<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 8, 1999
REGISTRATION NO. 333-
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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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WINSLOEW FURNITURE, INC.*
(Exact name of Registrant as specified in its charter)
<TABLE>
FLORIDA 2510 63-1127982
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<S> <C> <C>
(State or Jurisdiction of (Primary Standard Industrial
Incorporation or Organization) Classification Code Number) (IRS Employer Identification Number)
</TABLE>
160 VILLAGE STREET
BIRMINGHAM, ALABAMA 35242
(205) 408-7600
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(Address and telephone number of Registrant's principal executive offices)
BOBBY TESNEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WINSLOEW FURNITURE, INC.
160 VILLAGE STREET
BIRMINGHAM, ALABAMA 35242
(205) 408-7600
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(Name, address and telephone number of agent for service)
COPIES OF COMMUNICATIONS TO:
BRUCE E. MACDONOUGH, ESQ.
GREENBERG TRAURIG, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
TELEPHONE NO.: (305) 579-0500
FACSIMILE NO.: (305) 579-0717
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE(2)
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<S> <C> <C> <C> <C>
12 3/4% Series B Senior
Subordinated Notes due 2007...... $105,000,000 100% $105,000,000 $29,190
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Guarantees of 12 3/4% Series B
Senior Subordinated Notes due
2007........................... $105,000,000 -- -- --(3)
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Total................... $29,190
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) The registration fee has been calculated in accordance with Rule 457(f)(2)
under the Securities Act of 1933.
(3) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is
payable for the Guarantees.
The Registrants hereby amend this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrants
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
* Subsidiaries of WinsLoew Furniture, Inc. will guarantee the notes being
registered hereby and therefore are also Registrants. Information about such
additional Registrants appears on the following page.
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ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
PRIMARY STANDARD
STATE OR OTHER INDUSTRIAL I.R.S. EMPLOYER ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
JURISDICTION OF CLASSIFICATION CODE IDENTIFICATION NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S
NAME INCORPORATION NUMBER NUMBER PRINCIPAL EXECUTIVE OFFICE
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<S> <C> <C> <C> <C>
Winston Furniture
Company of Alabama,
Inc. ................ Alabama 2510 63-0957251 160 Village Street
Birmingham, Alabama 35242
Loewenstein, Inc. ..... Florida 2510 59-2504882 1801 North Andrews Extension
Pompano Beach, Florida 33061
Texacraft, Inc. ....... Texas 2510 76-0444966 601 West 6th Street
Houston, Texas 77004
Tropic Craft, Inc. .... Florida 2510 59-1784459 4251 South Pine Avenue
Ocala, Florida 32671
Winston Properties,
Inc. ................ Alabama 2510 63-1219605 160 Village Street
Birmingham, Alabama 35242
Pompeii Furniture Co.,
Inc. ................ Florida 2510 59-0912668 255 N.W. 25th Street
Miami, Florida 33127
</TABLE>
The name, address, including zip code, and telephone number, including area
code, of the agent for service of each of said additional registrants is:
Bobby Tesney, President and Chief Executive Officer
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
(205) 408-7600
<PAGE> 3
The information is this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it
is not soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED NOVEMBER 8, 1999
PROSPECTUS
WINSLOEW FURNITURE, INC.
OFFER TO EXCHANGE
$105,000,000
ALL OUTSTANDING ORIGINAL 12 3/4% SERIES A
SENIOR SUBORDINATED NOTES DUE 2007
FOR
REGISTERED 12 3/4% SERIES B
SENIOR SUBORDINATED NOTES DUE 2007
THE REGISTERED NOTES
The terms of the registered notes we will issue to you in exchange for your
original notes will be substantially identical to the terms of your original
notes except that, unlike our original notes, the registered notes will have no
transfer restrictions or registration rights.
MATERIAL TERMS OF THE EXCHANGE OFFER
- - The exchange offer will expire at 5:00 p.m., New York City time, on
, 1999, unless we extend the deadline.
- - We will exchange all original notes that are validly tendered and not
withdrawn before the exchange offer expires.
- - We will not receive any proceeds from the exchange offer.
- - We will issue the registered notes promptly after the exchange offer expires.
- - You may withdraw tenders of original notes at any time before the exchange
offer expires.
- - We believe that the exchange of original notes will not be a taxable event for
federal income tax purposes. You should read "Certain United States Federal
Income Tax Considerations" on page 119 for more information.
- - No public market currently exists for the registered notes. We do not expect
that an active public market in the registered notes will develop. We do not
intend to list the registered notes on any securities exchange or to arrange
for them to be quoted on any quotation system.
- - All broker-dealers must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933.
- - The exchange offer is subject to customary conditions, including the
conditions that the exchange offer not violate applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission.
INVESTING IN THE REGISTERED NOTES INVOLVES CERTAIN RISKS. SEE THE "RISK FACTORS"
SECTION ON PAGE 15 FOR INFORMATION THAT YOU SHOULD CONSIDER BEFORE YOU DECIDE TO
PARTICIPATE IN THIS EXCHANGE OFFER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE REGISTERED NOTES OR DETERMINED
THAT THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this prospectus is , 1999.
(WINSLOEW FURNITURE, INC. LOGO)
<PAGE> 4
WHERE YOU CAN FIND MORE INFORMATION
As a result of the exchange offer, we will be subject to the periodic
reporting and other informational requirements of the Exchange Act. We will file
annual, quarterly and special reports and other information with the SEC. In
addition, we have agreed under the indenture that governs the original notes and
the registered notes that, whether or not we are required to do so by the rules
and regulations of the SEC, for so long as any of the original notes or
registered notes remain outstanding, we will furnish to the holders of any of
those securities and file with the SEC, unless the SEC will not accept such a
filing, (i) all quarterly and annual financial information that would be
required to be contained in a filing with the SEC on Forms 10-Q and 10-K if we
were required to file such forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with respect to
the annual information only, a report thereon by our certified independent
public accountants and (ii) all reports that would be required to be filed with
the SEC on Form 8-K if we were required to file such reports. In addition, for
so long as any of the original notes or registered notes remain outstanding, we
have agreed to make available to any prospective purchaser or beneficial owner
of any of those securities in connection with any sale thereof the information
required by Rule 144A(d)(4) under the Securities Act.
This prospectus constitutes a part of a registration statement on Form S-4
filed by us with the SEC under the Securities Act. This prospectus, which forms
a part of the registration statement, does not contain all the information set
forth in the registration statement, certain parts of which have been omitted in
accordance with the rules and regulations of the SEC. Please refer to the
registration statement and related exhibits and schedules filed therewith for
further information with respect to us and the registered notes offered hereby.
Statements contained herein concerning the provisions of any document are not
necessarily complete and, in each instance, reference is made to the copy of
such document filed as an exhibit to the registration statement or otherwise
filed by us with the SEC and each such statement is qualified in its entirety by
such reference.
You may read and copy any document we file at the SEC's public reference
rooms located at 450 5th Street, N.W., Washington, D.C. 20549, at Seven World
Trade Center, 13th Floor, New York, New York 10048 and at Northwest Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Please call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms. Our SEC filings are also available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at: http://www.sec.gov. This information is available without charge upon
written or oral request to WinsLoew Furniture, Inc., 160 Village Street,
Birmingham, Alabama 35242, attention: Chief Financial Officer.
You should rely only on the information provided in this prospectus or any
prospectus supplement. We have not authorized any dealer, salesperson or anyone
else to provide you with different information. We may not make an offer of the
registered notes in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date of this prospectus.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain forward-looking statements about our
financial condition, results of operations and business within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. You can find many of these statements by looking for words
like "will," "should," "believes," "expects," "anticipates," "estimates,"
"intends," "may," "pro forma," or similar expressions used in this prospectus.
These forward-looking statements are subject to assumptions, risks and
uncertainties, including, among other things, those identified under the heading
"Risk Factors" in this prospectus and those relating to the following:
- our level of leverage;
- our ability to meet our debt service obligations;
- the subordination of the registered notes to our senior indebtedness,
which is secured by substantially all of our assets;
- the restrictions imposed upon us by our indenture and our senior credit
facility;
- our ability to identify suitable acquisition opportunities and to
finance, complete and integrate acquisitions;
- the competitive and cyclical nature of the furniture manufacturing
industry; and
- general domestic and global economic conditions.
Because these statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. You are cautioned not to place undue reliance on
these statements, which speak only as of the date of this prospectus.
We do not undertake any responsibility to release publicly any revisions to
these forward-looking statements to take into account events or circumstances
that occur after the date of this prospectus. Additionally, we do not undertake
any responsibility to update you on the occurrence of any unanticipated events
which may cause actual results to differ from those expressed or implied by the
forward-looking statements contained in this prospectus.
Market data and certain industry forecasts used throughout this prospectus
were obtained from internal surveys, market research, publicly available
information and industry publications. Industry publications generally state
that the information contained therein has been obtained from sources believed
to be reliable, but that the accuracy and completeness of such information is
not guaranteed. Similarly, internal surveys, industry forecasts and market
research, while believed to be reliable, have not been independently verified by
us.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
Because it is a summary, it does not contain all the information you should
consider before deciding to participate in this exchange offer. We urge you to
read the entire prospectus carefully, including the section titled "Risk
Factors" and the Consolidated Financial Statements and the notes relating to
those statements. When we say "we," "us," "the Company" or "WinsLoew," we mean
the combined business of WinsLoew Furniture, Inc. and its subsidiaries.
WHO WE ARE
GENERAL
We are a leading designer, manufacturer and distributor of a broad offering
of casual indoor and outdoor furniture and seating products. We also manufacture
ready-to-assemble furniture products. Our casual furniture includes chairs,
chaise lounges, tables, umbrellas and related accessories, which are generally
constructed from aluminum, wrought iron, wood or fiberglass. Our seating
products include wood, metal and upholstered chairs, sofas and loveseats, which
are offered in a wide variety of finish and fabric options. All of our casual
furniture and seating products are manufactured based on customer orders. We
sell our furniture products to the residential market and to the contract
market, consisting of commercial and institutional users. We believe that our
success is attributable to our proven ability to consistently deliver high
quality, innovatively-styled products on a timely basis with superior customer
service. On a pro forma basis, for the twelve months ended September 24, 1999,
our casual, seating and ready-to-assemble furniture products accounted for
49.3%, 42.1% and 8.6%, respectively, of our net sales. During this period, we
generated net sales of $167.7 million and earnings before interest, taxes,
depreciation and amortization, or "EBITDA," of $40.9 million, representing an
EBITDA margin of 24.4% which we believe is among the highest in the industry.
We market our casual furniture products to the residential market under the
Winston(R) and Pompeii(R) brand names through approximately 25 independent sales
representatives to over 800 active customers, which are primarily specialty
patio furniture stores located throughout the United States. In addition, we
market a broad line of casual furniture products in the contract markets under
the Texacraft(R), Tropic Craft(R) and Pompeii(R) brand names, primarily through
our in-house sales force, to lodging and restaurant chains, country clubs,
apartment developers and property management firms, architectural design firms,
municipalities and other commercial and institutional users.
We market our seating products to a broad customer base in the contract
market under the Loewenstein(R) and Gregson(R) brand names through approximately
40 independent sales organizations, which employ approximately 120 sales
representatives. Our customers include lodging and restaurant chains,
architectural design firms, professional sports complexes, schools, healthcare
facilities, office furniture dealers, retail store planners and other commercial
and institutional users in the contract market.
Over the past several years, we have undertaken a number of initiatives to
strengthen and grow our core casual furniture and seating businesses. We have
focused resources on our core business and disposed of non-core or unprofitable
operations. We have also implemented a strategic operating plan to enhance
operating efficiencies and controls and improve our market position. We believe
that these initiatives have contributed to the increase of our EBITDA margin
from 12.9% in fiscal 1995 to 24.4% on a pro forma basis for the twelve months
ended September 24, 1999.
We believe that we are well positioned to capitalize on a number of
positive industry dynamics and trends impacting our core business segments. Both
the casual furniture and seating products industries are highly fragmented,
which provides large and well capitalized companies, such as us, opportunities
to grow internally through increased market share and externally through
acquisitions.
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We believe that an increase in popularity of higher quality metal casual
furniture, such as the aluminum products we manufacture, and favorable
demographics, driven by the baby boom population, are benefiting our casual
furniture operations. The market for seating products is characterized by a wide
variety of diverse end markets which include offices, hotels and motels,
restaurants, country clubs, apartments, schools, healthcare facilities, retail
stores, municipalities and sports arenas. As we sell our seating products into
each of these end markets, we benefit from this market diversity. Furthermore,
the demand for seating products is generated by ongoing replacement of existing
furniture, refurbishment of existing facilities and construction of new
facilities. Based on our experience and knowledge of the industry, we believe
that the demand for seating products is primarily driven by refurbishment of
existing facilities and ongoing replacement of existing furniture, rather than
new construction. We target each of these segments, altering our focus based on
market conditions.
COMPETITIVE STRENGTHS
We believe that we have achieved our leading market position by
capitalizing on the following key competitive strengths.
Reputation for Producing High Quality Products. Our reputation for
providing customers with high quality products is built upon our use of superior
structural designs, aesthetic styling, sophisticated manufacturing techniques
and strict quality control standards.
Unique Delivery Capabilities. We have tailored our operations to meet the
unique delivery requirements of our customers who are casual furniture retailers
due to their short selling season, general desire to minimize inventory levels
and need to offer their customers products that will be available at the time of
or soon after their purchase, as well as our contract market customers who must
receive our casual furniture or seating products on a timely basis to meet their
own construction or operating deadlines.
Continual Focus on Customer Service. We are dedicated to providing the
highest level of customer service through our focus on complete customer
satisfaction by providing a variety of services which are geared towards
assisting our customers to improve the profitability of their business while
strengthening their loyalty to our products.
Efficient Operations and Variable Cost Structure. We continually review
our operations to identify ways to streamline our manufacturing process and
reduce our costs in order to further increase efficiencies and profitability,
such as:
- improving our manufacturing capabilities through the use of
technologically advanced systems,
- optimizing our use of vertical integration and outsourcing, as
appropriate,
- exiting lower margin or non-core businesses, and
- extensively reconfiguring manufacturing processes within our principal
manufacturing facilities.
Experienced Management Team with Significant Ownership. Our experienced
and dedicated management team has been instrumental in our success and
represents one of our key competitive advantages; moreover, each member of our
senior management team has worked with us for over 10 years and has extensive
experience in the furniture manufacturing industry.
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GROWTH STRATEGY
Our strategic objective is to further enhance our leading market position
in the residential and contract furniture markets. We plan on achieving this
objective through the continued implementation of the following strategies:
Increase Penetration of Existing Customers. We believe that we can
increase our penetration of existing customers by continuing to emphasize high
quality products, timely delivery and customer service together with
innovatively styled new product designs.
Attract New Customers. We have undertaken a number of programs to expand
our customer base in existing and new markets such as the use of specific market
focused sales personnel, private labeling and the targeting of national
specialty stores.
Selectively Introduce New Products. We annually update and expand our
product line with new designs and styles, as well as periodically introduce
complementary products.
Selectively Pursue Complementary Acquisitions. We continually review
acquisition opportunities that augment or complement our existing operations or
provide entry into new geographic markets, such as our recent acquisition of
Pompeii in July 1999.
We were incorporated in the state of Florida on September 23, 1994. Our
principal executive offices are located at 160 Village Street, Birmingham,
Alabama, 35242, and our telephone number is 205-408-7600.
