactory to the Requisite
Holders (each, a "Stock Pledge Agreement") pursuant to which the Company shall
grant to the Collateral Agent or any other Institutional Holder a pledge of and
security interest in the capital stock of a Subsidiary, then and in such event,
the Company shall concurrently with the execution and delivery of such Stock
Pledge Agreement, deliver to each of the holders of the Notes the following
items:
(a) an executed counterpart of such Stock Pledge Agreement;
(b) a certificate signed by an executive officer of the Company
making
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representations and warranties to the effect of those contained in
Sections 2, 10, 12 and 17 of Exhibit C to the Note Agreements, but with
respect to such Stock Pledge Agreement and to the effect that such
Stock Pledge Agreement constitutes a first and prior perfected security
interest in the capital stock which is the subject of such Stock Pledge
Agreement free and clear of all Liens of creditors of the Company,
other than the Lien of such Stock Pledge Agreement;
(c) such modifications, amendments or supplements to the
Intercreditor Agreement as may be deemed necessary by the Requisite
Holders to confirm that any proceeds realized from the enforcement by
the Collateral Agent or such other Institutional Holder of its rights
pursuant to such Stock Pledge Agreement as pledgee of such capital
stock shall be applied in accordance with the terms and provisions of
the Intercreditor Agreement; and
(d) an opinion of independent counsel to the Company satisfactory
to the Requisite Holders to the effect that (1) such Stock Pledge
Agreement has been duly authorized, executed and delivered and
constitutes the legal, valid and binding contract and agreement of the
Company enforceable in accordance with its terms, except as an
enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement
of creditors' rights generally and by general equitable principles and
(2) such Stock Pledge Agreement creates a valid and perfected first and
prior security interest in and pledge of the capital stock of the
Subsidiary which is the subject of such Stock Pledge Agreement.
Section 5.19. Designation of Subsidiaries. The Company may
designate or redesignate any Unrestricted Subsidiary as a Restricted Subsidiary
and may designate or redesignate any Restricted Subsidiary as an Unrestricted
Subsidiary; provided that:
(a) the Company shall have given not less than 10 days' prior
written notice to the holders of the Notes that a senior financial
officer has made such determination,
(b) at the time of such designation or redesignation and
immediately after giving effect thereto: (i) no Default or Event of
Default would exist and (ii) the Company would be permitted by the
provisions of Section 5.8(b) to incur at least $1.00 of additional
Indebtedness,
(c) in the case of the designation of an Unrestricted Subsidiary
as a Restricted Subsidiary and after giving effect thereto: (i) all
outstanding Indebtedness of such Restricted Subsidiary so designated
shall be permitted within the applicable limitations of Section 5.8 and
(ii) all existing Liens of such Restricted Subsidiary so designated
shall be permitted within the applicable limitations of Section 5.9,
other than Section 5.9(6) (notwithstanding that any such Lien existed
as of the first Closing Date), and
(d) the designation of a Subsidiary as "Restricted" or
"Unrestricted" shall not be changed more than twice.
SECTION 6. EVENTS OF DEFAULT AND REMEDIES THEREFOR.
Section 6.1. Events of Default. Any one or more of the following
shall constitute an "Event of Default" as such term is used herein:
(a) Default shall occur in the payment of interest on any Note
when the same shall have become due and such default shall continue for
more than five Business Days; or
(b) Default shall occur in the making of any required prepayment
on any of the Notes as provided in Section 2.1; or
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(c) Default shall occur in the making of any other payment of the
principal of any Note or premium, if any, thereon at the expressed or
any accelerated maturity date or at any date fixed for prepayment; or
(d) Default shall occur in the observance or performance of any
covenant or agreement contained in Section 5.6 through Section 5.11; or
(e) Default shall occur in the observance or performance of any
other provision of this Agreement which is not remedied within 30 days
after the occurrence thereof; or
(f) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of
the principal of or interest on any Indebtedness for borrowed money
(other than the Notes) of the Company or any Restricted Subsidiary
aggregating in excess of $3,000,000 and such default shall continue
beyond the period of grace, if any, allowed with respect thereto,
provided that an Event of Default shall not be deemed to have occurred
under Section 6(f) if any of the foregoing events occur only with
respect to Restricted Subsidiaries which are not Wholly-owned
Restricted Subsidiaries of the Company or Guarantors and if all such
non-Wholly-owned Restricted Subsidiaries do not, if considered in the
aggregate as a single Restricted Subsidiary, constitute a Significant
Restricted Subsidiary; or
(g) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Indebtedness
for borrowed money (other than the Notes) of the Company or any
Restricted Subsidiary aggregating in excess of $3,000,000 is
outstanding and such default or event shall result in the acceleration
of the maturity of any Indebtedness for borrowed money of the Company
or any Restricted Subsidiary outstanding thereunder, provided that an
Event of Default shall not be deemed to have occurred under this
Section 6(g) if any of the foregoing events occur only with respect to
Restricted Subsidiaries which are not Wholly-owned Restricted
Subsidiaries of the Company or Guarantors and if all such
non-Wholly-owned Restricted Subsidiaries do not, if considered in the
aggregate as a single Restricted Subsidiary, constitute a Significant
Restricted Subsidiary.
(h) Any representation or warranty made by the Company herein, in
any Supplement, or made by the Company in any statement or certificate
furnished by the Company in connection with the consummation of the
issuance and delivery of the Notes or furnished by the Company pursuant
hereto, is untrue in any material respect as of the date of the
issuance or making thereof; or
(i) Final judgment or judgments for the payment of money
aggregating in excess of $1,000,000 (net of insurance proceeds to the
extent the insurer has acknowledged liability with respect thereto) is
or are outstanding against the Company or any Restricted Subsidiary or
against any property or assets of either and any one of such judgments
has remained unpaid, unvacated, unbonded or unstayed by appeal or
otherwise for a period of 45 days from the date of its entry, provided
that an Event of Default shall not be deemed to have occurred under
this Section 6(i) if any of the foregoing events occur only with
respect to Restricted Subsidiaries which are not Wholly-owned
Restricted Subsidiaries of the Company or Guarantors and if all such
non-Wholly-owned Restricted Subsidiaries do not,
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if considered in the aggregate as a single Restricted Subsidiary,
constitute a Significant Restricted Subsidiary; or
(j) A custodian, liquidator, trustee or receiver is appointed for
the Company or any Restricted Subsidiary or for the major part of the
property of either and is not discharged within 30 days after such
appointment, provided that an Event of Default shall not be deemed to
have occurred under this Section 6(j) if any of the foregoing events
occur only with respect to Restricted Subsidiaries which are not
Wholly-owned Restricted Subsidiaries of the Company or Guarantors and
if all such non-Wholly-owned Restricted Subsidiaries do not, if
considered in the aggregate as a single Restricted Subsidiary,
constitute a Significant Restricted Subsidiary; or
(k) The Company or any Restricted Subsidiary becomes insolvent or
bankrupt, is generally not paying its debts as they become due or makes
an assignment for the benefit of creditors, or the Company or any
Restricted Subsidiary applies for or consents to the appointment of a
custodian, liquidator, trustee or receiver for the Company or such
Restricted Subsidiary or for the major part of the property of either,
provided that an Event of Default shall not be deemed to have occurred
under this Section 6(k) if any of the foregoing events occur only with
respect to Restricted Subsidiaries which are not Wholly-owned
Restricted Subsidiaries of the Company or Guarantors and if all such
non-Wholly-owned Restricted Subsidiaries do not, if considered in the
aggregate as a single Restricted Subsidiary, constitute a Significant
Restricted Subsidiary; or
(l) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Company or any Restricted Subsidiary and, if instituted
against the Company or any Restricted Subsidiary, are consented to or
are not dismissed within 60 days after such institution, provided that
an Event of Default shall not be deemed to have occurred under this
Section 6(l) if any of the foregoing events occur only with respect to
Restricted Subsidiaries which are not Wholly-owned Restricted
Subsidiaries of the Company or Guarantors and if all such
non-Wholly-owned Restricted Subsidiaries do not, if considered in the
aggregate as a single Restricted Subsidiary, constitute a Significant
Restricted Subsidiary; or
(m) For any reason any Subsidiary Note Guaranty or any Stock
Pledge Agreement shall cease to be in full force and effect for any
reason whatsoever, including, without limitation, a determination by
any governmental body or court that any of such agreements is invalid,
void or unenforceable or any Person which is a party thereto shall
contest or deny in writing the validity or enforceability of any of its
obligations under such agreement; or
(n) Any Plan shall fail to satisfy minimum funding requirements of
ERISA, a notice of intent to terminate a Plan shall have been received
by the Company, or the aggregate amount of unfunded benefit liabilities
shall exceed an amount equal to 5% of Consolidated Net Worth and any
such event or events could reasonably be expected to have a Material
Adverse Effect.
Section 6.2. Notice to Holders. When any Default or Event of Default
described in the foregoing Section 6.1 has occurred, or if the holder of any
Note or of any other evidence of Indebtedness for borrowed money of the Company
gives any written notice with respect to a default claimed by such holder in
such written notice to exist in respect of such Indebtedness for borrowed money
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or under the instrument or agreement under which such Indebtedness for borrowed
money is outstanding, the Company agrees to give notice within three Business
Days of such event to all holders of the Notes then outstanding.
Section 6.3. Acceleration of Maturities. When any Event of Default
described in paragraph (a), (b) or (c) of Section 6.1 has happened and is
continuing with respect to any series of Notes, any holder of any Note of such
series may, by notice in writing to the Company sent in the manner provided in
Section 9.6, declare the entire principal and all interest accrued on such Note
of such series to be, and such Note shall thereupon become, forthwith due and
payable, without any presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived. When any Event of Default described in
paragraphs (a) through (i), inclusive, or paragraphs (m) or (n), of said Section
6.1 has happened and is continuing, the holders of a majority of the aggregate
principal amount outstanding of any series of Notes may, by notice in writing to
the Company in the manner provided in Section 9.6, declare the entire principal
and all interest accrued on all Notes of such series to be, and all Notes of
such series shall thereupon become, forthwith due and payable, without any
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived. When any Event of Default described in paragraph (j),
(k) or (l) of Section 6.1 has occurred, then all outstanding Notes of every
series shall immediately become due and payable without presentment, demand or
notice of any kind. Upon the Notes becoming due and payable as a result of any
Event of Default as aforesaid, the Company will forthwith pay to the holders of
the Notes the entire principal and interest accrued on the Notes and, to the
extent not prohibited by applicable law, an amount as liquidated damages for the
loss of the bargain evidenced hereby (and not as a penalty) equal to the
Make-Whole Amount, determined as of the date on which the Notes shall so become
due and payable. No course of dealing on the part of the holder or holders of
any Notes nor any delay or failure on the part of any holder of Notes to
exercise any right shall operate as a waiver of such right or otherwise
prejudice such holder's rights, powers and remedies. The Company further agrees,
to the extent permitted by law, to pay to the holder or holders of the Notes all
costs and expenses incurred by them in the collection of any Notes upon any
default hereunder or thereon, including reasonable compensation to such holder's
or holders' attorneys for all services rendered in connection therewith.
Section 6.4. Rescission of Acceleration. The provisions of Section 6.3
are subject to the condition that if the principal of and accrued interest on
all or any outstanding Notes have been declared immediately due and payable by
reason of the occurrence of any Event of Default described in paragraphs (a)
through (i), inclusive, or paragraphs (m) or (n), of Section 6.1, the holders of
55% or more in aggregate principal amount of the outstanding Notes of any series
then outstanding may, by written instrument filed with the Company, rescind and
annul such declaration and the consequences thereof with respect to such series
of the Notes, provided that at the time such declaration is annulled and
rescinded:
(a) no judgment or decree has been entered for the payment of any
monies due pursuant to the Notes of such series or this Agreement;
(b) all arrears of interest upon all the Notes of such series and
all other sums payable under the Notes of such series and under this
Agreement (except any principal, interest or premium on the Notes of
such series which has become due and payable solely
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by reason of such declaration under Section 6.3) shall have been
duly paid; and
(c) each and every other Default and Event of Default shall have
been made good, cured or waived pursuant to Section 7.1;
and provided further, that no such rescission and annulment shall extend to or
affect any subsequent Default or Event of Default or impair any right consequent
thereto or affect in any manner whatsoever any recission or annulment pertaining
to any other series of the Notes or impair any right consequent thereto. Without
limiting the foregoing, the provisions of Section 6.3 are subject to the
condition that if the principal of and accrued interest on any outstanding Note
of any series have been declared by the holder thereof to be immediately due and
payable by reason of the occurrence of any Event of Default described in
paragraph (a), (b) or (c) of Section 6.1, such holder may, by written instrument
filed with the Company, rescind and annul such declaration and the consequences
thereof.
SECTION 7. AMENDMENTS, WAIVERS AND CONSENTS.
Section 7.1. Consent Required. Any term, covenant, agreement or
condition of this Agreement or any Supplement with respect to any series of
Notes, as the case may be, may, with the consent of the Company, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Company shall have obtained
the consent in writing of the Requisite Holders of such series; provided that
without the written consent of the holders of all of the Notes of a particular
series then outstanding, no such amendment or waiver shall be effective (a)
which will change the time of payment (including any prepayment required by
Section 2.1) of the principal of or the interest on any Note of such series or
change the principal amount thereof or change the rate of interest thereon, or
(b) which will change any of the provisions with respect to optional prepayments
in respect of such series, or (c) which will change the definitions of
"Make-Whole Amount", "Reinvestment Rate", "Statistical Release" or "Weighted
Average Life to Maturity" insofar as the same pertains to such series, or (d)
which will change the percentage of holders of the Notes required to consent to
any such amendment or waiver or the taking of any other action by Noteholders
under any of the provisions of this Section 7 or Section 6 insofar as the same
pertains to such series; and provided further, that anything contained in this
Sections 7.1 and 7.2 to the contrary notwithstanding, if for any reason
whatsoever it becomes necessary or appropriate to enter into any amendment of
this Agreement or any waiver with respect to compliance herewith by the Company
during the period from and including the first Closing Date through and
including the second Closing Date (the "Tranche C CutOff Date"): (1) Teachers
Insurance and Annuity Association of America and The Travelers Insurance Company
shall be deemed to be the holders of $15,000,000 and $4,000,000, respectively,
in aggregate principal amount of the outstanding Series 1998A Notes (i) for
purposes of any determination of the percentage of holders of the Notes required
to grant or deny such requested amendment or waiver and (ii) for purposes of any
determination of any payment of remuneration, whether by way of supplemental or
additional interest, fee or otherwise pursuant to Section 7.2, notwithstanding
that the issuance, sale and delivery of the Notes on the second Closing Date has
not been consummated at the time of such amendment or waiver is requested or
such payment of remuneration is determined pursuant to Section 7.2, and (2) if
for any reason whatsoever, the Notes to be issued to Teachers Insurance and
Annuity Association of America and The Travelers Insurance Company are not
issued on or prior to the Tranche C Note CutOff Date, any such amendment or
waiver entered into as contemplated by the foregoing clause (1)(i) of this
Section 7.1 shall, at the option of the holders of Notes representing a majority
of the aggregate outstanding Series 1998A Notes, be
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deemed null and void.
Section 7.2. Solicitation of Holders. So long as there are any Notes
outstanding, the Company will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement, any Supplement or the Notes unless each holder of Notes of each
series (irrespective of the amount of Notes then owned by it) shall, if such
proposed waiver or amendment shall affect such series, be informed thereof by
the Company and shall be afforded the opportunity of considering the same and
shall be supplied by the Company with sufficient information to enable it to
make an informed decision with respect thereto. The Company will not, directly
or indirectly, pay or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, to any holder of Notes as
consideration for or as an inducement to entering into by any holder of Notes of
any waiver or amendment of any of the terms and provisions of this Agreement or
the Notes unless such remuneration is concurrently offered and paid, on the same
terms, ratably to the holders of all Notes then outstanding (whether or not any
such holder has consented to such waiver or amendment). Promptly and in any
event within 30 days of the date of execution and delivery of any such waiver or
amendment, the Company shall provide a true, correct and complete copy thereof
to each of the holders of the Notes.
Section 7.3. Effect of Amendment or Waiver. Any such amendment or
waiver shall apply equally to all of the holders of the Notes of the series to
which such amendment or waiver pertains and shall be binding upon them, upon
each future holder of any Note of such series and upon the Company, whether or
not such Note shall have been marked to indicate such amendment or waiver. No
such amendment or waiver shall extend to or affect any obligation not expressly
amended or waived or impair any right consequent thereon.
SECTION 8. INTERPRETATION OF AGREEMENT; DEFINITIONS.
Section 8.1. Definitions. Unless the context otherwise requires, the
terms hereinafter set forth when used herein shall have the following meanings
and the following definitions shall be equally applicable to both the singular
and plural forms of any of the terms herein defined:
"Acquiring Person" shall mean a "person" or "group of persons" within
the meaning of Sections 13(d) and 14(d) of the Securities and Exchange Act of
1934, as amended, provided that notwithstanding the foregoing, "Acquiring
Person" shall not be deemed to include any member of the Company Control Group
unless such member has, directly or indirectly, disposed of, sold or otherwise
transferred to, or encumbered or restricted (whether by means of voting trust
agreement or otherwise) for the benefit of, an Acquiring Person all or any
portion of the Voting Stock of the Company directly or indirectly owned or
controlled by such member or such member directly or indirectly votes all or any
portion of the Voting Stock of the Company directly or indirectly owned or
controlled by such member for the taking of any action which, directly or
indirectly, constitutes or would result in a Change of Control, in which event
such member of the Company Control Group shall be deemed to constitute an
Acquiring Person to the extent of the Voting Stock of the Company owned or
controlled by such member.
"Additional Purchasers" shall mean a purchaser of Additional Notes.
"Additional Notes" shall have the meaning set forth in Section 1.4.
"Adjusted Leverage Ratio" shall mean, as of any date, the ratio of (a)
the Total Seasonally
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Adjusted Debt as of such date to (b) the Total Adjusted Capitalization as of
such date.
"Affiliate" shall mean any Person (other than a Subsidiary) (a) which
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company, (b) which
beneficially owns or holds 10% or more of any class of the Voting Stock of the
Company or (c) 10% or more of the Voting Stock (or in the case of a Person which
is not a corporation, 10% or more of the equity interest) of which is
beneficially owned or held by the Company or a Restricted Subsidiary. The term
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of Voting Stock, by contract or otherwise.
"Agreements" shall have the meaning set forth in Section 1.3.
"Attributable Indebtedness of Sale and Leaseback Transactions" shall
mean as of the date of any determination thereof with respect to all Sale and
Leaseback Transactions entered into by the Company or any Restricted Subsidiary,
an amount equal to the lesser of (a) the fair market value of the property or
assets which is or are the subject of such Sale and Leaseback Transactions (as
determined in good faith by the Board of Directors of the Company at or about
the time of the consummation of such Sale and Leaseback Transaction) and (b) the
aggregate amount of the Rentals due and to become due (discounted from the
respective due dates thereof to such date at the interest rate per annum
implicit in such lease, with all such discounts to be computed on the basis of a
360-day year of twelve 30-day months, and otherwise in accordance with GAAP)
under the lease or leases relating to such Sale and Leaseback Transactions.
"Bank Credit Agreement" shall mean the $175,000,000 Revolving Credit
Agreement dated as of November 13, 1998, as the same may be amended,
supplemented, replaced, renewed, or otherwise modified from time to time, by and
among the Company, various lenders party thereto from time to time and NBD Bank,
as Agent.
"Banks" or "the Banks" shall mean the lenders party to the Bank Credit
Agreement.
"Business Day" shall mean any day other than a Saturday, Sunday or
other day on which banks in Grand Rapids, Michigan or New York, New York are
required by law to close or are customarily closed.
"Capitalized Lease" shall mean any lease the obligation for Rentals
with respect to which is required to be capitalized on a consolidated balance
sheet of the lessee and its subsidiaries in accordance with GAAP.
"Capitalized Rentals" of any Person shall mean as of the date of any
determination thereof the amount at which the aggregate Rentals due and to
become due under all Capitalized Leases under which such Person is a lessee
would be reflected as a liability on a consolidated balance sheet of such
Person.
"Change of Control" shall mean the earliest to occur of: (1) the date
the Company enters into a binding written agreement with an Acquiring Person to
permit such Acquiring Person to acquire, directly or indirectly, beneficial
ownership of more than 50% of the total Voting Stock of the Company then
outstanding, or (2) the date a tender offer or exchange offer results in an
Acquiring Person, directly or indirectly, beneficially owning more than 50% of
the total Voting Stock of the Company then outstanding, or (3) the date an
Acquiring Person becomes, directly or indirectly, the beneficial owner of more
than 50% of the total Voting Stock of the Company then outstanding, or (4) the
date of a merger between the Company and any other Person, a consolidation of
the Company with any other Person or an acquisition of any other Person by the
Company, if immediately after such event, the Acquiring Person shall hold more
than 50% of the
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total Voting Stock of the Company outstanding immediately after giving effect to
such merger, consolidation or acquisition, or, if the Company shall not be the
surviving entity, of the surviving, resulting or continuing corporation.
"Change of Control Delayed Prepayment Date" shall have the meaning set
forth in Section 2.3(b).
"Change of Control Prepayment Date" shall have the meaning set forth in
Section 2.3(a).
"Closing Dates" shall have the meaning set forth in Section 1.2.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations from time to time promulgated thereunder.
"Collateral Agent" shall mean NBD Bank, in its role as Collateral Agent
under the Intercreditor Agreement.
"Company" shall mean Universal Forest Products, Inc., a Michigan
corporation, and any Person who succeeds to all, or substantially all, of the
assets and business of Universal Forest Products, Inc.
"Company Control Group" shall mean all, or any combination of, any one
or more of the individuals comprising Current Management and who, as of the date
of any determination hereof: (a) is employed on a full-time basis by the Company
as a director or officer of the Company, and (b) has been so employed for at
least three years preceding such date of determination, except Gary Wright who
shall in any event be deemed to be a member of the Company Control Group for so
long as he is employed on a full-time basis by the Company as a director or
officer.
"Company Notice" shall have the meaning set forth in Section 2.3(a).
"Consolidated Fixed Charges" for any period shall mean on a
consolidated basis the sum of (a) all Rentals expense (other than Rentals on
Capitalized Leases) during such period of the Company and its Restricted
Subsidiaries, (b) all Interest Expense on all Indebtedness (including the
interest component of Rentals on Capitalized Leases) of the Company and its
Restricted Subsidiaries and (c) all capitalized interest of the Company and its
Restricted Subsidiaries.
"Consolidated Funded Debt" shall mean all Funded Debt of the Company
and its Restricted Subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Consolidated Net Earnings" for any period shall mean the gross
revenues of the Company and its Restricted Subsidiaries for such period less all
expenses and other proper charges (including taxes on income), determined on a
consolidated basis after eliminating earnings or losses attributable to
outstanding Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses;
(b) the proceeds of any life insurance policy;
(c) net earnings and losses of any Restricted Subsidiary accrued
prior to the date it became a Restricted Subsidiary;
(d) net earnings and losses of any corporation (other than a
Restricted Subsidiary that is a Restricted Subsidiary prior to being
acquired by the Company or any Restricted Subsidiary), substantially
all the assets of which have been acquired in any manner by the Company
or any Restricted Subsidiary, realized by such corporation prior to the
date of such acquisition;
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(e) net earnings and losses of any corporation (other than a
Restricted Subsidiary that is a Restricted Subsidiary prior to being
consolidated or merged with or into the Company or any Restricted
Subsidiary) with which the Company or a Restricted Subsidiary shall
have consolidated or which shall have merged into or with the Company
or a Restricted Subsidiary prior to the date of such consolidation or
merger;
(f) net earnings of any business entity (other than a Restricted
Subsidiary) in which the Company or any Restricted Subsidiary has an
ownership interest unless such net earnings shall have actually been
received by the Company or such Restricted Subsidiary in the form of
cash distributions;
(g) any portion of the net earnings of any Restricted Subsidiary
which for any reason is unavailable for payment of dividends to the
Company or any other Restricted Subsidiary;
(h) earnings or losses resulting from any reappraisal,
revaluation, write-up or write-down of assets (other than earnings or
losses resulting from any reappraisal, revaluation, write-up or
write-down of assets or a business entity acquired by the Company or
any of its Restricted Subsidiaries, which reappraisal, revaluation,
write-up or write-down is made (x) in accordance with GAAP and with the
concurrence of the Company's independent public accountants and (y)
concurrently with the acquisition of such assets or business entity, as
the case may be);
(i) any deferred or other credit representing any excess of the
equity in any Restricted Subsidiary at the date of acquisition thereof
over the amount invested in such Restricted Subsidiary;
(j) any gain or loss arising from the acquisition of any
Securities of the Company or any Restricted Subsidiary;
(k) any reversal of any contingency reserve, except to the extent
that provision for such contingency reserve shall have been made from
income arising during such period and except any reversal of any
contingency reserve created to secure or fund any liability of the
Company or any of its Restricted Subsidiaries in connection with the
violation of any Environmental Law or in connection with any liability
relating to health or medical insurance maintained by the Company or
any of its Restricted Subsidiaries if in connection with any such
reversal the Company has created an alternative security, contingency
reserve or similar such offsetting asset relating to such liability
which in the reasonable opinion of the Board of the Directors of the
Company is adequate and prudent under the circumstances; and
(l) any other extraordinary gain or loss.
