--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS
FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS
THERETO FILED PURSUANT TO RULE 13d-2(a)
(AMENDMENT NO.___ )1
INTERIORS, INC.
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(Name of Issuer)
COMMON STOCK, CLASS A, $.001 PAR VALUE
--------------------------------------------------------------------------------
(Title of Class of Securities)
032065104
--------------------------------------------------------------------------------
(CUSIP Number)
MR. CARL F. MCWILLIAMS,
MODEL HOME INTERIORS, INC., 10120 BACON DRIVE, BELTSVILLE, MARYLAND 20705
--------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
November 22, 2000
--------------------------------------------------------------------------------
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box |_|.
Note: Schedules filed in paper format shall include a signed original
and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for
other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 18 Pages)
1 The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not
be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934, as amended (the "Act"), or otherwise subject to the liabilities of
that section of the Act but shall be subject to all other provisions of the Act
(however, see the Notes).
--------------------------------------------------------------------------------
<PAGE>
--------------------------- ---------------------------
CUSIP No. 032065104 SCHEDULE 13D Page 2 of 18 Pages
--------------------------- ---------------------------
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Jerry L. Bashore
--------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X|
(b) |_|
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS*
SC
--------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) |_|
Not Applicable
--------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
------------------------- ------- ----------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 700,695
------- ----------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
------- ----------------------------------------------
OWNED BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 700,695
------- ----------------------------------------------
10 SHARED DISPOSITIVE POWER
PERSON WITH
-0-
------------------------- ------- ----------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
700,695
--------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|_|
--------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.24%
--------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
--------- ----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
--------------------------- ---------------------------
CUSIP No. 032065104 SCHEDULE 13D Page 3 of 18 Pages
--------------------------- ---------------------------
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Charles R. Broderick III
--------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X|
(b) |_|
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS*
SC
--------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) |_|
Not Applicable
--------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
------------------------- ------- ----------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 700,695
------- ----------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
------- ----------------------------------------------
OWNED BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 700,695
------- ----------------------------------------------
10 SHARED DISPOSITIVE POWER
PERSON WITH
-0-
------------------------- ------- ----------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
700,695
--------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|_|
--------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.24%
--------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
--------- ----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
--------------------------- ---------------------------
CUSIP No. 032065104 SCHEDULE 13D Page 4 of 18 Pages
--------------------------- ---------------------------
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
William F. Carroll
--------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X|
(b) |_|
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS*
SC
--------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) |_|
Not Applicable
--------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
------------------------- ------- ----------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 700,695
------- ----------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
------- ----------------------------------------------
OWNED BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 700,695
------- ----------------------------------------------
10 SHARED DISPOSITIVE POWER
PERSON WITH
-0-
------------------------- ------- ----------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
700,695
--------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|_|
--------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.24%
--------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
--------- ----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
--------------------------- ---------------------------
CUSIP No. 032065104 SCHEDULE 13D Page 5 of 18 Pages
--------------------------- ---------------------------
--------- ----------------------------------------------------------------------
1 NAME OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY)
Carl F. McWilliams
--------- ----------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) |X|
(b) |_|
--------- ----------------------------------------------------------------------
3 SEC USE ONLY
--------- ----------------------------------------------------------------------
4 SOURCE OF FUNDS*
SC
--------- ----------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(d) or 2(e) |_|
Not Applicable
--------- ----------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
United States of America
------------------------- ------- ----------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 3,119,795
------- ----------------------------------------------
8 SHARED VOTING POWER
BENEFICIALLY
-0-
------- ----------------------------------------------
OWNED BY EACH 9 SOLE DISPOSITIVE POWER
REPORTING 700,695
------- ----------------------------------------------
10 SHARED DISPOSITIVE POWER
PERSON WITH
-0-
------------------------- ------- ----------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,119,795
--------- ----------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
|X|
--------- ----------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.53%
--------- ----------------------------------------------------------------------
14 TYPE OF REPORTING PERSON*
IN
--------- ----------------------------------------------------------------------
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
SCHEDULE 13D
This Schedule 13D is being filed by Jerry L. Bashore, Charles R.
Broderick III, William F. Carroll and Carl F. McWilliams (collectively, the
"Group"). This Schedule 13D is a joint filing of the Group, pursuant to an
Agreement to Joint Filing of Schedule 13D dated November 22, 2000, which is
attached hereto as Exhibit A and incorporated herein.
Item 1. Security and Issuer
-------------------
This Schedule 13D relates to the Class A Common Stock, par
value $.001 per share (the "Class A Common Stock"), of
Interiors, Inc., a Delaware corporation (the "Issuer"). The
address of the principal executive offices of the Issuer is
320 Washington Street, Mount Vernon, New York 10553.
Item 2. Identity and Background
-----------------------
Jerry L. Bashore
----------------
(A) Jerry L. Bashore.
(B) Bashore's business address is Model Home Interiors,
Inc., 10120 Bacon Drive, Beltsville, Maryland 20705.
(C) Bashore is Vice President of Sales for Model Home
Interiors, Inc., a wholly-owned subsidiary of the
Issuer. Model Home Interiors, Inc.'s principal
business is interior merchandising, and its address
is 10120 Bacon Drive, Beltsville, Maryland 20705.
(D) During the past five years, Bashore has not been
convicted in a criminal proceeding, excluding traffic
violations or similar misdemeanors.
(E) During the past five years, Bashore has not been a
party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and has
not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State
securities laws or finding any violation with respect
to such laws.
(F) Bashore is a citizen of the U.S.A.
Charles R. Broderick III
------------------------
(A) Charles R. Broderick III.
(B) Broderick's business address is The Bees Distributing
Co., 2920 Dede Road, Finksburg, Maryland 21048.
Page 6 of 18 Pages
<PAGE>
(C) Broderick is President of The Bees Distributing Co.
The Bees Distributing Co. is a wholesale beer
distributor, and its address is 2920 Dede Road,
Finksburg, Maryland 21048.
(D) During the past five years, Broderick has not been
convicted in a criminal proceeding, excluding traffic
violations or similar misdemeanors.
(E) During the past five years, Broderick has not been a
party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and has
not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State
securities laws or finding any violation with respect
to such laws.
(F) Broderick is a citizen of the U.S.A.
William F. Carroll
------------------
(A) William F. Carroll.
(B) Carroll's business address is Model Home Interiors,
Inc., 10120 Bacon Drive, Beltsville, Maryland 20705.
(C) Carroll is Executive Vice President of Model Home
Interiors, Inc., a wholly-owned subsidiary of the
Issuer. Model Home Interiors, Inc.'s principal
business is interior merchandising, and its address
is 10120 Bacon Drive, Beltsville, Maryland 20705.
(D) During the past five years, Carroll has not been
convicted in a criminal proceeding, excluding traffic
violations or similar misdemeanors.
(E) During the past five years, Carroll has not been a
party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and has
not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State
securities laws or finding any violation with respect
to such laws.
(F) Carroll is a citizen of the U.S.A.
Carl F. McWilliams
------------------
(A) Carl F. McWilliams.
Page 7 of 18 Pages
<PAGE>
(B) McWilliams' business address is Model Home Interiors,
Inc., 10120 Bacon Drive, Beltsville, Maryland 20705.
(C) McWilliams is President of Model Home Interiors,
Inc., a wholly-owned subsidiary of the Issuer. Model
Home Interiors, Inc.'s principal business is interior
merchandising, and its address is 10120 Bacon Drive,
Beltsville, Maryland 20705.
(D) During the past five years, McWilliams has not been
convicted in a criminal proceeding, excluding traffic
violations or similar misdemeanors.
(E) During the past five years, McWilliams has not been a
party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and has
not been subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or
mandating activities subject to, Federal or State
securities laws or finding any violation with respect
to such laws.
(F) McWilliams is a citizen of the U.S.A.
Item 3. Source and Amount of Funds and Other Consideration
--------------------------------------------------
The source and amount of funds or other consideration used, or
to be used, by each member of the Group in acquiring
beneficial ownership of shares of Class A Common Stock are set
forth below.
Acquisition of Class A Common Stock in Merger Transaction
between Model Home Interiors, Inc. and Interiors, Inc.
Prior to February 26, 1999, each member of the Group was a
stockholder of Model Home Interiors, Inc ("Model Home"). Each
member of the Group owned shares of Model Home in his own
name. The members of the Group acquired shares of the common
stock of Model Home for cash in 1986 in connection with the
acquisition of Model Home by the members of the Group and the
other former stockholders of Model Home.
On February 26, 1999, the Issuer acquired Model Home pursuant
to an Agreement and Plan of Merger (the "Merger Agreement")
dated December 31, 1998 by and among the Issuer, MHI
Acquisition Corp. and Model Home (which is attached hereto as
Exhibit B). The purchase price that the Issuer paid to the
former stockholders of Model Home consisted of (a) $2,000,000
in cash payable at closing, (b) promissory notes of the Issuer
in the aggregate principal amount of $230,766 delivered at
closing to extinguish obligations of Model Home to certain of
its former stockholders and (c) shares of Class A Common Stock
with a fair market value of $2,300,000 payable on the 18th
month anniversary of the closing,
Page 8 of 18 Pages
<PAGE>
as described below. Each of the members of the Group received
his pro rata portion of cash at closing.