RECENT DEVELOPMENTS
On July 30, 1999, we purchased all of the capital stock of Pompeii for
$18.2 million in cash, including fees and expenses. Pompeii is a manufacturer of
upper-end aluminum casual furniture sold in the contract and residential
markets. Pompeii provides us with a leading brand in the upper end of the casual
furniture market and a significant opportunity to achieve operating
efficiencies. For the year ended December 31, 1998, Pompeii had net revenues of
approximately $14.5 million and income from operations of approximately $2.8
million. We expect to spend approximately $1.5 million over the next 12 to 18
months for certain integration costs. We funded the Pompeii acquisition with
cash on hand and expect to fund the integration costs with working capital.
THE MERGER
On August 27, 1999, an affiliate of Trivest merged with and into us, and we
were the surviving corporation. Trivest is a private investment firm controlled
by Earl W. Powell, our Chairman of the Board. Through the merger, each
previously outstanding share of WinsLoew common stock was converted into the
right to receive $34.75 in cash, and all outstanding options were canceled, with
the holder entitled to the difference between the exercise price and $34.75. The
cash merger consideration, option cancellation payments and related fees and
expenses, which totaled approximately $282.6 million, were paid through the
proceeds received from the following transactions:
- an investment by Trivest affiliates and other investors, including
members of our senior management team and other employees, of
approximately $66.2 million in cash;
- a rollover equity investment by some of our existing shareholders,
including members of our senior management team and other employees, of
approximately $11.8 million of our common stock, valued at $34.75 per
share;
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- the borrowing of $95.0 million in term loans under our new $155.0 million
senior credit facility;
- the proceeds from the sale of units consisting of the original notes and
warrants; and
- available cash on hand of approximately $7.1 million.
For additional information, see "The Merger," "Use of Proceeds,"
"Capitalization," "Unaudited Pro Forma Financial Data" and "Description of the
Senior Credit Facility."
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THE EXCHANGE OFFER
Notes to be Exchanged...... On August 24, 1999, we issued $105 million
aggregate principal amount of 12 3/4% Series A
Senior Subordinated Notes due 2007 to the initial
purchasers in the original offering in a
transaction exempt from the registration
requirements of the Securities Act. We are offering
to exchange $1,000 principal amount at maturity of
our outstanding original 12 3/4% Series A Senior
Subordinated Notes due 2007 for each $1,000
principal amount at maturity of 12 3/4% Series B
Senior Subordinated Notes due 2007 that have been
registered under the Securities Act. As of this
date, there is outstanding $105 million aggregate
principal amount at maturity of original notes. The
terms of the original notes and the registered
notes will be the same, except that, unlike the
original notes, the registered notes will have no
transfer restrictions or registration rights. For
more details, see the section entitled "Description
of the Registered Notes."
The Exchange Offer......... You must properly tender your original notes in
accordance with the procedures described on page 69
of this prospectus. We will exchange all original
notes that you properly tender and do not withdraw.
If we exchange your original notes, we will issue
registered notes promptly after the expiration date
of the exchange offer.
Registration Rights
Agreement................ We sold the original notes to the initial
purchasers in a transaction exempt from the
registration requirements of the Securities Act.
The original notes were immediately resold by the
initial purchasers in reliance on Rule 144A under
the Securities Act. In connection with the sale, we
entered into a registration rights agreement with
the initial purchasers requiring us to make the
exchange offer. The registration rights agreement
further provides that we, together with the
guarantors, must
- file the registration statement with respect to
the exchange offer on or before November 25,
1999;
- use our best efforts to cause the registration
statement to be declared effective on or before
February 23, 2000;
- use our best efforts to consummate the exchange
offer within 60 business days after the
registration statement becomes effective; and
- file a shelf registration statement for the
resale of the original notes if the exchange
offer is not permitted by applicable law or SEC
policy or if any holder of original notes
notifies us that it is prohibited by law or SEC
policy from participating in the exchange offer
or reselling the registered notes as contemplated
below under " -- Resales of Registered Notes."
See "The Exchange Offer -- Purpose of the
Exchange Offer."
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Resales of the Registered
Notes.................... We believe that registered notes to be issued in
the exchange offer may be offered for resale,
resold and otherwise transferred by you without
compliance with the registration and prospectus
delivery provisions of the Securities Act if you
meet the following conditions:
(1) you acquire registered notes in the ordinary
course of your business;
(2) you are not engaging in and do not intend to
engage in a distribution of the registered
notes;
(3) you do not have an arrangement or understanding
with any person to participate in the
distribution of the registered notes; and
(4) you are not an "affiliate" of us or any
guarantor, as that term is defined in Rule 405
under the Securities Act.
However, the SEC has not considered this exchange
offer in the context of a no-action letter and we
cannot be sure that the staff of the SEC would make
the same determination with respect to the exchange
offer as in other circumstances. Furthermore, if
you do not meet the above conditions, you may incur
liability under the Securities Act if you transfer
any registered note without delivering a prospectus
meeting the requirements of the Securities Act. We
do not assume, or indemnify you against, that
liability.
Each broker-dealer that is issued registered notes
in this exchange offer for its own account in
exchange for original notes which that
broker-dealer acquired as a result of market-making
activities or other trading activities must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act in
connection with any resales of the registered
notes. Such a broker-dealer may use this prospectus
for an offer to resell or to otherwise transfer
these registered notes. Broker-dealers who acquire
original notes directly from us and not as a result
of market-making activities or other trading
activities may not rely on the SEC staff's
interpretations discussed above or participate in
the exchange offer and must comply with the
prospectus delivery requirements of the Securities
Act in order to resell the registered notes.
Expiration Date............ The exchange offer will expire at 5:00 p.m., New
York City time, on , 1999, or on a later
extended date and time as we may decide.
Conditions to the Exchange
Offer.................... The only conditions to completing the exchange
offer are that the exchange offer not violate
applicable law or any applicable interpretation of
the staff of the SEC and no injunction, order or
decree has been issued, or any action or proceeding
has been instituted or threatened that would
reasonably be expected to
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prohibit, prevent or materially impair our ability
to proceed with the exchange offer. See "The
Exchange Offer -- Conditions."
If any of these conditions do exist prior to the
expiration date, we may take the following
actions:
- refuse to accept any original notes and return
all previously tendered original notes;
- extend the duration of the exchange offer; or
- waive such conditions.
Procedures for Tendering
Original Notes Held in
the Form of Book-Entry
Interests................ We issued the original notes as global securities
in fully registered form without coupons.
Beneficial interests in the original notes which
are held by direct or indirect participants in The
Depository Trust Company through certificateless
depositary interests are shown on, and transfer of
the original notes can be made only through,
records maintained in book-entry form by DTC with
respect to its participants.
If you are a holder of an original note held in the
form of a book-entry interest and you wish to
tender your original notes for exchange pursuant to
the exchange offer, you must transmit to American
Stock Transfer & Trust Company, as exchange agent,
on or prior to the expiration of the exchange offer
either:
- a written or facsimile copy of a properly
completed and executed letter of transmittal and
all other required documents to the address set
forth on the cover page of the letter of
transmittal; or
- a computer-generated message transmitted by means
of DTC's Automated Tender Offer Program system
and forming a part of a confirmation of
book-entry transfer in which you acknowledge and
agree to be bound by the terms of the letter of
transmittal.
The exchange agent must also receive on or prior to
the expiration of the exchange offer either:
- a timely confirmation of book-entry transfer of
your original notes into the exchange agent's
account at DTC, in accordance with the procedure
for book-entry transfers described in this
prospectus under the heading "The Exchange
Offer -- Book-Entry Transfer"; or
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
A letter of transmittal accompanies this
prospectus. By executing the letter of transmittal
or delivering a computer-generated
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<PAGE> 13
message through DTC's Automated Tender Offer
Program system, you will represent to us that,
among other things:
(1) the registered notes to be acquired by you in
the exchange offer are being acquired in the
ordinary course of your business;
(2) you are not engaging in and do not intend to
engage in a distribution of the registered
notes;
(3) you do not have an arrangement or understanding
with any person to participate in the
distribution of the registered notes; and
(4) you are not an affiliate of us or any
guarantor.
Procedures for Tendering
Certificated Original
Notes.................... If you are a holder of book-entry interests in the
original notes, you are entitled to receive, in
limited circumstances, in exchange for your
book-entry interests, certificated notes which are
in equal principal amounts to your book-entry
interests. See "Book-Entry; Delivery and Form." No
certificated notes are issued and outstanding as of
the date of this prospectus. If you acquire
certificated original notes prior to the expiration
of the exchange offer, you must tender your
certificated original notes in accordance with the
procedures described in this prospectus under the
heading "The Exchange Offer -- Procedures for
Tendering -- Certificated Original Notes."
Special Procedures for
Beneficial Owners........ If you are the beneficial owner of original notes
which are registered in the name of a broker,
dealer, commercial bank, trust company or other
nominee and you wish to tender the original notes
in this exchange offer, you should contact such
registered holder promptly and instruct such
registered holder to tender the original notes on
your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing
the letter of transmittal and delivering the
original notes, either make appropriate
arrangements to register ownership of the original
notes in your own name or obtain a properly
completed bond power from the registered holder.
The transfer of registered ownership may take
considerable time and it may not be possible to
complete prior to the expiration date.
Guaranteed Delivery
Procedures................. If you wish to tender your original notes and your
original notes are not immediately available or you
cannot deliver your original notes, the letter of
transmittal or any other documents required by the
letter of transmittal to the exchange agent, or you
cannot complete the procedure for book-entry
transfer, then prior to the expiration date you
must tender your original notes according to the
guaranteed delivery procedures set forth in "The
Exchange Offer -- Guaranteed Delivery Procedures."
8
<PAGE> 14
Withdrawal Rights.......... Tenders of original notes may be withdrawn at any
time before 5:00 p.m., New York City time, on the
expiration date by delivering a written notice of
such withdrawal to the exchange agent in conformity
with the procedures set forth under "The Exchange
Offer -- Withdrawal of Tenders."
Acceptance of Original
Notes and Delivery of
Registered Notes......... Except under the circumstances described above
under "Conditions to the Exchange Offer," we will
accept for exchange any and all original notes
which are properly tendered in the exchange offer
before 5:00 p.m., New York City time, on the
expiration date. We will deliver the registered
notes promptly following the expiration date. If we
do not accept any of your original notes for
exchange we will return them to you as promptly as
practicable after the expiration or termination of
the exchange offer without any expense to you.
Interest on the Registered
Notes and the Original
Notes.................... Interest on your registered notes will accrue from
the date of the original issuance of the original
notes or from the date of the last periodic payment
of interest on the original notes, whichever is
later. Interest will not be paid on original notes
that are tendered and accepted for exchange.
Federal Income Tax
Considerations........... The exchange pursuant to this exchange offer should
not result in the realization of income, gain or
loss to you or to us for U.S. federal income tax
purposes. Please refer to "Certain United States
Federal Income Tax Consequences" later in this
prospectus.
Exchange Agent............. American Stock Transfer & Trust Company, the
trustee under the indenture, is serving as exchange
agent in connection with the exchange offer.
Consequences of Not
Exchanging Original
Notes.................... You may not offer, sell or otherwise transfer the
original notes except:
- in compliance with the registration requirements
of the Securities Act and any other applicable
securities laws; or
- pursuant to an exemption therefrom; or
- in a transaction not subject to such securities
laws.
Original notes that you do not exchange for
registered notes in the exchange offer will
continue to bear a legend reflecting such
restrictions on transfer. To the extent that
original notes are tendered and accepted in the
exchange offer, any trading market for original
notes which remain outstanding after the exchange
offer could be adversely affected.
9
<PAGE> 15
The registered notes and any original notes which
remain outstanding after consummation of the
exchange offer will vote together as a single class
for purposes of determining whether holders of the
requisite percentage in outstanding principal
amount thereof have taken certain actions or
exercised certain rights under our indenture.
TERMS OF THE REGISTERED NOTES
Registered Notes Offered... $105 million in aggregate principal amount at
maturity of 12 3/4% Series B Senior Subordinated
Notes due 2007. The registered notes will evidence
the same debt as the original notes and will be
issued under, and entitled to the benefits of, the
same indenture. The terms of the registered notes
are the same as the terms of the original notes in
all material respects except that the registered
notes:
- have been registered under the Securities Act,
- do not include rights to registration under the
Securities Act, and
- do not contain transfer restrictions applicable
to the original notes.
Maturity Date.............. August 15, 2007.
Interest................... The registered notes will bear interest at a fixed
annual rate of 12 3/4%, to be paid in cash every
six months on February 15 and August 15 of each
year, beginning on February 15, 2000.
Ranking.................... The registered notes and subsidiary guarantees will
be unsecured senior subordinated debt:
- The registered notes will rank junior in right of
payment to all of our debt outstanding at the
time of our recent merger transaction, and all
future debt that does not expressly provide that
it ranks equally with or junior to the registered
notes.
- The registered notes will rank senior in right of
payment to all of our future debt that expressly
provides that it ranks junior to the registered
notes.
As of September 24, 1999, we had approximately:
- $95.9 million of outstanding debt ranking ahead
of the notes;
- No debt ranking equally with the notes; and
- No debt ranking behind the notes.
Because we conduct substantially all of our
business through our subsidiaries, our ability to
satisfy our obligations under the registered notes
will depend on dividends and other intercompany
10
<PAGE> 16
transfers and advances from our subsidiaries. The
registered notes will also effectively rank junior
to all indebtedness and other liabilities of our
subsidiaries, except indebtedness that expressly
provides that it is not senior to the registered
notes and the guarantees.
Guarantees................. All of our direct and indirect domestic restricted
subsidiaries will guarantee the registered notes
with unconditional guarantees of payment that will
rank junior in right of payment to our senior debt
but will rank equal to any other senior
subordinated indebtedness that we may incur in the
future.
Optional Redemption........ On or after August 15, 2003, we may redeem some or
all of the registered notes at any time at the
redemption prices listed in the section
"Description of the Exchange Notes" under the
heading "Optional Redemption." Before August 15,
2002, we may redeem up to 25% of the registered
notes with the proceeds of certain public offerings
of equity in our company at the price listed in the
section "Description of the Registered Notes" under
the heading "Optional Redemption."
Mandatory Repurchase....... If we sell certain assets and do not use the
proceeds as specified in the indenture or if we
experience specific kinds of changes of control, we
must offer to repurchase the registered notes at
the prices listed in the section "Description of
the Registered Notes" under the heading "Repurchase
at the Option of the Holders."
Material Covenants......... We will issue the registered notes under our
indenture with American Stock Transfer & Trust
Company. The indenture, among other things,
restricts our ability and the ability of our
subsidiaries to:
- incur additional debt;
- pay dividends or make other distributions on our
equity securities;
- repurchase equity interests or subordinated
indebtedness;
- engage in sale and leaseback transactions;
- create liens;
- create encumbrances on the ability of our
subsidiaries to pay dividends or make other
distributions to us;
- enter into transactions with affiliates;
- sell our assets or assets of our subsidiaries;
- conduct certain lines of business; and
- enter into mergers and consolidations.
For more details, see the section "Description of
the Registered Notes" under the heading "Certain
Covenants."
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<PAGE> 17
Registration Rights........ Holders of registered notes are not entitled to any
registration rights with respect to the registered
notes.
Use of Proceeds............ We will not receive any proceeds from the exchange
offer.
Original Issue Discount.... Each original note was issued with original issue
discount for U.S. federal income tax purposes, and
each registered note should be treated for U.S.
federal income tax purposes as having the same
original issue discount as the original note
exchanged for it. Accordingly, original issue
discount on the registered notes will continue to
accrete as it did on the original notes and will be
includable as interest income periodically in a
holder's gross income for U.S. federal income tax
purposes in advance of receipt of the cash payments
to which the income is attributable. Original issue
discount on the original notes not exchanged will
accrete from their issue date in accordance with
their terms. See "Certain United States Federal
Income Tax Consequences."