"Consolidated Net Earnings Available for Fixed Charges" for any period
shall mean the sum of (a) Consolidated Net Earnings during such period plus (to
the extent deducted in determining Consolidated Net Earnings), (b) all
provisions for any Federal, state or other income taxes made by the Company and
its Restricted Subsidiaries during such period and (c) Consolidated Fixed
Charges during such period.
"Consolidated Net Worth" shall mean, as of any date, the amount of any
capital stock, paid in capital and similar equity accounts plus (or minus in the
case of a deficit) the capital surplus and retained earnings of the Company and
its Restricted Subsidiaries and the amount of any foreign currency translation
adjustment account shown as a capital account of the Company and its Restricted
Subsidiaries, all on a consolidated basis in accordance with GAAP.
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"Consolidated Total Assets" shall mean as of the date of any
determination thereof, total assets of the Company and its Restricted
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"Consolidated Total Capitalization" shall mean as of the date of any
determination thereof, the sum of (a) Consolidated Funded Debt plus (b)
Consolidated Net Worth.
"Contingent Liabilities" of any Person shall mean, as of any date, all
obligations of such Person or of others for which such Person is contingently
liable, as obligor, guarantor, surety or in any other capacity, or in respect of
which obligations such Person assures a creditor against loss or agrees to take
any action to prevent any such loss (other than endorsements of negotiable
instruments for collection in the ordinary course of business), including
without limitation all reimbursement obligations of such Person in respect of
any letters of credit, surety bonds or similar obligations and all obligations
of such Person to advance funds to, or to purchase assets, property or services
from, any other Person in order to maintain the financial condition of such
other Person.
"Current Debt" of any Person shall mean as of the date of any
determination thereof all (i) Indebtedness of such Person other than Funded Debt
and (ii) Guaranties by such Person of Current Debt of others.
"Current Management" shall mean Peter F. Secchia, William G. Currie,
Matthew Missad, Gary Wright, James H. Ward, Michael B. Glenn, and Elizabeth A.
Bowman, whether in case of each of the foregoing, such Person owns capital stock
of the Company directly or beneficially.
"Default" shall mean any event or condition the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default.
"Domestic Restricted Subsidiary" shall mean any direct or indirect
Restricted Subsidiary of the Company organized under the laws of any state of
the United States of America or the District of Columbia.
"Environmental Law" shall mean any federal, state or local statute,
law, regulation, order, consent decree or permit relating to the environment,
including, without limitation, those relating to releases, discharges or
emissions to air, water, land or groundwater, to the withdrawal or use of
groundwater, to the disposal, treatment, storage or management of hazardous
waste or Hazardous Substances, or to exposure to toxic or hazardous materials,
to the handling, transportation, discharge or release of gaseous or liquid
Hazardous Substances and any regulation, order, notice or demand issued pursuant
to such law, statute or ordinance, in each case applicable to the property of
the Company and its Subsidiaries or the operation of any thereof, including
without limitation the following: the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986, the Solid Waste Disposal Act, as amended by the
Resource Conservation and Recovery Act of 1976 and the Hazardous and Solid Waste
Amendments of 1984, the Hazardous Materials Transportation Act, as amended, the
Federal Water Pollution Control Act, as amended by the Clean Water Act of 1976,
the Safe Drinking Water Control Act, the Clean Air Act of 1966, as amended, the
Toxic Substances Control Act of 1976, the Emergency Planning and Community
Right-to-Know Act of 1986, the National Environmental Policy Act of 1975, and
any similar or implementing state law, and any state statute and any further
amendments to these laws providing
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for financial responsibility for cleanup or other actions with respect to the
release or threatened release of Hazardous Substances, and all rules and
regulations promulgated thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA shall be construed to also refer to any successor sections.
"ERISA Affiliate" shall mean any corporation, trade or business that
is, along with the Company, a member of a controlled group of corporations or a
controlled group of trades or businesses, as described in section 414(b) and
414(c), respectively, of the Code or Section 4001 of ERISA.
"Event of Default" shall have the meaning set forth in Section 6.1.
"Financial Contract "of a Person shall mean (a) any exchangetraded or
overthecounter futures, forward, swap or option contract or other financial
instrument with similar characteristics, or (b) any agreements, devices or
arrangements providing for payments related to fluctuations of interest rates,
exchange rates or forward rates, including, but not limited to, interest rate
exchange agreements, forward currency exchange agreements, interest rate cap or
collar protection agreements, forward rate currency or interest rate options.
"Funded Debt" of any Person shall mean (a) all Indebtedness of such
Person for borrowed money or which has been incurred in connection with the
acquisition of assets in each case having a final maturity of one or more than
one year from the date of origin thereof (or which is renewable or extendible at
the option of the obligor for a period or periods more than one year from the
date of origin), including all payments in respect thereof that are required to
be made within one year from the date of any determination of Funded Debt,
whether or not the obligation to make such payments shall constitute a current
liability of the obligor under GAAP, (b) all Capitalized Rentals of such Person,
(c) all Guaranties by such Person of Funded Debt of others, and (d) if, during
the 365-day period immediately preceding the date of any determination of Funded
Debt of such Person, there shall not have been a period of at least 30
consecutive days during which Indebtedness of such Person outstanding under all
revolving credit or similar agreements are equal to zero, then, and in such an
event, an amount equal to the highest aggregate amount of all such Indebtedness
outstanding during any period of 30 consecutive days selected by such Person
during such preceding 365-day period.
"GAAP" shall mean United States generally accepted accounting
principles at the time.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing, or in effect guaranteeing,
any Indebtedness, dividend or other obligation of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any property or assets constituting security therefor, (b) to advance or supply
funds (1) for the purchase or payment of such Indebtedness or obligation or (2)
to maintain working capital or any balance sheet or income statement condition
or otherwise to advance or make available funds for the purchase or payment of
such Indebtedness or obligation, (c) to lease property or to purchase Securities
or other property or services primarily for the purpose of assuring the owner of
such Indebtedness or obligation of the ability of the primary obligor to make
payment of the Indebtedness or obligation, or (d) otherwise to assure the owner
of the Indebtedness or obligation of the primary obligor against
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loss in respect thereof. For the purposes of all computations made under this
Agreement, a Guaranty in respect of any Indebtedness for borrowed money shall be
deemed to be Indebtedness equal to the principal amount of such Indebtedness for
borrowed money which has been guaranteed, and a Guaranty in respect of any other
obligation or liability or any dividend shall be deemed to be Indebtedness equal
to the maximum aggregate amount of such obligation, liability or dividend.
"Hazardous Substance" shall mean chromium, chromated copper arsenate,
or any other hazardous or toxic material, substance or waste, pollutant or
contaminant which is regulated under any statute, law, ordinance, rule or
regulation of any local, state, regional or federal authority having
jurisdiction over the property of the Company and its Subsidiaries or its use,
including but not limited to any material, substance or waste which is: (a)
defined as a hazardous substance under Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317) as amended; (b) regulated as a
hazardous waste under Section 1004 or Section 3001 of the Federal Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act (42
U.S.C. Section 6901 et seq.), as amended; (c) defined as a hazardous substance
under Section 101 of the Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. Section 9601 et seq.), as amended; (d) defined or
regulated as an ambient or hazardous air pollutant pursuant to the Clean Air Act
(42 U.S.C. Section 7401 et seq.), as amended; or (e) defined or regulated as a
hazardous substance or hazardous waste under any rules or regulations
promulgated under any of the foregoing statutes.
"Indebtedness" of any Person shall mean, as of any date, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person as lessee under any Capitalized Lease, (c) the unpaid purchase price for
goods, property or services acquired by such Person, except for accounts payable
and other accrued liabilities arising in the ordinary course of business which
are not materially past due, (d) all obligations of such Person to purchase
goods, property or services where payment therefor is required regardless of
whether delivery of such goods or property or the performance of such services
is ever made or tendered (generally referred to as "take or pay contracts"),
other than obligations incurred in the ordinary course of business, (e) all
obligations of such Person in respect of any Financial Contract (valued in an
amount equal to the highest termination payment, if any, that would be payable
by such Person upon termination for any reason on the date of determination),
(f) to the extent not included in the foregoing, obligations and liabilities
which would be classified as part of Total Debt, and (g) all obligations of
others similar in character to those described in clauses (a) through (f) of
this definition for which such Person is contingently liable, as obligor,
guarantor, surety or in any other capacity, or in respect of which obligations
such Person assures a creditor against loss or agrees to take any action to
prevent any such loss (other than endorsements of negotiable instruments for
collection in the ordinary course of business), including without limitation all
reimbursement obligations of such Person in respect of letters of credit, surety
bonds or similar obligations and all obligations of such Person to advance funds
to, or to purchase assets, property or services from, any other Person in order
to maintain the financial condition of such other Person.
"Initial Subsidiary Note Guaranty" shall have the meaning set forth in
Section 1.5.
"Institutional Holder" shall mean any of the following Persons: (a) any
bank, savings and loan association, savings institution, trust company or
national banking association, acting for its
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own account or in a fiduciary capacity, (b) any charitable foundation, (c) any
insurance company, (d) any fraternal benefit society, (e) any pension,
retirement or profit sharing trust or fund within the meaning of Title I of
ERISA or for which any bank, trust company, national banking association or
investment adviser registered under the Investment Advisers Act of 1940, as
amended, is acting as trustee or agent, (f) any investment company or business
development company, as defined in the Investment Company Act of 1940, as
amended, (g) any small business investment company licensed under the Small
Business Investment Act of 1958, as amended, (h) any broker or dealer registered
under the Securities Exchange Act of 1934, as amended, or any investment adviser
registered under the Investment Adviser Act of 1940, as amended, (i) any
government, any public employees' pension or retirement system, or any other
government agency supervising the investment of public funds, (j) any other
entity all of the equity owners of which are Institutional Holders or (k) any
other Person which may be within the definition of "qualified institutional
buyer" as such term is used in Rule 144A, as from time to time in effect,
promulgated under the Securities Act of 1933, as amended.
"Intercreditor Agreement" shall have the meaning set forth in Section
1.5.
"Interest Expense" for any period shall mean all interest and all
amortization of debt discount and any other fees, commissions and expenses
(including without limitation net interest costs of interest rate swaps and
hedges) on or in respect of any particular Indebtedness (including, without
limitation, paymentinkind, zero coupon and other like Securities and letters of
credit and banker's acceptances) for which such calculations are being made.
Computations of Interest Expense on a pro forma basis for Indebtedness having a
variable interest rate shall be calculated at the rate in effect on the date of
any determination.
"Investments" shall mean all investments, in cash or by delivery of
property, made directly or indirectly in any Person, whether by acquisition of
shares of capital stock, Indebtedness or other obligations or Securities or by
loan, advance, capital contribution or otherwise; provided, however, that
"Investments" shall not mean or include routine investments and property to be
used or consumed in the ordinary course of business.
"Lien" shall mean any interest in property securing an obligation owed
to, or a claim by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including but not
limited to the security interest lien arising from a mortgage, encumbrance,
pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances (including, with respect to
stock, stockholder agreements, voting trust agreements, buy-back agreements and
all similar arrangements) affecting property. For the purposes of this
Agreement, the Company or a Restricted Subsidiary shall be deemed to be the
owner of any property which it has acquired or holds subject to a conditional
sale agreement, Capitalized Lease or other arrangement pursuant to which title
to the property has been retained by or vested in some other Person for security
purposes and such retention or vesting shall constitute a Lien.
"Make-Whole Amount" shall mean in connection with any prepayment or
acceleration of the Notes the excess, if any, of (a) the aggregate present value
as of the date of such prepayment or payment of each dollar of principal being
prepaid or paid (taking into account the application of such prepayment or
payment required by Section 2.1) and the amount of interest (exclusive of
interest accrued to the date of prepayment or payment) that would have been
payable in respect of such
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<PAGE> 41
dollar if such prepayment or payment had not been made, determined by
discounting such amounts at the Reinvestment Rate from the respective dates on
which they would have been payable, over (b) 100% of the principal amount of the
outstanding Notes being prepaid or paid. For purposes of any determination of
the Make-Whole Amount:
"Reinvestment Rate" shall mean (1) the sum of .50%, plus the yield
reported on page "USD" of the Bloomberg Financial Markets Services
Screen (or, if not available, any other nationally recognized trading
screen reporting on-line intraday trading in the United States
government Securities) at 11:00 A.M. (New York City, New York time) for
the United States government Securities having a maturity (rounded to
the nearest month) corresponding to the remaining Weighted Average Life
to Maturity of the principal being prepaid or paid or (2) in the event
that no nationally recognized trading screen reporting on-line intraday
trading in the United States government Securities is available,
Reinvestment Rate shall mean the sum of .50%, plus the arithmetic mean
of the yields for the two columns under the heading "Week Ending"
published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the Weighted Average Life to Maturity of the principal
being prepaid or paid. If no maturity exactly corresponds to such
Weighted Average Life to Maturity, yields for the two published
maturities most closely corresponding to such Weighted Average Life to
Maturity shall be calculated pursuant to the immediately preceding
sentence and the Reinvestment Rate shall be interpolated or
extrapolated from such yields on a straight-line basis, rounding in
each of such relevant periods to the nearest month. For the purposes of
calculating the Reinvestment Rate, the most recent Statistical Release
published prior to the date of determination of the Make-Whole Amount
shall be used.
"Statistical Release" shall mean the then most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Federal Reserve System and which
establishes yields on actively traded U.S. Government Securities
adjusted to constant maturities or, if such statistical release is not
published at the time of any determination hereunder, then such other
reasonably comparable index which shall be designated by the Requisite
Holders.
"Weighted Average Life to Maturity" of the principal amount of the
Notes being prepaid or paid shall mean, as of the time of any
determination thereof, the number of years obtained by dividing the
then Remaining Dollar-Years of such principal by the aggregate amount
of such principal. The term "Remaining Dollar-Years" of such principal
shall mean the amount obtained by (1) multiplying (i) the remainder of
the amount of principal that would have become due on each scheduled
payment date if such prepayment or payment had not been made by (ii)
the number of years (calculated to the nearest one-twelfth) which will
elapse between the date of determination and such scheduled payment
date, and (2) totaling the products obtained in (1).
"Material Adverse Effect" shall mean a material adverse effect on (i)
the business, operations, affairs, financial condition, assets, or properties of
the Company and its Restricted Subsidiaries taken as a whole, (ii) the ability
of the Company to perform its obligation under this
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Agreement and the Notes or (iii) the validity or enforceability of this
Agreement or the Notes.
"Minority Interests" shall mean any shares of stock of any class of a
Restricted Subsidiary (other than directors' qualifying shares as required by
law) that are not owned by the Company and/or one or more of its Subsidiaries.
Minority Interests shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value of such
preferred stock, whichever is greater, and by valuing Minority Interests
constituting common stock at the book value of capital and surplus applicable
thereto adjusted, if necessary, to reflect any changes from the book value of
such common stock required by the foregoing method of valuing Minority Interests
in preferred stock.
"Multiemployer Plan" shall have the same meaning as in ERISA.
"Noteholder Notice" shall have the meaning set forth in Section 2.3(a).
"Notes" shall have the meaning set forth in Section 1.1.
"Offering Materials" shall mean the Private Placement Memorandum dated
November, 1998 delivered to each of the Purchasers by NationsBanc Montgomery
Securities LLC.
"Officer Notes" shall mean notes or other evidences of Indebtedness
entered into by officers of the Company within the limitations of this
Agreement, including without limitation Section 5.14, in connection with and as
part of an incentive stock option plan of the Company the purpose of which is to
permit such officer to acquire capital stock of the Company.
"Overdue Rate" shall mean the lesser of (a) the maximum interest rate
permitted by law and (b) the coupon rate of interest plus 2% per anum.
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any
entity succeeding to any or all of its functions under ERISA.
"Plan" shall mean a "pension plan," as such term is defined in ERISA,
established or maintained by the Company or any ERISA Affiliate or as to which
the Company or any ERISA Affiliate contributed or is a member or otherwise may
have any liability.
"Person" shall include an individual, a corporation, a limited
liability company, an association, a partnership, a trust or estate, a joint
stock company, an unincorporated organization, a joint venture, a trade or
business (whether or not incorporated), a government (foreign or domestic) and
any agency or political subdivision thereof, or any other entity.
"Purchasers" shall have the meaning set forth in Section 1.1.
"Qualified Current Debt" and "Qualified Funded Debt" shall mean Current
Debt or Funded Debt, as the case may, of a Restricted Subsidiary Guarantor which
is a Restricted Subsidiary Guarantor on the first Closing Date or any Person who
has become a Restricted Subsidiary Guarantor after the first Closing Date in
accordance with Section 5.17 hereof; provided that the obligee of such Current
Debt or Funded Debt shall have entered into the Intercreditor Agreement.
"Rentals" shall mean and include as of the date of any determination
thereof all fixed payments (including as such all payments which the lessee is
obligated to make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Restricted Subsidiary, as lessee or
sublessee under a lease of real or personal property (less, in the case of any
determination of Consolidated Fixed Charges, any fixed rents received by the
Company or any such Restricted Subsidiary, as sublessor, under any "triple net,
non-cancellable" sublease of the same such real or personal property). Fixed
rents under any so-called "percentage leases" shall be computed solely on the
basis of the minimum rents, if any, required to be paid by the lessee regardless
of sales volume or gross revenues.
"Reportable Event" shall have the same meaning as in ERISA.
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"Requisite Holders" shall mean the holders of at least a majority in
aggregate principal amount of the outstanding Notes of a series.
"Responsible Officer" shall mean the Chief Executive Officer, the
President or the Vice President-Finance of the Company.
"Restricted Subsidiary" shall mean any Subsidiary which: (i) at least
60% of the voting securities are owned by the Company and/or one or more
Wholly-owned Restricted Subsidiaries and (ii) the Company has designated a
Restricted Subsidiary by notice in writing given to the holders of the Notes,
provided that the designation of a Subsidiary as "unrestricted" or "restricted"
shall not be changed more than twice.
"Restricted Subsidiary Guarantor" shall mean a Subsidiary Guarantor
that is a Restricted Subsidiary.
"Sale and Leaseback Transaction" shall mean any arrangement whereby the
Company or any Restricted Subsidiary shall sell or transfer any property owned
by the Company or any Restricted Subsidiary to any Person other than the Company
or a Restricted Subsidiary and thereupon the Company or a Restricted Subsidiary
shall lease or intend to lease, as lessee, the same property.
"Security" shall have the same meaning as in Section 2(1) of the
Securities Act of 1933, as amended.
"Senior Funded Debt" shall mean all Funded Debt of the Company which is
not expressed to be subordinate or junior in rank to any other Funded Debt of
the Company.
"Senior Indebtedness" shall mean all unsecured Indebtedness for
borrowed money of the Company which is not expressed to be subordinate or junior
in rank to any other Indebtedness for borrowed money of the Company.
"Significant Restricted Subsidiary" shall mean any one or more
Restricted Subsidiaries which, if considered in the aggregate as a single
Restricted Subsidiary, would comprise 10% or more of the total assets of the
Company and its Subsidiaries on a consolidated basis.
"Stock Pledge Agreement" shall have the meaning set forth in Section
5.18.
"Subsidiary" shall mean as to any particular parent corporation, any
corporation of which more than 50% (of the number of votes) of the Voting Stock
shall be beneficially owned, directly or indirectly, by such parent corporation.
"Subsidiary" shall mean a subsidiary of the Company.
"Subsidiary Bank Guaranty" shall mean any Guaranty of any Subsidiary of
the Company with respect to the payment of sums due and owing under the Bank
Credit Agreement, or any replacement, renewal or modification thereof.
"Subsidiary Guarantor" shall mean a Subsidiary that Guaranties the
payment of the Notes and all other obligations of the Company under this
Agreement.
"Subsidiary Note Guaranty" shall mean any Guaranty of any Subsidiary of
the Company with respect to the payment of the Notes and all other sums due and
owing by the Company under this Agreement (including the Initial Subsidiary Note
Guaranty).
"Supplement" shall have the meaning set forth in Section 1.4.
"Total Adjusted Capitalization" shall mean, as of any date, the sum of
Consolidated Net Worth and Total Seasonally Adjusted Debt as of such date.
"Total Debt" as of any date, shall mean, without duplication, all of
the following for the
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Company and its Restricted Subsidiaries on a consolidated basis: (a) all
Indebtedness for borrowed money and similar monetary obligations evidenced by
bonds, notes, debentures, acceptances, Capitalized Lease obligations or
otherwise, (b) all liabilities secured by any Lien existing on property owned or
acquired by the Company or any Restricted Subsidiary subject thereto, whether or
not the liability secured thereby shall have been assumed, (c) all reimbursement
obligations under outstanding letters of credit, bankers' acceptances or similar
instruments in respect of drafts which (i) may be presented or (ii) have been
presented and have not yet been paid and are not included in clause (a) above,
and (d) all Guarantees and other Contingent Liabilities relating to
indebtedness, obligations or liabilities of the type described in the foregoing
clauses (a), (b) and (c).
"Total Seasonally Adjusted Debt" shall mean, as of the end of any
fiscal quarter of the Company, the following appropriate amount for such fiscal
quarter end: (a) for any fiscal quarter ending in March or June, 85% of Total
Debt as of the end of such fiscal quarter, and (b) for any fiscal quarter ending
in September or December, 115% of Total Debt as of the end of such fiscal
quarter.
"Tranche C Cut-Off Date" shall have the meaning set forth in Section
7.1
"Unrestricted Subsidiary" shall mean a Subsidiary of the Company that
is not a Restricted Subsidiary.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"Wholly-owned" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) and all Indebtedness for
borrowed money shall be owned by the Company and/or one or more of its
Wholly-owned Subsidiaries.
Section 8.2. Accounting Principles. Where the character or amount of
any asset or liability or item of income or expense is required to be determined
or any consolidation or other accounting computation is required to be made for
the purposes of this Agreement, the same shall be done in accordance with GAAP,
to the extent applicable, except where such principles are inconsistent with the
requirements of this Agreement.
Section 8.3. Directly or Indirectly. Where any provision in this
Agreement refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the action in
question is taken directly or indirectly by such Person.
SECTION 9. MISCELLANEOUS.
Section 9.1. Registered Notes. The Company shall cause to be kept at
its principal office a register for the registration and transfer of the Notes,
and the Company will register or transfer or cause to be registered or
transferred, as hereinafter provided, any Note issued pursuant to this
Agreement.
At any time and from time to time the holder of any Note which has been
duly registered as hereinabove provided may transfer such Note upon surrender
thereof at the principal office of the Company duly endorsed or accompanied by a
written instrument of transfer duly executed by the holder of such Note or its
attorney duly authorized in writing.
The Person in whose name any Note shall be registered shall be deemed
and treated as the owner and holder thereof for all purposes of this Agreement.
Payment of or on account of the principal, premium, if any, and interest on any
Note shall be made to or upon the written order
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of such holder.
Section 9.2. Exchange of Notes. At any time and from time to time, upon
not less than ten days' notice to that effect given by the holder of any Note
initially delivered or of any Note substituted therefor pursuant to Section 9.1,
thiS Section 9.2 or Section 9.3, and, upon surrender of such Note at its office,
the Company will deliver in exchange therefor, without expense to such holder,
except as set forth below, a Note of the same series and tranche, if any, for
the same aggregate principal amount as the then unpaid principal amount of the
Note so surrendered, or Notes in the denomination of $100,000 (or such lesser
amount as shall constitute 100% of the Notes of such holder) or any amount in
excess thereof as such holder shall specify, dated as of the date to which
interest has been paid on the Note so surrendered or, if such surrender is prior
to the payment of any interest thereon, then dated as of the date of issue,
registered in the name of such Person or Persons as may be designated by such
holder, and otherwise of the same form and tenor as the Notes so surrendered for
exchange. The Company may require the payment of a sum sufficient to cover any
stamp tax or governmental charge imposed upon such exchange or transfer.
