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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________
FORM 10-K
(Mark One)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended October 31, 1996 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from __________ to ______________
COMMISSION FILE NUMBER 0-23442
___________________________
CAMERON ASHLEY BUILDING PRODUCTS, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 58-1984957
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11651 PLANO ROAD, DALLAS, TEXAS 75243
(Address of principal executive offices) (Zip Code)
214-860-5100
(Registrant's telephone number, including area code)
___________________________
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK
(Title of Class)
Indicate by check 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. [X]
Aggregate market value of the Common Stock of the Registrant held by
non-affiliates of the Registrant (6,736,885 shares) on January 23,
1997: $91,790,058.
The number of shares of Common Stock of the Registrant outstanding as of
January 23, 1997 was 9,059,721 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
The information called for by Part III is incorporated by reference to the
definitive Proxy Statement for the Annual Meeting of Stockholders of the
Company to be held March 4, 1997, which will be filed with the Securities and
Exchange Commission not later than 120 days after October 31, 1996.
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PART I
ITEM 1. BUSINESS
GENERAL
Cameron Ashley Building Products, Inc., (together with its subsidiaries
Wm. Cameron & Co. ("Cameron") and Ashley Aluminum, Inc. ("Ashley"), the
"Company") is a national distributor of a broad line of building products
that are used principally in home improvement, remodeling and repair work and
in new residential construction. The Company's product lines include
roofing, millwork, pool and patio enclosure materials, insulation, siding,
steel products, industrial metals and a variety of other building materials.
The Company estimates that approximately 58% of its total sales are currently
made to the home improvement and the remodeling and repair markets and that
approximately 42% of its total sales are made to the new construction market.
The Company distributes its products through its extensive 107-branch network
to independent building materials dealers, professional builders, large
contractors and mass merchandisers but does not target individual homeowners
directly. As a result of its successful expansion program, the Company
currently operates distribution facilities in 29 states and serves markets in
45 states and parts of Mexico and Canada.
HISTORY OF THE BUILDING MATERIALS DISTRIBUTION CHANNEL
Prior to the 1970's, building materials distribution in both rural and
metropolitan markets was handled largely by independent dealers (i.e.,
lumberyards and hardware stores). These dealers, who generally purchased
their products from distributors, sold building products directly to
homeowners and small contractors as well as to large contractors and
homebuilders.
The advent of mass merchandisers, such as Home Depot and Lowe's, in the
late 1970's and 1980's altered this distribution channel dramatically in
metropolitan markets as these retailers displaced many metropolitan dealers.
A core strength of these mass merchandisers was marketing a broad range of
competitively priced home improvement and do-it-yourself products to the
homeowner and small contractor. Accordingly, independent building materials
distributors, who traditionally sold building products to metropolitan
dealers, redirected their efforts and worked to (i) sell directly to large
contractors and homebuilders in metropolitan markets, and (ii) provide mass
merchandisers with fill-in and specialty products that mass merchandisers
would not stock in their retail inventory.
This distribution structure remains in place today. In metropolitan
areas, mass merchandisers primarily sell products to retail customers such as
homeowners and small contractors. In rural areas, dealers (lumberyards and
hardware stores) sell products to homeowners and small contractors as well as
to large contractors and professional homebuilders. Independent building
products distributors, such as the Company, and major manufacturers, such as
Georgia Pacific and Weyerhaeuser, do not sell directly to retail customers.
Instead, they distribute products to (i) professional homebuilders and
contractors in metropolitan markets, (ii) dealers in rural markets, and (iii)
mass merchandisers in metropolitan areas.
INDUSTRY OVERVIEW
According to NATIONAL HOME CENTER NEWS, U.S. wholesale sales by the top
145 building products distributors were approximately $27.5 billion in 1995
compared to $27.7 billion in 1994. The building products distribution
industry is fragmented and characterized by a large number of small local or
regional distribution companies and a small number of major corporations with
national distribution capability. Many distributors are privately owned,
relationship based companies that emphasize service, delivery and reliability
to their customers. As a result of their small size, however, these
companies generally lack the purchasing power of a larger entity, may lack
the resources to offer multiple brands and broad lines of products and may
not possess sophisticated inventory management and control systems necessary
to operate efficiently in multiple branches. Management believes that the
competitive environment faced by small distributors, coupled with the desire
of many owners of such distributors for liquidity, has prompted a trend
toward industry consolidation and that such consolidation offers significant
opportunities to expansion-oriented distributors such as the Company.
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INDUSTRY CONSOLIDATION
The consolidation trend in the industry is supported and driven by both
(i) the benefits to major building products manufacturers and (ii) the mass
merchandisers' desire for nationwide servicing of their retail stores. The
advent of emerging national building products distributors, such as the Company,
is creating an opportunity for building products manufacturers to negotiate
national or regional supply arrangements with targeted distributors. Management
believes that building products manufacturers have begun to recognize that
reliance on targeted national distributors helps the manufacturers improve their
mix of higher margin products, control inventory costs, lessen credit risk and
maintain product availability over a broad territory. Management expects that
the evolution of this trend will enable large distributors to expand their
services and receive competitive pricing and purchasing terms from
manufacturers.
Management also believes that as mass merchandisers gain retail market
share and seek to control their inventory costs on non-commodity and specialty
products, these companies will become more important customers to the Company.
The Company is increasingly able to offer these mass merchandisers a reliable
supply of fill-in and specialty products on a nationwide basis. This value-
added service enhances the mass merchandisers' ability to (i) offer their retail
customers, particularly the small contractor, the broadest possible selection of
building products and (ii) manage their retail store inventories.
COMPANY STRATEGY
GENERAL
The Company's primary strategic objective is to establish a leading
national distribution network for a broad range of building products. The
principal elements of the Company's strategy include expanding its revenue base
through selective acquisitions, improving the performance of acquired businesses
and increasing the profitability of existing operations. By pursuing these
initiatives, the Company seeks to: (i) achieve growth and profitability superior
to its competition; (ii) provide building products manufacturers with unified
nationwide distribution capabilities; and (iii) expand its distribution network
to serve mass merchandisers of building materials and home improvement products.
ACQUISITION PROGRAM
In evaluating expansion opportunities, the Company generally seeks to
acquire distributors in order to enter markets in which the Company does not
have a presence or enable the Company to expand its product lines in existing
markets. The Company complements its acquisition activity by selectively
opening new branches. After acquiring or opening a new location, the Company
concentrates on expanding product lines offered at the location and improving
the location's operational efficiency. Since its formation in 1991, the Company
has completed 24 acquisitions and has grown from 40 branches as of December 31,
1991 to 107 branches as of October 31, 1996.
In January and March of 1993, the Company acquired certain Midwestern
distribution businesses from Owens-Corning Fiberglas Supply which established
its presence in Chicago, Detroit, Atlanta and Charlotte and added increased
distribution capacity in Dallas/Fort Worth. Through these acquisitions the
Company also added Owens-Corning Fiberglass Corporation ("Owens-Corning")
insulation and related items to its product lines in many of the Company's
existing operations.
In August 1994 and November 1994, Company acquired the Distribution
Division of Bird Incorporated ("Bird Distribution"), establishing a substantial
presence in New England and adding to its operations in the Midwest, Southeast
and Southwest. The Bird Distribution acquisition added to the Company's
purchasing power and established a relationship with Bird Incorporated, a large
manufacturer of roofing products. In December 1994, the Company acquired the
assets of CA Co. The CA Co. acquisition brought the Company into the Pacific
Northwest, adding branches in Washington and western Idaho.
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In May 1995, the Company acquired the assets of Warehouse Moulding and Door
Corporation (dba Albuquerque Door), enhancing its two existing branches in the
New Mexico market. In June 1995, the Company acquired the assets of States
Dealer Supply, Inc. initiating operations in the Oregon market. In September
1995, the Company acquired certain assets of Star, Inc. establishing a presence
in Utah and adding to its operations in Oregon and Arizona.
In March 1996, the Company acquired certain assets of a distribution
division of Premdor, Inc. in Ogden, Utah, establishing a millwork presence in
Utah. In May 1996, the Company acquired the assets of Jett Supply Co.,
initiating operations in Colorado and enhancing its two existing branches in
Chicago, Illinois and Houston, Texas. In May 1996, the Company acquired the
assets of Mile High Roofing & Exterior Supply Co., enhancing operations in
Colorado with locations in Loveland, Denver and Colorado Springs. In July
1996, the Company acquired the assets of California Roofers Supply, a
division of Star, Inc., initiating operations in California with eight
locations. In September 1996, the Company acquired the assets of Dependable
Roofing & Materials, establishing a presence in Palm Springs, California.
The pro forma information on acquisitions is discussed in Note 3 of the
financial statements.
OPERATING STRATEGY
The Company's operating strategy is focused on integrating acquired
businesses and improving the performance of acquired businesses and of the
Company's existing operations. Key elements of the Company's operating strategy
include the following:
CAPITALIZE ON PURCHASING ECONOMIES. The Company generally negotiates with
its vendors on a company-wide or regional basis to obtain volume discounts and
other favorable terms. Individual branch managers are responsible for selecting
and ordering inventory tailored to the varied needs of customers in their local
markets. As a significant customer to many of its vendors, the Company is able
to obtain competitive pricing and purchasing terms, ensure timely delivery of
products and maintain appropriate inventory availability. See "Business --
Purchasing."
CENTRALIZE MANAGEMENT INFORMATION SYSTEMS AND ADMINISTRATION. The Company
maintains centralized computer systems to support decision making throughout the
organization. The Company's branches are equipped with on-line, real time
management information systems. Acquired branches are converted to the
Company's systems either at the time of acquisition or shortly thereafter. The
Company's management information systems enable management to control and
monitor inventory levels, perform invoicing and order entry, establish delivery
routes and schedules and monitor sales and profitability by branch. Each branch
is, therefore, able to respond to specific customer needs and overall market
demand quickly and to monitor the effects of actions or decisions on performance
and profitability as they occur. Corporate management is able to monitor branch
and regional performance by utilizing the same system. The Company has also
centralized many administrative functions, such as employee benefits, insurance,
audit, human resources, accounting and legal, both to achieve economies of scale
and to help branch managers remain focused on maximizing profitability of their
locations. The Company utilizes electronic data interchange ("EDI") as a means
of facilitating the order process with its major suppliers and plans for
additional expansion to include larger customers.
DECENTRALIZE OPERATIONS. The Company has adopted a decentralized operating
philosophy to maximize the Company's responsiveness to its customers' varied
needs and to give the Company's branch managers a sense of responsibility and
accountability for the performance of their own operations and the Company as a
whole. While the Company negotiates price and purchase terms on a company-wide
or regional basis and uses central management information systems to achieve
economies of scale unavailable to smaller competitors, each branch manager is
responsible for selecting and ordering inventory to meet the needs of his
customers and for creating localized sales promotions and marketing programs.
Further, each branch manager has individual profit-and-loss responsibility for
his branch and receives incentive compensation based primarily upon the
profitability and return on working investment of his branch.
BROADEN PRODUCT LINES. The Company develops long-term relationships with
its customers by providing them with a broad range of products at competitive
prices. By broadening product lines, the Company improves the overall
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product mix available to its customers and seeks to enhance gross profit
margins by adding higher-margin specialty products to its branches. Acquired
branches, in particular, historically have had lower margin product lines
than those generally offered by the Company and have had a higher percentage
of direct shipments. Distribution of a wide variety of products also reduces
shipping costs by allowing delivery of more products per truckload, assists
dealers and mass merchandisers in managing their inventory burdens through
greater reliance on the Company and enables dealers to provide "one-stop
shopping" for customers with a variety of product needs. Products offered by
each branch vary according to market, geographic location and customer needs.
Management continually seeks opportunities to broaden the Company's product
lines through acquisitions of distributors offering complementary product
lines and by establishing relationships with additional vendors.
DIVERSIFY MARKETS. The Company has established a presence in a substantial
portion of the United States. As a result, the Company's financial performance
is not tied to a single geographic region's economy or other characteristics.
The diversity of the Company's customer base and the wide variety of
applications for the Company's products also decrease the impact of a downturn
in demand in any particular market segment. The Company works to benefit
further from its diversified markets by tailoring product offerings at the
Company's branches to local demand and market conditions. The risks posed by
the cyclical new residential construction market are mitigated by the Company's
participation in the less cyclical residential rehabilitation and remodeling
market.
FUTURE EXPANSION
Management believes that the building products distribution industry is
poised for further consolidation in response to the competitive disadvantages
faced by small distributors and the increasing demand by mass merchandisers and
building products manufacturers for larger, more efficient distributors. The
industry is characterized by a large number of small local or regional
distribution companies and a small number of major corporations with national
distribution capability. Many independent distributors (i.e. distributors that
are not controlled by building products manufacturers or mass merchandisers) are
privately owned, relationship-based companies that emphasize service, delivery
and reliability to their customers. Management believes that the competitive
environment faced by small distributors, coupled with the desire of many owners
of such distributors for liquidity, has prompted a trend toward industry
consolidation that offers significant opportunities for expansion oriented
distributors such as the Company. Management intends to pursue further
expansion of the Company's distribution network and product lines through
selective acquisitions and internal growth and, in the process, to complete the
Company's national distribution network. Management believes that this
expansion will position the Company to realize fully the economies of scale and
other efficiencies available to a nationwide distributor.
The Company has worked to develop, build and implement a corporate
infrastructure to support continued growth and makes extensive use of computer
information systems, including EDI, to support decision making throughout its
organization. Management believes that existing systems will, with upgrades
underway currently, readily support additional branches and new services.
PRODUCTS
The Company distributes a variety of building products to independent
dealers, professional builders, contractors and mass merchandisers. Its
principal products and markets are described below.
ROOFING PRODUCTS. Shingles, felt, roof tile, commercial roll roofing,
coatings, asphalt, flashings, vents and other roofing products are distributed
to residential and commercial roofing contractors and dealers, including
lumberyards and, to a lesser extent, mass merchandisers. Principal brands of
roofing products include Owens-Corning, GAF, CertainTeed, Monier, Genstar, Bird
Incorporated and Elk. Management believes the Company is one of the largest
roofing products wholesalers in the United States.
MILLWORK. Millwork includes doors, door units and component parts,
molding, windows, stair parts, blinds, shutters and screens, which are
distributed to dealers, contractors and builders in the residential construction
industry. The Company's major millwork lines include ThermaTru (residential
entry doors), Abitibi (prefinished moldings, shutters and architectural work),
Steves & Sons and Premdor (flush doors), and a variety of other regional
suppliers.
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The Company also pre-hangs door units for residential builders and dealers.
Millwork is distributed at branches located primarily in the Southwest,
Northeast and Northwest.
POOL AND PATIO ENCLOSURE PRODUCTS. Pool and patio enclosure products
include aluminum extrusions, roof panels, gutters, coil, screen, awnings,
handrails and various other exterior aluminum building products. These products
are sold by the Company to residential contractors and installers, who use them
in construction of pool enclosures, screen rooms, mobile home improvement
projects, carports and roof-over applications. Pool and patio enclosures are
widely used in Florida and along the Gulf Coast. Approximately 81% of the pool
and patio enclosure product line is purchased from a variety of suppliers for
redistribution by the Company. The remaining 19% consists of roll-formed roof
panels, gutters and fold-down window awnings fabricated by the Company. The
Company's fabrication capability allows it to produce a variety of sizes and
styles on an as-needed basis to control inventory costs or fill custom orders.
Management believes the Company is Florida's largest distributor of pool and
patio enclosure products.
INSULATION. The Company distributes a broad line of insulation materials
to contractors and dealers. Principal brands distributed by the Company include
Owens-Corning and CertainTeed products that are used in both residential and
commercial applications.
WOOD PRODUCTS. Plywood, siding, shelving, brown board, cabinet lumber and
paneling are distributed to dealers throughout the Southwest, Northeast and
Northwest. These products complement the other product lines offered by the
Company. The Company does not sell framing lumber products.
STEEL PRODUCTS. Steel products include rebar, mesh, corrugated metal,
nails, fencing and pneumatics that are distributed to dealers primarily in the
Southwest. Steel products complement the other construction product lines
offered by the Company.
INDUSTRIAL METALS. Industrial aluminum and stainless steel products fall
primarily into two categories: extrusions and sheet. These products are
purchased by sheet metal businesses, fabricators and manufacturers for use in a
variety of products. The Company purchases extruded products for distribution,
while third party processors and the Company cut sheet products from coils to
standard specifications. In addition, the Company has the ability to cut sheet
products to individual specifications.
VINYL SIDING. Vinyl siding consists of siding, soffit and accessories.
The Company purchases vinyl siding from several industry leaders and
distributes the product to builders, contractors, and mass merchandisers. In
addition, the Company sells trim coils, shutters, J blocks, gable, vents,
columns, rainware, doors and windows to complement this product line.
OTHER BUILDING PRODUCTS. The Company distributes a variety of building
materials such as stucco, aluminum siding, polyethylene, fireplaces, ceiling
tiles, grids, skylights, gutters, sheet rock, nails and fasteners to dealers,
contractors and builders. The product mix offered by each branch is tailored to
the demands of its local market. No other product category in this grouping
accounts for more than 5% of the Company's sales.
The following charts depict the Company's fiscal 1996, 1995 and 1994 net
sales by product type:
FISCAL 1996
[PIE CHART]
Roofing 36%
Industrial Metals 6%
Vinyl Siding 5%
Insulation 6%
Millwork 10%
Pool & Patio Enclosures 11%
Wood 5%
Other Building Products 21%
FISCAL 1995
[PIE CHART]
Roofing 31%
Industrial Metals 8%
Vinyl Siding 4%
Insulation 10%
Millwork 10%
Pool & Patio Enclosures 13%
Wood 8%
Other Building Products 16%
FISCAL 1994
[PIE CHART]
Roofing 29%
Industrial Metals 10%
Insulation 13%
Millwork 11%
Pool & Patio Enclosures 20%
Wood 4%
Other Building Products 13%
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PURCHASING
The Company generally negotiates the price and other purchase terms with
its vendors on a company-wide or regional basis. The Company negotiates large
block purchases of millwork, pool and patio and commodity products centrally to
capture purchasing economies. Branch or regional managers are responsible for
inventory selection and ordering on terms negotiated centrally, so that the
Company remains responsive to local market demand. Branch managers are also
responsible for inventory management.
Payment, discount and volume purchase programs are negotiated directly by
the Company with its major suppliers, with a significant portion of the
Company's purchases made from suppliers offering these programs. The Company is
a party to distribution agreements with Owens-Corning, CertainTeed and Bird
Incorporated appointing the Company as a distributor of certain of their
respective products on an exclusive or non-exclusive basis, depending on the
product and the territory involved. The agreements also provide certain price
protections for products purchased by the Company from these suppliers.
SALES AND MARKETING
The Company's marketing programs center on fostering strong customer
relationships and providing superior service. Marketing activities include
frequent scheduled deliveries, a broad range of in-store services, customer
training and a variety of marketing programs tailored to customer needs. The
Company focuses its marketing efforts primarily on the residential
rehabilitation and new housing segments and, to a lesser extent, on the
commercial and industrial segments. The Company has a national accounts
marketing staff that is responsible for negotiating programs and standards for
relationships with mass merchandisers, purchasing cooperatives and
manufacturers. Branch sales personnel are responsible for implementing on a
local basis the programs negotiated with these customers.
The Company's sales organization consists of outside field sales personnel
who report directly to their local branch manager and are supported by inside
customer service representatives at the branch. A substantial portion of the
compensation for salespersons takes the form of bonus and commission payments,
and branch managers can earn up to 40% of their base salary in bonus if branch
performance goals are achieved and can earn additional bonuses measured as a
share of the profits of their respective branches if such goals are exceeded.
BRANCH OPERATIONS
The Company distributes products through its current network of 107
branches, which are strategically located to provide prompt delivery and
responsive customer service. The Company utilizes a decentralized management
structure that emphasizes individual branch profit-and-loss responsibility and
seeks to maximize the benefits of its local market presence. A branch is
typically comprised of warehouse and receiving space, secure outdoor holding
space and office space. Local sales efforts are coordinated and supported at
the branches. The bulk of the remaining branch activities relate to receiving,
storing and delivering building products.
All branches are equipped with on-line, real time management information
systems that allow them to control and monitor inventory levels, perform
invoicing and order entry, and establish delivery routes and schedules.
Management also uses the Company's management information systems to monitor
sales and profitability by branch. The Company employs EDI capability to
enhance its ability to serve the needs of mass merchandisers and national
manufacturers. The Company continually monitors systems capacity and function
and adds additional capacity as necessary to support the Company's continued
growth.
Some of the Company's branches are organized into a formal "hub and spoke"
system, with large branches supporting smaller branches or mini-branches. Even
where a formal "hub and spoke" system has not been implemented, full-line
metropolitan branches typically provide fill-in service to smaller and rural
branches. Metropolitan branches are typically larger in square footage and
generally stock a full line of products, while the product mix at rural branches
is typically more limited and market specific.
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The Company establishes and maintains overall credit policy and terms at
the corporate level. Branch managers are generally responsible, within the
Company's policy, for overseeing the extension of credit and the collection of
past due accounts up to 60 days. The Company's central credit function assists
branches with major accounts, collects past due accounts beyond 60 days and
determines overall credit lines and credit approval. The Company obtains lien
rights and security interests where appropriate to provide security for larger
accounts. Management keeps credit lines reasonable with respect to customer
needs and financial resources and maintains a low tolerance for exceeding
amounts or terms. As a result, the Company's bad debt expense totaled
approximately 0.34% of net sales in fiscal 1996.
CUSTOMERS
The Company distributes products to a large number and variety of
independent building material dealers, professional builders, contractors, mass
merchandisers and others. The following charts illustrate the percentages of
the Company's fiscal 1996, 1995 and 1994 net sales attributable to the Company's
various types of customers:
FISCAL 1996
[PIE CHART]
Contractors 59%
Dealers 22%
Mass Merchandisers 11%
Builders 4%
Other 4%
FISCAL 1995
[PIE CHART]
Contractors 54%
Dealers 29%
Mass Merchandisers 7%
Builders 4%
Other 6%
FISCAL 1994
[PIE CHART]
Contractors 52%
Dealers 34%
Mass Merchandisers 5%
Builders 5%
Other 4%
COMPETITION
The Company's competition varies by product line, customer classification
and geographic market. The Company competes with many local and regional
building products distributors. The Company also competes with major
corporations with national distribution capability, such as Georgia-Pacific,
Weyerhaueser and other product manufacturers that engage in direct sales;
however, the Company also acts as a distributor for certain products of these
manufacturers. The Company sells products to large home center chains such as
Builders Square, Eagle Home Centers, Home Depot and Lowe's. The Company
generally does not sell to homeowners and small contractors and does not, except
in limited circumstances and locations, compete for those sales.
Management believes that the Company's target customers generally select
building products distributors on the basis of product availability, customer
relationships, service and delivery, geographic coverage, responsiveness and
credit availability. In the opinion of management, the Company competes
effectively on each of these bases. The Company utilizes its purchasing power
with major suppliers to obtain products at prices more favorable than its
smaller competitors. The Company's relative size also permits it to attract
experienced sales and service personnel and gives the Company the resources to
provide company-wide sales, product and service training programs. By working
closely with its customers and utilizing the Company's information systems, the
Company's branches are able to maintain appropriate inventory levels and are
well positioned to deliver completed orders on time.
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ENVIRONMENTAL
The Company is subject to federal, state and local environmental laws and
regulations. Management believes the Company is in material compliance with
applicable laws and regulations governing the discharge of hazardous waste into
the environment.
EMPLOYEES
As of October 31, 1996, the Company had 1,562 employees, including 90
corporate and administrative personnel and 1,472 branch employees. At the
branch level, a total of 1,155 people were employed as warehouse and
manufacturing personnel, truck drivers, office staff and labor supervisors; and
317 were employed as branch managers and sales personnel. See "Business --
Sales and Marketing." Unions represent a total of approximately 49 hourly
workers at the Company's Chicago, Detroit, San Antonio, New York City, Hauppauge
(New York) and Houston facilities. The Company has not experienced any work
stoppages. The remainder of the Company's employees are not represented by a
union or a collective bargaining unit. Management considers the Company's
employee relations to be satisfactory.
TRADENAMES
The Company has previously operated under various tradenames in the markets
it served, often retaining the name of an acquired business to preserve its
local identification. In November 1995, the Company converted all existing
branch operations at both Cameron and Ashley to the primary tradename "Cameron
Ashley Building Products". New acquisitions typically convert to the primary
tradename within 6 to 12 months after the purchase date. The tradenames under
which the Company has previously operated include the following: Albuquerque
Door, Atlantic Building Products Company, California Roofers Supply, CA Co.,
California Roofers Supply, Cameron Supply, Chesapeake Building Supply, Chicago
Supply, Greater Louisville Aluminum Company (GLACO), Jett Supply, Metro Roofing
Supply, Midwest Thermal Products, Midwest Insulation & Roofing, Midwest
Insulation & Siding, Mile High Roofing & Exterior Supply, New York Building
Products, PK Supply, Southland Building Products, Southwest Express, Southwest
Roofing Supply, States Dealer Supply, Thunderbird Steel, United Wholesale
Distributors, Westar Building Materials, Whitewater Building Products, Wholesale
Building Supply and Zaglin Wholesale. Many local branches will continue to use
certain of these names as secondary tradenames to maintain the associated
goodwill.
The operations of the Cameron and Ashley subsidiaries are identified by the
designations "Cameron Division" and "Ashley Division", respectively, where
appropriate.
SEASONALITY
The Company's first quarter and, to a lesser extent, its second quarter,
are typically adversely affected by winter construction cycles and weather
patterns as the level of activity in both the home improvement and new
construction markets decreases. The Company has a concentration of locations in
the sunbelt states, which can offset to some degree the effects of winter
weather in other states. Management closely monitors operating expenses and
inventory levels during seasonally affected periods and, to the extent possible,
controls variable operating costs.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company are Ronald R. Ross, Walter J.
Muratori, J. Curtis Baker, John H. Bradberry, C. Steven Gaffney, F. Dixon
McElwee, J. Harrell Spivey, John S. Davis and Thomas R. Miller.
RONALD R. ROSS (age 44) has been a director of the Company since 1994.
Mr. Ross has served as Chief Executive Officer since September 1996, as
Chairman of the Board and a director of the Company since February 1994 and
as President, Chief Executive Officer and a director of Wm. Cameron & Co.
("Cameron"), a subsidiary of the Company, since December 1991. Mr. Ross was
Vice President, Operations of the Cameron Wholesale division of CertainTeed
Corporation, a building products manufacturer, from September 1987 to
September 1991 and served as Vice President and General Manager of the
division until its sale to Cameron in December 1991.
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WALTER J. MURATORI (age 53) has been a director of the Company since 1994.
Mr. Muratori has served as President and a director of the Company since
February 1994 and as President and a director of Ashley Aluminum, Inc.
("Ashley"), a subsidiary of the Company, since October 1991 and from 1986 to
1989. From 1989 to 1991, Mr. Muratori served as President of Talquin Building
Products, Inc., a division of Florida Progress Corporation and the parent of
Ashley. From 1970 to 1986, Mr. Muratori held various sales and management
positions at Ashley.
J. CURTIS BAKER (age 57) has served as Executive Vice President of Cameron
since February 1995. He served as a Regional Vice President of Cameron from
1991 to February 1995. Prior to the formation of Cameron in 1991, Mr. Baker was
a Regional Manager for the Cameron Wholesale division of CertainTeed
Corporation.
JOHN H. BRADBERRY (age 46) has served as Executive Vice President of
Cameron since August 1996. Prior thereto, he served as Vice President - Chief
Accounting Officer of the Company from June 1995 to August 1996 and as Vice
President - Finance of the Company from December 1991 to June 1995. From
December 1991 to August 1996, Mr. Bradberry also served as Chief Financial
Officer of Cameron.
C. STEVEN GAFFNEY (age 48) has served as Vice President of the Company
since 1994 and as Executive Vice President of Ashley since 1991. He served as
President of Ashley from 1989 to 1991 and as its Vice President from 1986 to
1989. From 1971 to 1986, Mr. Gaffney held various sales and management
positions with Ashley.
F. DIXON MCELWEE (age 50) has served as Vice President - Chief Financial
Officer of the Company and Executive Vice President - Administration of Cameron
since June 1995. Prior to joining the Company, Mr. McElwee was employed as
Managing Director of Meridian Capital from 1992 to June 1995 and as Managing
Director of Quest Capital from 1990 to 1992, each an investment banking firm.
J. HARRELL SPIVEY (age 57) has served as Executive Vice President of
Cameron since February 1995. He served as a Regional Vice President of Cameron
from 1991 to February 1995. Prior to the formation of Cameron in 1991, Mr.
Spivey was a Regional Manager for the Cameron Wholesale division of CertainTeed
Corporation.
JOHN S. DAVIS (age 40) has served as Vice President - General Counsel and
Secretary of the Company since 1994. He was employed as Associate Counsel -
Mergers and Acquisitions of Electronic Data Systems Corporation (EDS) from 1990
to 1994.
THOMAS R. MILLER (age 47) has served as Vice President - Human Resources of
the Company since December 1994. From 1980 until December 1994, Mr. Miller
served as Managing Director of Employee Relations for American Airlines, Inc.
ITEM 2. PROPERTIES
The Company operates both owned and leased branches in 29 states. Its
facilities range in size from approximately 15,000 to 150,000 square feet. This
building space is used for warehousing and distribution purposes and, to a
lesser extent, for sales, manufacturing and administrative purposes. The
Company's corporate offices are located at a leased office facility near its
Dallas, Texas branch. The Company believes its facilities are adequately
maintained and utilized and are suitable for the purposes for which they are
used. See Note 9 to the Consolidated Financial Statements of the Company for a
summary of payments due under the Company's leases.
None of the Company's owned real properties are subject to any major
encumbrances.
ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is involved in routine litigation and
proceedings in the ordinary course of its business. Management believes that
pending litigation matters would not, if decided adversely to the Company, have
a material adverse effect on the Company's financial condition or results of
operations.
-9-
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted for a vote of security holders during the
fourth quarter ended October 31, 1996.
-10-
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company trades on the Nasdaq National Market System under the symbol
"CABP". The following table sets forth, for the Company's fiscal periods
indicated, the high and low last sale price per share for the Common Stock, as
reported on the Nasdaq National Market System.
HIGH LOW
------- -------
FISCAL 1996
First Quarter................... $10.625 $ 7.500
Second Quarter.................. 9.937 7.750
Third Quarter................... 13.125 9.750
Fourth Quarter.................. 13.750 10.125
HIGH LOW
------- -------
FISCAL 1995
First Quarter................... $18.750 $13.750
Second Quarter.................. 16.250 10.250
Third Quarter................... 14.375 10.000
Fourth Quarter.................. 13.250 7.500
As of January 6, 1997, there were approximately 69 holders of record of the
Common Stock. The Company has never declared or paid a cash dividend on its
Common Stock and does not intend to pay any cash dividends on its Common Stock
in the foreseeable future. The current policy of the Company's Board of
Directors is to retain all earnings to support operations and finance expansion.
The Credit Agreement restricts the payment of cash dividends without the prior
approval of NationsBank. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources." Future
declaration and payment of dividends, if any, will be determined in light of
then current conditions, including the Company's earnings, operations, capital
requirements, financial condition, restrictions in financing agreements and
other factors deemed relevant by the Board of Directors.
On April 1, 1996, the Company completed the sale of $50 million of Senior
Notes through a private placement of such securities conducted on a best efforts
basis by Dillon, Read & Co. Inc. and NationsBank Capital Markets, Inc. The
Senior Notes were sold in four tranches, with maturities ranging from April 15,
2001 to April 15, 2006 and bearing interest at rates ranging from 6.79% to 7.61%
per annum. Total commissions payable to the placement agents were $650,000.
The purchasers of the Senior Notes consisted of a small group of
institutional investors. The sale of Senior Notes was conducted as a limited
offering to accredited investors under the provisions of Regulation D
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended, and was therefore exempt from registration thereunder.
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
The selected financial data presented below as of October 31, 1996, 1995,
1994, 1993 and 1992 and for each of the five fiscal periods ended October 31,
1996, have been derived from audited consolidated financial statements of the
Company. The historical data set forth below should be read in conjunction with
the consolidated financial statements of the Company, together with the notes
thereto, included elsewhere herein and "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
-11-
<PAGE>
<TABLE>
FISCAL PERIOD ENDED OCTOBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales............................ $ 604,710 $ 503,691 $ 296,268 $ 224,014 $ 147,157
Cost of sales........................ 485,595 408,528 234,367 173,890 113,448
--------- --------- --------- --------- ---------
Gross profit....................... 119,115 95,163 61,901 50,124 33,709
Operating expenses................... 95,705 76,123 45,869 37,982 26,302
--------- --------- --------- --------- ---------
Income from operations............... 23,410 19,040 16,032 12,142 7,407
Interest expense..................... 3,910 3,376 2,333 2,983 2,637
Other (income) expense............... (16) (196) (367) 111 (68)
--------- --------- --------- --------- ---------
Income before income taxes........... 19,516 15,860 14,066 9,048 4,838
Provision for income taxes........... 7,447 5,985 5,366 3,335 1,807
--------- --------- --------- --------- ---------
Income before extraordinary charge... 12,069 9,875 8,700 5,713 3,031
--------- --------- --------- --------- ---------
Extraordinary charge - early
extinguishment of debt, net of
income tax.......................... 245 - - - -
--------- --------- --------- --------- ---------
Net income........................... $ 11,824 $ 9,875 $ 8,700 $ 5,713 $ 3,031
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share before
extraordinary charge................ $ 1.31 $ 1.15 $ 1.40 $ 1.14 $ 0.67
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Net income per share after
extraordinary charge................ $ 1.28 $ 1.15 $ 1.40 $ 1.14 $ 0.67
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average shares outstanding.. 9,196,000 8,580,000 6,222,000 5,026,000 4,499,000
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
AS OF OCTOBER 31,
-------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Balance Sheet Data:
Accounts receivable, net............. $ 92,932 $ 75,502 $ 54,789 $ 31,484 $ 20,494
Inventories.......................... 64,644 51,780 39,743 29,018 21,889
Total assets......................... 219,670 175,067 126,083 82,217 61,543
Accounts payable and accrued
expenses............................ 69,795 51,679 44,212 34,192 26,422
Long-term debt, less current
maturities.......................... 52,078 38,264 36,606 31,954 25,743
Stockholders' equity................. 95,609 82,986 43,506 13,695 7,568
Branches at end of period.............. 107 93 66 49 39
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The building products industry is affected by various factors including
general economic conditions, the level of building activity, weather conditions,
the rate of new home construction, interest rates and the availability of
credit. A significant portion of the Company's products are sold for use in the
home improvement, remodeling and repair market, which is relatively less
affected by these factors than the new residential construction market. The
Company estimates that approximately 58% of its total sales are currently made
to the home improvement and the remodeling and repair markets and that
approximately 42% of its total sales are made to the new construction market.
-12-
<PAGE>
The Company has experienced substantial improvement in its results of
operations since its formation in 1991. These improvements have included
significant increases in sales volume and improvement in the Company's operating
expenses as a percentage of net sales. The Company's net sales have more than
quadrupled from $147 million in fiscal 1992 to $605 million in fiscal 1996.
This net sales growth has been accomplished largely due to the 24 acquisitions
completed since October 1992. In addition, increased sales by existing branches
and new branch openings have contributed to the Company's growth. Further, the
Company's operating expenses as a percentage of net sales have declined from
17.9% in fiscal 1992 to 15.8% in fiscal 1996.
These positive trends have been partially offset by a declining gross
profit margin, which has resulted primarily from the product and sales mix of
acquired businesses. The businesses acquired by the Company since October 1992
typically either have had product lines consisting of narrow assortments of
commodity products or have had a relatively high proportion of products
distributed through direct shipments from manufacturers. Both of these
characteristics result in lower selling margins and a lower gross profit as a
percentage of net sales. In implementing its operating strategy for acquired
businesses, management focuses on improving gross profit as a percentage of net
sales. This requires the integration of additional product lines, a process
that takes time to implement because of market conditions, suppliers'
territorial restrictions and conversion of customers' buying requirements and
habits. Although the Company historically has been able to improve the gross
profit margins of acquired businesses and anticipates further improvements,
gross profit as a percentage of net sales will likely remain near current levels
with some improvement as product mix, pricing and sales mix improve. Operating
expenses, because of the different product and sales mix of acquired businesses,
have decreased as a percentage of net sales.
The net effect of these various factors has been a significant increase in
the Company's income from operations from $7.4 million in fiscal 1992 to
$23.4 million in fiscal 1996. Income from operations as a percentage of net
sales increased from 5.0% in fiscal 1992 to 5.4% in fiscal 1993 and fiscal 1994.
However, due to the declining gross profit margin discussed previously, which
was not offset by a reduction in operating expenses, income from operations as a
percentage of net sales decreased to 3.8% in fiscal 1995 and 3.9% in fiscal
1996.
The following table sets forth information regarding certain components of
net sales for the periods presented in "Selected Financial Data."
FISCAL PERIODS ENDED OCTOBER 31,
-----------------------------------------
1996 1995 1994 1993 1992
----- ----- ----- ----- -----
Net sales................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............... 80.3 81.1 79.1 77.6 77.1
----- ----- ----- ----- -----
Gross profit................ 19.7 18.9 20.9 22.4 22.9
Operating expenses.......... 15.8 15.1 15.5 17.0 17.9
----- ----- ----- ----- -----
Income from operations...... 3.9 3.8 5.4 5.4 5.0
Interest expense............ 0.7 0.7 0.8 1.3 1.7
Other (income) expense...... - (0.1) (0.1) 0.1 -
----- ----- ----- ----- -----
Income before income taxes.. 3.2 3.2 4.7 4.0 3.3
Provision for income taxes.. 1.2 1.2 1.8 1.5 1.2
----- ----- ----- ----- -----
Income before extraordinary
charge..................... 2.0% 2.0% 2.9% 2.5% 2.1%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
RESULTS OF OPERATIONS
FISCAL 1996 COMPARED TO FISCAL 1995
Net sales increased 20.1% from $503.7 million in 1995 to $604.7 million in
1996. This increase was due in part to 1996 containing a full 12 months of
sales from the 27 branches acquired or opened in 1995. These branches along
with existing branches contributed $55.1 million of this increase. In addition,
branches acquired in 1996 contributed approximately $40.1 million of the total
net sales increase of $101.0 million. New branches opened in 1996 contributed
approximately $5.8 million of the sales increase.
-13-
<PAGE>
Gross profit as a percentage of net sales increased from 18.9% in 1995 to
19.7% in 1996, with an overall increase of $24.0 million or 25.2% in 1996,
compared to 1995. The increase in gross profit as a percentage of net sales was
due primarily to an emphasis on sales of higher margin products while existing
certain less profitable product lines in areas such as the Northwest.
Additionally, aluminum price decreases caused favorable LIFO charges and
improved margins in the Florida markets.
Operating expenses increased 25.7% from $76.1 million in 1995 to $95.7
million in 1996. These expenses increased as a percentage of net sales from
15.1% to 15.8%. Operating expenses include both expenses directly attributable
to branch operations and corporate expenses and increased primarily as a result
of acquisitions and new branch openings. Higher net sales and gross profit
allowed for absorption of the overall expense increases without a negative
impact to earnings.
During the fourth quarter of 1996, the Company took at $591,000 non-
recurring restructuring charge related to its operations in Spokane, Washington
which had a $0.04 impact on EPS. The operations currently in four separate
locations are relocating to one 120,000 square foot facility to increase
efficiency, reduce costs and better service the customer base.
Income from operations increased 23.0% from $19.0 million in 1995 to $23.4
million in 1996 and increased as a percentage of net sales from 3.8% to 3.9%.
These increases were due to the factors described above.
Interest expense increased $0.5 million in 1996 compared to 1995 as a
result of higher borrowings required for 1996 acquisitions offset by a slight
reduction in interest rates.
As a result of the above factors, income before income taxes increased 22.6
% from $15.9 million in 1995 to $19.5 million in 1996. Net income increased
19.7% from $9.9 million in 1995 to $11.8 million in 1996, and net income as a
percentage of net sales remained at 2.0% from 1995 to 1996.