Pursuant to the Merger Agreement, the Issuer also agreed to
issue to the former stockholders of Model Home shares of Class
A Common Stock with a maximum fair market value of $2,000,000
(the "Earnout Shares") upon the attainment of certain earnings
goals by Model Home. Pursuant to Section 2.10 of the Merger
Agreement, the Issuer, Norwest Bank of Minnesota N.A. and Carl
F. McWilliams executed and delivered an escrow agreement (the
"Escrow Agreement") in order to, among other things, provide
security for payment obligations the Issuer has to such former
stockholders of Model Home in the form of the Earnout Shares
delivered to Norwest Bank of Minnesota N.A. (as escrow agent
under the Escrow Agreement) pursuant to Section 2.07(d) of the
Merger Agreement. The amount of Earnout Shares, if any, issued
to the former stockholders of Model Home was to be determined
by a formula that takes into consideration, among other
things, the earnings, interest income and tax and interest
expenses of Model Home for the fiscal years ending on December
31, 1999, 2000 and 2001. Pursuant to the Escrow Agreement, the
Earnout Shares would be held in an escrow account (the "Escrow
Account") together with the shares of Class A Common Stock
that would be payable on the 18th month anniversary of the
closing.
At the time of closing, the Issuer deposited into the Escrow
Account 1,056,342 shares of Class A Common Stock to secure the
Issuer's obligation to deliver the shares of Class A Common
Stock payable on the 18th month anniversary of the closing and
to secure payment of the promissory notes. Pursuant to the
Merger Agreement, if the value of the shares of Class A Common
Stock held in the Escrow Account falls below $1,840,000 based
on any 10 day-average of the closing sales price for such
shares, the Issuer would be required to deposit additional
shares into the Escrow Account. Accordingly, on October 26,
1999, August 5, 2000, and August 25, 2000, the Issuer
deposited 665,000, 968,271 and 2,162,837 additional shares of
Class A Common Stock, respectively, into the Escrow Account.
During the first year following the acquisition of Model Home,
Model Home achieved certain earnings threshold criteria
established at the time of the transaction. Accordingly, on
March 21, 2000, the Issuer released 763,561 Earnout Shares
valued at $644,000 (based on a price of $0.84373 per share as
of December 31, 1999), to the former stockholders of Model
Home. The members of the Group acquired shares of Class A
Common Stock at that time as follows:
Name Number of Shares
---- ----------------
Jerry L. Bashore 95,445
Charles R. Broderick, III 95,445
William F. Carroll 95,445
Carl F. McWilliams 95,445
Page 9 of 18 Pages
<PAGE>
Based on the 10 day-average of the closing price of Class A
Shares on August 28, 2000, the former stockholders of Model
Home were entitled to 4,842,003 shares of Class A Common Stock
on the 18th month anniversary of the closing. On August 28,
2000, there were currently only 4,088,889 such shares being
held in the Escrow Account to satisfy the Issuer's obligation.
Due to a decrease in the price of the shares of Class A Common
Stock, on September 15, 2000, the Issuer deposited 753,114
shares of Class A Common Stock into the Escrow Account. On
October 27, 2000, the Issuer released an aggregate of
4,842,003 shares of Class A Common Stock (based on a price of
$0.22 per share as of October 31, 2000) from the Escrow
Account. The members of the Group acquired shares of Class A
Common Stock at that time as follows:
Name Number of Shares
---- ----------------
Jerry L. Bashore 605,250
Charles R. Broderick, III 605,250
William F. Carroll 605,250
Carl F. McWilliams 605,250
On November 3, 2000, the Issuer deposited an additional
2,419,100 shares of Class A Common Stock into the Escrow
Account to secure future earnout obligations owed to the
former stockholders of Model Home with respect to the fiscal
year ending December 31, 2000. Pursuant to the terms of the
Escrow Agreement, McWilliams (as representative of the
individuals who are eligible for Earnout Shares) has the
authority to vote all such additional shares of Class A Common
Stock deposited into the Escrow Account, but he possesses no
other rights with respect to such shares. Because the
allocation of such Earnout Shares is determined by (among
other things) the earnings, interest income and tax and
interest expenses of Model Home for the fiscal year ending
December 31, 2000, and because those factors cannot be
determined until the end of Model Home's fiscal year, there is
no certainty at this time as to (a) whether such factors for
the current fiscal year will warrant the distribution of
Earnout Shares or the portion of the 2,419,100 shares held in
the Escrow Account that will be distributed to the members of
the Group based on the formula for determining such amount in
the Merger Agreement. However, the members of the Group do
expect to receive some additional Earnout Shares for the
current fiscal year. In addition, the Merger Agreement
provides for the potential distribution of additional Earnout
Shares with respect to the fiscal year ending December 31,
2001.
Other Acquisitions
In addition to the acquisitions described above, Carl F.
McWilliams' spouse purchased 1,160 shares of Class A Common
Stock on May 11, 1999 through personal funds. Carl F.
McWilliams disclaims ownership of these shares.
Page 10 of 18 Pages
<PAGE>
Item 4. Purpose of Transaction
----------------------
With respect to Bashore, Broderick, Carroll and McWilliams,
each a current or past employee of Model Home, the primary
purpose for their acquisition of shares of Class A Common
Stock, as described in Item 3 above, was for partial payment
from the Issuer in connection with the Issuer's acquisition of
Model Home.
On November 22, 2000, the members of the Group entered into a
Voting Agreement between and among each member of the Group
(the "Voting Agreement"). The primary purpose of the Voting
Agreement was to join all members of the Group together with
respect to voting on matters being presented at the Issuer's
Annual Meeting of Stockholders to be held on December 15,
2000, or any adjournment or postponement thereof. This
includes supporting the election of three (3) candidates to
the Issuer's Board of Directors in opposition to the slate
proposed by the Issuer's current Board. For further
information regarding the Voting Agreement, see Item 6 below.
Following the Annual Meeting, the members of the Group intend
to continue to evaluate the Issuer and its business prospects
and to take such actions as they shall deem necessary and
appropriate in their sole discretion to maximize the economic
value of their investment in the securities of the Issuer,
including (but not limited to), in the event the Group is
successful in changing the Issuer's current Board of
Directors, putting the Issuer on a sound financial footing,
selling or liquidating unprofitable businesses, properly
integrating existing businesses, maximizing the earnings of
profitable units and regaining the confidence of the Issuer's
customers, trade creditors and the investment community.
Except as stated above or as otherwise stated in this Schedule
13D, there are no other plans or proposals that the Group may
have that relate to or would result in:
(A) The acquisition by any person of additional
securities of the Issuer or the disposition of
securities of the Issuer;
(B) An extraordinary corporate transaction, such as a
merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries;
(C) A sale or transfer of a material amount of assets of
the Issuer or of any of its subsidiaries;
(D) Any change in the present board of directors or
management of the Issuer, including any plans or
proposals to change the number or term of directors
or to fill any existing vacancies on the board;
(E) Any material change in the present capitalization or
dividend policy of the Issuer;
Page 11 of 18 Pages
<PAGE>
(F) Any other material change in the Issuer's business or
corporate structure;
(G) Changes in the Issuer's charter, bylaws or
instruments corresponding thereto or other actions
which may impede the acquisition of control of the
Issuer by any person;
(H) Causing a class of securities of the Issuer to be
delisted from a national securities exchange or to
cease to be authorized to be quoted in an
inter-dealer quotation system of a registered
national securities association;
(I) A class of equity securities of the Issuer becoming
eligible for termination of registration pursuant to
Section 12(g)(4) of the Securities Exchange Act of
1934, as amended; or
(J) Any action similar to any of those enumerated above.
The members of the Group may, at any time or from time to
time, review or reconsider their position with respect to the
Issuer and formulate plans with respect to matters referred to
in this Item 4.
Item 5. Interest in Securities of the Issuer
------------------------------------
The following information only takes into consideration the
number of shares of Class A Common Stock outstanding and
issued as of November 13, 2000 (as enumerated in the Issuer's
Form 10-Q for the period ended September 30, 2000 (the "Form
10-Q")). The Issuer also has outstanding 2,455,000 shares of
Class B common stock of the Issuer that is convertible into
Class A Common Stock. The Issuer's Class B common stock votes
on most matters with Class A Common Stock, but is entitled to
five votes per share (Class A Common Stock is entitled to one
vote per share). This materially dilutes the voting strength
of holders of Class A Common Stock, including the Group.
Jerry L. Bashore
----------------
(A) The aggregate number and percentage of Class A Common
Stock beneficially owned by Bashore are 700,695
shares and 1.24% of the issued and outstanding shares
of Class A Common Stock (as of November 13, 2000 as
reported in the Issuer's Form 10-Q), respectively.