Section 9.3. Loss, Theft, Etc. of Notes. Upon receipt of evidence
satisfactory to the Company of the loss, theft, mutilation or destruction of any
Note, and in the case of any such loss, theft or destruction upon delivery of a
bond of indemnity in such form and amount as shall be reasonably satisfactory to
the Company, or in the event of such mutilation upon surrender and cancellation
of the Note, the Company will make and deliver without expense to the holder
thereof, a new Note, of like tenor, in lieu of such lost, stolen, destroyed or
mutilated Note. If the Purchaser or any subsequent Institutional Holder is the
owner of any such lost, stolen or destroyed Note, then the affidavit of an
authorized officer of such owner, setting forth the fact of loss, theft or
destruction and of its ownership of such Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof and no further
indemnity shall be required as a condition to the execution and delivery of a
new Note other than the written agreement of such owner to indemnify the
Company.
Section 9.4. Expenses, Stamp Tax Indemnity. Whether or not the
transactions herein contemplated shall be consummated, the Company agrees to pay
directly all of your out-of-pocket expenses in connection with the preparation,
execution and delivery of this Agreement and the transactions contemplated
hereby, including but not limited to the charges and disbursements of Chapman
and Cutler, your special counsel, duplicating and printing costs and charges for
shipping the Notes, adequately insured to you at your home office or at such
other place as you may designate, and all such expenses relating to any
amendments, waivers or consents pursuant to the provisions hereof (whether or
not the same are actually executed and delivered), including, without
limitation, any amendments, waivers, or consents resulting from any work-out,
renegotiation or restructuring relating to the performance by the Company of its
obligations under this Agreement and the Notes. Without limiting Section 4.1(h),
the Company agrees to pay, within fifteen Business Days of receipt thereof,
supplemental statements of Chapman and Cutler for disbursements unposted or not
incurred as of a Closing Date. The Company further agrees that it will pay and
save you harmless against any and all liability with respect to stamp and other
taxes, if any, which may be payable or which may be determined to be payable in
connection with the execution and delivery of this Agreement or the Notes,
whether or not any Notes are then outstanding and to pay and save
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<PAGE> 46
you harmless against any and all losses, costs and expenses relating to any
request by the Requisite Holders of the Notes for the Company to hire a
consultant pursuant to Section 5.16(c). The Company agrees to protect and
indemnify you against any liability for any and all brokerage fees and
commissions payable or claimed to be payable to any Person in connection with
the transactions contemplated by this Agreement. Without limiting the foregoing,
the Company agrees to pay the cost of obtaining the private placement number for
each series, and tranche, if any, of the Notes and authorizes the submission of
such information as may be required by Standard & Poor's CUSIP Service Bureau
for the purpose of obtaining such number.
Section 9.5. Powers and Rights Not Waived; Remedies Cumulative. No
delay or failure on the part of the holder of any Note in the exercise of any
power or right shall operate as a waiver thereof; nor shall any single or
partial exercise of the same preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies of the
holder of any Note are cumulative to, and are not exclusive of, any rights or
remedies any such holder would otherwise have.
Section 9.6. Notices. All communications provided for hereunder shall
be in writing and, if to you, delivered or mailed prepaid by registered or
certified mail or overnight air courier, or by facsimile communication, in each
case addressed to you at your address appearing on Schedule I to this Agreement
or any Supplement or such other address as you or the subsequent holder of any
Note initially issued to you may designate to the Company in writing, and if to
the Company, delivered or mailed by registered or certified mail or overnight
air courier, or by facsimile communication, to the Company at 2801 East
Beltline, N.E., Grand Rapids, Michigan 49525, Attention: Elizabeth A. Bowman, or
to such other address as the Company may in writing designate to you or to a
subsequent holder of the Note initially issued to you; provided, however, that a
notice to you by overnight air courier shall only be effective if delivered to
you at a street address designated for such purpose in Schedule I to this
Agreement or any Supplement, and a notice to you by facsimile communication
shall only be effective if made by confirmed transmission to you at a telephone
number designated for such purpose in Schedule I to this Agreement or any
Supplement, or, in either case, as you or a subsequent holder of any Note
initially issued to you may designate to the Company in writing.
Section 9.7. Environmental Indemnity and Covenant Not to Sue. (a) The
Company agrees to indemnify and hold harmless from time to time the Purchasers
and each other holder of the Notes, each Person claiming by, through, under or
on account of any of the foregoing and the respective directors, officers,
counsel and employees of each of the foregoing Persons (the "Indemnified
Parties") from and against any and all losses, claims, cost recovery actions,
administrative orders or proceedings, damages and liabilities to which any such
Indemnified Party may become subject (1) under any Environmental Law applicable
to the Company or any of its Subsidiaries or any of their respective properties,
(2) the presence, use, release, storage, treatment or disposal of Hazardous
Substances on or at any property owned or operated by the Company or any
Subsidiary, (3) as a result of the breach of or non-compliance by the Company or
any of its Subsidiaries with any Environmental Law applicable to the Company or
any of its Subsidiaries and (4) due to past ownership of any of their respective
properties or past activity on any of their respective properties which, though
lawful and fully permissible at the time, could result in present liability,
except to the extent the acts or omissions of such Indemnified Party, its
successors and assigns are the sole and direct cause of the circumstances giving
rise to such demand, claim, cost recovery action or lawsuit. The provisions of
this Section 9.7(a) shall survive termination of this
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<PAGE> 47
Agreement by payment in full of all of the Notes issued hereunder and shall
survive the transfer of any Note or Notes issued hereunder.
(b) Without limiting the provisions of Section 9.7(a), the Company and
its successors and assigns hereby waive, release and covenant not to bring
against any of the Indemnified Parties any demand, claim, cost recovery action
or lawsuit they may now or hereafter have or accrue arising from (1) any
Environmental Law now or hereafter enacted (including those applicable to the
Company or any of its Subsidiaries), (2) the presence, use, release, storage,
treatment or disposal of Hazardous Substances on or at any of the properties
owned or operated by the Company or any of its Subsidiaries, or (3) the breach
of or non-compliance by the Company with any Environmental Law or environmental
covenant applicable to the Company or any of its Subsidiaries, except to the
extent the acts or omissions of such Indemnified Party, its successors and
assigns are the sole and direct cause of the circumstances giving rise to such
demand, claim, cost recovery action or lawsuit.
The foregoing provisions of this Section 9.7 shall not restrict the
Company's ability to enforce its right to recover damages pursuant to any policy
of insurance providing coverage for environmental matters underwritten by any
holder of Notes in its capacity as an insurance company.
Section 9.8. Successors and Assigns. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to your benefit
and to the benefit of your successors and assigns, including each successive
holder or holders of any Notes.
Section 9.9. Survival of Covenants and Representations. All covenants,
representations and warranties made by the Company herein (including any
Supplement) and in any certificates delivered pursuant hereto, whether or not in
connection with a Closing Date, shall survive the closing and the delivery of
this Agreement and the Notes.
Section 9.10. Severability. Should any part of this Agreement for any
reason be declared invalid or unenforceable, such decision shall not affect the
validity or enforceability of any remaining portion, which remaining portion
shall remain in force and effect as if this Agreement had been executed with the
invalid or unenforceable portion thereof eliminated and it is hereby declared
the intention of the parties hereto that they would have executed the remaining
portion of this Agreement without including therein any such part, parts or
portion which may, for any reason, be hereafter declared invalid or
unenforceable.
Section 9.11. Governing Law. THIS AGREEMENT AND THE NOTES ISSUED AND
SOLD HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH NEW YORK
LAW, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
Section 9.12. Submission to Jurisdiction. The Company hereby expressly
waives all right to object to jurisdiction or execution in any legal action or
proceeding relating to this Agreement or the Notes which it may now or hereafter
have by reason of its domicile or by reason of any subsequent or other domicile.
The Company agrees that any legal action or proceeding with respect to this
Agreement or any Note, or any instrument, agreement or document mentioned or
contemplated herein, or to enforce any judgment obtained against the Company in
any such legal action or proceeding against it or any of its properties or
revenues, may be brought by the holder of any Note in the courts of the County
of New York, State of New York or of the United States
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<PAGE> 48
of America located in New York, New York, as the holder of any Note may elect,
and by execution and delivery of this Agreement, the Company irrevocably submits
to each such jurisdiction for such purpose only.
In addition, the Company hereby irrevocably and unconditionally waives,
to the extent not prohibited by applicable law, any objection which it may now
or hereafter have to the laying of venue of any of the aforesaid actions, suits
or proceedings arising out of or in connection with this Agreement or the Notes
brought in any of the aforesaid courts, and hereby further irrevocably and
unconditionally waives and agrees, to the extent not prohibited by applicable
law, not to plead or claim that any such action, suit or proceeding brought in
any such court has been brought in an inconvenient forum.
Section 9.13. Captions. The descriptive headings of the various
Sections or parts of this Agreement are for convenience only and shall not
affect the meaning or construction of any of the provisions hereof.
The execution hereof by you shall constitute a contract between us for
the uses and purposes hereinabove set forth, and this Agreement may be executed
in any number of counterparts, each executed counterpart constituting an
original but all together only one agreement.
UNIVERSAL FOREST PRODUCTS, INC.
By:
--------------------------------------
Its:
-------------------------------------
Accepted as of December 1, 1998.
[VARIATION]
By:
--------------------------------------
Its:
-------------------------------------
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<PAGE> 49
INFORMATION RELATING TO PURCHASERS
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
PRINCIPAL LIFE INSURANCE COMPANY $17,500,000 0
711 High Street (Two Notes:
Des Moines, Iowa 50392-0800 $12,500,000 and
Attn: Investment Department -Securities $5,000,000)
Telefacsimile: (515) 248-2490 (Tranche B)
Confirmation:(515) 248-3495
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
ABA #073000228
For credit to Principal Life Insurance Company
Account No. 0000014752 (for $12,500,000 Note)
Account No. 0000032395 (for $5,000,000 Note)
Reference: OBI PFGSE(S) B0061917(), Principal $_________, Interest
$_________. With sufficient information (including interest rate,
maturity date, interest amount, principal amount and premium amount, if
applicable) to identify the source and application of such funds.
Notices
All notices with respect to payments on the Notes should be sent to:
Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0960
Attention: Investment Accounting - Securities
Telefacsimile: (515) 248-2643
Confirmation: (515) 247-0689
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 42-0127290
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<PAGE> 50
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
COMMERCIAL UNION LIFE INSURANCE $1,500,000 0
COMPANY OF AMERICA (Tranche B)
c/o Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0800
Attn: Investment Department - Securities
Telefacsimile: (515) 248-2490
Confirmation: (515) 248-3495
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
First Union (Philadelphia)
ABA No. 031201467
1500 Market Street
Philadelphia, PA 19102-2509
Attention: Joe Amen
DDA 5000012398064
For further credit to Account No. 060073-02-4 (name of Commercial Union
Life Insurance Company of America/Principal)
Reference: OBI PFGSE(S) B0061917
With sufficient information (including interest rate, maturity date,
interest amount, principal amount and premium amount, if applicable) to
identify the source and application of such funds.
Notices
All notices with respect to payments to:
Principal Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0960
Attention: Investment Accounting - Securities
Telefacsimile: (515) 248-2643
Confirmation: (515) 247-0689
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Tax Identification No.: 04-2235236
50
<PAGE> 51
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
TMG LIFE INSURANCE COMPANY $2,000,000 0
c/o The Mutual Group (U.S.),Inc. (Tranche B)
401 North Executive Drive, Suite 300
Brookfield, Wisconsin 53008-0503
Attention: Connie Keller
Phone: (414) 641-4022
Facsimile: (414) 641-4055
</TABLE>
Payments
All payments on account of the Notes shall be made by wire or intrabank transfer
of immediately available funds to:
Norwest Bank Minnesota, N.A.
ABA #091000019
BNF A/C: 0840245
BNF: Trust Clearing Account
REF: ATTN: Income Collections
TRUST ACCOUNT: 12250600
Universal Forest Products Company, Inc.
PPN 913543 A# 1
Notices
All notices with respect to payments shall be delivered to:
TMG Life Insurance Company
c/o The Mutual Group (U.S.), Inc.
Attn: Tamie Greenwood
401 North Executive Drive, Suite 300
Brookfield, Wisconsin 53008-0503
Telephone Number: (414) 641-4027
Facsimile Number: (414) 641-4055
All other notices and communications to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 45-0208990
I-51
<PAGE> 52
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
THE GUARDIAN LIFE INSURANCE COMPANY $13,000,000 0
OF AMERICA (Tranche B)
201 Park Avenue South
New York, New York 10003
Attention: Mr. Thomas Donohue,
Investment Department 7B
Fax Number: (212) 777-6715
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.98% Series 1998 A Senior Notes, Tranche B,
due 2008, principal, premium or interest" to:
The Chase Manhattan Bank
FED ABA #021000021
CHASE/NYC/CTR/BNF
A/C 900-9-000200
Reference A/C #G05978 The Guardian
And the name and CUSIP for which payment is being made
Notices
All notices of payments, on or in respect of the Notes and written confirmation
of each such payment to:
The Guardian Life Insurance Company of America
201 Park Avenue South
New York, New York 10003
Attention: Investment Accounting M-IA
Fax Number: (212) 677-9023
All notices and communications other than those in respect to payments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: CUDD & CO.
Taxpayer I.D. Number: 13-6022143
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<PAGE> 53
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
MONY LIFE INSURANCE COMPANY $12,000,000 0
1740 Broadway (Tranche B)
New York, New York 10019
Attention: Capital Management UnitTelecopy
Number: (212) 708-2491
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.98% Series 1998 A Senior Notes, Tranche B,
due 2008, PPN 913543 A# 1, principal, premium or interest") to:
Chase Manhattan Bank
ABA #021000021
for credit to Private Income Processing Account No. 544-755102
Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:
IF BY REGISTERED MAIL, CERTIFIED MAIL OR FEDERAL EXPRESS:
The Chase Manhattan Bank
4 New York Plaza, 13th Floor
New York, New York 10004
Attention: Income Processing - J. Piperato, 13th Floor
IF BY REGULAR MAIL:
The Chase Manhattan Bank
Dept. 3492
P. O. Box 50000
Newark, New Jersey 07101-8006
WITH A SECOND COPY TO:
Telecopy Confirms and Notices:
I-53
<PAGE> 54
(212) 708-2152
Attention: Securities Custody Division M.D. 6-39A
Mailing Confirms and Notices:
MONY Life Insurance Company
1740 Broadway
New York, New York 10019
Attention: Securities Custody Division M.D. 6-39A
All notices and communications other than those in respect to payments to be
addressed as first provided above. Name of Nominee in which Notes are to be
issued: J. ROMEO & CO.
Taxpayer I.D. Number: 13-1632487
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<PAGE> 55
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
UNITED OF OMAHA LIFE INSURANCE $8,500,000 0
COMPANY (Tranche B)
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Attention: 4-Investment Loan
Administration
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.98% Series 1998 A Senior Notes, Tranche B,
due 2008, PPN 913543 A# 1, principal, premium or interest") to:
Chase Manhattan Bank
ABA #021000021
Private Income Processing
For credit to: United of Omaha Life Insurance Company
Account Number 900-9000200
a/c G07097
PPN 913543 A# 1
Interest Amount: 6.98%
Principal Amount: $8,500,000
Notices
Address for all notices in respect of payment of Principal and Interest,
Corporate Actions, and Reorganization Notifications:
The Chase Manhattan Bank
4 New York Plaza-13th Floor
New York, New York 10004
Attention: Investment Processing-J. Pipperato
a/c: G07097
Address for all other notices and communications (i.e., Quarterly/Annual
reports, Tax filings, Modifications, Waivers regarding the indenture) to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0322111
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<PAGE> 56
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
COMPANION LIFE INSURANCE COMPANY $2,000,000 0
c/o Mutual of Omaha Insurance Company (Tranche B)
Mutual of Omaha Plaza
Omaha, Nebraska 68175-1011
Attention: 4-Investment Loan
Administration
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer
of Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.98% Series 1998 A Senior Notes, Tranche B,
due 2008, PPN 913543 A# 1, principal, premium or interest") to:
Chase Manhattan BankABA #021000021
Private Income Processing
For credit to: Companion Life Insurance Company
Account Number 900-9000200
a/c G07903
PPN 913543 A# 1
Interest Amount: 6.98%
Principal Amount: $2,000,000
Notices
Address for all notices in respect of payment of Principal and Interest,
Corporate Actions, and Reorganization Notifications:
The Chase Manhattan Bank
4 New York Plaza-13th Floor
New York, New York 10004
Attention: Investment Processing-J. Pipperato
a/c: G07903
All other notices and communications (i.e., Quarterly/Annual reports, Tax
filings, Modifications, Waivers regarding the indenture) to be addressed as
first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-1595128
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<PAGE> 57
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
TEACHERS INSURANCE AND ANNUITY 0 $15,000,000
ASSOCIATION OF AMERICA (Tranche C)
730 Third Avenue
New York, New York 10017
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.98% Series 1998 A Senior Notes, Tranche C,
due 2009, PPN 913543 B* 4, principal, premium or interest") to:
Chase Manhattan Bank
ABA #021000021
New York, New York
Account of: Teachers Insurance and Annuity Association of America
Account Number 900-9-000200
For further credit to Account Number G07040
Reference: Universal Forest Products, Inc.
6.98% Series 1998 A Senior Notes, Tranche C, due 2009
PPN 913543 B* 4
Notices
All notices of payment on or in respect of the Notes and written confirmation of
each such payment to:
Teachers Insurance and Annuity Association of America
730 Third Avenue
New York, New York 10017-3206
Attention: Securities Accounting Division
Telephone: (212) 916-6004
Fax: (212) 916-6955
All other notices and communications to be addressed to:
TIAA-CREF
730 Third Avenue, 4th Floor
New York, New York 10017-3206
Attention: Securities Division, Archibald Team
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<PAGE> 58
Telephone: (212) 916-5781 (Michelle Lee) or
(212) 490-9000 (General Number)
Fax: (212) 916-6582 (Team Fax Number)
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 13-1624203
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<PAGE> 59
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
THE TRAVELERS LIFE AND ANNUITY $3,750,000
COMPANY (Tranche A)
One Tower Square
Hartford, Connecticut 06183-2030
Attention: Securities Department--Private
Placements
Telecopy: (860) 954-5243
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.69% Series 1998 A Senior Notes, Tranche A,
due 2008, PPN 913543 A@3, principal, premium or interest") to:
The Chase Manhattan Bank, N.A. (ABA #021-000021)
One Chase Manhattan Plaza
New York, New York 10081
for credit to: The Travelers
Consolidated Private Placement Account Number 910-2-587434
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed Attention: Securities Department --Cashier.
Name of Nominee in which Notes are to be issued: TRAL & CO
Taxpayer I.D. Number: 06-0904249
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<PAGE> 60
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
THE TRAVELERS INSURANCE COMPANY $3,750,000 $4,000,000
One Tower Square (Tranche A) (Tranche C)
Hartford, Connecticut 06183-2030
Attention: Securities Department--Private
Placements
Telecopy: (860) 954-5243
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., __% Series 1998 A Senior Notes, Tranche __,
due ____, PPN ________, principal, premium or interest") to:
The Chase Manhattan Bank, N.A. (ABA #021-000021)
One Chase Manhattan Plaza
New York, New York 10081
for credit to: The Travelers
Consolidated Private Placement Account Number 910-2-587434
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payment and written confirmation of each such payment,
to be addressed Attention: Securities Department --Cashier.
Name of Nominee in which Notes are to be issued: TRAL & CO
Taxpayer I.D. Number: 06-0566090
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<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
PROVIDENT MUTUAL LIFE INSURANCE $3,500,000 0
COMPANY (Two Notes:
P.O. Box 1717 $2,000,000 and
Valley Forge, Pennsylvania 19482-1717 $1,500,000)
Attention: Securities Investment (Tranche A)
Department $1,000,000
Telefacsimile: (610) 407-1322 (Tranche B)
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc. and as to interest rate, security description,
maturity date and PPN, principal, premium or interest") to:
PNC Bank (ABA #031-000-053)
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
for credit to: Provident Mutual Life Insurance Co.
Account Number 85-4084-21176
Notices
All notices and communications requiring overnight express delivery service
should be addressed to:
1205 Westlakes Drive
Berwyn, PA 19312-2405
Attention: Treasurer
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 23-0990450
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<PAGE> 62
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
PROVIDENTMUTUAL LIFE AND ANNUITY $1,500,000 0
COMPANY OF AMERICA (Tranche A)
P.O. Box 1717
Valley Forge, Pennsylvania 19482-1717
Attention: Securities Investment
Department
Telefacsimile: (610) 407-1322
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.69% Series 1998 A Senior Notes, Tranche A,
due 2005, PPN 913543 A@ 3, principal, premium or interest") to:
PNC Bank (ABA #031-000-053)
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
for credit to: Providentmutual Life and Annuity Company of America
Account Number 85-5075-4911
Notices
All notices and communications requiring overnight express delivery service
should be addressed to:
1205 Westlakes Drive
Berwyn, PA 19312-2405
Attention: Treasurer
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 23-161-908-2
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<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
CANADA LIFE INSURANCE COMPANY OF AMERICA $3,000,000 0
c/o The Canada Life Assurance Company (Tranche A)
Corporate Treasury, SP-11
330 University Avenue
Toronto, Ontario, Canada M5G 1R8
Attention: Brian Lynch, Associate
Treasurer, U.S. Private Placements
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
Chase Manhattan Bank
ABA #021-000-021
Account No. 900-9-000200
Trust Account No. G52709, Canada Life Insurance Company of America
Attention: Ms. Doll Balbadar
reference: name of issuer, rate, maturity date, type of security,
whether principal and/or interest and
due date.
Notices
All notices and communications to be addressed as first provided above, except
notice with respect to payment, and written confirmation of each such payment,
to be addressed:
Chase Manhattan Bank
North America Insurance
3 Chase MetroTech Centre - 6th Floor
Brooklyn, New York 11245
Attention: Ms. Doll Balbadar
with a copy to:
The Canada Life Assurance Company
330 University Avenue, SP12
Toronto, Ontario, Canada M5G 1R8
Attention: Supervisor, Securities Accounting
Name of Nominee in which Notes are to be issued: J. Romeo & Co.
Taxpayer I.D. Number: 38-2816473
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<PAGE> 64
I-64
<PAGE> 65
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
THE CANADA LIFE ASSURANCE COMPANY $2,000,000 0
Corporate Treasury, SP-11 (Tranche A)
330 University Avenue
Toronto, Ontario, Canada M5G 1R8
Attention: Brian Lynch, Associate
Treasurer, U.S. Private Placements
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds to:
Chase Manhattan Bank
ABA #021-000-021
Account No. 900-9-000200
Trust Account No. G52708, The Canada Life Assurance Company
Attention: Bond Interest
reference: CUSIP, name of issuer, rate, maturity date, type of
security, whether principal and/or interest and due date.
Notices
All notices and communications to be addressed as first provided above, except
notice with respect to payment, and written confirmation of each such payment,
to be addressed:
Chase Manhattan Bank
North America Insurance
3 Chase MetroTech Centre - 6th Floor
Brooklyn, New York 11245
Attention: Ms. Doll Balbadar
with a copy to:
The Canada Life Assurance Company
330 University Avenue, SP12
Toronto, Ontario, Canada M5G 1R8
Attention: Supervisor, Securities Accounting
Name of Nominee in which Notes are to be issued: J. Romeo & Co.
Taxpayer I.D. Number: 38-0397420
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<PAGE> 66
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
WOODMEN ACCIDENT AND LIFE COMPANY $2,000,000 0
P.O. Box 82288 (Tranche B)
Lincoln, Nebraska 68501
Attention: Securities Division
Telecopy Number: (402) 437-4392
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.98% Series 1998 A Senior Notes, Tranche B,
due 2008, PPN 913543 A# 1, principal, premium or interest") to:
U.S. Bank
ABA #104-000-029
for credit to: Woodmen Accident and Life Company
Account Number 1-494-0092-9092
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above; provided, however, all notices and communications delivered by overnight
courier shall be addressed as follows:
Woodmen Accident and Life Company
1526 K Street
Lincoln, Nebraska 68508
Attention: Securities Division
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0339220
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<PAGE> 67
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
BERKSHIRE LIFE INSURANCE COMPANY $2,000,000 0
700 South Street (Tranche A)
Pittsfield, Massachusetts 01201
Attention: Securities Department
Telefacsimile: (413) 442-9763
Telephone: (413) 499-4321
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.69% Series 1998 A Senior Notes, Tranche A,
due 2005, PPN 913543 A@ 3, principal, premium or interest") to:
The Chase Manhattan Bank, N.A.