FISCAL 1995 COMPARED TO FISCAL 1994
Net sales increased 70.0% from $296.3 million in 1994 to $503.7 million in
1995. This increase was due in part to 1995 containing a full 12 months of
sales from the 27 branches acquired or opened in 1994. These branches along
with existing branches contributed $111.1 million of this increase. In
addition, branches acquired in 1995 contributed approximately $88.3 million of
the total net sales increase of $207.4 million. New branches opened in 1995
contributed approximately $8.0 million of the sales increase.
Gross profit as a percentage of net sales decreased from 20.9% in 1994 to
18.9% in 1995, with an overall increase of $33.3 million or 53.7% in 1995,
compared to 1994. The decline in gross profit as a percentage of net sales was
due primarily to a full year's operation of branches acquired or opened in 1994
and early 1995; these branches generally have less extensive and lower margin
product lines including more commodity products. Management continues to
emphasize and expand higher margin products and exit certain less profitable
product lines in its efforts to improve margins at these acquired branches.
Additionally, aluminum price increases caused unfavorable LIFO charges and
competitive price pressures in its Florida markets contributed to lower gross
margins.
Operating expenses increased 65.8% from $45.9 million in 1994 to $76.1
million in 1995. These expenses decreased as a percentage of net sales from
15.5% to 15.1%. Operating expenses include both expenses directly attributable
to branch operations and corporate expenses and increased primarily as a result
of acquisitions and new branch openings. Higher net sales allowed for
absorption of the overall expense increases and resulted in the decrease in
operating expenses as a percentage of net sales in 1995. Also during 1995, cost
reduction programs were implemented to help manage operating expense growth at
reasonable levels.
Income from operations increased 18.8% from $16.0 million in 1994 to $19.0
million in 1995 but decreased as a percentage of net sales from 5.4% to 3.8%.
This decrease was attributable to reductions in gross profit as a percentage of
net sales which was not offset by a reduction in operating expenses. The dollar
increase was due to the factors described above.
Interest expense increased $1.0 million in 1995 compared to 1994 as a
result of higher borrowings required for 1995 acquisitions, offset by the
proceeds from the 1995 offering which were used to reduce outstanding
indebtedness.
-14-
<PAGE>
As a result of the above factors and $0.2 million in other income from
gains on sales of assets, income before income taxes increased 12.8% from $14.1
million in 1994 to $15.9 million in 1995. Net income increased 13.8% from $8.7
million in 1994 to $9.9 million in 1995, and net income as a percentage of net
sales decreased from 2.9% in 1994 to 2.0% in 1995.
EFFECTS OF INFLATION
Management does not believe that inflation has had a material impact on
results of operations for the periods presented. Substantial increases in
costs, however, could have an impact on the Company and the industry.
Management believes that, to the extent inflation affects its costs in the
future, the Company can generally offset inflation by increasing prices if
competitive conditions permit.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary needs for capital resources are to finance
acquisitions, inventories, accounts receivable and capital expenditures.
Borrowings for working capital typically increase during periods of sales
expansion when higher levels of inventory and receivables are needed and
decrease as inventories and receivables are converted to cash and are used to
pay down debt. The Company had $52.1 million of long-term debt, less current
maturities, outstanding as of October 31, 1996, consisting of the indebtedness
described below. See Note 7 to the Consolidated Financial Statements of the
Company for a discussion of these borrowings.
SENIOR DEBT: As of October 31, 1996, the Company had $50 million of
unsecured Senior Notes bearing interest at an average of 7 1/8%. These
notes mature at various dates beginning April 15, 2001, with a final
maturity of April 15, 2006.
REVOLVING CREDIT AGREEMENT: The Company is a party to a credit agreement
due January 15, 2001, which as of October 31, 1996 permitted revolving
borrowings of up to $75 million under the revolving line of credit
indebtedness (the "Revolver"), none of which was outstanding at that date.
Borrowings under the Revolver are unsecured.
OTHER DEBT: As of October 31, 1996, the Company had $2.9 million in debt
payable to various sellers of businesses acquired by the Company and to
capital lessors in connection with capital lease obligations. These notes
generally are collateralized by certain assets of the subsidiaries and are
subordinate to the Senior Debt and the Revolver.
Under the terms of the Senior Debt and the Revolver, the Company is subject
to various restrictive covenants regarding, among other things, payment of any
dividends, capital expenditures limitations, incurrence of indebtedness from
others in excess of certain amounts and consummation of any merger or
acquisition of an entity that is not engaged in the building materials
distribution business without the consent of the lenders. Financial covenants
include, but are not limited to, maintaining current ratios, minimum net worth
ratios, fixed charges ratios and debt to earnings ratios.
Net cash generated from operating activities was $10.7 million and $22.5
million for fiscal 1995 and 1996, respectively. Capital expenditures were $4.5
million and $8.9 million in fiscal 1995 and 1996, respectively. Five
acquisitions were made in fiscal 1995 for $34.8 million, and five acquisitions
were made in fiscal 1996, for $24.8 million.
The Company believes that its current cash position, funds from operations,
and the availability of funds under its credit agreement, will be sufficient to
meet anticipated requirements for working capital.
NEW ACCOUNTING STANDARDS
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" (SFAS No. 121) establishes accounting
standards for the impairment of long-lived assets, certain identifiable
intangibles, and goodwill related to those assets to be held and used and for
long-lived assets and certain identifiable intangibles to be disposed of. SFAS
No. 121 requires the review of long-lived assets and certain identifiable
intangibles for impairment. If an impairment event has occurred and it is
determined that the carrying value of the asset may not be recoverable, an
impairment loss will be
-15-
<PAGE>
recognized as measured by the amount by which the carrying amount of the
assets exceeds the fair value of the asset. The Company does not anticipate
adoption of SFAS No. 121 will have a material impact on its results of
operations or financial position.
The Company will adopt Statement of Financial Accounting Standards (SFAS)
No. 123, "Accounting for Stock-Based Compensation" during fiscal 1997.
Management expects to continue to measure compensation costs using APB Opinion
No. 25, "Accounting for Stock Issued to Employees," and will therefore include
pro forma disclosures in the notes to the financial statements for all awards
granted after November 1, 1996. The adoption of this statement is not expected
to have a significant effect on the financial statements of the Company.
SEASONALITY AND QUARTERLY FINANCIAL INFORMATION
The Company's fiscal quarters are subject to seasonal fluctuations caused
by construction cycles and weather patterns. See "Business - Seasonality".
The following table sets forth selected quarterly financial information.
This information is derived from unaudited financial statements of the Company
and includes, in the opinion of management, all normal and recurring adjustments
that management considers necessary for a fair statement of the results for such
periods. The operating results for any quarter are not necessarily indicative
of results for any future period.
FISCAL 1996
---------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT
PERCENTAGE AND PER SHARE AMOUNTS)
Net sales...................... $120,041 $135,085 $163,852 $185,731
Gross profit................... 23,147 26,590 32,176 37,202
Operating expenses............. 20,837 21,685 24,181 29,002
Income from operations......... 2,310 4,905 7,995 8,200
Net income .................... 987 2,390 4,166 4,281
Net income per share........... 0.11 0.26 0.45 0.46
Gross profit as a percentage
of net sales ................. 19.3% 19.7% 19.6% 20.0%
Operating expenses as a
percentage of net sales....... 17.4% 16.1% 14.8% 15.6%
Income from operations as a
percentage of net sales....... 1.9% 3.6% 4.9% 4.4%
FISCAL 1995
---------------------------------------------
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT
PERCENTAGE AND PER SHARE AMOUNTS)
Net sales...................... $100,543 $117,290 $137,722 $148,136
Gross profit .................. 21,005 21,599 25,390 27,169
Operating expenses............. 17,456 17,613 18,744 22,310
Income from operations......... 3,549 3,986 6,646 4,859
Net income..................... 1,611 1,970 3,770 2,524
Net income per share........... $ 0.23 $ 0.23 $ 0.40 $ 0.27
Gross profit as a percentage
of net sales.................. 20.9% 18.4% 18.4% 18.3%
Operating expenses as a
percentage of net sales....... 17.4% 15.0% 13.6% 15.1%
Income from operations as a
percentage of net sales....... 3.5% 3.4% 4.8% 3.3%
-16-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
FINANCIAL STATEMENTS OF REGISTRANT:
CAMERON ASHLEY BUILDING PRODUCTS, INC.
Independent Auditors' Report............................................ 18
Consolidated Balance Sheets, October 31, 1996 and 1995.................. 19
Consolidated Statements of Income for the Years Ended October 31, 1996,
1995 and 1994.......................................................... 20
Consolidated Statements of Stockholders' Equity for the Years Ended
October 31, 1996, 1995 and 1994........................................ 21
Consolidated Statements of Cash Flows for the Years Ended
October 31, 1996, 1995 and 1994........................................ 22
Notes to Consolidated Financial Statements.............................. 23
-17-
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Cameron Ashley Building
Products, Inc.:
We have audited the accompanying consolidated balance sheets of Cameron
Ashley Building Products, Inc. and subsidiaries as of October 31, 1996 and 1995,
and the related consolidated statements of income, stockholders' equity, and
cash flows for each of the three years in the period ended October 31, 1996.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Cameron Ashley Building
Products, Inc. and subsidiaries at October 31, 1996 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended October 31, 1996 in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Dallas, Texas
December 13, 1996
-18-
<PAGE>
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED BALANCE SHEETS
OCTOBER 31,
-------------------
1996 1995
-------- --------
(DOLLARS IN THOUSANDS)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents......................... $ 5,078 $ 3,494
Accounts receivable, less allowances of
$2,719 in 1996 and $2,581 in 1995................ 92,932 75,502
Inventories ...................................... 64,644 51,780
Prepaid expenses and other assets................. 1,223 1,738
Deferred income taxes............................. 1,141 843
-------- --------
Total current assets............................ 165,018 133,357
PROPERTY, PLANT AND EQUIPMENT, NET.................. 31,219 23,591
INTANGIBLES, NET.................................... 22,538 17,530
OTHER ASSETS........................................ 895 589
-------- --------
TOTAL .......................................... $219,670 $175,067
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ................................. $ 54,839 $ 40,410
Accrued expenses ................................. 14,956 11,269
Current maturities of debt........................ 790 1,099
-------- --------
Total current liabilities....................... 70,585 52,778
LONG-TERM DEBT, LESS CURRENT MATURITIES............. 52,078 38,264
DEFERRED INCOME TAXES............................... 1,398 1,039
-------- --------
Total liabilities............................... 124,061 92,081
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY:
Preferred stock; authorized 100,000 shares; no
shares issued and outstanding
Common stock, no par value; authorized
20,000,000 shares; 9,477,480 and 9,021,175
shares issued in 1996 and 1995, respectively..... 60,641 58,550
Retained earnings (Note 1)........................ 39,143 27,319
Treasury stock, at cost, 431,974 and 297,200
shares in 1996 and 1995, respectively............ (4,175) (2,883)
-------- --------
Total stockholders' equity...................... 95,609 82,986
-------- --------
TOTAL........................................... $219,670 $175,067
-------- --------
-------- --------
See notes to consolidated financial statements
-19-
<PAGE>
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED OCTOBER 31,
---------------------------------
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
NET SALES.................................. $ 604,710 $ 503,691 $ 296,268
COST OF SALES.............................. 485,595 408,528 234,367
--------- --------- ---------
GROSS PROFIT............................. 119,115 95,163 61,901
OPERATING EXPENSES......................... 95,705 76,123 45,869
--------- --------- ---------
INCOME FROM OPERATIONS..................... 23,410 19,040 16,032
INTEREST EXPENSE........................... (3,910) (3,376) (2,333)
OTHER INCOME............................... 16 196 367
--------- --------- ---------
INCOME BEFORE INCOME TAXES................. 19,516 15,860 14,066
PROVISION FOR INCOME TAXES................. 7,447 5,985 5,366
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY CHARGE......... 12,069 9,875 8,700
--------- --------- ---------
EXTRAORDINARY CHARGE-EARLY EXTINGUISHMENT
OF DEBT, NET OF INCOME TAX OF $132,000.... 245 0 0
--------- --------- ---------
NET INCOME................................. $ 11,824 $ 9,875 $ 8,700
--------- --------- ---------
--------- --------- ---------
INCOME PER SHARE BEFORE EXTRAORDINARY
CHARGE.................................... $ 1.31 $ 1.15 $ 1.40
--------- --------- ---------
--------- --------- ---------
NET INCOME PER SHARE AFTER EXTRAORDINARY
CHARGE.................................... $ 1.28 $ 1.15 $ 1.40
--------- --------- ---------
--------- --------- ---------
WEIGHTED AVERAGE SHARES OUTSTANDING........ 9,196 8,580 6,222
--------- --------- ---------
--------- --------- ---------
See notes to consolidated financial statements.
-20-
<PAGE>
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
COMMON STOCK
------------- RETAINED TREASURY
SHARES VALUE EARNINGS STOCK TOTAL
------ ----- -------- ----- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE AS OF NOVEMBER 1, 1993....... 4,459 $ 4,951 $ 8,744 $13,695
Proceeds from initial public
offering of 2,000,000 shares at
$12.00 per share, net of expenses
of $2.9 million..................... 2,000 21,100 21,100
Proceeds from exercise of stock
options............................. 3 11 11
Net income........................... 8,700 8,700
----- ------- ------- ------- -------
BALANCE AS OF OCTOBER 31, 1994....... 6,462 26,062 17,444 43,506
Proceeds from public offering of
2,450,000 shares at $14.00 per
share, net of expenses of
$2.4 million........................ 2,450 31,921 31,921
Proceeds from exercise of stock
options including tax benefits
of $406,000......................... 105 526 526
Purchase of treasury stock........... $(2,883) (2,883)
Proceeds from employee stock purchase
plan................................ 4 41 41
Net income........................... 9,875 9,875
----- ------- ------- ------- -------
BALANCE AS OF OCTOBER 31, 1995....... 9,021 58,550 27,319 (2,883) 82,986
Proceeds from exercise of stock
options, including tax benefits
of $1,491,000....................... 443 1,970 - - 1,970
Proceeds from employee stock
purchase plan....................... 13 121 - - 121
Purchase of treasury stock........... - - - (1,292) (1,292)
Net income........................... - - 11,824 - 11,824
----- ------- ------- ------- -------
BALANCE AS OF OCTOBER 31, 1996....... 9,477 $60,641 $39,143 $(4,175) $95,609
----- ------- ------- ------- -------
----- ------- ------- ------- -------
</TABLE>
See notes to consolidated financial statements.
-21-
<PAGE>
CAMERON ASHLEY BUILDING PRODUCTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
YEAR ENDED OCTOBER 31,
----------------------
1996 1995 1994
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income........................... $ 11,824 $ 9,875 $ 8,700
Adjustments to reconcile net income
to cash provided by operating
activities:
Depreciation and amortization........ 6,118 4,641 3,585
(Gain) Loss on sale of property and
equipment........................... 12 (143) (133)
Deferred income taxes................ 61 (193) 186
Other................................ (299)
Changes in assets and liabilities,
net of acquisitions:
Accounts receivable.............. (6,666) (6,400) (8,508)
Inventories...................... (2,506) 4,248 787
Prepaid expenses and other
assets.......................... 782 (731) (399)
Accounts payable and accrued
expenses........................ 13,936 (781) (92)
Other current liabilities........ (1,104) 167 92
-------- -------- --------
Net cash provided by
operating activities........ 22,457 10,683 3,919
-------- -------- --------
INVESTING ACTIVITIES:
Acquisitions......................... (24,762) (34,783) (29,175)
Seller financings of acquired
businesses and deferred payments.... 700 2,288 1,684
-------- -------- --------
Cash paid for acquisitions....... 24,062 (32,495) (27,491)
Purchases of property, plant and
equipment........................... (8,933) (4,505) (2,232)
Other................................ (3) (43) 14
-------- -------- --------
Net cash used in investing
activities.................. (32,998) (37,043) (29,709)
-------- -------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings under long
term debt........................... 50,000 10,000
Issuance costs paid on Senior Debt... (762)
Net borrowings (repayment) under
revolving lines of credit........... (25,000) 720 2,467
Repayment of long term debt.......... (10,133) (6,379)
Repayment of seller financing of
acquired businesses................. (2,457) (669) (2,487)
Proceeds from sales of common stock.. 31,921 21,100
Proceeds from employee stock purchase
plan................................ 121 41
Exercise of stock options............ 1,970 526 11
Purchase of treasury stock........... (1,292) (2,883)
Other................................ (322) (159) (185)
-------- -------- --------
Net cash provided by
financing activities........ 12,125 29,497 24,527
-------- -------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS...................... 1,584 3,137 (1,263)
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR............................... 3,494 357 1,620
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF
YEAR.................................. $ 5,078 $ 3,494 $ 357
-------- -------- --------
-------- -------- --------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest............... $ 3,628 $ 3,055 $ 1,942
-------- -------- --------
-------- -------- --------
Cash paid for income taxes........... $ 7,034 $ 5,620 $ 4,217
-------- -------- --------
-------- -------- --------
</TABLE>
See notes to consolidated financial statements.
-22-
<PAGE>
CAMERON ASHLEY BUILDING PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts
of Cameron Ashley Building Products, Inc. (the "Company"), and its wholly
owned subsidiaries, Wm. Cameron & Co. ("Cameron") and Ashley Aluminum, Inc.
("Ashley").
The Company distributes building products to independent dealers
(lumberyards and hardware stores), professional builders, contractors and
mass merchandisers throughout the United States and in Mexico and Canada.
Products distributed by the Company are used primarily in new residential
construction and home improvement, remodeling and repair work, as well as in
commercial and industrial applications.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS. All highly liquid debt instruments with a maturity of
three months or less when purchased are classified as cash equivalents.
INVENTORIES. Inventories are stated at the lower of last-in, first-out
("LIFO") cost or market. Included in inventory cost are costs directly
associated with the fabrication of the Company's products.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment is recorded
at cost. Costs associated with major additions are capitalized and
depreciated. Upon disposal, the cost of properties and related accumulated
depreciation are removed from the accounts, with gains and losses reflected
in earnings.
Depreciation is provided over the estimated useful lives of the
depreciable assets. Assets are generally depreciated on the straight-line
method over the estimated service lives of the related assets, which range
from 3 to 40 years. Leasehold improvements are depreciated over the shorter
of their estimated useful lives or the term of the related lease.
INTANGIBLE ASSETS. Intangibles consist primarily of noncompete
agreements, which are recorded at cost and are amortized over periods of
three to five years, the contractual term of the agreements, and goodwill,
which is primarily amortized over 25 years.
REVENUE RECOGNITION. Sales are recorded at the time merchandise is
shipped and are reported net of estimated returns and allowances.
INCOME TAXES. Income taxes are provided for using the asset and
liability method under which deferred income taxes are recognized for the tax
consequences of temporary differences between the financial statement
carrying amounts and the tax basis of existing assets and liabilities by
applying enacted statutory tax rates. The effect on deferred taxes of a
change in tax rates is recognized in income in the period that includes the
enactment date. The Company periodically evaluates the collectibility of
deferred tax assets and provides a valuation allowance for the portion of
such assets not considered realizable.
CONCENTRATION OF CREDIT RISK. The Company is primarily engaged in the
distribution of building products throughout the United States. The Company
grants credit to customers, substantially all of whom are dependent upon the
construction economic sector. The Company continuously evaluates its
customers' financial condition but does not generally require collateral.
The concentration of credit risk with respect to accounts receivable is
limited due to the Company's large customer base located throughout the
United States. The Company maintains an allowance for doubtful accounts
based upon the expected collectibility of its accounts receivable, and credit
losses have been within management's expectations.
-23-
<PAGE>
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from those estimated.
NET INCOME PER SHARE. Net income per share is computed by dividing net
income by the weighted average shares outstanding. Weighted average shares
used in the primary calculation include the actual shares outstanding and the
net additional shares which would be issuable upon the exercise of stock
options and tax benefits, assuming that the Company used the proceeds to
purchase additional shares at estimated fair value during the year. Fully
diluted income per share is not presented, because such amount differs by
less than 3% from the primary calculation.
NEW ACCOUNTING STANDARDS. Statement of Financial Account Standards No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of" (SFAS No. 121) establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of. SFAS No. 121
requires the review of long-lived assets and certain identifiable intangibles
for impairment. If an impairment has occurred and it is determined that the
carrying value of the asset may not be recoverable, an impairment loss will
be recognized as measured by the amount by which the carrying amount of the
assets exceeds the fair value of the asset. The Company will adopt SFAS No. 121
at the beginning of fiscal 1997. The Company does not anticipate adoption of
SFAS No. 121 will have a material impact on its results of operations or
financial position.
The Company will adopt SFAS No. 123, "Accounting for Stock-Based
Compensation" during fiscal 1997. Management expects to continue to measure
compensation costs using APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and will therefore include certain disclosures in the notes to
the financial statements for all awards granted after November 1, 1996. The
adoption of this statement is not expected to have a significant effect on
the financial statements of the Company.
RECLASSIFICATIONS. Certain prior year amounts have been reclassified to
conform to current-year presentation.
3. ACQUISITIONS
Over the past three years, the Company has acquired certain net assets
and operations of various building materials distributors. All of these
transactions were accounted for as purchases; therefore, results of
operations of the Company include the operations of the business subsequent
to their acquisitions.
In fiscal 1994, five businesses were acquired at a total net cost of
$29.2 million. During fiscal 1995, seven businesses were acquired at a total
net cost of $34.8 million. During fiscal 1996, five businesses were acquired
at a total net cost of $24.8 million. A pro forma results of operations for
these acquisitions are not presented due to the immaterial effect on
historical results.
4. INVENTORIES
The Company values its inventories using the LIFO method. Had the
Company used the first-in, first-out ("FIFO") method, inventories would have
been approximately $2,227,000 and $3,508,000 higher at October 31, 1996 and
1995, respectively. Under FIFO, income from operations for the year ended
October 31, 1996 would have been lower by approximately $1,281,000, and
income from operations for the years ended October 31, 1995 and 1994 would
have been higher by approximately $1,299,000 and $806,000, respectively.
-24-
<PAGE>
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at October 31:
1996 1995
---- ----
(IN THOUSANDS)
Land.............................................. $ 3,006 $ 3,006
Building and improvements......................... 12,504 10,491
Machinery and equipment........................... 8,195 6,519
Furniture and fixtures............................ 8,077 4,866
Vehicles.......................................... 10,657 5,528
Other............................................. 716 1,050
-------- -------
43,155 31,460
Less accumulated depreciation..................... (11,936) (7,869)
-------- -------
Total......................................... $ 31,219 $23,591
-------- -------
-------- -------
Included in property and equipment at October 31, 1996 and 1995, is
$880,000 and $93,000, respectively, of equipment under capital leases.
Amortization of these assets is included in depreciation and amortization
expense.
6. INTANGIBLE ASSETS
Intangible assets consist of the following at October 31:
1996 1995
---- ----
(IN THOUSANDS)
Noncompete agreements.............................. $ 3,128 $ 3,195
Goodwill........................................... 23,502 16,304
Other.............................................. 1,367 1,748
-------- -------
27,997 21,247
Accumulated amortization........................... (5,459) (3,717)
-------- -------
Total......................................... $22,538 $17,530
-------- -------
-------- -------
7. LONG-TERM DEBT
Long-term debt consists of the following at October 31:
1996 1995
---- ----
(IN THOUSANDS)
Senior Debt:
Unsecured Senior Notes with maturities and
interest rates as follows:
$10,000,000 due April 15, 2001 bearing
interest at 6.79%
$15,000,000 due April 15, 2002 bearing
interest at 6.79%
$10,000,000 due April 15, 2003 bearing
interest at 7.21%
$15,000,000 due April 15, 2006 bearing
interest at 7.61%
Interest is due semi-annually, with an average
interest rate of 7 1/8%........................ $50,000
NationsBank of Texas, N.A. (as lead agent):
Revolving credit note due January 15, 2001;
unsecured; interest is due quarterly at the
LIBOR rate plus 0.50% to 1.0%, or at a base
rate (defined in the agreement as prime)....... 0 $25,000
-25-
<PAGE>
Term loan, principal payments of $500,000 due
each October, January, April and July, beginning
in October 1996, with the final payment due
July 31, 2001; interest is payable quarterly at
the LIBOR rate plus 1.25% to 1.75%, or at a base
rate (defined in the agreement) plus 0.25% to
0.50%. At October 31, 1995, the interest rate
was 7.062%..................................... 0 10,000
Seller financing of acquired businesses:
CertainTeed Corporation - Collateralized
note, annual principal and interest payments
of $369,000 commencing December 31, 1994;
balance due December 31, 1998; interest
accruing at 9% per annum....................... 0 2,210
Other - Various terms, interest rates ranging
from 8% to 9%.................................. 2,271 2,029
Other, including capital leases (see Note 9)....... 597 124
-------- -------
52,868 39,363
Less current maturities............................ (790) (1,099)
-------- -------
Long-term debt............................. $52,078 $38,264
-------- -------
-------- -------
The seller notes payable are subordinated to the obligations under the
NationsBank agreement. The notes are collateralized by certain land and
buildings.
In April 1996, the Company amended the credit facility with NationsBank
and other banks (collectively referred to as "NationsBank"). The financing
agreement with NationsBank covers a revolving line of credit up to $75
million. The financing agreement restricts distributions to stockholders to
50% of net income, issuance of stock by the Company's subsidiaries, the
assumption of debt and liens by the Company's subsidiaries, and requires
compliance with certain financial ratios and covenants. The obligations of
the Company to NationsBank are unsecured. The NationsBank revolving credit
note also requires the Company to pay a quarterly commitment fee on the
unused balance ranging from 0.2% to 0.3% on the difference between the
revolving commitment of $75 million and revolving advances outstanding.
Aggregate maturities of long-term debt during the fiscal years subsequent
to October 31, 1996 are as follows:
(IN THOUSANDS)
1997........................................................ $ 790
1998........................................................ 912
1999........................................................ 710
2000........................................................ 370
2001........................................................ 10,086
Thereafter.................................................. 40,000
-------
Total.................................................. $52,868
-------
-------
-26-
<PAGE>
8. INCOME TAXES
The provision for income taxes computed by applying the federal statutory
tax rate to income before income taxes differs from the actual provision for
income taxes as set forth below for the years ended October 31:
1996 1995 1994
---- ---- ----
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
(IN THOUSANDS)
Income taxes at statutory $6,699 35.0% $5,551 35.0% $4,782 34.0%
rates......................
State taxes based on income
net of federal income tax
benefit.................... 450 2.4 546 3.4 575 4.1
Other....................... 166 0.8 (112) (0.7) 9 0.1
------ ---- ------ ---- ------ ----
Total income tax expense.. $7,315 38.2% $5,985 37.7% $5,366 38.2%
------ ---- ------ ---- ------ ----
------ ---- ------ ---- ------ ----
The provision for income taxes consists of the following:
Current year income taxes... $7,254 $6,178 $5,180
Deferred income taxes....... 61 (193) 186
------ ------ ------
Total income tax expense.. $7,315 $5,985 $5,366
------ ------ ------
------ ------ ------
The components of the deferred tax assets and liabilities consist of the
following at October 31:
1996 1995
---- ----
ASSETS LIABILITIES NET ASSETS LIABILITIES NET
------ ----------- --- ------ ----------- ---
(IN THOUSANDS)
Allowance for doubtful
accounts................... $1,041 $1,041 $1,015 $ 1,015
Inventory................... 668 $(1,470) (802) 368 $(1,297) (929)
Accrued liabilities......... 761 761 778 778
Sales returns and allowances 105 105 96 96
Other....................... 36 36 (117) (117)
------ ------- ------ ------ ------- -------
Current.................. 2,611 (1,470) 1,141 2,140 (1,297) 843
------ ------- ------ ------ ------- -------
Property, plant and equipment (1,398) (1,398) (1,039) (1,039)
------ ------- ------ ------ ------- -------
Noncurrent............... (1,398) (1,398) (1,039) (1,039)
------ ------- ------ ------ ------- -------
Total................. $2,611 $(2,868) $ (257) $2,140 $(2,336) $ (196)
------ ------- ------ ------ ------- -------
------ ------- ------ ------ ------- -------
-27-
<PAGE>
9. COMMITMENTS AND CONTINGENCIES
Future minimum lease payments under noncancelable lease agreements during
the years subsequent to October 31, 1996 are as follows:
CAPITAL LEASES OPERATING LEASES
-------------- ----------------
(IN THOUSANDS)
1997 . . . . . . . . . . . . . . . . . . . $ 315 $ 6,183
1998 . . . . . . . . . . . . . . . . . . . 291 5,047
1999 . . . . . . . . . . . . . . . . . . . 48 3,662
2000 . . . . . . . . . . . . . . . . . . . 1,863
2001 . . . . . . . . . . . . . . . . . . . 1,141
Thereafter . . . . . . . . . . . . . . . . 1,635
------ --------
Total minimum lease payments . . . . . . . 654 $ 19,531
--------
--------
Amount representing interest . . . . . . . (73)
Present value of net minimum lease ------
payments (including current portion
of $268,000). . . . . . . . . . . . . . . $ 581
------
------
During the years ended October 31, 1996, 1995 and 1994, the Company
incurred rent expense of approximately $6,744,000, $5,551,000 and $2,447,000,
respectively.
From time to time, the Company is involved in litigation and proceedings in
the ordinary course of its business. Management believes that pending
litigation matters would not, if decided adversely to the Company, have a
material adverse effect on the Company's financial condition, results of
operations or cash flows.
10. CAPITAL STOCK
The Company's Stock Incentive Plan and 1996 Stock Incentive Plan
(collectively referred to as the "Management Plans") provide for the possible
issuance of options, phantom shares, stock awards, stock appreciation rights,
performance unit awards or dividend equivalent rights. Options, which
constitute the only issuances under the Management Plans, have been granted at
fair market value of the Company's common stock on the date of grant. The
options generally vest over three- to five-year periods and expire within ten
years of grant date.
-28-
<PAGE>
Activity under the Management Plans is as follows:
OPTION
SHARES PRICE
------ ------
Outstanding at November 1, 1993. . . . 1,040,472 $0.95-$ 7.11
Granted. . . . . . . . . . . . . . . . 91,448 12.00- 17.50
Exercised. . . . . . . . . . . . . . . (2,921) 1.42- 4.03
Canceled . . . . . . . . . . . . . . . (352) 1.42- 4.03
---------
Outstanding at October 31, 1994. . . . 1,128,647 0.95- 17.50
Granted. . . . . . . . . . . . . . . . 188,412 9.50- 16.25
Exercised. . . . . . . . . . . . . . . (99,552) 0.95- 4.03
Canceled . . . . . . . . . . . . . . . (33,250) 3.08- 16.00
---------
Outstanding at October 31, 1995. . . . 1,184,257 0.95- 17.50
Granted. . . . . . . . . . . . . . . . 371,594 10.00- 12.25
Exercised. . . . . . . . . . . . . . . (447,963) 0.95- 7.11
Canceled . . . . . . . . . . . . . . . (31,100) 1.42- 16.25
---------
Outstanding at October 31, 1996. . . . 1,076,788 0.95- 17.50
---------
---------
Exercisable at October 31, 1996. . . . 518,291 $0.95-$17.50
---------
---------
A Non-Management Directors Plan (the "Directors Plan") provides for the
issuance of up to 25,000 options to purchase shares at an exercise price equal
to fair market value of the Company's common stock on date of grant. At October
31, 1996, options to purchase 15,000 shares were outstanding, and 10,664 options
were exercisable.
At October 31, 1996, 1,401,249 and 11,000 additional options were available
for future grant under the Management and Directors' Plans, respectively, and
2,515,037 shares of common stock were reserved for issuance upon the exercise of
outstanding options or future option grants under all plans.
During fiscal 1995, the Company's board of directors authorized the
repurchase of up to 750,000 shares of the Company's common stock. Through
October 31, 1996, the Company had repurchased 431,974 shares of the Company's
common stock at an average price per share of $9.66.
During fiscal 1995, the Company adopted an Employee Stock Purchase Plan
under which employees are granted an option to purchase shares of the Company's
common stock on the first day of the quarter which is automatically exercised on
the last day of the quarter. The option price is 85% of the fair market value
of the stock at the end of the quarter. Options for shares were exercised at
prices ranging from $7.44 to $10.73 during fiscal 1996 and $8.08 to $11.26
during fiscal 1995. At October 31, 1996 and 1995, there were 182,152 and
195,494 shares of common stock reserved for purchase under the plan,
respectively.
11. EMPLOYEE BENEFITS
The Company has 401(k) plans that cover substantially all employees. The
Company's funding policy is to match the employee's contributions up to 4% of
the employee's base salary, not to exceed certain allowable limits. Employees
vest in Company contributions evenly over four years. The Company's
contributions for the years ended October 31, 1996, 1995 and 1994 were $907,000,
$586,000 and $615,000, respectively.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with Statement of Financial Accounting
Standards No. 107, "Disclosures about Fair Value of Financial Instruments." The
estimated fair value amounts have been determined by the Company, 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 effect of using different market assumptions
and/or estimation methodologies may be material to the estimated fair value
amounts.
-29-
<PAGE>
The carrying amount and fair value of certain financial instruments consist of
the following at October 31:
1996 1995
------------------- --------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
------ ---------- ------ ----------
(IN THOUSANDS)
Assets:
Cash and cash equivalents. . $ 5,078 $ 5,078 $ 3,494 $ 3,494
Accounts receivable, net . . 92,932 92,932 75,502 75,502
Liabilities:
Accounts payable . . . . . . 54,839 54,839 40,410 40,410
Current maturities . . . . . 790 790 1,099 1,099
Long-term debt . . . . . . . 52,078 52,078 38,264 38,264
CASH AND CASH EQUIVALENTS, ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND
CURRENT MATURITIES OF DEBT - The carrying amounts of these items approximate
their fair value due to their short-term nature or are the amounts payable on
demand.
LONG-TERM DEBT - Interest rates that are currently available to the Company
for issuance of debt with similar terms and remaining maturities are used to
estimate fair value of debt.
13. CONSULTING AGREEMENTS
The Company has an agreement expiring in December 1998 with an affiliate
of a major shareholder for financial and management consulting services to be
provided to the Company. This agreement, executed in November 1996, amended
and superseded prior consulting agreements with the Company's operating
subsidiaries. The consulting agreement provides for base monthly fees of
$15,000 plus expenses, and additional compensation if approved by the Board
of Directors. Fees under prior agreements with the Company's operating
subsidiaries for the years ended October 31, 1996, 1995 and 1994, totaled
$426,000, $338,000 and $560,000, respectively.
14. SUBSEQUENT EVENTS
On November 12, 1996, the Company executed a letter of intent to acquire
the assets of Boyd Distributors, a division of Ince Holdings, Ltd. with 18
locations across Canada, pending completion of the Company's due diligence.
The estimated purchase price is $15,000,000 and is subject to certain
adjustments.
On December 3, 1996, the Company formed a new wholly-owned subsidiary,
Cameron Ashley Financial Services, Inc., to provide home improvement financing
to homeowners through the Company's existing customer base. The subsidiary
was capitalized with $1,050,000 cash from the Company and a $20,000,000
Revolving Credit Agreement with Bank One, Texas, N.A. due December 3, 1997.
The NationsBank Credit Agreement was amended to accommodate the new facility.
On December 9, 1996, the Company acquired the assets of Metro Roofing
Supply, Inc. located in Arkansas for an estimated purchase price of
$1,300,000. The purchase price is subject to certain adjustments and was
funded with cash.
On December 13, 1996, the Company acquired the assets of Midwest Thermal
Products, Inc., Midwest Insulation and Siding, Inc. and Midwest Insulation
and Roofing, Inc. located in Arkansas, Missouri and Oklahoma for an estimated
purchase price of $3,300,000. The purchase price is subject to certain
adjustments and was funded with cash.
-30-
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
-31-
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Director and Nominee Information", "Executive
Officers of the Company" and "Section 16(a) Beneficial Owner Reporting
Compliance" appearing in the Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held on March 4, 1997 sets forth certain
information with respect to the directors and executive officers of the
Company and is incorporated herein by reference. Certain information with
respect to the executive officers of the Registrant is included elsewhere in
Part I hereof under the caption "Executive Officers of the Registrant".
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" appearing in the
Registrant's Proxy Statement for the Annual Meeting of Shareholders to be
held on March 4, 1997, sets forth certain information with respect to the
compensation of management of the Registrant and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The sections entitled "Principal Shareholders of the Company" and
"Election of Directors" appearing in the Registrant's Proxy Statement for the
Annual Meeting of Shareholders to be held on March 4, 1997, set forth
certain information with respect to the ownership of the Registrant's Common
Stock and are incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Section entitled "Compensation Committee Interlocks and Insider
Participation" appearing in the Registrant's Proxy Statement for the Annual
Meeting of Shareholders to be held on March 4, 1997 set forth certain
information with respect to these matters and is incorporated herein by
reference.
- 32 -
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) DOCUMENTS INCORPORATED BY REFERENCE OR FILED WITH THIS REPORT;
(1.) FINANCIAL STATEMENTS
The Financial Statements of the Company are listed in Item 8 of
Part II.
(2.) FINANCIAL STATEMENT SCHEDULE
Independent Auditors' Report on Financial Statement Schedule.
Schedule II -- Valuations and Qualifying Accounts
The other schedules have been omitted because they are inapplicable.
(3.) EXHIBITS INCORPORATED BY REFERENCE OR FILED WITH THIS REPORT
The exhibits listed below are filed with or incorporated by reference
into this Annual Report on Form 10-K. The exhibits which are denominated
with an asterisk (*) were previously filed as part of, and are hereby
incorporated by reference from, the Company's Registration Statement on Form
S-1 (No. 33-75054) filed with the Commission on February 8, 1994 and
effective on March 24, 1994. Other exhibits denominated with numbered
footnotes are incorporated by reference to the other filings with the
Commission set forth below. Unless otherwise indicated, the exhibit number
corresponds to the exhibit number incorporated by reference. ITEMS LISTED IN
BOLDFACE CONSTITUTE MANAGEMENT CONTRACTS OR COMPENSATORY PLANS OR
ARRANGEMENTS.
2.1 -- Exchange Agreement dated as of February 16, 1994 among Cameron
Ashley Inc., Cameron, Ashley, the shareholders and option
holders of Cameron and Ashley and William A. Davies.*
3.1 -- Amended and Restated Articles of Incorporation.*
3.2 -- Amended and Restated Bylaws.*
4.1 -- See Articles II, III, IV of the Amended and Restated Articles
of Incorporation filed as Exhibit 3.1 and Articles 2,
7, 8 and 9 of the Amended and Restated Bylaws filed as
Exhibit 3.2.
10.1 -- Intentionally omitted.
10.1.1 -- Intentionally omitted.
10.2 -- Intentionally omitted.
10.2.1 -- Intentionally omitted.
10.3 -- Intentionally omitted.
10.4 -- CAMERON ASHLEY INC. STOCK INCENTIVE PLAN.*
- 33 -
<PAGE>
10.5 -- FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT.*
10.6 -- CAMERON ASHLEY INC. NON-MANAGEMENT DIRECTORS' STOCK
OPTION PLAN.*
10.6.1 -- TECHNICAL AMENDMENT TO CAMERON ASHLEY INC. NON-MANAGEMENT
DIRECTORS' STOCK OPTION PLAN.(2)
10.7 -- EMPLOYMENT AND CONFIDENTIALITY AGREEMENT DATED DECEMBER 20,
1991 BETWEEN CAMERON AND RONALD R. ROSS.*
10.7.1 -- EMPLOYMENT AGREEMENT DATED SEPTEMBER 1, 1996 BETWEEN
WM. CAMERON & CO. AND RONALD R. ROSS.
10.8 -- EMPLOYMENT AND CONFIDENTIALITY AGREEMENT DATED OCTOBER 18, 1991
BETWEEN ASHLEY AND WALTER J. MURATORI.*
10.8.1 -- EMPLOYMENT AGREEMENT DATED SEPTEMBER 1, 1996 BETWEEN
ASHLEY ALUMINUM, INC. AND WALTER J. MURATORI.
10.9 -- Intentionally omitted.
10.10 -- Intentionally omitted.
10.11 -- FORM OF INDEMNIFICATION AGREEMENT BETWEEN THE COMPANY
AND EACH OF ITS DIRECTORS.*
10.11.1 -- FORM OF INDEMNIFICATION AGREEMENT BETWEEN THE COMPANY AND
EACH OF ITS EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
OF THE COMPANY.(1)
10.12 -- Agreement for Consulting Services dated December 20, 1991
between Cameron and CGW Southeast Management Company,
as amended.*
10.13 -- Agreement for Consulting Services dated October 18, 1991
between Ashley and CGW Southeast Management Company,
as amended.*
10.14 -- Amended and Restated Agreement for Consulting Services dated
November 1, 1996 among the Company, Cameron, Ashley and
CGW Southeast Management Company.