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<PAGE> 18
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical financial data for each of the three years
in the period ended December 31, 1998 have been derived from, and should be read
in conjunction with, our audited consolidated financial statements and the notes
thereto, which have been audited by Ernst & Young LLP, independent auditors, and
are included elsewhere in this prospectus. The following historical consolidated
financial data for the nine-month periods ended September 25, 1998 and September
24, 1999 have been derived from our unaudited interim consolidated financial
statements, include, in the opinion of management, all adjustments necessary to
present fairly the data for such periods, and are included elsewhere in this
prospectus. The following pro forma financial data were derived from our
historical consolidated financial information and other data included elsewhere
in this prospectus. The information set forth below should be read in
conjunction with "Unaudited Pro Forma Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements and the notes thereto appearing elsewhere in
this prospectus.
<TABLE>
<CAPTION>
HISTORICAL
PRO ----------------------------- PRO FORMA
HISTORICAL FORMA TWELVE
------------------------------ -------- NINE MONTHS ENDED MONTHS
YEAR ENDED DECEMBER 31, ----------------------------- ENDED
----------------------------------------- SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 24,
1996 1997 1998 1998(1) 1998 1999 1999(1)
-------- -------- -------- -------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................... $117,405 $122,145 $141,360 $159,124 $106,726 $120,736 $167,667
Cost of sales................ 78,029 79,431 87,232 97,167 66,829 72,733 100,941
-------- -------- -------- -------- -------- -------- --------
Gross profit............... 39,376 42,714 54,128 61,957 39,897 48,003 66,726
Selling, general and
administrative expenses.... 21,472 21,427 23,124 26,236 17,673 19,318 27,477
Amortization................. 1,444 992 1,122 6,209 806 1,611 6,218
-------- -------- -------- -------- -------- -------- --------
Operating income........... 16,460 20,295 29,882 29,512 21,418 27,074 33,031
Interest expense............. 3,083 2,296 635 26,130 824 2,280 25,059
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before income
taxes...................... 13,377 17,999 29,247 3,382 20,594 24,794 7,972
Provision for income taxes... 4,834 6,838 10,947 2,939 7,731 10,433 5,636
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations................. 8,543 11,161 18,300 443 12,863 14,361 2,336
Loss from discontinued
operations, net of taxes... (259) (718) -- -- -- -- --
Gain (loss) from sale of
discontinued operations,
net of taxes(2)............ -- (8,200) 2,031 2,031 -- -- 2,031
-------- -------- -------- -------- -------- -------- --------
Net income................... $ 8,284 $ 2,243 $ 20,331 $ 2,474 $ 12,863 $ 14,361 $ 4,367
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(3).................... $ 19,439 $ 22,929 $ 32,500 $ 37,493 $ 23,334 $ 29,834 $ 40,931
EBITDA margin(3)............. 16.6% 18.8% 23.0% 23.6% 21.9% 24.7% 24.4%
Depreciation and
amortization............... 2,979 2,634 2,618 7,981 1,916 2,760 7,900
Capital expenditures, net.... 1,351 425 942 1,135 1,131 275 86
PRO FORMA RATIOS:
EBITDA to cash interest expense(4)...................................................................... 1.7x
Total debt to EBITDA.................................................................................... 4.8x
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 24,
1999
-------------
<S> <C>
BALANCE SHEET DATA:
Working capital............................................. $ 13,320
Total assets................................................ 297,831
Total debt (including current portion)...................... 197,030(5)
Stockholders' equity........................................ 78,806(5)
(footnotes on following page)
</TABLE>
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<PAGE> 19
(1) The pro forma financial data for the year ended December 31, 1998 gives
effect to the merger and the acquisitions of Tropic Craft and Pompeii as if
all had occurred as of the beginning of the period. The pro forma financial
data for the twelve months ended September 24, 1999 gives effect to the
merger and the Pompeii acquisition as if both had occurred as of the
beginning of the period. See "Unaudited Pro Forma Financial Data."
(2) See note 2 of our consolidated financial statements.
(3) EBITDA represents earnings before interest, taxes, depreciation and
amortization, loss from discontinued operations, net of taxes, and gain
(loss) from sale of discontinued operations, net of taxes, and is presented
to provide additional information with respect to our debt service capacity.
EBITDA margin represents EBITDA divided by net sales. EBITDA should not be
considered in isolation from, or as a substitute for, net income, cash flows
from operations or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity. Rather, EBITDA is presented because it is a widely accepted
supplemental financial measure, and we believe it provides relevant and
useful information. Our calculation of EBITDA may not be comparable to
similarly titled measures reported by other companies since all companies do
not calculate this non-GAAP measure in the same fashion. Our EBITDA
calculation is not intended to represent cash provided by (used in)
operating activities, since it does not include interest and taxes and
changes in operating assets and liabilities, nor is it intended to represent
the net increase in cash, since it does not include cash provided by (used
in) investing and financing activities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Description
of the Registered Notes."
(4) Cash interest expense represents total interest expense less amortization of
deferred financing fees and amortization of original issue discount,
amounting to $1.5 million for both the year ended December 31, 1998 and the
twelve months ended September 24, 1999.
(5) The registered notes are recorded at a discount of approximately $3.9
million to the face amount to reflect the original issue discount on the
registered notes of approximately $2.5 million and the value attributed to
the warrants issued with the original notes of approximately $1.4 million,
which has been recorded as an increase to stockholders' equity.
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<PAGE> 20
RISK FACTORS
An investment in the registered notes involves significant risk. You should
carefully consider the following factors, as well as the other information in
this prospectus that relates to our business, results of operations, condition
and prospects, before deciding to participate in this exchange offer. In this
prospectus, we sometimes refer to the original notes and the registered notes
together as the "notes."
LEVERAGE -- WE HAVE A SUBSTANTIAL AMOUNT OF DEBT, WHICH COULD MATERIALLY
ADVERSELY AFFECT OUR FINANCIAL POSITION, RESULTS OF OPERATIONS AND PROSPECTS AND
PREVENT US FROM FULFILLING OUR DEBT OBLIGATIONS.
We have substantial debt and leverage. As of September 24, 1999:
- our total debt outstanding was approximately $197.0 million;
- our interest expense would have been approximately $18.9 million for the
nine months ended September 24, 1999 and $26.1 million for the year ended
December 31, 1998 on a pro forma basis after giving effect to the merger
and the Tropic Craft and Pompeii acquisitions;
- our total stockholders' equity was approximately $78.8 million; and
- the sufficiency of our earnings available to cover fixed charges for the
twelve months ended September 24, 1999 would have been approximately 1.3
to 1 on a pro forma basis after giving effect to the merger and the
Pompeii acquisition.
As of September 24, 1999, we had approximately $20.0 million available for
permitted future acquisitions under our acquisition loan facility and
approximately $23.1 million available for future borrowings under our revolving
credit facility. We urge you to consider the information under "Capitalization"
and "Pro Forma Financial Data" for more information on these matters.
Depending on our future performance, we and our subsidiaries are permitted
to incur significant additional debt in the future, including debt to finance
acquisitions. Our high level of debt could have negative consequences. For
example, it could:
- increase our vulnerability to adverse general economic and industry
conditions;
- require us to dedicate a substantial portion of our cash flow from
operations to required principal payments on our debt, thereby reducing
the availability of our cash flow for working capital, capital
investments, acquisitions and other business activities;
- limit our ability to obtain additional financing to fund future working
capital, capital investments, acquisitions and other business activities;
- expose us to the risk of interest rate fluctuations to the extent we pay
interest at variable rates on our other debt;
- limit our flexibility to plan for, and react to, changes in our business
and our industry; and
- place us at a competitive disadvantage compared to our less leveraged
competitors.
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<PAGE> 21
ABILITY TO SERVICE DEBT -- WE MAY NOT BE ABLE TO GENERATE SUFFICIENT CASH FLOW
TO MEET OUR DEBT SERVICE REQUIREMENTS.
We cannot assure you that our future cash flow will be sufficient to meet
our debt obligations and commitments, and any insufficiency could have a
negative impact on our business. Our ability to generate cash flow from
operations to make scheduled payments on our debt as they become due will depend
on our future financial performance, which will be affected by a range of
economic, competitive and business factors. We cannot control many of these
factors, such as general economic and financial conditions in the furniture
industry and economy at large or competitive initiatives of our competitors. If
we do not generate sufficient cash flow from operations, we may have to
undertake alternative financing plans, such as refinancing or restructuring our
debt, selling assets, reducing or delaying capital investments or seeking to
raise additional capital. We cannot assure you that any such refinancing would
be possible, that any assets could be sold (or, if sold, of the timing of such
sales and the amount of proceeds realized therefrom) or that additional
financing could be obtained on acceptable terms, if at all.
SUBORDINATION -- IN THE EVENT OF LIQUIDATION, DISSOLUTION OR BANKRUPTCY, HOLDERS
OF THE NOTES WILL BE PAID FROM ANY ASSETS REMAINING AFTER PAYING HOLDERS OF OUR
SENIOR INDEBTEDNESS.
The notes and the guarantees are general unsecured obligations, junior in
right of payment to all of our and the guarantors' existing and future senior
indebtedness, including borrowings under our senior credit facility. The notes
and the guarantees are also effectively subordinated to any secured debt that we
or our subsidiaries may have now or in the future to the extent of the assets
securing that debt. In addition, the notes are effectively subordinated to all
of the liabilities of any of our subsidiaries that do not guarantee the notes.
If we or a guarantor is declared bankrupt or insolvent, or is liquidated, or if
we have a payment default under debt that is senior to the notes or a default
that results in the maturity of that debt being accelerated, debt that ranks
ahead of the notes and the guarantees will be entitled to be paid in full from
our assets or the assets of the guarantor, as applicable, before any payment may
be made with respect to the notes or affected guarantees. The subordination
provisions of the indenture also provide that payments with respect to the notes
and the guarantees will be prohibited in the event of a payment default on a
designated portion of our debt that ranks ahead of the notes or the guarantees.
In any of the foregoing events, we cannot assure you that we would have
sufficient assets to pay amounts due on the notes. As a result, holders of the
notes may receive less, ratably, than the holders of debt senior to the notes
and guarantees.
RESTRICTIVE DEBT COVENANTS -- OUR INDENTURE AND SENIOR CREDIT FACILITY IMPOSE
RESTRICTIONS ON US THAT MAY RESTRICT OUR ABILITY TO OPERATE OUR BUSINESS.
Our indenture and senior credit facility contain covenants that restrict
our ability to take various actions, such as incurring additional debt, paying
dividends, repurchasing junior debt, making investments, entering into certain
transactions with affiliates, merging or consolidating with other entities and
selling all or substantially all of our assets. In addition, our senior credit
facility contains other limitations including restrictions on us prepaying the
notes, and the senior credit facility and the indenture also require us to
maintain specified financial ratios. Our ability to comply with these financial
ratios can be affected by events beyond our control and we cannot assure you
that we will satisfy those requirements. A breach of any of these provisions
could result in a default under the senior credit facility, which would allow
those lenders to declare all amounts outstanding under the senior credit
facility immediately due and payable. If we were unable to pay those amounts,
the senior lenders could proceed against substantially all of our assets, which
serve as collateral to secure that debt. In such an event, we cannot assure you
that our assets would be sufficient to repay that amount or the amounts due
under the notes in full. In addition, if a default occurs with respect to
16
<PAGE> 22
senior indebtedness, the subordination provisions of the indenture will likely
restrict payments to holders of the notes. We may also be prevented from taking
advantage of business opportunities that arise because of the limitations
imposed on us by the restrictive covenants under the indenture and the senior
credit facility. We urge you to read the information under "Description of the
Registered Notes -- Certain Covenants" and "Description of the Registered
Notes -- Certain Senior Credit Facility" for a more detailed discussion of the
substantive requirements of these restrictive covenants.
HOLDING COMPANY STRUCTURE -- WE RELY UPON DISTRIBUTIONS FROM OUR SUBSIDIARIES TO
MEET OUR PAYMENT OBLIGATIONS.
We are a holding company with no significant assets other than our
investments in our subsidiaries and we conduct substantially all of our business
through our subsidiaries. Accordingly, we must rely upon dividends or other
distributions, loans or other payments from our subsidiaries to generate the
funds necessary to meet our obligations, including the payment of principal,
premiums, if any, interest and liquidated damages, if any, on the notes. The
ability of our subsidiaries to pay dividends or to make loans or other payments
or advances to us will depend upon their operating results and will be subject
to applicable laws and contractual restrictions contained in the instruments
governing any indebtedness of those subsidiaries, including the senior credit
facility. Although the indenture limits the ability of our subsidiaries to enter
into consensual restrictions on their ability to pay dividends and make other
payments to us, the indenture limitations are subject to a number of significant
qualifications. We urge you to read the information under "Description of the
Registered Notes -- Certain Covenants -- Limitation on Dividend and Other
Payment Restrictions Affecting Subsidiaries" for more information on the
limitations imposed by the indenture in this respect.
CHANGE OF CONTROL -- WE MAY NOT BE ABLE TO REPURCHASE THE NOTES UPON A CHANGE OF
CONTROL.
If a change of control were to occur, we may be required to make an offer
to purchase all the outstanding notes at a price equal to 101% of their
principal amount at maturity, plus accrued and unpaid interest and liquidated
damages, if any, to the date of purchase. In such a situation, we cannot assure
you that we would have enough funds to pay for all of the notes that are
tendered under the offer to purchase. If we were required to repurchase the
notes, we would probably require third party financing; however, we cannot be
sure we would be able to obtain such financing on acceptable terms, if at all.
In addition, our senior credit facility restricts our ability to repurchase
notes, including pursuant to a change of control offer. A change of control may
also result in an event of default under the senior credit facility and may
cause the acceleration of that debt, in which case we would have to pay in full
our senior credit facility and any such senior indebtedness before repurchasing
the notes. We urge you to read the information under "Description of the
Registered Notes -- Repurchase at the Option of the Holders -- Change in
Control," "Description of the Registered Notes -- Ranking and Subordination" and
"Description of the Senior Credit Facility" for more information regarding the
treatment of a change of control under the indenture and our senior credit
facility.
ASSET ENCUMBRANCES -- OUR ASSETS ARE ENCUMBERED TO SECURE OUR SENIOR
INDEBTEDNESS.
The notes are not secured by any of our assets. Our obligations under our
senior credit facility, however, are secured by a first priority security
interest in substantially all of our assets, including a first priority pledge
of all of the capital stock of our subsidiaries. If bankruptcy proceedings are
initiated by or against us or certain guarantors, or if we are found to be
insolvent, or are liquidated, or if payment under our senior credit facility is
accelerated, the lenders under our senior credit facility would be entitled to
exercise all legal remedies available to a secured lender. Accordingly, these
lenders will have a claim on substantially all of our assets that will have
priority over any claim for
17
<PAGE> 23
payment under the notes or the guarantees. In any such event, because the notes
are not secured by any of our assets, it is possible that there would be no
assets remaining from which claims of the holders of the notes could be
satisfied or, if any assets remained, they might be insufficient to fully
satisfy those claims. Accordingly, the notes and guarantees are effectively
junior in right of payment to all secured debt, even if the secured debt ranks
equally in right of payment to the notes and the guarantees.
FRAUDULENT CONVEYANCE MATTERS -- UNDER SPECIFIC CIRCUMSTANCES, COURTS COULD VOID
THE NOTES OR THE GUARANTEES.