(B) With respect to 700,695 shares of Class A Common
Stock identified pursuant to paragraph (A) above,
Bashore has the sole power to vote or to direct the
vote and the sole power to dispose or to direct the
disposition of such shares of Class A Common Stock.
(C) Bashore acquired 605,250 shares of Class A Common
Stock at $0.22 per share on October 27, 2000. The
Issuer issued such shares, which were
Page 12 of 18 Pages
<PAGE>
valued at $0.22 per share at the time of issuance,
pursuant to the terms of the Merger Agreement, as
further described in Item 3 above.
(D) Not applicable.
(E) Not applicable.
Charles R. Broderick III
------------------------
(A) The aggregate number and percentage of Class A Common
Stock beneficially owned by Broderick are 700,695
shares and 1.24% of the issued and outstanding shares
of Class A Common Stock (as of November 13, 2000 as
reported in the Issuer's Form 10-Q), respectively.
(B) With respect to 700,695 shares of Class A Common
Stock identified pursuant to paragraph (A) above,
Broderick has the sole power to vote or to direct the
vote and the sole power to dispose or to direct the
disposition of such shares of Class A Common Stock.
(C) Broderick acquired 605,250 shares of Class A Common
Stock at $0.22 per share on October 27, 2000. The
Issuer issued such shares, which were valued at $0.22
per share at the time of issuance, pursuant to the
terms of the Merger Agreement, as further described
in Item 3 above.
(D) Not applicable.
(E) Not applicable.
William F. Carroll
------------------
(A) The aggregate number and percentage of Class A Common
Stock beneficially owned by Carroll are 700,695
shares and 1.24% of the issued and outstanding shares
of Class A Common Stock (as of November 13, 2000 as
reported in the Issuer's Form 10-Q), respectively.
(B) With respect to 700,695 shares of Class A Common
Stock identified pursuant to paragraph (A) above,
Carroll has the sole power to vote or to direct the
vote and the sole power to dispose or to direct the
disposition of such shares of Class A Common Stock.
(C) Carroll acquired 605,250 shares of Class A Common
Stock at $0.22 per share on October 27, 2000. The
Issuer issued such shares, which were valued at $0.22
per share at the time of issuance, pursuant to the
terms of the Merger Agreement, as further described
in Item 3 above.
(D) Not applicable.
Page 13 of 18 Pages
<PAGE>
(E) Not applicable.
Carl F. McWilliams
------------------
(A) The aggregate number and percentage of Class A Common
Stock beneficially owned by McWilliams are 3,119,795
shares and 5.53% of the issued and outstanding shares
of Class A Common Stock (as of November 13, 2000 as
reported in the Issuer's Form 10-Q), respectively.
This amount does not include 1,160 shares of Class A
Common Stock held by McWilliams' spouse, which have
been disclaimed by McWilliams in this Item 5 below.
(B) With respect to 3,119,795 shares of Class A Common
Stock identified pursuant to paragraph (A) above,
McWilliams has the sole power to vote or to direct
the vote. With respect to 701,855 shares of Class A
Common Stock identified pursuant to paragraph (A)
above, McWilliams has the sole power to dispose or to
direct the disposition of such shares of Class A
Common Stock.
(C) McWilliams acquired 605,250 shares of Class A Common
Stock at $0.22 per share on October 27, 2000. The
Issuer issued such shares, which were valued at $0.22
per share at the time of issuance, pursuant to the
terms of the Merger Agreement, as further described
in Item 3 above. On November 3, 2000, McWilliams
gained beneficial ownership of 2,419,100 shares of
Class A Common Stock that were placed in the Escrow
Account pursuant to the Merger Agreement and Escrow
Agreement, as further described in Item 3 above. On
November 3, 2000, such shares were valued at $0.23
per share.
(D) Not applicable.
(E) Not applicable.
DISCLAIMER OF BENEFICIAL OWNERSHIP
Jerry L. Bashore
----------------
Pursuant to Rule 13d-4 under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), Bashore disclaims beneficial
ownership, for the purposes of Regulation 13D under the Exchange Act,
of any shares of Class A Common Stock held beneficially or otherwise by
other members of the Group. Bashore declares that the filing of this
statement shall not be construed as an admission that Bashore is, for
the purposes of Section 13(d) or 13(g) of the Exchange Act, the
beneficial owner of any securities covered by this statement other than
those shares of Class A Common Stock expressly set forth in this
statement as being beneficially owned by him.
Page 14 of 18 Pages
<PAGE>
Charles R. Broderick III
------------------------
Pursuant to Rule 13d-4 under the Exchange Act, Broderick
disclaims beneficial ownership, for the purposes of Regulation 13D
under the Exchange Act, of any shares of Class A Common Stock held
beneficially or otherwise by other members of the Group. Broderick
declares that the filing of this statement shall not be construed as an
admission that Broderick is, for the purposes of Section 13(d) or 13(g)
of the Exchange Act, the beneficial owner of any securities covered by
this statement other than those shares of Class A Common Stock
expressly set forth in this statement as being beneficially owned by
him.
William F. Carroll
------------------
Pursuant to Rule 13d-4 under the Exchange Act, Carroll
disclaims beneficial ownership, for the purposes of Regulation 13D
under the Exchange Act, of any shares of Class A Common Stock held
beneficially or otherwise by other members of the Group. Carroll
declares that the filing of this statement shall not be construed as an
admission that Carroll is, for the purposes of Section 13(d) or 13(g)
of the Exchange Act, the beneficial owner of any securities covered by
this statement other than those shares of Class A Common Stock
expressly set forth in this statement as being beneficially owned by
him.
Carl F. McWilliams
------------------
Pursuant to Rule 13d-4 under the Exchange Act, McWilliams
disclaims beneficial ownership, for the purposes of Regulation 13D
under the Exchange Act, of any shares of Class A Common Stock held
beneficially or otherwise by his spouse.
Item 6. Contracts, Arrangements, Understandings or Relationships with
--------------------------------------------------------------
Respect to Securities of the Issuer
------------------------------------
Voting Agreement
----------------
On November 22, 2000, the members of the Group entered into
the Voting Agreement with respect to the Issuer's Annual
Meeting. A copy of the Voting Agreement is attached hereto as
Exhibit D. The purpose of the Voting Agreement is set forth in
Item 4. The Voting Agreement evidences the agreement of each
member of the Group (a) to vote their shares at the next
Issuer stockholder meeting (a) in favor of the nominees listed
in the Voting Agreement and (b) in the same manner as to (i)
any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving the
Issuer and its subsidiaries and/or affiliates, any sale or
transfer of a material amount of assets of the Issuer, its
subsidiaries and/or affiliates or the Issuer capital stock,
any reorganization, recapitalization or liquidation of the
Issuer and its subsidiaries and/or affiliates or any other
takeover proposal; (ii) any change in the
Page 15 of 18 Pages
<PAGE>
management or Board of Directors of the Issuer; (iii) any
material change in the present capitalization or dividend
policy of the Issuer; (iv) any amendment to the Issuer's
Articles of Incorporation or Bylaws or other proposal or
transaction involving the Issuer, which amendment or other
proposal or transaction which changes in any manner the voting
rights of any class of the Company's capital stock; (v) any
other material change in the Issuer's corporate structure or
business, (vi) any stockholder proposal or (vii) the
appointment of auditors. The Voting Agreement provides that
decisions on any such matters shall be decided by a majority
vote of the four members of the Group. Pursuant to the Voting
Agreement, McWilliams was appointed as the proxy for the
members of the Group to vote their respective shares of the
Issuer in accordance with the terms of such agreement.
Merger Agreement
----------------
The Merger Agreement is described more particularly in Item 3.
A copy of the Merger Agreement is attached hereto as Exhibit
B.
Escrow Agreement
----------------
The Escrow Agreement is described more particularly in Item 3.
A copy of the Escrow Agreement is attached hereto as Exhibit
C.
Item 7. Material to be Filed as Exhibits
--------------------------------
See the Exhibit Index attached to this Schedule 13D.
Page 16 of 18 Pages
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement on this Schedule 13D is
true, complete and correct.
Date: November 22, 2000 Jerry L. Bashore /s/ Jerry L. Bashore
----------------------------
Date: November 22, 2000 Charles R. Broderick III /s/ Charles R. Broderick III
----------------------------
Date: November 22, 2000 William F. Carroll /s/ William F. Carroll
----------------------------
Date: November 22, 2000 Carl F. McWilliams /s/ Carl F. McWilliams
----------------------------
Attention: Intentional misstatements or omissions of fact constitute Federal
criminal violations (see 18 U.S.C. 1001).
Page 17 of 18 Pages
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
A Agreement to Joint Filing of Schedule 13D, dated November 22,
2000, between and among Jerry L. Bashore, Charles R. Broderick
III, William F. Carroll and Carl F. McWilliams.