ABA #021000021
for credit to: Berkshire Life Insurance Company
Account Number 002-4-020877
Notices
All notices and communications, including notices with respect to payments and
written confirmation of each such payment, to be addressed as first provided
above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 04-1083480
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<PAGE> 68
<TABLE>
<CAPTION>
<S> <C> <C>
PRINCIPAL AMOUNT OF NOTES PRINCIPAL AMOUNT OF NOTES TO
TO BE PURCHASED ON FIRST BE PURCHASED ON SECOND
NAMES AND ADDRESS OF PURCHASER CLOSING DATE CLOSING DATE
THE SECURITY MUTUAL LIFE INSURANCE $2,000,000 0
COMPANY OF LINCOLN, NEBRASKA (Tranche A)
200 Centennial Mall North
Lincoln, Nebraska 68508
</TABLE>
Payments
All payments on or in respect of the Notes to be by bank wire transfer of
Federal or other immediately available funds (identifying each payment as
"Universal Forest Products, Inc., 6.69% Series 1998 A Senior Notes, Tranche A,
due 2005, PPN 913543 A@ 3, principal, premium or interest") to:
National Bank of Commerce (ABA #1040-00045)
13th and O Streets
Lincoln, Nebraska
for credit to: Security Mutual Life
Account Number 40-797-624
Notices
All notices and communications to be addressed as first provided above, except
notices with respect to payments and written confirmation of each such payment
to be addressed:
The Security Mutual Life Insurance Company
of Lincoln, Nebraska
200 Centennial Mall North
Lincoln, Nebraska 68508
Attention: Investment Department
Fax: (402) 434-9599
Phone: (402) 434-9500
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0293990
I-68
<PAGE> 69
FUNDED DEBT; LIENS SECURING FUNDED DEBT
(INCLUDING CAPITALIZED LEASES); SUBSIDIARIES; AND
RESTRICTED SUBSIDIARIES AS OF THE FIRST AND SECOND CLOSING DATE
See Attached
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<PAGE> 70
ENVIRONMENTAL OBLIGATIONS
See Attached
I-70
<PAGE> 71
UNIVERSAL FOREST PRODUCTS, INC.
6.69% Series 1998A Senior Note, Tranche A,
Due December 21, 2005
PPN 913543 A@3
No.
December 21, 1998
$
UNIVERSAL FOREST PRODUCTS, INC., a Michigan corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the twenty-first day of December, 2005
the principal amount of
DOLLARS ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 6.69% per annum from the date hereof until maturity, payable
semiannually on the twenty-first day of June and December in each year
(commencing on June 21, 1999) and at maturity. The Company agrees to pay
interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the Overdue Rate after
the due date, whether by acceleration or otherwise, until paid. "Overdue Rate"
shall mean the lesser of (a) the maximum interest rate permitted by law and (b)
8.69% per annum.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Grand Rapids, Michigan in coin or currency of
the United States of America which at the time of payment shall be legal tender
for the payment of public and private debts. If any amount of principal,
premium, if any, or interest on or in respect of this Note becomes due and
payable on any date which is not a Business Day, such amount shall be payable on
the immediately succeeding Business Day. "Business Day" means any day other than
a Saturday, Sunday or other day on which banks in either Grand Rapids, Michigan
or New York, New York are required by law to close or are customarily closed.
This Note is one of the 6.69% Series 1998A Senior Notes, Tranche A, due
December 21, 2005 of the Company in the aggregate principal amount of
$21,500,000, which, together with the 6.98% Series 1998A Senior Notes, Tranche
B, due December 21, 2008 of the Company in the
I-71
<PAGE> 72
aggregate principal amount of $59,500,000, the 6.98% Series 1998A Senior Notes,
Tranche C, due December 21, 2008 of the Company in the aggregate principal
amount of $19,000,000 and any Additional Notes are issued or to be issued under
and pursuant to the terms and provisions of the separate Note Agreements, each
dated as of December 1, 1998 (the "Note Agreements"), entered into by the
Company with the original Purchasers therein referred to and any Additional
Purchasers of Additional Notes and the holder hereof is entitled equally and
ratably with the holders of all other Notes outstanding under the Note
Agreements to all the benefits provided for thereby or referred to therein.
Reference is hereby made to the Note Agreements for a statement of such rights
and benefits.
This Note and the other Notes outstanding under the Note Agreements may
be declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
THIS NOTE AND SAID NOTE AGREEMENTS ARE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
UNIVERSAL FOREST PRODUCTS, INC.
By
Its
I-72
<PAGE> 73
UNIVERSAL FOREST PRODUCTS, INC.
6.98% Series 1998A Senior Note, Tranche B,
Due December 21, 2008
PPN 913543 A# 1
No.
December 21, 1998
$
UNIVERSAL FOREST PRODUCTS, INC., a Michigan corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the twenty-first day of December, 2008
the principal amount of
DOLLARS ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 6.98% per annum from the date hereof until maturity, payable
semiannually on the twenty-first day of June and December in each year
(commencing on June 21, 1999) and at maturity. The Company agrees to pay
interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the Overdue Rate after
the due date, whether by acceleration or otherwise, until paid. "Overdue Rate"
shall mean the lesser of (a) the maximum interest rate permitted by law and (b)
8.98% per annum.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Grand Rapids, Michigan in coin or currency of
the United States of America which at the time of payment shall be legal tender
for the payment of public and private debts. If any amount of principal,
premium, if any, or interest on or in respect of this Note becomes due and
payable on any date which is not a Business Day, such amount shall be payable on
the immediately succeeding Business Day. "Business Day" means any day other than
a Saturday, Sunday or other day on which banks in either Grand Rapids, Michigan
or New York, New York are required by law to close or are customarily closed.
This Note is one of the 6.98% Series 1998A Senior Notes, Tranche B, due
December 21, 2008 of the Company in the aggregate principal amount of
$59,500,000, which, together with the 6.69% Series 1998A Senior Notes, Tranche
A, due December 21, 2005 of the Company in the aggregate principal amount of
$21,500,000, the 6.98% Series 1998A Senior Notes, Tranche C,
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<PAGE> 74
due December 21, 2008 of the Company in the aggregate principal amount of
$19,000,000 and any Additional Notes are issued or to be issued under and
pursuant to the terms and provisions of the separate Note Agreements, each dated
as of December 1, 1998 (the "Note Agreements"), entered into by the Company with
the original Purchasers therein referred to and any Additional Purchasers of
Additional Notes and the holder hereof is entitled equally and ratably with the
holders of all other Notes outstanding under the Note Agreements to all the
benefits provided for thereby or referred to therein. Reference is hereby made
to the Note Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements may
be declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
THIS NOTE AND SAID NOTE AGREEMENTS ARE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
UNIVERSAL FOREST PRODUCTS, INC.
By
Its
I-74
<PAGE> 75
UNIVERSAL FOREST PRODUCTS, INC.
6.98% Series 1998-A Senior Note, Tranche C,
Due December 21, 2008
PPN 913543 B* 4
No.
February 4, 1999
$
UNIVERSAL FOREST PRODUCTS, INC., a Michigan corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the twenty-first day of December, 2008
the principal amount of
DOLLARS ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of 6.98% per annum from the date hereof until maturity, payable
semiannually on the twenty-first day of June and December in each year
(commencing on June 21, 1999) and at maturity. The Company agrees to pay
interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally
enforceable) on any overdue installment of interest, at the Overdue Rate after
the due date, whether by acceleration or otherwise, until paid. "Overdue Rate"
shall mean the lesser of (a) the maximum interest rate permitted by law and (b)
8.98% per annum.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Grand Rapids, Michigan in coin or currency of
the United States of America which at the time of payment shall be legal tender
for the payment of public and private debts. If any amount of principal,
premium, if any, or interest on or in respect of this Note becomes due and
payable on any date which is not a Business Day, such amount shall be payable on
the immediately succeeding Business Day. "Business Day" means any day other than
a Saturday, Sunday or other day on which banks in either Grand Rapids, Michigan
or New York, New York are required by law to close or are customarily closed.
This Note is one of the 6.98% Series 1998-A Senior Notes, Tranche C,
due December 21, 2008 of the Company in the aggregate principal amount of
$19,000,000, which together with the 6.69% Series 1998-A Senior Notes, Tranche
A, due December 21, 2005 of the Company in the aggregate principal amount of
$21,500,000, the 6.98% Series 1998-A Senior Notes, Tranche B,
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<PAGE> 76
due December 21, 2008 of the Company in the aggregate principal amount of
$59,500,000 and any Additional Notes are issued or to be issued under and
pursuant to the terms and provisions of the separate Note Agreements, each dated
as of December 1, 1998 (the "Note Agreements"), entered into by the Company with
the original Purchasers therein referred to and any Additional Purchasers of
Additional Notes and the holder hereof is entitled equally and ratably with the
holders of all other Notes outstanding under the Note Agreements to all the
benefits provided for thereby or referred to therein. Reference is hereby made
to the Note Agreements for a statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements may
be declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
THIS NOTE AND SAID NOTE AGREEMENTS ARE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
UNIVERSAL FOREST PRODUCTS, INC.
By
Its
I-76
<PAGE> 77
[FORM OF INITIAL SUBSIDIARY NOTE GUARANTY]
I-77
<PAGE> 78
[INTERCREDITOR AGREEMENT]
I-78
<PAGE> 79
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to you as follows:
1. Subsidiaries. Schedule II attached to the Agreements correctly
states the name of each of the Company's Subsidiaries, its jurisdiction of
incorporation, the percentage of its Voting Stock owned by the Company and/or
its Subsidiaries and whether each such Subsidiary is a Restricted Subsidiary or
an Unrestricted Subsidiary. The Company and each Restricted Subsidiary has good
and marketable title to all of the shares it purports to own of the stock of
each Restricted Subsidiary, free and clear in each case of any Lien. All such
shares have been duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. The Company, and each
Restricted Subsidiary,
(a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all licenses and
permits to own and operate its properties and to carry on its business
as now conducted and as presently proposed to be conducted, except for
any license or permit the failure of which to have would not materially
and adversely affect the properties, business, prospects, profits or
condition (financial or otherwise) of the Company or of the Company and
its Restricted Subsidiaries, taken as a whole; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the nature of the
business transacted by it or the nature of the property owned or leased
by it makes such licensing or qualification necessary.
3. Business and Property. You have heretofore been furnished with a
copy of the Offering Materials (as defined in the Agreements and herein referred
to as the "Offering Materials") delivered to you by NationsBank Montgomery
Securities, LLC which generally sets forth the business conducted and proposed
to be conducted by the Company and its Subsidiaries and the principal properties
of the Company and its Subsidiaries.
4. Financial Statements. (a) The consolidated balance sheets of the
Company and its consolidated Subsidiaries as of December 25, 1993, December 31,
1994, December 30, 1995, December 28, 1996 and December 27, 1997 and the
statements of earnings, shareholders' equity and cash flows for the fiscal years
ended on said dates, each accompanied by a report thereon containing an opinion
unqualified as to scope limitations imposed by the Company and otherwise without
qualification except as therein noted, by Deloitte & Touche, have been prepared
in accordance with GAAP consistently applied except as therein noted, are
correct and complete and present fairly the financial position of the Company
and its consolidated Subsidiaries as of such dates and the results of their
operations and changes in their cash flows for such periods.
(b) Since December 27, 1997, there has been no change in the condition,
financial or otherwise, of the Company and its consolidated Subsidiaries as
shown on the consolidated balance sheet as of such date except changes in the
ordinary course of business, none of which individually or in the aggregate
could reasonably be expected to have a Material Adverse Effect.
5. Indebtedness. Schedule II attached to the Agreements correctly
describes all Current Debt, Funded Debt, Capitalized Leases and Attributable
Indebtedness of Sale and Leaseback Transactions of the Company and its
Restricted Subsidiaries outstanding on the first and second
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<PAGE> 80
Closing Date.
6. Full Disclosure. Neither the financial statements referred to in
paragraph 4 hereof nor the Agreements, the Offering Materials or any other
written statement furnished by the Company to you in connection with the
negotiation of the sale of the Notes, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact peculiar to the
Company or its Restricted Subsidiaries which the Company has not disclosed to
you in writing which materially affects adversely nor, so far as the Company can
now foresee, will materially affect adversely the properties, business,
prospects, profits or condition (financial or otherwise) of the Company and its
Restricted Subsidiaries, taken as a whole.
7. Pending Litigation. There are no proceedings pending or, to the
knowledge of the Company after due inquiry, threatened against or affecting the
Company or any Restricted Subsidiary in any court or before any governmental
authority or arbitration board or tribunal which could reasonably be expected to
have a Material Adverse Effect.
8. Title to Properties. The Company and each Restricted Subsidiary has
good and marketable title in fee simple (or its equivalent under applicable law)
to all material parcels of real property and has good title to all the other
material items of property it purports to own, including that reflected in the
most recent balance sheet referred to in paragraph 4 hereof, except as sold or
otherwise disposed of in the ordinary course of business and except for Liens
permitted by the Agreements.
9. Patents and Trademarks. The Company and each Restricted Subsidiary
owns or possesses all patents, trademarks, trade names, service marks,
copyright, licenses and rights with respect to the foregoing necessary for the
present and planned future conduct of its business, without any known conflict
with the rights of others.
10. Sale is Legal and Authorized. The sale of the Notes and compliance
by the Company with all of the provisions of the Agreements (including any
Supplement) and the Notes:
(a) are within the corporate powers of the Company;
(b) will not violate any provisions of any law or any order
of any court or governmental authority or agency and will not conflict
with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under the Articles of
Incorporation or Bylaws of the Company or any indenture or other
material agreement or instrument to which the Company is a party or by
which it may be bound or result in the imposition of any Liens or
encumbrances on any property of the Company; and
(c) have been duly authorized by proper corporate action on
the part of the Company (no action by the stockholders of the Company
being required by law, by the Articles of Incorporation or Bylaws of
the Company or otherwise), executed and delivered by the Company and
the Agreements and the Notes constitute the legal, valid and binding
obligations, contracts and agreements of the Company enforceable in
accordance with their respective terms.
11. No Defaults. No Default or Event of Default has occurred and is
continuing. The Company is not in default in the payment of principal or
interest on any Indebtedness for borrowed money and is not in default under any
instrument or instruments or agreements under and subject to which any
Indebtedness for borrowed money has been issued and no event has occurred and is
continuing under the provisions of any such instrument or agreement which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
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<PAGE> 81
12. Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Company of the
Agreements or the issuance, sale or delivery of the Notes or compliance by the
Company with any of the provisions of the Agreements or the Notes.
13. Taxes. All tax returns required to be filed by the Company or any
Restricted Subsidiary in any jurisdiction have, in fact, been filed, and all
taxes, assessments, fees and other governmental charges upon the Company or any
Restricted Subsidiary or upon any of their respective properties, income or
franchises, which are shown to be due and payable in such returns have been
paid. For all taxable years ending on or before December 31, 1993, the Federal
income tax liability of the Company and its Restricted Subsidiaries has been
satisfied and either the period of limitations on assessment of additional
Federal income tax has expired or the Company and its Restricted Subsidiaries
have entered into an agreement with the Internal Revenue Service closing
conclusively the total tax liability for the taxable year. The Company does not
know of any proposed additional tax assessment against it for which adequate
provision has not been made on its accounts, and no material controversy in
respect of additional Federal or state income taxes due since said date is
pending or to the knowledge of the Company threatened. The provisions for taxes
on the books of the Company and each Restricted Subsidiary are adequate for all
open years, and for its current fiscal period.
14. Use of Proceeds. The net proceeds from the sale of the Notes will
be used for general corporate purposes including to repay existing Indebtedness
of the Company and its Subsidiaries. No part of the proceeds from the sale of
the Notes hereunder will be used, directly or indirectly, for the purpose of
buying or carrying any margin stock within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System (12 CFR 221), or for the
purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock does not constitute more
than 5% of the value of the consolidated assets of the Company and its
Restricted Subsidiaries and the Company does not have any present intention that
margin stock will constitute more than 5% of the value of such assets. As used
in this Paragraph 14, the terms "margin stock" and "purpose of buying or
carrying" shall have the meanings assigned to them in said Regulation U.
15. Private Offering. Neither the Company, directly or indirectly, nor
any agent on its behalf has offered or will offer the Notes or any similar
Security or has solicited or will solicit an offer to acquire the Notes or any
similar Security from or has otherwise approached or negotiated or will approach
or negotiate in respect of the Notes or any similar Security with any Person
other than the Purchasers and not more than 52 other institutional investors,
each of whom was offered a portion of the Notes at private sale for investment.
Neither the Company, directly or indirectly, nor any agent on its behalf has
offered or will offer the Notes or any similar Security or has solicited or will
solicit an offer to acquire the Notes or any similar Security from any Person so
as to bring the issuance and sale of the Notes within the provisions of Section
5 of the Securities Act of 1933, as amended.
16. ERISA. (a) The Company and each ERISA Affiliate (i) have operated
and administered each of its plans in compliance with all applicable laws,
except where non-compliance could not reasonably be expected to result in a
Material Adverse Effect, and (ii)
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<PAGE> 82
has not incurred any Material liability, nor has any event, transaction or
condition occurred or exists that would reasonably be expected to result in the
incurrence of any such Material liability or the imposition of any Material
Lien, pursuant to Title I or IV of ERISA or pursuant to penalty or excise tax
provisions of the Code relating to employee benefit plans or to Section
401(a)(29) or 412 of the Code.
(b) The present value of the aggregate benefit liabilities under each
of its plans (other than multiemployer plans), determined as of the end of such
plan's most recently ended plan year, did not exceed the aggregate current value
of the assets of such plan allocable to such benefit liabilities, or such
deficit, if any, did not exceed 5% of Adjusted Consolidated Net Worth. The term
"benefit liabilities" has the meaning specified in Section 4001 of ERISA and the
terms "current value" and "present value" have the meaning specified in Section
3 of ERISA.
(c) The Company currently does not have any Multiemployer plans.
(d) The expected postretirement benefit obligation (determined as of
the last day of the Company's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without regard to
liabilities attributable to continuation coverage mandated by Section 4980B of
the Code) of the Company and its Subsidiaries is not Material or has otherwise
been disclosed in the most recent audited consolidated financial statements of
the Company and its Subsidiaries.
(e) The execution and delivery of the Note Agreement and the issuance
and sale of the Notes will not involve any transaction that is subject to the
prohibitions of Section 406 of ERISA or in connection with which a tax could be
imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code which in either event
could reasonably be expected to result in a Material Adverse Effect. The
representation is made in reliance upon and subject to the accuracy of the
representation as to the sources of the funds used to pay the purchase price of
the Notes to be purchased.
17. Compliance with Law. Neither the Company nor any Restricted
Subsidiary (1) is in violation of any law, ordinance, franchise, governmental
rule or regulation to which it is subject; or (2) has failed to obtain any
license, permit, franchise or other governmental authorization necessary to the
ownership of its property or to the conduct of its business, which violation or
failure to obtain could reasonably be expected to have a Material Adverse Effect
or impair the ability of the Company to perform its obligations contained in the
Agreement (including any Supplement) or the Notes. Neither the Company nor any
Restricted Subsidiary is in default with respect to any order of any court or
governmental authority or arbitration board or tribunal.
18. Investment Company Act. The Company is not, and is not directly or
indirectly controlled by or acting on behalf of any Person which is, required to
register as an "investment company" under the Investment Company Act of 1940, as
amended.
19. Foreign Assets Control Regulations, etc. Neither the Company nor
any of the Company's Restricted Subsidiaries or Affiliates is, by reason of
being a "national" of "designated foreign country" or a "specially designated
national" within the meaning of the Regulations of the Office of Foreign Assets
Control, United States Treasury Department (31 C.F.R., Subtitle B, Chapter V),
or for any other reason, subject to any restriction or prohibition under, or is
in violation of, any Federal statue or Presidential Executive Order, or any
rules or regulations of any department, agency or administrative body
promulgated under any such statute or order, concerning trade or other relations
with any foreign country or any citizen or national thereof or the ownership or
operation of any property.
20. Environmental Matters. To the best of the Company's knowledge, the
following
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clauses (a) through (f) are true and correct, except for any of such matters
which individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect:
(a) the Company, each Restricted Subsidiary, and the properties
each owns or operates comply in all material respects with every
applicable Environmental Law;
(b) the Company and each Restricted Subsidiary has obtained all
permits, licenses and other governmental approvals required by every
applicable Environmental Law for its operations and the properties it
owns or operates;
(c) no Hazardous Substance has been released or disposed at any
property currently owned or operated or while previously owned or
operated by the Company or any Restricted Subsidiary;
(d) except as set forth on Schedule III, neither the Company nor
any Restricted Subsidiary has any liability for removal, remedial,
response or corrective action, natural resource damage or other harm
pursuant to any applicable Environmental Law, either with respect to
properties currently or previously owned or operated by the Company and
its Subsidiaries;
(e) neither the Company nor any Restricted Subsidiary is subject
to, has notice or knowledge of or is required to give any notice of any
claim, demand, action, lawsuit or legal proceeding pursuant to any
applicable Environmental Law in connection with the operations of or
the properties owned by the Company or any Restricted Subsidiary; and
(f) there is no legal or regulatory proceeding pending or
applicable Environmental Law which would be expected to prohibit or
materially reduce the use of chromated copper arsenate ("CCA") or any
other wood preservative by the Company or any Restricted Subsidiary.
21. Year 2000. The Company and its Restricted Subsidiaries have
implemented measures to have all critical business systems Year 2000 compliant
in a timely manner and the advent of the Year 2000 and its impact on such
business systems is not expected to have a Material Adverse Effect.
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DESCRIPTION OF SPECIAL COUNSEL'S CLOSING OPINION
The closing opinion of Chapman and Cutler, special counsel to the
Purchasers, called for by Section 4.1 of the Note Agreements, shall be dated the
Closing Date and addressed to the Purchasers, shall be satisfactory in form and
substance to the Purchasers and shall be to the effect that:
1. The Company is a corporation, validly existing and in good
standing under the laws of the State of Michigan and has the corporate
power and the corporate authority to execute and deliver the Note
Agreements and to issue the Notes.
2. The Note Agreements have been duly authorized by all necessary
corporate action on the part of the Company, have been duly executed
and delivered by the Company and constitute the legal, valid and
binding contracts of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
3. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles is
considered in a proceeding in equity or at law).
4. The issuance and sale of the Notes and the execution and
delivery by the Company of the Note Agreements do not conflict with or
result in any breach of any of the provisions of the Articles of
Incorporation or By-laws of the Company.
5. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreements does not, under
existing law, require the registration of the Notes under the
Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the opinion of
Varnum, Riddering, Schmidt & Howlett is satisfactory in scope and form to
Chapman and Cutler and that, in their opinion, the Purchasers are justified in
relying thereon.
In rendering the opinion set forth in paragraph 1 above, Chapman and
Cutler may rely solely upon an examination of the Articles of Incorporation
certified by, and a certificate of good standing of the Company from, the
Department of Commerce of the State of Michigan, the By-laws of the Company and
the general business corporation law of the State of Michigan. The opinion of
Chapman and Cutler is limited to the laws of the State of New York, the general
business corporation law of the State of Michigan and the Federal laws of the
United States.
With respect to matters of fact upon which such opinion is based,
Chapman and Cutler may rely on appropriate certificates of public officials and
officers of the Company.
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DESCRIPTION OF CLOSING OPINION OF COUNSEL TO THE COMPANY
The closing opinion of Varnum, Riddering, Schmidt & Howlett, counsel
for the Company, which is called for by Section 4.1 of the Note Agreements,
shall be dated the Closing Date and addressed to the Purchasers, shall be
satisfactory in scope and form to the Purchasers and shall be to the effect
that:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of Michigan,
has the corporate power and the corporate authority to execute and
perform the Note Agreements and to issue the Notes and has the full
corporate power and the corporate authority to conduct the activities
in which it is now engaged and is duly licensed or qualified and is in
good standing as a foreign corporation in each jurisdiction in which
the character of the properties owned or leased by it or the nature of
the business transacted by it makes such licensing or qualification
necessary.
2. Each Restricted Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly licensed or qualified and is
in good standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary and
all of the issued and outstanding shares of capital stock of each such
Restricted Subsidiary have been duly issued, are fully paid and
non-assessable and are owned by the Company, by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
3. Each Note Agreement has been duly authorized by all necessary
corporate action on the part of the Company, has been duly executed and
delivered by the Company and constitutes the legal, valid and binding
contract of the Company enforceable in accordance with its terms,
subject to bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles is
considered in a proceeding in equity or at law).