10.15 -- Intentionally omitted.
10.16 -- Credit Agreement ("Credit Agreement") between the Company
and NationsBank of Texas National Association, as
administrative lender, dated as of June 30, 1994.(1)
10.16.1 -- First Amendment to Credit Agreement, dated as of
October 28, 1994.(1)
10.16.2 -- Second Amendment to Credit Agreement, dated as of
February 2, 1995.(2)
10.16.3 -- Third Amendment to Credit Agreement, dated as of
November 30, 1995.(3)
10.17 -- CAMERON ASHLEY INC. 1995 QUALIFIED EMPLOYEE STOCK
PURCHASE PLAN.(4)
- 34 -
<PAGE>
10.18 -- First Restated Credit Agreement among the Company, NationsBank
of Texas National Association, as Agent, ABN Amro Bank,
N.V. as Co-Agent, and other Lenders, dated as of April 18,
1996.(5)
10.18.1 -- First Amendment to First Restated Credit Agreement dated
December 3, 1996 among the Company, NationsBank of Texas,
National Association, as Agent, ABN Amro Bank N.V., as
Co-Agent, and other Lenders.
10.19 -- Note Purchase Agreement between the Company and various
Purchasers dated as of April 1, 1996.(5)
10.20 -- CHANGE IN CONTROL EMPLOYMENT AGREEMENT BETWEEN THE COMPANY
AND RONALD R. ROSS DATED AS OF JUNE 1, 1996.(5)
10.21 -- CHANGE IN CONTROL EMPLOYMENT AGREEMENT BETWEEN THE COMPANY
AND WALTER J. MURATORI DATED AS OF JUNE 1, 1996.(5)
10.22 -- Credit Agreement dated December 3, 1996 between Cameron
Ashley Financial Services, Inc., as Borrower, and
Bank One, Texas, N.A., as Lender.
10.23 -- CAMERON ASHLEY BUILDING PRODUCTS, INC. 1996 STOCK
INCENTIVE PLAN.
10.23.1 -- FIRST AMENDMENT TO THE CAMERON ASHLEY BUILDING PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN, DATED DECEMBER 11, 1996.
11.1 -- Statement regarding computation of per share earnings.
21.1 -- List of Subsidiaries of the Registrant.*
23.1 -- Consent of Deloitte & Touche LLP.
- - - - -------------------
(1) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-1, (No. 33-88778) filed with the
Commission on January 26, 1995 and effective on March 2, 1995.
(2) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 1995, filed with the Commission on March 17, 1995.
(3) Incorporated by reference to the exhibit filed with the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1995, filed
with the Commission on January 26, 1996.
(4) Incorporated by reference to Exhibit 4.2 filed with the Company's
Registration Statement on Form S-8 (No. 33-90782) filed with the
Commission on March 30, 1995.
(5) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1996.
(b) CURRENT REPORTS ON FORM 8-K:
No Current Reports on Form 8-K were filed by the Registrant during the
fourth quarter of the fiscal year ended October 31, 1996.
- 35 -
<PAGE>
(c) EXHIBITS:
The Index to Exhibits filed or incorporated by reference pursuant
Item 601 of Regulation S-K and the Exhibits being filed with this
Report are included following the signature pages to this Form 10-K.
(d) FINANCIAL STATEMENTS OF SUBSIDIARIES OR AFFILIATES:
Not applicable.
- 36 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K
to be signed on its behalf by the undersigned, thereunto duly authorized, on
January 27, 1997.
CAMERON ASHLEY BUILDING PRODUCTS, INC.
By: /s/ F. Dixon McElwee
----------------------------------------
F. Dixon McElwee
Vice President - Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints F. Dixon McElwee and John S. Davis, jointly
and severally, his attorneys-in-fact, each with full power of substitution,
for him in any and all capacities, to sign any amendments to this Annual
Report on Form 10-K and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report on Form 10-K has been signed by the following persons on behalf of the
Registrant and in the capacities indicated on January 27, 1997.
SIGNATURE TITLE
--------- -----
/s/ Ronald R. Ross Chairman of the Board and Chief Executive Officer
- - - - -------------------------- (Principal Executive Officer)
Ronald R. Ross
/s/ Walter J. Muratori President and Director
- - - - --------------------------
Walter J. Muratori
/s/ F. Dixon McElwee Vice President - Chief Financial Officer
- - - - -------------------------- (Principal Financial and Accounting Officer)
F. Dixon McElwee
/s/ J. Veronica Biggins Director
- - - - --------------------------
J. Veronica Biggins
/s/ Richard L. Cravey Director
- - - - --------------------------
Richard L. Cravey
/s/ Harry K. Hornish Director
- - - - --------------------------
Harry K. Hornish
- 37 -
<PAGE>
/s/ Allen J. Keesler, Jr. Director
- - - - --------------------------
Allen J. Keesler, Jr.
/s/ Donald S. Huml Director
- - - - --------------------------
Donald S. Huml
/s/ Don A. Rice Director
- - - - --------------------------
Don A. Rice
/s/ Charles C. Schoen, III Director
- - - - --------------------------
Charles C. Schoen, III
/s/ Edwin A. Wahlen, Jr. Director
- - - - --------------------------
Edwin A. Wahlen, Jr.
/s/ Stanley C. Weiss Director
- - - - --------------------------
Stanley C. Weiss
- 38 -
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULE
Page
----
Independent Auditors' Report on Financial Statement Schedules S-2
Schedule II -- Valuation and Qualifying Accounts S-3
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors and Shareholders of Cameron Ashley Building
Products, Inc.:
We have audited the consolidated financial statements of Cameron Ashley
Building Products, Inc. and subsidiaries as of October 31, 1996 and 1995 and
for each of the years in the period ended October 31, 1996 and have issued
our report thereon dated December 13, 1996. Our audits also included the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K. This
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
DELOITTE & TOUCHE LLP
Dallas, Texas
December 13, 1996
S-2
<PAGE>
SCHEDULE II
CAMERON ASHLEY BUILDING PRODUCTS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
BALANCE AT CHARGES IN BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ADDITIONS DEDUCTIONS PERIOD
----------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year Ended October 31, 1994:
Allowance for doubtful accounts. . . . 1,515 1,235 470(1) 1,168 2,052
Year Ended October 31, 1995:
Allowance for doubtful accounts. . . . 2,052 2,203 333(1) 2,007 2,581
Year Ended October 31, 1996:
Allowance for doubtful accounts. . . . 2,581 2,257 0 2,119 2,719
</TABLE>
(1) Amount represents the allowance for doubtful accounts of acquired
businesses as of the date of acquisition.
S-3
<PAGE>
INDEX TO EXHIBITS
Items listed in boldface constitute management contracts or compensatory
plans or arrangements.
EXHIBIT NUMBER DESCRIPTION
2.1 -- Exchange Agreement dated as of February 16, 1994 among Cameron
Ashley Inc., Cameron, Ashley, the shareholders and option
holders of Cameron and Ashley and William A. Davies.*
3.1 -- Amended and Restated Articles of Incorporation.*
3.2 -- Amended and Restated Bylaws.*
4.1 -- See Articles II, III, IV of the Amended and Restated Articles
of Incorporation filed as Exhibit 3.1 and Articles 2, 7,
8 and 9 of the Amended and Restated Bylaws filed as
Exhibit 3.2.
10.1 -- Intentionally omitted.
10.1.1 -- Intentionally omitted.
10.2 -- Intentionally omitted.
10.2.1 -- Intentionally omitted.
10.3 -- Intentionally omitted.
10.4 -- CAMERON ASHLEY INC. STOCK INCENTIVE PLAN.*
10.5 -- FORM OF NON-QUALIFIED STOCK OPTION AGREEMENT.*
10.6 -- CAMERON ASHLEY INC. NON-MANAGEMENT DIRECTORS' STOCK
OPTION PLAN.*
10.6.1 -- TECHNICAL AMENDMENT TO CAMERON ASHLEY INC. NON-MANAGEMENT
DIRECTORS' STOCK OPTION PLAN.(2)
10.7 -- EMPLOYMENT AND CONFIDENTIALITY AGREEMENT DATED DECEMBER 20,
1991 BETWEEN CAMERON AND RONALD R. ROSS.*
10.7.1 -- EMPLOYMENT AGREEMENT DATED SEPTEMBER 1, 1996 BETWEEN
WM. CAMERON & CO. AND RONALD R. ROSS.
10.8 -- EMPLOYMENT AND CONFIDENTIALITY AGREEMENT DATED OCTOBER 18,
1991 BETWEEN ASHLEY AND WALTER J. MURATORI.*
10.8.1 -- EMPLOYMENT AGREEMENT DATED SEPTEMBER 1, 1996 BETWEEN
ASHLEY ALUMINUM, INC. AND WALTER J. MURATORI.
10.9 -- Intentionally omitted.
10.10 -- Intentionally omitted.
<PAGE>
10.11 -- FORM OF INDEMNIFICATION AGREEMENT BETWEEN THE COMPANY AND EACH
OF ITS DIRECTORS.*
10.11.1 -- FORM OF INDEMNIFICATION AGREEMENT BETWEEN THE COMPANY AND EACH
OF ITS EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS OF THE
COMPANY.(3)
10.12 -- Agreement for Consulting Services dated December 20, 1991
between Cameron and CGW Southeast Management Company,
as amended.*
10.13 -- Agreement for Consulting Services dated October 18, 1991
between Ashley and CGW Southeast Management Company,
as amended.*
10.14 -- Amended and Restated Agreement for Consulting Services dated
November 1, 1996 among the Company, Cameron, Ashley and
CGW Southeast Management Company.
10.15 -- Intentionally omitted.
10.16 -- Credit Agreement ("Credit Agreement") between the Company and
NationsBank of Texas National Association, as
administrative lender, dated as of June 30, 1994.(1)
10.16.1 -- First Amendment to Credit Agreement, dated as of
October 28, 1994.(1)
10.16.2 -- Second Amendment to Credit Agreement, dated as of
February 2, 1995.(2)
10.16.3 -- Third Amendment to Credit Agreement, dated as of
November 30, 1995.(3)
10.17 -- CAMERON ASHLEY INC. 1995 QUALIFIED EMPLOYEE STOCK
PURCHASE PLAN.(4)
10.18 -- First Restated Credit Agreement among the Company,
NationsBank of Texas National Association, as Agent,
ABN Amro Bank, N.V. as Co-Agent, and other Lenders,
dated as of April 18, 1996.(5)
10.18.1 -- First Amendment to First Restated Credit Agreement dated
December 3, 1996 among the Company, NationsBank of
Texas, National Association, as Agent, ABN Amro Bank N.V.,
as Co-Agent, and other Lenders.
10.19 -- Note Purchase Agreement between the Company and various
Purchasers dated as of April 1, 1996.(5)
10.20 -- CHANGE IN CONTROL EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND
RONALD R. ROSS DATED AS OF JUNE 1, 1996.(5)
10.21 -- CHANGE IN CONTROL EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND
WALTER J. MURATORI DATED AS OF JUNE 1, 1996.(5)
10.22 -- Credit Agreement dated December 3, 1996 between Cameron
Ashley Financial Services, Inc., as Borrower, and
Bank One, Texas, N.A., as Lender.
10.23 -- CAMERON ASHLEY BUILDING PRODUCTS, INC. 1996 STOCK
INCENTIVE PLAN.
10.23.1 -- FIRST AMENDMENT TO THE CAMERON ASHLEY BUILDING PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN, DATED DECEMBER 11, 1996.
<PAGE>
11.1 -- Statement regarding computation of per share earnings.
21.1 -- List of Subsidiaries of the Registrant.*
23.1 -- Consent of Deloitte & Touche LLP.
- - - - ------------------
The exhibits which are denominated with an asterisk (*) were previously
filed as part of, and are hereby incorporated by reference from, the
Company's Registration Statement on Form S-1 (No. 33-75054) filed with the
Commission on February 8, 1994 and effective on March 24, 1994.
(1) Incorporated by reference to the exhibit filed with the Company's
Registration Statement on Form S-1, (No. 33-88778) filed with the
Commission on January 26, 1995 and effective on March 2, 1995.
(2) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
January 31, 1995, filed with the Commission on March 17, 1995.
(3) Incorporated by reference to the exhibit filed with the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1995, filed
with the Commission on January 26, 1996.
(4) Incorporated by reference to Exhibit 4.2 filed with the Company's
Registration Statement on Form S-8 (No. 33-90782) filed with the
Commission on March 30, 1995.
(5) Incorporated by reference to the exhibit filed with the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended
April 30, 1996.
<PAGE>
EXHIBIT 10.7.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made, effective as of the 1st day of September, 1996,
between WM. CAMERON & CO., a Georgia corporation dba CAMERON ASHLEY BUILDING
PRODUCTS (the "Company") and RONALD R. ROSS, a resident of the State of Texas
("Executive").
BACKGROUND
Executive has been employed by the Company pursuant to an Employment and
Confidentiality Agreement dated December 20, 1991 (the "Prior Agreement") as an
executive employee. The Company desires to extend the employment relationship
with Executive, and Executive desires to continue employment on the terms and
conditions set forth below. This Agreement is intended to replace and supersede
the Prior Agreement.
AGREEMENT
In consideration of the continued employment of Executive by the Company,
the premises, and the mutual agreements hereinafter set forth, the parties
agree:
1. DEFINITIONS. The following terms used herein shall have the
definitions set forth below:
(a) "Business" or "Business of the Company" means the business of
distribution of building materials.
(b) "Cause" means conduct amounting to fraud or dishonesty against
the Company; Executive's willful violation of Sections 2(a) or (b) hereof, or
any of the Company's work rules or policies or repeated absences from work
without a reasonable excuse, if the Board of Directors of the Parent notifies
Executive of such violation or absence in writing and Executive fails to cure
such violation or absenteeism within five (5) days after written notice has been
given, provided that written notice relating to such violation or absenteeism
shall only be given once as it relates to a particular manner of conduct;
intoxication with alcohol or drugs while on Company business during regular
business hours; a conviction or plea of guilty or NOLO CONTENDERE to a felony or
a crime involving dishonesty against the Company; or Executive's failure to
observe the requirements of Sections 2(c), 5 or 6 hereof.
<PAGE>
(c) "Disability" means (i) the inability of Executive to perform the
duties of Executive's employment due to physical or emotional incapacity or
illness, where such inability is expected to be a long-continued and indefinite
duration or (ii) Executive shall be entitled to (x) disability retirement
benefits under the federal Social Security Act or (y) recover benefits under any
long-term disability plan or policy maintained by the Company. In the event of
a dispute, the determination of Disability shall be made by the Board of
Directors of the Company and shall be supported by advice of a physician
competent in the area to which such Disability relates.
(d) "Effective Date" means the date set forth above.
2. TERMS OF ENGAGEMENT; DUTIES
(a) The Company hereby employs Executive, commencing on the Effective
Date, and Executive hereby accepts employment by the Company subject to the
terms and conditions hereof. Executive is engaged initially with the title and
functions of Chairman and Chief Executive Officer of the Company and Chairman
and Chief Executive Officer of the parent company, Cameron Ashley Building
Products, Inc. ("Parent"). Executive shall report to and shall perform the
duties assigned by the Board of Directors of the Company and the Parent from
time to time, and as are provided in the Bylaws of the Company and the Parent.
At all times during the term of this Agreement, the Executive shall be employed
as a senior executive of the Company with appropriate and commensurate title,
rank and status and Executive shall retain the chairman and chief executive
position of any division or unit of the Company or the Parent in the future
that contains substantially all of the assets of the Company and the Parent as
are held by the Company and the Parent on the Effective Date.
(b) Throughout the term of this Agreement, Executive shall:
(i) devote all of Executive's business effort, time,
energy, and skill (reasonable vacations and reasonable absences due to
illness excepted) to the duties assigned by the Board of Directors
of the Company and the Parent;
(ii) faithfully, loyally, and industriously perform such
duties, subject to the control and supervision of the Board of Directors
of the Company and the Parent; and
(iii) diligently follow and implement all lawful
management policies and decisions of the Company and the Parent that are
communicated to Executive.
(c) During the term of this Agreement, Executive shall not be engaged
(whether or not during normal business hours) in any other business or
professional activity, whether or not such activity is pursued for gain, profit
or other pecuniary advantage that is contrary to the provisions of Section
2(b)(i) above; provided, however, that this restriction shall not be construed
as preventing Executive from (i) investing his personal assets in businesses
which do not compete with the Company in such form or manner as will not require
any services on the part of Executive in the operation or the affairs of the
companies in which such investments are made and in which his
-2-
<PAGE>
participation is solely that of an investor or (ii) purchasing securities in
any corporation whose securities are regularly traded provided that such
purchase shall not result in his collectively owning beneficially at any time
five (5%) percent or more of the equity securities of any corporation engaged
in a business competitive to that of the Company.
3. COMPENSATION. In consideration of the services rendered by Executive
pursuant to this Agreement, the Company shall provide the following:
(a) A base salary of Two Hundred Seventy Five Thousand Dollars
($275,000) per annum (the "Base Salary") which Base Salary will be reviewed
periodically and may be increased by the Company from time to time. The Base
Salary shall be paid in accordance with the Company's standard payroll practices
in effect from time to time, and shall be subject to such deductions and
withholdings as are required by law or by policies of the Company.
(b) Executive shall be eligible to be considered for an annual cash
performance bonus, which may consist of an amount of up to one hundred percent
(100%) of the Base Salary in the applicable year based on the attainment of
performance objectives established by the Board of Directors of the Company and
the Parent in good faith and Executive's contributions to the attainment of
those objectives, and shall be in such amount and payable in such manner and on
such terms as are determined by the Board of Directors of the Company and the
Parent in good faith. Nothing contained in this subsection (b) shall obligate
the Company to pay a bonus to Executive, unless the Board of Directors of the
Company and the Parent determines to award such a bonus to Executive.
(c) The right to participate in any insurance plans maintained by the
Company from time to time to the extent that Executive's position, tenure,
salary, age, health and other qualifications make him eligible to participate,
and such other fringe benefits as are provided to the other senior management
employees of the Company, provided that the Company shall not be required to
adopt or continue any insurance plans or fringe benefits.
(d) Reimbursement for all reasonable business expenses incurred by
Executive in connection with the Business of the Company (including car
allowance) subject to compliance with the expense reimbursement policies
established by the Company and in sufficient detail to comply with Internal
Revenue Service Regulations.
(e) A grant, as of the Effective Date, of 200,000 options to purchase
Common Stock of the Parent issued under the existing Stock Incentive Plans of
the Parent. The exercise price of such options shall be $12.25, the Fair Market
Value as of the date hereof. Such options will have a term of ten years and
will vest in one-fifth increments over five years from the date of grant.
(f) Executive shall be eligible for an additional grant of options to
purchase Common Stock of the Parent as of the end of the term hereof in such
amount as shall be determined by the Board of Directors of the Parent.
-3-
<PAGE>
(g) The remuneration and benefits set forth in this Section 3 shall
be the only compensation payable to Executive with respect to his employment
hereunder, and Executive shall not be entitled to receive any compensation in
addition to that set forth in this Section 3 for any services rendered by him in
any capacity to the Company or any affiliated corporation unless agreed to in
writing by the Company or such affiliated corporation.
4. TERM AND TERMINATION OF THIS AGREEMENT. The term of employment of
Executive pursuant to this Agreement shall commence on the Effective Date and
shall continue for a term of three (3) years, or until sooner terminated as
provided herein.
(a) Executive's employment hereunder may be terminated:
(i) Upon the death or Disability of Executive;
(ii) By the Company, immediately for Cause;
(iii) By Executive upon ninety (90) days prior written
notice to the Company;
(iv) By Company immediately upon written notice to
Executive; or
(v) By mutual agreement between Executive and the Company.
(b) Except as set forth below, upon termination of Executive's
employment hereunder pursuant to this Section 4, the Company shall have no
further obligation to Executive or his personal representative with respect to
remuneration due under this Agreement, except for Base Salary earned but unpaid
at date of termination, provided however, Executive's covenants in Sections 5
and 6 of this Agreement shall survive the termination of Executive's employment
hereunder. Upon termination of Executive's employment hereunder pursuant to
Section 4(a)(iv) above, Executive shall be entitled to receive severance pay
(the "Severance Amount") consisting of an amount equal to (i) the then current
annualized Base Salary plus (ii) the average of the annual bonus actually paid
to or accrued for Executive hereunder for the two (2) most recent fiscal years
of the Company ending prior to the date of termination, paid together over a
twelve (12) month period in accordance with the Company's standard payroll
practices in effect at the time of termination. If Executive elects to continue
coverage on the Company's health plan upon termination of employment pursuant to
Section 4(a)(iv) above, the Company will pay the monthly premiums for the first
twelve months of the eligible continuation period or until Executive obtains
employment and has satisfied any necessary waiting periods under the new
employer's health plan, whichever is sooner. It is understood that Executive's
coverage under the Company's disability, accidental death or dismemberment and
group life insurance plans cease as of the date of termination. If Executive
fails to observe the requirements of Sections 5 or 6 hereof, then the Company
shall have no obligation to pay any portion of the Severance Amount remaining
unpaid to Executive.
5. OWNERSHIP, NON-DISCLOSURE, AND NON-USE OF TRADE SECRETS.
-4-
<PAGE>
(a) The following terms used in this Section 5 shall have the
definitions set forth below:
(i) "Excluded Information" means any data or information
that is a Trade Secret hereunder (1) that has been voluntarily
disclosed to the public by the Company or has become generally known
to the public (except where such public disclosure has been made by
or through the Executive or by a third person or entity with the
knowledge of the Executive without authorization by the Company);
(2) that has been independently developed and disclosed by parties
other than the Executive or the Company to the Executive or to the
public generally without a breach of any obligation of
confidentiality by any such person running directly or indirectly to
the Company; or (3) that otherwise enters the public domain through
lawful means.
(ii) "Trade Secrets" means information which derives
economic value, actual or potential, from not being generally known
and not being readily ascertainable to other persons who can obtain
economic value from its disclosure or use and which is the subject
of efforts that are reasonable under the circumstances to maintain
its secrecy or confidentiality. Trade Secrets may include either
technical or non-technical data, including without limitation, (1)
any useful process, machine, chemical formula, composition of
matter, or other device which (A) is new or which Executive has a
reasonable basis to believe may be new, (B) is being used or studied
by the Company and is not described in a printed patent or in any
literature already published and distributed externally by the
Company, and (C) is not readily ascertainable from inspection of a
product of the Company; (2) any engineering, technical, or product
specifications including those of features used in any current
product of the Company or to be used, or the use of which is
contemplated, in a future product of the Company; (3) any
application, operating system, communication system, or other
computer software (whether in source or object code) and all flow
charts, algorithms, coding sheets, routines, subroutines,
compilers, assemblers, design concepts, test data, documentation, or
manuals related thereto, whether or not copyrighted, patented or
patentable, related to or used in the Business of the Company; or
(4) information concerning the customers, suppliers, products,
pricing strategies of the Company, personnel assignments and
policies of the Company, or matters concerning the financial affairs
and management of the Company or any parent, subsidiary, or
affiliate of the Company; provided however, that Trade Secrets shall
not include any Excluded Information.
(b) Executive acknowledges and agrees that all Trade Secrets, and all
physical embodiments thereof, are confidential to and shall be and remain the
sole and exclusive property of the Company and that any Trade Secrets produced
by the Executive during the period of Executive's employment by the Company
shall be considered "work for hire" as such term is defined in 17 U.S.C. Section
101, the ownership and copyright of which shall be vested solely in the Company.
Executive agrees (i) immediately to disclose to the Company all Trade Secrets
developed in whole or part by Executive during the term of Executive's's
employment by the Company, and (ii) at the request and expense of the Company,
to do all things and sign all documents or instruments reasonably necessary in
the opinion of the Company to eliminate any ambiguity as to the rights of the
Company in such Trade Secrets including, without limitation, providing to the
Company Executive's full cooperation
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in any litigation or other proceeding to establish, protect, or obtain such
rights. Upon request by the Company, and in any event upon termination of
Executive's employment by the Company for any reason, Executive shall promptly
deliver to the Company all property belonging to the Company including, without
limitation, all Trade Secrets (and all embodiments thereof) then in Executive's
custody, control or possession.
(c) Executive agrees that all Trade Secrets of the Company received
or developed by Executive as a result of Executive's employment with the Company
will be held in trust and strictest confidence, that Executive will protect such
Trade Secrets from disclosure, and that Executive will make no use of such Trade
Secrets, except in connection with Executive's employment hereunder, without the
Company's prior written consent. The obligations of confidentiality contained
in this Agreement will apply during Executive's employment by the Company and
(i) with respect to all Trade Secrets consisting of scientific or technical
data, at any and all times after expiration or termination (for whatever reason)
of such employment; and (ii) with respect to all other Trade Secrets, for a
period of two (2) years after such expiration or termination, unless a longer
period of protection is provided by law.
6. NONCOMPETE; NONSOLICITATION COVENANTS.
(a) The following terms used in this Section 6 shall have the
definitions set forth below:
(i) "Affiliate" means any person or entity directly or
indirectly controlling, controlled by, or under common control with
Executive. As used herein, the word "control" means the power to direct
the management and affairs of a person.
(ii) "Area" means all of North America.
(iii) "Competing Enterprise" means any person or any
business organization of whatever form, engaged directly or indirectly
within the Area in the Business of the Company.
(b) Executive covenants that Executive shall, during the term of this
Agreement and for a period of one (1) year following the termination, for
whatever reason, of Executive's employment by the Company, observe the following
separate and independent covenants:
(i) Neither Executive nor any Affiliate will, without the
prior written consent of the Company, within the Area, either directly or
indirectly, (A) become financially interested in a Competing Enterprise
(other than as a holder of less than five percent of the outstanding voting
securities of any entity whose voting securities are listed on a national
securities exchange or quoted by the National Association of Securities
Dealers, Inc. automated quotation system), or (B) engage in or be employed
by any Competing Enterprise as a consultant, officer, director, or
executive or managerial employee.
(ii) Neither Executive nor any Affiliate will, without the
prior
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written consent of the Company, either directly or indirectly, on
Executive's own behalf or in the service or on behalf of others, solicit,
divert, or appropriate, or attempt to solicit, divert, or appropriate, to
any Competing Enterprise within the Area, any person or entity whose account
with the Company was serviced by or under Executive's direction or
supervision during the term of this Agreement.
(iii) Neither Executive nor any Affiliate will, without the
Company's prior written consent, either directly or indirectly, on
Executive's own behalf or in the service or on behalf of others, solicit,
divert, or hire away, or attempt to solicit, divert, or hire away, to any
Competing Enterprise, any person employed by the Company, whether or not
such employee is a full-time or a temporary employee of the Company and
whether or not such employment is pursuant to written agreement and whether
or not such employment is at will.
7. REMEDIES. Executive acknowledges and agrees that the Company is
engaged in the Business of the Company in and throughout the Area, and that by
virtue of the training, duties, and responsibilities attendant with Executive's
employment by the Company and the special knowledge of the business and
operations of the Company that Executive will have as a consequence of
Executive's employment by the Company, great loss and irreparable damage would
be suffered by the Company if the Executive should breach or violate any of the
terms or provisions of the covenants and agreements set forth herein. Executive
further acknowledges and agrees that each such covenant and agreement is
reasonably necessary to protect and preserve the interest of the Company.
Therefore, in addition to all the remedies provided at law or in equity,
Executive agrees and consents that the Company shall be entitled to a temporary
restraining order and a permanent injunction to prevent a breach or contemplated
breach of any of the covenants or agreements of Executive contained herein. The
existence of any claim, demand, action or cause of action of Executive against
the Company shall not constitute a defense to the enforcement by the Company of
any of the covenants or agreements herein whether predicated upon this Agreement
or otherwise, and shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
8. GENERAL PROVISIONS.
(a) In the event that any one or more of the provisions, or parts of
any provisions, contained in the Agreement shall for any reason be held to be
invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed and
shall be construed as a separate and independent covenant and should any part or
provision of any of such covenants be held or declared invalid by any court of
competent jurisdiction, such invalidity shall in no way render invalid or
unenforceable any other part or provision thereof or any other covenant of the
parties not held or declared invalid.
(b) This Agreement and the rights and obligations of the Company
hereunder may
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be assigned by the Company to any subsidiary of or successor to the Company,
and shall inure to the benefit of, shall be binding upon, and shall be
enforceable by any such assignee, provided that any such assignee shall agree
to assume and be bound by this Agreement. This Agreement and the rights and
obligations of Executive hereunder may not be assigned by Executive.
(c) The waiver by the Company of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of Texas.
The parties agree that any appropriate state court located in Dallas County,
Texas or any Federal Court located in Dallas, Texas shall have exclusive
jurisdiction of any case or controversy arising under or in connection with this
Agreement and shall be a proper forum in which to adjudicate such case or
controversy. The parties consent to the jurisdiction of such courts.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Executive by the Company. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Executive unless made in writing and signed by the parties. All prior
understandings and agreements relating to the employment of Executive by the
Company (including the Prior Agreement) are hereby expressly terminated and
superseded.
(f) Any notice, request, demand, or other communication required to
be given hereunder shall be made in writing and shall be deemed to have been
fully given if personally delivered or if mailed by United States Mail,
certified or registered, postage prepaid, to the parties at the following
addresses (or at such other addresses as shall be given in writing by any party
to the other party hereto):
If to Executive:
Ronald R. Ross
816 Hills Creek Drive
McKinney, TX 75070
If to Company:
Wm. Cameron & Co. dba Cameron Ashley Building Products
11651 Plano Road
Dallas, TX 75243
(g) This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, and it shall not be necessary for
the same counterpart of this agreement be signed by all of the undersigned in
order for the agreements set forth herein to be binding upon all of the
undersigned in accordance with the terms hereof.
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IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
WM. CAMERON & CO. dba
Cameron Ashley Building Products
By: /s/ JOHN S. DAVIS
-----------------------------------------------
John S. Davis, Vice President & General Counsel
EXECUTIVE:
/s/ RONALD R. ROSS
-----------------------------------------------
Ronald R. Ross
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EXHIBIT 10.8.1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective as of the 1st day of September, 1996,
between ASHLEY ALUMINUM, INC., a Georgia corporation dba CAMERON ASHLEY
BUILDING PRODUCTS (the "Company") and WALTER J. MURATORI, a resident of the
State of Florida ("Executive").
BACKGROUND
Executive has been employed by the Company pursuant to an Employment and
Confidentiality Agreement dated October 18, 1991 (the "Prior Agreement") as
an executive employee. The Company desires to extend the employment
relationship with Executive, and Executive desires to continue employment on
the terms and conditions set forth below. This Agreement is intended to
replace and supersede the Prior Agreement.
AGREEMENT
In consideration of the continued employment of Executive by the Company,
the premises, and the mutual agreements hereinafter set forth, the parties
agree:
1. DEFINITIONS. The following terms used herein shall have the
definitions set forth below:
(a) "Business" or "Business of the Company" means the business of
distributing patio and screen enclosure products, vinyl and aluminum building
products, windows, fascia, soffit, fasteners, and other exterior building
products and roll forming aluminum building products.
(b) "Cause" means conduct amounting to fraud or dishonesty against
the Company; Executive's willful violation of Sections 2(a) or (b) hereof, or
any of the Company's work rules or policies or repeated absences from work
without a reasonable excuse, if the Board of Directors of the Parent notifies
Executive of such violation or absence in writing and Executive fails to cure
such violation or absenteeism within five (5) days after written notice has
been given, provided that written notice relating to such violation or
absenteeism shall only be given once as it relates to a particular manner of
conduct; intoxication with alcohol or drugs while on Company business during
regular business hours; a conviction or plea of guilty or NOLO CONTENDERE to
a felony or a crime involving dishonesty against the Company; or Executive's
failure to observe the requirements of Sections 2(c), 5 or 6 hereof.
<PAGE>
(c) "Disability" means (i) the inability of Executive to perform
the duties of Executive's employment due to physical or emotional incapacity
or illness, where such inability is expected to be a long-continued and
indefinite duration or (ii) Executive shall be entitled to (x) disability
retirement benefits under the federal Social Security Act or (y) recover
benefits under any long-term disability plan or policy maintained by the
Company. In the event of a dispute, the determination of Disability shall be
made by the Board of Directors of the Company and shall be supported by
advice of a physician competent in the area to which such Disability relates.
(d) "Effective Date" means the date set forth above.
2. TERMS OF ENGAGEMENT; DUTIES
(a) The Company hereby employs Executive, commencing on the
Effective Date, and Executive hereby accepts employment by the Company
subject to the terms and conditions hereof. Executive is engaged initially
with the title and functions of President and Chief Executive Officer of the
Company and President of the parent company, Cameron Ashley Building
Products, Inc. ("Parent"). Executive shall report to and shall perform the
duties assigned by the Board of Directors of the Company and the Parent from
time to time, and as are provided in the Bylaws of the Company and the
Parent. At all times during the term of this Agreement, the Executive shall
be employed as a senior executive of the Company with appropriate and
commensurate title, rank and status and Executive shall retain the president
position of any division or unit of the Company or the Parent in the future
that contains substantially all of the assets of the Company as are held by
the Company on the Effective Date.
(b) Throughout the term of this Agreement, Executive shall:
(i) devote all of Executive's business effort, time,
energy, and skill (reasonable vacations and reasonable absences due to
illness excepted) to the duties assigned by the Board of Directors of
the Company and the Parent;
(ii) faithfully, loyally, and industriously perform such
duties, subject to the control and supervision of the Board of Directors
of the Company and the Parent; and
(iii) diligently follow and implement all management
policies and decisions of the Company and the Parent that are
communicated to Executive.
(c) During the term of this Agreement, Executive shall not be
engaged (whether or not during normal business hours) in any other business
or professional activity, whether or not such activity is pursued for gain,
profit or other pecuniary advantage that is contrary to the provisions of
Section 2(b)(i) above; provided, however, that this restriction shall not be
construed as preventing Executive from (i) investing his personal assets in
businesses which do not compete with the Company in such form or manner as
will not require any services on the part of Executive in the operation or
the affairs of the companies in which such investments are made and in which
his participation is solely that of an investor or (ii) purchasing securities
in any corporation whose
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securities are regularly traded provided that such purchase shall not result
in his collectively owning beneficially at any time five (5%) percent or more
of the equity securities of any corporation engaged in a business competitive
to that of the Company.
3. COMPENSATION. In consideration of the services rendered by
Executive pursuant to this Agreement, the Company shall provide the following:
(a) A base salary of Two Hundred Twenty-Five Thousand Dollars
($225,000) per annum (the "Base Salary") which Base Salary will be reviewed
periodically and may be increased by the Company from time to time. The Base
Salary shall be paid in accordance with the Company's standard payroll
practices in effect from time to time, and shall be subject to such
deductions and withholdings as are required by law or by policies of the
Company.
(b) Executive shall be eligible to be considered for an annual cash
performance bonus, which may consist of an amount of up to one hundred
percent (100%) of the Base Salary in the applicable year based on the
attainment of performance objectives established by the Board of Directors of
the Company and the Parent in good faith and Executive's contributions to the
attainment of those objectives, and shall be in such amount and payable in
such manner and on such terms as are determined by the Board of Directors of
the Company and the Parent. Nothing contained in this subsection (b) shall
obligate the Company to pay a bonus to Executive, unless the Board of
Directors of the Company and the Parent determines to award such a bonus to
Executive.
(c) The right to participate in any insurance plans maintained by
the Company from time to time to the extent that Executive's position,
tenure, salary, age, health and other qualifications make him eligible to
participate, and such other fringe benefits as are provided to the other
senior management employees of the Company, provided that the Company shall
not be required to adopt or continue any insurance plans or fringe benefits.
(d) Reimbursement for all business reasonable expenses authorized
by the Company and incurred by Executive in connection with the Business of
the Company (including car allowance) subject to compliance with the expense
reimbursement policies established by the Company and in sufficient detail to
comply with Internal Revenue Service Regulations.
(e) A grant, as of the Effective Date, of 100,000 options to
purchase Common Stock of the Parent issued under the existing Stock Incentive
Plans of the Parent. The exercise price of such options shall be $12.25, the
Fair Market Value as of the date hereof. Such options will have a term of ten
years and will vest in one-fifth increments over five years from the date of
grant.
(f) Executive shall be eligible for an additional grant of options
to purchase Common Stock of the Parent as of the end of the term hereof in
such amount as shall be determined by the Board of Directors of the Parent.
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(g) The remuneration and benefits set forth in this Section 3 shall
be the only compensation payable to Executive with respect to his employment
hereunder, and Executive shall not be entitled to receive any compensation in
addition to that set forth in this Section 3 for any services rendered by him
in any capacity to the Company or any affiliated corporation unless agreed to
in writing by the Company or such affiliated corporation.
4. TERM AND TERMINATION OF THIS AGREEMENT. The term of employment of
Executive pursuant to this Agreement shall commence on the Effective Date and
shall continue for a term of three (3) years, or until sooner terminated as
provided herein.
(a) Executive's employment hereunder may be terminated:
(i) Upon the death or Disability of Executive;
(ii) By the Company, immediately for Cause;
(iii) By Executive upon ninety (90) days prior written
notice to the Company;
(iv) By Company immediately upon written notice to
Executive; or
(v) By mutual agreement between Executive and the Company.
(b) Except as set forth below, upon termination of Executive's
employment hereunder pursuant to this Section 4, the Company shall have no
further obligation to Executive or his personal representative with respect
to remuneration due under this Agreement, except for Base Salary earned but
unpaid at date of termination, provided however, Executive's covenants in
Sections 5 and 6 of this Agreement shall survive the termination of
Executive's employment hereunder. Upon termination of Executive's employment
hereunder pursuant to Section 4(a)(iv) above, Executive shall be entitled to
receive severance pay (the "Severance Amount") consisting of an amount equal
to (i) the then current annualized Base Salary plus (ii) the average of the
annual bonus actually paid to or accrued for Executive hereunder for the two
(2) most recent fiscal years of the Company ending prior to the date of
termination, paid together over a period of twelve (12) months in accordance
with the Company's standard payroll practices in effect at the time of
termination. If Executive elects to continue coverage on the Company's
health plan upon termination of employment pursuant to Section 4(a)(iv)
above, the Company will pay the monthly premiums for the first twelve months
of the eligible continuation period or until Executive obtains employment and
has satisfied any necessary waiting periods under the new employer's health
plan, whichever is sooner. It is understood that Executive's coverage under
the Company's disability, accidental death or dismemberment and group life
insurance plans cease as of the date of termination. If Executive fails to
observe the requirements of Sections 5 or 6 hereof, then the Company shall
have no obligation to pay any portion of the Severance Amount remaining
unpaid to Executive.
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5. OWNERSHIP, NON-DISCLOSURE, AND NON-USE OF TRADE SECRETS.
(a) The following terms used in this Section 5 shall have the
definitions set forth below:
(i) "Excluded Information" means any data or information
that is a Trade Secret hereunder (1) that has been voluntarily
disclosed to the public by the Company or has become generally known
to the public (except where such public disclosure has been made by
or through the Executive or by a third person or entity with the
knowledge of the Executive without authorization by the Company);
(2) that has been independently developed and disclosed by parties
other than the Executive or the Company to the Executive or to the
public generally without a breach of any obligation of confidentiality
by any such person running directly or indirectly to the Company; or
(3) that otherwise enters the public domain through lawful means.
(ii) "Trade Secrets" means information which derives
economic value, actual or potential, from not being generally known
and not being readily ascertainable to other persons who can obtain
economic value from its disclosure or use and which is the subject of
efforts that are reasonable under the circumstances to maintain its
secrecy or confidentiality. Trade Secrets may include either
technical or non-technical data, including without limitation,
(1) any useful process, machine, chemical formula, composition of
matter, or other device which (A) is new or which Executive has a
reasonable basis to believe may be new, (B) is being used or studied
by the Company and is not described in a printed patent or in any
literature already published and distributed externally by the
Company, and (C) is not readily ascertainable from inspection of a
product of the Company; (2) any engineering, technical, or product
specifications including those of features used in any current product
of the Company or to be used, or the use of which is contemplated, in
a future product of the Company; (3) any application, operating
system, communication system, or other computer software (whether in
source or object code) and all flow charts, algorithms, coding sheets,
routines, subroutines, compilers, assemblers, design concepts, test
data, documentation, or manuals related thereto, whether or not
copyrighted, patented or patentable, related to or used in the
Business of the Company; or (4) information concerning the customers,
suppliers, products, pricing strategies of the Company, personnel
assignments and policies of the Company, or matters concerning the
financial affairs and management of the Company or any parent,
subsidiary, or affiliate of the Company; provided however, that
Trade Secrets shall not include any Excluded Information.