B Agreement and Plan of Merger dated December 31, 1998 by and
among the Issuer, MHI Acquisition Corp. and Model Home
Interiors, Inc., filed as Exhibit 2 to the Current Report on
Form 8-K of Interiors, Inc. (File No. 0-24352), dated February
26, 1999, incorporated herein by reference.
C Escrow Agreement dated February 26, 1999, by and among the
Issuer, Norwest Bank of Minnesota, N.A. and Carl McWilliams.
D Voting Agreement dated November 22, 2000, by and between Jerry
L. Bashore, Charles R. Broderick III, William F. Carroll and
Carl F. Williams.
Page 18 of 18 Pages
<PAGE>
EXHIBIT A
Agreement to Joint Filing of Schedule 13D
Dated November 22, 2000
We agree to jointly submit this Schedule 13D, and any subsequent
amendments thereto, which is filed on behalf of each of us individually.
Jerry L. Bashore /s/ Jerry L. Bashore
-----------------------------------
Charles R. Broderick III /s/ Charles R. Broderick III
-----------------------------------
William F. Carroll /s/ William F. Carroll
-----------------------------------
Carl F. McWilliams /s/ Carl F. McWilliams
-----------------------------------
<PAGE>
EXHIBIT C
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Escrow Agreement") is made and entered
into as of the 26th day of February, 1999 by and among Interiors, Inc., a
Delaware corporation ("Buyer"), Norwest Bank of Minnesota, N.A. (together with
its successors and assigns, the "Escrow Agent"), and Carl McWilliams (the
"Representative"). For purposes of this Escrow Agreement, all capitalized terms
shall have the meanings ascribed to such terms in the Merger Agreement (defined
below) unless otherwise defined herein.
RECITALS
A. Pursuant to that certain Agreement and Plan of Merger, dated
as of December 31, 1998 (the "Merger Agreement") by and among Model Homes
Interiors, Inc., a Maryland corporation (the "Company"), Buyer and MHI
Acquisition Corp., a Maryland corporation ("Newco"), Newco is merging with and
into the Company.
B. The Merger Agreement provides that Buyer shall be entitled to
indemnification pursuant to the terms set forth in the Merger Agreement for
certain Damages resulting from breaches of representations, warranties and
covenants made by the Company.
C. The Merger Agreement provides that Buyer is obligated to pay
the Shareholders the Anniversary Date Payment as adjusted in accordance with the
Merger Agreement.
D. The Merger Agreement also provides that on the Closing Date
the Buyer will issue Promissory Notes to certain Shareholders.
E. The Merger Agreement also provides that not less than sixty
(60) days prior to the end of any Earnout Period, Buyer will (i) estimate the
number of shares of Buyer Common Stock to be delivered to the Shareholders for
each Earnout Period in accordance with Section 2.07 of the Merger Agreement and
(ii) deliver such Earnout Shares to the Escrow Agent to be released by the
Escrow Agent pursuant to the terms of the Merger Agreement.
F. The purposes of the escrow account established hereby are to
(i) secure the indemnification obligations of the Shareholders, (ii) secure
Buyer's payment obligations of the Anniversary Date Payment made on the date
that is the eighteenth month anniversary of the Closing Date (the "Anniversary
Date"), as adjusted in accordance with the Merger Agreement, (iii) to secure
Buyer's payment obligations under the Promissory Notes, (iv) deliver the Earnout
Shares to the Shareholders in accordance with the terms of the Merger Agreement
and (v) hold the Escrow Shares (as defined herein) in escrow and release to the
Shareholders subject to certain terms and conditions set forth herein.
<PAGE>
F. The execution and delivery of this Escrow Agreement is a
condition precedent to the obligation of Buyer to consummate the transaction
contemplated by the Merger Agreement.
G. Pursuant to that certain Shareholders' Agreement, the
Shareholders have appointed the Representative to act as the Shareholders'
representative in connection with, among other things, the execution and
delivery of this Escrow Agreement and the administration of the matters
contemplated hereby.
NOW THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained in this Escrow
Agreement, and intending to be legally bound, the parties hereto agree as
follows:
1. Escrow of Buyer Common Stock.
(a) To Secure the indemnification obligations of
Shareholders and as security for Buyer's obligations under the Merger Agreement
to make the Anniversary Date Payment, within fifteen (15) Business Days after
the Closing, the Buyer agrees to deliver to the Escrow Agent (i) a certificate
representing a number of shares of Buyer Common Stock, the fair market value of
which as of the Closing Date is $2,760,000 (which as of the date hereof is
equivalent to 120% of the aggregate amount of the parties' estimated amount of
the Anniversary Date Payment) (the "Anniversary Date Payment Shares"), and (ii)
a duly executed stock power separate from such certificate, the receipt of which
the Escrow Agent hereby acknowledges.
(b) As security for Buyer's performance under any
Promissory Note issued by Buyer in accordance with Section 2.13(f) of the Merger
Agreement, Buyer agrees to deliver to the Escrow Agent within fifteen (15)
Business Days after the Closing (i) a certificate representing a number of
shares of Buyer Common Stock, the fair market value of which is as of the
Closing equivalent to the face value of the Promissory Notes issued and
outstanding (collectively, the "Security Shares") and (ii) a duly executed stock
power separate from such certificate, the receipt of which the Escrow Agent
hereby acknowledges.
(c) In accordance with the terms of the Merger Agreement,
within sixty (60) days prior to the end of the First Earnout Period, Buyer
agrees to deliver, if applicable, to the Escrow Agent (i) a certificate
representing the Earnout Shares, if any, as determined in accordance with
Section 2.07 of the Merger Agreement and (ii) a duly executed stock power
separate from certificate. The Earnout Shares, if any, delivered to the Escrow
Agent will be disbursed to the Shareholders in their Allocable Percentages on
each Earnout Date pursuant to the terms of the Merger Agreement. The Security
Shares, the Anniversary Date Payment Shares and the Earnout Shares are
collectively referred to herein as the "Escrow Shares."
(d) The Escrow Shares shall be deposited in an account
established at the Escrow Agent for receipt of such escrow Shares (the "Escrow
Account") and shall be held in such Escrow Account and distributed in accordance
with the terms and provisions of this Escrow Agreement.
2
<PAGE>
(e) Any securities, non-cash dividends or other property
distributable in respect of or in exchange for any of the Escrow Shares, whether
by way of stock dividends, stock splits or otherwise, shall be delivered to the
Escrow Agent, who shall hold such securities, non-cash dividends or other
property in the Escrow Account. Such securities shall be issued in the name of
the Escrow Agent or its nominee and all such securities, non-cash dividends or
other property shall be considered part of the Escrow Account for purposes
hereof.
(f) The Representative shall have the right, in his sole
discretion, on behalf of, and as directed by, the Shareholders, to direct the
Escrow Agent in writing as to the exercise of any voting rights pertaining to
the Escrow Shares, and the Escrow Agent shall comply with any such written
instructions. In the absence of such instructions, the Escrow Agent shall not
vote any of the Escrow Shares.
(g) The respective interests of the Shareholders in the
Escrow Account shall not be assignable or transferable, other than by operation
of law. Notice of any such assignment or transfer by operation of law shall be
given to the Escrow Agent and Buyer, and no such assignment or transfer shall be
valid until such notice is given.
2. Buyer's Option to Redeem. At any time prior to the Anniversary
Date, Buyer shall have the right, but not the obligation, to redeem the
Anniversary Date Payment Shares from the Shareholders in exchange for payment of
a cash amount equivalent to $2,000,000, less the amount of any resolved claim or
claims paid pursuant to Section 8 hereof, plus interest thereon at a rate of ten
percent (10%) per annum commencing as of the Closing Date (the "Redemption
Option"). If Buyer elects to exercise its Redemption Option, Buyer shall provide
thirty (30) days prior written notice of such election to the Representative and
Escrow Agent (the "Redemption Notice"). Buyer shall also deliver with the
Redemption Notice to the Escrow Agent, by wire transfer of immediately available
funds or, at Buyer's election, by cashier's check, cash in an amount equivalent
to $2,000,000 less the amount of any resolved claim or claims paid pursuant to
Section 8 hereof, plus any accrued but unpaid dividends (the "Redemption Cash
Payment"). Upon receipt of the Redemption Cash Payment, the Escrow Agent (i)
shall deliver the Anniversary Date Payment Shares to Buyer and (ii) hold the
Redemption Cash Payment in the Escrow Account to be distributed in accordance
with the terms hereof.
3. Adjustment of Anniversary Date Payment Shares or Security
Shares. In the event the fair market value of the Anniversary Date Payment
Shares falls below eighty percent (80%) of the aggregate amount of the
Anniversary Date Payment, as adjusted in accordance with the Merger Agreement,
or the fair market value of the Security Shares falls below the aggregate face
value of all outstanding Promissory Notes for a period exceeding thirty (30)
consecutive days, then the Representative shall deliver notice to Buyer of such
shortfall and the Buyer shall deliver to the Escrow Agent additional shares of
Buyer Common Stock within thirty (30) days of receipt of Buyer's notice so that
the aggregate fair market value of the Anniversary Date Payment Shares equals
100% of the aggregate amount of the Anniversary Date Payment, as adjusted in
accordance with the Merger Agreement, or the aggregate fair market value of the
Security Shares equals 100% of the face value of all outstanding Promissory
Notes, as applicable.