Under applicable provisions of the United States Bankruptcy Code or
comparable provisions of state fraudulent transfer or conveyance law, a court of
competent jurisdiction could void, in whole or in part, the notes or the
guarantees or, alternatively, subordinate the notes or the guarantees to our
existing and future debt. For example, a court could void the notes or
guarantees if it finds that at the time the notes or guarantees were issued any
of the following occurred:
- we or the guarantors incurred such indebtedness with the intent to
hinder, delay or defraud creditors; or
- we or the guarantors received less than reasonably equivalent value or
fair consideration for incurring such debt, and
- were insolvent,
- were rendered insolvent by reason of the incurrence of such debt and
the application of the proceeds of that debt,
- were engaged or were about to engage in a business or transaction for
which the assets remaining within the United States constituted
unreasonably small capital to carry on our business, or
- intended to incur, or believed that we would incur, debts beyond our
ability to pay as they matured.
The measure of insolvency for purposes of determining these fraudulent
conveyance issues will vary depending upon the law applied in each case.
Generally, however, we would be considered insolvent if the sum of our debts,
including contingent liabilities, is greater than all of our assets at fair
valuation or if the present fair saleable value of our assets was less than the
amount that would be required to pay the probable liability on our existing
debts, including contingent liabilities, as they become absolute and matured.
We believe that, for purposes of the United States Bankruptcy Code and
state fraudulent transfer or conveyance laws, the original notes were issued,
and the registered notes are being issued, without the intent to hinder, delay
or defraud creditors and for proper purposes and in good faith. Because a
portion of the proceeds of the indebtedness, including the proceeds from the
sale of the original notes and guarantees, that we incurred in connection with
the merger were paid to our shareholders in the merger, a court might find that
we did not receive reasonably equivalent value or fair consideration for the
issuance of the notes and the guarantees. However, we believe that after the
issuance of the notes and the application of proceeds therefrom, we are solvent,
have sufficient capital for carrying on our business and will be able to pay our
debts as they mature. We cannot assure you, however, that a court would agree
with our view.
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<PAGE> 24
ACQUISITIONS -- THERE ARE RISKS ASSOCIATED WITH OUR ACQUISITION STRATEGY.
Our growth strategy includes the acquisition of complementary businesses
and/or product lines, and, as part of our effort to pursue appropriate
acquisition opportunities, we regularly engage in discussions regarding possible
acquisitions, combinations or other transactions with industry participants,
including other direct competitors. There is substantial competition for
attractive acquisition candidates. We cannot assure you that we will be able to
successfully identify suitable furniture manufacturers or finance and complete
any particular acquisition, combination or other transaction on acceptable
terms. The integration of acquired companies may require substantial attention
from our senior management, which may limit the amount of time available to be
devoted to our day-to-day operations or to our growth strategy. We also cannot
assure you that we will be able to successfully integrate their operations into
ours or that we will be able to avoid all material adverse affects such a
transaction may have on our business, financial condition, results of
operations, prospects and ability to service our debt obligations.
SIGNIFICANT CUSTOMER -- THE LOSS OF OUR PRINCIPAL CUSTOMER COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.
In 1996, 1997 and 1998, sales to Marriott International, Inc. accounted for
10%, 16% and 17% of consolidated net sales, respectively, and 24%, 34% and 35%
of our consolidated net seating sales. Effective January 1, 1999, we entered
into a three year agreement with Marriott International, Inc. pursuant to which
we are a preferred supplier of upholstered seating products for certain of its
affiliates, including Marriott's Lodging, Senior Living Services and Marketplace
businesses, as well as Host Marriott Services Corporation. We have no other
material long-term contracts for the purchase of products with our customers and
instead generally sell our products under short-term purchase orders, which is
consistent with general industry practice. However, as part of our growth
strategy of increasing penetration of existing customers and reaching new
customers, we are seeking to enter into similar contracts with other customers
in the contract markets, especially hospitality providers. The loss of Marriott
or any other significant customer or a substantial reduction in purchases by any
such customer would have a material adverse effect on our business, financial
condition, results of operations, prospects and ability to service our debt
obligations.
RAW MATERIALS -- WE ARE VULNERABLE TO SIGNIFICANT PRICE INCREASES AND SHORTAGES.
Our principal raw materials consist of extruded aluminum tubes, steel rods,
woven vinyl fabrics, paint/finishing materials, vinyl strapping, cushion filler
materials, cartons, glass table tops, component parts for seating, particle
board and other lumber products and hardware. We have no long-term supply
contracts. Aluminum is a commodity and, as such, the price for aluminum is
subject to market conditions beyond our control. Significant fluctuations in
prices of aluminum, lumber and other raw materials could have a material adverse
effect on our business, financial condition, results of operations, prospects or
ability to service our debt obligations.
STRONG COMPETITION -- WE OPERATE IN A HIGHLY COMPETITIVE ENVIRONMENT.
The furniture industry is highly competitive and includes a large number of
manufacturers, none of which dominates the market. A number of competitors offer
products similar to ours. Some competitors have greater financial and other
resources than we do. We believe that the principal competitive factors in our
industry are product design, construction quality, prompt delivery, product
availability, customer service and price. Our failure to effectively compete in
any of these categories could have a material adverse effect on our business,
financial condition, results of operations, prospects and ability to service our
debt obligations. In particular, our historic relationship with
19
<PAGE> 25
leading Italian design firms has enhanced our ability to compete in our seating
business. There can be no assurance that we will not lose these relationships or
that our competitors will not establish similar relationships with the same or
other design firms and become able to offer similar products that compete with
ours. In addition, while sales of imported, foreign-produced casual furniture
represent a small percentage of furniture sales in the United States, imports
have increased in recent years and significant further increases in imports
could have a material adverse effect on our business, financial condition,
results of operation, prospects and ability to service our debt obligations.
KEY PERSONNEL -- WE DEPEND ON OUR SENIOR MANAGEMENT.
Our success depends upon the continued contributions of our senior
management, including Bobby Tesney, our President and Chief Executive Officer.
We have entered into employment agreements with Mr. Tesney and other senior
executives that became effective upon the consummation of the merger. Our loss
of the services of Mr. Tesney or any of our other senior executives could have a
material adverse effect on our business, financial condition, results of
operations, prospects and ability to service our debt obligations.
LITIGATION -- A PURPORTED CLASS ACTION COMPLAINT HAS BEEN FILED AGAINST US.
On March 25, 1999, a complaint was filed on behalf of a purported class of
our shareholders in the Circuit Court of Jefferson County, Alabama against us
and each of our directors, alleging, among other things, breaches of fiduciary
duty in connection with our merger with Trivest Furniture. On June 14, 1999, we
and the members of the board of directors filed a motion to dismiss the lawsuit
or, in the alternative, to grant summary judgment in our favor. A hearing has
been set for November 11, 1999. We believe that the complaint is without merit
and intend to vigorously defend the action. A judgment against us in this action
could have a material adverse effect on us. See "Business -- Legal Proceedings."
SIGNIFICANT SHAREHOLDERS -- AFFILIATES OF TRIVEST CONTROL THE COMPANY.
Affiliates of Trivest beneficially own approximately 94% of our capital
stock and have the power to designate all of our directors and exercise control
over our business, policies and affairs. The interests of Trivest and the
holders of the notes may differ from each other.
THE FURNITURE INDUSTRY -- THE FURNITURE INDUSTRY IS CYCLICAL.
The furniture manufacturing industry is cyclical and sensitive to general
economic conditions, consumer confidence and discretionary income, interest rate
levels, housing starts and credit availability. These factors not only affect
the ultimate consumer, but also affect specialty retailers, full-line furniture
retailers and department stores, which are important customers that purchase our
casual furniture products in the residential market. These factors also affect
the lodging industry, restaurant chains, apartment developers and managers,
architectural design firms and other commercial users in the contract market,
which are customers that purchase our casual furniture and seating products.
Residential furniture purchases are generally discretionary, and, in view of the
fact that they represent a significant expenditure to the average consumer, they
are often deferred during times of economic uncertainty. We cannot assure you
that a prolonged economic downturn would not have a material adverse effect on
our business, financial condition, results of operations, prospects and ability
to service our debt obligations.
20
<PAGE> 26
SEASONALITY -- OUR QUARTERLY RESULTS OF OPERATIONS FLUCTUATE DUE TO SEASONALITY
IN THE CASUAL FURNITURE MARKET.
Sales of our casual products are typically higher in the second quarter of
each year as a result of high retail demand for casual furniture preceding the
summer months. In addition, weather conditions during the peak retail selling
season and the resulting impact on consumer purchases of outdoor furniture
products can also affect our casual furniture sales.
ENVIRONMENTAL REGULATION -- WE ARE SUBJECT TO EXTENSIVE ENVIRONMENTAL
REGULATION.
Our operations and facilities are subject to a number of federal, state and
local environmental laws and regulations, which govern, among other things, the
discharge of hazardous materials into the air and water, as well as the
handling, storage and disposal of hazardous materials. In particular, we are
subject to environmental laws and regulations regarding air emissions from paint
and finishing operations and wood dust levels in our manufacturing operations.
Pursuant to various environmental laws, a current or previous owner or operator
of real property may be liable for the costs of removal or remediation of
hazardous materials. Environmental laws typically impose liability whether or
not the owner or operator knew of, or was responsible for, the presence of
hazardous materials. Although management believes that our operations and
facilities are in material compliance with environmental laws and regulations,
future changes in them or interpretations thereof or the nature of our
operations may require us to make significant additional capital expenditures to
ensure compliance in the future.
We do not maintain environmental liability insurance, and the expenses
related to a potential environmental claim against us could have a material
adverse effect on our business, financial condition, results of operations,
prospects and ability to service our debt obligations.
YEAR 2000 ISSUES -- WE COULD BE ADVERSELY AFFECTED IF YEAR 2000 PROBLEMS ARE
SIGNIFICANT.
As the end of the century nears, there is a widespread concern that many
existing computer programs that use only the last two digits to refer to a year
will not properly recognize a year that begins with the digits "20" instead of
"19." If not corrected, many computer applications could fail, create erroneous
results, or cause unanticipated systems failures, among other problems. Our
failure, or the failure of one or more of our key suppliers, customers or
distributors, to address successfully year 2000 issues could have a material
adverse effect on our business, financial condition, results of operations,
prospects and ability to service our debt obligations. We urge you to read the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Year 2000 Considerations."
RISKS ASSOCIATED WITH THE ORIGINAL NOTES -- AFTER COMPLETION OF THIS EXCHANGE
OFFER, THE LIQUIDITY OF ANY MARKET FOR THE ORIGINAL NOTES COULD BE ADVERSELY
AFFECTED AND THE ORIGINAL NOTES MAY NO LONGER BE ENTITLED TO ANY REGISTRATION
RIGHTS.
We issued the original notes in a private offering exempt from the
registration requirements of the Securities Act. Accordingly, you may not offer,
sell or otherwise transfer your original notes except in compliance with the
registration requirements of the Securities Act and applicable state securities
laws or pursuant to exemptions from such registration requirements. After
completion of this exchange offer, if you do not exchange your original notes
for registered notes in this exchange offer, your original notes will continue
to be subject to these transfer restrictions and you will no longer be entitled
to any registration rights under the registration rights agreement, except under
limited circumstances.
21
<PAGE> 27
To the extent original notes are tendered and accepted in the exchange
offer, the liquidity of the trading market, if any, for the original notes not
so exchanged could be adversely affected.
LACK OF PUBLIC MARKET -- THERE IS NO PUBLIC MARKET FOR THE NOTES.
The registered notes are being offered to the holders of the original
notes. Before the offering of the registered notes, there has been no public
market for the notes, and we do not intend to apply for the listing of the notes
on any securities exchange or for quotation of the notes on any automated
quotation system. If the registered notes are traded after their initial
issuance, they may trade at a discount from the initial offering price of the
original notes exchanged for them, depending upon prevailing interest rates, the
market for similar securities, our performance and other factors. The initial
purchasers of the original notes have advised us that they intend to make a
market in the registered notes, as permitted by applicable laws and regulations;
however, the initial purchasers are not obligated to do so, and they may
discontinue those market making activities at any time without notice. In
addition, any market making activity may be limited during the exchange offer
and while the effectiveness of any shelf registration statement is pending.
Therefore, there can be no assurance that an active market for the registered
notes will develop or, if developed, that it will continue.
ORIGINAL ISSUE DISCOUNT -- HOLDERS OF REGISTERED NOTES WILL BE TAXED ON ORIGINAL
ISSUE DISCOUNT.
The registered notes will be deemed to be issued at a discount from their
principal amount at maturity. Consequently, holders of registered notes
generally will be required to include amounts in gross income for United States
federal income tax purposes in advance of receipt of the cash payments to which
this income is attributable.
If a bankruptcy case is commenced by or against us under the United States
Bankruptcy Code after the issuance of the registered notes, the claim of a
holder of registered notes may be limited to an amount equal to the sum of the
initial offering price for the original notes exchanged for the registered notes
and that portion of the original issue discount that is not deemed to constitute
"unmatured interest" for purposes of the United States Bankruptcy Code. Any
original issue discount that was not amortized as of the date of the
commencement of this bankruptcy filing would constitute "unmatured interest."
DIVIDEND POLICY -- WE HAVE NEVER PAID DIVIDENDS AND ARE RESTRICTED FROM DOING
SO.
We have never paid cash dividends on our common stock and have no plans to
do so in the foreseeable future. The declaration and payment of any dividends in
the future will be determined by our board of directors, in its discretion, and
will depend on a number of factors, including our earnings, capital requirements
and overall financial condition. In addition, our ability to declare and pay
dividends is substantially restricted under the terms of the indenture governing
the notes and under our senior credit facility.
22
<PAGE> 28
RESALES OF REGISTERED NOTES -- SOME PERSONS WHO PARTICIPATE IN THIS EXCHANGE
OFFER MUST DELIVER A PROSPECTUS IN CONNECTION WITH RESALES OF THE REGISTERED
NOTES.
Based on no-action letters issued by the staff of the SEC to third parties,
we believe that you may offer for resale, resell or otherwise transfer the
registered notes without compliance with the registration and prospectus
delivery requirements of the Securities Act. However, in some instances
described in this prospectus under "The Exchange Offer," you will remain
obligated to comply with the prospectus delivery requirements of the Securities
Act to transfer your registered notes. In these cases, if you transfer any
registered note without delivering a prospectus meeting the requirements of the
Securities Act or without an exemption from registration of your registered
notes under the Securities Act, you may incur liability under this act. We do
not and will not assume, or indemnify you against, this liability.
23
<PAGE> 29
THE MERGER
On August 27, 1999, Trivest Furniture Corporation, an affiliate of Trivest,
merged with and into us, and we were the surviving corporation. Trivest
Furniture Corporation was a newly formed Florida corporation organized by an
investor group led by Trivest, including two private investment partnerships
affiliated with Trivest and members of our senior management, for the purpose of
acquiring WinsLoew. Trivest is a private investment firm specializing in
acquisitions, recapitalizations and other principal investing activities and is
controlled by Earl W. Powell, our Chairman of the Board. As a result of the
merger, each holder of outstanding WinsLoew common stock, other than Trivest
Furniture Corporation, received $34.75 per share in cash, without interest, and
the holder of each outstanding option received a cash payment equal to the
difference between $34.75 and the exercise price of the option. The cash merger
consideration, option cancellation payments and related fees and expenses, which
totaled approximately $282.6 million, were provided by the following sources:
- approximately $66.2 million in cash equity contributions to Trivest
Furniture Corporation from its shareholders, which consisted of two
private investment partnerships affiliated with Trivest, individuals
affiliated with Trivest, members of our senior management team and other
employees and investors;
- approximately $11.8 million in direct and indirect rollover equity
contributions valued at $34.75 per share to Trivest Furniture Corporation
from certain of our shareholders, including members of our senior
management team and other employees;
- aggregate borrowings of $95.0 million of term loans under our $155.0
million senior credit facility;
- the proceeds from the sale of units consisting of the original notes and
warrants; and
- available cash on hand of approximately $7.1 million.