(b) Executive acknowledges and agrees that all Trade Secrets, and
all physical embodiments thereof, are confidential to and shall be and remain
the sole and exclusive property of the Company and that any Trade Secrets
produced by the Executive during the period of Executive's employment by the
Company shall be considered "work for hire" as such term is defined in 17
U.S.C. Section 101, the ownership and copyright of which shall be vested
solely in the Company. Executive agrees (i) immediately to disclose to the
Company all Trade Secrets developed in whole or part by Executive during the
term of Executive's's employment by the Company, and (ii) at the request and
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expense of the Company, to do all things and sign all documents or
instruments reasonably necessary in the opinion of the Company to eliminate
any ambiguity as to the rights of the Company in such Trade Secrets
including, without limitation, providing to the Company Executive's full
cooperation in any litigation or other proceeding to establish, protect, or
obtain such rights. Upon request by the Company, and in any event upon
termination of Executive's employment by the Company for any reason,
Executive shall promptly deliver to the Company all property belonging to the
Company including, without limitation, all Trade Secrets (and all embodiments
thereof) then in Executive's custody, control or possession.
(c) Executive agrees that all Trade Secrets of the Company received
or developed by Executive as a result of Executive's employment with the
Company will be held in trust and strictest confidence, that Executive will
protect such Trade Secrets from disclosure, and that Executive will make no
use of such Trade Secrets, except in connection with Executive's employment
hereunder, without the Company's prior written consent. The obligations of
confidentiality contained in this Agreement will apply during Executive's
employment by the Company and (i) with respect to all Trade Secrets
consisting of scientific or technical data, at any and all times after
expiration or termination (for whatever reason) of such employment; and (ii)
with respect to all other Trade Secrets, for a period of two (2) years after
such expiration or termination, unless a longer period of protection is
provided by law.
6. NONCOMPETE; NONSOLICITATION COVENANTS.
(a) The following terms used in this Section 6 shall have the
definitions set forth below:
(i) "Affiliate" means any person or entity directly or
indirectly controlling, controlled by, or under common control with
Executive. As used herein, the word "control" means the power to direct
the management and affairs of a person.
(ii) "Area" means all of North America.
(iii) "Competing Enterprise" means any person or any
business organization of whatever form, engaged directly or indirectly
within the Area in the Business of the Company.
(b) Executive covenants that Executive shall, during the term of
this Agreement and for a period of one (1) year following the termination,
for whatever reason, of Executive's employment by the Company, observe the
following separate and independent covenants:
(i) Neither Executive nor any Affiliate will, without the
prior written consent of the Company, within the Area, either directly or
indirectly, (A) become financially interested in a Competing Enterprise
(other than as a holder of less than five percent of the outstanding voting
securities of any entity whose voting securities are listed on a national
securities exchange or quoted by the National Association of Securities
Dealers, Inc. automated quotation system), or (B) engage in or be employed
by any Competing
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Enterprise as a consultant, officer, director, or executive or managerial
employee.
(ii) Neither Executive nor any Affiliate will, without the
prior written consent of the Company, either directly or indirectly, on
Executive's own behalf or in the service or on behalf of others, solicit,
divert, or appropriate, or attempt to solicit, divert, or appropriate, to
any Competing Enterprise within the Area, any person or entity whose
account with the Company was serviced by or under Executive's direction
or supervision during the term of this Agreement.
(iii) Neither Executive nor any Affiliate will, without
the Company's prior written consent, either directly or indirectly, on
Executive's own behalf or in the service or on behalf of others, solicit,
divert, or hire away, or attempt to solicit, divert, or hire away, to any
Competing Enterprise, any person employed by the Company, whether or not
such employee is a full-time or a temporary employee of the Company and
whether or not such employment is pursuant to written agreement and
whether or not such employment is at will.
7. REMEDIES. Executive acknowledges and agrees that the Company is
engaged in the Business of the Company in and throughout the Area, and that
by virtue of the training, duties, and responsibilities attendant with
Executive's employment by the Company and the special knowledge of the
business and operations of the Company that Executive will have as a
consequence of Executive's employment by the Company, great loss and
irreparable damage would be suffered by the Company if the Executive should
breach or violate any of the terms or provisions of the covenants and
agreements set forth herein. Executive further acknowledges and agrees that
each such covenant and agreement is reasonably necessary to protect and
preserve the interest of the Company. Therefore, in addition to all the
remedies provided at law or in equity, Executive agrees and consents that the
Company shall be entitled to a temporary restraining order and a permanent
injunction to prevent a breach or contemplated breach of any of the covenants
or agreements of Executive contained herein. The existence of any claim,
demand, action or cause of action of Executive against the Company shall not
constitute a defense to the enforcement by the Company of any of the
covenants or agreements herein whether predicated upon this Agreement or
otherwise, and shall not constitute a defense to the enforcement by the
Company of any of its rights hereunder.
8. GENERAL PROVISIONS.
(a) In the event that any one or more of the provisions, or parts
of any provisions, contained in the Agreement shall for any reason be held to
be invalid, illegal, or unenforceable in any respect by a court of competent
jurisdiction, the same shall not invalidate or otherwise affect any other
provision hereof, and this Agreement shall be construed as if such invalid,
illegal, or unenforceable provision had never been contained herein.
Specifically, but without limiting the foregoing in any way, each of the
covenants of the parties to this Agreement contained herein shall be deemed
and shall be construed as a separate and independent covenant and should any
part or provision of any of such covenants be held or declared invalid by any
court of competent jurisdiction, such invalidity shall in no way render
invalid or unenforceable any other part or provision thereof or any other
covenant of the parties not held or declared invalid.
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(b) This Agreement and the rights and obligations of the Company
hereunder may be assigned by the Company to any subsidiary of or successor to
the Company, and shall inure to the benefit of, shall be binding upon, and
shall be enforceable by any such assignee, provided that any such assignee
shall agree to assume and be bound by this Agreement. This Agreement and the
rights and obligations of Executive hereunder may not be assigned by
Executive.
(c) The waiver by the Company of any breach of this Agreement by
Executive shall not be effective unless in writing, and no such waiver shall
operate or be construed as a waiver of the same or another breach on a
subsequent occasion.
(d) This Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the laws of the State of
Florida. The parties agree that any appropriate state court located in
Hillsborough County, Florida or any Federal Court located in Tampa, Florida
shall have exclusive jurisdiction of any case or controversy arising under or
in connection with this Agreement and shall be a proper forum in which to
adjudicate such case or controversy. The parties consent to the jurisdiction
of such courts.
(e) This Agreement embodies the entire agreement of the parties
relating to the employment of Executive by the Company. No amendment or
modification of this Agreement shall be valid or binding upon the Company or
Executive unless made in writing and signed by the parties. All prior
understandings and agreements relating to the employment of Executive by the
Company (including the Prior Agreement) are hereby expressly terminated and
superseded.
(f) Any notice, request, demand, or other communication required to
be given hereunder shall be made in writing and shall be deemed to have been
fully given if personally delivered or if mailed by United States Mail,
certified or registered, postage prepaid, to the parties at the following
addresses (or at such other addresses as shall be given in writing by any
party to the other party hereto):
If to Executive:
Walter J. Muratori
18913 Crescent Road
Odessa, FL 33566
If to Company:
Ashley Aluminum, Inc. dba Cameron Ashley Building Products
5120 W. Clifton
Tampa, FL 33634
(g) This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, and it shall not be
necessary for the same counterpart of this agreement be signed by all of the
undersigned in order for the agreements set forth herein to be binding upon
all of the undersigned in accordance with the terms hereof.
-8-
<PAGE>
IN WITNESS WHEREOF, the Company and Executive have each executed and
delivered this Agreement as of the date first above written.
COMPANY:
ASHLEY ALUMINUM, INC. dba
Cameron Ashley Building Products
By: /s/ RONALD R. ROSS
------------------------------
Ronald R. Ross, Director
EXECUTIVE:
/s/ WALTER J. MURATORI
------------------------------
Walter J. Muratori
-9-
<PAGE>
EXHIBIT 10.14
AMENDED AND RESTATED
AGREEMENT FOR CONSULTING SERVICES
(CGW SOUTHEAST MANAGEMENT COMPANY)
THIS AGREEMENT is entered into as of the 1st day of November, 1996 (the
"Effective Date"), by and among Cameron Ashley Building Products, Inc., a
Georgia corporation (the "Company"), Wm. Cameron & Co., a Georgia corporation
("Cameron"), Ashley Aluminum, Inc., a Georgia corporation ("Ashley"), and CGW
Southeast Management Company, a Georgia corporation ("CGW Management").
W I T N E S S E T H :
WHEREAS, Cameron and Ashley, wholly-owned subsidiaries of the Company (the
"Subsidiaries") have previously engaged CGW Management for general consulting
services pursuant to separate Agreements for Consulting Services dated December
20, 1991 and October 18, 1991, respectively (each as amended pursuant to
Amendments dated September 30, 1993 and Second Amendments dated January 1, 1994)
(collectively, the "Prior Agreements").
WHEREAS, the Company desires to engage CGW Management for the purpose of
providing general consulting services to the Company in replacement of the
Services being provided to the Subsidiaries under the Prior Agreements; and
WHEREAS, CGW Management is willing to amend and replace the Prior
Agreements and accept such engagement upon the terms and conditions set forth
herein;
NOW, THEREFORE, for and in consideration of the above premises and the
mutual covenants and agreements hereinafter set forth, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. SCOPE OF CONSULTING SERVICES. The Company retains CGW Management, and
CGW Management accepts engagement by the Company, in the capacity of management
consultant to the Company. In such capacity, CGW Management will assist the
Company in financial planning and analysis and engage in business strategy
planning at the direction of the Company. CGW Management agrees to be available
as needed, which services shall be provided by CGW Management through Richard L.
Cravey and Edwin A. Wahlen, Jr., unless they are incapacitated or no longer
employees or principals of CGW Management or any of its affiliates. Such
consulting services shall include evaluation of potential candidates for
acquisition by the Company, assisting the Company in relations with its lenders,
and providing advice to the Company on its capital needs and structure. Unless
required by reason of the nature of the particular consulting service, such
service may be performed at the offices of CGW Management.
<PAGE>
2. TERM. The term (the "Term") of this Agreement shall be a period
beginning on the Effective Date and ending on December 20, 1998. This Agreement
may be terminated prior to the expiration of the Term only (i) by mutual
agreement of CGW Management and the Company, (ii) as provided in Paragraph 5
below, or (iii) by the Company upon the willful failure of CGW Management to
provide consulting services hereunder if such failure is not remedied within
thirty (30) days after receipt by CGW Management of written notice by the
Company to CGW Management. Upon any termination of this Agreement, CGW
Management's right to receive compensation pursuant to Paragraph 3 hereof shall
cease and terminate, and CGW Management shall thereafter have only the right, if
applicable, to receive amounts payable pursuant to Paragraph 5 hereof.
3. COMPENSATION.
(a) For the services rendered by CGW Management hereunder, the
Company shall pay to CGW Management a monthly fee (the "Retainer Fee") of
Fifteen Thousand Dollars ($15,000) due and payable in arrears on the 10th day of
each month during the Term of this Agreement commencing November 10, 1996 (the
date on which each is due and payable herein called a "Payment Date").
(b) The Retainer Fee shall be subject to review from time to time and
shall be adjusted in good faith to reflect increases in the amount of management
consulting services requested by the Company and performed by CGW Management.
(c) In addition to the Retainer Fee, the Company may pay to CGW
Management additional compensation (the "Additional Compensation") with respect
to each fiscal year of the Company ending during the term hereof in such amount
as shall be approved by the Board of Directors of the Company, with such
Additional Compensation being based on the overall performance of the Company
and its subsidiaries and affiliates; provided, however, the Additional
Compensation paid under this Section 3(c) shall not exceed One Hundred and
Eighty Thousand Dollars ($180,000). The Additional Compensation shall be paid
no later than sixty (60) days after the end of the fiscal year for which it is
awarded.
(d) The Retainer Fee shall be automatically adjusted from time to
time to reflect a reduction in the percentage ownership in the issued and
outstanding shares of Common Stock of the Company ("Shares") by CGW Southeast
Partners I, L.P. ("CGW Fund II") during the term hereof. Specifically, the
Retainer Fee shall be reduced ratably, effective as of the next month after a
reduction in ownership of shares by CGW Fund II, so that the proportion which
the adjusted Retainer Fee bears to the Retainer Fee on the Effective Date is the
same as the proportion which the current ownership of Shares by CGW Fund II
bears to the ownership of Shares by CGW Fund II on the Effective Date. For
purposes hereof, CGW acknowledges that it owns 1,909,646 Shares as of the
Effective Date.
(e) In the event of a reduction in ownership of Shares by CGW Fund
II, the Additional Compensation shall also be proportionately reduced in
accordance with Section 3(d).
2
<PAGE>
4. EXPENSES. The Company shall reimburse CGW Management for all of CGW
Management's costs, expenses and fees (other than ordinary overhead) reasonably
incurred in connection with (i) attendance at routine meetings with the Company,
(ii) its provision of management consulting services hereunder, and (iii) any
special projects or services requested by the Company that are not ordinarily
associated with CGW Management's engagement by the Company. Such reimbursements
will be paid to CGW Management in a timely manner in accordance with the regular
expense reimbursement policy of the Company and upon submission by CGW
Management of all documentation ordinarily required by the Company's policy on
reimbursement of expenses.
5. CHANGE OF OWNERSHIP. CGW Management shall have the right, in its sole
discretion, to terminate the Agreement at any time following the occurrence of a
Change in Control with respect to the Company. As used herein, a "Change in
Control" shall be deemed to have occurred with respect to the Company upon (i)
the consummation of any merger, share exchange or consolidation in which the
Company is not the continuing or surviving entity and the stockholders of the
Company shall following such merger, share exchange or consolidation not own,
directly or indirectly, at least fifty percent (50%) of the outstanding voting
securities of the continuing or surviving entity, (ii) any sale, transfer or
other disposition by the Company of fifty percent (50%) or more of the voting
stock of the Company other than through a public offering of the voting stock of
the Company or other than in connection with the exercise of options to purchase
such voting stock granted to employees or lenders of the Company, (iii) any
transaction or series of transactions in which the current holders of the
Company's common stock cease to own, directly or indirectly, fifty percent (50%)
or more of the voting stock of the Company or other than through a public
offering of the voting stock of the Company or other than in connection with the
exercise of options to purchase voting securities of the Company granted to
employees or lenders of the Company, or (iv) any sale in a single transaction or
a series of related transactions of all or substantially all of the assets of
the Company. CGW Management may exercise its right to terminate this Agreement
pursuant to this Paragraph 5 by giving written notice to that effect to the
Company which notice shall be effective thirty (30) days following the date it
is given, and upon such termination CGW Management shall have no further
obligation hereunder. The Company agrees to notify CGW Management promptly of
any Change in Control of the Company by mailing to CGW Management written notice
of such Change in Control, it being the intent of this provision that CGW
Management be informed at all times concerning the ownership of the Company.
Upon termination of this Agreement pursuant to this Paragraph 5 prior to the
expiration of the Term, the Company agrees to pay to CGW Management, as
liquidated damages, an amount equal to Fifteen Thousand Dollars ($15,000) (or
such lesser amount reflecting the reduced amount of the monthly Retainer Fee
calculated under Section 3(d) hereof) multiplied by the remaining months of the
original Term. The amount due under this Paragraph 5 shall be paid immediately
upon the termination of this Agreement pursuant to this Paragraph 5.
6. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of the
parties hereto with respect to consulting services to be provided by CGW
Management. No amendment or modification of this Agreement shall be valid or
binding upon the Company or CGW Management unless made in writing and signed by
the parties hereto.
3
<PAGE>
7. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Georgia.
8. AMENDMENT AND REPLACEMENT. This Agreement hereby amends, restates,
replaces and supersedes the Prior Agreements in their entirety.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
CGW SOUTHEAST MANAGEMENT COMPANY
By: /s/ RICHARD L. CRAVEY
------------------------------------------
Richard L. Cravey, Managing Director
CAMERON ASHLEY BUILDING PRODUCTS, INC.
By: /s/ RONALD R. ROSS
------------------------------------------
Ronald R. Ross, Chairman & CEO
WM. CAMERON & CO.
By: /s/ RONALD R. ROSS
------------------------------------------
Ronald R. Ross, President
ASHLEY ALUMINUM, INC.
By: /s/ WALTER J. MURATORI
------------------------------------------
Walter J. Muratori, President
4
<PAGE>
EXHIBIT 10.18.1
FIRST AMENDMENT
TO FIRST RESTATED CREDIT AGREEMENT
This First Amendment to First Restated Credit Agreement (this "FIRST
AMENDMENT"), dated as of December 3, 1996, is entered into among Cameron Ashley
Building Products, Inc., a Georgia corporation, Wm. Cameron & Co., a Georgia
corporation, Ashley Aluminum, Inc., a Georgia corporation, CABP, Inc., an
Arizona corporation, Cameron Ashley Financial Services, Inc., a Texas
corporation ("CAFS"), NationsBank of Texas, National Association, as Issuing
Bank and Agent, ABN AMRO Bank, N.V., as Co-Agent, and each Lender.
BACKGROUND
Borrower, Agent, Co-Agent, Issuing Bank and Lenders have entered into the
First Restated Credit Agreement dated as of April 18, 1996 (such agreement,
together with all amendments and restatements thereof, the "CREDIT AGREEMENT").
Borrower has requested that Lenders, Issuing Bank and Agent waive certain Events
of Default and amend the Credit Agreement to, among other things, permit
Borrower to organize CAFS as a Wholly-Owned Subsidiary of Borrower which will
make loans to residential consumers to acquire building materials sold by
Borrower or a Guarantor for use in the construction or improvement of personal
residences.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are all hereby acknowledged, Borrower, Agent,
Co-Agent, Issuing Bank, Lenders and Guarantors and CAFS covenant and agree as
follows:
1. DEFINED TERMS. Capitalized terms used herein and not otherwise defined
herein have the meaning given to them in the Credit Agreement.
2. AMENDMENTS (CREDIT AGREEMENT). The Credit Agreement is amended as follows:
(a) SECTION 1.01 is amended by the addition of the following in
alphabetical order:
"CAFS" means Cameron Ashley Financial Services, Inc., a Texas
corporation.
"CAFS CREDIT AGREEMENT" means the Credit Agreement dated as of
December 3, 1996, between CAFS and Bank One, Texas, N.A.
"CAFS GUARANTY" means the Guaranty dated as of December 3, 1996,
made by Borrower in favor of Bank One, Texas, N.A.
"CAFS LIABILITY" means all obligations and liabilities, whether
now or hereafter existing or acquired, and contingent or matured,
including but not limited to all Debt and Contingent Liabilities, and
all other liabilities, of (a) CAFS, and
<PAGE>
(b) Borrower related to all obligations and liabilities described in
CLAUSE (A), including but not limited to all agreements to acquire any
debt, equity or asset of CAFS, guarantee any obligation of CAFS, and
maintain the liquidity or net worth of CAFS, all liabilities resulting
from substantive consolidation, membership in any corporate group or
similar equitable remedy, claims with respect to the breach of any
agreement, all damages and penalties, and any indemnity of any Person.
"SEPARATENESS AGREEMENT" means the agreement in the form of
EXHIBIT K.
(b) The definition of "Permitted Acquisition" is amended by adding ";
PROVIDED, FURTHER, the business lines of Borrower and Guarantors shall be deemed
to not include any line of business of CAFS" immediately preceding the period.
(c) SECTION 2.14 is amended by adding the following at the end thereof:
No Letter of Credit shall be issued for the account of or
otherwise used for the benefit of CAFS and no proceeds of any Advance
shall be advanced to CAFS; PROVIDED, Borrower may use proceeds of
Advances not to exceed in the aggregate $3,000,000 to acquire capital
stock of CAFS.
(d) SECTION 4.12 is amended by adding "(other than CAFS)" immediately
after the first "Subsidiary".
(e) CLAUSE (b) of SECTION 5.05 is amended by deleting "and" and
substituting a comma IN LIEU thereof and adding "and CAFS" immediately after
"Cameron".
(f) SECTION 5.07 is deleted and the following is substituted IN LIEU
thereof:
5.07 DEBT. BORROWER AND SUBSIDIARIES OTHER THAN CAFS.
Borrower shall not, and shall not permit any of its Subsidiaries
(other than CAFS) to, create, incur, assume, become, or be liable in
any manner in respect of, or suffer to exist, any Debt, except
(a) Debt under the Loan Papers, (b) Funded Debt under each Note
Purchase Agreement and guaranties of such Debt made by Subsidiaries of
Borrower, (c) other Debt in existence on the date hereof, as shown on
SCHEDULE 4.08-a, (d) purchase money Debt incurred for the acquisition
of tangible assets, provided the aggregate principal amount of such
Debt incurred in any fiscal year shall not exceed $1,000,000, (e)
trade payables incurred and paid in the ordinary course of business,
(f) Contingent Liabilities under or relating to the Loan Papers, (g)
Contingent Liabilities in existence on the date hereof, as shown on
SCHEDULE 4.08-a, (h) Debt of each Subsidiary of Borrower (other than
CAFS) to Borrower, (i) Contingent Liabilities resulting from the
endorsement of negotiable instruments for collection in the ordinary
course of business, (j) Convertible Subordinated Debt in an aggregate
principal amount not to exceed at any time $25,000,000, (k) as to
Borrower and its Subsidiaries (other than CAFS) on a consolidated
basis, other Debt not to exceed at any time, in the aggregate
principal amount, the difference between (i) $10,000,000, minus (ii)
the sum of all Attributable Debt in respect of all Sale and Leasebacks
occurring on and after
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<PAGE>
the Effective Date, (l) renewals and restatements of any Debt described
in SECTIONS 5.07(a) through (k), provided the principal amount of the
Debt renewed or restated does not exceed the principal amount of such
Debt immediately prior to such renewal or restatement, and (m) as to
Borrower, only, its obligations under the CAFS Guaranty.
(g) SECTION 5.08 is deleted and the following is substituted IN LIEU
thereof:
5.08 DISPOSITIONS OF ASSETS. Borrower shall not, and shall
not permit any of its Subsidiaries to, sell, lease, assign, or
otherwise dispose of any of its assets, except (a) with respect to
Borrower and its Subsidiaries (other than CAFS), Permitted
Dispositions, and (b) with respect to CAFS, Transfers of assets in the
ordinary course of business of CAFS for full and fair consideration.
(h) SECTION 5.09 is amended by adding "; PROVIDED, CAFS shall not merge or
consolidate with or into any Person and shall not make any Investment other than
(y) making direct and indirect loans to or acquiring existing loans made to
residential consumers to acquire building materials sold by Borrower or a
Guarantor for use in the construction or improvement of personal residences and
(z) Investments described in CLAUSES (a), (b), and (e) through (k) of the
definition of "Restricted Investments," immediately after "entity".
(i) SECTION 5.10 is amended by adding "(other than CAFS)" immediately
after each "Subsidiaries".
(j) SECTION 5.12 is deleted and the following is substituted IN LIEU
thereof:
5.12 ISSUANCE OF CAPITAL STOCK; AMENDMENT OF CHARTER.
(a) SUBSIDIARIES OTHER THAN CAFS. Borrower shall not
permit any of its Subsidiaries (other than CAFS) to, issue, sell
or otherwise dispose of any capital stock in such Person, or any
options or rights to acquire such capital stock. Borrower shall
not sell, transfer, encumber or otherwise dispose of any equity
interest or ownership interest in any Subsidiary of Borrower
(other than CAFS) and shall not permit any Subsidiary of Borrower
(other than CAFS) to sell, transfer, encumber or otherwise
dispose of any equity interest or ownership interest in any
Person which is a Subsidiary of such Subsidiary of Borrower.
(b) BORROWER AND ALL SUBSIDIARIES. Borrower shall not
amend its articles of organization or bylaws, and Borrower shall
not permit any of its Subsidiaries to amend its articles of
organization or bylaws, in any manner which impairs or revokes
any approval related to the Loan Papers.
(c) CAFS. Borrower shall not permit CAFS to issue, sell or
otherwise dispose of any capital stock, or any options or rights
to acquire such capital stock, except for full and fair
consideration. Borrower shall not sell, transfer, encumber or
otherwise dispose of any equity interest or
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<PAGE>
ownership interest in CAFS if after giving effect to any sale of
any equity interest in CAFS Borrower owns less than 50% of the
voting securities of CAFS or does not possess the power to direct
or cause the direction of management of policies of CAFS; PROVIDED,
Borrower may sell any or all equity interest in CAFS owned by
Borrower if contemporaneously with such sale Borrower is released
of all liability with respect to CAFS, including all CAFS Liability.
(k) SECTION 5.13 is deleted and the following is substituted IN LIEU
thereof:
5.13 CHANGE OF OWNERSHIP. Borrower shall not, and shall not
permit any of its Subsidiaries to, permit any change in the ownership
of (a) Ashley, Cameron and CABP from the ownership thereof as of the
date hereof as disclosed on SCHEDULE 4.01-B and (b) CAFS not permitted
by SECTION 5.12.
(l) SECTION 5.14 is deleted and the following is substituted IN LIEU
thereof:
5.14 SALE AND LEASEBACK. Borrower shall not, and shall not
permit any of its Subsidiaries (other than CAFS) to, enter into any
Sale and Leaseback if the Attributable Debt of such Sale and Leaseback
exceeds the difference between (a) $10,000,000, minus (b) the sum of
(i) the aggregate amount of all Attributable Debt of all other Sale
and Leasebacks occurring on and after the Effective Date plus (ii) the
aggregate outstanding principal amount of other Debt of Borrower and
its Subsidiaries (other than CAFS) permitted pursuant to SECTION
5.07(a)(xi). Borrower shall not permit CAFS to enter into any Sale
and Leaseback.
(m) SECTION 5.15 is deleted and the following is substituted IN LIEU
thereof:
Borrower shall not, and shall not permit any of its Subsidiaries
to, change the nature of its business as conducted on the Effective
Date. Neither Borrower nor any Subsidiary of Borrower (other than
CAFS) shall engage at any time in any business now or hereafter
conducted by CAFS. CAFS shall not engage in any business other than
making direct and indirect loans to or acquiring existing loans made
to residential consumers to acquire building materials sold by
Borrower or a Guarantor for use in the construction or improvement of
personal residences and the securitization of such loans.
(n) SECTION 5.16 is amended by adding the following at the end thereof:
; PROVIDED, all transactions by CAFS with any Affiliate of
Borrower shall be in accordance with the Separateness Agreement.
(o) SECTION 5.18 is amended by adding the following at the end thereof:
CAFS shall not become a party to or be obligated in any manner
with respect to any Note Purchase Agreement, Senior Note or other
Senior Note Paper.
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<PAGE>
(p) A new SECTION 5.20, which provides as follows, is added:
5.20 CAFS.
(a) No Subsidiary of Borrower (other than CAFS), whether now or
hereafter existing or acquired, shall be liable at any time in any
manner for any obligation, now or hereafter existing, of CAFS,
including, but not limited to, by way of any guarantee of obligations
of CAFS, any agreement to acquire any debt or equity of CAFS, assume
any liability or acquire any asset of CAFS, or maintain the liquidity
or net worth of CAFS, or substantive consolidation or similar
equitable remedy.
(b) Borrower shall not be liable at any time for any CAFS
Liability; PROVIDED, Borrower may (i) acquire for cash equity of CAFS
(in addition to all equity of CAFS owned by Borrower on December 3,
1996), and (ii) execute and perform under the CAFS Guaranty, or (iii)
do any combination of activities described in CLAUSES (i) and (ii);
PROVIDED, FURTHER, the sum of (A) the aggregate gross cash purchase
price of equity acquired on and prior to December 3, 1996 and pursuant
to CLAUSE (i), plus (B) the aggregate amount for which Borrower may be
liable under the CAFS Guaranty, plus (C) the aggregate amount paid by
Borrower and the fair market value of property of Borrower transferred
with respect to all other CAFS Liabilities, plus (D) the aggregate
amount of all other liabilities of Borrower in respect of CAFS
Liabilities (valued based on the reasonable determination of Borrower
(including in such valuation the probability of any claim maturing)
or, if Agent disagrees with any such determination, based on the
reasonable determination of Agent), shall not exceed at any time
$8,000,000.
(c) CAFS shall not, and Borrower shall not permit CAFS to, amend
or restate the CAFS Credit Agreement or any related agreement (other
than the CAFS Guaranty) if the effect of such amendment or restatement
is to either increase the amount for which Borrower is liable pursuant
to the CAFS Credit Agreement or any related agreement or create any
new liability of Borrower not existing pursuant to the CAFS Guaranty
(as it existed on December 3, 1996). Borrower shall not amend or
restate, or permit any amendment or restatement of, the CAFS Guaranty;
PROVIDED, Borrower may terminate or reduce the amount of its
obligations pursuant to the CAFS Guaranty.
(q) Existing SECTION 5.20 is renumbered to be SECTION 5.21 and is amended
by adding "(other than CAFS)" immediately after "Subsidiaries" and by adding ",
and Borrower shall cause CAFS to comply with those provisions of ARTICLE V
expressly applicable to it" immediately before the period.
(r) SECTION 6.10(m) is amended by deleting "and" immediately after the
semicolon.
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<PAGE>
(s) A new SECTION 6.10(n) is added which provide as follows:
As soon as it is available and in any event within five days
after the effectiveness thereof, a complete copy of all agreements,
and all amendments and restatements thereof, with respect to Debt of
CAFS, each securitization of any asset of CAFS and each agreement with
respect to the issuance of or any right to acquire any capital stock
or other equity interest of CAFS. As soon as possible or in any event
within two Business Days after knowledge by an officer of Borrower or
CAFS of the occurrence of any default or event of default under any
agreement related to Debt of CAFS or any agreement related to
securitization of any asset of CAFS, a notice from an officer of
Borrower or CAFS acceptable to Agent, setting forth the details of
such default or event of default, and the action being taken or
proposed to be taken with respect thereto.
(t) SECTION 6.12 is amended by adding "(other than CAFS)" immediately
after "Subsidiaries" and by adding ", and CAFS to comply with those provisions
of ARTICLE VI expressly applicable to it" immediately before the period.
(u) SECTION 7.01(l) is amended by deleting "or" immediately after the
semicolon.
(v) SECTION 7.01(m) is amended by deleting the period and substituting ";
or" IN LIEU thereof.
(w) SECTION 7.01 is amended by adding the following at the end thereof:
(n) Any Obligor is found to have any liability in respect of any
obligations or business operations of CAFS not permitted pursuant to
SECTION 5.20(b).
(x) A new SECTION 7.08, which provides as follows, is added:
7.08 CAFS. For purposes of SECTION 7.01(f) only, "Obligor" shall
be deemed to include CAFS.
(y) SCHEDULE 4.08-a is deleted and a new SCHEDULE 4.08-a, in the form of
SCHEDULE 4.08-a to this First Amendment, is substituted IN LIEU thereof.
(z) SCHEDULE 9.02 is amended by deleting each reference to "First
Interstate Bank of Texas, N.A." and substituting, IN LIEU thereof, "Wells Fargo
Bank (Texas), National Association."
(aa) A new EXHIBIT K, in the form of EXHIBIT A to this First Amendment, is
added.
3. AMENDMENTS (LOAN PAPERS). Each Loan Paper containing a telephone or
telecopier number for Borrower or any Guarantor is amended by deleting each
"(214)" preceding each telephone or telecopier number for Borrower or any
Guarantor and substituting "(972)" IN LIEU thereof.
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<PAGE>
4. REPRESENTATIONS AND WARRANTIES (BORROWER AND CAFS). Borrower and CAFS,
jointly and severally, represent and warrant to Agent, Co-Agent, Issuing Bank
and each Lender that, as of the date hereof and after giving effect to the
amendments in SECTIONS 2 and 3, the following are true and correct:
(a) CAFS is a corporation duly organized, validly existing, and in good
standing under the Laws of the State of Texas. CAFS is qualified to do business
in all jurisdictions where the nature of its business or Properties require such
qualification, except where the failure to so qualify would not result in a
Material Adverse Change. Set forth on SCHEDULE 4 is a complete and accurate
listing, with respect to CAFS, showing (i) its street and mailing address, which
is its principal place of business and executive office, (ii) the classes of
capital stock and the numbers of shares authorized and outstanding, (iii) each
legal and beneficial owner of outstanding capital stock on the date hereof,
indicating the ownership percentage, and (iv) all outstanding options, rights,
rights of conversion or purchase, rights of first refusal, and similar rights
relating to the equity interests of CAFS. CAFS has all requisite corporate
power and authority to own, operate and encumber its Property and assets and to
conduct its business as presently conducted and as proposed to be conducted and
in connection with and following the consummation of the transactions
contemplated by the Loan Papers. All of the outstanding common stock of CAFS is
validly issued, fully paid and nonassessable. CAFS is a Wholly-Owned Subsidiary
of Borrower. As of the date hereof, CAFS has not conducted any operations and
its only activities have been related to its organization and obtaining
qualifications to do business and Licenses and discussions with financial
institutions regarding capitalization of CAFS and providing credit facilities
for and securitization of accounts receivable of CAFS.
(b) The Board of Directors of CAFS has duly authorized the execution,
delivery, and performance of the Loan Papers to be executed by CAFS. No consent
of the stockholders of CAFS (except any consent already obtained) is required as
a prerequisite to the validity and enforceability of any Loan Papers or any
other document contemplated hereby. CAFS has full legal right, power, and
authority to execute, deliver, and perform under the Loan Papers to be executed
and delivered by it. The Loan Papers constitute the legal, valid, and binding
obligations of CAFS (as to each Loan Paper to which it is a party) enforceable
in accordance with their terms (subject as to enforcement of remedies to any
applicable Debtor Relief Laws).
(c) The execution or delivery of any Loan Paper to which CAFS is a party,
and performance thereunder, does not conflict with, or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, or result in
any violation of, or result in the creation of any Lien upon any Properties of
CAFS under, or require any consent (other than consents already obtained),
approval, or other action by, notice to, or filing with any Tribunal or Person
pursuant to, the corporate governance documents of CAFS, any award of any
arbitrator, or any agreement, instrument, or Law to which any Obligor or any of
its Properties is subject.
(d) The PRO FORMA financial statements of CAFS contained in the "Home
Improvement Finance Contract Funding Program" delivered to Agent fairly present
its PRO FORMA financial condition as of such date and were prepared in
accordance with GAAP. Those portions of such financial statements which contain
projections were prepared in good faith and management believes them to be based
on reasonable assumptions (each of which are stated in such statement) and to
provide reasonable estimations of future performance as of the dates and for the
periods
-7-
<PAGE>
shown for CAFS, subject to the uncertainty and approximation inherent in
any projections. Such financial statements reflect all material liabilities,
direct and contingent, of CAFS that are required to be disclosed in accordance
with GAAP. As of the date of such financial statements, there were no
Contingent Liabilities, liabilities for Taxes, forward or long-term commitments,
or unrealized or anticipated losses from any unfavorable commitments that are
not reflected on such financial statements or otherwise disclosed in writing to
Agent. CAFS's fiscal year ends on October 31.
(e) There is no pending or, to Borrower's and CAFS's best knowledge,
threatened Litigation against CAFS.
(f) CAFS possesses, or is in the process of obtaining, all material
Licenses and is not in violation thereof in any material respect. CAFS has,
subject to procurement of certain Licenses to operate as a finance company in
certain states, full power, authority, and legal right to own and operate its
Properties, and to conduct its business. CAFS has good and indefeasible title
(fee or leasehold, as applicable) to its Properties, subject to no Lien of any
kind, except as permitted hereunder. CAFS is not in violation of its corporate
governance documents, or any Law, or material agreement or instrument binding on
or affecting it or any of its Properties. No business or Properties of CAFS is
affected by any strike, lock-out, or other labor dispute, drought, storm,
earthquake, embargo, act of God or public enemy, or other casualty that could
constitute a Material Adverse Change.
(g) CAFS has no outstanding Debt or Contingent Liabilities, except as
shown on SCHEDULE 4.08-a, and neither it nor any of its Properties are subject
to any Liens, other than Liens pursuant to CAFS Credit Agreement. No equity
interest of CAFS is subject to any Lien, including any restriction on
hypothecation or transfer, except as provided in the CAFS Credit Agreement.
(h) CAFS is a newly-organized corporation and has not, and, as of the date
hereof, has no obligation to file any federal, state, of other Tax return, and
has, as of the date hereof, no liability in respect of any Taxes.
(i) CAFS has not incurred any liability to the PBGC with respect to any
Plan. No ERISA Event has occurred with respect to any Plan. CAFS has not
participated in any Prohibited Transaction with respect to any Plan or trust
created thereunder, and the consummation of the transactions contemplated hereby
will not involve any Prohibited Transaction. CAFS has not incurred any
Withdrawal Liability to any Multiemployer Plan. CAFS has not been notified by
the sponsor of a Multiemployer Plan that such Multiemployer Plan is in
reorganization or has been terminated, within the meaning of Title IV of ERISA.
(j) CAFS has no interest in any real Property (other than office space
leased from Borrower). No Hazardous Materials are generated, produced, or
stored at or in connection with the Properties and operations of CAFS. Borrower
and CAFS have taken all appropriate steps to determine, and have determined,
that no Hazardous Materials have been disposed of or otherwise released on or to
any Property on which any operations of CAFS are conducted, except in compliance
with Environmental Laws. CAFS has no potential liability with respect to any
release of any Hazardous Materials into the environment. The use which CAFS
intends to make of the
-8-
<PAGE>
real Property (whether leased or owned) on which any of its operations are
conducted will not result in the unlawful or unauthorized disposal or other
release of any Hazardous Materials.
(k) CAFS has no Investments.
(l) The "Home Improvement Finance Contract Funding Program" prepared by
Banc One Capital Corporation is a complete description of the business which
CAFS will conduct and the method of securitization of accounts receivable owned
by CAFS.
(m) CAFS has received and reviewed this First Amendment and each related
Loan Paper.
(n) None of Borrower, CAFS or any other Obligor has made a material
misstatement of fact, or failed to disclose any fact necessary to make the facts
disclosed not misleading, to Agent or any Lender during the course of
negotiation of this First Amendment.
5. REPRESENTATIONS AND WARRANTIES (BORROWER). Borrower represents and
warrants to Agent, Co-Agent, Issuing Bank and each Lender that, as of the date
hereof and after giving effect to the amendments in SECTIONS 2 and 3, the
following are true and correct:
(a) The representations and warranties contained in the Credit Agreement
and each of the other Loan Papers are true and correct in all material respects
on and as of the date hereof as though made on and as of such date (except as to
representations and warranties which (i) refer to a specific date, (ii) have
been modified by transactions permitted pursuant to the Credit Agreement or any
other Loan Paper, or (iii) have been specifically waived in writing by Agent).
(b) Borrower has full power and authority to execute, deliver and perform
this First Amendment, and this First Amendment, the Credit Agreement and each
other Loan Paper, constitute the legal, valid and binding obligation of
Borrower, enforceable in accordance with their terms (subject as to enforcement
of remedies to any applicable Debtor Relief Laws).
(c) No authorization, approval, consent or other action by, notice to, or
filing with, any Tribunal or other Person, is required for the execution,
delivery or performance by Borrower of this First Amendment.
6. WAIVER.
(a) SECTION 3.02(iii) of the Credit Agreement provides that it is a
condition precedent to the making of each Advance and the issuance of each
Letter of Credit that each Subsidiary of Borrower execute a Guaranty. SECTION
5.10 of the Credit Agreement prohibits Borrower from granting a negative pledge
in favor of any Person. SECTION 10(e) of the CAFS Guaranty prohibits Borrower
from granting a Lien on any capital stock of CAFS.