3
<PAGE>
4. Foreclosure.
(a) The Representative may foreclose on the Anniversary
Date Payment Shares if Buyer fails to fulfill its payment obligations under
Section 2.06 of the Merger Agreement.
(b) The Representative may foreclose on the Security
Shares if Buyer fails to fulfill its payment obligations under any Promissory
note, and Buyer fails to cure such payment default within thirty (30) days after
receipt by Buyer of written notice from the Representative of such payment
default. Upon Buyer's payment in full of all of the Promissory Notes issued to
the Shareholders, the Escrow Agent shall release to Buyer the Security Shares
attributable to such Promissory Notes.
5. Investment of Escrow Account. Cash dividends distributable in
respect of any of the Escrow Shares, if any, shall be held and invested or
reinvested by the Escrow Agent at the written or oral request of the
Representative in any of the following securities:
(a) obligations issued or guaranteed by the United States
or any person controlled or supervised by and acting as an instrumentality of
the United States pursuant to authority granted by Congress;
(b) certificates of deposit of banks or trust companies,
including those of the Escrow Agent, organized under the laws of the United
States of America; and
(c) money market funds registered under the Investment
Company Act of 1940, as amended, the shares of which are registered under the
Securities Act, which invest only in securities of the types described in clause
(a) above, including (without limitation) investments in funds administered by
the Escrow Agent or its affiliate or with respect to which the Escrow Agent or
its affiliate is an investment manager or receives fees or other remuneration
and without restriction due to any rule requiring the Escrow Agent or its
affiliate to avoid any conflict of interest, all of which rules are knowingly
waived by the parties hereto.
Such investments shall be made subject to any orders of the
Representative with respect thereto, provided that investments of monies in the
Escrow Account shall in any event mature or be redeemable or be subject to
liquidation by sale or otherwise at the option of the Escrow Agent at such time
as may be necessary to make timely disbursements from the Escrow Account.
Subject to any such orders with respect thereto, or in the absence of any orders
from the Representative, the Escrow Agent may from time to time sell such
investments and reinvest the proceeds therefrom in other investments of the type
described in this Section maturing or redeemable as aforesaid. Any such
investments may be purchased from the Escrow Agent or any affiliate of the
Escrow Agent. The Escrow Account shall be credited with all proceeds of sale and
income from such investment.
6. Term. Subject to the indemnification claims made by Buyer
against Shareholders pursuant to the Merger Agreement, the term of this Escrow
Agreement shall commence on the date hereof and terminate on the later of (a)
the tenth Business Day after the Anniversary Date,
4
<PAGE>
(b) the date that the Earnout Shares with an aggregate fair market value up to
$2,000,000 have been delivered to Shareholders by the Escrow Agent pursuant to
the Merger Agreement and this Escrow Agreement or (c) the date on which the last
pending claim is resolved and paid.
7. Claims Against Escrow Account.
(a) If, at an time during the term of this Escrow
Agreement, Buyer has incurred or suffered Damages to which it is entitled to
indemnification under Article V of Article X of the Merger Agreement, Buyer
shall give written notice of such claim to the Representative and the Escrow
Agent, stating in reasonably sufficient detail the events or circumstances which
are the basis for and amount of such claim. If the Representative objects to any
such claim, he shall given written notice of such objection to Buyer and the
Escrow Agent within ten (10) days after the date of receipt of Buyer's notice,
and shall state the basis for such objection. Notwithstanding the foregoing,
such ten (10) day period shall be extended to a twenty (20) day period if within
such original ten (10) day period the Representative gives written notice to
Buyer and the Escrow Agent that additional time is necessary to respond to the
claim. If no objection to Buyer's claim is made by the Representative within
such ten (10) day period, or twenty (20) day period, as applicable, the claim
shall be deemed resolved and shall be paid by the Escrow Agent pursuant to
Section 8 without further mutual instructions from the parties.
(b) If the Representative provides timely notice of
objection to any claim, Buyer and the Representative shall attempt to resolve
the dispute and, if they are able to do so, shall give mutual written notice to
the Escrow Agent of the resolution of the dispute and the amount of the claim
resolved, if any.
(c) If Buyer and the Representative are unable informally
to resolve a disputed claim pursuant to Section 7(b) above within twenty (20)
days after the date of the Representative's objection to Buyer's claim, the
dispute shall be settled by a court of competent jurisdiction in the State of
New York or the United States District Court for the Southern District of New
York. Any decision or award of such court shall be treated as a claim resolved
under this Escrow Agreement and shall be final and conclusive on the parties to
this Escrow Agreement and their respective affiliates. The parties hereto agree
that any action or proceeding pursuant to this Escrow Agreement shall be brought
in an appropriate New York Court or in the United States District Court for the
Southern District of New York, and in connection with such action or proceeding,
the laws of the State of Maryland shall govern. The parties hereto hereby
consent to the jurisdiction of such court. Buyer and the Representative may each
respectively appoint such attorneys, accountants and agent to act for them
before the court.
8. Payment of Resolved Claims. Within five (5) days following the
day on which a claim is resolved pursuant to Section 7 above, the Escrow Agent
shall release to Buyer an amount of the Escrow Shares or the Redemption Cash
Payment, as applicable, out of the Escrow Account which is equivalent to the
amount of any such resolved claim. If Escrow Shares are released to Buyer
pursuant to the preceding sentence, then the number of Escrow Shares released to
Buyer shall be an amount with a fair market value equal to the lesser of (i) the
amount of any such resolved claim or (ii) the fair market value of all Escrow
Shares remaining in the Escrow Account which shall be the average closing bid
price per share of Buyer Common Stock for the
5
<PAGE>
ten (10) trading days immediately preceding the date of the distribution. The
Escrow Agent shall record into a ledger maintained in connection with the Escrow
Account the date such resolved claim was paid, the amount of the claim paid and
the number of Escrow Shares, or the amount of the Redemption Cash Payment,
delivered to Buyer as payment of the claim. For purposes of this Agreement, the
balance of the Escrow Account shall be determined on a cash basis.
9. Release of Anniversary Date Payment Shares. On the Anniversary
Date, the Escrow Agent shall, subject to Buyer's exercise of the Redemption
Option pursuant to Section 2 hereto, hold and distribute, as applicable, the
Escrow Shares or the Redemption Cash Payment in accordance with the following:
(a) If there is on the Anniversary Date neither any claim
asserted by the Buyer which has not yet been resolved (a "Pending Claim")
pursuant to Section 9 hereof, nor any claim of Buyer resolved but not paid, the
Escrow Agent shall distribute to the Shareholders, in accordance with their
respective Allocable Percentages, the Escrow Shares or the Redemption Cash
Payment. If the Escrow Agent distributes Escrow Shares on the Anniversary Date,
the following shall apply:
(i) The Escrow Agent shall distribute to the
Shareholders in their Allocable Percentages the Anniversary Date Payment Shares
having a fair market value of $2,300,000.00, less the amount of any claims
resolved prior to the Anniversary Date and as adjusted pursuant to Section 2.08
of the Merger Agreement (the "Escrow Account Distribution Amount").
(ii) If on the Anniversary Date, the Anniversary
Date Payment Shares have a fair market value greater than the Escrow Account
Distribution Amount, then the Escrow Agent shall return to Buyer the Anniversary
Date Payment Shares having a fair market value on the Anniversary Date equal to
the difference between (x) the fair market value of the Anniversary Date Payment
Shares on the Anniversary Date and (y) the Escrow Account Distribution Amount.
The number of Anniversary Date Payment Shares to be returned by Escrow Agent to
Buyer pursuant to this Section 9(a) shall be rounded down to the nearest whole
share.
(iii) If the Escrow Agent is required to return
shares of Anniversary Date Payment Shares to Buyer pursuant to subsection
(a)(ii) above, Buyer and the Representative shall give joint written notice of
such event to the Escrow Agent within five (5) Business Days of the Anniversary
Date. Such written notice shall include the number of Anniversary Date Payment
Shares to be returned to Buyer pursuant to subsection (a)(ii) above (the
"Returned Shares"), and the Escrow Agent shall release the Returned Shares to
Buyer out of the Escrow Account on the Anniversary Date.
(iv) If on the Anniversary Date, the Anniversary
Date Payment Shares have a fair market value less than the Escrow Account
Distribution Amount, Buyer shall deliver to the Escrow Agent that number of
shares of Buyer Common Stock having a fair market value equal to the difference
between (x) the Escrow Account Distribution Amount and (y) the fair market value
of the Anniversary Date Payment Shares on the Anniversary Date (the "Additional
6
<PAGE>
Shares"), and the Escrow Agent shall return to the Shareholders the Anniversary
Date Payment Shares plus the Additional Shares; provided that Buyer in its sole
discretion may choose to pay the Shareholders in cash the amount of such
difference.