4. The Notes have been duly authorized by all necessary corporate
action on the part of the Company, have been duly executed and
delivered by the Company and constitute the legal, valid and binding
obligations of the Company enforceable in accordance with their terms,
subject to bankruptcy, insolvency, fraudulent conveyance or similar
laws affecting creditors' rights generally, and general principles of
equity (regardless of whether the application of such principles is
considered in a proceeding in equity or at law).
5. The Guaranties have been duly authorized by all necessary
corporate action on the part of the each Restricted Subsidiary party
thereto, have been duly executed and delivered by the party thereto and
constitute the legal, valid and binding obligations of the party
thereto, enforceable in accordance their terms, subject to bankruptcy,
insolvency, fraudulent conveyance or similar laws affecting creditors'
rights generally, and general principles of equity (regardless of
whether the applications of such principles is considered in a
proceeding in equity or at law).
6. No approval, consent or withholding of objection on the part
of, or filing,
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registration or qualification with, any governmental body, Federal,
state or local, is necessary in connection with the execution, delivery
and performance of the Note Agreements or the Notes.
7. No approval, consent or withholding of objection on the part
of, or filing, registration or qualification with, any governmental
body, Federal, state or local, is necessary in connection with the
execution, delivery and performance of the Restricted Subsidiary Note
Guaranties.
8. The issuance and sale of the Notes and the execution, delivery
and performance by the Company of the Note Agreements do not conflict
with or result in any breach of any of the provisions of or constitute
a default under or result in the creation or imposition of any Lien
upon any of the property of the Company pursuant to the provisions of
the Articles of Incorporation or By-laws of the Company or any
agreement or other instrument known to such counsel to which the
Company is a party or by which the Company may be bound.
9. The execution, delivery and performance by each Restricted
Subsidiary delivering a Restricted Subsidiary Note Guaranty does not
conflict with or result in any breach of any of the provisions of or
constitute a default under or result in the creation or imposition of
any Lien upon any of the property of such Restricted Subsidiary
pursuant to the provisions of the Articles of Incorporation or Bylaws
of such Restricted Subsidiary or any agreement or other instrument
known to such counsel to which such Restricted Subsidiary is a party by
which such Restricted Subsidiary may be bound.
10. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Agreements does not, under
existing law, require the registration of the Notes under the
Securities Act of 1933, as amended, or the qualification of an
indenture under the Trust Indenture Act of 1939, as amended.
11. The issuance of the Notes and the use of the proceeds of the
sale of the Notes in accordance with the provisions of and contemplated
by the Note Agreements do not violate or conflict with Regulation T, U
or X of the Board of Governors of the Federal Reserve System.
12. There is no litigation pending or, to the best knowledge of
counsel, threatened which in counsel's opinion could reasonably be
expected to have a materially adverse effect on the Company's business
or assets or which would impair the ability of the Company to issue and
deliver the Notes or to comply with the provisions of the Note
Agreements.
The opinion of Varnum, Riddering, Schmidt & Howlett shall cover such
other matters relating to the sale of the Notes as the Purchasers may reasonably
request. With respect to matters of fact on which such opinion is based, such
counsel shall be entitled to rely on appropriate certificates of public
officials and officers of the Company.
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<PAGE> 87
SUPPLEMENT TO NOTE PURCHASE AGREEMENT
Dated as of
,
To the Purchaser(s) named in
Schedule I hereto
Ladies and Gentlemen:
This [Number] Supplement to Note Purchase Agreement (the "Supplement")
is between Universal Forest Products, Inc. (the "Company") whose address is 2801
East Beltline, N.E. Grand Rapids, Michigan 49525 and the institutional investors
named on Schedule I attached hereto (the "Purchasers").
Reference is hereby made to the separate and several Note Purchase
Agreements dated as of December 1, 1998 (the "Note Agreements") between the
Company and the purchasers listed on Schedule I thereto. All capitalized terms
not otherwise defined herein shall have the same meaning as specified in the
Note Agreements. Reference is further made to Section 4.3 thereof which requires
that, prior to the delivery of any Additional Notes, the Company and each
Additional Purchaser shall execute and deliver a Supplement.
The Company hereby agrees with the Purchaser(s) named on Schedule I
hereto as follows: 1. The Company has authorized the issue and sale of
$ aggregate principal amount of its % Series Senior Notes,
due , (the "Series Notes"). The Series Notes, together
with the Series 1998A Notes initially issued pursuant to the Note Agreements and
each series of Additional Notes which may from time to time be issued pursuant
to the provisions of Section 1.4 of the Note Agreements, are collectively
referred to as the "Notes" (such term shall also include any such notes issued
in substitution therefor pursuant to Section 9.2 of the Note Agreement). The
Series Notes shall be substantially in the form attached hereto as Exhibit 1
with such changes therefrom, if any, as may be approved by the Purchaser(s) and
the Company.
2. Subject to the terms and conditions hereof and as set forth in the
Note Agreements and on the basis of the representations and warranties
hereinafter set forth, the Company agrees to issue and sell to each Purchaser,
and each Purchaser agrees to purchase from the Company, Series Notes in the
principal amount [and of the tranche] set forth opposite such Purchaser's name
on Schedule I hereto at a price of 100% of the principal amount thereof on the
Closing Date hereafter mentioned.
3. Delivery of the $ in aggregate principal amount of the
Series Notes will be made at the offices of , , ,
against payment therefor in Federal Reserve or other funds current and
immediately available at the principal office of NBD Bank, Chicago, Illinois in
the amount of the purchase price at 10:00 A.M., Chicago time, on , or
such later date (not later than , ) as shall mutually be agreed upon
by the Company and the Purchasers of the Series Notes (the "Closing Date").
4. [Here insert prepayment provisions (including any applicable premium
upon default
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<PAGE> 88
and acceleration), closing conditions and representations and warranties
applicable to Series Notes].
5. The Purchaser represents and warrants that the representations and
warranties set forth in Section 3.2 of the Note Agreements are true and correct
on the date hereof with respect to the Series Notes.
6. The Company and each Purchaser agree to be bound by and comply with
the terms and provisions of the Note Agreements as if such Purchaser were an
original signatory to the Note Agreements.
The execution hereof shall constitute a contract between the Company
and the Purchaser(s) for the uses and purposes hereinabove set forth, and this
agreement may be executed in any number of counterparts, each executed
counterpart constituting an original but all together only one agreement.
UNIVERSAL FOREST PRODUCTS, INC.
By
Printed Name:
Its:
Accepted as of ,
[VARIATION]
By
Printed Name:
Its:
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<PAGE> 89
INFORMATION RELATING TO PURCHASERS
PRINCIPAL AMOUNT
NAME AND ADDRESS OF PURCHASER OF SERIES NOTES
TO BE PURCHASED
[NAME OF PURCHASER] $
(1) All payments by wire transfer of
immediately available funds to:
with sufficient information to identify the source
and application of such funds.
(2) All notices of payments and written
confirmations of such wire transfers:
(3) All other communications:
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FORM OF SERIES NOTE
% Series Note, Tranche ,
Due PPN
No.
$
UNIVERSAL FOREST PRODUCTS, INC., a Michigan corporation (the
"Company"), for value received, hereby promises to pay to
or registered assigns
on the day of
the principal amount of
DOLLARS ($ )
and to pay interest (computed on the basis of a 360-day year of twelve 30-day
months) on the principal amount from time to time remaining unpaid hereon at the
rate of % per annum from the date hereof until maturity, payable
on the day of and in each year (commencing on
) and at maturity. The Company agrees to pay interest on
overdue principal (including any overdue required or optional prepayment of
principal) and premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest, at the Overdue Rate after the due date, whether
by acceleration or otherwise, until paid. "Overdue Rate" shall mean the lesser
of (a) the maximum interest rate permitted by law and (b) % per annum.
Both the principal hereof and interest hereon are payable at the
principal office of the Company in Grand Rapids, Michigan in coin or currency of
the United States of America which at the time of payment shall be legal tender
for the payment of public and private debts. If any amount of principal,
premium, if any, or interest on or in respect of this Note becomes due and
payable on any date which is not a Business Day, such amount shall be payable on
the immediately succeeding Business Day. "Business Day" means any day other than
a Saturday, Sunday or other day on which banks in either Grand Rapids, Michigan
or New York, New York are required by law to close or are customarily closed.
This Note is one of the % Series Notes, Tranche , due
of the Company in the aggregate principal amount of $ , which,
together with the 6.69% Series 1998A Senior Notes, Tranche A, due December 21,
2005 of the Company in the aggregate principal amount of $21,500,000, the 6.98%
Series 1998A Senior Notes, Tranche B, due December 21, 2008 of the Company in
the aggregate principal amount of $59,500,000 the 6.98%
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Series 1998A Senior Notes, Tranche C, due December 21, 2008 of the Company in
the aggregate principal amount of $19,000,000 and any Additional Notes are
issued or to be issued under and pursuant to the terms and provisions of the
separate Note Agreements, each dated as of December 1, 1998 (the "Note
Agreements"), entered into by the Company with the original Purchasers therein
referred to and any Additional Purchasers of Additional Notes and the holder
hereof is entitled equally and ratably with the holders of all other Notes
outstanding under the Note Agreements to all the benefits provided for thereby
or referred to therein. Reference is hereby made to the Note Agreements for a
statement of such rights and benefits.
This Note and the other Notes outstanding under the Note Agreements may
be declared due prior to their expressed maturity dates and certain prepayments
are required to be made thereon, all in the events, on the terms and in the
manner and amounts as provided in the Note Agreements.
The Notes are not subject to prepayment or redemption at the option of
the Company prior to their expressed maturity dates except on the terms and
conditions and in the amounts and with the premium, if any, set forth in the
Note Agreements.
This Note is registered on the books of the Company and is transferable
only by surrender thereof at the principal office of the Company duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of this Note or its attorney duly authorized in writing.
Payment of or on account of principal, premium, if any, and interest on this
Note shall be made only to or upon the order in writing of the registered
holder.
THIS NOTE AND SAID NOTE AGREEMENTS ARE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE.
UNIVERSAL FOREST PRODUCTS, INC.
By
Its
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<PAGE> 1
UNIVERSAL FOREST PRODUCTS, INC.
FINANCIAL INFORMATION
Table of Contents
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Selected Financial Data......................................................................... 1
Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................................................. 2-18
Independent Auditors' Report.................................................................... 19
Consolidated Balance Sheets as of December 26, 1998
and December 27, 1997`..................................................................... 20
Consolidated Statements of Earnings for the Years Ended
December 26, 1998, December 27, 1997, and December 28, 1996................................ 21
Consolidated Statements of Shareholders' Equity for the Years Ended
December 26, 1998, December 27, 1997, and December 28, 1996................................ 22
Consolidated Statements of Cash Flows for the Years Ended
December 26, 1998, December 27, 1997, and December 28, 1996................................ 23-24
Notes to Consolidated Financial Statements...................................................... 25-42
Price Range of Common Stock and Dividends....................................................... 43
</TABLE>
<PAGE> 2
FIVE YEAR SUMMARY OF
SELECTED FINANCIAL DATA
(In thousands except per share and statistics data.)
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
CONSOLIDATED STATEMENT OF EARNINGS
DATA(1)
<S> <C> <C> <C> <C> <C>
Net sales................................... $1,238,907 $1,066,300 $891,230 $754,466 $881,406
Gross profit(2)............................. 149,214 95,478 89,714 75,502 70,271
Earnings before income taxes................ 43,034 25,982 29,803 23,951 18,950
Net earnings................................ 26,419 16,957 17,832 14,388 11,450
Diluted earnings per share.................. $1.280 $0.930 $0.980 $0.800 $0.640
Dividends per share......................... $0.070 $0.065 $0.060 $0.105 $0.050
Weighted average shares
outstanding with common
stock equivalent.......................... 20,613 18,234 18,121 18,047 18,022
CONSOLIDATED BALANCE SHEET DATA(1)
Working capital............................. $ 99,859 $ 89,783 $ 90,639 $ 83,533 $ 78,878
Total assets................................ 420,070 229,383 198,866 180,791 172,034
Long-term debt and capital lease
obligations............................... 141,880 49,977 55,854 59,209 64,037
Shareholders' equity........................ 191,583 115,898 100,815 84,597 72,888
STATISTICS(1)
Gross profit as a percentage of
net sales................................. 12.0% 9.0% 10.1% 10.0% 7.9%
Net earnings as a percentage of
net sales.................................. 2.1% 1.6% 2.0% 1.9% 1.3%
Return on beginning equity.................. 22.8% 16.8% 21.0% 19.7% 18.2%
Current ratio............................... 2.22 2.32 3.30 3.38 3.13
Debt to equity ratio........................ .74 .43 .55 .70 .88
Book value per common share................. $ 9.29 $ 6.65 $ 5.82 $ 4.89 $ 4.23
</TABLE>
(1) The financial data for 1994 through 1996 was restated to include the
results of Consolidated Building Components, Inc. ("CBC"). CBC merged with
a subsidiary of the Company on December 22, 1997, and was accounted for as
a pooling of interests.
(2) In 1995, the Company reclassified delivery expense to include it as a
component of cost of goods sold and gross profit. For comparability, gross
profit for 1994 was restated to include delivery expense.
1
<PAGE> 3
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RISK FACTORS
Included in this report are certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements are based on the beliefs of management of Universal Forest Products,
Inc. (the "Company") as well as on assumptions made by and information currently
available to the Company at the time such statements were made. Actual results
could differ materially from those included in such forward-looking statements
as a result of, among other things, the factors set forth below, the matters
included in this report generally, and certain economic and business factors,
some of which may be beyond the control of the Company. Investors are cautioned
that all forward-looking statements involve risks and uncertainty.
Lumber Market Volatility:
The Company experiences significant fluctuations in the cost of lumber products
from primary producers. A variety of factors over which the Company has no
control, including government regulations, environmental regulations, weather
conditions, economic conditions, and natural disasters, impact the cost of
lumber products and the Company's selling prices. While the Company attempts to
minimize its risk from severe price fluctuations, substantial, prolonged trends
in lumber prices can affect the Company's financial results. The Company
anticipates that these fluctuations will continue in the future.
Competition:
The Company is subject to competitive selling and pricing pressures in its major
markets. While the Company is generally aware of its existing competitors'
capabilities, it is subject to entry in its markets by new competitors, which
could negatively impact financial results.
Market Growth:
The Company's sales growth is dependent, in part, upon growth within the markets
it serves. If the Company's markets do not achieve anticipated growth, or if the
Company fails to maintain its market share, financial results could be impaired.
Economic Trends:
As a result of its recent business combinations in the site-built construction
market, management believes the Company's ability to achieve growth in sales and
margins has become more dependent on general economic conditions, such as
interest rates, housing starts and unemployment levels. To
2
<PAGE> 4
the extent these conditions change significantly in the future, the Company's
financial results could be impacted.
Business Combinations:
The Company has completed several business combinations within the past eighteen
months and plans to continue its acquisition activity in the immediate future in
order to achieve certain strategic objectives. There are many inherent risks
associated with business combinations, including assimilation and successfully
managing growth. While the Company conducts extensive due diligence and has
taken steps to ensure successful assimilation, factors beyond the Company's
control could influence the results of these acquisitions.
Government Regulations:
The Company is subject to a substantial amount of existing government
regulations which create a burden on the Company. Should the Company become
subject to additional laws and regulations enacted in the future, or changes in
interpretation of existing laws, it could have an adverse affect on the
Company's financial results.
Seasonality:
The majority of the Company's products are used in outdoor construction
activities, therefore its sales volumes and profits can be negatively affected
by adverse weather conditions in certain geographic markets. In addition,
adverse weather conditions in certain regions can negatively impact the
Company's operations and consequently its productivity and costs per unit.
Please recognize the above risk factors when reviewing the Company's business
prospects.
FLUCTUATIONS IN LUMBER PRICES
The following table presents the Random Lengths framing lumber composite price
for the years ended December 26, 1998, December 27, 1997 and December 28, 1996:
<TABLE>
<CAPTION>
RANDOM LENGTHS
AVERAGE $/MBF
-------------------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
January............................ $360 $436 $329
February........................... 375 444 347
March.............................. 369 433 353
April.............................. 369 457 374
May................................ 331 444 420
June............................... 332 430 409
July............................... 345 429 402
August............................. 355 413 443
</TABLE>
3
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
September.......................... 328 393 443
October............................ 329 378 421
November........................... 340 379 459
December........................... 348 370 428
Annual average..................... 349 $417 $402
Annual percentage change........... (16.3%) 3.7% 19.3%
</TABLE>
The Random Lengths composite price is a weighted average of nine key framing
lumber prices chosen from major producing areas and species. The composite price
is designed as a broad measure of price movement in the commodity lumber market
("Lumber Market").
Management believes the overall decline in the Lumber Market in 1998 can be
attributed to the following factors, which have caused an over-supply of lumber
in North America.
- - Global economic conditions have resulted in fewer exports of North American
lumber. In addition, the United States is a preferred market for lumber
exported from other countries due to its strong economy.
- - Greater production efficiencies and increased capacity of sawmills.
- - The emergence and growing acceptance of substitute products for solid-sawn
lumber in building applications. For example, wood I-joists are increasingly
used in place of certain sizes of lumber.
SEASONALITY
The Company's business is seasonal in nature and results of operations vary from
quarter to quarter. Demand for the Company's treated lumber and outdoor
specialty products, such as fencing, decking and lattice, experience the
greatest seasonal effects. Sales of treated lumber also experience the greatest
Lumber Market risk. Sales of treated lumber are generally at their highest
levels between the months of April through August. This sales peak, combined
with capacity constraints in the wood treatment process, requires the Company to
build its inventory of treated lumber throughout the winter and spring. Since
sales prices of treated lumber products are generally indexed to the Lumber
Market at the time they are shipped, the Company's profits can be negatively
affected by prolonged declines in the Lumber Market during its primary selling
season. To mitigate this risk, supply programs are maintained with vendors that
are intended to decrease the Company's exposure. These programs include those
materials which are most susceptible to adverse changes in the Lumber Market,
and also allow the Company to carry a lower investment in inventories.
BUSINESS COMBINATIONS
In 1997, the Company established strategic objectives which include being the
largest manufacturer of engineered trusses, wall panels and I-joists for
conventional site-built construction, a new market for the Company, and
specialty wood packaging for industrial users. In line with this strategy, the
Company completed the following mergers and acquisitions in 1997 and 1998:
4
<PAGE> 6
- - On December 22, 1997, a subsidiary of the Company completed a merger with
Consolidated Building Components, Inc. ("CBC"), a manufacturer of engineered
trusses, wall panels and other products for commercial and residential
builders and producers of manufactured homes. CBC operates two plants in
Northwest Pennsylvania. The Company issued approximately 398,000 shares of
its common stock in exchange for all of the stock of CBC. This transaction
has been accounted for as a pooling of interests; therefore, financial
statements for 1996 and prior years were restated to reflect this merger. CBC
had net sales in fiscal 1997 totaling $24 million.
- - On December 29, 1997, a partnership of the Company acquired substantially all
of the assets of Structural Lumber Products, Inc. ("SLP"), a manufacturer of
engineered trusses and wall panels for residential builders. SLP operates
plants in San Antonio, Austin and Dallas, Texas. The total purchase price of
the transaction was $18.5 million. SLP had net sales in fiscal 1997 totaling
$22 million.
- - On March 30, 1998, a subsidiary of the company acquired 100% of the
outstanding shares of privately held Shoffner Industries, Inc. ("Shoffner")
in exchange for $41.1 million in cash and 3 million shares of the Company's
common stock. Shoffner is a manufacturer of engineered trusses for commercial
and residential builders and had 14 facilities in 7 states at the time of the
acquisition. Shoffner had net sales in fiscal 1997 totaling $90 million.
- - On April 14, 1998, a subsidiary of the Company acquired substantially all of
the assets and assumed certain liabilities of Atlantic General Packaging,
Inc. ("AGP"), a manufacturer of specialty wood packaging products. AGP
operates one facility in Warrenton, North Carolina. The total purchase price
for the net assets of AGP was comprised of cash totaling approximately $1.0
million, a note payable of $857,000, and 57,950 shares of the Company's
common stock. AGP had net sales in fiscal 1997 totaling $4 million.
- - On April 20, 1998, a subsidiary of the Company acquired substantially all of
the assets and assumed certain liabilities of Advanced Component Systems,
Inc. ("ACS"), a manufacturer of engineered trusses for commercial and
residential builders. ACS operates one facility in Lafayette, Colorado. The
total purchase price of ACS was $27 million. ACS had net sales in fiscal 1997
totaling $39 million.
- - On June 4, 1998, a subsidiary of the Company acquired substantially all of
the assets of Industrial Lumber Company, Inc. ("ILC"), a distributor of low
grade cut lumber for packaging. The total purchase price for the net assets
of ILC was comprised of cash totaling approximately $3.0 million and notes
payable totaling $2.2 million. ILC had net sales in fiscal 1997 totaling $15
million.
- - On November 4, 1998, a subsidiary of the Company acquired 59% of the
outstanding shares of Nascor, Inc. ("Nascor"), located in Calgary, Alberta.
Nascor manufactures engineered trusses, I- joists and pre-insulated wall
panels for commercial and residential builders. In addition, Nascor conducts
licensing activities associated with its I-joist technology. The total
purchase price for the shares was $2.8 million in cash. Nascor had sales and
licensing revenues totaling $13 million in 1998.
- - On December 18, 1998, a subsidiary of the Company acquired 45% of the
outstanding shares of Pino Exporta S.A. de C.V., which subsequently changed
its name to Pinelli Universal S. de R.L. de C.V. ("Pinelli"). Pinelli is
located in Durango, Mexico, where it manufactures moulding and millwork
products for customers in the United States. The total purchase price for the
minority interest was $3.0 million in cash. In addition, the Company will
provide a revolving credit facility to Pinelli totaling up to $5.0 million.
The Company advanced $3.2 million on December 18, 1998.
5
<PAGE> 7
Pinelli generated annual sales of $25 million in 1998. The Company has
accounted for this investment using the equity method.
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, the components of the
Company's Consolidated Statements of Earnings as a percentage of net sales,
including reorganization and other costs recognized in 1997.
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0%
Cost of goods sold........................................ 88.0 91.0 89.9
------ ------ ------
Gross profit.............................................. 12.0 9.0 10.1
Selling, general, and administrative expenses............. 7.8 6.0 6.4
Reorganization costs...................................... 0.2
------ ------ ------
Earnings from operations.................................. 4.2 2.8 3.7
Other expense, net........................................ 0.7 0.4 0.3
------ ------ ------
Earnings before income taxes.............................. 3.5 2.4 3.4
Income taxes.............................................. 1.4 0.8 1.4
------ ------ ------
Net earnings.............................................. 2.1% 1.6% 2.0%
====== ====== ======
</TABLE>
REORGANIZATION AND OTHER COSTS
In the fourth quarter of 1997, the Company announced a plan to reorganize its
operating structure and recorded a charge to earnings totaling $1.7 million. In
connection with this plan, the Company completed the following activities in
1998:
- - Consolidated the management of its operating companies from five regional
companies down to two integrated divisions.
- - Consolidated its regional purchasing operations from five offices down to
two.
- - Commenced the consolidation of its Southern California operations from two
plants down to one.
- - Discontinued its treating operations in North East, Maryland.
- - Discontinued manufacturing and/or selling certain products and product lines.
Management believes the reorganization will allow the Company to be more
efficient in its procurement of raw materials, improve the utilization of its
assets, and take advantage of its national presence to create new business
opportunities with national customers and vendors.
6
<PAGE> 8
In addition to reorganization costs, the Company incurred other costs totaling
$1.6 million related to writing down inventory of an unprofitable product line
and certain real estate to net realizable value. The following table presents,
for the periods indicated, the components of the Company's Consolidated
Statements of Earnings as a percentage of sales, excluding reorganization and
other costs recognized in 1997.
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------------------------
DECEMBER 26, DECEMBER 27, DECEMBER 28,
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net sales................................................. 100.0% 100.0% 100.0%
Cost of goods sold........................................ 88.0 91.0 89.9
------ ------ ------
Gross profit.............................................. 12.0 9.0 10.1
Selling, general, and administrative expenses............. 7.8 5.9 6.4
------ ------ ------
Earnings from operations.................................. 4.2 3.1 3.7
Other expense, net........................................ 0.7 0.3 0.3
------ ------ ------
Earnings before income taxes.............................. 3.5 2.8 3.4
Income taxes.............................................. 1.4 1.0 1.4
------ ------ ------
Net earnings.............................................. 2.1% 1.8% 2.0%
====== ====== ======
</TABLE>
The following discussion of the Company's results of operations excludes the
reorganization and other costs discussed above.