(b) Subject to the occurrence of each condition specified in SECTION 7 and
performance of each provision of this First Amendment and in reliance on the
representations and warranties in SECTIONS 4 and 5, Agent, Issuing Bank and each
Lender waive (i) the condition precedent of SECTION 3.02(iii) that CAFS execute
a Guaranty, and (ii) the prohibition of SECTION 5.10 of the
-9-
<PAGE>
Credit Agreement with respect to the negative pledge by Borrower of capital
stock of CAFS pursuant to SECTION 10(e) of the CAFS Guaranty, only.
(c) Borrower and Guarantors acknowledge and agree that except as expressly
provided in SECTION 6(b), none of Agent, Issuing Bank or any Lender waives any
term or condition of the Loan Papers or otherwise impairs any rights or remedies
which Agent, Issuing Bank or any Lender may have.
7. CONDITIONS OF EFFECTIVENESS. This First Amendment shall be effective on
the date Agent delivers to Borrower written notice that each of the following
has occurred or exists ("AMENDMENT DATE"):
(a) The effectiveness of this First Amendment shall not contravene any Law
applicable to Agent, Co-Agent, Issuing Bank or any Lender.
(b) No Material Adverse Change, as determined by Agent, shall have
occurred and be continuing since October 31, 1995.
(c) No Default or Event of Default shall exist.
(d) Agent, Co-Agent, Issuing Bank, each Lender, each Obligor and CAFS
shall have executed and received counterparts of this First Amendment.
(e) Agent shall have received, contemporaneously with Borrower's execution
of this First Amendment, payment of all fees (including attorneys' fees incurred
by Agent prior to execution of this First Amendment and in the preparation,
negotiation and execution of this First Amendment).
(f) Agent shall have received an Officer's Certificate, executed by
authorized officers of CAFS, dated the Amendment Date, certifying (A) that
attached copies of its Articles of Incorporation and Bylaws are true and
complete, and in full force and effect, without amendment except as shown, (B)
that a copy of resolutions of the Board of Directors of CAFS attached thereto
authorizing execution, delivery and performance of this First Amendment and all
other Loan Papers, is true and complete, and that such resolutions are in full
force, were duly adopted, have not been amended, modified, or revoked, and such
resolutions constitute all resolutions adopted with respect to the transactions
related to the Loan Papers, and (C) to the incumbency, name, and signature of
each officer of CAFS authorized to sign this First Amendment and any other Loan
Papers on its behalf.
Agent, Co-Agent, Issuing Bank and each Lender may conclusively rely on the
certificates delivered pursuant to this First Amendment until Agent receives
notice in writing to the contrary.
(g) Agent shall have received, in form and substance satisfactory to it,
(i) certificates from the Secretary of State and other appropriate officials of
the State of Texas certifying that CAFS is a corporation duly organized, validly
existing, and in good standing in Texas as of the date thereof, and (ii) with
respect to each state in which CAFS is qualified to do business, certificates of
appropriate authorities in each such state, all issued within ten days of the
-10-
<PAGE>
Amendment Date to the effect that CAFS is in good standing and duly qualified to
transact business in each such state.
(h) Agent shall have received an opinion of counsel to Borrower,
Guarantors and CAFS dated the Amendment Date, which counsel shall be acceptable
to Agent, such opinion to be in the form of EXHIBIT B, together with instruction
letters from Borrower, Guarantors and CAFS.
(i) Agent shall have received each of the following, in form and substance
satisfactory to Agent:
(i) the results of UCC and other Lien searches against the
assets of Borrower and CAFS; and
(ii) a Compliance Certificate prepared as of the date hereof.
(j) Agent shall have received, in form and substance satisfactory to Agent
and its counsel, such other approvals, documents, certificates, and instruments
as Agent shall require.
8. RATIFICATION. Ashley, Cameron and CABP each (a) represents and warrants
that it has received and reviewed this First Amendment and (b) ratifies and
affirms its obligations under the Loan Papers, as amended by this First
Amendment.
9. REFERENCE TO THE CREDIT AGREEMENT.
(a) On the Amendment Date, each reference in the Credit Agreement to "this
Agreement", "hereunder", or words of like import shall mean and be a reference
to the Credit Agreement, as affected and amended hereby.
(b) The Credit Agreement, as affected by the amendments referred to above,
shall remain in full force and effect and is hereby ratified and confirmed.
(c) THE CREDIT AGREEMENT, AS AFFECTED BY THE AMENDMENTS CONTAINED IN THIS
FIRST AMENDMENT, TOGETHER WITH EACH OTHER LOAN PAPER, REPRESENT THE FINAL
AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
10. EXECUTION IN COUNTERPARTS. This First Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.
11. GOVERNING LAW; BINDING EFFECT. This First Amendment shall be governed by
and construed in accordance with the laws of the State of Texas and be binding
upon the parties hereto and their respective permitted successors and assigns.
-11-
<PAGE>
12. HEADINGS. Section headings in this First Amendment are included herein for
convenience of reference only and shall not constitute part of this First
Amendment for any other purpose.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
as of December 3, 1996.
BORROWER:
CAMERON ASHLEY BUILDING PRODUCTS, INC.
By: /S/ F. DIXON MCELWEE
-----------------------------------------------
F. Dixon McElwee, Vice President
GUARANTORS:
ASHLEY ALUMINUM, INC.
By: /S/ WALTER J. MURATORI
-----------------------------------------------
Walter J. Muratori, President
WM. CAMERON & CO.
By: /S/ F. DIXON MCELWEE
-----------------------------------------------
F. Dixon McElwee, Vice President
CABP, INC.
By: /S/ F. DIXON MCELWEE
-----------------------------------------------
F. Dixon McElwee, Vice President
CAFS:
CAMERON ASHLEY FINANCIAL SERVICES, INC.
By: /S/ F. DIXON MCELWEE
-----------------------------------------------
F. Dixon McElwee, President
-13-
<PAGE>
AGENT:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION, as Agent
By: /S/ DAN KILLIAN
-----------------------------------------------
Dan Killian, Vice President
CO-AGENT:
ABN AMRO BANK, N.V., Atlanta Agency, as Co-Agent
By: /S/ LARRY KELLEY
-----------------------------------------------
Larry Kelley, Group Vice President
By: /S/ STEVEN HIPSMAN
-----------------------------------------------
Steven Hipsman, Vice President
ISSUING BANK:
NATIONSBANK OF TEXAS, NATIONAL
ASSOCIATION, as Issuing Bank
By: /S/ DAN KILLIAN
-----------------------------------------------
Dan Killian, Vice President
LENDERS:
NATIONSBANK OF TEXAS, NATIONAL ASSOCIATION
By: /S/ DAN KILLIAN
-----------------------------------------------
Dan Killian, Vice President
ABN AMRO BANK, N.V., Atlanta Agency
By: /S/ LARRY KELLEY
-----------------------------------------------
Larry Kelley, Group Vice President
By: /S/ STEVEN HIPSMAN
-----------------------------------------------
Steven Hipsman, Vice President
-14-
<PAGE>
WELLS FARGO BANK (TEXAS), NATIONAL
ASSOCIATION (formerly known as First Interstate Bank of
Texas, N.A.)
By: /S/ KEN TAYLOR
-----------------------------------------------
Ken Taylor, Assistant Vice President
SUNTRUST BANK, ATLANTA
By: /S/ TRISHA E. HARDY
-----------------------------------------------
Trisha E. Hardy, Banking Officer
By: /S/ JOHN A. FIELDS, JR.
-----------------------------------------------
John A. Fields, Jr., Vice President
(Print Name) (Print Title)
-15-
<PAGE>
EXHIBIT 10.22
[EXECUTION]
- - - - ------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------
CREDIT AGREEMENT
between
CAMERON ASHLEY FINANCIAL SERVICES, INC.
and
BANK ONE, TEXAS, N.A.
December 3, 1996
$20,000,000
- - - - ------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
Page
<S> <C> <C>
ARTICLE I
GENERAL TERMS. . . . . . . . . . . . . . . . . 1
Section 1.1 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 OTHER DEFINITIONAL PROVISIONS . . . . . . . . . . . . . . . . . . 11
Section 1.3 EXHIBITS AND SCHEDULES. . . . . . . . . . . . . . . . . . . . . . 11
Section 1.4 CALCULATIONS AND DETERMINATIONS . . . . . . . . . . . . . . . . . 11
ARTICLE II
AMOUNT AND TERMS OF ADVANCES. . . . . . . . . . . . . 11
Section 2.1 COMMITMENT AND ADVANCES . . . . . . . . . . . . . . . . . . . . . 12
Section 2.2 PROMISSORY NOTE; OPTIONAL PREPAYMENTS . . . . . . . . . . . . . . 12
Section 2.3 NOTICE AND MANNER OF OBTAINING BORROWINGS . . . . . . . . . . . . 12
Section 2.4 FACILITY FEE. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.5 WAREHOUSE CUSTODIAN FEE . . . . . . . . . . . . . . . . . . . . . 12
Section 2.6 MANDATORY REPAYMENTS. . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.7 BUSINESS DAYS . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 2.8 PAYMENT PROCEDURE . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.9 RATE ELECTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 2.10 INCREASED COST OF FIXED RATE PORTIONS . . . . . . . . . . . . . . 14
Section 2.11 AVAILABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 2.12 FUNDING LOSSES . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 2.13 REIMBURSABLE TAXES . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE III
COLLATERAL . . . . . . . . . . . . . . . . . 16
Section 3.1 COLLATERAL. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.2 BORROWING REQUEST; DELIVERY OF CONSUMER NOTES TO CUSTODIAN. . . . 16
Section 3.3 POWER OF ATTORNEY . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.4 REDEMPTION OF COLLATERAL. . . . . . . . . . . . . . . . . . . . . 17
Section 3.5 CORRECTION OF CONSUMER NOTES. . . . . . . . . . . . . . . . . . . 18
Section 3.6 RELEASE OF COLLATERAL . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE IV
CONDITIONS PRECEDENT. . . . . . . . . . . . . . . 19
Section 4.1 INITIAL BORROWING . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.2 ALL BORROWINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 20
<PAGE>
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ARTICLE V
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . 21
Section 5.1 ORGANIZATION AND GOOD STANDING. . . . . . . . . . . . . . . . . . 22
Section 5.2 AUTHORIZATION AND POWER . . . . . . . . . . . . . . . . . . . . . 22
Section 5.3 NO CONFLICTS OR CONSENTS. . . . . . . . . . . . . . . . . . . . . 22
Section 5.4 ENFORCEABLE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . 22
Section 5.5 PRIORITY OF LIENS . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.6 NO LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.7 FINANCIAL CONDITION OF BORROWER . . . . . . . . . . . . . . . . . 23
Section 5.8 FULL DISCLOSURE . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.9 NO DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.10 NO LITIGATION. . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.11 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 5.12 PRINCIPAL OFFICE, ETC. . . . . . . . . . . . . . . . . . . . . . 23
Section 5.13 COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . . . . . . . 23
Section 5.14 SUBSIDIARIES . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.15 INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.16 PERMITS, PATENTS, TRADEMARKS, ETC. . . . . . . . . . . . . . . . 24
Section 5.17 STATUS UNDER CERTAIN FEDERAL STATUTES. . . . . . . . . . . . . . 24
Section 5.18 SECURITIES ACT . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.19 POLLUTION CONTROL. . . . . . . . . . . . . . . . . . . . . . . . 24
Section 5.20 NO APPROVALS REQUIRED. . . . . . . . . . . . . . . . . . . . . . 24
Section 5.21 SURVIVAL OF REPRESENTATIONS. . . . . . . . . . . . . . . . . . . 25
Section 5.22 INDIVIDUAL CONSUMER NOTES. . . . . . . . . . . . . . . . . . . . 25
ARTICLE VI
AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . 26
Section 6.1 TAXES AND OTHER LIENS . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.2 MAINTENANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.3 FURTHER ASSURANCES. . . . . . . . . . . . . . . . . . . . . . . . 27
Section 6.4 REIMBURSEMENT OF EXPENSES . . . . . . . . . . . . . . . . . . . . 27
Section 6.5 INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.6 ACCOUNTS AND RECORDS. . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.7 RIGHT OF INSPECTION . . . . . . . . . . . . . . . . . . . . . . . 28
Section 6.8 NOTICE OF CERTAIN EVENTS. . . . . . . . . . . . . . . . . . . . . 28
Section 6.9 USE OF PROCEEDS; MARGIN STOCK . . . . . . . . . . . . . . . . . . 28
Section 6.10 NOTICE OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . 29
Section 6.11 COMPLIANCE WITH LOAN DOCUMENTS . . . . . . . . . . . . . . . . . 29
Section 6.12 OPERATIONS AND PROPERTIES. . . . . . . . . . . . . . . . . . . . 29
Section 6.13 FINANCIAL STATEMENTS AND REPORTS . . . . . . . . . . . . . . . . 29
ARTICLE VII
NEGATIVE COVENANTS . . . . . . . . . . . . . . . 31
Section 7.1 NO MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
<PAGE>
<S> <C> <C>
Section 7.2 LIMITATION ON INDEBTEDNESS. . . . . . . . . . . . . . . . . . . . 31
Section 7.3 BUSINESS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 7.4 LIQUIDATIONS AND DISPOSITIONS OF SUBSTANTIAL ASSETS . . . . . . . 31
Section 7.5 LOANS, ADVANCES, AND INVESTMENTS. . . . . . . . . . . . . . . . . 32
Section 7.6 ACTIONS WITH RESPECT TO COLLATERAL. . . . . . . . . . . . . . . . 32
Section 7.7 TANGIBLE NET WORTH. . . . . . . . . . . . . . . . . . . . . . . . 32
Section 7.8 MINIMUM LIQUIDITY . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.9 TOTAL LIABILITIES TO BORROWER'S CONSOLIDATED TANGIBLE NET WORTH . 33
Section 7.10 RESTRICTIONS ON DIVIDENDS AND PAYMENTS OF SUBORDINATED DEBT. . . 33
Section 7.11 TRANSACTIONS WITH AFFILIATES . . . . . . . . . . . . . . . . . . 33
Section 7.12 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.13 ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Section 7.14 CHANGE OF PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . 33
Section 7.15 FISCAL YEAR, METHOD OF ACCOUNTING. . . . . . . . . . . . . . . . 33
ARTICLE VIII
EVENTS OF DEFAULT. . . . . . . . . . . . . . . . 34
Section 8.1 NATURE OF EVENT . . . . . . . . . . . . . . . . . . . . . . . . . 34
Section 8.2 DEFAULT REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE IX
CONCERNING BANK ONE . . . . . . . . . . . . . . . 36
Section 9.1 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 9.2 LIMITATION OF LIABILITY . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE X
MISCELLANEOUS. . . . . . . . . . . . . . . . . 38
Section 10.1 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.2 AMENDMENTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 10.3 INVALIDITY . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.4 SURVIVAL OF AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 39
Section 10.5 RENEWAL, EXTENSION OR REARRANGEMENT. . . . . . . . . . . . . . . 39
Section 10.6 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.7 CUMULATIVE RIGHTS. . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.8 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 10.9 LIMITATION ON INTEREST . . . . . . . . . . . . . . . . . . . . . 39
Section 10.10 BANK ACCOUNTS; OFFSET . . . . . . . . . . . . . . . . . . . . . 40
Section 10.11 ASSIGNMENTS AND PARTICIPATIONS. . . . . . . . . . . . . . . . . 40
Section 10.12 EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.13 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. . . . . . . . . . 41
Section 10.14 COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.15 ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . 41
Section 10.16 TERMINATION; LIMITED SURVIVAL . . . . . . . . . . . . . . . . . 41
Section 10.17 JOINT AND SEVERAL LIABILITY . . . . . . . . . . . . . . . . . . 42
</TABLE>
<PAGE>
EXHIBITS
Exhibit A - Form of Promissory Note
Exhibit B - Form of Borrowing Request
Exhibit C-1 - Form of Officer's Certificate of Borrower
Exhibit C-1 - Form of Officer's Certificate of Guarantor
Exhibit D - Form of Collateral Release Request
Exhibit E - Form of Bailee Letter
Exhibit F - Form of Borrowing Base Report
Exhibit G - Form of Trust Receipt
Exhibit H - Form of Rate Election
Exhibit I - Underwriting Guidelines
Exhibit J - Form of Guaranty
Exhibit K - Form of Security Agreement
Exhibit L - Warehouse Custodian Fees
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made and entered into as of December 3, 1996,
between CAMERON ASHLEY FINANCIAL SERVICES, INC., a Texas corporation
("BORROWER"), and BANK ONE, TEXAS, N.A. ("BANK ONE").
The parties hereto hereby agree as follows:
ARTICLE I
GENERAL TERMS
Section 1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"ADJUSTED BASE RATE" means the per annum rate of interest one-half of one
percent (0.5%) below the Base Rate. If the Base Rate changes after the date
hereof, the Adjusted Base Rate shall automatically increase or decrease, as the
case may be, without notice to Borrower.
"ADVANCE" shall mean a disbursement by Bank One of any sum or sums lent by
Bank One to Borrower hereunder.
"AFFILIATE" means, as to any Person, each other Person that directly or
indirectly (through one or more intermediaries or otherwise) controls, is
controlled by, or is under common control with, such Person.
"AGREEMENT" shall mean this Credit Agreement, as the same may from time to
time be amended, modified, supplemented or restated.
"APPROVED INVESTOR" means the Trustee under the Asset Securitization
Facility and any other investor approved in writing by Bank One as an Approved
Investor.
"ASSET SECURITIZATION FACILITY" means a facility approved by Bank One which
provides for the sale by Borrower of the Consumer Notes to a trustee, acting for
certain investors.
"BAILEE LETTER" means a bailee letter from Bank One to an Approved Investor
in the form of "Exhibit "E".
"BANK ONE" shall have the meaning assigned to such term in the preamble
hereof.
"BASE RATE" shall mean the base commercial rate of interest as announced
from time to time by Bank One (which may not be the lowest, best, or most
favorable rate of interest which Bank One may charge on loans to its customers).
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"BASE RATE PORTION" means that portion of the unpaid principal balance of
the Loan which is not made up of Fixed Rate Portions.
"BORROWER" shall have the meaning assigned to such term in the preamble
hereof.
"BORROWER'S CONSOLIDATED DEBT" means all Consolidated liabilities and
similar balance sheet items of Borrower.
"BORROWER'S CONSOLIDATED TANGIBLE NET WORTH" means the remainder of all
Consolidated assets of Borrower, other than intangible assets (including without
limitation as intangible assets such assets as patents, copyrights, licenses,
franchises, goodwill, trade names, trade secrets and leases other than oil, gas
or mineral leases or leases required to be capitalized under GAAP and any
residual interests of Borrower under the Asset Securitization Facility, MINUS
Borrower's Consolidated Debt (other than Subordinated Debt).
"BORROWING" shall mean a borrowing consisting of an Advance by Bank One
pursuant to a Borrowing Request.
"BORROWING BASE" means at any date, the Collateral Value calculated as of
such date.
"BORROWING BASE REPORT" means a report prepared by Borrower in the form of
Exhibit F.
"BORROWING DATE" with respect to a particular Borrowing shall mean the
Business Day identified by Borrower as the day on which it requests that such
Borrowing be made, such day shall be identified in the related Borrowing
Request.
"BORROWING REQUEST" shall mean a request, in the form of EXHIBIT "B", for a
Borrowing pursuant to ARTICLE II.
"BUSINESS DAY" shall mean any day other than Saturdays, Sundays and other
days on which commercial banks are authorized or required by law to close in the
State of Texas. Any Business Day in any way relating to Fixed Rate Portions
(such as the day on which an Interest Period begins or ends) must also be a day
on which transactions in United States' dollars are carried out in the
eurocurrency market.
"CAPITAL LEASE" shall mean any lease of Property if the then present value
of the minimum rental commitment thereunder should, in accordance with GAAP, be
capitalized on a balance sheet of the lessee.
"CASH EQUIVALENTS" shall mean (i) securities issued or directly and fully
guaranteed or insured by the United States Government or any agency or
instrumentality thereof which mature within 90 days from the date of
acquisition, and (ii) time deposits and certificates of deposit, which mature
within 90 days from the date of acquisition, of Bank One or any other
domestic commercial bank having capital and surplus in excess of $200,000,000,
which has, or the holding company of which has, a commercial paper
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rating of at least the second highest credit rating given by either Standard &
Poors Corporation or Moody's Investors Service, Inc.
"CHANGE OF CONTROL" means the acquisition by any Person, or group of
Persons acting together, a of a direct or indirect interest in more than
forty-nine percent (49%) of the voting power of the voting stock of Borrower,
by way of merger or consolidation or otherwise.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COLLATERAL" shall have the meaning given it in the Security Agreement.
"COLLATERAL RELEASE REQUEST" shall mean a request, in the form of EXHIBIT
"D", that Bank One release its Lien in and upon certain Collateral pursuant to
SECTION 3.6.
"COLLATERAL VALUE" shall mean, with respect to each Eligible Consumer Note,
an amount equal to eighty-five percent (85%) of the lesser of (i) if Borrower
funded the loan made pursuant to the Consumer Note, the original principal
amount of such Consumer Note or (ii) if Borrower acquired such Consumer Note
after the initial funding, the purchase price for such Consumer Note (less
expenses) MINUS, in each case, the amount of principal paid under such Consumer
Note and delivered to Bank One for application to the payment of the Consumer
Note.
"COMMITMENT" shall mean the obligation of Bank One to make Advances to
Borrower pursuant to SECTION 2.1 hereof in an aggregate amount not to exceed at
any one time $20,000,000.
"CONSOLIDATED" refers to the consolidation of any Person, in accordance
with GAAP, with its properly consolidated subsidiaries. References herein to a
Person's Consolidated financial statements, financial position, financial
condition, liabilities, etc. refer to the consolidated financial statements,
financial position, financial condition, liabilities, etc. of such Person and
its properly consolidated subsidiaries.
"CONSUMER NOTE" shall mean the note, installment sales contract, or other
evidence of indebtedness evidencing the indebtedness of an Obligor under a home
improvement loan together with the rights and obligations of a holder thereof
and payments thereon and proceeds therefrom.
"DEBTOR LAWS" shall mean all applicable liquidation, conservatorship,
bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or
similar laws from time to time in effect affecting the rights of creditors
generally.
"DEFAULT" shall mean any of the events specified in SECTION 8.1 hereof,
whether or not any requirement for notice or lapse or time or any other
condition has been satisfied.
"DIVIDENDS", in respect of any corporation, shall mean:
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(i) Cash distributions or any other distributions on, or in respect
of, any class of equity security of such corporation, except for
distributions made solely in shares of securities of the same class;
and
(ii) Any and all funds, cash or other payments made in respect of the
redemption, repurchase or acquisition of such securities.
"ELIGIBLE CONSUMER NOTES" shall mean all Consumer Notes (i) which are made
payable to the order of Borrower or have been endorsed (without restriction or
limitation) payable to the order of Borrower,(ii) which are valid and
enforceable in accordance with their respective terms,(iii) in which Bank One
has been granted and continues to hold a perfected first-priority security
interest,(iv) which are in a form that has been prepared by Bankers Systems or
otherwise approved by Bank One,(v) which, are eligible for purchase under an
Asset Securitization Facility and conform in all respects with all the
requirements for purchase of such Consumer Notes under such Asset Securitization
Facility and (vi) as to which the representations and warranties set forth in
Section 5.22 are true and correct without any limitation as to Borrower's
knowledge thereof; PROVIDED, HOWEVER, that any Consumer Note (vii) pledged by
Borrower under the Security Agreement for a period in excess of the Warehousing
Period or (viii) which has been out of Bank One's possession under a Bailee
Letter for twenty-one (21) or more days, or (ix) which has been out of Bank
One's possession under a Trust Receipt for fifteen (15) or more days, or (x)
which is in default more than 60 days; or (xi) which was not originated in
accordance with the Underwriting Guidelines or (xii) which was originated
fraudulently or (xiii) the Obligor of which has instituted a proceeding in
bankruptcy or reorganization under Debtor Laws, or (xiv) is no longer eligible
for purchase under the Asset Securitization Facility or ceases to conform in all
respects with all requirements for purchase thereunder, SHALL NOT BE AN ELIGIBLE
CONSUMER NOTE.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, together with the regulations from time to time
promulgated with respect thereto.
"ERISA AFFILIATE" shall mean all members of the group of corporations and
trades or businesses (whether or not incorporated) which, together with
Borrower, are treated as a single employer under Section 414 of the Code.
"ERISA PLAN" shall mean any pension benefit plan subject to Title IV of
ERISA or Section 412 of the Code maintained or contributed to by Borrower or any
ERISA Affiliate with respect to which Borrower has a fixed or contingent
liability.
"EVENT OF DEFAULT" shall mean any of the events specified in SECTION 8.1
hereof, provided that any requirement in connection with such event for the
giving of notice or the lapse of time, or the happening of any further
condition, event or act has been satisfied.
"FACILITY FEE" shall mean the fee described in SECTION 2.4 hereof.
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"FISCAL QUARTER" means the period of three months ending January 31, April
30, July 31 and October 31 of each year.
"FISCAL YEAR" means the one-year period ending October 31 of each year.
"FIXED RATE" means, with respect to each particular Fixed Rate Portion and
the associated LIBOR Rate and Reserve Percentage, the rate per annum calculated
by Bank One (rounded upwards, if necessary, to the next higher 0.01%) determined
on a daily basis pursuant to the following formula:
Fixed Rate =
LIBOR RATE + A
-----------------------------
(100.0% - Reserve Percentage)
where A means one and one-quarter percent (1.25%) per annum. If the
Reserve Percentage changes during the Interest Period for a Fixed Rate
Portion, Bank One may, at its option, either change the Fixed Rate for such
Fixed Rate Portion or leave it unchanged for the duration of such Interest
Period. The Fixed Rate shall in no event, however, exceed the Maximum
Rate.
"FIXED RATE PORTION" means that portion of the unpaid principal balance of
the Loan which Borrower designates as such in a Rate Election.
"FUNDING ACCOUNT" shall mean the non-interest bearing demand checking
account established by Borrower with Bank One to be used for the deposit of
proceeds of Advances and the funding of Consumer Notes by Borrower.
"GAAP" means those generally accepted accounting principles and practices
which are recognized as such by the Financial Accounting Standards Board (or any
generally recognized successor) and which, in the case of Borrower and Guarantor
and its consolidated subsidiaries, are applied for all periods after the date
hereof in a manner consistent with the manner in which such principles and
practices were applied to the financing statements described in Section 5.7. If
any change in any accounting principle or practice is required by the Financial
Accounting Standards Board (or any such successor) in order for such principle
or practice to continue as a generally accepted accounting principle or
practice, all reports and financial statements required hereunder with respect
to Borrower or Guarantor, or with respect to Borrower or Guarantor and their
Consolidated subsidiaries may be prepared in accordance with such change, but
all calculations and determinations to be made hereunder may be made in
accordance with such change only after notice of such change is given to Bank
One and Bank One agrees to such change insofar as it affects the accounting of
Borrower, Guarantor or of Guarantor and its Consolidated subsidiaries.
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<PAGE>
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any agency,
department, state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GOVERNMENTAL REQUIREMENT" shall mean any law, statute, code, ordinance,
order, rule, regulation, judgment, decree, injunction, franchise, permit,
certificate, license, authorization or other direction or requirement
(including, without limitation, any of the foregoing which relate to
environmental standards or controls, energy regulations and occupational, safety
and health standards or controls) of any arbitrator, court or other Governmental
Authority, which exercises jurisdiction over any Related Person or any of its
Property.
"GUARANTOR" means Cameron Ashley Building Products, Inc., a Georgia
corporation.
"GUARANTY" shall mean the Guaranty dated as of even date herewith, executed
by Guarantor in the form attached hereto as EXHIBIT "J", as the same may from
time to time be further supplemented, amended or restated.
"GUARANTY OBLIGATION" of any Person shall mean any contract, agreement or
understanding of such Person pursuant to which such Person guarantees, or in
effect guarantees, any Indebtedness, lease, dividends or other obligations (the
"PRIMARY OBLIGATIONS") or any other Person (the "PRIMARY OBLIGOR") in any
manner, whether directly or indirectly, contingently or absolutely, in whole or
in part, including without limitation agreements:
(i) to purchase such Primary Obligation or any property constituting
direct or indirect security therefor;
(ii) to advance or supply funds (A) for the purchase or payment of
any such Primary Obligation, or (B) to maintain working capital or other
balance sheet conditions of the Primary Obligor or otherwise to maintain
the net worth or solvency of the Primary Obligor;
(iii) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such Primary Obligation of the
ability of the Primary Obligor to make payment of such Primary Obligation;
or
(iv) otherwise to assure or hold harmless the owner of any such
Primary Obligation against loss in respect thereof;
PROVIDED, THAT "GUARANTY OBLIGATION" shall not include endorsements that
are made in the ordinary course of business of negotiable instruments or
documents for deposit or collection. The amount of any Guaranty Obligation
shall be deemed to be the maximum amount for which the guarantor may be
liable pursuant to the agreement that governs such Guaranty Obligation,
unless such maximum amount is not stated or determinable, in which case the
amount of such obligation shall be the maximum reasonably anticipated
liability thereon, as determined by such guarantor in good faith.
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"INDEBTEDNESS" of any Person at a particular date shall mean the sum
(without duplication) at such date of (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services or
which is evidenced by a note, bond, debenture, or similar instrument,(ii) all
obligations of such Person under any Capital Lease,(iii) all obligations of such
Person in respect of letters of credit, acceptances, or similar obligations
issued or created for the account of such Person,(iv) all Guaranty Obligations
of such Person, and (v) all liabilities secured by any Lien on any property
owned by such Person, whether or not such Person has assumed or otherwise become
liable for the payment thereof, and (vi) any liability of such Person or any
Affiliate thereof in respect of unfunded vested benefits under an ERISA Plan.
"INTEREST PERIOD means, with respect to each particular Fixed Rate Portion,
a period of 30, 60 or 90 days, as specified in the Rate Election applicable
thereto, beginning on and including the date specified in such Rate Election
(which must be a Business Day), and ending on but not including the same day of
the month as the day on which it began (e.g., a period beginning on the third
day of one month shall end on but not include the third day of another month),
provided that each Interest Period which would otherwise end on a day which is
not a Business Day shall end on the next succeeding Business Day (unless such
next succeeding Business Day is the first Business Day of a calendar month, in
which case such Interest Period shall end on the immediately preceding Business
Day). No Interest Period may be elected which would extend past the Termination
Date.
"LATE PAYMENT RATE": at the time in question, four percent (4.0%) per
annum plus the Base Rate then in effect; provided that, with respect to any
Fixed Rate Portion of a Loan with an Interest Period extending beyond the date
such Fixed Rate Portion becomes due and payable, "Late Payment Rate" shall mean
four percent (4.0%) per annum plus the related Fixed Rate.
"LIBOR RATE" shall mean, with respect to each particular Fixed Rate Portion
and with respect to the related Interest Period, the rate of interest per annum
at which deposits in the lawful currency of the United States of America are
offered by the major London clearing banks, as reported by Knight-Ridder news
service (or if Knight Ridder news service ceases to report such rate, another
similar news reporting service selected by Bank One in its sole discretion), in
the London interbank eurodollar market for a period of time equal or comparable
to the related Interest Period and in an amount equal to or comparable to the
principal amount of the Fixed Rate Portion to which such Interest Period
relates.
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (whether statutory or otherwise), or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, any conditional sale or other
title retention agreement, any financing lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the uniform commercial code or comparable law of any
jurisdiction in respect of any of the foregoing).
"LOAN" shall mean at any time the aggregate principal amount of all
Advances made and outstanding hereunder.
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"LOAN DOCUMENT" shall mean any, and "LOAN DOCUMENTS" shall mean all, of
this Agreement, the Note, the Security Instruments, the Guaranty and any and all
other agreements or instruments now or hereafter executed and delivered by
Borrower or any other Person in connection with, or as security for the payment
or performance of any or all of the Obligations, as any of such may be renewed,
amended or supplemented from time to time.
"MATERIAL ADVERSE EFFECT" shall mean any material adverse effect on (i) the
validity or enforceability of this Agreement, the Note or any other Loan
Document,(ii) the business, operations, total Property or financial condition of
any Related Person,(iii) the collateral under any Security Instrument; or (iv)
the ability of Borrower to fulfill its obligations under this Agreement, the
Note, or any other Loan Document to which it is a party.
"MAXIMUM RATE" has the meaning given it in the Note.
"NET INCOME" of any Person shall mean, for the period ending on a
particular date, the net income (after taxes) of such Person which would appear
on statements of income and cash flows of such Person for such period prepared
in accordance with GAAP.
"NOTE" shall mean the promissory note delivered by Borrower to Bank One
pursuant to SECTION 2.2 in the form attached hereto as EXHIBIT "A", and all
renewals, modifications and extensions thereof.
"OBLIGATIONS" shall mean all present and future Indebtedness, obligations,
and liabilities of Borrower to Bank One, and all renewals and extensions
thereof, or any part thereof, arising pursuant to this Agreement or any other
Loan Document, and all interest accrued thereon, and reasonable attorneys' fees
and other costs incurred in the drafting, negotiation, enforcement or collection
thereof, regardless of whether such indebtedness, obligations, and liabilities
are direct, indirect, fixed contingent, joint, several or joint and several.
"OBLIGOR" shall mean the obligor on a Consumer Note.
"PBGC" means the Pension Benefit Guaranty Corporation or any Governmental
Authority succeeding to any of its functions.
"PERSON" shall mean any individual, corporation, partnership, joint
venture, association, joint stock company, trust, unincorporated organization,
Governmental Authority, or any other form of entity.
"PROPERTY" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"RATE ELECTION has the meaning given it in Section 2.9.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System as in effect from time to time.
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"REGULATION U" shall mean Regulation U issued by the Board of Governors of
the Federal Reserve System as in effect from time to time.
"REGULATION X" shall mean Regulation X issued by the Board of Governors of
the Federal Reserve System as in effect from time to time.
"RELATED PERSONS" shall mean Borrower and any Subsidiary of Borrower.
"REPORTABLE EVENT" shall mean (1) a reportable event described in Sections
4043(b)(5) or (6) of ERISA or the regulations promulgated thereunder, or (2) any
other reportable event described in Section 4043(b) of ERISA or the regulations
promulgated thereunder other than a reportable event not subject to the
provision for 30-day notice to the PBGC pursuant to a waiver by the PBGC under
Section 4043(a) of ERISA.
"REQUIREMENT OF LAW" as to any Person shall mean the charter and by-laws or
other organizational or governing documents of such Person, and any law,
statute, code, ordinance, order, rule, regulation, judgment, decree, injunction,
franchise, permit, certificate, license, authorization or other determination,
direction or requirement (including, without limitation, any of the foregoing
which relate to environmental standards or controls, energy regulations and
occupational, safety and health standards or controls) of any arbitrator, court
or other Governmental Authority, in each case applicable to or binding upon such
Person or any of its Property or to which such Person or any of its Property is
subject.
"RESERVE PERCENTAGE" means, on any day with respect to each particular
Fixed Rate Portion, the maximum reserve requirement, as determined by Bank One
(including without limitation any basic, supplemental, marginal, emergency or
similar reserves), expressed as a percentage and rounded to the next higher
0.01%, which would then apply to Bank One under Regulation D with respect to
"Eurocurrency liabilities" (as such term is defined in Regulation D) equal in
amount to Bank One's Fixed Rate Portion were Bank One to have such "Eurocurrency
liabilities". If such reserve requirement shall change after the date hereof,
Borrower shall be promptly notified thereof and the Reserve Percentage shall be
automatically increased or decreased, as the case may be, from time to time as
of the effective time of each such change in such reserve requirement.
"SECURITY AGREEMENT" shall mean the Security Agreement dated as of even
date herewith, between Borrower and Bank One in the form attached hereto as
EXHIBIT "K", as the same may from time to time be further supplemented, amended
or restated.
"SECURITY INSTRUMENTS" shall mean (i) the Security Agreement, and (ii) such
other executed documents as are or may be necessary to grant to Bank One a
perfected first, prior and continuing security interest in and to all the
collateral described in ARTICLE III hereof, and any and all other agreements or
instruments now or hereafter executed and delivered by Borrower in connection
with, or as security for the payment or performance of, all or any of the
Obligations, including Borrower's obligations under the Note and this Agreement,
as such agreements may be amended, modified or supplemented from time to time.
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"SETTLEMENT ACCOUNT" shall mean the non-interest bearing demand checking
account established by Borrower with Bank One to be used for the proceeds
from the sale of the Consumer Notes and the payment of the Obligations.
"SUBMISSION LIST" shall mean a list in the form of Schedule I to the form
of the Borrowing Request.
"SUBORDINATED DEBT" shall mean unsecured Indebtedness of Borrower in an
original principal amount not to exceed $6,000,000 which is issued on terms
acceptable to Bank One and which is subordinated to Bank One on terms acceptable
to Bank One, in each case in Bank One's sole discretion.
"SUBSIDIARY" shall mean, with respect to any Person, any corporation,
association, partnership, joint venture, or other business or corporate entity,
enterprise or organization which is directly or indirectly (through one or more
intermediaries) controlled by or owned fifty percent or more by such Person.
"TERMINATION DATE" shall mean the earlier of (i) the 364th day after the
date of the Agreement, or (ii) the day on which the Note first becomes due and
payable in full.
"TERMINATION EVENT" shall mean (1) the occurrence with respect to any ERISA
Plan of a Reportable Event, (2) the withdrawal of the Borrower or any ERISA
Affiliate from a plan during a plan year in which it was a "substantial
employer", as defined in Section 4001(a)(2) of ERISA, (3) the distribution to
affected parties of a notice of intent to terminate any ERISA Plan or the
treatment of any ERISA Plan amendment as a termination under Section 4041 of
ERISA, (4) the institution of proceedings to terminate any ERISA Plan by the
PBGC under Section 4042 of ERISA, or (5) any other event or condition which
might constitute grounds under Section 4042 of ERISA for the termination of, or
the appointment of a trustee to administer, any ERISA Plan.
"TOTAL LIABILITIES" of any Person shall mean, as of any date, all amounts
which would be included as liabilities on a balance sheet of such Person as of
such date prepared in accordance with GAAP.
"TRUST RECEIPT" shall mean an agreement in the form of Exhibit G signed by
Borrower and delivered to Bank One.
"UCC" shall mean the Uniform Commercial Code as adopted in the State of
Texas, TEX. BUS. & COM. CODE ANN. Section 1.101 ET SEQ. (Vernon 1994), as the
same may hereafter be amended.
"UNDERWRITING GUIDELINES" means the underwriting guidelines established by
Borrower (and approved by Bank One), a copy of which is attached as Exhibit I.
"WAREHOUSE CUSTODIAN FEE" shall mean the fee set out in SECTION 2.5 hereof.
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"WAREHOUSING PERIOD" shall mean (i) until the earlier of the date of the
Asset Securitization Facility or the 270th day after the date hereof, 270 days;
and (ii) thereafter, 180 days.
Section 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this
Agreement shall have the above-defined meanings when used in this Agreement, the
Note or any other Loan Document, certificate, report or other document made or
delivered pursuant hereto.
(b) Each term defined in the singular form in SECTION 1.1 shall mean the
plural thereof when the plural form of such term is used in this Agreement, the
Note or any other Loan Document, certificate, report or other document made or
delivered pursuant hereto, and each term defined in the plural form in SECTION
1.1 shall mean the singular thereof when the singular form of such term is used
herein or therein.
(c) The words "hereof," "herein," "hereunder" and similar terms when used
in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and section, subsection, schedule and
exhibit references herein are references to sections, subsections, schedules and
exhibits to this Agreement unless otherwise specified.
(d) Unless the context otherwise requires or unless otherwise provided
herein the terms defined in this Agreement which refer to a particular
agreement, instrument or document also refer to and include all renewals,
extensions, modifications, amendments and restatements of such agreement,
instrument or document, provided that nothing contained in this section shall be
construed to authorize any such renewal, extension, modification, amendment or
restatement.
(e) As used herein, in the Note or in any other Loan Document,
certificate, report or other document made or delivered pursuant hereto,
accounting terms relating to any Person and not specifically defined in this
Agreement or therein shall have the respective meanings given to them under
GAAP.
Section 1.3 EXHIBITS AND SCHEDULES. All Exhibits and Schedules attached
to this Agreement are a part hereof for all purposes.
Section 1.4 CALCULATIONS AND DETERMINATIONS. All calculations under the
Loan Documents of interest and of fees shall be made on the basis of actual days
elapsed (including the first day but excluding the last) and a year of 360 days.