(v) For purposes of this Section 9(a), the fair
market value of the Anniversary Date Payment Shares and the Returned Shares to
be returned to Buyer, if any, as of the Anniversary Date shall be computed using
the average closing bid price per share of Buyer Common Stock for the ten (10)
trading days immediately preceding the Anniversary Date.
(b) If there is on the Anniversary Date any Pending
Claim, or any claim resolved but not paid, the Escrow Agent shall reserve and
continue to hold in the Escrow Account an amount of Escrow Shares and other
property having a fair market value equal to the lesser of (i) the fair market
value of all Escrow Shares and other property in the Escrow Account or (ii) the
total amount of all Pending Claims and resolved but not paid claims, and shall
distribute to the Shareholders the remainder of the Escrow Shares, if any, and
any other property retained in the Escrow Account, if any, in accordance with
their respective Allocable Percentages. For purposes of the preceding sentence,
the fair market value of such Escrow Shares shall be computed using the average
closing bid price per share of Buyer Common Stock for the ten (10) trading days
immediately preceding the Anniversary Date.
(c) Following the Anniversary Date, as each Pending Claim
as resolved, for which an amount was reserved according to Section 9(b) hereof,
the Escrow Agent shall release to Buyer an amount of the Escrow Shares out of
the Escrow Account which is equivalent to the amount of such unresolved claim;
provided, however, that if at that time there remain other Pending Claims or
resolved but not paid claims, the Escrow Agent shall continue to hold the
remaining retained Escrow Shares and other property. When no Pending Claims or
resolved but not paid claims remain, the Escrow Agent shall distribute to the
Shareholders the balance, if any, of the Escrow Shares in accordance with their
respective Allocable Percentages.
(d) Any distribution to any Shareholder provided for
herein shall be paid to the estate of the Shareholder if the Shareholder is then
deceased.
10. Release of Earnout Shares. On each Earnout Date, the Escrow
Agent shall, hold and distribute, the Earnout Shares, if any, for each Earnout
Period in accordance with the following:
(a) If there is on each Earnout Date neither a Pending
Claim, nor any claim of Buyer resolved but not paid, the Escrow Agent shall
distribute to the Shareholders, in accordance with their respective Allocable
Percentages, the Earnout Shares for each Earnout Period, provided however that
the fair market value of all Earnout Shares distributed to the Shareholders
pursuant to this Section 10 shall not exceed $2,000,000. If the Escrow Agent
distributes Earnout Shares on any Earnout Date, the following shall apply:
(i) The Escrow Agent shall distribute to the
Shareholders in their Allocable Percentages the number of Earnout Shares for the
First Earnout Period, if any, having a fair market value equal to the First
Earnout Payment within seventy-five (75) days of the end
7
<PAGE>
of the First Earnout
Period, less the amount of any claims resolved prior to the end of the First
Earnout Period;
(ii) The Escrow Agent shall distribute to the
Shareholders in their Allocable Percentages the number of Earnout Shares for the
Second Earnout Period, if any, having a fair market value equal to the Second
Earnout Payment within seventy-five (75) days of the end of the Second Earnout
Period, less the amount of any claims resolved prior to the end of the Second
Earnout Period;
(iii) The Escrow Agent shall distribute to the
Shareholders in their Allocable Percentages the number of Earnout Shares for the
Third Earnout Period, if any, having a fair market value equal to the Third
Earnout Payment within seventy-five (75) days of the end of the Third Earnout
Period, less the amount of any claims resolved prior to the end of the Third
Earnout Period;
(iv) Any provision in this Escrow Agreement to
the contrary notwithstanding, upon the delivery of Earnout Shares to the
Shareholders having an aggregate fair market value equal to $2,000,000, the
Escrow Agent shall return to Buyer all remaining Earnout Shares.
(v) If the Escrow Agent is required to return
Earnout Shares pursuant to subsection (a)(iv) above, Buyer and the
Representative shall give joint written notice of such event to the Escrow Agent
within five (5) Business Days of the distribution to the Shareholders of Earnout
Shares having an aggregate fair market value equal to $2,000,000. Such written
notice shall include the number of Earnout Shares to be returned to Buyer
pursuant to subsection (a)(iv) above, and the Escrow Agent shall release such
Earnout Shares to Buyer within five (5) Business Days of the receipt of such
written notice.
(vi) For purposes of this Section 10(a) the fair
market value of the Earnout Shares, if any, as of each Earnout Date shall be
computed using the average closing bid price per share of Buyer Common stock for
the ten (10) trading days immediately preceding the applicable Earnout Date.
(b) If there is on any Earnout Date any Pending Claim, or
any claim resolved but not paid, the Escrow Agent shall reserve and continue to
hold in the Escrow Account an amount of Earnout Shares having a fair market
value equal to the lesser of (i) the fair market value of all Earnout Shares in
the Escrow Account or (ii) the total amount of all Pending claims and resolved
but not paid claims, and shall, subject to subsection (a)(iv) above, distribute
to the Shareholders the remainder of the Earnout Shares, if any, retained in the
Escrow Account, if any, in accordance with their respective Allocable
Percentages. For purposes of the preceding sentence, the fair market value of
such Earnout Shares shall be computed using the average closing bid price per
share of Buyer Common Stock for the ten (10) trading days immediately preceding
the applicable Earnout Date.
(c) Following each Earnout Date, as each Pending Claim is
resolved, for which an amount was reserved according to Section 10(b) hereof,
the Escrow Agent shall release
8
<PAGE>
to Buyer an amount of the Earnout Shares out of the Escrow Account which is
equivalent to the amount of such unresolved claim; provided, however, that if at
that time there remain other Pending Claims or resolved but not paid claims, the
Escrow Agent shall continue to hold the remaining retained Earnout Shares and
other property. When no Pending Claims or resolved but not paid claims remain,
the Escrow Agent shall distribute to the Shareholders the balance, if any, of
the Earnout Shares in accordance with their respective Allocable Percentages,
subject to subsection (a)(iv) above.
(d) Any distribution to any Shareholder provided for
herein shall be paid to the estate of the Shareholder if the Shareholder is then
deceased.
11. Release of Security Shares. Within fifteen (15) Business Days
of the receipt of written notice from any Shareholder that Buyer has paid in
full such Shareholder's Promissory Note, the Escrow Agent shall release to Buyer
(a) the number of Security Shares the fair market value of which is equivalent,
as of the date of the receipt of such written notice, to the face value of such
Promissory Note and (b) the duly executed stock power executed by Buyer to
secure performance of such Promissory Note.
12. Escrow Agent.
(a) The duties of the Escrow Agent hereunder shall be
entirely administrative and not discretionary. The Escrow Agent shall be
obligated to act only in accordance with written or oral instruction received by
it as provided in this Escrow Agreement and is authorized hereby to comply with
any orders, judgments or decrees of any court with or without jurisdiction and
shall not be liable as a result of its compliance with the same.
(b) As to any legal questions arising in connection with
the administration of this Escrow Agreement, the Escrow Agent may rely
absolutely upon the opinions given to its by its counsel and shall be free of
liability for acting in reliance on such opinions.
(c) The Escrow Agent may rely absolutely upon the
genuineness and authorization of the signature and purported signature of any
party upon any instruction, notice, release, receipt or other documentation
delivered to it pursuant to this Escrow Agreement.
(d) The Escrow Agent shall not be required to calculate
the value of the Buyer Common Stock delivered to the Escrow Agent pursuant to
this Escrow Agreement.
(e) The Escrow Agent shall not be required to exercise
any voting rights with respect to the Buyer Common Stock delivered to the Escrow
Agent pursuant to this Escrow Agreement.
(f) The Escrow Agent may, as a condition to the
disbursement of monies as provided herein, require from the payee or recipient a
receipt therefor and, upon final payment of disposition, a release of the Escrow
Agent from any liability arising out of its execution or performance of this
Escrow Agreement, such release to be in a form satisfactory to the Escrow Agent.
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<PAGE>
(g) Each the Buyer and the Representative agrees to pay
one-half of the Escrow Agent's compensation for its services as set forth on
Annex B attached hereto, until termination of this Escrow Agreement or
resignation of the Escrow Agent.
13. Indemnity.
(a) Buyer and the Representative agree to and hereby do
waive any suit, claim, demand or cause of action of any kind which they or it
may have or may assert against the Escrow Agent arising out of or relating to
the execution or performance by the Escrow Agent of this Escrow Agreement,
unless such suit, claim, demand or cause of action is based upon the willful
neglect or gross negligence or bad faith of the Escrow Agent. They further agree
to indemnify the Escrow Agent against and from any and all claims, demands,
costs, liabilities and expenses, including reasonable counsel fees, which may be
asserted against it or to which it may be exposed or which it may incur by
reason of its execution or performance of this Escrow Agreement. Such agreement
to indemnify shall survive the termination of this Escrow Agreement until
extinguished by any applicable statute of limitations.