NET SALES
The Company manufactures, treats, and distributes lumber and other products to
the do-it-yourself (DIY), manufactured housing, wholesale lumber, industrial and
conventional site-built construction markets. The Company's strategic objectives
relative to sales include:
- - Continuing to diversify the Company's end market sales mix by increasing its
sales of specialty wood packaging to industrial users and "engineered wood
products" to the site-built construction market. Engineered wood products
consist of roof and floor trusses, wall panels and I-joists.
- - Increasing unit sales to each of the Company's core markets, DIY and
manufactured housing.
- - Maximizing its sales of "value-added" products. Value-added product sales
consist of fencing, decking, lattice and other outdoor specialty products
sold to the DIY market; roof trusses sold to producers of manufactured
homes; specialty wood packaging; and engineered wood products. A long-term
goal of the Company is to achieve a ratio of value-added sales to total sales
of at least 50%.
7
<PAGE> 9
In order to measure its progress toward attaining these objectives, management
analyzes the following financial data relative to sales:
- - Sales by market classification.
- - The percentage change in sales attributable to changes in overall selling
prices versus changes in the quantity of units shipped.
- - The ratio of value-added product sales to total sales.
This information is presented in the tables and narrative that follow.
The following table presents, for the periods indicated, the Company's net sales
(in thousands) and percentage of total net sales by market classification.
<TABLE>
<CAPTION>
Years Ended
-------------------------------------------------------------------------
December 26, December 27, December 28,
Market Classification 1998 % 1997 % 1996 %
- --------------------- ------------ ----- ----------- ----- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
DIY............................. $ 562,622 45.4 $499,195 46.8% $419,657 47.1%
Manufactured Housing............ 401,679 32.4 406,986 38.2 343,107 38.5
Wholesale Lumber................ 70,239 5.7 74,928 7.0 64,612 7.2
Industrial...................... 76,817 6.2 64,562 6.1 44,159 5.0
Site-Built Construction......... 127,550 10.3 20,629 1.9 19,695 2.2
---------- ----- ---------- ------ --------- ------
Total........................... $1,238,907 100.0 $1,066,300 100.0% $891,230 100.0%
========== ===== ========== ====== ========= ======
</TABLE>
Note: In 1998, the Company reviewed the market classifications of each of its
customers and made certain reclassifications. Prior year sales have been
restated due to these customer reclassifications.
The following table estimates, for the periods indicated, the Company's
percentage change in net sales which were attributable to changes in overall
selling prices versus changes in units shipped.
<TABLE>
<CAPTION>
% Change
---------------------------------------------
in Sales in Selling Prices in Units
--------- ----------------- ---------
<S> <C> <C> <C>
1998 versus 1997 ................. +16% -8% +24%
1997 versus 1996.................. +20% +6% +14%
1996 versus 1995 ................. +18% +11% +7%
</TABLE>
The following table presents, for the periods indicated, the Company's
percentage of value-added and commodity-based sales to total sales.
<TABLE>
<CAPTION>
Value-Added Commodity-Based
----------- ---------------
<S> <C> <C>
1998.............................. 38.8% 61.2%
1997.............................. 28.6% 71.4%
1996.............................. 28.7% 71.3%
</TABLE>
8
<PAGE> 10
The increase in the Company's ratio of value-added sales to total sales in 1998
compared to 1997 is primarily due to recent business acquisitions ("New
Plants"). Over 82% of the total sales from these New Plants are categorized as
value-added sales. "Existing Plants" (plants of the Company other than New
Plants) increased their ratio of value-added sales to total sales from 28.6% in
1997 to 30.5% in 1998.
DIY Market:
Do-It-Yourself Retailing, in its November 1998 edition, estimated a 5.6%
increase in total retail sales by home improvement retailers comparing 1998 with
1997. It also estimated a compounded annual growth rate ("CAGR") from 1996 to
1998 of 6.5%. The Company realized a 10.3% CAGR in sales to this market from
1996 to 1998, despite a 13.4% decrease in the average Lumber Market.
Net sales to the DIY market increased $63 million, or 12.7%, in 1998, compared
to 1997. Over $51 million of this increase was due to sales generated by recent
business acquisitions. At the end of 1997 and throughout 1998, the Company
acquired manufacturers of engineered wood products used in site-built
construction. Although the majority of these products are sold directly to
builders, a portion is sold through certain national retail customers and
lumberyards. In addition, the Company's Existing Plants increased their unit
sales to the DIY market despite a 16% decrease in the Lumber Market. This
increase in unit sales was primarily driven by sales to the Company's largest
customer, which increased by 27%.
Net sales to the DIY market increased $80 million, or 19.0%, in 1997 compared to
1996, due to an increase in unit sales combined with an overall increase in
selling prices. The increase in unit sales was primarily attributable to overall
growth in the DIY industry, combined with an increase in the Company's market
share. The Company has strong relationships with its national retail customers,
due to its ability to provide quality products and a high level of service at
competitive prices. As certain national retail customers have continued to
capture additional market share in the industry, the Company has increased its
market share in turn. Overall selling prices increased in 1997 compared to 1996
as a result of the higher level of the Lumber Market in 1997.
Manufactured Housing Market:
Manufactured Home Merchandiser, in its January 1999 edition, estimated an
increase in industry shipments to retailers of almost 5% in 1998 compared to
1997, and a 1% CAGR from 1996 to 1998. The Company realized a 5.4% CAGR in sales
to this market from 1996 to 1998, despite a 13.4% decrease in the average Lumber
Market.
Net sales to the manufactured housing market decreased $5 million, or 1.3%, in
1998 compared to 1997, due to a decline in overall selling prices offset by an
increase in unit sales. Overall selling prices to this market decreased as a
result of the lower level of the Lumber Market in 1998 compared to 1997. Higher
unit sales was due to CBC, acquired at the end of 1997, which increased its
sales to this market.
9
<PAGE> 11
Net sales to the manufactured housing market increased $64 million, or 18.6%, in
1997 compared to 1996, due to an increase in unit sales combined with an overall
increase in selling prices. The unit sales increase was due to the acquisition
of three plants from Hi-Tek Forest Products, Inc. ("Hi-Tek") on October 1, 1996.
Hi-Tek was a former competitor of the Company in the manufactured housing
market. The increase in overall selling prices was attributable to the higher
level of the Lumber Market in 1997 compared to 1996.
Wholesale Market:
Net sales to the wholesale market decreased $5 million, or 6.3%, in 1998
compared to 1997, primarily due to a decrease in selling prices. The decrease in
overall selling prices was attributable to the lower level of the Lumber Market
in 1998 compared to 1997. Net sales to the wholesale market increased $10
million, or 16.0%, in 1997 compared to 1996, primarily due to an increase in
unit sales. Although increasing sales to the wholesale market is not a strategic
objective, the Company continues to supply its existing customers and take
advantage of opportunities for new business when it provides favorable net
margins.
Industrial Market:
Net sales to the industrial market increased $12 million, or 19.0%, in 1998
compared to 1997, primarily due to the recent acquisitions of AGP and ILC. The
Company plans to continue to obtain market share through an internal growth
strategy. This strategy is focused on developing niche products and increasing
sales of specialty packaging through the technology acquired from AGP. In many
cases, the products produced for this market allow the company to increase its
raw material yields and recognize higher margins.
Net sales to the industrial market increased $20 million, or 46.2%, in 1997
compared to 1996, due to an increase in unit sales combined with an increase in
overall selling prices. In 1997, new sales positions and incentive programs were
created to grow sales to this market. The increase in overall selling prices was
due to the higher level of the Lumber Market in 1997 compared to 1996.
Site-Built Construction Market:
Sales to the site-built construction market increased $107 million in 1998
compared to 1997, due to the Company's recent acquisitions of SLP, Shoffner and
ACS. Sales to this market in 1996 and 1997 represent those of CBC, whose results
were pooled with the Company. The Freedonia Group, in its Industry Study 979,
estimated the size of the engineered wood components market in the United States
at $9 billion. The Company, due to its recent acquisitions, is one of the
largest manufacturers of these products in the nation.
10
<PAGE> 12
COST OF GOODS SOLD AND GROSS PROFIT
Gross profit as a percentage of net sales increased to 12.0% in 1998, compared
to 9.0% in 1997. This increase was primarily due to the following factors:
- - An increase in sales of engineered wood products as a result of recent
business acquisitions.
- - An increase in sales of fencing products in certain regions of the country.
- - An increase in sales of specialty wood packaging and components to the
industrial market.
- - An improvement in results from sales of trusses to the manufactured housing
industry over historically low levels recognized in 1997.
Gross profit as a percentage of net sales decreased to 9.0% in 1997 compared to
10.1% in 1996. This decrease was primarily due to a combination of the following
factors:
- - The Lumber Market was on a prolonged downward trend the final six months
of 1997, compared to an upward trend in 1996 that existed the majority of
the year. These market conditions caused the Company to realize lower
gross margins on the sale of commodity-based products in 1997 compared to
1996.
- - Intense price competition on the sale of trusses to the manufactured
housing market, in certain geographic regions, resulted in lower gross
margins on the sale of trusses in 1997 compared to 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") increased $33 million, or
52%, comparing 1998 with 1997. This increase was primarily due to:
- - Expenses added through business acquisitions and other new operations. The
SG&A of these operations totaled $24 million in 1998.
- - An increase in selling and administrative headcount to support the growth of
the business.
- - An increase in incentive compensation expenses tied to profitability and
return on investment objectives.
- - Increases in certain variable selling and marketing expenses tied to sales.
Selling, general and administrative expenses increased $6 million, or 11.1%,
comparing 1997 to 1996. The net increase was primarily due to:
- - General increases in selling and administrative headcount to support the
growth of the business.
- - Expenses added through the acquisition of Hi-Tek.
- - The creation of new centralized marketing, national sales and manufacturing
design departments.
- - Increased depreciation expense related to upgraded information systems.
- - These increases were offset by a decrease in incentive compensation expenses
related to profitability and return on investment objectives.
11
<PAGE> 13
OTHER EXPENSE, NET
Other expense, net is primarily comprised of interest expense and interest
income. Net interest costs increased approximately $5 million in 1998 compared
to 1997, primarily due to acquisition related debt totaling approximately $98
million for the year. Net interest costs increased approximately $702,000,
comparing 1997 to 1996, as average cash balances decreased and seasonal
borrowings on lines of credit increased in 1997. This occurred as a result of
greater working capital requirements from a growth in business and the
acquisition of Hi-Tek on October 1, 1996.
INCOME TAXES
The Company's effective tax rate was 38.6% in 1998 compared to 34.7% in 1997.
Effective tax rates differ from statutory federal income tax rates, primarily
due to:
- - Provisions for state and local income taxes, which can vary from year to
year based on changes in income generated by the Company in each of the
states in which it operations.
- - Permanent tax differences.
The Company recognized a comparatively higher effective tax rate in 1998 due to
an increase in state and local income taxes combined with a permanent tax
difference related to a recent acquisition. The Company's 1997 effective tax
rate was unusually low due to the effect of pooling the pre-tax earnings of CBC
(a former S-Corporation) in 1997.
The Company's effective tax rate was 34.7% in 1997 compared to 40.2% in 1996.
Due to the reorganization it completed on December 28, 1996 to formalize its
existing operating structure, the Company realized a reduction in its state
income taxes for 1997. In addition, the Company recognized a lower effective tax
rate in 1997 due to the pooling of CBC as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows provided by operating activities totaled $66.5 million in 1998
compared to $19.1 million in 1997. This increase is primarily due to the
following factors:
- - Net earnings and non-cash expenses increased as a result of recent business
acquisitions.
- - Inventories of Existing Plants increased by approximately $21 million
comparing December 27, 1997 with December 28, 1996. Conversely, inventories
of these plants decreased by approximately $20 million comparing December 26,
1998 with December 27, 1997. The increase in year-end inventory from 1996 to
1997 was primarily due to the fact that Existing Plants began to build
inventories earlier than normal in anticipation of their strong selling
season. In addition, vendors supplied less inventory under consignment
programs at the end of 1997 compared to 1996. The corresponding decrease in
inventory from 1997 to 1998 was due to the fact that Existing Plants did not
build inventory levels as early as the prior year, the Company reduced its
number
12
<PAGE> 14
of inventory locations through the consolidation of its purchasing offices,
and the Company closed and sold the inventory of certain unprofitable plants
in 1998.
Due to the seasonality of the Company's business and the effects of the Lumber
Market, management believes the Company's cash cycle (days sales outstanding
plus days supply of inventory less days payables outstanding) is a better
indicator of its working capital management. The Company's cash cycle increased
to 46.0 days in 1998 from 44.2 days in 1997. This increase is primarily due to
the effect of recent acquisitions of suppliers to the site-built construction
market. Receivables related to this market are generally not collected as
quickly as the Company's receivables from other markets.
Capital expenditures totaled $28.4 million in 1998, compared to $13.6 million in
1997. The increase is primarily due to several new facilities acquired during
1998. The cost of these facilities totaled $12 million, which includes $3
million for a new divisional office near Atlanta, Georgia. The remaining
increase was primarily due to greater amounts spent in 1998 to expand production
capacity at Existing Plants, and amounts spent on special equipment related to a
potential new product. Capital expenditures in 1998 to replace and/or upgrade
existing operating equipment were at levels consistent with 1997. On December
26, 1998, outstanding purchase commitments on capital projects totaled $9.3
million. The Company intends to satisfy these commitments utilizing its
revolving credit facility.
The Company spent approximately $98 million in 1998 related to business
acquisitions. Significant businesses acquired are mentioned earlier in this
document under the caption "Business Combinations." The Company initially funded
the cash portion of the purchase price of all acquisitions using its short-term
lines of credit.
Cash flows provided by financing activities totaled $59 million in 1998, and
consisted of the following transactions:
- - Repayments of long-term debt totaled $32 million, which included $18 million
of debt assumed in the acquisition of Shoffner. The remaining amount
consisted of $6 million paid on senior unsecured notes, $6 million paid on
term notes, $1 million paid on capital lease obligations, and $1 million paid
on non-compete obligations.
- - On November 13, 1998, the Company closed on a five-year, $175 million
revolving credit facility involving a syndicate of nine banks. The facility
is unsecured. Interest on outstanding amounts are payable at a rate of 50
basis points over the applicable Eurodollar rate. The facility was
immediately used to repay amounts outstanding on the Company's short-term
lines of credit. The Company subsequently canceled these credit lines.
- - The Company completed a private placement of senior unsecured notes totaling
$100 million on December 21, 1998. The notes were issued in two installments.
The Company received $81 million on December 21, 1998, and repaid amounts
outstanding on its revolving credit facility. The remaining $19 million was
received on February 4, 1999. The notes have an average life of nine years
and an average fixed interest rate of 6.9%.
- - The Company paid $1.5 million in dividends in 1998 at a rate of $0.07 per
share.
13
<PAGE> 15
Financial covenants on the Company's revolving credit facility and senior
unsecured notes include a minimum net worth requirement, a minimum interest
coverage test, and a maximum leverage ratio. The Company is well within its
requirements at December 26, 1998.
ENVIRONMENTAL CONSIDERATIONS AND REGULATIONS
The Company is self-insured for environmental impairment liability, and accrues
for the estimated cost of remedial actions when situations requiring such action
arise. The Company owns and operates seventeen facilities throughout the United
States that chemically treat lumber products. In connection with the ownership
and operation of these and other real properties, and the disposal or treatment
of hazardous or toxic substances, the Company may, under various federal, state
and local environmental laws, ordinances and regulations, be potentially liable
for removal and remediation costs, as well as other potential costs, damages and
expenses. Remediation activities are currently being conducted or planned at the
Company's Granger, Indiana; North East, Maryland; Union City, Georgia;
Stockertown, Pennsylvania; Elizabeth City, North Carolina; and Schertz, Texas
treatment facilities.
The Company has accrued, in other long-term liabilities, amounts totaling $2.3
million and $2.0 million at December 26, 1998 and December 27, 1997,
respectively, representing the estimated costs to complete remediation efforts
currently in process and those expected to occur in the future. The Company
believes that the potential future costs of known remediation efforts will not
have a material adverse effect on its future financial position, results of
operations or liquidity.
"THE YEAR 2000"
The Company has reviewed its primary business and financial systems, and has
concluded it will not have any material "Year 2000" issues with the computer
programs which drive these systems. Accordingly, management does not expect to
incur any programming costs in this area. The Company believes its risks
associated with the "Year 2000" relate primarily to its customers, suppliers,
service providers and possible disruptions in the overall economy. Management is
currently reviewing the systems of its significant customers and vendors, as
well as its other ancillary systems, and has detected no material issues to
date. This review is expected to be completed in April 1999, and have
incremental costs totaling approximately $50,000. Although there can be no
absolute assurances that there will not be a material adverse effect on the
Company if third parties do not resolve their "Year 2000" issues in a timely
manner, the Company believes its activities will minimize these risks. The
Company will continue to evaluate and develop contingency plans as a result of
its "Year 2000" assessment.
14
<PAGE> 16
FORWARD OUTLOOK
The following section contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements are
based on the beliefs and objectives of management as well as on assumptions made
by and information currently available to the Company. Actual results could
differ materially from those included in such forward-looking statements.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty.
PERFORMANCE 2002:
In 1997, the Company concluded its annual planning efforts and announced its
goals for growth and diversification entitled Performance 2002. The goals called
for the Company to double its sales by the year 2002 while maintaining or
achieving a leadership position in the four markets that consume the vast
majority of wood fiber in the United States. The Company's sales goals by market
are as follows (in millions):
<TABLE>
<CAPTION>
Required
Sales in 5-Year
Market Classification 2002 CAGR
--------------------- -------- --------
<S> <C> <C>
DIY.................................. $1,000 15%
Manufactured Housing................. 500 4%
Industrial and Other................. 250 12%
Site-Built Construction.............. 250 65%
------
Total................................ $2,000 13%
====== ===
</TABLE>
Since the end of 1997, the Company completed several business acquisitions to
help achieve these goals. The Company plans to pursue additional business
acquisitions and will also start up several new operations as it continues to
execute its growth strategy.
DIY MARKET:
Do-It-Yourself Retailing, in its November 1998 edition, forecasted the following
total retail sales for home improvement retailers for 1999 through 2002 (in
billions), which result in a CAGR of 4%. The Company has no means of
ascertaining the accuracy of this industry-wide projection, and actual results
could vary significantly. Moreover, irrespective of any growth in industry
sales, the Company's sales could vary materially, due to a variety of factors,
such as increased competition, the Lumber Market, and other factors, which are
beyond the Company's control.
<TABLE>
Retail Sales
------------
<S> <C>
1998.................. $145.3
1999.................. $151.1
2000.................. $157.2
2001.................. $163.4
2002.................. $170.0
</TABLE>
15
<PAGE> 17
The consolidation within the DIY industry continued in 1998 as top performers
obtained additional market share. The Company feels it is in a position to
capitalize on these industry conditions as a result of its national presence,
service capabilities that meet stringent customer requirements, and diversified
product offerings. The Company's goal is to increase market share with an
emphasis on new value-added products, including engineered wood products.
MANUFACTURED HOUSING MARKET:
Manufactured Home Merchandiser, in its January 1999 edition, forecasted a flat
number of industry shipments in 1999. The Company has no means of ascertaining
the accuracy of this industry-wide projection, and actual results could vary
significantly. Moreover, irrespective of any growth in industry sales, the
Company's sales could vary materially, due to a variety of factors, such as
increased competition, the Lumber Market and other factors, which are beyond the
Company's control.
The Company believes this industry will continue to experience moderate
long-term growth as manufactured homes continue to be an attractive alternative
to conventional homes as a result of their affordability, the availability of
conventional long-term financing, and substantial improvements in quality. Due
to its leadership position in the market, management believes the Company is
well-placed to capitalize on industry growth. Management believes the Company
may also have market share growth opportunities involving the sale of new
value-added products to these customers such as moulding and millwork.
INDUSTRIAL MARKET:
A key strategic objective of the Company is to increase its sales of wood
packaging products to industrial users. In 1998, the Company increased its unit
sales to this market through its acquisitions of ILC and AGP. The Company plans
to continue to obtain market share through an internal growth strategy utilizing
its current manufacturing capabilities. This strategy is focused on developing
niche products and increasing sales of specialty packaging through technology
acquired from AGP.
SITE-BUILT CONSTRUCTION MARKET:
Since December of 1997, the Company merged with CBC and acquired SLP, Shoffner,
ACS and 59% of the outstanding shares of Nascor. These business acquisitions
have allowed the Company to become one of the largest manufacturers of
engineered wood products in the United States while operating 20 plants in 10
states. Management plans to continue to obtain market share by beginning to
manufacture wall panels and I-joists in markets where it currently produces only
trusses. In some instances this will involve adding production capacity to
existing facilities, and in other instances, when forecasted volumes are higher,
it will involve opening new plants. Management will also pursue business
acquisitions in order to enter key geographic markets.
16
<PAGE> 18
The National Association of Home Builders has published the following forecasted
housing starts by region (in thousands).
<TABLE>
<CAPTION>
Years
--------------------------
Region 1998 1999 2000
------ ---- ---- ----
<S> <C> <C> <C>
Northeast............... 151 144 148
South................... 748 677 676
Midwest................. 320 292 295
West.................... 391 377 383
----- ----- -----
Total................... 1,610 1,490 1,502
===== ===== =====
</TABLE>
Housing starts are expected to have reached peak levels in 1998 while having
increased 8.9% from 1997. Despite a forecasted decrease in housing starts from
this peak level, management believes the sale of engineered wood components will
continue to grow. The Freedonia Group, in its Industry Study 979, forecasted a
7% CAGR in the sale of engineered wood components through the year 2002. Sales
growth is expected as a result of the benefits these products provide builders
over traditional carpentry methods employed on the job site. Some of these
benefits include cost advantages through more efficient labor and better
material utilization, faster home construction and improved product quality.
GROSS PROFIT
Management believes the following factors may impact the Company's future gross
profits:
- - Current economic conditions will continue to impact the supply of lumber in
North America, which in turn will impact the Company's cost of lumber and the
selling prices of its products. The Company employs pricing methods and
inventory management techniques to minimize the impact of Lumber Market
fluctuations on its gross profit per unit.
- - The Company has a key long-term strategic objective of increasing its ratio
of value-added sales to total sales to 50%, which in turn should increase
gross margins. Management believes its acquisition and internal sales growth
strategies will help it continue to make progress toward this objective.
Achievement of this goal is dependent, in part, upon certain factors that are
beyond the control of management.
- - The Company has plans to start several new facilities in 1999 which will
produce a variety of products, including treated lumber, remanufactured
lumber and engineered wood components. In addition, the Company expects to
consolidate two plants located in Southern California. Gross margins may be
impacted as a result of normal inefficiencies associated with starting these
new operations, and their ratio of value-added sales to total sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
The Company plans to increase its selling, general and administrative (SG&A)
expenses in 1999 in order to support its business growth. The following factors,
among others, will contribute to the increase in expenses.
17
<PAGE> 19
- - Several new operations will be started in 1999 which will require local
selling and administrative departments.
- - Centralized Sales, Marketing and Manufacturing Departments will increase
headcount in order to execute strategic initiatives that will help the
Company achieve sales and margin goals.
- - The Company's corporate headquarters will increase expenses in order to
support the dramatic growth of the business.
Although the Company will strive to achieve economies of scale in SG&A costs as
the business grows, management expects that these costs will increase as a
percentage of sales as the Company continues to increase the proportion of its
business consisting of engineered wood components. These value-added products
have extensive design and engineering support costs which are captured in SG&A.
LIQUIDITY AND CAPITAL RESOURCES
Management expects to spend between $35 million and $40 million on capital
expenditures in 1999. Besides "maintenance" capital expenditures totaling
approximately $9 million, the Company plans to spend approximately $5 million to
upgrade or expand the production capacity of its existing plants, and
approximately $24 million on new operations in key markets. In addition, the
Company plans to continue to execute its acquisition strategy in 1999, and will
consider issuing additional long-term debt and/or common stock as part of a
transaction.
In 1999, the Company intends to continue its current dividend policy of $.035
per share semi-annually. In addition, the Company is obligated to pay amounts
due on long-term debt totaling approximately $9.8 million.
After the final funding of its senior unsecured notes on February 4, 1999, the
Company had the entire amount of its $175 million revolving credit facility
available at December 26, 1998. Seasonal working capital requirements are
expected to consume $65 million to $75 million of this availability. The Company
experiences its highest working capital requirements during the period from
April through July. The Company will finance its remaining capital requirements
mentioned above by using its revolving credit facility, issuing additional
long-term debt or common stock, or by using a combination of these methods.
18
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
Board of Directors
Universal Forest Products, Inc.