The equity contributions, the senior credit facility and the net proceeds
of the offering of the units closed contemporaneously with the closing of the
merger and were conditioned on the completion of each other.
Earl W. Powell, Phillip T. George, M.D., William F. Kaczynski, Jr. and
Peter W. Klein are affiliates of Trivest and were members of our board of
directors prior to the merger. Messrs. Powell, Kaczynski and Klein continue to
be members of our board of directors. See "Management." Prior to the merger,
Messrs. Powell, George, Kaczynski and Klein beneficially owned an aggregate of
approximately 30.1% of our capital stock including approximately 23.7% held by
investment partnerships affiliated with Trivest. Messrs. Powell, George,
Kaczynski and Klein individually received an aggregate of approximately $12.3
million of cash merger consideration on the same terms as other shareholders and
the cancellation of outstanding stock options. This amount was net of aggregate
rollover equity contributions, valued at $34.75 per share, to Trivest Furniture
Corporation of approximately $4.0 million by Messrs. Powell and George. The two
private investment partnerships affiliated with Trivest received an aggregate of
approximately $59.2 million of cash merger consideration for all shares of
WinsLoew common stock they held. Two investment partnerships affiliated with
Trivest that were not previously shareholders of WinsLoew invested approximately
$68.9 million in Trivest Furniture Corporation. After the merger, Messrs. Powell
and George beneficially own an aggregate of approximately 93.4% of our capital
stock, including approximately 88.3% held by the investing Trivest partnerships.
In addition, each of Messrs. Powell, George, Kaczynski and Klein is an indirect
investor in certain of the Trivest partnerships that were our shareholders prior
to the merger and the Trivest partnerships that became our shareholders
24
<PAGE> 30
through the merger. Several other individuals affiliated or associated with
Trivest hold approximately 0.4% of our capital stock. See "Principal
Shareholders."
Prior to the merger, Bobby Tesney, R. Craig Watts, Stephen C. Hess, Vincent
A. Tortorici, Rick J. Stephens and Jerry C. Camp were members of our senior
management and Mr. Tesney was a member of our board of directors. Following the
merger, Messrs. Tesney, Watts, Tortorici, Stephens and Camp continue to be
members of our senior management and Mr. Tesney continues to be a member of our
board of directors. Messrs. Tesney, Watts, Hess, Tortorici, Stephens and Camp
received an aggregate of approximately $14.2 million of cash merger
consideration on the same terms as other shareholders and the cancellation of
outstanding stock options. This amount is net of aggregate cash equity
contributions and rollover equity contributions, valued at $34.75 per share, to
Trivest Furniture Corporation of approximately $3.8 million by Messrs. Tesney,
Watts, Hess, Tortorici, Stephens and Camp, so that, after the merger, they
beneficially own an aggregate of approximately 5.1% of our capital stock. See
"Principal Shareholders."
The principal shareholders also executed an investors' agreement in
connection with the closing of the merger providing for, among other things,
registration rights and rights relating to the transferability of shares of our
common stock. In addition, approximately 35 key employees and independent sales
representatives acquired approximately 1.1% of our capital stock for
approximately $800,000 and entered into shareholders' agreements providing for,
among other things, rights relating to the transferability of shares of common
stock. See "Certain Transactions" for more information regarding the investors'
agreement and the shareholders' agreements.
25
<PAGE> 31
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange offer. In
consideration for issuing the registered notes as contemplated in this
prospectus, we will receive in exchange original notes in like principal amount
at maturity. The original notes surrendered in exchange for registered notes
will be retired and cancelled and cannot be reissued. Accordingly, the issuance
of the registered notes will not result in any increase in our indebtedness.
The following table sets forth the sources and uses of the funds for the
merger:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
SOURCES OF FUNDS
- ----------------
Senior credit facility(1)................................... $ 95.0
Units consisting of original notes and warrants............. 102.5
Cash equity investment(2)................................... 66.2
Rollover equity investment(3)............................... 11.8
Available cash on hand...................................... 7.1
------
Total............................................. $282.6
======
USES OF FUNDS
- -------------
WinsLoew merger consideration............................... $268.3
Estimated fees and expenses(4).............................. 14.3
------
Total............................................. $282.6
======
</TABLE>
- ---------------
(1) Our $155.0 million senior credit facility with BankBoston consists of three
term loans aggregating $95.0 million, all of which was borrowed at closing,
a $40.0 million revolving credit facility, none of which was borrowed at
closing, and a $20.0 million acquisition loan facility, none of which was
borrowed at closing. See "Description of the Senior Credit Facility." As of
September 24, 1999, we had undrawn availability based on a borrowing base
formula under the revolving credit facility of approximately $23.1 million
and $20.0 million under the acquisition loan facility, both of which are
subject to certain conditions.
(2) Represents investments by Trivest affiliates, members of senior management
and other investors in Trivest Furniture Corporation.
(3) Consists of common stock, valued at $34.75 per share, held by members of
senior management and other shareholders before the merger that were
directly or indirectly contributed to Trivest Furniture Corporation.
(4) Includes debt issuance costs, financial advisory and other fees and expenses
related to the merger, including fees of approximately $3.0 million to
Trivest. See "Certain Transactions."
26
<PAGE> 32
CAPITALIZATION
The following table sets forth our capitalization as of September 24, 1999.
This table should be read in conjunction with the "Selected Historical
Consolidated Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and the accompanying notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 24, 1999
------------------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 762
========
Long-term debt, including current portion:
Existing total debt....................................... $ 12
Senior Credit Facility:
Revolving credit facility(1)........................... 925
Revolving acquisition facility(2)...................... --
Term A loan facility................................... 25,000
Term B loan facility................................... 62,500
Term C loan facility................................... 7,500
12 3/4% Senior Subordinated Notes due 2007, net(3)........ 101,093
--------
Total debt............................................. 197,030
Stockholders' equity(3)(4).................................. 78,806
--------
Total capitalization................................. $275,836
========
</TABLE>
- -------------------------
(1) As of September 24, 1999, we had undrawn availability of approximately $23.1
million under our new $40.0 million revolving credit facility, based on a
borrowing base formula. See "Description of the Senior Credit Facility."
(2) The revolving acquisition facility will be used to fund permitted
acquisitions, subject to certain conditions. Such amounts will be available
through December 31, 2001, at which time amounts not drawn will be
cancelled, and amounts outstanding will be converted into a term loan that
will amortize beginning March 31, 2002. See "Description of the Senior
Credit Facility."
(3) The notes are recorded at a discount of approximately $3.9 million to the
face amount to reflect the original issue discount on the notes of
approximately $2.5 million and the value attributed to the warrants issued
as part of the units with the notes of approximately $1.4 million, which has
been recorded as an increase to stockholders' equity.
(4) Excludes 24,129 shares of common stock reserved for issuance upon exercise
of outstanding warrants. See "Description of Capital Stock."
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<PAGE> 33
SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following selected historical consolidated financial data for each of
the three years in the period ended December 31, 1998 and as of December 31,
1997 and 1998 have been derived from, and should be read in conjunction with,
our audited consolidated financial statements, which have been audited by Ernst
& Young LLP, independent auditors and are included elsewhere in this prospectus.
The following selected historical consolidated financial data for each of the
two years in the period ended December 31, 1995 and as of December 31, 1994,
1995 and 1996 have been derived from audited financial statements that are not
included in this prospectus. The following historical consolidated financial
data for the nine-month periods ended September 25, 1998 and September 24, 1999
have been derived from our unaudited interim consolidated financial statements,
include, in the opinion of management, all adjustments necessary to present
fairly the data for such periods, and are included elsewhere in this prospectus.
Due to the seasonality of our operations and other factors, the results of
operations for the nine months ended September 24, 1999 may not be indicative of
the results that may be expected for the full year. The information set forth
below should be read in conjunction with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and our consolidated financial
statements and the notes thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, -----------------------------
---------------------------------------------------- SEPTEMBER 25, SEPTEMBER 24,
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................... $ 95,561 $110,887 $117,405 $122,145 $141,360 $106,726 $120,736
Cost of sales............... 65,060 78,710 78,029 79,431 87,232 66,829 72,733
-------- -------- -------- -------- -------- -------- --------
Gross profit.............. 30,501 32,177 39,376 42,714 54,128 39,897 48,003
Selling, general and
administrative expenses... 16,303 19,303 21,472 21,427 23,124 17,673 19,318
Amortization................ 2,000 2,087 1,444 992 1,122 806 1,611
Non-recurring charges....... 917 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Operating income.......... 11,281 10,787 16,460 20,295 29,882 21,418 27,074
Interest expense............ 2,795 3,841 3,083 2,296 635 824 2,280
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before income
taxes and extraordinary
item...................... 8,486 6,946 13,377 17,999 29,247 20,594 24,794
Provision for income
taxes..................... 3,068 3,489 4,834 6,838 10,947 7,731 10,433
-------- -------- -------- -------- -------- -------- --------
Income from continuing
operations before
extraordinary item........ 5,418 3,457 8,543 11,161 18,300 12,863 14,361
Income (loss) from
discontinued operations,
net of taxes.............. 934 (9,199) (259) (718) -- -- --
Gain (loss) from sale of
discontinued operations,
net of taxes(1)........... -- -- -- (8,200) 2,031 -- --
Extraordinary item.......... -- 1,698 -- -- -- -- --
-------- -------- -------- -------- -------- -------- --------
Net income (loss)......... $ 6,352 $ (4,044) $ 8,284 $ 2,243 $ 20,331 $ 12,863 $ 14,361
======== ======== ======== ======== ======== ======== ========
OTHER FINANCIAL DATA:
EBITDA(2)................... $ 14,698 $ 14,273 $ 19,439 $ 22,929 $ 32,500 $ 23,334 $ 29,834
EBITDA Margin(2)............ 15.4% 12.9% 16.6% 18.8% 23.0% 21.9% 24.7%
Depreciation and
amortization.............. 3,417 3,486 2,979 2,634 2,618 1,916 2,760
Capital expenditures........ 3,261 2,702 1,351 425 942 1,131 275
Ratio of earnings to fixed
charges(3)................ 4.0x 2.8x 5.3x 8.8x 47.1x 26.0x 11.9x
BALANCE SHEET DATA (AT END
OF PERIOD):
Working capital............. $ 37,711 $ 58,785 $ 40,102 $ 29,937 $ 25,840 $ 18,498 $ 13,320
Total assets................ 111,054 104,004 99,950 80,414 84,553 78,747 297,831
Total debt (including
current portion).......... 40,893 41,941 40,681 16,423 1,447 1,126 197,030
Stockholders' equity........ 60,680 53,228 48,400 51,026 66,226 59,400 78,806
(footnotes on following page)
</TABLE>
28
<PAGE> 34
(1) See note 2 of our consolidated financial statements.
(2) EBITDA represents earnings before interest, taxes, depreciation and
amortization, loss from discontinued operations, net of taxes, and gain
(loss) from sale of discontinued operations, net of taxes, and is presented
to provide additional information with respect to our debt service capacity.
EBITDA margin represents EBITDA divided by net sales. EBITDA should not be
considered in isolation from, or as a substitute for, net income, cash flows
from operations or cash flow data prepared in accordance with generally
accepted accounting principles or as a measure of a company's profitability
or liquidity. Rather, EBITDA is presented because it is a widely accepted
supplemental financial measure, and we believe it provides relevant and
useful information. Our calculation of EBITDA may not be comparable to
similarly titled measures reported by other companies since all companies do
not calculate this non-GAAP measure in the same fashion. Our EBITDA
calculation is not intended to represent cash provided by (used in)
operating activities, since it does not include interest and taxes and
changes in operating assets and liabilities, nor is it intended to represent
the net increase in cash, since it does not include cash provided by (used
in) investing and financing activities. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Description
of the Registered Notes."
(3) For the purpose of calculating the ratio of earnings to fixed charges, (a)
earnings consist of income (loss) from continuing operations before income
taxes and extraordinary item plus fixed charges (excluding capitalized
interest), and (b) fixed charges consist of interest expense (including
capitalized interest) on, and amortized discounts and capitalized expenses
related to, all indebtedness and that portion of rental expense that is
representative of interest.
29
<PAGE> 35
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated statements of operations for
the year ended December 31, 1998, and the nine months ended September 24, 1999
give effect to the merger and the acquisitions of Tropic Craft and Pompeii as if
they had occurred on January 1, 1998. The unaudited pro forma financial
statements are based upon the historical accounting financial information
appearing elsewhere in this prospectus.
The pro forma adjustments are based upon available information and certain
assumptions that management believes are reasonable and are described in the
notes accompanying the pro forma financial statements. The unaudited pro forma
financial statements are provided for information purposes only and do not
purport to represent what our results of operations or financial position would
actually have been had the transactions in fact occurred at such dates or to
project our results of operations or financial position at or for any future
date or period.
The unaudited pro forma financial statements and accompanying notes should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes thereto contained elsewhere herein. The merger was treated as a
purchase business combination for financial accounting purposes.
30
<PAGE> 36
WINSLOEW FURNITURE, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
TROPIC TRANSACTION PRO
WINSLOEW(1) CRAFT(2) POMPEII(3) ADJUSTMENTS FORMA
----------- -------- ---------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net sales...................... $141,360 $3,251 $ 14,513 $ -- $159,124
Cost of goods sold............. 87,232 1,089 8,846 -- 97,167
-------- ------ ---------- ---------- --------
Gross profit................... 54,128 2,162 5,667 -- 61,957
Selling, general and
administrative expenses...... 23,124 571 2,832 (291)(4) 26,236
Amortization................... 1,122 145 451 4,491 (5) 6,209
-------- ------ ---------- ---------- --------
Operating income............... 29,882 1,446 2,384 (4,200) 29,512
Interest expense............... 635 309 1,492 23,694 (6) 26,130
-------- ------ ---------- ---------- --------
Income from continuing
operations before income
taxes........................ 29,247 1,137 892 (27,894) 3,382
Provision for income taxes..... 10,947 433 339 (8,780)(7) 2,939
-------- ------ ---------- ---------- --------
Income from continuing
operations................... 18,300 704 553 (19,114) 443
Gain from sale of discontinued
operations, net of taxes..... 2,031 -- -- -- 2,031
-------- ------ ---------- ---------- --------
Net income................... $ 20,331 $ 704 $ 553 $ (19,114) $ 2,474
======== ====== ========== ========== ========
EBITDA....................... $ 32,500 $1,652 $ 3,050 $ 291 $ 37,493
======== ====== ========== ========== ========
</TABLE>
- -------------------------
(1) Represents actual results of operations for WinsLoew for the year ended
December 31, 1998. See our consolidated financial statements and the notes
thereto contained elsewhere in this prospectus.
(2) Represents the unaudited pro forma results of operations for Tropic Craft,
which was acquired on June 30, 1998, for the six month period ended June 30,
1998. The results of operations of Tropic Craft for the six months ended
December 31, 1998 are reflected in the actual results of operations of
WinsLoew. See note 3 of notes to the audited consolidated financial
statements. The pro forma adjustments include (a) the elimination of the
prior owner's compensation, (b) incremental costs associated with new
employment agreements, (c) the elimination of leasing costs for purchased
real estate that was previously leased by Tropic Craft, and (d) amortization
related to goodwill and intangibles purchased. All such adjustments have
been affected at a tax rate of 38%.
(3) Represents the unaudited pro forma results of operations for Pompeii, which
was acquired on July 30, 1999, for the year ended December 31, 1998. The pro
forma adjustments include (a) the elimination of the prior owner's
compensation, (b) lower costs associated with the new employment agreements,
(c) increased leasing costs for purchased real estate owned by the prior
owner, and (d) amortization related to goodwill and intangibles purchased.
All such adjustments have been affected at a tax rate of 38%.
(4) Represents a reduction in the management fee paid under the new Management
Agreement with Trivest executed in connection with the merger.