(b) In case any litigation is brought against the Escrow
Agent in respect of which indemnity may be sought hereunder, the Escrow Agent
shall give prompt notice of that litigation to the parties hereto, and the
parties upon receipt of that notice shall have the obligation and the right to
assume the defense of such litigation, provided that failure of the Escrow Agent
to give that notice shall not relieve the parties hereto from any of their
obligations under this Section unless that failure prejudices the defense of
such litigation by said parties. At its own expense, the Escrow Agent may employ
separate counsel and participate in the defense. The parties hereto shall not be
liable for any settlement without their respective consents.
14. Acknowledgment by the Escrow Agent. By execution and delivery
of this Escrow Agreement, the Escrow Agent acknowledges that the terms and
provisions of this Escrow Agreement are acceptable and it agrees to carry out
the provisions of this Escrow Agreement on its part.
15. Resignation or Removal of Escrow Agent; Successors.
(a) The Escrow Agent may resign as such following the
giving of thirty (30) days' prior written notice to the other parties hereto.
Similarly, the Escrow Agent may be removed and replaced following the giving of
thirty (30) days' prior written notice to the Escrow Agent by the
Representative. In either event, the duties of the Escrow Agent shall terminate
thirty (30) days after the date of such notice (or as of such earlier date as
may be mutually agreeable); and the Escrow Agent shall then deliver the balance
of the Escrow Account then in its possession to a successor Escrow Agent as
shall be appointed by the other parties hereto as evidenced by a written notice
filed with the Escrow Agent.
(b) If for any reason any person or entity is unwilling
to serve as successor Escrow Agent and if the other parties hereto are unable to
agree upon a successor or shall have failed to appoint a successor prior to the
expiration of thirty (30) days following the date of the
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<PAGE>
notice of resignation or removal, the then acting Escrow Agent may petition any
court of competent jurisdiction for the appointment of a successor Escrow Agent
or other appropriate relief; and any such resulting appointment shall be binding
upon all of the parties hereto.
(c) Every successor appointed hereunder shall execute,
acknowledge and deliver to its predecessor and the other parties hereto, an
instrument in writing accepting such appointment hereunder, and thereupon such
successor, without any further act, shall become fully vested with all the
duties, responsibilities and obligations of its predecessor; but such
predecessor shall, nevertheless, on the written request of its successor or any
of the parties hereto, execute and deliver an instrument or instruments
transferring to such successor all the rights of such predecessor hereunder, and
shall duly assign, transfer and deliver a property, securities and monies held
by it pursuant to this Escrow Agreement to its successor. Should any instrument
be required by any successor for more fully vesting in such successor the
duties, responsibilities and obligation hereby vested or intended to be vested
in the predecessor, any and all such instruments in writing shall, on the
request of any of the other parties hereto, be executed, acknowledged and
delivered by the predecessor.
(d) In the event of an appointment of a successor, the
predecessor shall cease to be custodian of any funds, securities or other assets
and records it may hold pursuant to this Escrow Agreement, and the successor
shall become such custodian.
(e) Upon acknowledgment by any successor Escrow Agent of
the receipt of then the remaining balance of the Escrow Fund, the then acting
Escrow Agent shall be fully released and relieved of all duties,
responsibilities and obligations under this Escrow Agreement.
16. Entire Agreement, Amendments and Waivers. This Escrow
Agreement and the Merger Agreement contain the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior and
contemporaneous agreements, negotiations, discussions, arrangements or
understandings with respect thereto. No amendment, supplement, modification or
waiver of this Escrow Agreement shall be binding unless executed in writing by
the Escrow Agent, Buyer and the Representative. No waiver of any of the
provisions of this Escrow Agreement shall be deemed or shall constitute a waiver
of any other provision hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided. In addition
to the remedies provided in this Escrow Agreement, any party may pursue any and
all remedies now or hereafter existing at law or in equity.
17. Execution Counterparts. This Escrow Agreement may be executed
in one or more counterparts (including by facsimile), each of which shall be
regarded as an original and all of which shall constitute but one and the same
instrument.
18. Severability. If any provision of this Escrow Agreement, or
any covenant, obligation or agreement contained herein is determined by a court
to be invalid or unenforceable, such determination shall not affect any other
provision, covenant, obligation or agreement, each of which shall be construed
and enforced as if such invalid or unenforceable portion were not contained
therein. Such invalidity or unenforceability shall not affect any valid and
enforceable application thereof, and each such provision, covenant, obligation
or agreement shall be deemed
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<PAGE>
to be effective, operative, made, entered into or taken in the manner and to the
full extent permitted by law.
19. Headings. The headings in this Escrow Agreement shall be
solely for convenience of reference and shall in no way define, limit or
describe the scope or intent of any provisions or sections of this Escrow
Agreement.
20. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and shall be deemed to be
sufficiently given (a) if delivered personally, upon delivery, (b) if delivered
by registered or certified mail (return receipt requested), postage prepaid,
upon the earlier of actual delivery or upon three days after being mailed, and
(c) if delivered by telecopy, upon confirmation of transmission by telecopy, in
each case to the parties at the following address:
<TABLE>
<CAPTION>
<S> <C>
(a) As to Buyer: Interiors, Inc.
320 Washington Street
Mt. Vernon, New York 10553
Attention: Max Munn
Facsimile: (914) 665-1610
With a copy to: Arthur L. Zwickel, Esq.
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071
Facsimile: (213) 627-0705
(b) As to Escrow Agent: Norwest Bank Minnesota, N.A.
11000 Broken Land Parkway
Columbia, Maryland 21044-3562
Attn: Debra S. Taylor, Vice President
Facsimile: (410) 884-2337
(c) As to Representative: Mr. Carl McWilliams
c/o Model Home Interiors, Inc.
10120 Bacon Drive
Beltsville, Maryland 20705
Facsimile: (301) 937-3785
With a copy to: Mezzullo & McCandlish
1111 East Main Street, Suite 1500
P. O. Box 796 (Zip: 23218)
Richmond, Virginia 23219
Facsimile: (804) 775-3800
Attention: Thomas A. Grant, Esq.
</TABLE>
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<PAGE>
Any of the parties hereto may, by notice given hereunder, designate any further
or different address to which subsequent notices or other communications shall
be sent.
21. Expenses. Except as otherwise provided for herein, each party
shall be responsible for its own costs and expenses with respect to matters
involving this Escrow Agreement.
22. Successors. This Escrow Agreement shall be binding upon, and
inure to, the benefit of the heirs, executors, successors and assignees of the
parties hereto, and no other person shall have any right, benefit or obligation
hereunder.
23. Gender. Words of the masculine gender include the feminine and
the neuter, and when the context so requires, words of the neuter gender may
refer to any gender.
24. Applicable Law. This Escrow Agreement shall be governed by and
construed and enforced in accordance with the internal laws (and not the law of
conflicts) of the State of Maryland.
IN WITNESS WHEREOF, each of the parties hereto has caused this Escrow
Agreement to be executed on its behalf as of the day and year first above
written.
BUYER:
INTERIORS, INC.
By: /s/
--------------------------------
An Authorized Officer
ESCROW AGENT:
NORWEST BANK MINNESOTA, N.A.
By: /s/
--------------------------------
An Authorized Officer
REPRESENTATIVE:
/s/ Carl McWilliams
----------------------------------
Carl McWilliams
13
<PAGE>
EXHIBIT D
VOTING AGREEMENT
----------------
This VOTING AGREEMENT (this "Agreement"), dated as of November 22,
2000, is made by and among JERRY L. BASHORE, a resident of the State of
Maryland, CHARLES R. BRODERICK, III, a resident of the State of Maryland,
WILLIAM F. CARROLL, a resident of the District of Columbia, and CARL F.
MCWILLIAMS, a resident of the State of Maryland, and (each a "Stockholder" and
collectively, the "Stockholders").
WHEREAS, the Stockholders wish to enter into an agreement for the
voting of all of the capital stock of Interiors, Inc., a Delaware corporation
(the "Company"), "beneficially owned" (as such term is defined in the Securities
Exchange Act of 1934, as amended) by each of them with respect to certain
matters.
TERMS OF AGREEMENT
------------------
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto do
covenant and agree as follows:
1. Nature and Term of Agreement. This Agreement is intended to
qualify as a voting agreement entered into and in accordance with and pursuant
to the terms of Section 218(c) of the Delaware Corporation Law, as amended. The
term of this Agreement shall commence on the date hereof and shall continue for
six (6) months unless sooner terminated by written consent of the parties
hereof.