Grand Rapids, Michigan
We have audited the accompanying consolidated balance sheets of Universal Forest
Products, Inc. and subsidiaries as of December 26, 1998 and December 27, 1997,
and the related consolidated statements of earnings, shareholders' equity, and
cash flows for each of the three fiscal years in the period ended December 26,
1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Universal Forest Products, Inc. and
subsidiaries as of December 26, 1998 and December 27, 1997, and the results of
their operations and their cash flows for each of the three fiscal years in the
period ended December 26, 1998, in conformity with generally accepted accounting
principles.
Grand Rapids, Michigan
January 25, 1998
19
<PAGE> 21
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
ASSETS December 26, December 27,
Note 1998 1997
---- ----------- ------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents ....................................... B $ 920 $ 3,157
Accounts receivable (net of allowance for doubtful accounts
of $3,540 and $449) ........................................... B 62,846 35,616
Inventories:
Raw materials ................................................. B 36,856 38,240
Finished goods ................................................ B 71,543 72,923
--------- ---------
108,399 111,163
Other current assets ............................................ B 2,911 426
Prepaid income taxes ............................................ L 2,625 3,134
Deferred income taxes ........................................... B, L 4,176 4,141
--------- ---------
Total Current Assets .......................................... 181,877 157,637
OTHER ASSETS ....................................................... B, F, J 10,978 4,474
GOODWILL AND NON-COMPETE AGREEMENTS ................................ B, N 95,229 2,525
PROPERTY, PLANT & EQUIPMENT:
Land and improvements ........................................... B, E 24,363 16,113
Buildings and improvements ...................................... B, E 70,091 37,030
Machinery, equipment and office furniture ....................... B, E 84,392 58,214
Construction in progress ........................................ 14,529 5,358
--------- ---------
193,375 116,715
Less accumulated depreciation and amortization .................. B, E (61,389) (51,968)
--------- ---------
131,986 64,747
--------- ---------
$ 420,070 $ 229,383
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt ................................................. B, D $ 1,997 $ 4,500
Accounts payable ................................................ B 38,751 34,053
Accrued liabilities:
Compensation and benefits ..................................... B, K 28,025 16,345
Other ......................................................... B, C 3,485 3,167
Current portion of long-term debt and capital lease obligations.. B, D, E, N 9,760 9,789
--------- ---------
Total Current Liabilities ..................................... 82,018 67,854
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS, less current portion ............................... B, D, E, N 132,120 40,188
DEFERRED INCOME TAXES .............................................. B, L 8,100 1,766
OTHER LIABILITIES .................................................. F, M 6,249 3,677
COMMITMENTS AND CONTINGENCIES ...................................... M
SHAREHOLDERS' EQUITY:
Preferred stock, no par value; shares authorized 1,000,000;
issued and outstanding, none
Common stock, no par value; shares authorized 40,000,000;
issued and outstanding, 20,710,263 and 17,572,262 ............. B, G, H 20,710 17,572
Additional paid-in capital ...................................... B, G 77,526 29,855
Retained earnings ............................................... B 95,221 70,253
Accumulated other comprehensive earnings ........................ (1,072) (882)
--------- ---------
192,385 116,798
Officers' stock notes receivable ................................ I (802) (900)
--------- ---------
191,583 115,898
--------- ---------
$ 420,070 $ 229,383
========= =========
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 22
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended
------------------------------------------------
December 26, December 27, December 28,
Note 1998 1997 1996
---- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET SALES ......................... B $ 1,238,907 $ 1,066,300 $ 891,230
COST OF GOODS SOLD ................ B, E, K 1,089,693 970,822 801,516
----------- ----------- -----------
GROSS PROFIT ...................... 149,214 95,478 89,714
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES ....................... B, E, J, K 97,056 63,461 57,122
REORGANIZATION COSTS .............. C 1,698
----------- ----------- -----------
EARNINGS FROM OPERATIONS .......... 52,158 30,319 32,592
OTHER EXPENSE (INCOME):
Interest expense ............... B, D 9,506 4,305 4,248
Interest income ................ (334) (368) (1,013)
Other, net ..................... B (48) 400 (446)
----------- ----------- -----------
TOTAL OTHER EXPENSE .......... 9,124 4,337 2,789
----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES ...... 43,034 25,982 29,803
INCOME TAXES ...................... B,L 16,615 9,025 11,971
----------- ----------- -----------
NET EARNINGS ...................... $ 26,419 $ 16,957 $ 17,832
=========== =========== ===========
EARNINGS PER SHARE - BASIC ........ $ 1.33 $ 0.97 $ 1.02
EARNINGS PER SHARE - DILUTED ...... $ 1.28 $ 0.93 $ 0.98
WEIGHTED AVERAGE SHARES
OUTSTANDING .................... B 19,917 17,528 17,428
WEIGHTED AVERAGE SHARES OUTSTANDING
WITH COMMON STOCK EQUIVALENTS .. B 20,613 18,234 18,121
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 23
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Accumulated
Additional Other Officers'
Paid-In Retained Comprehensive Stock Notes
Common Stock Capital Earnings Earnings Receivable Total
------------ ---------- -------- ------------- ------------ -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 30, 1995............ $ 17,439 $ 28,260 $ 40,642 $ (998) $ (746) $ 84,597
Comprehensive earnings:
Net earnings........................ 17,832
Foreign currency translation
adjustment........................ 168
Total comprehensive earnings.......... 18,000
Cash dividends - $.060 per share...... (1,022) (1,022)
CBC shareholder distributions......... (304) (304)
Issuance of 98,971 shares............ 99 186 285
Repurchase of 100,000 shares.......... (100) (722) (822)
Payments received on officers' stock
notes receivable.................... 81 81
-------- -------- -------- ------- ------ ---------
BALANCE AT DECEMBER 28, 1996............ $ 17,438 $ 28,446 $ 56,426 $ (830) $ (665) $ 100,815
Comprehensive earnings:
Net earnings........................ 16,957
Foreign currency translation
adjustment........................ (52)
Total comprehensive earnings.......... 16,905
Cash dividends - $.065 per share...... (1,116) (1,116)
CBC shareholder distributions......... (978) (978)
Issuance of 186,452 shares............ 187 426 613
Repurchase of 82,502 shares........... (83) (1,036) (1,119)
Tax benefits from non-qualified
stock options exercised............. 613 613
Issuance of officers' stock
notes receivable.................... 30 370 (400)
Payments received on officers' stock
notes receivable.................... 165 165
-------- -------- -------- -------- ------ ---------
BALANCE AT DECEMBER 27, 1997............ $ 17,572 $ 29,855 $ 70,253 $ (882) $ (900) $ 115,898
Comprehensive earnings:
Net earnings........................ 26,419
Foreign currency translation
adjustment........................ (190)
Total comprehensive earnings.......... 26,229
Cash dividends - $.070 per share...... (1,451) (1,451)
Final settlement of CBC acquisition... (17) (218) (235)
Issuance of 3,154,866 shares.......... 3,155 47,889 51,044
Payments received on officers' stock
notes receivable.................... 98 98
-------- -------- -------- ------- ------ ---------
BALANCE AT DECEMBER 26, 1998............ $ 20,710 $ 77,526 $ 95,221 $(1,072) $ (802) $ 191,583
======== ======== ======== ======= ====== =========
</TABLE>
See notes to consolidated financial statements.
22
<PAGE> 24
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended
--------------------------------------------------------
December 26, December 27, December 28,
Note 1998 1997 1996
---- ------------ ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net earnings ................................... B $ 26,419 $ 16,957 $ 17,832
Adjustments to reconcile net earnings to net
cash provided by operations:
Depreciation and amortization ................ E 12,584 9,515 8,625
Amortization of non-compete agreements
and goodwill ............................... B, N 2,464 527 121
Deferred income taxes ........................ B, L 1,292 (578) (635)
Loss on sale of property, plant and
equipment .................................. 422 683 15
Stock Gift and Stock Grant Program expense ... G 27 5 5
Changes in:
Accounts receivable ........................ B (5,698) (1,974) (5,600)
Inventories ................................ B 20,093 (20,767) (20,502)
Other ...................................... B 186 20 (1,024)
Accounts payable and accrued liabilities.... B 8,790 14,694 4,866
--------- --------- ---------
Net cash provided by operations .......... 66,579 19,082 3,703
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment ..... B (28,433) (13,631) (9,346)
Acquisitions, net of cash received ............. B (98,167) (10,413)
Proceeds from sale of property, plant
and equipment ................................ B 1,688 380 233
Advance to an unconsolidated subsidiary ........ B (3,200)
Collection of notes receivable ................. I 377 618 298
Purchases of other assets ...................... (370) (205) (168)
--------- --------- ---------
Net cash used in investing activities ...... (128,105) (12,838) (19,396)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under revolving credit facility.. D 16,380
Net borrowings (repayments) of notes payable.... B, D (4,500) 4,500
Proceeds from issuance of long-term debt ....... B, D 80,304 984
Repayment of long-term debt .................... B, D (31,952) (6,312) (3,815)
Proceeds from issuance of common stock ......... G, H 508 608 280
Cash dividends paid ............................ (1,451) (1,116) (1,022)
CBC shareholder distributions .................. B (978) (96)
Repurchase of common stock ..................... G (1,119) (822)
--------- --------- ---------
Net cash provided by (used in)
financing activities ................... 59,289 (4,417) (4,491)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ........................... (2,237) 1,827 (20,184)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR .............................. 3,157 1,330 21,514
--------- --------- ---------
CASH AND CASH EQUIVALENTS,
END OF YEAR .................................... $ 920 $ 3,157 $ 1,330
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
23
<PAGE> 25
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(in thousands)
<TABLE>
<CAPTION>
Years Ended
------------------------------------------------------
December 26, December 27, December 28,
Note 1998 1997 1996
---- ------------ ------------ ------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest ....................................... D $ 9,407 $ 4,347 $ 4,247
Income taxes ................................... L 14,815 12,934 10,984
NON-CASH INVESTING ACTIVITIES:
Note payable issued in exchange for non-compete
agreements ..................................... B 2,462
Note payable issued in business combination ...... B 857
Property, plant and equipment acquired through
capital leases ................................. E 181 59
Fair market value of common stock issued in
business combinations .......................... B 50,509
Officers' stock notes receivable ................. I 400
Real estate received in lieu of note receivable... 347
NON-CASH FINANCING ACTIVITIES:
Inventory exchanged for a note receivable ........ 1,040
CBC distribution of real estate, net of mortgage.. B 208
</TABLE>
See notes to consolidated financial statements.
24
<PAGE> 26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
OPERATIONS
Universal Forest Products, Inc. (the "Company") manufactures, treats and
distributes lumber products for the do-it-yourself, manufactured housing,
industrial, and site-built construction markets. The Company's principal
products are preservative-treated wood, remanufactured lumber, lattice,
fence panels, deck components, specialty packaging, engineered trusses,
wall panels, I-joists and other building products.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries and partnerships.
All significant intercompany transactions and balances have been
eliminated. The equity method of accounting is used for the Company's 50%
or less owned affiliates over which the Company has the ability to
exercise significant influence.
FISCAL YEAR
The Company's fiscal year is a 52 or 53 week period, ending on the last
Saturday of December. Unless otherwise stated, references to 1998, 1997
and 1996 relate to the fiscal years ended December 26, 1998, December 27,
1997 and December 28, 1996, respectively. Each of these fiscal years were
comprised of 52 weeks.
FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
In accordance with Statement of Financial Accounting Standards ("SFAS")
No. 107, "Disclosures about Fair Value of Financial Instruments," the
estimated fair values of financial instruments have been determined by
the Company; significant differences in fair market values and recorded
values are disclosed in Note D. The estimated fair value amounts have
been determined using available market information and appropriate
valuation methodologies. However, considerable judgment is required in
interpreting market data to develop the estimates of fair value.
Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that the Company could realize in a current
market exchange. The use of different market assumptions and/or
estimation methodologies may have a material effect on the estimated fair
value amounts.
The fair value estimates presented herein are based on pertinent
information available to management as of December 26, 1998. Although
management is not aware of any factors that would significantly affect
the estimated fair value amounts, such amounts have not been
25
<PAGE> 27
comprehensively revalued for purposes of these financial statements since
that date, and current estimates of fair value may differ significantly
from the amounts presented herein.
USE OF ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Management believes its estimates
to be reasonable, however, actual results could differ from these
estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of cash and highly-liquid investments
purchased with an original maturity of three months or less.
INVENTORIES
Inventories are stated at the lower of average cost or market. Raw
materials consist primarily of unfinished wood products expected to be
manufactured or treated prior to sale, while finished goods represent
various manufactured and treated wood products ready for sale.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Expenditures for
renewals and betterments are capitalized, and maintenance and repairs are
expensed as incurred. Depreciation is computed principally by the
straight-line method over the estimated useful lives of the assets as
follows:
Buildings and improvements................ 15 to 31.5 years
Land improvements......................... 5 to 15 years
Machinery and equipment................... 3 to 8 years
Office furniture.......................... 5 to 8 years
FOREIGN CURRENCY TRANSLATION
The functional currency for the Company's foreign operations is the
applicable local currency, except in Mexico. Due to the
hyper-inflationary state of the Mexican economy, the U.S. dollar has been
used as the functional currency in 1998 and 1997. The translation from
the applicable foreign currencies to U.S. dollars is performed for
balance sheet accounts using current exchange rates in effect at the
balance sheet date. For revenues, expenses, gains and losses, the
transaction date exchange rate is used. Gains or losses resulting from
the translation are included as a separate component of shareholders'
equity. Gains or losses resulting from
26
<PAGE> 28
foreign currency transactions were not material in 1998, 1997 or 1996,
and are reflected in earnings from continuing operations.
INCOME TAXES
Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax bases of assets and liabilities
that will result in taxable or deductible amounts in the future. Such
deferred income tax asset and liability computations are based on enacted
tax laws and rates applicable to periods in which the differences are
expected to affect taxable income. Valuation allowances are established
when necessary to reduce deferred tax assets to the amounts expected to
be realized. Income tax expense is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets
and liabilities.
REVENUE RECOGNITION AND ALLOWANCE FOR DOUBTFUL ACCOUNTS
Revenue is recognized at the time the product is shipped to the customer.
The Company accrues for bad debt expense based on its history of accounts
receivable write-offs to sales. Individual accounts receivable balances
are evaluated on a monthly basis, and those balances considered to be
uncollectible are charged to the allowance. Collections of amounts
previously written off are recorded as an increase to the allowance. Bad
debt expense amounted to approximately $515,000, $728,000 and $707,000,
for 1998, 1997 and 1996, respectively.
EARNINGS PER COMMON SHARE
As required by Statement of Financial Accounting Standard No. 128,
"Earnings Per Share," basic earnings per share ("EPS") is calculated
based on the weighted average number of common shares outstanding during
the periods presented, while diluted EPS is calculated based on the
weighted average number of common and common equivalent shares
outstanding during the periods presented, giving effect to stock options
granted in 1993 and 1998 (see Note H), utilizing the "treasury stock"
method.
27
<PAGE> 29
A reconciliation of the changes in the numerator and the denominator from
the calculation of basic EPS to the calculation of diluted EPS follows
(in thousands, except per share date).
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------- -------------------------------- ----------------------------------
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
(Numerator)(Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
---------- ------------- ------ ----------- ------------- ------ ----------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Earnings.......... $26,419 $16,957 $17,832
Basic EPS
Income available
to common
stockholders...... 26,419 19,917 $1.33 16,957 17,528 $0.97 17,832 17,428 $1.02
===== ===== =====
Effect of Dilutive
Securities
Options............... 696 706 693
------ ------ ------
Diluted EPS
Income available
to common
stockholders
and assumed
options
exercised......... $26,419 20,613 $1.28 $16,957 18,234 $0.93 $17,832 18,121 $0.98
======= ====== ===== ======= ====== ===== ======= ====== =====
</TABLE>
Options to purchase 240,000 shares of common stock at exercise prices
ranging from $18.25 to $31.30 were outstanding at December 26, 1998, but
were not included in the computation of diluted EPS because the options'
exercise prices were greater than the average market price of the common
stock and, therefore, would be antidilutive.
STOCK-BASED COMPENSATION
Effective January 1, 1996, the Company adopted SFAS No. 123, "Accounting
for Stock-Based Compensation," and as permitted by this Standard,
continues to apply the recognition and measurement principles of
Accounting Principles Board Opinion No. 25 to its stock-based
compensation (see Note H).
RECLASSIFICATIONS
Certain reclassifications have been made in the 1996 and 1997
consolidated financial statements to conform to the classifications used
in 1998.
28
<PAGE> 30
B. BUSINESS COMBINATIONS
On December 22, 1997, a subsidiary of the Company completed a merger with
Consolidated Building Components, Inc. ("CBC"), a manufacturer of
engineered trusses, wall panels and other products for commercial and
residential builders and producers of manufactured homes. CBC operates
two plants in Northwest Pennsylvania. The Company issued 398,000 shares
of its common stock in exchange for all of the stock of CBC. This
transaction was accounted for as a pooling of interests. CBC's
shareholders had elected to be taxed as an S-Corporation; therefore, no
provision for federal or state income taxes was included in CBC's
financial statements for 1997 and 1996. A provision for deferred taxes
was recorded by the Company on December 27, 1997 for differences between
financial statement and tax bases of assets and liabilities that will
result in taxable or deductive amounts in the future.
Each of the following business combinations have been accounted for as a
purchase. Accordingly, in each instance, the purchase price was allocated
to the assets acquired and liabilities assumed based on their fair market
values at the date of acquisition. Any excess of the purchase price over
the fair value of the acquired assets and assumed liabilities was
recorded as goodwill in each transaction. The Company has amortized
goodwill on a straight-line basis over 40 years. The results of
operations of each acquisition is included in the Company's consolidated
financial statements since the date it was acquired.
Effective October 1, 1996, the Company acquired certain assets of Hi-Tek
Forest Products, Inc. ("Hi-Tek") for $10,413,000 and assumed accounts
payable totaling $495,000. The acquired assets included a non-compete
agreement with a fair value of $2.1 million. The non-compete agreement
spans a five year time period, covers the geographic regions in which the
acquired plants operate, and is being amortized over the term of the
agreement on a straight-line basis. The acquired operations are located
in Bend, Oregon; Boise, Idaho; and Corona, California.
On December 29, 1997, a partnership of the Company acquired substantially
all of the assets of Structural Lumber Products, Inc. ("SLP"), a
manufacturer of engineered trusses and wall panels for residential
builders. SLP operates plants in San Antonio, Austin and Dallas, Texas.
The total purchase price of the transaction was $18.5 million, initially
funded through the Company's lines of credit. The excess of the purchase
price over the estimated fair value of the acquired assets was $12.7
million.
On March 30, 1998, a subsidiary of the Company acquired 100% of the
outstanding shares of Shoffner Industries, Inc. ("Shoffner") in exchange
for $41.1 million in cash, initially funded through the Company's lines
of credit, and 3 million shares of the Company's common stock. Shoffner
is a manufacturer of engineered roof and floor trusses for commercial and
residential builders with 14 facilities in 7 states at the time of
acquisition. The excess of the purchase price over the estimated fair
value of the acquired assets and liabilities assumed was $66.6 million.
On April 14, 1998, a subsidiary of the Company acquired substantially all
of the assets and assumed certain liabilities of Atlantic General
Packaging, Inc. ("AGP"), a manufacturer of specialty wood packaging
products. AGP operates one facility in Warrenton, North Carolina.
29
<PAGE> 31
The total purchase price for the net assets of AGP consisted of cash of
$1.0 million, a note payable of $857,000, and 57,950 shares of the
Company's common stock.
On April 20, 1998, a subsidiary of the Company acquired substantially all
of the assets and assumed certain liabilities of Advanced Component
Systems, Inc. ("ACS"), a manufacturer of engineered trusses for
commercial and residential builders. ACS operates one facility in
Lafayette, Colorado. The total purchase price for the net assets of ACS
was $27.0 million of cash, initially funded through the Company's lines
of credit. The excess of the purchase price over the estimated fair value
of the acquired assets and liabilities assumed was $10.6 million.
On June 4, 1998, a subsidiary of the Company acquired substantially all
of the assets of Industrial Lumber Company, Inc. ("ILC"), a distributor
of low grade cut lumber for packaging. The total purchase price for the
net assets of ILC consisted of $3.0 million in cash, initially funded
through the Company's lines of credit. The Company also exchanged notes
payable totaling $2.2 million for non-compete agreements. The non-compete
agreements are being amortized on a straight-line basis over the ten year
term of the agreements.
On November 4, 1998, a subsidiary of the Company acquired 59% of the
outstanding shares of Nascor Incorporated ("Nascor"), a manufacturer of
engineered trusses, pre-insulated wall panels and I-joists. Nascor
operates out of a single facility in Calgary, Alberta. The Company
exchanged $2.8 million for 5,552,500 shares of Nascor's outstanding
common stock. The transaction was initially funded through the Company's
revolving credit facility. The excess of the purchase price over the
estimated fair value of the acquired assets, assumed liabilities and
minority interest liability was $1.4 million.
On December 18, 1998, a subsidiary of the Company acquired a 45% interest
in Pino Exporta, renamed to Pinelli Universal S. de R.L. de C.V.
("Pinelli"), a manufacturer of mouldings and related products. Pinelli
operates out of one facility in Durango, Mexico. The Company exchanged
$3.0 million for its share of the outstanding common stock of Pinelli,
and accounts for its investment utilizing the equity method of
accounting. The Company retains an option to acquire an additional 5%
interest for $1 million. The option expires after December 1, 2001. In
conjunction with this investment, the Company advanced $3.2 million in
cash to Pinelli in exchange for a note receivable. The note bears
interest at an annual rate of two and one-half percent above the prime
rate and the principal is due no later than December 1, 2003.
In addition, the Company completed other business combinations during
1998 which are not material to its financial condition and results of
operations and have been excluded from the discussion above.
The following unaudited pro forma consolidated results of operations for
the twelve months ended December 26, 1998 and December 27, 1997 assumes
the acquisitions of SLP, Shoffner, and ACS occurred on December 29, 1996
(in thousands, except per share data). The pro forma effects of AGP, ILC
and certain other acquisitions are not included because they are not
material individually, or in the aggregate.
30
<PAGE> 32
<TABLE>
<CAPTION>
For the Year Ended For the Year Ended
December 26, 1998 December 27, 1997
(unaudited) (unaudited)
------------------ ------------------
<S> <C> <C>
Net sales........................... $1,269,127 $1,218,743
Net earnings........................ $ 26,986 $ 23,898
Earnings per share:
Basic........................ $ 1.31 $ 1.16
Diluted...................... $ 1.26 $ 1.13
Weighted average shares outstanding:
Basic........................ 20,663 20,528
Diluted...................... 21,359 21,234
</TABLE>
The pro forma results above include certain adjustments to give effect to
amortization of goodwill, interest expense, compensation of management,
certain other adjustments, and related income tax effects. The pro forma
results are not necessarily indicative of the operating results that
would have occurred had the acquisitions been completed at the beginning
of the earliest period presented, nor are they necessarily indicative of
future operating results.
C. REORGANIZATION COSTS
In the fourth quarter of 1997, the Company announced a plan of
reorganization. Management believes the reorganization will allow the
Company to be more efficient in its procurement of raw materials, improve
the utilization of its assets, and take advantage of its national
presence to create new business opportunities with national customers and
vendors. In 1998, the Company:
- Consolidated the management of its operating companies from five
regional companies down to two integrated divisions.
- Consolidated its regional purchasing operations from five offices down
to two.
- Commenced the consolidation on its Southern California operations from
two plants down to one.
- Discontinued its treating operations in North East, Maryland.
- Discontinued manufacturing and/or selling certain products and product
lines.
These activities resulted in a reorganization charge which incorporated
the cost of:
- Employee severance agreements.
- Writing down fixed assets abandoned or sold to their net realizable
value.
31
<PAGE> 33
- Future lease payments for facilities which were abandoned.
- Writing down inventory of a discontinued product line to its net
realizable value.
- Future remediation costs at the discontinued treating plant.
The reorganization charge of $1.6 million in 1997 consisted of
termination benefits of $448,000, writedowns of fixed assets of $260,000,
abandoned lease costs of $216,000, and environmental remediation costs of
$695,000. During 1998, the Company made payments related to the
reorganization of $379,000 and reclassed other amounts against the
related fixed asset. The remaining accrued amounts aggregating $401,000
relate to termination benefits that are expected to be paid in 1999 and
future lease payments.