(5) Represents amortization of goodwill generated in the merger transactions,
amortized over 40 years, offset by reduced amortization ($297,000) of
deferred financing fees due to the expiration of the previous credit
agreement.
(6) Represents cash interest expense as a result of borrowings outstanding under
our senior credit facility and the issuance of the original notes in
connection with the merger transactions and non-cash interest expense ($1.5
million) associated with the amortization of deferred financing fees
incurred in connection with our new senior credit facility and the original
notes and the discount to the face amount of the original notes and the
value attributed to the warrants issued with the original notes.
(7) Represent the tax effect of adjustment (4) and (6) above at a 38% tax rate.
31
<PAGE> 37
WINSLOEW FURNITURE, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 24, 1999
<TABLE>
<CAPTION>
TRANSACTION
WINSLOEW(1) POMPEII(2) ADJUSTMENTS PRO FORMA
----------- ---------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales............................... $120,736 $ 8,128 $ -- $128,864
Cost of goods sold...................... 72,733 4,978 -- 77,711
-------- -------- -------- --------
Gross profit............................ 48,003 3,150 -- 51,153
Selling, general and administrative
expenses.............................. 19,318 2,041 (194)(3) 21,165
Amortization............................ 1,611 263 2,792 (4) 4,666
-------- -------- -------- --------
Operating income........................ 27,074 846 (2,598) 25,322
Interest expense........................ 2,280 870 15,796 (5) 18,946
-------- -------- -------- --------
Income before income taxes.............. 24,794 (24) (18,394) 6,376
Provision for income taxes.............. 10,433 (9) (5,777)(6) 4,647
-------- -------- -------- --------
Net income............................ $ 14,361 $ (15) $(12,617) $ 1,729
======== ======== ======== ========
EBITDA................................ $ 29,834 $ 1,328 $ 194 $ 31,356
======== ======== ======== ========
</TABLE>
- -------------------------
(1) Represents actual results of operations for WinsLoew for the six months
ended June 25, 1999. See our unaudited interim Consolidated Financial
Statements and the notes thereto contained elsewhere in this prospectus.
(2) Represents the unaudited pro forma results of operations for Pompeii, which
was acquired on July 30, 1999, for the seven months ended July 30, 1999. The
results of operations of Pompeii for the two months ended September 24, 1999
are reflected in the actual results of operations of WinsLoew. See note 7 of
notes to the unaudited interim consolidated financial statements. The pro
forma adjustments include (a) the elimination of the prior owner's
compensation, (b) lower costs associated with the new employment agreements,
(c) increased leasing costs for purchased real estate owned by the prior
owner, and (d) amortization related to goodwill and intangibles purchased.
All such adjustments have been affected at a tax rate of 38%.
(3) Represents a reduction in the management fee paid under the new Management
Agreement with Trivest executed in connection with the merger transactions.
(4) Represents amortization of goodwill generated in the merger transactions,
offset by reduced amortization ($198,000) of deferred financing fees and the
write-off of the remaining financing fees ($201,000) due to the expiration
of the previous credit agreement.
(5) Represents cash interest expense as a result of borrowings outstanding under
our senior credit facility and the issuance of the original notes in
connection with the merger transactions and non-cash interest expense
($977,000) associated with the amortization of deferred financing fees
incurred in connection with our new senior credit facility and the original
notes and the discount to the face amount of the original notes and the
value attributed to the warrants issued with the notes.
(6) Represent the tax effect of adjustments (3) and (5) above at a 38% tax rate.
32
<PAGE> 38
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
We are a leading designer, manufacturer and distributor of a broad offering
of casual indoor and outdoor furniture and seating products. We also manufacture
ready-to-assemble furniture products. Our casual furniture includes chairs,
chaise lounges, tables, umbrellas and related accessories, which are generally
constructed from aluminum, wrought iron, wood or fiberglass. Our seating
products include wood, metal and upholstered chairs, sofas and loveseats, which
are offered in a wide variety of finish and fabric options. All of our casual
furniture and seating products are manufactured pursuant to customer orders. We
sell our furniture products to the residential market and to the contract
market, consisting of commercial and institutional users.
We have undertaken a number of initiatives in recent years to strengthen
and grow our core casual furniture and seating businesses. We have focused our
resources on our core business and disposed of non-core or unprofitable
operations. In 1997, we sold our wrought iron furniture business, and in 1998 we
discontinued and sold or liquidated some of our ready-to-assemble furniture
operations. We embarked on a focused acquisition program to broaden our core
product offering that, to date, has resulted in the acquisitions of Tropic
Craft, a manufacturer of casual furniture sold into the contract market, and
Pompeii, a manufacturer of upper-end casual furniture sold into both the
residential and contract markets. See "Business -- General."
Sale of Wrought Iron Furniture Business. During the third quarter of 1997,
we disposed of certain assets of our wrought iron business in the casual
furniture product line. The sale generated net cash proceeds of $2.1 million.
This business accounted for net sales of $11.0 million in 1996 and $5.7 million
in 1997 through the sale date. The operating income of this business was not
material to consolidated operating income. During the third quarter of 1997, we
recorded approximately $0.2 million of costs associated with the sale in
selling, general and administrative expenses.
Discontinued Operations. During 1997 we also adopted a plan to dispose of
our ready-to-assemble operations. At that time, our ready-to-assemble furniture
products included ergonomically-designed computer workstations, which we
referred to as "space savers," promotionally-priced coffee and end tables, wall
units and rolling carts and an extensive line of futons, futon frames and
related accessories. As a result of this decision, we recorded a pre-tax
non-cash charge totaling $12.4 million in the fourth quarter of 1997 relating to
the disposal of the ready-to-assemble operations. The following is a summary of
the components of the charge (in millions):
<TABLE>
<S> <C>
Write-off of goodwill in connection with sale of assets..... $ 3.9
Reduction of inventory value................................ 2.8
Reduction of property to net realizable value............... 2.1
Reduction of accounts receivable value...................... 1.4
Other liabilities/reserves.................................. 1.0
Accrual for losses through disposition...................... 1.2
-----
Total..................................................... $12.4
=====
</TABLE>
We planned to sell two of our ready-to-assemble furniture businesses and
liquidate the assets related to our futon business, which was our other
ready-to-assemble furniture line. During 1998 we sold one of the businesses,
completed the liquidation of the futon business and decided to retain our
Southern Wood business due to improved profitability (see note 2 to the notes to
our consolidated
33
<PAGE> 39
financial statements). Accordingly, the financial data included in this
prospectus has been restated to reflect Southern Wood as a continuing operation.
Purchase of Tropic Craft. In June 1998, we purchased all of the stock of
Tropic Craft, a designer and manufacturer of casual furniture sold into the
contract markets, for $9.3 million in cash. In addition, the seller will be
entitled to receive aggregate contingent purchase price payments of up to $1.0
million upon achievement of targeted earning performance with respect to the
years ending June 30, 1999 and June 30, 2000. The acquisition resulted in
goodwill of $6.9 million. Funds for the acquisition were provided under our
existing credit facility. We accounted for the acquisition under the purchase
method and, accordingly, the operating results of Tropic Craft have been
included in our historical consolidated operating results only since the date of
acquisition.
Purchase of Pompeii. In July 1999, we acquired all of the stock of
Pompeii, a manufacturer of upper-end aluminum casual furniture sold into the
contract and residential markets, for $18.2 million in cash. Pompeii provides us
with a leading brand in the upper end of the casual furniture market and a
significant opportunity to achieve operating efficiencies. For the year ended
December 31, 1998, Pompeii had net revenues of approximately $14.5 million and
income from operations of approximately $2.8 million. We expect to spend
approximately $1.5 million over the next 12 to 18 months for certain integration
costs. We funded the Pompeii acquisition with available cash on hand and expect
to fund the integration costs with working capital. We accounted for the
acquisition under the purchase method and, accordingly, the operating results of
Pompeii have been included in our historical consolidated operating results only
since the date of the acquisition. Also see "Pro Forma Financial Data."
RESULTS OF OPERATIONS
The following table sets forth net sales, gross profit and gross margin as
a percent of net sales for the fiscal periods indicated for each of our product
lines, in thousands, except for percentages:
<TABLE>
<CAPTION>
1996 1997 1998
--------------------------- --------------------------- ---------------------------
NET GROSS GROSS NET GROSS GROSS NET GROSS GROSS
SALES PROFIT MARGIN SALES PROFIT MARGIN SALES PROFIT MARGIN
-------- ------- ------ -------- ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Casual furniture........... $ 58,066 $23,812 41.0% $ 56,363 $24,164 42.9% $ 59,733 $28,227 47.3%
Seating.................... 48,629 14,126 29.0 58,386 17,256 29.6 69,938 23,439 33.5
Ready-to-assemble.......... 10,710 1,438 13.4 7,396 1,294 17.5 11,689 2,462 21.1
-------- ------- -------- ------- -------- -------
Total.................... $117,405 $39,376 33.5% $122,145 $42,714 35.0% $141,360 $54,128 38.3%
======== ======= ======== ======= ======== =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------------------------------------
SEPTEMBER 25, 1998 SEPTEMBER 24, 1999
--------------------------- ---------------------------
NET GROSS GROSS NET GROSS GROSS
SALES PROFIT MARGIN SALES PROFIT MARGIN
-------- ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Casual furniture........... $ 47,423 $21,754 45.9% $58,110 $27,470 47.3%
Seating.................... 50,833 16,349 32.2 51,485 17,911 34.8
Ready-to-assemble.......... 8,470 1,794 21.2 11,141 2,622 23.5
-------- ------- -------- -------
Total.................... $106,726 $39,897 37.4% $120,736 $48,003 39.8%
======== ======= ======== =======
</TABLE>
34
<PAGE> 40
The following table sets forth certain information relating to our
operations expressed as a percentage of our net sales:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, NINE MONTHS ENDED
------------------------ -----------------------------
SEPTEMBER 25, SEPTEMBER 24,
1996 1997 1998 1998 1999
---- ---- ---- ------------- -------------
<S> <C> <C> <C> <C> <C>
Gross profit........................ 33.5% 35.0% 38.3% 37.4% 39.8%
Selling, general and administrative
expense........................... 18.3 17.6 16.4 16.5 16.0
Amortization........................ 1.2 0.8 0.8 0.8 1.4
Operating income.................... 14.0 16.6 21.1 20.1 22.4
Interest expense.................... 2.6 1.9 0.4 0.8 1.9
Provision for income taxes.......... 4.1 5.6 7.7 7.2 8.6
Income from continuing operations
before extraordinary item......... 7.3 9.1 13.0 12.1 11.9
Loss from discontinued operations,
net of taxes...................... (0.2) (0.6) -- -- --
Gain (loss) from sale of
discontinued operations, net of
taxes............................. -- (6.7) 1.4 -- --
Net income.......................... 7.1 1.8 14.4 12.1 11.9
EBITDA.............................. 16.6 18.8 23.0 21.9 24.7
</TABLE>
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 24, 1999 AND NINE MONTHS ENDED
SEPTEMBER 25, 1998
Net Sales. Our consolidated net sales for the nine months ended September
24, 1999, increased $14.0 million, or 13.1%, to $120.7 million, compared to
$106.7 million in the nine months ended September 25, 1998. Our casual and
ready-to-assemble product lines experienced strong sales increases. Sales of
casual products increased 22.5% in the nine months ended September 24, 1999,
compared to the comparable period of 1998. Excluding Tropic Craft, which was
purchased in the third quarter of 1998, and Pompeii, which was purchased in the
third quarter of 1999, sales of casual products increased 10.0%. We believe that
this increase in demand is primarily due to our emphasis on quality, leading the
industry through innovative designs and providing customer flexibility with our
delivery program during the short casual retail season. Ready-to-assemble
product sales increased 31.5% in the first nine months of 1999, compared to the
comparable period of 1998, primarily due to increased demand on all
ready-to-assemble furniture. Seating sales experienced only a slight 1.3%
increase during the nine months ended September 24, 1999 compared to the
comparable period of 1998, primarily due to less favorable market conditions
during the period.
Gross Profit. Consolidated gross profit increased $8.1 million in the nine
months ended September 24, 1999 to $48.0 million, or 39.9%, compared to $39.9
million, or 37.4%, in the comparable period of 1998. All three of our product
lines contributed to the increase in gross profit. The casual product line gross
profit improved to 47.3% in the nine months ended September 24, 1999 compared to
45.9% in the comparable period of 1998, due to increased demand and improved
operating efficiencies. The gross profit for seating products improved to 34.8%
in the nine months ended September 24, 1999 compared to 32.2% in the comparable
period of 1998 due to a favorable product mix and improved profit margins on our
core seating products. The ready-to-assemble product line gross profit improved
to 23.5% in the nine months ended September 24, 1999, compared to 21.2% in the
comparable period of 1998, due to increased demand and improved operating
efficiencies.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.6 million ($1.1 million excluding Pompeii,
which was purchased in the third quarter of
35
<PAGE> 41
1999) in the nine months ended September 24, 1999 to $19.3 million, compared to
selling, general and administrative expenses of $17.7 million in the comparable
period of 1998. The increase was primarily the result of higher sales related
expenditures.
Amortization. Amortization expense increased $0.8 million to $1.6 million
in the nine months ended September 24, 1999, compared to $806,000 in the
comparable period of 1998, due to amortization of goodwill related to the Tropic
Craft and Pompeii acquisitions and the merger with Trivest Furniture
Corporation.
Operating Income. As a result of the above, operating income increased by
$5.7 million, to $27.1 million (22.4% of net sales) in the nine months ended
September 24, 1999, compared to $21.4 million (20.1% of net sales) in the
comparable period of 1998.
Interest Expense. Our interest expense increased $1.5 million in the nine
months ended September 24, 1999, compared to the comparable period of 1998, due
to debt incurred in the merger with Trivest Furniture Corporation.
Provision for Income Taxes. Our effective tax rate for the nine months
ended September 24, 1999 was 42.1% compared to 37.5% for the comparable period
of 1998. The effective tax rate is greater than the federal statutory rate
primarily due to the effect of state income taxes and non-deductible goodwill
amortization.
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 AND 1997
Net Sales. Our consolidated net sales for 1998 increased $19.3 million or
15.8% to $141.4 million, compared to $122.1 million in 1997. Sales of casual
furniture increased 17.9%, excluding sales relating to our wrought iron
business, which we sold in 1997. We believe that due to our high quality and
innovative designs, our timely delivery capability and our focus on customer
service existing residential customers have continued to allocate more floor
space to our casual aluminum furniture products, which has resulted in increased
sales of our products to residential consumers. Sales of seating products
increased 19.8% due to growth in the core business and increased demand from the
lodging industry. Sales of ready-to-assemble products increased 58.0% due to
increased demand as we broadened our product offering to include additional
flat-line products and case goods which allowed us to enter new markets.
Gross Profit. Consolidated gross profit increased $11.4 million in 1998 to
$54.1 million compared to $42.7 million in 1997. Our casual, seating and
ready-to-assemble furniture products each generated increased gross profits in
1998 due to greater operating efficiencies, increased sales volumes and improved
raw material costs.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.7 million in 1998 to $23.1 million (16.4%
of net sales), compared to 1997 selling, general and administrative expense of
$21.4 million (17.5% of net sales), due to increased commission expense and
other variable costs related to the increased sales volume in 1998.
Amortization. Amortization expense increased $0.1 million in 1998,
compared to 1997, due to amortization of goodwill related to the Tropic Craft
acquisition.
Operating Income. As a result of the above, operating income increased by
$9.6 million, to $29.9 million (21.1% of net sales) in 1998, compared to $20.3
million (16.6% of net sales) in 1997.