2. Representations of Stockholder. Each Stockholder represents
that such Stockholder:
(a) is the beneficial owner of that number of shares of
Class A Common Stock, par value $0.001 per share, of the Company (the "Shares")
set forth opposite such Stockholder's name on Exhibit A; and
(b) has the right, power and authority to execute and
deliver this Agreement and to perform its obligations under this Agreement, and
this Agreement has been duly executed and delivered by such Stockholder and
constitutes a valid and legally binding agreement of such Stockholder,
enforceable in accordance with its terms except as such validity, enforceability
and binding effect may be limited by bankruptcy, insolvency, moratorium and
other laws affecting creditors' rights generally and by equitable principles;
and such execution, delivery and performance by such Stockholder of this
Agreement will not (i) conflict with, require consent, waiver or approval under,
or result in a breach of or default under, any of the terms of any material
contract, commitment or other obligation (written or oral) to which such
Stockholder is a party or by which such Stockholder is bound; (ii) violate any
order, writ, injunction, decree or statute, or any rule or regulation,
applicable to such Stockholder or any of the properties or assets of
Stockholder; or (iii) result in the creation of, or impose any obligation on
such Stockholder to create any lien, charge or other encumbrance of any nature
whatsoever upon the Shares.
<PAGE>
3. Agreement to Vote Shares.
(a) At the annual meeting of the stockholders of the
Company to be held on December 15, 2000, or at any adjournment or postponement
thereof or in any other circumstances upon which the Stockholders' vote, consent
or other approval is sought during the term of this Agreement, the Stockholders
agree that they will vote or cause to be voted all of their respective Shares in
favor of the following nominees to the Board of Directors of the Company (the
"Nominees"):
Kinsey C. Craichy
Charles M. Egan
Carl F. McWilliams
(b) At the annual meeting of the stockholders of the
Company to be held on December 15, 2000, or at any adjournment or postponement
thereof or in any other circumstances upon which the Stockholders' vote, consent
or other approval is sought during the term of this Agreement, the Stockholders
agree that they will vote or cause to be voted all of their respective Shares in
the same manner, as determined in accordance with Section 4(a), with respect to:
(i) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination involving the
Company, its subsidiaries and/or affiliates, any sale or transfer of a material
amount of assets of the Company, its subsidiaries and/or affiliates or the
Company capital stock, any reorganization, recapitalization or liquidation of
the Company, its subsidiaries and/or affiliates or any other takeover proposal;
(ii) any change in the management or Board of
Directors of the Company;
(iii) any material change in the present
capitalization or dividend policy of the Company;
(iv) any amendment to the Company's Certificate
of Incorporation or Bylaws or other proposal or transaction involving the
Company, which amendment or other proposal or transaction changes in any manner
the voting rights of any class of the Company's capital stock;
(v) any other material change in the Company's
corporate structure or business;
(vi) any shareholder proposal; or
(vii) the appointment of auditors.
(c) Each Stockholder hereby appoints Carl McWilliams,
until the termination of this Agreement, as proxy and attorney-in-fact (with
full power of substitution), for and in the name, place and stead of such
Stockholder, with respect to the Shares held by such Stockholder,
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<PAGE>
to vote the Shares held by such Stockholder, or grant or execute a consent or
approval, at any meeting of the Stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which their vote, consent
or other approval is sought in accordance with this Section 3. Such proxy shall
be irrevocable and coupled with an interest. Each Stockholder will take such
further action and execute such other instruments as may be necessary to effect
the intent of this proxy, and hereby revokes any proxy previously granted by it
with respect to the Shares held by it. Each Stockholder agrees that this
Agreement, including the provisions of this Section 3, may be recorded in the
books and records of the Company. Notwithstanding the foregoing, nothing in this
Agreement shall limit or affect any Stockholder's ability to vote in his, her or
its sole discretion on, and no Stockholder shall grant or be deemed to grant any
proxy or power-of-attorney with respect to, any matter other than those matters
specifically referred to in this Section 3.
4. Proxy Contest.
(a) The Stockholders contemplate challenging the current
Board of Directors and management of the Company with respect to matters
concerning the governance and capitalization of the Company (the "Proxy
Contest"). With respect to the Proxy Contest and any other matter set forth in
Section 3, any decision or action of the Stockholders as a group shall first be
approved by the affirmative vote of a majority of the Stockholders.
(b) In connection with the matters contemplated by this
Agreement, each Stockholder hereby agrees to pay a Pro Rata Share of the fees
and expenses incurred for legal, proxy solicitation and other professional
services rendered in connection herewith. "Pro Rata Share" shall mean the
percentage that equals the result of (i) the number one, divided by (ii) the
total number of Stockholders hereunder. Each Stockholder further agrees to pay a
Pro Rata Share of any costs other than and in addition to those set forth above,
which are incurred in connection with the matters contemplated by this
Agreement, including, but not limited to, long distance telephone and facsimile
charges, copying, printing, courier fees and delivery costs.
5. Additional Purchases. Each Stockholder agrees that in the
event (a) of any stock dividend, stock split, recapitalization,
reclassification, combination or exchange of shares of capital stock of the
Company on, of or affecting the Shares of such Stockholder, (b) such Stockholder
purchases or otherwise acquires after the execution of this Agreement (including
by conversion) beneficial ownership of any additional shares of the Company's
capital stock, or (c) such Stockholder voluntarily acquires the right to vote or
share in the voting of any shares of the Company's capital stock other than the
Shares, any such additional shares of the Company's capital stock acquired or
purchased by him, her or it shall be subject to the terms of this Agreement and
shall constitute Shares to the same extent as if they were owned by such
Stockholder on the date hereof. Each Stockholder agrees to promptly notify the
other Stockholders upon any change in beneficial ownership of any shares of the
Company's capital stock.
6. No Transfer. Until termination of this Agreement, each
Stockholder hereby agrees not to sell, transfer, assign or otherwise dispose of
any of his, her or its Shares other than sales, transfers, assignments or other
dispositions to affiliates of such Stockholder or to another
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<PAGE>
Stockholder or transfers upon the death of a Stockholder, without the prior
written consent of the Stockholders holding at least two-thirds (2/3) of the
remaining number of Shares hereunder. Any permitted transferee of such Shares
shall become a party to this Agreement and any purported transfer of such Shares
to a person or entity that has not become a party hereto shall be null and void.
7. Further Assurances. From time to time, at the reasonable
request of Carl McWilliams and without further consideration, each party hereto
shall execute and deliver such additional documents and take all such further
action as may be necessary or desirable to consummate and make effective, in the
most expeditious manner practicable, the transactions contemplated by this
Agreement.
8. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given, if delivered
personally, by telecopier or sent by certified mail, return receipt requested,
postage prepaid or by a recognized air courier service, as follows:
Jerry L. Bashore
1319 Cameron Hill Court
Silver Spring, MD 20910
Charles R. Broderick, III
100 Dot Sam Road
Reisterstown, MD 21136
William F. Carroll
2649 Woodley Road N.W.
Washington, D.C. 20008
Carl F. McWilliams
927 Montgomery Street
Laurel, MD 20707
9. Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of law or otherwise by any of the parties without the prior
written consent of the other parties, and any attempted or purported assignment
shall be void. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
10. Entire Agreement; No Third-Party Beneficiaries. This Agreement
(a) constitutes the entire agreement, and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter of this Agreement and (b) is not intended to confer upon any
person other than the parties any rights or remedies.
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<PAGE>
11. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to seek an injunction
or injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
12. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Delaware applicable to
contracts made and to be performed in that State, without giving effect to the
conflict of laws provisions thereof.
13. Venue. Each party hereto hereby irrevocable submits to the
exclusive jurisdiction of any state or federal court sitting in the City of
Wilmington, Delaware in any action or proceeding arising out of or relating to
this Agreement and hereby irrevocably agrees that all claims in respect of such
action or proceeding may be heard and determined in such state court or, to the
extent permitted by law, in such federal court. Each of the parties hereby
irrevocably consents to the service of process in any such action or proceeding
by the mailing by certified mail of copies of any service or copies of any
summons and complaint and any other process to such party at the address
specified in Section 8 hereof. The parties further agree that a final judgment
in any such action or proceeding shall be conclusive and may be enforced in
other jurisdictions by suit on the judgment or in any other manner provided by
law. Nothing in this Section 13 shall affect the right of a party to serve legal
process in any other manner permitted by law.
14. Severability. Whenever possible, each provision or portion of
any provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
15. Counterparts. This Agreement may be executed in two (2) or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
[SIGNATURES ON NEXT PAGE]
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STOCKHOLDERS:
Date: November 22, 2000 /s/ Jerry Bashore
----------------------------------------
Jerry Bashore
Date: November 22, 2000 /s/ C. R. Broderick, III
----------------------------------------
C. R. Broderick, III
Date: November 22, 2000 /s/ William F. Carroll
----------------------------------------
William F. Carroll
Date: November 22, 2000 /s/ Carl McWilliams
----------------------------------------
Carl McWilliams
6
<PAGE>
Exhibit A
---------
No. of Shares of Class A
Name of Stockholder Common Stock
------------------- ------------
Jerry L. Bashore 700,695
Charles R. Broderick, III 700,695
William F. Carroll 700,695
Carl F. McWilliams 3,119,795
---------
Total Shares: 5,221,880
7