Unless otherwise expressly provided herein or unless Bank One otherwise consents
all financial statements and reports furnished to Bank One hereunder shall be
prepared and all financial computations and determinations pursuant hereto shall
be made in accordance with GAAP.
ARTICLE II
AMOUNT AND TERMS OF ADVANCES
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Section 2.1 COMMITMENT AND ADVANCES. Subject to the terms and conditions
contained in this Agreement, Bank One agrees to make Advances to Borrower on a
revolving credit basis from time to time on any Business Day from the date of
this Agreement through the Termination Date. Each Borrowing under this SECTION
2.1 shall be in an aggregate amount of not less than $100,000. The aggregate
principal amount of all Advances at any time outstanding shall not exceed the
lesser of (i) the aggregate Collateral Value of all Consumer Notes, or (ii)
$20,000,000. Prior to the Termination Date, Borrower may, at its option, from
time to time, request Advances, prepay the Loan in whole or in part, and
reborrow amounts so paid, all in accordance with the terms and conditions
hereof.
Section 2.2 PROMISSORY NOTE; OPTIONAL PREPAYMENTS. The Advances made by
Bank One pursuant to this ARTICLE II shall be evidenced by the Note. The Note
shall be payable and bear interest as set forth therein. Borrower may from time
to time, without premium or penalty, prepay the Note, in whole or in part.
Section 2.3 NOTICE AND MANNER OF OBTAINING BORROWINGS. Borrower shall
give Bank One a notice of each request for a Borrowing pursuant to a Borrowing
Request in accordance with the provisions of SECTION 4.2 hereof. After Bank
One's receipt of such request and upon fulfillment of the applicable conditions
set forth in ARTICLE IV, Bank One will make the Advance requested by crediting
the Funding Account with a like amount of immediately available funds.
Section 2.4 FACILITY FEE. In consideration of Bank One's commitment to
make Advances, Borrower will pay to Bank One a one-time facility fee in the
amount of one-fourth of one percent (0.25%) of the Commitment.
Section 2.5 WAREHOUSE CUSTODIAN FEE. Borrower will pay to Bank One
warehouse custodian fees in the amounts set forth on Exhibit L for each Consumer
Note delivered to Bank One pursuant to Section 3.2. Such warehouse custodian
fees for each month shall be payable on the first day of the next calendar
month.
Section 2.6 MANDATORY REPAYMENTS.
(a) If at any time the Loan exceeds the aggregate Collateral Value,
Borrower shall within one (1) Business Day after receipt of written notice
thereof from Bank One, repay the amount of such excess to Bank One or (ii)
deliver to Bank One additional Eligible Consumer Notes as Collateral in an
amount sufficient to cause the Collateral Value of all Eligible Consumer Notes
(determined at the time of delivery of such additional Collateral to Bank One)
to equal or exceed the Loan.
(b) all payments of principal on the Consumer Notes that are part of the
Collateral shall be delivered to Bank One through a lock box (as described in
the Security Agreement) and applied to the prepayment of the Loan.
Section 2.7 BUSINESS DAYS. If the date for any payment hereunder falls on
a day which is not a Business Day, then for all purposes of the Note and this
Agreement the same shall be
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deemed to have fallen on the next following Business Day, and such extension
of time shall in such case be included in the computation of payments of fees
and interest.
Section 2.8 PAYMENT PROCEDURE. All payments of interest on the Note, all
payments of principal, including any principal payment made with proceeds of
Collateral, and fees hereunder shall be made directly to Bank One in federal or
other immediately available funds before 1:00 p.m. (Dallas time) on the
respective dates when due via wire transfer to the Funding Account. All
payments received by Bank One shall be applied FIRST to all costs, expenses,
fees and reasonable attorneys' fees incurred by, and custodian or other fees due
to, Bank One arising out of or in connection with this Agreement, the Note or
the other Loan Documents, including without limitation, all costs, expenses,
fees and reasonable attorneys' fees arising out of or in connection with the
negotiation, preparation and enforcement of such documents; SECOND, to the
payment of interest then due and payable under the Note; and LAST, to the
principal of the Note. Bank One shall promptly notify Borrower of the
application of any payment to anything other than the principal of or interest
on the Note.
Section 2.9 RATE ELECTIONS. Borrower may from time to time designate all
or any portion of the Loan (including any yet to be made Advances which are to
be made prior to or at the beginning of the designated Interest Period but
excluding any portion of the Loan which is required to be repaid prior to the
end of the designated Interest Period) as a Fixed Rate Portion; provided that
without the consent of Bank One Borrower may make no such election during the
continuance of a Default and that Borrower may make such an election with
respect to an already existing Fixed Rate Portion only if such election will
take effect at or after the termination of the Interest Period applicable to
such already existing Fixed Rate Portion. Each election by Borrower of a Fixed
Rate Portion shall:
(a) Be made in writing in the form and substance of the "Rate
Election" attached hereto as Exhibit H, duly completed;
(b) Specify the amount of the Loan which Borrower desires to
designate as a Fixed Rate Portion, the first day of the Interest Period
which is to apply thereto, and the length of such Interest Period; and
(c) Be received by Bank One not later than 10:00 a.m., Dallas, Texas
time, on the third Business Day preceding the first day of the specified
Interest Period.
Each election which meets the requirements of this section (herein called a
"Rate Election") shall be irrevocable. Borrower may make no Rate Election
which does not specify an Interest Period complying with the definition of
"Interest Period" in Section 1.1 and the amount of the Fixed Rate Portion
elected in any Rate Election must be at least $100,000. Upon the
termination of each Interest Period the portion of the Loan theretofore
constituting the related Fixed Rate Portion shall, unless the subject of a
new Rate Election then taking effect, automatically become a part of the
Base Rate Portion and become subject to all provisions of the Loan
Documents governing the Base Rate Portion. Borrower shall have no more
than seven (7) Fixed Rate Portions in effect at any time.
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Section 2.10 INCREASED COST OF FIXED RATE PORTIONS. If any applicable
domestic or foreign law, treaty, rule or regulation (whether now in effect or
hereinafter enacted or promulgated, including Regulation D) or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law):
(a) shall change the basis of taxation of payments to Bank One of any
principal, interest, or other amounts attributable to any Fixed Rate
Portion or otherwise due under this Agreement in respect of any Fixed Rate
Portion (other than taxes imposed on the overall net income of Bank One or
any lending office of Bank One by any jurisdiction in which Bank One or any
such lending office is located); or
(b) shall change, impose, modify, apply or deem applicable any
reserve, special deposit or similar requirements in respect of any Fixed
Rate Portion (excluding those for which Bank One is fully compensated
pursuant to adjustments made in the definition of Fixed Rate) or against
assets of, deposits with or for the account of, or credit extended by, Bank
One; or
(c) shall impose on Bank One or the interbank eurocurrency deposit
market any other condition affecting any Fixed Rate Portion, the result of
which is to increase the cost to Bank One of funding or maintaining any
Fixed Rate Portion or to reduce the amount of any sum receivable by Bank
One in respect of any Fixed Rate Portion by an amount deemed by Bank One to
be material,
then Bank One shall promptly notify Borrower in writing of the happening of
such event and of the amount required to compensate Bank One for such event
(on an after-tax basis, taking into account any taxes on such
compensation), which notice shall set forth in reasonable detail the
computation of such amount to be paid, whereupon (i) Borrower shall pay
such amount to Bank One and (ii) Borrower may elect, by giving to Bank One
not less than three Business Days' notice, to convert all (but not less
than all) of any such Fixed Rate Portion into a part of the Base Rate
Portion.
Section 2.11 AVAILABILITY. If (a) any change in applicable laws,
treaties, rules or regulations or in the interpretation or administration
thereof of or in any jurisdiction whatsoever, domestic or foreign, shall make it
unlawful or impracticable for Bank One to fund or maintain Fixed Rate Portions,
or shall materially restrict the authority of Bank One to purchase or take
offshore deposits of dollars (i.e., "Eurodollars"), or (b) Bank One determines
that matching deposits appropriate to fund or maintain any Fixed Rate Portion
are not available to it, or (c) Bank One determines that the formula for
calculating the Fixed Rate does not fairly reflect the cost to Bank One of
making or maintaining loans based on such rate, then Borrower's right to elect
Fixed Rate Portions shall be suspended to the extent and for the duration of
such illegality, impracticability or restriction and all Fixed Rate Portions (or
portions thereof) which are then outstanding or are then the subject of any Rate
Election and which cannot lawfully or practicably be maintained or funded shall
immediately become or remain part of the Base Rate Portion. Borrower agrees to
indemnify Bank One and hold it harmless against all costs, expenses, claims,
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penalties, liabilities and damages which may result from any such change in law,
treaty, rule, regulation, interpretation or administration. Such
indemnification shall be on an after-tax basis, taking into account any taxes
imposed on the amounts paid as indemnity.
Section 2.12 FUNDING LOSSES. In addition to its other obligations
hereunder, Borrower will indemnify Bank One against, and reimburse Bank One on
demand for any loss, expense or charge incurred or sustained by Bank One
(including any loss, expense or charge incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by Bank One to fund or maintain
Fixed Rate Portions or Advances), as a result of (a) any payment or prepayment
(whether authorized or required hereunder or otherwise) of all or a portion of a
Fixed Rate Portion on a day other than the day on which the applicable Interest
Period ends, (b) any payment or prepayment, whether required hereunder or
otherwise, of the Loan made after the delivery, but before the effective date,
of a Rate Election, if such payment or prepayment prevents such Rate Election
from becoming fully effective, (c) the failure of any Advance to be made or of
any Rate Election to become effective due to any condition precedent not being
satisfied or due to any other action or inaction of Borrower, or (d) any
conversion (whether authorized or required hereunder or otherwise) of all or any
portion of any Fixed Rate Portion into the Base Rate Portion or into a different
Fixed Rate Portion on a day other than the day on which the applicable Interest
Period ends. Such indemnification shall be on an after-tax basis, taking into
account any taxes imposed on the amounts paid as indemnity.
Section 2.13 REIMBURSABLE TAXES. Borrower covenants and agrees that:
(a) Borrower will indemnify Bank One against and reimburse Bank One
for all present and future income, stamp and other taxes, levies, costs and
charges whatsoever imposed, assessed, levied or collected on or in respect
of this Agreement or any Fixed Rate Portions (whether or not legally or
correctly imposed, assessed, levied or collected), excluding, however, any
taxes imposed on or measured by the overall net income of Bank One or any
lending office of Bank One by any jurisdiction in which Bank One or any
such lending office is located (all such non-excluded taxes, levies, costs
and charges being collectively called "Reimbursable Taxes" in this
section). Such indemnification shall be on an after-tax basis, taking into
account any taxes imposed on the amounts paid as indemnity.
(b) All payments on account of the principal of, and interest on, the
Loan and the Note, and all other amounts payable by Borrower to Bank One
hereunder, shall be made in full without set-off or counterclaim and shall
be made free and clear of and without deductions or withholdings of any
nature by reason of any Reimbursable Taxes, all of which will be for the
account of Borrower. In the event of Borrower being compelled by law or
other regulations to make any such deduction or withholding from any
payment to Bank One, Borrower shall pay on the due date of such payment, by
way of additional interest, such additional amounts as are needed to cause
the amount receivable by Bank One after such deduction or withholding to
equal the amount which would have been receivable in the absence of such
deduction or withholding. If Borrower should make any deduction or
withholding as aforesaid, Borrower shall within 60 days
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thereafter forward to Bank One an official receipt or other official
document evidencing payment of such deduction or withholding.
(c) If Borrower is ever required to pay any Reimbursable Tax with
respect to any Fixed Rate Portion Borrower may elect, by giving to Bank One
not less than three Business Days' notice, to convert all (but not less
than all) of any such Fixed Rate Portion into a part of the Base Rate
Portion, but such election shall not diminish Borrower's obligation to pay
all Reimbursable Taxes.
ARTICLE III
COLLATERAL
Section 3.1 COLLATERAL. To secure the payment of the Obligations and the
performance by Borrower of its obligations hereunder and under the other Loan
Documents, Borrower (a) shall grant (and does hereby grant) to Bank One a first
and prior security interest in and to the Collateral and (b) shall execute all
documents and instruments, and perform all other acts reasonably deemed
necessary by Bank One, to perfect the security interest of Bank One in and to
such Collateral.
Section 3.2 BORROWING REQUEST; DELIVERY OF CONSUMER NOTES TO CUSTODIAN.
Each Borrowing Request shall be accompanied by a Submission List and shall be
delivered to Bank One at:
1900 Pacific, Sixth Floor
Dallas, Texas 75201
Telephone: (214) 290-6082
FAX: (214) 290-6089
Each Borrowing Request delivered to Bank One shall be accompanied by a
Submission List and the following items with respect to any Consumer Notes
thereby offered as security:
(a) the original of each Consumer Note, endorsed in blank (without
restriction or limitation);
(b) an original executed Assignment in blank for each Consumer Note,
in recordable form, and otherwise in form satisfactory to Bank One; and
(c) a completion certificate in a form agreed upon by Borrower and
Bank One, signed by the Obligor on such Consumer Note; and
(d) a copy of an interim assignment if Borrower did not originate
such Consumer Note.
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Section 3.3 POWER OF ATTORNEY. Borrower hereby irrevocably appoints Bank
One its attorney in fact, with full power of substitution, for and on behalf and
in the name of Borrower, which power of attorney shall become effective upon the
occurrence and remain effective during the continuance of an Event of Default,
to (i) endorse and deliver to any Person any check, instrument or other paper
coming into Bank One's possession and representing payment made in respect of
any Consumer Note delivered to and held by Bank One hereunder as Collateral or
in respect of any other collateral;(ii) prepare, complete, execute, deliver and
record any assignment to Bank One or to any other Person of any Consumer Note
delivered to and held by Bank One hereunder as Collateral;(iii) endorse and
deliver any Consumer Note delivered to and held by Bank One hereunder as
Collateral and do every other thing necessary or desirable to effect transfer of
all or any part of the Collateral to Bank One or to any other Person;(iv) take
all necessary and appropriate action with respect to all Obligations and the
Collateral to be delivered to Bank One or held by Borrower in trust for Bank
One;(v) commence, prosecute, settle, discontinue, defend, or otherwise dispose
of any claim relating to any part of the Collateral; and (vi) sign Borrower's
name wherever appropriate to effect the performance of this Agreement. This
section shall be liberally, not restrictively, construed so as to give the
greatest latitude to Bank One's power, as Borrower's attorney-in-fact, to
collect, sell, and deliver any of the Collateral and all other documents
relating thereto. The powers and authorities herein conferred on Bank One may
be exercised by Bank One through any Person who, at the time of the execution of
a particular instrument, is an authorized officer of Bank One. The power of
attorney conferred by this SECTION 3.3 is granted for a valuable consideration
and is coupled with an interest and irrevocable so long as the Obligations, or
any part thereof, shall remain unpaid or the Commitment is outstanding. All
Persons dealing with Bank One, or any officer thereof acting pursuant hereto
shall be fully protected in treating the powers and authorities conferred by
this SECTION 3.3 as existing and continuing in full force and effect until
advised by Bank One that the Obligations have been fully and finally paid and
satisfied and the Commitment has been terminated.
Section 3.4 REDEMPTION OF COLLATERAL.
(a) GENERALLY. So long as no Default or Event of Default shall be in
existence, Borrower may obtain the release of the security interest in favor of
Bank One in all or any part of the Collateral at any time, and from time to
time, by paying to Bank One, as a repayment hereunder, the Collateral Value of
the Collateral to be so released (such amount to be determined as of the date of
such release).
(b) REDEMPTION PURSUANT TO SALE. Borrower may from time to time request
that Bank One permit the sale of Collateral to an Approved Investor. Upon the
receipt by Bank One of such a request from Borrower, and so long as no Default
or Event of Default shall be in existence;
(i) Bank One shall deliver to the Approved Investor, under a Bailee
Letter, the Consumer Notes being sold which are held by Bank One pursuant
to SECTION 3.2 hereof, with the release of the security interest in favor
of Bank One in such items being conditioned upon timely payment to Bank One
of the amount described in SUBSECTION 3.4(b)(ii); and
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(ii) Within a period of time acceptable to Bank One, but in no event
more than twenty-one (21) days after the delivery by Bank One to such
Approved Investor of the Consumer Notes described in SUBSECTION 3.4(b)(i),
Borrower shall pay, or cause to be paid, to Bank One as a repayment
hereunder an amount equal to the Collateral Value of the Consumer Notes
(such Collateral Value being determined as of the date of such redemption);
PROVIDED, that at no time shall more than $500,000 of Consumer Notes (such
value being determined as of the date of such redemption) be in transit to
or from or in the possession of any Approved Investor at any time, except
in the case of a sale to the trustee for an Asset Securitization Facility.
(c) CONTINUATION OF LIEN. The security interest in favor of Bank One in
all Consumer Notes transmitted pursuant to SUBSECTION 3.4(b) shall continue in
effect until such time as Bank One shall have received payment in full of the
amount described in SUBSECTION 3.4(b)(ii).
(d) APPLICATION OF PROCEEDS; NO DUTY. Subject to the next sentence of
this SUBSECTION 3.4(d), Bank One shall not be under any duty at any time to
credit Borrower for any amounts due from any Approved Investor in respect of any
purchase of any Consumer Notes contemplated under SUBSECTION 3.4(b) above, until
Bank One has actually received immediately available funds. Any funds so
received will be treated as payments under and processed and applied in
accordance with SECTION 2.8. Bank One shall not be under any duty at any time
to collect any amounts or otherwise enforce any obligations due from an Approved
Investor in respect of any such purchase.
Section 3.5 CORRECTION OF CONSUMER NOTES. Borrower may from time to time
request that Bank One release a Consumer Note (the "Released Note") that
constitutes Collateral so that such Consumer Note may be replaced by a corrected
Consumer Note (the "Correction Note"). Upon receipt by Bank One of such a
request from Borrower, and so long as no Default or Event of Default shall be in
existence, Bank One shall deliver to Borrower, under a Trust Receipt, the
Released Note to be corrected, with the release of the Lien in favor of Bank One
being conditioned upon the receipt by Bank One of a Correction Note acceptable
to it; PROVIDED, that (i) at no time shall more than $250,000 of Released Notes
(such value being determined by the Collateral Value assigned to such Collateral
when it is delivered to Bank One by Borrower hereunder) be released and not have
been replaced with Correction Notes hereunder,(ii) until such time as the
Correction Note shall have been delivered to Bank One, the Collateral Value
attributed to the Released Note shall be the lesser of (x) the Collateral Value
attributed to such Released Note without giving effect to this proviso and (y)
100% of the principal balance of the Correction Note and (iii) notwithstanding
the preceding clause (ii), unless the Correction Note is delivered to Bank One
endorsed in blank (without restriction or limitation) within fifteen (15) days
of the release by the Bank of the Released Note, the Collateral Value attributed
to both the Released Note and the Correction Note shall be zero.
Section 3.6 RELEASE OF COLLATERAL. So long as no Default or Event of
Default shall be in existence, Borrower may obtain the release of the security
interest in favor of Bank One in Consumer Notes constituting all or any part of
the Collateral at any time, and from time to time, PROVIDED that the aggregate
Collateral Value of the Consumer Notes (after giving effect to the contemplated
release) is greater than or equal to the Loan. Upon receipt of a properly
executed
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Collateral Release Request and provided that the other conditions hereof are
satisfied, Bank One shall (i) hold as custodian for Borrower the Consumer
Notes with respect to which Borrower has requested that Bank One release its
Lien and (ii) deliver same to such Person and for such purpose, including
Bank One for delivery as Collateral hereunder, as Borrower may direct in
writing; PROVIDED, that (a) Bank One shall not be required to hold any
Consumer Note or any document related thereto for the benefit of any Person
other than Borrower under the provisions of this SECTION 3.6, (b) the only
duty that Bank One shall have with respect to any Consumer Note held by Bank
One pursuant to this SECTION 3.6 shall be to exercise the same diligence in
the care thereof which Bank One exercises in the care of its own property,
(c) Bank One shall be fully protected in relying on any delivery instructions
from Borrower in which Borrower purports to be entitled to direct delivery of
the items identified therein, and (d) Borrower shall reimburse Bank One for
all expenses incurred in connection with the delivery of any item held by it
under this SECTION 3.6. Without in any way limiting the proviso set forth in
the preceding sentence, Bank One shall have no duty to collect any amount
which may be due on or in respect of any Consumer Note held by it pursuant to
this SECTION 3.6, to notify Borrower of any amount which may be due in
connection therewith, nor to take any other action with respect thereto
except to deliver such Consumer Note to such Person as Borrower may direct.
ARTICLE IV
CONDITIONS PRECEDENT
The obligation of Bank One to make Advances hereunder is subject to
fulfillment of the conditions precedent stated in this ARTICLE IV.
Section 4.1 INITIAL BORROWING. The obligation of Bank One to make its
initial Advance hereunder shall be subject to, in addition to the conditions
precedent specified in SECTION 4.2 hereof, delivery to Bank One of the following
(each of the following documents being duly executed and delivered and in form
and substance satisfactory to Bank One, and, with the exception of the Note,
each in a sufficient number of originals that Bank One and its counsel may both
have an executed original of each document):
(a) an executed counterpart of this Agreement and of all instruments,
certificates and opinions referred to in this ARTICLE IV not theretofore
delivered (except the Borrowing Request which is to be delivered at the
time provided in SUBSECTION 4.2(a) hereof);
(b) the Note;
(c) the Security Agreement;
(d) the Guaranty;
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(e) the Underwriting Guidelines of Borrower, approved by Bank One in
its sole discretion;
(f) a certificate of the Secretary or Assistant Secretary of Borrower
setting forth (i) resolutions of Borrower's board of directors authorizing
the execution, delivery, and performance by Borrower of the Note, this
Agreement and any Security Instruments provided herein and identifying the
officers of Borrower authorized to sign such instruments, and (ii) specimen
signatures of the officers so authorized;
(g) a copy, certified as true by the Secretary or Assistant Secretary
of Borrower, of the articles or certificate of incorporation and the bylaws
of Borrower, together with all amendments thereto;
(h) a certificate of the existence and good standing of Borrower in
its state of incorporation;
(i) a certificate of the Secretary or Assistant Secretary of
Guarantor setting forth (i) resolutions of Guarantor's board of directors
authorizing the execution, delivery, and performance by Guarantor of the
Guaranty and any other Loan Documents provided herein and identifying the
officers of Guarantor authorized to sign such instruments, and (ii)specimen
signatures of the officers so authorized;
(j) a copy, certified as true by the Secretary or Assistant Secretary
of Guarantor, of the articles or certificate of incorporation and the
bylaws of Guarantor, together with all amendments thereto;
(k) a certificate of the existence and good standing of Guarantor in
its state of incorporation;
(l) a favorable written opinion from Borrower's General Counsel as to
such matters incident to the transactions herein contemplated as Bank One
may reasonably request; and
(m) such other documents as Bank One may reasonably request at any
time at or prior to the Borrowing Date of the initial Borrowing hereunder.
Section 4.2 ALL BORROWINGS. The obligation of Bank One to make any
Advance to fund any Borrowing pursuant to this Agreement (including the first)
is subject to the following further conditions precedent:
(a) prior to 10:30 a.m. (Dallas time) on the Borrowing Date, Borrower
shall deliver to Bank One a Borrowing Request executed by Borrower and
accompanied by the items required by SECTION 3.2 hereof;
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(b) all Consumer Notes in which Borrower has granted a Lien to Bank
One shall have been physically delivered to the possession of Bank One or a
bailee acceptable to Bank One to the extent that such possession is
necessary or appropriate for the purpose of perfecting the Lien of Bank One
in such collateral and Bank One has received evidence of its filed or
perfected lien and security interest;
(c) the representations and warranties of each Related Person
contained in this Agreement or any Security Instrument (other than those
representations and warranties which are by their terms limited to the date
of the agreement in which they are initially made) shall be true and
correct in all material respects on and as of the date of such Advance;
(d) no Default or Event of Default shall have occurred and be
continuing and no change or event which constitutes a Material Adverse
Effect shall have occurred as of the date of such Advance;
(e) the Funding Account shall be established and in existence;
(f) the making of such Advance shall not be prohibited by any
Governmental Requirement;
(g) Bank One shall have received evidence of insurance covering
Borrower's business assets, in amounts and in form and substance
satisfactory to Bank;
(h) Bank One shall have received such other documents and opinions of
counsel, including such documents as may be necessary or desirable to
perfect or maintain the priority of any Lien granted or intended to be
granted hereunder or otherwise and including favorable written opinions of
counsel with respect thereto, as Bank One may reasonably request;
(i) Borrower shall have paid the Facility Fee and the fees and
expenses of Bank One's counsel for its work in connection with the
transactions contemplated by the Agreement; and
(j) the sole shareholder of Borrower shall have made to Borrower
capital contributions in the following aggregate amounts by the following
dates: $1,000,000 by the date hereof; $1,500,000 by February 15, 1997; and
$2,500,000 by May 15, 1997.
Delivery to Bank One of a Borrowing Request shall be deemed to constitute a
representation and warranty by Borrower on the date thereof and on the Borrowing
Date, if any, set forth therein as to the facts specified in Subsections (c) and
(d) of this SECTION 4.2.
ARTICLE V
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REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
Section 5.1 ORGANIZATION AND GOOD STANDING. Each Related Person (a) is a
corporation duly incorporated and existing in good standing under the laws of
the jurisdiction of its incorporation, (b) is duly qualified as a foreign
corporation and in good standing in all jurisdictions in which its failure to be
so qualified could have a Material Adverse Effect, (c) has the corporate power
and authority to own its properties and assets and to transact the business in
which it is engaged and is or will be qualified in those states wherein it
proposes to transact business in the future and (d) is in compliance with all
Requirements of Law except to the extent that the failure to comply therewith
could not, in the aggregate, have a Material Adverse Effect.
Section 5.2 AUTHORIZATION AND POWER. Each Related Person has the
corporate power and requisite authority to execute, deliver and perform the Loan
Documents to which it is a party; each Related Person is duly authorized to and
has taken all corporate action necessary to authorize it to, execute, deliver
and perform the Loan Documents to which it is a party and is and will continue
to be duly authorized to perform such Loan Documents.
Section 5.3 NO CONFLICTS OR CONSENTS. Neither the execution and delivery
by any Related Person of the Loan Documents to which it is a party, nor the
consummation of any of the transactions herein or therein contemplated, nor
compliance with the terms and provisions hereof or with the terms and provisions
thereof, will (a) materially contravene or conflict with any terms or provisions
of the charter or bylaws of any Related Person, any Requirement of Law to which
any Related Person is subject, or any indenture, mortgage, deed of trust, or
other agreement or instrument to which any Related Person is a party or by which
any Related Person may be bound, or to which the Property of any Related Person
may be subject, or (b) result in the creation or imposition of any Lien, other
than the Lien of the Security Agreement, on the Property of any Related Person.
All actions, approvals, consents, waivers, exemptions, variances, franchises,
orders, permits, authorizations, rights and licenses required to be taken, given
or obtained, as the case may be, from any Governmental Authority that are
necessary in connection with the transactions contemplated by the Loan Documents
have been obtained.
Section 5.4 ENFORCEABLE OBLIGATIONS. This Agreement, the Note and the
other Loan Documents to which any Related Person is a party are the legal, valid
and binding obligations of such Related Person, enforceable in accordance with
their respective terms, except as limited by Debtor Laws.
Section 5.5 PRIORITY OF LIENS. Upon delivery to Bank One of each
Borrowing Request, Bank One shall have valid, enforceable, perfected, first
priority Liens and security interests in each Consumer Note identified therein
and thereafter or concurrently delivered to Bank One.
Section 5.6 NO LIENS. Borrower has good and indefeasible title to the
Collateral free and clear of all Liens and other adverse claims of any nature,
other than Liens in the Collateral in favor of Bank One.
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Section 5.7 FINANCIAL CONDITION OF BORROWER. Borrower has delivered to
Bank One copies of the annual audited and quarterly unaudited Consolidated
balance sheets of Guarantor as of October 31, 1995 and July 31, 1996,
respectively, and the related Consolidated statements of income, stockholders'
equity and cash flows of Guarantor for the periods ended such dates; such
financial statements fairly present the Consolidated financial condition of
Guarantor as of such dates and the results of operations of Guarantor for the
period ended on such dates and have been prepared in accordance with GAAP,
subject to normal year-end adjustments; as of July 31, 1996, there were no
obligations, liabilities or Indebtedness (including material contingent and
indirect liabilities and obligations or unusual forward or long-term
commitments) of Borrower which are not reflected in such financial statements
and no change which constitutes a Material Adverse Effect has occurred in the
financial condition or business of Borrower since the date of such financial
statements.
Section 5.8 FULL DISCLOSURE. There is no material fact that Borrower has
not disclosed to Bank One which could adversely affect the properties, business,
prospects or condition (financial or otherwise) of Borrower, or could adversely
affect the Collateral. To the best knowledge of Borrower, neither the financial
statements referred to in SECTION 5.7 hereof, nor any Borrowing Request,
officer's certificate or statement delivered by Borrower to Bank One in
connection with this Agreement, contains any untrue statement of material fact.
Section 5.9 NO DEFAULT. No Related Person is in default under any loan
agreement, mortgage, security agreement or other material agreement or
obligation to which it is a party or by which any of its Property is bound.
Section 5.10 NO LITIGATION. There are no material actions, suits or
legal, equitable, arbitration or administrative proceedings pending, or to the
knowledge of Borrower threatened, against any Related Person, the adverse
determination of which could constitute a Material Adverse Effect.
Section 5.11 TAXES. All tax returns required to be filed by each Related
Person in any jurisdiction have been filed and all taxes, assessments, fees and
other governmental charges upon each Related Person or upon any of its
properties, income or franchises have been paid prior to the time that such
taxes could give rise to a Lien thereon, unless protested in good faith by
appropriate proceedings and with respect to which reserves in conformity with
GAAP have been established on the books of such Related Person. No Related
Person has any knowledge of any proposed tax assessment against any Related
Person.
Section 5.12 PRINCIPAL OFFICE, ETC. The principal office, chief executive
office and principal place of business of each Related Person is at the address
set forth in Section 10.1.
Section 5.13 COMPLIANCE WITH ERISA. No Related Person nor any ERISA
Affiliate of any Related Person currently maintains, contributes to, is required
to contribute to or has any liability, whether absolute or contingent, with
respect to an ERISA Plan. With respect to all other employee benefit plans
maintained or contributed to by each Related Person, each Related Person is in
material compliance with ERISA.
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Section 5.14 SUBSIDIARIES. As of the date hereof, Borrower does not have
any Subsidiary or own any stock in any other corporation or association.
Section 5.15 INDEBTEDNESS. No Related Person has any Indebtedness
outstanding other than the Indebtedness permitted by SECTION 7.2.
Section 5.16 PERMITS, PATENTS, TRADEMARKS, ETC.
(a) Each Related Person has all permits and licenses necessary for the
operation of its business, except to the extent that failure to obtain any such
permit or license could not have a Material Adverse Effect on such Related
Person.
(b) Each Related Person owns or possesses (or is licensed or otherwise has
the necessary right to use) all patents, trademarks, service marks, trade names
and copyrights, technology, know-how and processes, and all rights with respect
to the foregoing, which are necessary for the operation of its business, without
any known material conflict with the rights of others. The consummation of the
transactions contemplated hereby will not alter or impair in any material
respect any of such rights of each Related Person.
Section 5.17 STATUS UNDER CERTAIN FEDERAL STATUTES. No Related Person is
(a) 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", as such terms are defined in the Public Utility Holding Company Act of
1935, as amended, (b) a "public utility", as such term is defined in the Federal
Power Act, as amended, (c) an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company Act of
1949, as amended or (d) a "rail carrier", or a "person controlled by or
affiliated with a rail carrier", within the meaning of Title 49, U.S.C., and
each Related Person is not a "carrier" to which 49 U.S.C. Section 11301(b)(1) is
applicable.
Section 5.18 SECURITIES ACT. No Related Person has issued any
unregistered securities in violation of the registration requirements of the
Securities Act of 1933, as amended, or of any other Requirement of Law, and is
not violating any rule, regulation, or requirement under the Securities Act of
1933, as amended, or the Securities and Exchange Act of 1934, as amended. No
Related Person is required to qualify an indenture under the Trust Indenture Act
of 1939, as amended, in connection with its execution and delivery of the Note.
Section 5.19 POLLUTION CONTROL. Each Related Person is in compliance
with, and to the best of each Related Person's knowledge after due inquiry, each
Related Person has, at all times since its incorporation, been in compliance
with, all Requirements of Law relating to pollution control (a) in the United
States and the State of Texas and (b) in each other jurisdiction where it is
presently doing business.
Section 5.20 NO APPROVALS REQUIRED. Other than consents and approvals
previously obtained and actions previously taken, neither the execution and
delivery of this Agreement, the Note and the other Loan Documents to which any
Related Person is a party, nor the
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consummation of any of the transactions contemplated hereby or thereby
requires the consent or approval of, the giving of notice to, or the
registration, recording or filing by any Related Person of any document with,
or the taking of any other action in respect of, any Governmental Authority
which has jurisdiction over each Related Person or any of its Property.
Section 5.21 SURVIVAL OF REPRESENTATIONS. All representations and
warranties by Borrower herein shall survive delivery of the Note and the making
of the Advances, and any investigation at any time made by or on behalf of Bank
One shall not diminish the right of Bank One to rely thereon.
Section 5.22 INDIVIDUAL CONSUMER NOTES. Borrower hereby represents that
with respect to each Consumer Note that is part of the Collateral:
(a) The terms of each Consumer Note have not been impaired, waived,
altered or modified in any respect, except by written instruments delivered
to Bank One and no provision of any Consumer Note has been "whited out" or
erased unless such modification has been initialed by each of the parties
to the Consumer Note. No instrument of waiver, alteration or modification
has been executed, and no obligor on a Consumer Note has been released, in
whole or in part, except in connection with an assumption agreement, a copy
of which assumption agreement has been delivered to Bank One;
(b) No Consumer Note is subject to any set-off, counterclaim or
defense, including the defense of usury, nor will the operation of any of
the terms of any Consumer Note or the exercise of any right thereunder,
render such Consumer Note unenforceable, in whole or in part, or subject to
any right of rescission, set-off, counterclaim or defense, including the
defense of usury, and to the best knowledge of Borrower, no such right of
rescission, set-off, counterclaim or defense has been asserted in any
proceeding or was asserted in any state or federal bankruptcy or insolvency
proceeding at the time the Consumer Note was originated;
(c) Any and all Requirements of Law applicable to each Consumer Note
have been complied with including, without limitation, all consumer laws,
usury, truth-in-lending, consumer credit protection, equal credit
opportunity or disclosure laws applicable to each Consumer Note;
(d) Borrower has not waived the performance by the Obligor of any
action, if the Obligor's failure to perform such action would cause the
Consumer Note to be in default;
(e) Each Consumer Note is genuine and each is the legal, valid and
binding obligation of the obligor thereof, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors'
rights in general and by general principles of equity;
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(f) To the best knowledge of Borrower, all parties to each Consumer
Note had legal capacity at the time to execute and deliver such Consumer
Note, and such Consumer Note has been duly and properly executed by such
parties;
(g) Borrower has good and marketable title to each Consumer Note, was
the sole owner thereof and had full right to pledge the Consumer Note to
Bank One free and clear of any other encumbrance, equity, lien, pledge,
charge, claim or security interest;
(h) To the best knowledge of Borrower, there is no default, breach,
violation or event of acceleration existing under any Consumer Note and
there is no event which, with the passage of time or with notice and/or the
expiration of any grace or cure period, would constitute a default, breach,
violation or event of acceleration and no such default, breach, violation
or event of acceleration has been waived;
(i) Each Consumer Note originated by Borrower or a third party is
underwritten by Borrower in accordance with Borrower's then current
underwriting guidelines and all applicable regulatory requirements.
(j) All improvements to be made to each Obligor Property with the
proceeds of the Consumer Note have been completed and a certificate for
such Consumer Note executed by the related Obligor wherein such Obligor
states that the related contractor or seller of the home improvement has
completed to such Obligor's satisfaction the improvements for which the
Consumer Note was obtained has been delivered to Borrower;
(k) The origination practices of Borrower, and to the best knowledge
of Borrower, the origination practices used by third party originators,
with respect to the the Consumer Notes and the collection practices used by
the Borrower with respect to each Consumer Note have been in all material
respects legal, proper, prudent and customary in the home improvement loan
origination and servicing business; and
(l) Each Consumer Note originated by Borrower, and to the best
knowledge of Borrower, each Consumer Note originated by a third party, was
originated in compliance with all applicable laws and no fraud or
misrepresentation was committed by any Person in connection therewith.
ARTICLE VI
AFFIRMATIVE COVENANTS
Each Related Person shall at all times comply with the covenants contained
in this ARTICLE VI, from the date hereof and for so long as any part of the
Obligations or the Commitment is outstanding.
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Section 6.1 TAXES AND OTHER LIENS. Each Related Person shall pay and
discharge promptly all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or upon any of its Property as well as all
claims of any kind (including claims for labor, materials, supplies and rent)
which, if unpaid, might become a Lien upon any or all of its Property; provided,
however, Borrower shall not be required to pay any such tax, assessment, charge,
levy or claim if the amount, applicability or validity thereof shall currently
be contested in good faith by appropriate proceedings diligently conducted by or
on behalf of Borrower and if Borrower shall have set up reserves therefor
adequate under GAAP.
Section 6.2 MAINTENANCE. Each Related Person shall (i) maintain its
corporate existence, rights and franchises;(ii) observe and comply in all
material respects with all Governmental Requirements, and (iii) maintain its
Properties (and any Properties leased by or consigned to it or held under title
retention or conditional sales contracts) in good and workable condition at all
times and make all repairs, replacements, additions and improvements to its
Properties as are necessary and proper so that the business carried on in
connection therewith may be conducted properly and efficiently at all times.
Section 6.3 FURTHER ASSURANCES. Borrower shall, within three (3) Business
Days (or in the case of Consumer Notes, such longer period as provided under
SECTION 3.5 of this Agreement) after the request of Bank One, cure any defects
in the execution and delivery of the Note, this Agreement or any other Loan
Document and each Related Person shall, at its expense, promptly execute and
deliver to Bank One upon request all such other and further documents,
agreements and instruments in compliance with or accomplishment of the covenants
and agreements of each Related Person in this Agreement and in the other Loan
Documents or to further evidence and more fully describe the collateral intended
as security for the Note, or to correct any omissions in this Agreement or the
other Loan Documents, or more fully to state the security for the obligations
set out herein or in any of the other Loan Documents, or to make any recordings,
to file any notices, or obtain any consents.
Section 6.4 REIMBURSEMENT OF EXPENSES. Borrower shall pay (i) all
reasonable legal fees (including, without limitation, allocated costs for
in-house legal service) incurred by Bank One in connection with the
preparation, negotiation or execution of this Agreement, the Note and the
other Loan Documents and any amendments, consents or waivers executed in
connection therewith,(ii) all fees, charges or taxes for the recording or
filing of the Security Instruments,(iii) all out-of-pocket expenses of Bank
One in connection with the administration of this Agreement, the Note and the
other Loan Documents, including courier expenses incurred in connection with
the Collateral, and (iv) all amounts expended, advanced or incurred by Bank
One to satisfy any obligation of Borrower under this Agreement or any of the
other Loan Documents or to collect the Note, or to enforce the rights of Bank
One under this Agreement or any of the other Loan Documents, which amounts
shall include all court costs, reasonable attorneys' fees (including, without
limitation, for trial, appeal or other proceedings), fees of auditors and
accountants, and investigation expenses reasonably incurred by Bank One in
connection with any such matters, together with interest at the post-maturity
rate specified in the Note on each item specified in clause (i) through (iv)
from thirty (30) days after the date of written demand or request for
reimbursement until the date of reimbursement.
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Section 6.5 INSURANCE. Each Related Person shall maintain with
financially sound and reputable insurers, insurance with respect to its
Properties and business against such liabilities, casualties, risks and
contingencies and in such types and amounts as is customary in the case of
Persons engaged in the same or similar businesses and similarly situated,
including, without limitation, a fidelity bond or bonds with financially sound
and reputable insurers with such coverage and in such amounts as is customary in
the case of Persons engaged in the same or similar businesses and similarly
situated. Upon request of Bank One, each Related Person shall furnish or cause
to be furnished to Bank One from time to time a summary of the insurance
coverage of each Related Person in form and substance satisfactory to Bank One
and if requested shall furnish Bank One copies of the applicable policies.