Interest Expense. Our interest expense decreased $1.7 million in 1998,
compared to 1997 due to the repayment of $15.0 million of indebtedness during
the year.
36
<PAGE> 42
Provision for Income Taxes. Our effective tax rate from continuing
operations of 37.4% in 1998 and 38.0% in 1997 is greater than the federal
statutory rate due to the effect of state income taxes and non-deductible
goodwill amortization.
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND 1996
Net Sales. Our consolidated net sales for 1997 increased $4.7 million or
4.0% to $122.1 million, compared to $117.4 million in 1996. Sales of casual
furniture increased 7.6% excluding sales relating to our wrought iron business,
which we sold in 1997. We believe that due to our high quality and innovative
designs, our timely delivery capability and our focus on customer service,
existing residential customers have allocated more floor space to our casual
aluminum furniture products, which has resulted in increased sales of our
products to residential consumers. Sales of seating products increased 20.1% due
to growth in the core business and increased demand from the lodging industry.
Sales of ready-to-assemble products decreased 30.9% due to the loss of a major
customer.
Gross Profit. Consolidated gross profit increased $3.3 million in 1997 to
$42.7 million compared to $39.4 million in 1996. Our casual furniture and
seating products each generated increased gross profits in 1997 due to greater
operating efficiencies, increased sales volumes (after excluding sales for our
Lyon Shaw wrought iron business sold in 1997) and improved raw material costs.
The ready-to-assemble product line experienced a 10.0% decrease in gross profit
in 1997 due to lower sales volume.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $45,000 in 1997, compared to 1996, due to
various cost reduction programs which more than offsets increases in commission
expense and other variable costs related to the increased sales volume in 1997.
Amortization. Amortization expense decreased $0.5 million due to the
intangible assets that became fully amortized in 1996.
Operating Income. As a result of the above, we recorded operating income
of $20.3 million (16.6% of net sales) in 1997, compared to operating income of
$16.5 million (14.0% of net sales) in 1996.
Interest Expense. Our interest expense decreased $0.8 million in 1997,
compared to 1996 due to the repayment of $24.3 million of indebtedness during
the year.
Provision for Income Taxes. Our effective tax rate from continuing
operations of 38.0% in 1997 and 36.1% in 1996 is greater than the federal
statutory rate due to the effect of state income taxes and non-deductible
goodwill amortization.
SEASONALITY AND QUARTERLY INFORMATION
Sales of casual products are typically higher in the second quarter of each
year as a result of high retail demand for casual furniture preceding the summer
months. Weather conditions during the peak retail selling season and the
resulting impact on consumer purchases of outdoor furniture products can also
affect sales of our casual products. During the third quarter of 1997, we sold
our Lyon Shaw wrought iron division (See note 3 to the consolidated financial
statements).
The following table presents our unaudited quarterly data for 1997, 1998
and 1999. Such operating results are not necessarily indicative of results for
future periods. We believe that all necessary and normal recurring adjustments
have been included in the amounts in order to present fairly and in accordance
with generally accepted accounting principles the selected quarterly information
when read in conjunction with our consolidated financial statements included
elsewhere
37
<PAGE> 43
herein. The results of operations for any quarter are not necessarily indicative
of results for a full year. The following data has been restated to reflect
Southern Wood as a continuing operation.
<TABLE>
<CAPTION>
FIRST SECOND THIRD
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1999 QUARTERS
Net sales............................................ $32,910 $47,679 $40,147
Gross profit......................................... $12,879 $19,696 $15,428
Operating income..................................... $ 6,838 $11,833 $ 8,403
Income before income taxes........................... $ 6,715 $11,879 $ 6,200
Net income........................................... $ 4,184 $ 7,350 $ 2,827
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1998 QUARTERS
Net sales............................................ $27,576 $42,892 $36,258 $34,634
Gross profit......................................... $ 9,630 $16,740 $13,527 $14,231
Operating income..................................... $ 4,871 $10,282 $ 6,265 $ 8,464
Income from continuing operations.................... $ 2,873 $ 6,199 $ 3,791 $ 5,437
Net income........................................... $ 2,873 $ 6,199 $ 3,791 $ 7,468
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
1997 QUARTERS
Net sales............................................ $24,682 $39,854 $29,523 $28,086
Gross profit......................................... $ 7,519 $15,020 $10,073 $10,102
Operating income..................................... $ 2,592 $ 8,313 $ 4,440 $ 4,950
Income from continuing operations.................... $ 1,047 $ 4,729 $ 2,355 $ 3,030
Net income (loss).................................... $ 818 $ 4,504 $ 2,282 $(5,361)
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Our short-term cash needs are primarily for debt service and working
capital, including accounts receivable and inventory requirements. We have
historically financed our short-term liquidity needs with internally generated
funds and revolving line of credit borrowings. At September 24, 1999, we had
$13.3 million of working capital and, under our senior credit facility, $23.1
million of unused and available funds under the revolving credit facility and
$20.0 million of unused and available funds under the acquisition loan facility.
Cash Flows from Operating Activities. During 1998, net cash provided by
operations increased to $31.1 million, compared to $22.0 million in 1997,
primarily due to improved profitability from continuing operations. Net cash
provided by operations was $30.7 million and $33.0 million for the nine months
ended September 24, 1999 and September 25, 1998, respectively. The decrease was
primarily due to the sale of assets of discontinued operations in 1998. In
addition, the use of cash in the first quarter of 1999 reflects our financing of
accounts receivable pursuant to our long-standing sales strategy of providing
extended payment terms to customers. During the first four months of each year,
accounts receivable in the casual furniture division normally increases due to
extended payment terms offered to customers to encourage purchases of our
products prior to the second quarter when most customers purchase their casual
furniture. During the second quarter, we receive payment on these accounts
receivable. Management believes that this special sales program provides a
matching advantage, reduces the effects of seasonality on our operations and
reduces our finished goods inventory levels.
38
<PAGE> 44
Cash Flows from Investing Activities. During 1998, we spent $0.9 million
on capital expenditures and $9.3 million on the purchase of Tropic Craft (see
note 3 to the audited consolidated financial statements), compared to capital
expenditures of $0.4 million and the receipt of $2.1 million in proceeds from
the sale of certain assets of our wrought iron business in 1997. Net cash used
in investing activities was $298.8 million and $10.5 million for the nine months
ended September 24, 1999 and September 25, 1998, respectively. Cash used in
investing activities in the first nine months of 1999 included $280.3 million
used in the merger with Trivest Furniture Corporation and $18.2 million used in
the acquisition of Pompeii. Cash used in investing activities in the first nine
months of 1998 included $9.3 million for the purchase of Tropic Craft. See notes
2 and 7 to the unaudited interim consolidated financial statements. At September
24, 1999, we had no material commitments for capital expenditures.
Cash Flows From Financing Activities. During 1998, we used cash generated
by operations to repay $15.0 million of debt and purchase $6.1 million of our
common stock (see note 5 to the audited consolidated financial statements). In
1997, we used cash generated by operations and investing activities to repay
$24.3 million of debt. Net cash provided by financing activities was $268.4
million in the nine months ended September 24, 1999 compared to $19.8 million
used in financing activities in the comparable period of 1998. In the first nine
months of 1999, cash was primarily provided by proceeds from borrowings under
our senior credit facility and the issuance of units consisting of the original
notes and warrants. See note 4 to our unaudited interim consolidated financial
statements. In the first nine months of 1998, we primarily used cash to retire
revolving credit debt and to repurchase shares of our common stock.
We financed the merger with $78.0 million of cash and rollover equity
investment, approximately $7.1 million of available cash on hand, term loan
borrowings of approximately $95.0 million under our $155.0 million senior credit
facility and proceeds from the sale of units consisting of the original notes
and warrants. See "The Merger."
Our senior credit facility consists of three term loans aggregating $95.0
million, all of which was borrowed at closing, a $40.0 million revolving credit
facility, none of which was borrowed at closing, and a $20.0 million acquisition
loan facility, none of which was borrowed at closing. See "Description of the
Senior Credit Facility." As of September 24, 1999, we had undrawn availability
based on a borrowing base formula under the revolving credit facility of
approximately $23.1 million and $20.0 million under the acquisition loan
facility, both of which are subject to certain conditions.
We have significant amounts of debt requiring interest and principal
repayments. The notes require semi-annual interest payments commencing in
February 2000 and will mature in August 2007. Borrowings under the senior credit
facility require monthly interest payments commencing in September 1999. Of the
term loans, $3.6 million mature in each of 2000 and 2001, $6.6 million mature in
each of 2002 and 2003, $7.6 million mature in 2004, $29.7 million mature in 2005
and $37.2 million mature in 2006. Amounts outstanding under the revolving credit
facility mature December 31, 2004. Amounts outstanding under the acquisition
loan facility at December 31, 2001 mature 20% in 2002, 30% in 2003 and 50% in
2004. As of September 24, 1999, $0.9 million was outstanding under the revolving
credit facility and no amounts were outstanding under the acquisition loan
facility. As of September 24, 1999:
- our total debt outstanding was approximately $197.0 million;
- our interest expense would have been approximately $18.9 million for the
nine months ended September 24, 1999 and $26.1 million for the year ended
December 31, 1998 on a pro forma basis after giving effect to the merger
and the Pompeii acquisition;
- our total stockholders' equity was approximately $78.8 million; and
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<PAGE> 45
- the sufficiency of our earnings available to cover fixed charges for the
twelve months ended September 24, 1999 would have been approximately 1.3
to 1 on a pro forma basis after giving effect to the merger and the
Pompeii acquisition.
Our other liquidity needs relate to working capital, capital expenditures
and potential acquisitions. We intend to fund our working capital, capital
expenditures and debt service requirements through cash flow generated from
operations and borrowings under our senior credit facility.
We believe that existing sources of liquidity and funds expected to be
generated from operations will provide adequate cash to fund our anticipated
working capital needs. Significant expansion of our business or the completion
of any material strategic acquisitions may require additional funds which, to
the extent not provided by internally generated sources, could require us to
seek access to debt or equity markets.
Our anticipated capital needs through 2000 will consist primarily of the
following:
- interest payments due on the notes and interest and principal due under
our senior credit facility,
- increases in working capital driven by the growth of our business, and
- the financing of capital expenditures.
Aggregate capital expenditures are budgeted at approximately $8.0 million
through 2000 (approximately $0.3 million of which had been spent as of September
24, 1999) and will consist of approximately $2.0 million to purchase a currently
leased facility, approximately $2.5 million to purchase and upgrade an
additional facility and approximately $3.5 million for general facility
improvements. To the extent available, funds will be used to reduce outstanding
borrowings under our senior credit facility. Management believes that funds
generated from operations and funds available under our senior credit facility
will be sufficient to satisfy our debt service obligations, working capital
requirements and commitments for capital expenditures.
FOREIGN EXCHANGE FLUCTUATIONS AND EFFECTS OF INFLATION
We purchase some component parts for our seating products from several
Italian suppliers, which we pay for in local currency. These purchases expose us
to the effects of fluctuations in the value of the U.S. dollar versus the
Italian lira. If the U.S. dollar declines in value versus the Italian lira, we
will pay more in U.S. dollars for these purchases. To reduce our exposure to
loss from such potential foreign exchange fluctuations, we will occasionally
enter into foreign exchange forward contracts. These contracts allow us to buy
Italian lira at a predetermined exchange rate, thereby transferring the risk of
subsequent exchange rate fluctuations to a third party. However, if we are
unable to continue such forward contract activities, and our inventories
increase in connection with expanding sales activities, a weakening of the U.S.
dollar against the Italian lira could result in reduced gross margins. At
December 31, 1998, we did not have any foreign currency forward contracts
outstanding. We elected to hedge a portion of our exposure to purchases to be
made in 1999 by entering into foreign currency forward contracts with a value of
approximately $2.3 million, approximately $0.9 million of which were outstanding
and unsettled at September 24, 1999, maturing at approximately $0.3 million per
month. We did not incur significant gains or losses from these foreign currency
transactions. Our hedging activities relate solely to our component purchases in
Italy; we do not speculate in foreign currency.
Inflation has not had a significant impact on us in the past three years,
and management does not expect inflation to have a significant impact in the
foreseeable future.
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YEAR 2000
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This error could potentially result in
a system failure or miscalculation causing disruptions to operations.
In mid-1995, we began an assessment of the Year 2000 issue on our internal
information technology systems and other non-information technology systems such
as facility automation control systems, third-party network systems and other
embedded technology and microcontrollers, as well as for the replacement or
correction of all such systems required in the new millennium. Based on the
assessment, we determined that it was necessary to replace portions of our
software and hardware so that those systems will properly utilize dates beyond
December 31, 1999, including third-party network equipment, software products
and services.
As of September 24, 1999, we have completed testing and remediation of 100%
of our continuing operations business critical systems at an aggregated cost of
approximately $0.5 million, which represented approximately 20% of our
information technology budget for the last four years, and was funded from
internally generated funds. Approximately 59% of these costs were for
replacement of existing software, approximately 23% were for replacement and/or
upgrade of existing hardware, approximately 12% were for replacement of
non-information technology systems and equipment, and approximately 6% were for
repair and/or upgrade of existing software. Non-information technology systems
do not represent a significant component of our operations. We deduct these
costs from income. Other non-Year 2000 technology efforts have not been
materially delayed.
We have contacted and received responses from all of our material suppliers
and customers concerning Year 2000 compliance. Based on these discussions we are
not aware of any supplier or customer with a Year 2000 issue that could have a
material adverse effect on our business, financial position, results of
operations or liquidity. We did not use any independent verification or
validation process to assure the reliability of their risk and cost estimates.
Consequently, we have no means of ensuring that suppliers or customers will be
Year 2000 ready. The effect of non-compliance by third parties is not
determinable.
In the event that our program to resolve the Year 2000 issue is not
successful, management believes that it has established adequate contingency
plans whereby we would rely on our own manual systems, independent of external
providers' Year 2000 compliance, maintain increased inventory levels and adjust
staffing levels for our business critical systems. Management believes that such
an event would not materially affect our financial position or results of
operations. However, disruptions in the general economy resulting from Year 2000
issues could have a material adverse effect our business, financial condition,
results of operations, liquidity or prospects.
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BUSINESS
GENERAL
We are a leading designer, manufacturer and distributor of a broad offering
of casual indoor and outdoor furniture and seating products. We also manufacture
certain ready-to-assemble furniture products. Our casual furniture includes
chairs, chaise lounges, tables, umbrellas and related accessories, which are
generally constructed from aluminum, wrought iron, wood or fiberglass. Our
seating products include wood, metal and upholstered chairs, sofas and
loveseats, which are offered in a wide variety of finish and fabric options. All
of our casual furniture and seating products are manufactured pursuant to
customer orders. We sell our furniture products to the residential market and to
the contract market, consisting of commercial and institutional users. We
believe that our success is attributable to our proven ability to consistently
deliver high quality, innovatively-styled products on a timely basis with
superior customer service. On a pro forma basis for the twelve months ended,
September 24, 1999, our casual, seating and ready-to-assemble furniture products
accounted for 49.3%, 42.1% and 8.6%, respectively, of our net sales. On a pro
forma basis, during this period, we generated net sales of $167.7 million and
EBITDA of $40.9 million, representing an EBITDA margin of 24.4% which we believe
is among the highest in the industry.
We market our casual furniture products to the residential market under the
Winston(R) and Pompeii(R) brand names through approximately 25 independent sales
representatives to over 800 active customers, which are primarily specialty
patio furniture stores located throughout the United States. We believe that
Winston(R) and Pompeii(R) are two of the leading brand names in the residential
casual furniture sector. We offer over 25 separate style collections of casual
furniture products for the residential market, each of which is comprised of
numerous pieces available in various combinations of finishes and fabrics. Our
target market is the medium to upper-end price category of the casual furniture
market, with suggested retail prices for a table and four chairs typically
ranging from $700 to $3,500. As a result, we do not sell our casual furniture
products to mass merchandisers. In addition, we market a broad line of casual
furniture products in the contract markets under the Texacraft(R), Tropic
Craft(R) and Pompeii(R) brand names, primarily through our in-house sales force,
to lodging and restaurant chains, country clubs, apartment developers and
property management firms, architectural design firms, municipalities and other
commercial and institutional users.