D. DEBT
Effective November 13, 1998, the Company obtained a five-year, $175
million revolving credit facility which includes amounts reserved for
letters of credit. The facility expires in November 2003, and replaced
the Company's unsecured lines of credit which had short-term borrowings
of $4,500,000 at December 27, 1997. Borrowings under the revolver were at
50 basis points over the applicable Eurodollar rate, while borrowings
under the lines were at negotiated rates below each respective bank's
prime rate. The average rates on these borrowings in 1998 and 1997 were
5.6% and 6.0%, respectively. In 1996, the Company did not draw on its
lines. The amounts outstanding under the revolving credit facility are
included in the long-term debt summary below. Outstanding letters of
credit extended on the Company's behalf aggregated $4,030,000 at December
26, 1998.
A majority-owned subsidiary of the Company has an operating line of
credit with a bank totaling $2,380,000, which bears interest at the
bank's prime lending rate (7% at December 26, 1998) plus 2.25% per annum.
The line is secured by inventory and accounts receivable. There was
$1,997,000 outstanding on this line at December 26, 1998. In addition,
this subsidiary has outstanding letters of credit totaling approximately
$1.0 million at December 26, 1998.
On December 21, 1998, the Company completed a $100 million private
placement of senior unsecured notes payable. The notes were issued in two
installments. The Company received the first two tranches aggregating $81
million on December 21, 1998, and the remaining tranche of $19 million on
February 4, 1999. The notes have an average life of nine years and an
average interest rate of 6.9%.
32
<PAGE> 34
Long-term debt and capital lease obligations are summarized as follows at
December 26, 1998 and December 27, 1997 (amounts in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- -------
<S> <C> <C>
Senior unsecured notes, $5,714 due annually commencing May 1998 through
May 2004, interest due semi-annually at 7.15%............................... $ 34,286 $40,000
Series 1998-A Senior Notes Tranche B, due on December 21,
2008, interest payable semi-annually at 6.98% commencing
June 21, 1999................................................................ 59,500
Series 1998-A Senior Notes Tranche A, due on December 21,
2005, interest payable semi-annually at 6.69% commencing
June 21, 1999................................................................ 21,500
Revolving credit facility totaling $175,000,000, due on
November 13, 2003, interest due monthly at a floating rate
(5.28% at December 26, 1998)................................................. 16,380
Bank term loan, $119 due monthly through November 1999,
interest due monthly at 7.75%................................................ 1,429 2,738
Bank term loan, $350 due semi-annually through December 1999,
interest due monthly at 9.67%................................................ 700 1,400
Bank term loan, $500 due semi-annually through December 2001,
interest due monthly at 5.25%................................................ 4,000
Capital lease obligations, interest imputed at rates ranging
from 7.25% to 8.00%.......................................................... 3,430 826
Notes payable under non-compete agreements, interest imputed
at a rate of 7.0%............................................................ 2,014 436
Other.......................................................................... 2,641 577
-------- -------
141,880 49,977
Less current portion........................................................... 9,760 9,789
-------- -------
Long-term portion.............................................................. $132,120 $40,188
======== =======
</TABLE>
The terms of the revolving credit facility and senior unsecured note
agreements (collectively the "agreements") require, in part, the Company
to maintain a minimum net worth and comply with certain financial ratios.
The agreements also restrict the amount of additional indebtedness the
Company may incur and the amount of assets which may be sold.
33
<PAGE> 35
At December 26, 1998, the principal maturities of long-term debt and
capital lease obligations are as follows (in thousands):
<TABLE>
<S> <C>
1999..................................... $ 9,760
2000..................................... 9,870
2001..................................... 6,076
2002..................................... 6,060
2003..................................... 28,124
Thereafter............................... 81,990
-------
$141,880
========
</TABLE>
At December 26, 1998, the estimated fair value of the Company's long-term
debt, including the current portion, was $142,162,000, which was $282,000
more than the carrying value. The estimated fair value is based on rates
anticipated to be available to the Company for debt with similar terms
and maturities. The estimated fair value of notes payable included in
current liabilities approximated the carrying value.
E. LEASES
Leased property included in the balance sheet at December 26, 1998 and
December 27, 1997 is as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
Land and improvements................... $ 295 $ 276
Buildings and improvements.............. 481 319
Machinery and equipment................. 3,111 251
------ -----
3,887 846
Less accumulated amortization........... (369) (186)
------ -----
$3,518 $ 660
====== =====
</TABLE>
The Company leases certain real estate under operating lease agreements
with original terms ranging from one to ten years. The Company is
required to pay real estate taxes and other occupancy costs under these
leases. Certain of these leases carry renewal options of five to fifteen
years. The Company also leases motor vehicles and equipment under
operating lease agreements, for periods of one to seven years. Future
minimum payments under noncancellable leases at December 26, 1998 are as
follows (in thousands):
34
<PAGE> 36
<TABLE>
<CAPTION>
Capital Operating
Leases Leases Total
------ ------ -----
<S> <C> <C> <C>
1999................................... $ 546 $ 3,814 $ 4,360
2000................................... 489 2,627 3,116
2001................................... 473 2,017 2,490
2002................................... 2,365 1,395 3,760
2003................................... 259 785 809
Thereafter............................. 927 927
------ ------- -------
Total minimum lease payments........... 4,132 $11,565 $15,462
======= =======
Less imputed interest ................. (702)
------
Present value of minimum lease payments.. $3,430
======
</TABLE>
Rent expense was approximately $5,766,000, $4,816,000 and $3,718,000 in
1998, 1997 and 1996, respectively, including approximately $100,000 paid
annually to the Company's profit-sharing plan for the lease of certain
property in 1996.
F. DEFERRED COMPENSATION
The Company has established a program whereby certain executives
irrevocably elected to defer receipt of certain compensation in 1985
through 1988. Deferred compensation payments to these executives will
commence upon their retirement from the Company. The Company has
purchased life insurance on such executives, payable to the Company in
amounts which, if assumptions made as to mortality experience, policy
dividends and other factors are realized, will accumulate cash values
adequate to reimburse the Company for all payments for insurance and
deferred compensation obligations. In the event cash values are not
sufficient to fund such obligations, the program allows the Company to
reduce benefit payments to such amounts as may be funded by accumulated
cash values.
G. COMMON STOCK
In April 1994, shareholders approved the Employee Stock Purchase Plan
("Stock Purchase Plan") and Director Retainer Stock Plan ("Stock Retainer
Plan"). The Stock Purchase Plan allows eligible employees to purchase
shares of Company stock at a share price equal to 90% of fair market
value on the purchase date. In 1998, 1997 and 1996, 15,016, 8,677 and
3,471 shares, respectively, were issued under this Plan for amounts
totaling approximately $208,000, $113,000 and $33,000, respectively. The
Stock Retainer Plan allows eligible members of the Board of Directors to
defer their retainer fees and receive shares of Company stock at the time
of their retirement, disability or death. The number of shares to be
received is equal to the amount of the retainer fee deferred multiplied
by 110% divided by the fair market value of a share of Company stock at
the time of deferral, and is increased for dividends declared. The
Company has accrued approximately $163,000, $123,000 and $83,000 at
December 26, 1998, December 27, 1997 and December 28, 1996, respectively,
for amounts incurred under this Plan.
35
<PAGE> 37
The Employee Stock Gift Program was approved by the Board of Directors in
January 1994, and allows management to gift shares of stock to eligible
employees based on length of service. The Company gifted 400, 275 and 500
shares of stock under this Plan in 1998, 1997 and 1996, respectively, and
recognized the market value of the shares at the date of issuance as an
expense.
On October 27, 1995, the Board of Directors approved a share repurchase
program for up to 1,000,000 shares of the Company's common stock.
Repurchases are to be made to the extent of share issuances under the
Company's employee benefit and stock option plans. In 1997 and 1996, the
Company repurchased 82,502 and 100,000 shares, respectively, of its
common stock for $1,119,000 and $822,000, respectively.
In January 1997, the Company instituted a Directors' Stock Grant Program.
In lieu of a cash increase in the amount of Director fees, each outside
Director receives 100 shares of stock for each Board Meeting attended up
to a maximum of 400 shares per year. In 1998, the Company issued 1,500
shares and recognized the market value of the shares at the date of
issuance as an expense.
On April 22, 1997, the shareholders approved an amendment to the
Company's Articles of Incorporation increasing authorized common stock
from 25,000,000 shares to 40,000,000 shares. Apart from the shares of
common stock reserved for issuance under the above-referenced plans and
plans outlined in Note H, the Company does not have any present plan,
understanding or agreement to issue additional shares of common stock.
On April 22, 1997, the shareholders approved the Long Term Stock
Incentive Plan to succeed the Company's 1994 Employee Stock Option Plan.
The Plan reserves a maximum of 1,100,000 shares, and provides for the
granting of incentive stock options, reload options, stock appreciation
rights, restricted stock, performance shares, and other stock-based
awards. The term of the Plan is ten years. As of December 27, 1997, no
awards had been granted under this Plan. In 1998, the Company granted
incentive stock options for 471,500 shares, as discussed in Note H.
At December 26, 1998, a total of 2,137,530 shares are reserved for
issuance under the Plans mentioned above and under Note H below.
H. STOCK OPTIONS AND STOCK-BASED COMPENSATION
In January 1998, the Company granted incentive stock options for 346,500
shares of common stock under its Long Term Stock Incentive Plan. Options
were granted to certain employees and officers of the Company at exercise
prices ranging from $13.19 to $24.46, which equaled or exceeded the
market value of the stock on the date of each grant. The options are
exercisable on various dates from 2001 through 2013, and the option
recipients must be employed by the Company at the time of exercise.
Options for 11,462 shares were canceled during the year as a result of
terminated employees.
36
<PAGE> 38
On April 22, 1998, the Company granted incentive stock options for
125,000 shares of common stock under its Long Term Stock Incentive Plan.
Options were granted to certain employees and officers of the Company at
exercise prices ranging from $17.44 to $31.30, which equaled or exceeded
the market value of the stock on the date of each grant. The options are
exercisable on various dates from 2001 through 2013, and the option
recipients must be employed by the Company at the time of exercise.
As permitted under Statement of Financial Accounting Standards No. 123
("SFAS 123"), "Accounting for Stock-Based Compensation," the Company
continues to apply the provisions of APB Opinion No. 25 which recognizes
compensation expense under the intrinsic value method. Had compensation
cost for the stock options granted in 1998 been determined under the fair
value based method defined in SFAS 123, the Company's net earnings and
earnings per share would have been reduced to the following pro forma
amounts in 1998 (in thousands, except per share amounts).
<TABLE>
<S> <C>
Net Earnings:
As Reported.............. $26,419
Pro Forma................ 23,842
EPS - Basic:
As Reported.............. $1.33
Pro Forma................ 1.20
EPS - Diluted:
As Reported.............. $1.28
Pro Forma................ 1.16
</TABLE>
Because the fair value based method of accounting has not been applied to
options granted prior to fiscal year 1996, the resulting pro forma
compensation cost may not be indicative of future amounts.
The fair value of each option granted in 1998 is estimated on the date of
the grant using the Black-Scholes option pricing model with the following
weighted average assumptions.
<TABLE>
<S> <C>
Risk Free Interest Rate................... 6.20%
Expected Life............................. 8.0 years
Expected Volatility....................... 28.35%
Expected Dividend Yield................... 0.41%
</TABLE>
On June 8, 1989, the Company granted non-qualified stock options to
certain executive officers. In April 1997, two officers exercised all of
their options and purchased 140,000 shares of stock for $364,400. In
February 1996, a former officer exercised all of his options and
purchased 60,000 shares of stock for $132,600. At December 27, 1997, all
of the non-qualified options granted under this plan had been exercised.
37
<PAGE> 39
On June 1, 1993, shareholders approved the Incentive Stock Option Plan
(the "Plan") for officers of the Company. Options for the purchase of all
1,200,000 shares of the Company's common stock authorized under the Plan
have been granted. The Plan provides that the options are exercisable
only if the officer is employed by the Company at the time of exercise
and holds at least seventy-five percent of the individuals' shares held
on April 1, 1993. The Plan also requires the option shares to be held for
periods of six months to three years. In April of 1998, 1997 and 1996,
officers exercised options and purchased 80,000 shares, 37,500 shares and
35,000 shares, respectively, for $300,000, $131,250 and $113,750,
respectively. Options for 135,000 shares have been canceled as a result
of terminated employees. The remaining options (shown below in thousands)
are exercisable within thirty days of the anniversary of the Plan in the
years and at the prices shown below:
<TABLE>
<CAPTION>
Numbers of Option Price
Plan Anniversary Shares (per share)
---------------- ---------- ------------
<S> <C> <C>
1999........................... 170 $4.00
2000........................... 80 4.25
2001........................... 163 4.50
2002........................... 170 5.00
2005........................... 170 5.75
2006........................... 60 6.00
2007........................... 60 6.25
2008........................... 40 6.50
---
913
===
</TABLE>
On November 10, 1993, the Company granted an option to purchase 10,000
shares of common stock to an officer of the Company at an option price of
$7.25 per share. The option is exercisable for a period of thirty days
prior to November 10, 2003, and the officer must be employed by the
Company at the time of exercise. The agreement also requires the
purchased shares to be held at least one year.
I. OFFICERS' STOCK NOTES RECEIVABLE
Officers' stock notes receivable represent notes obtained by the Company
from certain officers for the purchase of the Company's common stock. On
January 1, 1997, the Company sold 30,188 shares of common stock to four
officers in exchange for additional notes receivable totaling $399,991.
Interest on the notes ranges from fixed rates of seven to eleven percent
per annum and a variable rate of the prime rate less 10% (minimum 6%,
maximum 12%). At December 26, 1998, payments on the notes are due as
follows (in thousands):
38
<PAGE> 40
<TABLE>
<S> <C>
1999................................. $123
2000................................. 83
2001................................. 89
2002................................. 120
2003................................. 57
Thereafter........................... 330
----
$802
</TABLE>
J. LIFE INSURANCE
In September 1995, the Company acquired a second-to-die life insurance
policy on its Chairman of the Board and his spouse, the Company's largest
shareholders. The death benefit on the policy totals $8,700,000 and the
Company is the beneficiary. The Company also maintains an officer's life
insurance policy on the Chairman with a death benefit of $1,300,000. The
cash surrender value on these policies at December 26, 1998 is included
in "Other Assets."
K. RETIREMENT PLAN
The Company has a profit sharing and 401(k) plan for the benefit of
substantially all of its employees. Amounts contributed to the plan are
made at the discretion of the Board of Directors. The Company contributed
approximately $1,462,000, $1,135,000 and $1,528,000 in 1998, 1997 and
1996, respectively. In addition, the Company matched 25% of employee
contributions, on a discretionary basis, totaling $597,000, $521,000 and
$440,000 in 1998, 1997 and 1996, respectively. The basis for matching
contributions may not exceed the lesser of 6% of the employee's annual
compensation or $10,000.
L. INCOME TAXES
Income tax provisions for the years ended December 26, 1998, December 27,
1997, and December 28, 1996 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Currently payable:
Federal.......... $ 13,049 $ 9,047 $ 10,141
State and local.. 1,659 356 2,465
Foreign.......... 615 200
-------- -------- --------
15,323 9,603 12,606
Net Deferred:
Federal.......... 1,048 (674) (504)
State and local.. 244 96 (131)
-------- -------- --------
1,292 (578) (635)
-------- -------- --------
$ 16,615 $ 9,025 $ 11,971
======== ======== ========
</TABLE>
39
<PAGE> 41
The effective income tax rates are different from the statutory federal
income tax rates for the following reasons:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate... 35.0% 35.0% 35.0%
State and local taxes .............. 2.9 1.4 4.9
Effect of pooling CBC .............. (1.5) (0.1)
Other .............................. 0.7 (0.2) 0.4
---- ---- ----
Effective income tax rate .......... 38.6% 34.7% 40.2%
==== ==== ====
</TABLE>
The Company has no present intention of remitting undistributed earnings
of its Canadian subsidiaries aggregating $3,700,000 at December 26, 1998
and, accordingly, no deferred tax liability has been established relative
to these earnings. If these amounts were not considered permanently
reinvested, a deferred tax liability of approximately $172,000 would have
been required.
Temporary differences which give rise to deferred tax assets and
liabilities at December 26, 1998 and December 27, 1997 are as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997
--------------------------------- -------------------------------
Deferred Deferred Tax Deferred Deferred Tax
Tax Assets Liabilities Tax Assets Liabilities
------------ ------------ ---------- ------------
<S> <C> <C> <C> <C>
Employee benefits.......... 1,609 (827) $2,374 $ (492)
Depreciation............... 9,536 2,937
Inventory.................. 556 900
Accrued expenses........... 1,820 (531) 595 (372)
All other.................. 191 (78) 272 (307)
------ ------ ------ ------
$4,176 $8,100 $4,141 $1,766
====== ====== ====== ======
</TABLE>
M. COMMITMENTS AND CONTINGENCIES
The Company is self-insured for environmental impairment liability and
accrues an expense for the estimated cost of required remedial actions
when situations requiring such action arise. The Company owns and
operates a number of facilities throughout the United States that
chemically treat lumber products. In connection with the ownership and
operation of these and other real properties, and the disposal or
treatment of hazardous or toxic substances, the Company may, under
various federal, state, and local environmental laws, ordinances, and
regulations, be potentially liable for removal and remediation costs, as
well as other potential costs, damages, and expenses. Remediation
activities are currently being conducted or planned at the Company's
Granger, Indiana; North East, Maryland; Union City, Georgia; Stockertown,
Pennsylvania; Elizabeth City, North Carolina; and Schertz, Texas wood
preservation facilities.
40
<PAGE> 42
The Company has accrued, in other long-term liabilities, amounts totaling
$2,324,000 and $2,038,000 at December 26, 1998 and December 27, 1997,
respectively, representing the estimated costs to complete remediation
efforts currently in process and those expected to occur in the future.
The accrued costs include operating ground water reclamation wells,
estimated costs of chemical treatments and consultant fees.
Various lawsuits and claims, including those involving ordinary routine
litigation incidental to its business, to which the Company is a party,
are pending, or have been asserted, against the Company. Although the
outcome of these matters cannot be predicted with certainty, and some of
them may be disposed of unfavorably to the Company, management has no
reason to believe that their disposition will have a material adverse
effect on the consolidated financial position, operating results or
liquidity of the Company.
On December 26, 1998, the Company had outstanding purchase commitments on
capital projects totaling $9,300,000.
N. NON-COMPETE AGREEMENT WITH FORMER OFFICER
In February 1996, the Company entered into a consulting and non-compete
agreement with one of its former officers. Included in the agreement are
conditions that the former officer provide certain consulting services
and agree not to compete with the Company for a period of eleven years.
The Company will make a future payment to the officer totaling $100,000
in 1999. The non-competition asset is being amortized on a straight-line
basis over the eleven year non-compete period.
O. SEGMENT REPORTING
The Company adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" in 1998. This statement revised the
standards for reporting information about operating segments in financial
statements and for related disclosures about products and services,
geographic areas, and major customers. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision
maker in deciding how to allocate resources and in assessing performance.
Under the definition of a segment, each of the Company's manufacturing,
treating and distribution facilities may be considered a segment of its
business. Under SFAS No. 131, segments may be aggregated if the segments
have similar economic characteristics and if the nature of the products,
distribution methods, customers and regulatory environments are similar.
The Company has chosen to aggregate its facilities into one reporting
segment. The Company operates manufacturing, treating and distribution
facilities throughout North America. In 1998, 1997 and 1996, 20%, 18% and
15% of net sales, respectively, were to a single customer.
41
<PAGE> 43
Information regarding principal geographic areas was as follows (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------------------------- ------------------------- ----------------------
Long-Lived Long-Lived Long-Lived
Net Sales Assets Net Sales Assets Net Sales Assets
--------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States....... $1,210,073 $226,472 $1,040,321 $69,788 $876,675 $66,747
Canada.............. 28,254 8,249 25,046 1,958 13,338 2,091
Mexico.............. 580 3,472 933 1,217
---------- -------- ---------- ------- -------- -------
Total............... $1,238,907 $238,193 $1,066,300 $71,746 $891,230 $68,838
========== ======== ========== ======= ======== =======
</TABLE>
Sales generated in Canada and Mexico are primarily to customers in the
United States of America.
P. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth selected financial information for all of
the quarters during the years ended December 26, 1998 and December 27,
1997 (in thousands, except per share data):
<TABLE>
<CAPTION>
First Second Third Fourth
-------------------- -------------------- -------------------- --------------------
1998 1997 1998 1997 1998 1997 1998 1997
---------- --------- --------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............... $238,197 $219,450 $388,677 $348,060 $341,071 $292,264 $270,962 $206,526
Gross profit............ 24,573 20,509 46,315 33,401 42,879 25,096 35,447 16,472
Net earnings (loss)..... 3,577 3,627 11,123 9,517 8,498 5,496 3,221 (1,683)
Diluted earnings (loss)
per share............. .20 .20 .52 .52 .40 .30 .15 (.10)
</TABLE>
Amounts have been restated for all periods presented due to the
acquisition of Consolidated Building Components, Inc. on December 22,
1997, which was accounted for as a pooling of interests. See Note B of
Notes to Consolidated Financial Statements.
42
<PAGE> 44
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Company's common stock trades on the Nasdaq National Market tier of the
Nasdaq Stock Market under the symbol UFPI. The following table sets forth the
range of high and low sales prices as reported by Nasdaq.
<TABLE>
<CAPTION>
Fiscal 1998 High Low Fiscal 1997 High Low
----------- ---- --- ----------- ---- ---
<S> <C> <C> <C> <C> <C>
Fourth Quarter......... 20.500 12.668 Fourth Quarter........ 17.750 12.500
Third Quarter.......... 18.750 14.125 Third Quarter......... 18.000 14.000
Second Quarter......... 18.500 15.500 Second Quarter........ 14.750 12.260
First Quarter.......... 17.000 12.250 First Quarter......... 14.875 11.875
</TABLE>
There were approximately 5,700 shareholders of record as of March 1, 1999.
In 1998, the Company paid dividends on its common stock of $.035 per share in
June and again in December. The Company intends to continue with its current
dividend policy for the foreseeable future, and retain the balance of its
earnings for use in the expansion of its business.
43
<PAGE> 1
EXHIBIT 21
LIST OF REGISTRANT'S SUBSIDIARIES
1. Universal Forest Products Eastern Division, Inc., a Michigan Corporation.
2. Universal Forest Products Western Division, Inc., a Michigan Corporation.
3. Shoffner Industries, Inc., a Michigan Corporation.
4. Shoffner Industries, LLC., a Limited Liability Company.
5. Consolidated Building Components, Inc., a Pennsylvania Corporation.
6. Euro-Pacific Building Materials, Inc., an Oregon Corporation.
7. Universal Forest Products of Canada, Inc., a Canadian Corporation.
8. Nascor, Inc., a Canadian Corporation (59% owned).
9. Universal Forest Products de Mexico, S.A. de C.V., a Mexican Corporation.
10. Universal Forest Products Mexico Holdings, S. de R.L. de C.V., a Mexican
Corporation.
11. Universal Forest Products - FSC, Inc., a Barbados Corporation.
12. Universal Forest Products Holding Company, Inc., a Michigan Corporation.
13. Universal Forest Products Reclamation Center, Inc., a Michigan
Corporation.
14. Universal Truss, Inc., a Michigan Corporation.
15. Universal Consumer Products, Inc., a Michigan Corporation.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement No.
33-1465835 of Universal Forest Product, Inc. on Form S-8 of our report dated
January 25, 1999, appearing in and incorporated by reference in the Annual
Report on Form 10-K of Universal Forest Products, Inc. for the year ended
December 26, 1998.
DELOITTE & TOUCHE LLP
Grand Rapids, Michigan
March 25, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S AUDITED FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED DECEMBER
26, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> DEC-26-1998
<EXCHANGE-RATE> 1
<CASH> 920
<SECURITIES> 0
<RECEIVABLES> 66,386
<ALLOWANCES> 3,540
<INVENTORY> 108,399
<CURRENT-ASSETS> 181,877
<PP&E> 193,375
<DEPRECIATION> 61,389
<TOTAL-ASSETS> 420,070
<CURRENT-LIABILITIES> 82,018
<BONDS> 125,500
0
0
<COMMON> 20,710
<OTHER-SE> 170,873
<TOTAL-LIABILITY-AND-EQUITY> 420,070
<SALES> 1,238,907
<TOTAL-REVENUES> 1,239,289
<CGS> 1,089,693
<TOTAL-COSTS> 97,056
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,506
<INCOME-PRETAX> 43,034
<INCOME-TAX> 16,615
<INCOME-CONTINUING> 52,158
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,419
<EPS-PRIMARY> 1.33
<EPS-DILUTED> 1.28
</TABLE>