Section 6.6 ACCOUNTS AND RECORDS. Each Related Person shall keep books of
record and account in which full, true and correct entries will be made of all
dealings or transactions in relation to its business and activities, in
accordance with GAAP.
Section 6.7 RIGHT OF INSPECTION. Each Related Person shall permit
authorized representatives of Bank One to discuss the business, operations,
assets and financial condition of such Related Person with their officers and
employees, and to visit and inspect any of the Properties of each Related
Person, all at such reasonable times and as often as Bank One may request. Each
Related Person will provide its accountants with a copy of this Agreement
promptly after the execution hereof and will instruct its accountants to answer
candidly any and all questions that the officers of Bank One or any authorized
representatives of Bank One may address to them in reference to the financial
condition or affairs of any Related Person as those conditions or affairs relate
to this Agreement. Each Related Person may have its representatives in
attendance at any meetings between the officers or other representatives of Bank
One and such Related Person's accountants held in accordance with this
authorization.
Section 6.8 NOTICE OF CERTAIN EVENTS. Borrower shall promptly notify Bank
One upon (i) the receipt of any notice from, or the taking of any other action
by, the holder of any promissory note, debenture or other evidence of
Indebtedness of any Related Person with respect to a claimed default, together
with a detailed statement by a responsible officer of Borrower specifying the
notice given or other action taken by such holder and the nature of the claimed
default and what action Borrower is taking or proposes to take with respect
thereto;(ii) the commencement of, or any determination in, any legal, judicial
or regulatory proceedings which, if adversely determined, could have a Material
Adverse Effect;(iii) any change in senior management of Borrower;(iv) any
material adverse change in the business, operations, prospects or financial
condition of any Related Person, including, without limitation, the insolvency
of any Related Person,(v) any event or condition which, if adversely determined,
could have a Material Adverse Effect or (vi) the occurrence of any Termination
Event.
Section 6.9 USE OF PROCEEDS; MARGIN STOCK. The proceeds of the Advances
shall be used by Borrower solely for the funding of Consumer Notes in the
ordinary course of Borrower's business. None of such proceeds shall be used for
the purpose of purchasing or carrying any "margin stock" as defined in
Regulation U, or for the purpose of reducing or retiring any Indebtedness which
was originally incurred to purchase or carry margin stock or for any other
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purpose which might constitute this transaction a "purpose credit" within the
meaning of such Regulation U. Neither Borrower nor any Person acting on behalf
of Borrower shall take any action in violation of Regulation U or Regulation X
or shall violate Section 7 of the Securities Exchange Act of 1934 or any rule or
regulation thereunder, in each case as now in effect or as the same may
hereafter be in effect.
Section 6.10 NOTICE OF DEFAULT. Borrower shall furnish to Bank One
immediately upon becoming aware of the existence of any Default or Event of
Default, a written notice specifying the nature and period of existence thereof
and the action which Borrower is taking or proposes to take with respect
thereto.
Section 6.11 COMPLIANCE WITH LOAN DOCUMENTS. Each Related Person shall
promptly comply with any and all covenants and provisions of this Agreement the
Note and the other Loan Documents.
Section 6.12 OPERATIONS AND PROPERTIES. Each Related Person shall comply
in all material respects with all Government Requirements applicable to it, and
in accordance with customary industry standards in managing and operating its
business. Borrower shall strictly comply with the Underwriting Guidelines.
Section 6.13 FINANCIAL STATEMENTS AND REPORTS. The Related Persons shall
at all times maintain full and accurate books of account and records. The
Related Persons shall maintain a standard system of accounting and Borrower
shall furnish to Bank One the following, all in form and detail reasonably
satisfactory to Bank One:
(a) Promptly after becoming available, and in any event within ninety
(90) days after the close of each Fiscal Year, the Consolidated and
consolidating balance sheets of Guarantor as of the end of such Fiscal
Year, and the related Consolidated and consolidating statements of income,
stockholders' equity and cash flows of Guarantor for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures
for the preceding Fiscal Year, accompanied by the related report of
independent certified public accountants of national standing acceptable to
Bank One which report shall be to the effect that such statements have been
prepared in accordance with GAAP applied on a basis consistent with prior
periods except for such changes in such principles with which the
independent public accountants shall have concurred;
(b) Promptly after becoming available, and in any event within ninety
(90) days after the close of each Fiscal Year, the Consolidated and
consolidating balance sheets of Borrower as of the end of such Fiscal Year,
and the related Consolidated and consolidating statements of income,
stockholders' equity and cash flows of Borrower for such Fiscal Year,
setting forth in each case in comparative form the corresponding figures
for the preceding Fiscal Year, accompanied by the related report of
independent certified public accountants of national standing acceptable to
Bank One which report shall be to the effect that such statements have been
prepared in accordance with GAAP applied on a basis
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consistent with prior periods except for such changes in such principles
with which the independent public accountants shall have concurred;
(c) Promptly after becoming available, and in any event within thirty
(30) days after the end of each fiscal quarter, including the fourth Fiscal
Quarter in each Fiscal Year, Consolidated and consolidating balance sheets
of Guarantor as of the end of such quarter and the related Consolidated and
consolidating statements of income, stockholders' equity and cash flows of
Guarantor for such quarter and the period from the first day of the then
current Fiscal Year through the end of such quarter, certified by the chief
financial officer or other executive officer of Guarantor to have been
prepared in accordance with GAAP applied on a basis consistent with prior
periods, subject to normal year-end adjustments;
(d) Promptly after becoming available, and in any event within thirty
(30) days after the end of each month, including the twelfth month in each
Fiscal Year, balance sheets of Borrower as of the end of such month and the
related statements of income, stockholders' equity and cash flows of
Borrower for such month and the period from the first day of the then
current Fiscal Year through the end of such month, certified by the chief
financial officer or other executive officer of Borrower to have been
prepared in accordance with GAAP applied on a basis consistent with prior
periods, subject to normal year-end adjustments;
(e) Promptly upon receipt thereof, a copy of each other report
submitted to Guarantor by independent accountants in connection with any
annual, interim or special audit of the books of Borrower or Guarantor;
(f) Promptly and in any event within thirty (30) days after the end
of each calendar month, a certificate executed by the president or chief
financial officer of Borrower, setting forth all of Borrower's warehouse
borrowings;
(g) Promptly and in any event within thirty (30) days after the end
of each Fiscal Quarter in each Fiscal Year (except the last), and within
fifteen (15) days after the completion of each year-end audit by Borrower's
independent public accountants, a completed Officer's Certificate in the
form of Exhibit "C" hereto, executed by the president, chief financial
officer or other executive officer of Guarantor and Borrower.
(h) Promptly and in any event within thirty (30) days after the end
of each month, a management report regarding Borrower's servicing and
delinquency, including delinquency status of Consumer Notes, total
principal amount, number of Consumer Notes, default experience, geographic
concentration, weighted average coupon, weighted average maturity, weighted
average servicing fee, in each case in form and detail as required by Bank
One, prepared as of the end of such month and for the Fiscal Year to date;
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(i) As soon as available, and in any event within 30 days after the
end of each month, a Borrowing Base Report, appropriately completed with
all attachments and in the form of Exhibit F attached hereto; and
(j) Such other information concerning the business, properties or
financial condition of the Related Persons as Bank One may reasonably
request.
ARTICLE VII
NEGATIVE COVENANTS
Each Related Person shall at all times comply with the covenants contained
in this ARTICLE VII, from the date hereof and for so long as any part of the
Obligations or the Commitment is outstanding:
Section 7.1 NO MERGER. No Related Person shall merge or consolidate with
or into any Person, except that any Subsidiary (except Borrower) of Guarantor
may merge or consolidate with Guarantor as long as Guarantor is the surviving
business entity. No Related Person shall acquire by purchase or otherwise all
or substantially all of the assets (except to the extent that such assets
consist solely of Consumer Notes and rights to service Consumer Notes) or
capital stock of any Person.
Section 7.2 LIMITATION ON INDEBTEDNESS. No Related Person shall incur,
create, contract, assume, have outstanding, guarantee or otherwise be or become,
directly or indirectly, liable in respect of any Indebtedness except for the
following:
(a) the Obligations;
(b) the Subordinated Debt;
(c) unsecured Indebtedness for working capital advances, owed by
Borrower to Guarantor; and
(d) lease financing or purchase money financing for equipment which
is secured by the equipment so leased or purchased.
Section 7.3 BUSINESS. No Related Person shall, directly or indirectly,
engage in any business which differs materially from that currently engaged in
by such Related Person.
Section 7.4 LIQUIDATIONS AND DISPOSITIONS OF SUBSTANTIAL ASSETS. No
Related Person shall dissolve or liquidate or sell, transfer, lease or otherwise
dispose of any material portion of its property or assets or business; PROVIDED
HOWEVER, that subject to SECTION 3.4(b) hereof, nothing in this SECTION 7.4
shall be construed to prohibit such Related Person from selling Consumer Notes
in the ordinary course of its business.
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Section 7.5 LOANS, ADVANCES, AND INVESTMENTS. No Related Person shall
make any loan (other than Consumer Notes), advance, or capital contribution to,
or investment in (including any investment in any Subsidiary, joint venture or
partnership), or purchase or otherwise acquire any of the capital stock,
securities, or evidences of indebtedness of, any Person (collectively,
"INVESTMENT"), or otherwise acquire any interest in, or control of, another
Person, except for the following:
(a) Cash Equivalents;
(b) Any acquisition of securities or evidences of indebtedness of
others when acquired by each Related Person in settlement of accounts
receivable or other debts arising in the ordinary course of its business,
so long as the aggregate amount of any such securities or evidences of
indebtedness is not material to the business or condition (financial or
otherwise) of each Related Person;
(c) Consumer Notes acquired in the ordinary course of each Related
Person's business; and
(d) Investments in its wholly-owned Subsidiaries in an aggregate
amount not to exceed $100,000 at any time; provided that such Subsidiary
shall have executed and delivered to Bank One a guaranty of all of the
Obligations in form and substance acceptable to Bank One, in its sole
discretion.
Section 7.6 ACTIONS WITH RESPECT TO COLLATERAL. Borrower shall not:
(a) Compromise, extend, release, or adjust payments on any
Collateral;
(b) Agree to the amendment or termination of the Asset Securitization
Facility, if such amendment, termination or substitution may reasonably be
expected (as determined by Bank One in its sole discretion) to have a
Material Adverse Effect;
(c) Transfer, sell, assign, or deliver any Collateral pledged to Bank
One to any Person other than Bank One, except pursuant to the Asset
Securitization Facility or pursuant to SECTION 3.4; or
(d) Grant, create, incur, permit or suffer to exist any Lien upon any
Collateral except for Liens granted to Bank One to secure the Consumer
Notes and Obligations.
Section 7.7 TANGIBLE NET WORTH. As of the date hereof, Borrower's
Consolidated Tangible Net Worth shall not be less than $1,000,000; as of
February 15, 1997, Borrower's Consolidated Tangible Net Worth shall not be less
than $1,500,000; and as of May 15, 1997 and as of the last day of each Fiscal
Quarter thereafter, Borrower's Consolidated Net Worth shall not be less than
$2,500,000.
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Section 7.8 MINIMUM LIQUIDITY. Borrower at all times shall maintain cash
and/or Cash Equivalents in an amount of not less than $500,000.
Section 7.9 TOTAL LIABILITIES TO BORROWER'S CONSOLIDATED TANGIBLE NET
WORTH. The ratio of Borrower's Consolidated Total Liabilities to Borrower's
Consolidated Tangible Net Worth shall not be more than 7.0 to 1.0, as of the
last day of any calendar month.
Section 7.10 RESTRICTIONS ON DIVIDENDS AND PAYMENTS OF SUBORDINATED DEBT.
No Related Person shall directly or indirectly declare or make, or incur any
liability to make, any Dividend. Without Bank One's prior written consent,
which consent shall not be unreasonably withheld, no Related Person shall make
any payment on the Subordinated Debt prior to the stated maturity thereof;
provided that the Related Persons may pay interest on the Subordinated Debt
without Bank One's consent so long as no Default or Event of Default shall have
occurred and be continuing.
Section 7.11 TRANSACTIONS WITH AFFILIATES. No Related Person shall enter
into any transactions including, without limitation, any purchase, sale, lease
or exchange of property or the rendering of any service, with any Affiliate
other than another Related Person unless such transactions are otherwise
permitted under this Agreement, are in the ordinary course of each Related
Person's business and are upon fair and reasonable terms no less favorable to
such Related Person than it would obtain in a comparable arm's length
transaction with a Person not an Affiliate.
Section 7.12 LIENS. No Related Person shall grant, create, incur, assume,
permit or suffer to exist any Lien, upon any of its Property, including without
limitation any and all of each Related Person's Consumer Notes, and the proceeds
from any thereof, other than (i) Liens which secure payment of the Obligations,
and (ii) to the extent not otherwise prohibited hereunder, Liens which secure
payment of the Indebtedness described in Section 7.2(b) on property other than
Collateral.
Section 7.13 ERISA PLANS. No Related Person shall adopt or agree to
maintain or contribute to any ERISA Plan without the prior written consent of
Bank One which consent shall not be unreasonably withheld. Each Related Person
shall promptly notify Bank One in writing in the event an ERISA Affiliate adopts
an ERISA Plan.
Section 7.14 CHANGE OF PRINCIPAL OFFICE. No Related Person shall move its
principal office, executive office or principal place of business from the
address set forth in SECTION 10.1 without prior written notice to Bank One.
Section 7.15 FISCAL YEAR, METHOD OF ACCOUNTING. No Related Person shall
change its Fiscal Year or make any material change in its method of accounting
without prior written notice to Bank One.
ARTICLE VIII
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EVENTS OF DEFAULT
Section 8.1 NATURE OF EVENT. An Event of Default shall exist if any one
or more of the following occurs:
(a) Borrower fails to make any payment of principal or interest on
the Note, or payment of any fee, expense or other amount due hereunder,
under the Note or under any other Loan Document, on or before the date such
payment is due;
(b) Guarantor fails to make any payment of any Obligation owing by
Guarantor under the Guaranty on or before the date such payment in due;
(c) Default is made in the due observance or performance by any
Related Person of any covenant set forth in ARTICLE VII or by Guarantor of
any covenant set forth in the Guaranty;
(d) Default is made in the due observance or performance by any
Related Person of any of the other covenants or agreements contained in
this Agreement and such default continues for a period of thirty (30) days
after Bank One gives Borrower notice thereof;
(e) Any Related Person defaults in the due observance or performance
or any of the covenants or agreements contained in any other Loan Document
to which it is a party, and (unless such default otherwise constitutes a
Default pursuant to other provisions of this SECTION 8.1) such default
continues unremedied beyond the expiration of any applicable grace period
which may be expressly allowed under such other Loan Document;
(f) Any material statement, warranty or representation by or on
behalf of any Related Person contained in this Agreement, the Note or any
other Loan Document to which it is a party, or in any Borrowing Request,
officer's certificate or other writing furnished in connection with this
Agreement, proves to have been incorrect or misleading in any material
respect as of the date made or deemed made;
(g) any Related Person fails to make when due or within any
applicable grace period any payment on any Indebtedness other than the
Obligations with an unpaid principal balance of over $100,000; or any event
or condition occurs under any provision contained in any agreement under
which such obligation is governed, evidenced or secured (or any other
material breach or default under such obligation or agreement occurs) if
the effect thereof is to cause or permit the holder or trustee of such
obligation to cause such obligation to become due prior to its stated
maturity; or any such obligation becomes due (other than by regularly
scheduled payments) prior to its stated maturity; or any of the foregoing
occurs with respect to any one or more items of Indebtedness of any Related
Person with unpaid principal balances exceeding, in the aggregate,
$100,000;
(h) Any Related Person or Guarantor:
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(i) suffers the entry against it of a judgment, decree or order
for relief by a court of competent jurisdiction in an involuntary
proceeding commenced under any applicable bankruptcy, insolvency or
other similar law of any jurisdiction now or hereafter in effect,
including the federal Bankruptcy Code, as from time to time amended,
or has any such proceeding commenced against it which remains
undismissed for a period of sixty days; or
(ii) commences a voluntary case under any applicable bankruptcy,
insolvency or similar law now or hereafter in effect, including the
federal Bankruptcy Code, as from time to time amended; or applies for
or consents to the entry of an order for relief in an involuntary case
under any such law; or makes a general assignment for the benefit of
creditors; or fails generally to pay (or admits in writing its
inability to pay) its debts as such debts become due; or takes
corporate or other action to authorize any of the foregoing; or
(iii) suffers the appointment of or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator or
similar official of all or a substantial part of its assets or of any
part of the Collateral in a proceeding brought against or initiated by
it, and such appointment or taking possession is neither made
ineffective nor discharged within sixty days after the making thereof,
or such appointment or taking possession is at any time consented to,
requested by, or acquiesced to by it; or
(iv) suffers the entry against it of a final judgment for the
payment of money in excess of $100,000 with respect to Borrower or
$1,000,000 with respect to Guarantor (not covered by insurance
satisfactory to Bank One in its discretion), unless the same is
discharged within thirty days after the date of entry thereof or an
appeal or appropriate proceeding for review thereof is taken within
such period and a stay of execution pending such appeal is obtained;
or
(v) suffers a writ or warrant of attachment or any similar
process to be issued by any court against all or any substantial part
of its assets or any part of the Collateral, and such writ or warrant
of attachment or any similar process is not stayed or released within
thirty days after the entry or levy thereof or after any stay is
vacated or set aside;
(i) This Agreement, the Note or any other Loan Document shall for any
reason cease to be in full force and effect, or be declared null and void or
unenforceable in whole or in part as the result of any action initiated by
any Person other than Bank One; or the validity or enforceability of any
such document shall be challenged or denied by any Person other than Bank
One;
(j) Any default or event of default shall occur with respect to the
payment of any Indebtedness of a Related Person or Guarantor to Bank One
(other than the Obligations);
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(k) Either (i) any "accumulated funding deficiency" (as defined in
Section 412(a) of the Code in excess of $25,000 exists with respect to any
ERISA Plan, whether or not waived by the Secretary of the Treasury or his
delegate, or (ii) any Termination Event occurs with respect to any ERISA
Plan and the then current value of such ERISA Plan's benefits guaranteed
under Title IV of ERISA exceeds the then current value of such ERISA Plan's
assets available for the payment of such benefits by more than $10,000 (or
in the case of a Termination Event involving the withdrawal of a
substantial employer, the withdrawing employer's proportionate share of
such excess exceeds such amount) or (iii) each Related Person or any ERISA
Affiliate withdraws from a multiemployer plan resulting in liability under
Title IV of ERISA of an amount in excess of $10,000;
(l) a Change of Control occurs; or
(m) any Indebtedness of Guarantor under that certain Credit Agreement
dated April 18, 1996, among Guarantor, NationsBank of Texas, N.A., as Agent, and
certain financial institutions is accelerated.
Section 8.2 DEFAULT REMEDIES. Upon the occurrence and during the
continuance of an Event of Default, Bank One may declare its Commitment to be
terminated and/or declare the entire principal and all interest accrued on the
Note to be, and the Note, together with all Obligations, shall thereupon become,
forthwith due and payable, without any presentment, demand, protest, notice of
protest and nonpayment, notice of acceleration or of intent to accelerate or
other notice of any kind, all of which hereby are expressly waived.
Notwithstanding the foregoing, if an Event of Default specified in
SUBSECTIONS 8.1(h)(i), (ii) OR (iii) above occurs with respect to Borrower, the
Commitment shall automatically and immediately terminate and the Note and all
other Obligations shall become automatically and immediately due and payable,
both as to principal and interest, without any action by Bank One and without
presentment, demand, protest, notice of protest and nonpayment, notice of
acceleration or of intent to accelerate, or any other notice of any kind, all of
which are hereby expressly waived, anything contained herein or in any Note to
the contrary notwithstanding.
ARTICLE IX
CONCERNING BANK ONE
Section 9.1 INDEMNIFICATION.
(a) Borrower agrees to indemnify Bank One and each director, officer,
agent, attorney, employee, representative and Affiliate of Bank One (each an
"Indemnified Party"), upon demand, from and against any and all liabilities,
obligations, claims, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements (including reasonable fees of attorneys,
accountants, experts and advisors) of any kind or nature whatsoever (in this
Section 9.1 collectively called "liabilities and costs") which to any extent (in
whole or in part) may be imposed on, incurred by, or asserted against any
Indemnified Party growing out of, resulting from or in
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any other way associated with any of the Collateral, the Loan Documents and
the transactions and events (including the enforcement or defense thereof) at
any time associated therewith or contemplated therein. THE FOREGOING
INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN
ANY WAY OR TO ANY EXTENT CAUSED, IN WHOLE OR IN PART, UNDER ANY CLAIM OR
THEORY OF STRICT LIABILITY, OR ARE CAUSED, IN WHOLE OR PART, BY ANY NEGLIGENT
ACT OR OMISSION OF ANY KIND BY SUCH INDEMNIFIED PARTY, PROVIDED ONLY THAT
SUCH INDEMNIFIED PARTY SHALL BE NOT ENTITLED UNDER THIS SECTION TO RECEIVE
INDEMNIFICATION FOR THAT PORTION, IF ANY, OF ANY LIABILITIES AND COSTS WHICH
IS PROXIMATELY CAUSED BY ITS OWN INDIVIDUAL GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. If any Person (including each Related Person or any of its
Affiliates) ever alleges such gross negligence or willful misconduct by an
Indemnified Party, the indemnification provided for in this section shall
nonetheless be paid upon demand, subject to later adjustment or
reimbursement, until such time as a court of competent jurisdiction enters a
final judgment as to the extent and effect of the alleged gross negligence or
willful misconduct.
(b) Promptly after receipt by an Indemnified Party of notice of any claim,
action or proceeding with respect to which an Indemnified Party is entitled to
indemnification hereunder, such Indemnified Party will notify Borrower of such
claim or the commencement of such action or proceeding, provided that the
failure of an Indemnified Party to give notice as provided herein shall not
relieve each Related Person of its obligations under this SECTION 9.1 with
respect to such Indemnified Party, except to the extent that each Related Person
is actually prejudiced by such action or proceeding, and will employ counsel
reasonably satisfactory to the Indemnified Party and will pay the reasonable
fees and expenses of such counsel. Notwithstanding the preceding sentence, the
Indemnified Party will be entitled, at the expense of each Related Person, to
employ counsel separate from counsel for each Related Person and for any other
party in such action if the Indemnified Party reasonably determines that a
conflict of interest or other reasonable basis exists which makes representation
by counsel chosen by each Related Person not advisable, PROVIDED that each
Related Person shall not be obligated to pay for the reasonable fees and
expenses of more than one counsel for all Indemnified Parties in respect of a
particular controversy. In the event an Indemnified Party appears as a witness
in any action or proceeding brought against each Related Person (or any of its
officers, directors, agents or employees) in which an Indemnified Party is not
named as a defendant, each Related Person agrees to reimburse such Indemnified
Party for all expenses incurred by it (including reasonable fees and expenses of
counsel) in connection with its appearing as a witness.
Section 9.2 LIMITATION OF LIABILITY. Neither Bank One nor any of its
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken by it or them under or in connection with this Agreement.
THE FOREGOING EXCULPATION SHALL APPLY TO ANY NEGLIGENT ACT OR OMISSION OF ANY
KIND BY ANY SUCH PERSON OR ANY ACT BY SUCH PERSON FOR WHICH STRICT LIABILITY IS
IMPOSED, PROVIDED THAT SUCH PERSON SHALL BE LIABLE FOR ITS OWN INDIVIDUAL GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
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ARTICLE X
MISCELLANEOUS
Section 10.1 NOTICES. Any notice or request required or permitted to be
given under or in connection with this Agreement, the Note or the other Loan
Documents (except as may otherwise be expressly required therein) shall be in
writing and shall be mailed by first class or express mail, postage prepaid, or
sent by telex, telegram, telecopy or other similar form of rapid transmission,
confirmed by mailing (by first class or express mail, postage prepaid) written
confirmation at substantially the same time as such rapid transmission, or
personally delivered to an officer of the receiving party. All such
communications shall be mailed, sent or delivered to the parties hereto at their
respective addresses as follows:
Borrower: CAMERON ASHLEY FINANCIAL SERVICES, INC.
11651 Plano Rd.
Dallas, Texas 75243
Attention: F. Dixon McElwee
FAX: (214) 860-5148
Telephone: (214) 860-5100
Bank One: BANK ONE, TEXAS, N.A.
1717 Main Street, Third Floor
Dallas, Texas 75201
Attention: Corporate Lending
FAX: (214) 290-2765
Telephone: (214) 290-2688
or at such other addresses or to such individual's or department's attention as
any party may have furnished the other party in writing. Any communication so
addressed and mailed shall be deemed to be given (i) if sent by mail, on the
fifth day after such communication is deposited in the mail, (ii) if sent by
telecopy or other rapid transmission, when such communication is transmitted to
the appropriate number and the appropriate receipt is received or otherwise
acknowledged, and (iii) if sent by hand delivery or overnight courier, when left
at the address of the addressee addressed as provided above, except that notices
and requests given pursuant to SUBSECTION 3.4(b), Borrowing Requests, Collateral
Release Requests, and communications related thereto shall not be effective
until actually received by Bank One or Borrower, as the case may be; and any
notice so sent by rapid transmission shall be deemed to be given when receipt of
such transmission is acknowledged, and any communication so delivered in person
shall be deemed to be given when receipted for by, or actually received by, an
authorized officer of Borrower or Bank One, as the case may be.
Section 10.2 AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, the Security Instruments, the Note, or any other Loan Document,
nor consent to any departure by any Related Person from the terms thereof, shall
in any event be effective unless the
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same shall be in writing and signed by Bank One, and then such waiver or
consent shall be effective only in the specific instance and for the specific
purpose for which given.
Section 10.3 INVALIDITY. In the event that any one or more of the
provisions contained in the Note, this Agreement or any other Loan Document
shall, for any reason, be held invalid, illegal or unenforceable in any respect,
such invalidity, illegality or unenforceability shall not affect any other
provision of such document.
Section 10.4 SURVIVAL OF AGREEMENTS. All covenants and agreements herein
and in any other Loan Document not fully performed before the date hereof or the
date thereof, and all representations and warranties herein or therein, shall
survive until payment in full of the Obligations and termination of the
Commitment.
Section 10.5 RENEWAL, EXTENSION OR REARRANGEMENT. All provisions of this
Agreement and of the other Loan Documents shall apply with equal force and
effect to each and all promissory notes hereafter executed which in whole or in
part represent a renewal, extension for any period, increase or rearrangement of
any part of the Obligations originally represented by the Note or of any part of
such other Obligations.
Section 10.6 WAIVERS. No course of dealing on the part of Bank One, or
any of its officers, employees, consultants or agents, nor any failure or delay
by Bank One with respect to exercising any right, power or privilege of Bank One
under the Note, this Agreement or any other Loan Document shall operate as a
waiver thereof, except as otherwise provided in SECTION 10.2 hereof.
Section 10.7 CUMULATIVE RIGHTS. The rights and remedies of Bank One under
the Note, this Agreement, and any other Loan Document shall be cumulative, and
the exercise or partial exercise of any such right or remedy shall not preclude
the exercise of any other right or remedy.
Section 10.8 CONSTRUCTION. THIS AGREEMENT, THE NOTE AND EACH OTHER LOAN
DOCUMENT IS A CONTRACT MADE UNDER AND SHALL BE CONSTRUED, INTERPRETED AND
ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE UNITED STATES OF
AMERICA AND THE STATE OF TEXAS. TEX. REV. CIV. STAT. ANN. ART. 5069, CH. 15
(WHICH REGULATES CERTAIN REVOLVING LOAN ACCOUNTS AND REVOLVING TRIPARTY
ACCOUNTS) SHALL NOT APPLY TO THIS AGREEMENT OR THE NOTE.
Section 10.9 LIMITATION ON INTEREST. Bank One, each Related Person and
any other parties to the Loan Documents intend to contract in strict compliance
with applicable usury law from time to time in effect. In furtherance thereof
such Persons stipulate and agree that none of the terms and provisions contained
in the Loan Documents shall ever be construed to create a contract to pay, for
the use, forbearance or detention of money, interest in excess of the maximum
amount of interest permitted to be charged by applicable law from time to time
in effect. Neither each Related Person nor any present or future guarantors,
endorsers, or other Persons hereafter becoming liable for payment of any
Obligation shall ever be liable for unearned interest thereon
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<PAGE>
or shall ever be required to pay interest thereon in excess of the maximum
amount that may be lawfully charged under applicable law from time to time in
effect, and the provisions of this section shall control over all other
provisions of the Loan Documents which may be in conflict or apparent
conflict herewith. Bank One expressly disavows any intention to charge or
collect excessive unearned interest or finance charges in the event the
maturity of any Obligation is accelerated. If (a) the maturity of any
Obligation is accelerated for any reason, (b) any Obligation is prepaid and
as a result any amounts held to constitute interest are determined to be in
excess of the legal maximum, or (c) Bank One or any other holder of any or
all of the Obligations shall otherwise collect moneys which are determined to
constitute interest which would otherwise increase the interest on any or all
of the Obligations to an amount in excess of that permitted to be charged by
applicable law then in effect, then all such sums determined to constitute
interest in excess of such legal limit shall, without penalty, be promptly
applied to reduce the then outstanding principal of the related Obligations
or, at Bank One's or such holder's option, promptly returned to each Related
Person or the other payor thereof upon such determination. In determining
whether or not the interest paid or payable, under any specific circumstance,
exceeds the maximum amount permitted under applicable law, Bank One and each
Related Person (and any other payors thereof) shall to the greatest extent
permitted under applicable law, (i) characterize any non-principal payment as
an expense, fee or premium rather than as interest, (ii) exclude voluntary
prepayments and the effects thereof, and (iii) amortize, prorate, allocate,
and spread the total amount of interest throughout the entire contemplated
term of the instruments evidencing the Obligations in accordance with the
amounts outstanding from time to time thereunder and the maximum legal rate
of interest from time to time in effect under applicable law in order to
lawfully charge the maximum amount of interest permitted under applicable
law. In the event applicable law provides for an interest ceiling under Texas
Revised Civil Statutes Annotated article 5069-1.04, that ceiling shall be the
indicated rate ceiling.
Section 10.10 BANK ACCOUNTS; OFFSET. To secure the repayment of the
Obligations each Related Person hereby grants to Bank One and to each financial
institution which hereafter acquires a participation or other interest in the
Loan or Note (in this section called a "Participant") a security interest, a
lien, and a right of offset, each of which shall be in addition to all other
interests, liens, and rights of Bank One or Participant at common law, under the
Loan Documents, or otherwise, and each of which shall be upon and against (a)
any and all moneys, securities or other property (and the proceeds therefrom) of
any Related Person now or hereafter held or received by or in transit to Bank
One or Participant from or for the account any Related Person, whether for
safekeeping, custody pledge, transmission, collection or otherwise, (b) any and
all deposits (general or special, time or demand, provisional or final) of any
Related Person with Bank One or Participant, and (c) any other credits and
claims of any Related Person at any time existing against Bank One or
Participant, including claims under certificates of deposit. Upon the
occurrence and during the continuance of any Event of Default, each of Bank One
and Participants is hereby authorized to foreclose upon, offset, appropriate,
and apply, at any time and from time to time, without notice to Borrower, any
and all items hereinabove referred to against the Obligations then due and
payable.
Section 10.11 ASSIGNMENTS AND PARTICIPATIONS. All covenants and
agreements by or on behalf of each Related Person in the Note, this Agreement,
or any other Loan Document shall
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bind such Related Person's successors, and assigns and shall inure to the
benefit of Bank One and its successors and assigns. Each Related Person
shall not, however, have the right to assign its rights under this Agreement
or any interest herein, without the prior written consent of Bank One. In
the event that Bank One sells participations in the Note or other Obligations
of each Related Person incurred or to be incurred pursuant to this Agreement
to other lenders, each of such other lenders shall have the rights of offset
against such Obligations and similar rights or Liens to the same extent as
may be available to Bank One. If Bank One assigns any of its rights
hereunder, it shall promptly give notice thereof to each Related Person;
provided, however, that failure to give such notice shall not render Bank One
liable to each Related Person and shall not affect each Related Person's
Obligations or the rights and remedies of Bank One hereunder. Bank One may
disclose information (including, without limitation, information identified
to it in writing as confidential information) regarding each Related Person,
the Affiliates of each Related Person, and the transactions contemplated by
this Agreement, to participants and prospective participants, in the
Obligations; provided, that Bank One shall not make any such confidential
information available to any such participant or prospective participant
without first securing from such Person a written agreement to maintain all
such confidential information in confidence.
Section 10.12 EXHIBITS. The exhibits attached to this Agreement are
incorporated herein and shall be considered a part of this Agreement for the
purposes stated herein, except that in the event of any conflict between any of
the provisions of such exhibits and the provisions of this Agreement, the
provisions of this Agreement shall prevail.
Section 10.13 TITLES OF ARTICLES, SECTIONS AND SUBSECTIONS. All titles or
headings to articles, sections, subsections or other divisions of this Agreement
or the exhibits hereto are only for the convenience of the parties and shall not
be construed to have any effect or meaning with respect to the other content of
such articles, sections, subsections or other divisions, such other content
being controlling as to the agreement between the parties hereto.
Section 10.14 COUNTERPARTS. This Agreement may be executed in
counterparts, and it shall not be necessary that the signatures of both of the
parties hereto be contained on any one counterpart hereof; each counterpart
shall be deemed an original, but all counterparts together shall constitute one
and the same instrument.
Section 10.15 ENTIRE AGREEMENT. THE NOTE, THIS AGREEMENT, AND THE OTHER
LOAN DOCUMENTS EXECUTED AND DELIVERED AS OF EVEN DATE HEREWITH REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES HERETO AND THERETO AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.
Section 10.16 TERMINATION; LIMITED SURVIVAL. In its sole and absolute
discretion Borrower may at any time that no Obligations are owing elect in a
notice delivered to Bank One to terminate this Agreement. Upon receipt by Bank
One of such a notice, if no Obligations are then owing, this Agreement
(including but not limited to the power of attorney granted under Section 3.3
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hereof) and all other Loan Documents shall thereupon be terminated and the
parties thereto released from all prospective obligations thereunder.
Notwithstanding the foregoing or anything herein to the contrary, any waivers or
admissions made by any Person in any Loan Documents, any Obligations, and any
obligations which any Person may have to indemnify or compensate Bank One shall
survive any termination of this Agreement or any other Loan Document. At the
request and expense of Borrower, Bank One shall prepare and execute all
necessary instruments to reflect and effect such termination of the Loan
Documents.
Section 10.17 JOINT AND SEVERAL LIABILITY. All Obligations which are
incurred by two or more Related Persons shall be their joint and several
obligations and liabilities.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
duly executed as of the date first above written.
BORROWER: CAMERON ASHLEY FINANCIAL SERVICES, INC.
By: /s/ F. DIXON MCELWEE
------------------------------------
Name: F. Dixon McElwee
Title: President
BANK ONE: BANK ONE, TEXAS, N.A.
By: /s/ WILLIAM R. LITTLE
------------------------------------
Name: William R. Little
Title: Vice President
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EXHIBIT 10.23
CAMERON ASHLEY BUILDING PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN
<PAGE>
CAMERON ASHLEY BUILDING PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN
TABLE OF CONTENTS
Section 1 -- Definitions................................................ 1
1.1 Definitions 1
Section 2 -- The Stock Incentive Plan................................... 3
2.1 Purpose of the Plan 3
2.2 Stock Subject to the Plan 4
2.3 Administration of the Plan 4
2.4 Eligibility and Limits 4
Section 3 -- Terms of Stock Incentives.................................. 4
3.1 Terms and Conditions of All Stock Incentives 4
3.2 Terms and Conditions of Option 5
3.3 Terms and Conditions of Stock Appreciation Rights 7
3.4 Terms and Conditions of Stock Awards 7
3.5 Terms and Conditions of Dividend Equivalent Rights 7
3.6 Terms and Conditions of Performance Unit Awards 8
3.7 Terms and Conditions of Phantom Shares 8
3.8 Treatment of Awards Upon Termination of Employment 9
Section 4 -- Restrictions on Stock...................................... 9
4.1 Escrow of Shares 9
4.2 Forfeiture of Shares 9
4.3 Restrictions on Transfer 9
Section 5 -- General Provisions......................................... 9
5.1 Withholding 9
5.2 Changes in Capitalization; Merger; Liquidation 10
5.3 Cash Awards 11
5.4 Compliance with Code 11
5.5 Right to Terminate Employment or Directorship 11
5.6 Non-alienation of Benefits 11
5.7 Restrictions on Delivery and Sale of Shares; Legends 11
5.8 Termination and Amendment of the Plan 11
5.9 Stockholder Approval 11
5.10 Choice of Law 12
5.11 Effective Date of Plan 12
<PAGE>
CAMERON ASHLEY BUILDING PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN
SECTION 1 DEFINITIONS
1.1 DEFINITIONS. Whenever used herein, the masculine pronoun shall be
deemed to include the feminine, and the singular to include the plural, unless
the context clearly indicates otherwise, and the following capitalized words and
phrases are used herein with the meaning thereafter ascribed:
(a) "BOARD OF DIRECTORS" means the board of directors of the Company.
(b) "CAUSE" has the same meaning as provided in any employment
agreement between the Participant and the Company on the date of Termination of
Employment, or if no such definition or employment agreement exists, "Cause"
means conduct amounting to (1) fraud or dishonesty against the Company,
(2) Participant's willful misconduct, repeated refusal to follow the reasonable
directions of the Board of Directors, or knowing violation of law in the course
of performance of the duties of Participant's employment with the Company,
(3) repeated absences from work without a reasonable excuse, (4) repeated
intoxication with alcohol or drugs while on the Company's premises during
regular business hours, (5) a conviction or plea of guilty or NOLO CONTENDERE to
a felony or a crime involving dishonesty, or (6) a breach or violation of the
terms of any employment or other agreement to which Participant and the Company
are party.
(c) "CHANGE OF CONTROL" means the first to occur of the following
events:
(i) any person (as defined in Section 3(a)(9) of the Exchange Act
and as used in Sections 13(d) and 14(d) thereof), excluding the Company, any
Subsidiary and any employee benefit plan sponsored or maintained by the Company
or any Subsidiary (including any trustee of such plan acting as trustee
thereof), but including a 'group' as defined in Section 13(d)(3) of the Exchange
Act (a "Person"), becomes the beneficial owner of shares of the Company having
at least thirty percent (30 %) of the total number of votes that may be cast for
the election of directors of the Company (the "Voting Shares"), or, if greater,
that percentage of Voting Shares owned by CGW Southeast Partners I, L.P. (such
30% or greater percentage hereinafter referred to as the "Voting Share
Percentage"); provided that no Change of Control will occur as a result of an
acquisition of stock by CGW Southeast Partners I, L.P. or the Company which
increases, proportionately, the stock representing the voting power of the
Company owned by such person or group above the Voting Share Percentage, and
provided further that if such person or group acquires stock representing more
than the Voting Share Percentage by reason of share purchases by the Company,
and after such share purchases by the Company acquires any additional shares
representing voting power of the Company, then a Change of Control shall occur;
(ii) the shareholders of the Company shall approve any merger or
other business combination of the Company, sale of the Company's assets or
combination of the foregoing transactions (a "Transaction") other than a
Transaction involving only the Company, one or more of its Subsidiaries, or CGW
Southeast Partners I, L.P. or any of its affiliates, or a Transaction
immediately following which the shareholders of the Company immediately prior to
the Transaction continue to have a majority of the voting power in the resulting
entity excluding for this purpose any shareholder owning directly or indirectly
more than ten percent (10%) of the shares of the other company involved in the
merger; or
(iii) within any 24-month period beginning on or after the
Effective Date, the persons who were directors of the Company immediately
before the beginning of such period (the "Incumbent Directors") shall cease
(for any reason other than death) to constitute at least a majority of the
Board of Directors or the board of directors of any successor to the Company,
provided that any director who was not a director as of the Effective Date
shall be deemed to be an Incumbent Director if such director was elected to the
Board of Directors by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually or by prior operation of this clause (iii); and provided
further that any director elected to the Board of Directors to avoid or settle
a threatened or actual proxy contest shall in no event be deemed to be an
Incumbent Director.
<PAGE>
Notwithstanding the foregoing, any distribution or transfer of shares of
the Company by CGW Southeast Partners I, L.P., to its partners or its affiliates
shall in no event be a Change in Control.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the committee appointed by the Board of
Directors to administer the Plan. The Committee shall consist of at least two
members of the Board of Directors each of whom shall be both a "non-employee
director," as defined in Rule 16b-3 as promulgated under the Exchange Act and an
"outside director" within the meaning of Code Section 162(m).
(f) "COMPANY" means Cameron Ashley Building Products, Inc., a Georgia
corporation.
(g) "COVERED EMPLOYEE" shall have the meaning set forth in Code
Section 162(m)(3).
(h) "DISABILITY" has the same meaning as provided in the employment
agreement between the Participant and the Company on the date the Participant
ceases active work due to a disability, or if no such definition or employment
agreement exists, Disability means (1) the inability of Participant to perform
the duties of Participant's employment due to physical or emotional incapacity
or illness, where such inability is expected to be of long-continued and
indefinite duration or (2) Participant shall be entitled to (i) disability
retirement benefits under the federal Social Security Act or (ii) recover
benefits under any long-term disability plan or policy maintained by the Company
(or its Parent or Subsidiaries). In the event of a dispute, the determination
of Disability shall be made by the Board of Directors and shall be supported by
advice of a physician competent in the area to which such Disability relates.
(i) "DISPOSITION" means conveyance, sale, transfer, assignment,
pledge or hypothecation, whether outright or as security, inter vivos or
testamentary, with or without consideration, voluntary or involuntary.
(j) "DIVIDEND EQUIVALENT RIGHTS" means certain rights to receive cash
payments as described in Plan Section 3.5.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended from time to time.
(l) "EXERCISE PRICE" means the price per share of Stock purchasable
under any Option.
(m) "FAIR MARKET VALUE" with regard to a date means the closing price
at which Stock shall have been sold on the last trading date prior to that date
as reported by the National Association of Securities Dealers Automated
Quotation System (or, if applicable, as reported by a national securities
exchange selected by the Committee on which the shares of Stock are then
actively traded) and published in The Wall Street Journal; provided that, for
purposes of granting awards other than Incentive Stock Options, Fair Market
Value of the shares of Stock may be determined by the Committee by reference to
the average market value determined over a period certain or as of specified
dates, to a tender offer price for the shares of Stock (if settlement of an
award is triggered by such an event) or to any other reasonable measure of fair
market value.
(n) "OPTION" means a non-qualified stock option or an incentive stock
option.
(o) "OVER 10% OWNER" means an individual who at the time an Incentive
Stock Option is granted owns Stock possessing more than 10% of the total
combined voting power of the Company or one of its Parents or Subsidiaries,
determined by applying the attribution rules of Code Section 424(d).
(p) "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if (with respect to
Incentive Stock Options, at the time of granting of the Option), each of the
corporations other than the Company owns stock possessing 50 % or more of the
total
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combined voting power of all classes of stock in one of the other corporations
in the chain.
(q) "PARTICIPANT" means individual who receives a Stock Incentive
hereunder.
(r) "PERFORMANCE UNIT AWARD" refers to a performance unit award
described in Plan Section 3.6.
(s) "PHANTOM SHARE" refers to the rights described in Plan Section
3.7.
(t) "PLAN" means the Cameron Ashley Building Products, Inc. Stock
Incentive Plan.
(u) "STOCK" means the Company's common stock, no par value.
(v) "STOCK APPRECIATION RIGHT" means a stock appreciation right
described in Plan Section 3.3.
(w) "STOCK AWARD" means a stock award described in Plan Section 3.4.
(x) "STOCK INCENTIVE AGREEMENT" means an agreement between the
Company and a Participant or other documentation evidencing an award of a Stock
Incentive.
(y) "STOCK INCENTIVE PROGRAM" means a written program established by
the Committee, pursuant to which Stock Incentives are awarded under the Plan
under uniform terms, conditions and restrictions set forth in such written
program.
(z) "STOCK INCENTIVES" means, collectively, Dividend Equivalent
Rights, Options, Performance Unit Awards, Phantom Shares, Stock Appreciation
Rights and Stock Awards.
(aa) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, with respect to
incentive stock options, at the time of the granting of the Option, each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in the chain.
(bb) "TERMINATION OF EMPLOYMENT" means the termination of the
employee-employer relationship between a Participant and the Company (and its
Parent and Subsidiaries), regardless of whether severance or similar payments
are made to the Participant, for any reason, including, but not by way of
limitation, a termination by resignation, discharge, death, Disability or
retirement. The Committee shall, in its absolute discretion, determine the
effect of all matters and questions relating to a Termination of Employment,
including, but not by way of limitation, the question of whether a leave of
absence constitutes a Termination of Employment, or whether a Termination of
Employment is for Cause.
SECTION 2 THE STOCK INCENTIVE PLAN
2.1 PURPOSE OF THE PLAN. The Plan is intended to (a) provide incentive to
directors, officers and key employees of the Company (and its Parent and
Subsidiaries), to stimulate their efforts toward the continued success of the
Company (and its Parent and Subsidiaries) and to operate and manage the business
in a manner that will provide for the long-term growth and profitability of the
Company (and its Parent and Subsidiaries); (b) encourage stock ownership by
directors, officers and employees by providing them with a means to acquire a
proprietary interest in the Company, acquire shares of Stock, or to receive
compensation which is based upon appreciation in the value of Stock; and
(c) provide a means of obtaining, rewarding and retaining key personnel.
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2.2 STOCK SUBJECT TO THE PLAN. Subject to adjustment in accordance with
Section 5.2, 1,500,000 shares of Stock (the "Maximum Plan Shares") are hereby
reserved exclusively for issuance pursuant to Stock Incentives. The shares
of Stock attributable to the nonvested, unpaid, unexercised, unconverted or
otherwise unsettled portion of any Stock Incentive that is forfeited or
canceled or expires or terminates for any reason without becoming vested,
paid, exercised, converted or otherwise settled in full shall again be
available for purposes of the Plan.
2.3 ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee, which shall be comprised of at least two members of the Board of
Directors, each of whom shall be both a "non-employee director", as defined in
Rule 16b-3 as promulgated under the Exchange Act, and an "outside director"
within the meaning of Code Section 162(m). The Committee shall have full
authority in its discretion to determine the directors, officers and key
employees of the Company (or its Parent or Subsidiaries) to whom Stock
Incentives shall be granted and the terms and provisions of Stock Incentives,
subject to the Plan. Subject to the provisions of the Plan, the Committee shall
have full and conclusive authority to interpret the Plan; to prescribe, amend
and rescind rules and regulations relating to the Plan; to determine the terms
and provisions of the respective Stock Incentive Agreements or Stock Incentive
Programs and to make all other determinations necessary or advisable for the
proper administration of the Plan. The Committee's determinations under the
Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, awards under the Plan (whether or not such
persons are similarly situated). The Committee's decisions shall be final and
binding on all Participants. To the extent permitted by Code Section 162(m),
the Committee may delegate to any member of the Board of Directors or officer of
the Company the administrative authority to (a) interpret the provisions of the
Plan, any Stock Incentive Agreement or any Stock Incentive Program; and (b)
determine the treatment of Stock Incentives upon a Termination of Employment, as
contemplated in Plan Section 3.8.
2.4 ELIGIBILITY AND LIMITS. Stock Incentives may be granted only to
directors, officers and key employees of the Company (or its Parent or
Subsidiary),but an Incentive Stock Option may not be granted to a non-employee
director. In the case of incentive stock options, the aggregate Fair Market
Value (determined as at the date an incentive stock option is granted) of stock
with respect to which stock options intended to meet the requirements of Code
Section 422 become exercisable for the first time by an individual during any
calendar year under all plans of the Company (and its Parent or Subsidiary)
shall not exceed $100,000; provided further, that if the limitation is exceeded,
the incentive stock option(s) which cause the limitation to be exceeded shall be
treated as non-qualified stock option(s). The maximum number of shares of stock
subject to an Option or Stock Appreciation Right that can be granted to a
"Covered Employee" (as defined in Code Section 162(m)(3)) during a calendar year
is 200,000. The maximum fair market value of any Stock Incentive (other than
Options and Stock Appreciation Rights) that may be received by a Covered
Employee (less any consideration paid by the Covered Employee for such Stock
Incentive) during any one calendar year is $100,000.
SECTION 3 TERMS OF STOCK INCENTIVES
3.1 TERMS AND CONDITIONS OF ALL STOCK INCENTIVES.
(a) The number of shares of Stock as to which a Stock Incentive shall
be granted shall be determined by the Committee in its sole discretion, subject
to the provisions of Section 2.2 as to the total number of shares available for
grants under the Plan and subject to the limitations of Section 2.4.
(b) Each Stock Incentive shall either be evidenced by a Stock
Incentive Agreement in such form and containing such terms, conditions and
restrictions as the Committee may determine to be appropriate, or, except for
Options or Stock Appreciation Rights, be made subject to the terms of a Stock
Incentive Program, containing such terms, conditions and restrictions as the
Committee may determine to be appropriate. Each Stock Incentive Agreement or
Stock Incentive Program shall be subject to the terms of the
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Plan and any provisions contained in the Stock Incentive Agreement or Stock
Incentive Program that are inconsistent with the Plan shall be null and void.
(c) The date a Stock Incentive is granted shall be the date on which
the Committee has approved the terms and conditions of the Stock Incentive and
has determined the recipient of the Stock Incentive and the number of shares
covered by the Stock Incentive and has taken all such other action necessary to
complete the grant of the Stock Incentive.
(d) Notwithstanding any vesting provisions established pursuant to
Section 3.2, 3.3, 3.4, 3.5, 3.6 or 3.7 of the Plan, upon a Change in Control
(1) any unexpired Option may be exercised whether or not vested, (2) any Stock
Appreciation Right may become payable whether or not vested as to the full
number of shares of Stock covered by the Option or Stock Appreciation Right
without regard to the date of grant of the Option or Stock Appreciation Right,
(3) any Restricted Stock Award which has not been previously forfeited shall be
fully vested, (4) that any outstanding Dividend Equivalent Rights shall become
payable as to the full number of shares of Stock covered by the Dividend
Equivalent Right, (5) any outstanding Performance Unit Awards become payable as
to the full number of units subject to the Performance Unit Award, and (6) any
Phantom Shares shall become fully payable as to the full number of Phantom
Shares.
(e) Any Stock Incentive may be granted in connection with all or any
portion of a previously or contemporaneously granted Stock Incentive. Exercise
or vesting of a Stock Incentive granted in connection with another Stock
Incentive may result in a pro rata surrender or cancellation of any related
Stock Incentive, as specified in the applicable Stock Incentive Agreement or
Stock Incentive Program.
(f) Stock Incentives shall not be transferable or assignable except
by will or by the laws of descent and distribution. Stock Incentives shall be
exercisable, during the Participant's lifetime, only by the Participant; or in
the event of the Disability of the Participant, by the legal representative of
the Participant; or in the event of the death of the Participant, by the legal
representatives of the Participant's estate or if no legal representative has
been appointed, by the successor in interest determined under the Participant's
will.
(g) The Committee may determine that any Stock Incentive granted
pursuant to this Plan to a Participant (including, but not limited to,
Participants who are Covered Employees) shall be determined solely on the basis
of (a) the achievement by the Company or a Subsidiary of the Company of a
specified target earnings per share, return on equity or net income, (b) the
Company's or Subsidiary's stock price, (c) the achievement by a business unit of
the Company or Subsidiary of a specified target net income or (d) any
combination of the goals set forth in (a) through (c) above. Furthermore, the
Committee reserves the right for any reason to reduce (but not increase) any
Stock Incentive, notwithstanding the achievement of a specified goal. If a
Stock Incentive is made on such basis, the Committee shall establish goals prior
to the beginning of the calendar year for which such performance goal relates
(or such later date as may be permitted under Code Section 162(m)). Any payment
of a Stock Incentive granted with performance goals shall be conditioned on the
written certification of the Committee in each case that the performance goals
and any other material conditions of the Stock Incentive were satisfied.
3.2 TERMS AND CONDITIONS OF OPTION. Each Option granted under the Plan
shall be evidenced by a Stock Incentive Agreement. At the time any Option is
granted, the Committee shall determine whether the Option is to be an incentive
stock option described in Code Section 422 or a non-qualified stock option, and
the Option shall be clearly identified as to its status as an incentive stock
option or a non-qualified stock option. At the time any incentive stock option
granted under the Plan is exercised, the Company shall be entitled to legend the
certificates representing the shares of Stock purchased pursuant to the Option
to clearly identify them as representing the shares purchased upon the exercise
of an incentive stock option. An incentive stock option may only be granted
within ten (10) years from the earlier of the date the Plan is adopted or
approved by the Company's stockholders.
(a) OPTION PRICE. Subject to adjustment in accordance with Section
5.2 and the other
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provisions of this Section 3.2, the Exercise Price under (i) any
non-qualified stock option shall be as set forth in the applicable Stock
Incentive Agreement, but in no event less than Fair Market Value of a share
of Stock on the date such Option is granted; and (ii) any incentive stock
option shall be as set forth in the applicable Stock Incentive Agreement, but
in no event shall it be less than the Fair Market Value on the date the
Option is granted. With respect to each grant of an incentive stock option
to a Participant who is an Over 10% Owner, the Exercise Price shall not be
less than 110% of the Fair Market Value on the date the Option is granted.
(b) OPTION TERM. Any incentive stock option granted to a Participant
who is not an Over 10% Owner shall not be exercisable after the expiration of
ten (10) years after the date the Option is granted. Any incentive stock option
granted to a Participant who is an Over 10% Owner shall not be exercisable after
the expiration of five (5) years after the date the Option is granted. The term
of any non-qualified stock option shall be as specified in the applicable Stock
Incentive Agreement.
(c) PAYMENT. Payment for all shares of Stock purchased pursuant to
exercise of an Option shall be made in any form or manner authorized by the
Committee in the Stock Incentive Agreement, including, but not limited to, (i)
cash, (ii) by delivery to the Company of a number of shares of Stock which have
been owned by the holder for at least six (6) months prior to the date of
exercise having an aggregate Fair Market Value of not less than the product of
the Exercise Price multiplied by the number of shares the Participant intends to
purchase upon exercise of the Option on the date of delivery; (iii) in a
cashless exercise through a broker; or (iv) by having a number of shares of
Stock withheld, the Fair Market Value of which as of the date of exercise is
sufficient to satisfy the Exercise Price. In its discretion, the Committee also
may authorize (at the time an Option is granted or thereafter) Company financing
to assist the Participant as to payment of the Exercise Price on such terms as
may be offered by the Committee in its discretion. Any such financing shall
require the payment by the Participant of interest on the amount financed at a
rate not less than the "applicable federal rate" under the Code. If a Stock
Incentive Agreement so provides, the Participant may be granted a new Option to
purchase a number of shares of Stock equal to the number of previously owned
shares of Stock tendered in payment for each share of Stock purchased pursuant
to the terms of the Stock Incentive Agreement. Any such new Option shall be
subject to the terms and conditions of the Stock Incentive Agreement pursuant to
which such new Option is granted. Payment of the Exercise Price shall be made
at the time that the Option or any part thereof is exercised, and no shares
shall be issued or delivered upon exercise of an Option until full payment has
been made by the Participant. The holder of an Option, as such, shall have none
of the rights of a stockholder.
(d) CONDITIONS TO THE EXERCISE OF AN OPTION. Each Option granted
under the Plan shall be exercisable by whom, at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Stock Incentive Agreement; provided, however, that subsequent to
the grant of an Option, the Committee, at any time before complete termination
of such Option, may accelerate the time or times at which such Option may be
exercised in whole or in part, and may permit the Participant or any other
designated person to exercise the Option, or any portion thereof, for all or
part of the remaining Option term, notwithstanding any provision of the Stock
Incentive Agreement to the contrary.
(e) TERMINATION OF INCENTIVE STOCK OPTION. With respect to an,
incentive stock option, in the event of Termination of Employment of a
Participant, the Option or portion thereof held by the Participant which is
unexercised shall expire, terminate, and become unexercisable no later than the
expiration of three (3) months after the date of Termination of Employment;
provided, however, that in the case of a holder whose Termination of Employment
is due to death or Disability, one (1) year shall be substituted for such three
(3) month period. For purposes of this Subsection (e), Termination of
Employment of the Participant shall not be deemed to have occurred if the
Participant is employed by another corporation (or a parent or subsidiary
corporation of such other corporation) which has assumed the incentive stock
option of the Participant in a transaction to which Code Section 424(a) is
applicable.
(f) SPECIAL PROVISIONS FOR CERTAIN SUBSTITUTE OPTIONS.
Notwithstanding anything to the contrary in this Section 3.2, any Option issued
in substitution for an option previously issued by another entity, which
substitution occurs in connection with a transaction to which Code Section
424(a) is applicable, may
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provide for an exercise price computed in accordance with such Code Section
and the regulations thereunder and may contain such other terms and
conditions as the Committee may prescribe to cause such substitute Option to
contain as nearly as possible the same terms and conditions (including the
applicable vesting and termination provisions) as those contained in the
previously issued option being replaced thereby.
3.3 TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS. A Stock
Appreciation Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Option, or not in connection with a
Stock Incentive. A Stock Appreciation Right shall entitle the Participant to
receive the excess of (1) the Fair Market Value of a specified or determinable
number of shares of the Stock at the time of payment or exercise over (2) a
specified or determinable price which, in the case of a Stock Appreciation Right
granted in connection with an Option, shall be not less than the Exercise Price
for that number of shares subject to that Option, or in the case of any other
Stock Appreciation Right, no less than one hundred percent (100%) of the Fair
Market Value of that number of shares of Stock subject to the Stock Appreciation
Right at the time the Stock Appreciation Right was granted. A Stock
Appreciation Right granted in connection with a Stock Incentive may only be
exercised to the extent that the related Stock Incentive has not been exercised,
paid or otherwise settled.
(a) SETTLEMENT. Upon settlement of a Stock Appreciation Right, the
Company shall pay to the Participant the appreciation in cash or shares of Stock
(valued at the aggregate Fair Market Value on the date of payment or exercise)
as provided in the Stock Incentive Agreement or, in the absence of such
provision, as the Committee may determine.
(b) CONDITIONS TO EXERCISE. Each Stock Appreciation Right granted
under the Plan shall be exercisable or payable at such time or times, or upon
the occurrence of such event or events, and in such amounts, as the Committee
shall specify in the Stock Incentive Agreement; provided, however, that
subsequent to the grant of a Stock Appreciation Right, the Committee, at any
time before complete termination of such Stock Appreciation Right, may
accelerate the time or times at which such Stock Appreciation Right may be
exercised or paid in whole or in part.
3.4 TERMS AND CONDITIONS OF STOCK AWARDS. The shares of Stock
attributable to the nonvested, unpaid, unexercised, unconverted or otherwise
unsettled portion of any Stock Award that is forfeited or canceled or expires or
terminates for any reason without becoming vested, paid, exercised, converted or
otherwise settled in full shall again be available for purposes of the Section.
The restrictions or conditions on such shares, if any, shall be as the Committee
determines, and the certificate for such shares shall bear evidence of any
restrictions or conditions. Subsequent to the date of the grant of the Stock
Award, the Committee shall have the power to permit, in its discretion, an
acceleration of the expiration of an applicable restriction period with respect
to any part or all of the shares awarded to a Participant. The Committee may
require a cash payment from the Participant in an amount no greater than the
aggregate Fair Market Value of the shares of Stock awarded determined at the
date of grant in exchange for the grant of a Stock Award or may grant a Stock
Award without the requirement of a cash payment.
3.5 TERMS AND CONDITIONS OF DIVIDEND EQUIVALENT RIGHTS. A Dividend
Equivalent Right shall entitle the Participant to receive payments from the
Company in an amount determined by reference to any cash dividends paid on a
specified number of shares of Stock to Company stockholders of record during the
period such rights are effective. The Committee may impose such restrictions
and conditions on any Dividend Equivalent Right as the Committee in its
discretion shall determine, including the date any such right shall terminate
and may reserve the right to terminate, amend or suspend any such right at any
time.
(a) PAYMENT. Payment in respect of a Dividend Equivalent Right may
be made by the Company in cash or shares of Stock (valued at Fair Market Value
on the date of payment) as provided in the Stock Incentive Agreement or Stock
Incentive Program, or, in the absence of such provision, as the Committee may
determine.
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(b) CONDITIONS TO PAYMENT. Each Dividend Equivalent Right granted
under the Plan shall be payable at such time or times, or upon the occurrence of
such event or events, and in such amounts, as the Committee shall specify in the
applicable Stock Incentive Agreement or Stock Incentive Program; provided,
however, that subsequent to the grant of a Dividend Equivalent Right, the
Committee, at any time before complete termination of such Dividend Equivalent
Right, may accelerate the time or times at which such Dividend Equivalent Right
may be paid in whole or in part.
3.6 TERMS AND CONDITIONS OF PERFORMANCE UNIT AWARDS. A Performance Unit
Award shall entitle the Participant to receive, at a specified future date,
payment of an amount equal to all or a portion of the value of a specified or
determinable number of units (stated in terms of a designated or determinable
dollar amount per unit) granted by the Committee. At the time of the grant, the
Committee must determine the base value of each unit, the number of units
subject to a Performance Unit Award, the performance factors applicable to the
determination of the ultimate payment value of the Performance Unit Award and
the period over which Company performance shall be measured. The Committee may
provide for an alternate base value for each unit under certain specified
conditions. (See Section 3.1(g) for performance goals applicable to Covered
Employees.)
(a) PAYMENT. Payment in respect of Performance Unit Awards may be
made by the Company in cash or shares of Stock (valued at Fair Market Value on
the date of payment) as provided in the applicable Stock Incentive Agreement or
Stock Incentive Program or, in the absence of such provision, as the Committee
may determine.
(b) CONDITIONS TO PAYMENT. Each Performance Unit Award granted under
the Plan shall be payable at such time or times, or upon the occurrence of such
event or events, and in such amounts, as the Committee shall specify in the
applicable Stock Incentive Agreement or Stock incentive Program; provided,
however, that subsequent to the grant of a Performance Unit Award, the
Committee, at any time before complete termination of such Performance Unit
Award, may accelerate the time or times at which such Performance Unit Award may
be paid in whole or in part.
3.7 TERMS AND CONDITIONS OF PHANTOM SHARES. Phantom Shares shall entitle
the Participant to receive, at a specified future date, payment of an amount
equal to all or a portion of the Fair Market Value of a specified number of
shares of Stock at the end of a specified period. At the time of the grant, the
Committee shall determine the factors which will govern the portion of the
rights so payable, including, at the discretion of the Committee, any
performance criteria that must be satisfied as a condition to payment. Phantom
Share awards containing performance criteria may be designated as Performance
Share Awards. (See Section 3.1(g) for performance goals applicable to Covered
Employees.)
(a) PAYMENT. Payment in respect of Phantom Shares may be made by the
Company in cash or shares of Stock (valued at Fair Market Value on the date of
payment) as provided in the applicable Stock Incentive Agreement or Stock
Incentive Program, or, in the absence of such provision, as the Committee may
determine.
(b) CONDITIONS TO PAYMENT Each Phantom Share granted under the Plan
shall be payable at such time or times, or upon the occurrence of such event or
events, and in such amounts, as the Committee shall specify in the applicable
Stock Incentive Agreement or Stock Incentive Program; provided, however, that
subsequent to the grant of a Phantom Share, the Committee, at any time before
complete termination of such Phantom Share, may accelerate the time or times at
which such Phantom Share may be paid in whole or in part.
3.8 TREATMENT OF AWARDS UPON TERMINATION OF EMPLOYMENT. Except as
otherwise provided by Plan Section 3.2(e) and Section 3.1(g), any award under
this Plan to a Participant who has experienced a Termination of Employment may
be canceled, accelerated, paid or continued, as provided in the applicable Stock
Incentive Agreement or Stock Incentive Program, or, in the absence of such
provision, as the Committee
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may determine. The portion of any award exercisable in the event of
continuation or the amount of any payment due under a continued award may be
adjusted by the Committee to reflect the Participant's period of service from
the date of grant through the date of the Participant's Termination of
Employment or such other factors as the Committee determines are relevant to
its decision to continue the award.
SECTION 4 RESTRICTIONS ON STOCK
4.1 ESCROW OF SHARES. Any certificates representing the shares of Stock
issued under the Plan shall be issued in the Participant's name, but, if the
applicable Stock Incentive Agreement or Stock Incentive Program so provides, the
shares of Stock shall be held by a custodian designated by the Committee (the
"Custodian"'). Each applicable Stock Incentive Agreement or Stock Incentive
Program providing for transfer of shares of Stock to the Custodian shall appoint
the Custodian as the attorney-in-fact for the Participant for the term specified
in the applicable Stock Incentive Agreement or Stock Incentive Program, with
full power and authority in the Participant's name, place and stead to transfer,
assign and convey to the Company any shares of Stock held by the Custodian for
such Participant, if the Participant forfeits the shares under the terms of the
applicable Stock Incentive Agreement or Stock Incentive Program. During the
period that the Custodian holds the shares subject to this Section, the
Participant shall be entitled to all rights, except as provided in the
applicable Stock Incentive Agreement or Stock Incentive Program, applicable to
shares of Stock not so held. Any dividends declared on shares of Stock held by
the Custodian shall, as the Committee may provide in the applicable Stock
Incentive Agreement or Stock Incentive Program, be paid directly to the
Participant or, in the alternative, be retained by the Custodian or by the
Company until the expiration of the term specified in the applicable Stock
Incentive Agreement or Stock Incentive Program and shall then be delivered,
together with any proceeds, with the shares of Stock to the Participant or to
the Company, as applicable.
4.2 FORFEITURE OF SHARES. Notwithstanding any vesting schedule set forth
in any Stock Incentive Agreement or Stock Incentive Program, a Stock Incentive
Agreement or Stock Incentive Program may provide that in the event a
Participant's employment is terminated by the Company for Cause or in the event
that a Participant violates a noncompetition agreement as set forth in the Stock
Incentive Agreement or Stock Incentive Program, all Stock Incentives and shares
of Stock issued to the holder pursuant to the Plan shall be forfeited; provided,
however, that the Company shall return to the holder the lesser of any
consideration paid by the Participant in exchange for Stock issued to the
Participant pursuant to the Plan or the then Fair Market Value of the Stock
forfeited hereunder.
4.3 RESTRICTIONS ON TRANSFER. The Participant shall not have the right to
make or permit to exist any Disposition of the shares of Stock issued pursuant
to the Plan except as provided in the Plan or the Stock Incentive Agreement or
Stock Incentive Program. Any Disposition of the shares of Stock issued under
the Plan by the Participant not made in accordance with the Plan or the
applicable Stock Incentive Agreement or the Stock Incentive Program shall be
void. The Company shall not recognize, or have the duty to recognize, any
Disposition not made in accordance with the Plan or the Stock Incentive
Agreement or Stock Incentive Program, and the shares so transferred shall
continue to be bound by the Plan and the Stock Incentive Agreement or Stock
Incentive Program.
SECTION 5 GENERAL PROVISIONS
5.1 WITHHOLDING. The Company shall deduct from all cash distributions
under the Plan any taxes required to be withheld by federal, state or local
government. Whenever the Company proposes or is required to issue or transfer
shares of Stock under the Plan or upon the vesting of any Stock Award, the
Company shall have the right to require the recipient to remit to the Company an
amount sufficient to satisfy any federal, state and local withholding tax
requirements prior to the delivery of any certificate or certificates for such
shares or the vesting of such Stock Award. A Participant may pay the
withholding tax in cash, or, if the applicable Stock Incentive Agreement or
Stock Incentive Program provides, a Participant may elect to have the number of
shares of Stock he is to receive reduced by, or with respect to a Stock Award,
tender back to the Company,
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the smallest number of whole shares of Stock which, when multiplied by the
Fair Market Value of the shares of Stock determined as of the Tax Date
(defined below), is sufficient to satisfy federal, state and local, if any,
withholding taxes arising from exercise or payment of a Stock Incentive (a
"Withholding Election"). A Participant may make a Withholding Election only
if both of the following conditions are met:
(a) The Withholding Election must be made on or prior to the date on which
the amount of tax required to be withheld is determined (the "Tax Date") by
executing and delivering to the Company a properly completed notice of
Withholding Election as prescribed by the Committee; and
(b) Any Withholding Election made will be irrevocable except on six months
advance written notice delivered to the Company; however, the Committee may in
its sole discretion disapprove and give no effect to the Withholding Election.
5.2 CHANGES IN CAPITALIZATION; MERGER: LIQUIDATION.
(a) The number of shares of Stock reserved for the grant of Options,
Dividend Equivalent Rights, Performance Unit Awards, Phantom Shares, Stock
Appreciation Rights and Stock Awards; the number of shares of Stock reserved for
issuance upon the exercise or payment, as applicable, of each outstanding
Option, Dividend Equivalent Right, Performance Unit Award, Phantom Share and
Stock Appreciation Right and upon vesting or grant, as applicable, of each Stock
Award; the Exercise Price of each outstanding Option and the specified number of
shares of Stock to which each outstanding Dividend Equivalent Right, Phantom
Share and Stock Appreciation Right pertaining shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Stock resulting
from a subdivision or combination of shares or the payment of a stock dividend
in shares of Stock to holders of outstanding shares of Stock or any other
increase or decrease in the number of shares of Stock outstanding effected
without receipt of consideration by the Company.
(b) In the event of or anticipation of any merger, consolidation or
other reorganization of the Company or tender offer for shares of Stock, the
Committee may make such adjustments with respect to awards and take such other
action as it deems necessary or appropriate to reflect or such merger,
consolidation, reorganization or tender offer, including, without limitation,
the substitution of new awards, the termination or adjustment of outstanding
awards, the acceleration of awards or the removal of restrictions on outstanding
awards. Any adjustment pursuant to this Section 5.2 may provide, in the
Committee's discretion, for the elimination without payment therefor of any
fractional shares that might otherwise become subject to any Stock Incentive,
but shall not otherwise diminish the then value of the Stock Incentive.
(c) Except as expressly provided in this Section 5.2 or in Section
3.1(d), the holder of an Option or Stock Appreciation Right shall have no rights
by reason of any subdivision or combination of shares of Stock of any class or
the payment of any stock dividend or any other increase or decrease in the
number of shares of Stock of any class or by reason of any Change in Control or
distribution to the Company's shareholders of assets or stock of another
corporation. Except as expressly provided herein and except for any
distributions or adjustments made with respect to shares of Stock issued under
the Plan in connection with a distribution or adjustment made with respect to
all other outstanding shares of Stock, any issue by the Company of shares of
stock of any class, or securities convertible into shares of any class, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Stock subject to any Stock Incentive. The
existence of the Plan and the Stock Incentives granted pursuant to the Plan
shall not affect in any way the right or power of the Company to make or
authorize any adjustment, reclassification, reorganization or other change in
its capital or business structure, any merger or consolidation of the Company,
any issue of debt or equity securities having preferences or priorities as to
the Stock or the rights thereof, the dissolution or liquidation of the Company,
any sale or transfer of all or any part of its business or assets, or any other
corporate act or proceeding.
5.3 CASH AWARDS. The Committee may, at any time and in its discretion,
grant to any holder of a Stock Incentive the right to receive, at such times and
in such amounts as determined by the Committee in
-10-
<PAGE>
its discretion, a cash amount which is intended to reimburse such person for
all or a portion of the federal, state and local income taxes imposed upon
such person as a consequence of the receipt of the Stock Incentive or the
exercise of rights thereunder.
5.4 COMPLIANCE WITH CODE. All incentive stock options to be granted
hereunder are intended to comply with Code Section 422, and all provisions of
the Plan and all incentive stock options granted hereunder shall be construed in
such manner as to effectuate that intent.
5.5 RIGHT TO TERMINATE EMPLOYMENT OR DIRECTORSHIP. Nothing in the Plan or
in any Stock Incentive shall confer upon any Participant the right to continue
as a director, employee or officer of the Company or any of its affiliates or
affect the right of the Company or any of its affiliates to terminate the
Participant's employment or directorship at any time.
5.6 NON-ALIENATION OF BENEFITS. Other than as specifically provided with
regard to the death of a Participant, no benefit under the Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge; and any attempt to do so shall be void. No such benefit
shall, prior to receipt by the Participant, be in any manner liable for or
subject to the debts, contracts, liabilities, engagements or torts of the
Participant.
5.7 RESTRICTIONS ON DELIVERY AND SALE OF SHARES; LEGENDS. Each Stock
Incentive is subject to the condition that if at any time the Committee, in its
discretion, shall determine that the listing, registration or qualification of
the shares covered by such Stock Incentive upon any securities exchange or under
any state or federal law is necessary or desirable as a condition of or in
connection with the granting of such Stock Incentive or the purchase or delivery
of shares thereunder, the delivery of any or all shares pursuant to such Stock
Incentive may be withheld unless and until such listing, registration or
qualification shall have been effected. If a registration statement is not in
effect under the Securities Act of 1933 or any applicable state securities laws
with respect to the shares of Stock purchasable or otherwise deliverable under
Stock Incentives then outstanding, the Committee may require, as a condition of
exercise of any Option or as a condition to any other delivery of Stock pursuant
to a Stock Incentive, that the Participant or other recipient of a Stock
Incentive represent, in writing, that the shares received pursuant to the Stock
Incentive are being acquired for investment and not with a view to distribution
and agree that the shares will not be disposed of except pursuant to an
effective registration statement, unless the company shall have received an
opinion of counsel that such disposition is exempt from such requirement under
the Securities Act of 1933 or any applicable state securities laws. The Company
may include on certificates representing shares delivered pursuant to a Stock
Incentive such legends referring to the foregoing representations or
restrictions or any other applicable restrictions on resale as the Company, in
its discretion, shall deem appropriate.
5.8 TERMINATION AND AMENDMENT OF THE PLAN. The Board of Directors at any
time may amend or terminate the Plan without stockholder approval; provided,
however, that the Board of Directors may condition any amendment on the approval
of stockholders of the Company if such approval is necessary or advisable with
respect to tax, securities or other applicable laws. No such termination or
amendment without the consent of the holder of a Stock Incentive shall adversely
affect the rights of the Participant under such Stock Incentive.
5.9 STOCKHOLDER APPROVAL. The Plan shall be submitted to the stockholders
of the Company for their approval within twelve (12) months before or after the
adoption of the Plan by the Board of Directors of the Company. If such approval
is not obtained, any Stock Incentive granted hereunder shall be void.
5.10 CHOICE OF LAW. The laws of the State of Georgia shall govern the
Plan, to the extent not preempted by federal law.
5.11 EFFECTIVE DATE OF PLAN. The Plan shall become effective as of May 21,
1996 (the date the Board approved the Plan) (the "Effective Date"); subject,
however, to the approval of the Plan by the Company's shareholders at their next
annual meeting. Stock Incentives granted hereunder prior to such
-11-
<PAGE>
approval shall be conditioned upon such approval. Unless such approval is
obtained within twelve months of the Effective Date, this Plan and any Stock
Incentives awarded hereunder shall become void thereafter.
CAMERON ASHLEY BUILDING PRODUCTS, INC.
By: /s/ RONALD R. ROSS
------------------------------------
Ronald R. Ross, Chairman and
Chief Executive Officer
ATTEST:
/s/ JOHN S. DAVIS
- - - - -------------------------------
Secretary
[Corporate Seal]
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<PAGE>
EXHIBIT 10.23.1
FIRST AMENDMENT TO THE
CAMERON ASHLEY BUILDING PRODUCTS, INC.
1996 STOCK INCENTIVE PLAN
THIS AMENDMENT, made this 11th day of December, 1996, by CAMERON ASHLEY
BUILDING PRODUCTS, INC., a corporation organized and doing business under the
laws of the State of Georgia (the "Company").
W I T N E S S E T H :
WHEREAS, on May 21, 1996, the Board of Directors of the Company approved
the adoption by the Company of the Cameron Ashley Building Products, Inc. 1996
Stock Incentive Plan (the "Plan") subject to approval of the shareholders of the
Company;
WHEREAS, the Company will submit the Plan to its shareholders at the annual
meeting of shareholders on March 4, 1997;
WHEREAS, the Company desires to amend the Plan prior to submission to the
shareholders to allow for non-qualified stock options to be granted at a
discount to fair market value on the date of grant;
WHEREAS, the Board of Directors of the Company approved such amendment at
its regular quarterly meeting on December 11, 1996;
NOW, THEREFORE, the Plan is hereby amended, effective as of December 11,
1996, as follows:
1. By substituting the following for Plan Section 3.2(a) OPTION PRICE,
subsection (i), as follows:
"... (i) any non-qualified stock option shall be as set forth in the
applicable Stock Incentive Agreement, but in no event less than 25% OF THE Fair
Market Value of a share of Stock on the date such Option is granted; ...".
Except as specifically amended hereby, the Plan shall remain in full force
and effect as prior to the adoption of this Amendment.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Amendment to be executed on
the day and year first above written.
CAMERON ASHLEY BUILDING PRODUCTS, INC.
By: /s/ RONALD R. ROSS
----------------------------------------------------
Ronald R. Ross, Chairman and Chief Executive Officer
ATTEST:
By /s/ JOHN S. DAVIS
--------------------------
John S. Davis, Secretary
[CORPORATE SEAL]
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<PAGE>
EXHIBIT 11.1
CAMERON ASHLEY BUILDING PRODUCTS, INC.
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
YEARS ENDED OCTOBER 31, 1996,
1995 AND 1994
-----------------------------------------
1996(1) 1995(1) 1994(1)
----------- ---------- ----------
<S> <C> <C> <C>
Average common stock outstanding....................... 8,903,000 8,057,000 5,620,000
Average options outstanding............................ 990,000 1,184,000 1,128,000
Effects of treasury stock method (based on exercise
proceeds and tax benefit)......................... (697,000) (661,000) (526,000)
----------- ---------- ----------
Weighted average common shares outstanding........... $ 9,196,000 8,580,000 6,222,000
----------- ---------- ----------
----------- ---------- ----------
Income before extraordinary charge..................... $12,069,000 $9,875,000 $8,700,000
----------- ---------- ----------
----------- ---------- ----------
Net income............................................. $11,824,000 $9,875,000 $8,700,000
----------- ---------- ----------
----------- ---------- ----------
Income per share before extraordinary charge........... $ 1.31 $ 1.15 $ 1.40
----------- ---------- ----------
----------- ---------- ----------
Net income per share after extraordinary charge........ $ 1.28 $ 1.15 $ 1.40
----------- ---------- ----------
----------- ---------- ----------
</TABLE>
- - - - -------------------
(1) Only the primary diluted computation of earnings per share is presented
since fully diluted earnings per share and primary earnings per share do not
differ by more than 3%.
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-80326 and Registration Statement No. 33-90782 of Cameron Ashley Building
Products, Inc. on Forms S-8 of our report dated December 13, 1996, appearing in
this Annual Report on Form 10-K of Cameron Ashley Building Products, Inc. for
the year ended October 31, 1996.
DELOITTE & TOUCHE, LLP
Dallas, Texas
January 24, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> OCT-31-1996
<CASH> 5,078
<SECURITIES> 0
<RECEIVABLES> 95,651
<ALLOWANCES> 2,719
<INVENTORY> 64,644
<CURRENT-ASSETS> 165,018
<PP&E> 43,155
<DEPRECIATION> 11,936
<TOTAL-ASSETS> 219,670
<CURRENT-LIABILITIES> 70,585
<BONDS> 0
0
0
<COMMON> 60,641
<OTHER-SE> 34,968
<TOTAL-LIABILITY-AND-EQUITY> 219,670
<SALES> 604,710
<TOTAL-REVENUES> 604,710
<CGS> 485,595
<TOTAL-COSTS> 93,448
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,257
<INTEREST-EXPENSE> 3,910
<INCOME-PRETAX> 19,516
<INCOME-TAX> 7,447
<INCOME-CONTINUING> 12,069
<DISCONTINUED> 0
<EXTRAORDINARY> 245
<CHANGES> 0
<NET-INCOME> 11,824
<EPS-PRIMARY> 1.28
<EPS-DILUTED> 1.28
</TABLE>