We market our seating products to a broad customer base in the contract
market under the Loewenstein(R) and Gregson(R) brand names (through
approximately 40 independent sales organizations, which employ approximately 120
sales representatives). Our customers include lodging and restaurant chains,
architectural design firms, professional sports complexes, schools, healthcare
facilities, office furniture dealers, retail store planners and other commercial
and institutional users in the contract market. We manufacture over 300 distinct
models of seating products ranging from traditional to contemporary styles of
chairs, as well as reception area love seats, sofas and stools. We design,
assemble and finish our seating products with component parts from a variety of
suppliers, including a number of Italian manufacturers. We believe that our
success in distinguishing our seating products from those of our competitors is
due in part to our long-standing and frequently exclusive relationships with a
number of leading Italian designers and manufacturers. These relationships
enable us to offer products incorporating unique designs and sophisticated
manufacturing techniques that are generally unavailable or are not cost
effective in the United States. We have excellent and in many instances
long-term relationships with our diverse customer base, which includes, for
example, Marriott International. We recently entered into a three year contract
with Marriott under which we are a preferred supplier of upholstered seating
products for certain of its affiliated lodging chains. We also provide seating
for various retailers, as well as commercial and institutional construction
projects,
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such as professional sports stadiums and arenas. For example, we recently were
selected to provide all luxury sky box seating for a major new professional
sports arena in Los Angeles.
Over the past several years, we have undertaken a number of initiatives to
strengthen and grow our core casual furniture and seating businesses. We have
focused resources on our core business and disposed of non-core or unprofitable
operations. In 1997, we sold our wrought iron furniture business, and in 1998 we
discontinued and sold or liquidated certain of our ready-to-assemble furniture
operations. We also embarked on a focused acquisition program to broaden our
core product offering that, to date, has resulted in the acquisitions of Tropic
Craft, a manufacturer of casual furniture sold into the contract markets, and
Pompeii, a manufacturer of upper-end casual furniture sold into both the
residential and contract markets. We have also implemented a strategic operating
plan to enhance operating efficiencies and controls and improve our market
position. As part of this plan, we reconfigured the manufacturing processes
within the majority of our manufacturing facilities to allow faster product flow
through the plants. In addition, we reallocated production between our two main
seating facilities to achieve increased efficiencies. We believe that these
initiatives have contributed to the increase of our EBITDA margin from 12.9% in
fiscal 1995 to 24.4% on a pro forma basis for the twelve months ended September
24, 1999.
We were incorporated in the state of Florida on September 23, 1994. Our
principal executive offices are located at 160 Village Street, Birmingham,
Alabama 35242, and our telephone number is (205) 408-7600.
COMPETITIVE STRENGTHS
We believe that we have achieved our leading market position by
capitalizing on the following key competitive strengths.
Reputation for Producing High Quality Products. Our reputation for
providing customers with high quality products is built upon our use of superior
structural designs, aesthetic styling, sophisticated manufacturing techniques
and strict quality control standards. Our dedication to quality begins with a
customer-oriented design process that is based upon independent market research
and the involvement of senior management, independent designers, sales
representatives, dealers, our engineering department and suppliers. We also
employ a number of sophisticated manufacturing processes that increase the
quality of our products and differentiate them from those of our competitors.
For example, we use an electrostatically applied ultraviolet cured wood
finishing system that produces one of the most consistent, durable and vibrant
finishes in the industry. Further, to ensure that only the highest quality
products are shipped to our customers, we have established numerous check points
where the quality of all of the products is examined during the manufacturing
process. Our focus on quality is evidenced by our low level of actual warranty
claims which, for the past five years, have approximated only 0.8% of net sales.
Our reputation for producing high quality products is further evidenced by our
receipt of the Casual Furniture Retailer Association's prestigious
"Manufacturer's Leadership Award" three times and being recognized as a finalist
every year since the award was first given in 1990. The criteria for this award
include quality, design, merchandising, customer service and ethics.
Unique Delivery Capabilities. We have tailored our operations to meet the
unique delivery requirements of our customers. On time delivery is critical to
our casual furniture retailers because of their short selling season, general
desire to minimize inventory levels and need to offer their customers products
that will be available at the time of or soon after their purchase. Our
commitment to timely delivery to these retailers is exemplified by our "Quick
Ship" program under which we, rather than the customer, pay the freight charges
if shipment is not made within 15 working days from credit approval of a
customer's order. Since we introduced this program in 1988,
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we have never had to pay freight charges. Our ability to deliver "in time, on
time" is also important to our contract market customers, who must receive our
casual furniture or seating products on a timely basis to meet their own
construction or operating deadlines. We believe that our "Quick Ship" program
and our ability to deliver our products "in time, on time" are unique in the
furniture manufacturing industry and distinguish us from our competitors.
Continual Focus on Customer Service. We are dedicated to providing the
highest level of customer service through our focus on complete customer
satisfaction. We provide a variety of services which are geared towards
assisting our customers to improve the profitability of their business while
strengthening their loyalty to our products. For example, in our casual
furniture segment, we provide retailers with improved terms and extended payment
plans for products ordered prior to the main selling season which ensures them
product availability and slightly lower costs. We also respond to customers'
urgent orders with our "red flag" service which gives such products priority in
our plants throughout the manufacturing process. Moreover, in the event a
customer requests a replacement part that does not need to be manufactured, we
guarantee delivery within 24 hours of our receipt of the order. This level of
customer service is equally important to our seating customers. Since our
seating customers require unique product features, we work closely with them to
provide customized seating products that meet their particular needs. We offer
these customized products quickly and cost effectively through our flexible
manufacturing processes and trained sales staff knowledgeable in the design,
manufacture, variety and decor applications of our products. We also have a
customer service department at each manufacturing plant to respond directly to
customer inquiries.
Efficient Operations and Variable Cost Structure. We continually review
our operations to identify ways to streamline our manufacturing process and
reduce our costs in order to further increase efficiencies and profitability.
Over the past few years, we have
- improved our manufacturing capabilities through the use of
technologically advanced systems,
- optimized our use of vertical integration and outsourcing, as
appropriate,
- exited lower margin or non-core businesses, and
- extensively reconfigured manufacturing processes within our principal
manufacturing facilities.
We operate our business with a highly variable cost structure so we can
react quickly to significant changes in market conditions. Our manufacturing and
other operations can be rapidly adjusted, as appropriate, to reduce labor, raw
materials, general administrative and other costs. These variable costs
represent the majority of our total operating expenses. Historically, our
variable cost structure, combined with our flexible manufacturing capabilities,
has allowed us to maintain our profit margins during periods of market weakness.
Experienced Management Team with Significant Ownership. Our experienced
and dedicated management team has been instrumental in our success and
represents one of our key competitive advantages. Each member of our senior
management team has worked with us for over 10 years and has extensive
experience in the furniture manufacturing industry. Bobby Tesney, our President
and Chief Executive Officer, leads our management team and has over 20 years of
industry experience. We also benefit from the experience and expertise of
Trivest, a private investment firm specializing in acquisitions,
recapitalizations and other principal investing activities, which has been an
investor in WinsLoew and its predecessors since 1985. Trivest provides strategic
consulting, acquisition and other advice to us. Earl Powell, president and chief
executive officer of Trivest, has served as Chairman of the Board of WinsLoew
and its predecessors for over 10 years. Trivest's investment partnerships and
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other affiliated and associated individuals beneficially own approximately 93.8%
of our capital stock and members of senior management beneficially own
approximately 5.1% of our capital stock.
GROWTH STRATEGY
Our strategic objective is to further enhance our leading market position
in the residential and contract furniture markets. We plan on achieving this
objective through the continued implementation of the following strategies:
Increase Penetration of Existing Customers. We are constantly working on
ways to increase our sales to our existing customer base. We believe that we can
increase our penetration of existing customers by continuing to emphasize high
quality products, timely delivery and customer service together with
innovatively styled new product designs. For example, through these focused
efforts our specialty retail customers are dedicating increased retail floor
space to our casual furniture products, which generates increased sales for our
products. Similarly, we began selling seating products to a single Marriott
lodging chain in the early 1990's, and today, due to our consistently superior
performance, we are a preferred provider of seating products to Marriott and
several of its affiliated lodging chains.
Attract New Customers. We have undertaken a number of programs to expand
our customer base in existing and new markets. Examples of these efforts include
the use of specific market focused sales personnel, private labeling and the
targeting of national specialty stores. In our seating business, we are in the
process of establishing dedicated sales groups to focus on attractive specialty
end markets. We established our first such group to focus exclusively on selling
seating products in the lodging industry. As a result of this effort, we have
entered into an agreement with another national lodging chain to be a preferred
supplier for its seating products. Through our private labeling program, we are
seeking to take advantage of the trend towards outsourcing by selling our
seating products to several nationally recognized designers of office furniture
systems who in turn sell our products under their own brand name. In the
residential market, we are targeting national specialty stores that offer home
design products, including casual furniture. The penetration of these national
specialty retailers allows us to take advantage of new, expanding distribution
channels and capitalize on the significant marketing clout of these retailers
without significantly increasing our selling and marketing expenses or
cannibalizing our existing customer base.
Selectively Introduce New Products. We annually update and expand our
product line with new designs and styles, as well as periodically introduce
complementary products. Each year we undergo a design process that results in
the introduction of newly designed products that make up a meaningful portion of
our product offering. Our design process involves personnel from all areas of
the Company including senior management, manufacturing and sales, as well as our
distributors and sales representatives in an effort to design new furniture
styles which are attractive and innovative while cost effective to manufacture
and have a higher likelihood of success. We also periodically add new products
that complement our existing product offering. For example, we recently expanded
our product line to include tables for lobbies and other common areas in the
hospitality industry.
Selectively Pursue Complementary Acquisitions. We continually review
acquisition opportunities that augment or complement our existing operations or
provide entry into new geographic markets. We also seek to improve the
efficiency of our recent acquisitions by reducing overhead, leveraging sales and
distribution, achieving raw material purchasing savings and improving
manufacturing operations. Tropic Craft for example, which was acquired in 1998,
provided us with an increased presence in the contract market for casual
furniture. Pompeii, which we acquired on July 30, 1999, provides us with a
leading brand in the upper end of the casual furniture market and a significant
opportunity to achieve operating efficiencies.
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INDUSTRY DYNAMICS AND TRENDS
We believe that we are well positioned to take advantage of the following
industry dynamics and trends impacting our core business segments.
CASUAL FURNITURE
Highly Fragmented. The casual furniture industry is highly fragmented and
includes a large number of manufacturers, none of which individually accounts
for a significant market share. The casual furniture industry is served by a
large number of relatively small private companies, most of which have sales
under $50.0 million. We believe that the fragmented nature of the industry
provides larger and well capitalized companies, such as us, an opportunity to
grow internally through increasing market share and externally through
acquisitions.
Favorable Demographics. The majority of U.S. household outdoor furniture
purchases are estimated to be made by households headed by 25 to 54 year olds.
We believe that the large baby boom population is driving increased spending by
this age group. In addition, we believe than an increase in vacation and second
home purchases is also contributing to increased casual furniture purchases.
Such homes are frequently located in warm climates and generate casual furniture
purchases.
Foreign Competition. In recent years there has been an increased level of
imports in the U.S. outdoor and casual furniture market. However, these foreign
manufacturers generally compete in the lower end of the market, in which we do
not participate, as they have been unable to provide the service, quality and
timely delivery required by the middle to upper end of the market. As a result,
we have not been, and do not expect to be, significantly impacted by foreign
competitors.
Dominated by Metal Products. The U.S. casual furniture market is dominated
by metal product lines, primarily aluminum. Metal products have increased in
popularity during the 1990s due to rising consumer preference for higher quality
casual furniture products, such as the aluminum products we manufacture. This
increase in popularity, combined with rising demand and the lower levels of
competition from low-cost imports, have resulted in rising demand for our casual
furniture.
SEATING PRODUCTS
Highly Fragmented. The contract markets for seating products that we
operate in are served by a number of divisions of large public and private
companies as well as a large number of relatively small, privately-held regional
companies. As in the casual furniture sector, we believe that the fragmented
nature of the industry provides larger and well capitalized companies such as
us, an opportunity to grow internally through increasing market share and
externally through acquisitions.
Diverse End Markets. The market for seating products is characterized by a
wide variety of diverse end markets which include offices, hotels and motels,
restaurants, country clubs, apartments, schools, healthcare facilities, retail
stores, municipalities and sports arenas. We sell our seating products into each
of these end markets. Therefore, we believe that we are not dependent on any
particular end market.
Replacement, Refurbishment and New Construction. The demand for new
seating products is generated by ongoing replacement of existing furniture,
refurbishment of existing facilities and construction of new facilities. Based
on our experience and knowledge of the industry, we believe that the demand for
seating products is primarily driven by refurbishment and ongoing replacement
rather than new construction due to the relatively large installed base. For
example, in the hotel sector, according to industry sources, there are
approximately 3.8 million hotel rooms in the United States,
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of which approximately 90% are refurbished every seven years, versus
approximately 100,000 new rooms constructed annually. We target each of these
segments, altering our focus based upon market conditions.
HISTORY
We were formed in December 1994 through the merger of Winston Furniture
Company, Inc., a designer, manufacturer and distributor of casual furniture for
both the residential and contract markets, and Loewenstein Furniture Group,
Inc., a manufacturer of seating products for the contract markets and of
ready-to-assemble furniture products, with and into WinsLoew Furniture, Inc., a
newly-formed corporation that was organized for the purpose of the merger. Prior
to that merger, Winston and Loewenstein were publicly held corporations whose
common stock traded on the Nasdaq National Market. From January 1995 through
August 1999, we were a publicly held corporation, and our common stock traded on
the Nasdaq National Market.
During the fourth quarter of 1995, we disposed of the assets of our office
seating business. During the third quarter of 1997, we disposed of certain
assets of our wrought iron furniture manufacturing business in the casual
furniture product line. During 1997, we adopted a plan to dispose of our three
ready-to-assemble furniture businesses and recorded a pretax non-cash charge
totaling $12.4 million in the fourth quarter of 1997 relating to the disposal of
our ready-to-assemble operations. During 1998, we sold one of the businesses,
completed the liquidation of a second, our futon business, and decided to retain
the third ready-to-assemble business, Southern Wood, due to improved
profitability and, accordingly, have reclassified our Southern Wood results to
continuing operations. During the third quarter of 1998, we acquired the stock
of Tropic Craft, a manufacturer of aluminum casual outdoor furniture sold into
contract markets. In July 1999, we acquired Pompeii, a manufacturer of upper-end
aluminum casual furniture sold into the contract and residential markets. See
notes 2 and 3 of our audited consolidated financial statements and note 7 of our
unaudited interim consolidated financial statements for additional information
with respect to our discontinued operations, acquisitions and dispositions.
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PRODUCTS AND MARKETS
We design, manufacture and distribute three principal product lines: casual
furniture designed for residential, commercial and institutional use; seating
products designed for commercial and institutional use; and ready-to-assemble
furniture designed for household use. On a pro forma basis, for the twelve
months ended September 24, 1999, our casual, seating and ready-to-assemble
furniture products accounted for 49.3%, 42.1% and 8.6%, respectively, of our net
sales. The following is a summary of our principal products, customers and
markets:
<TABLE>
<CAPTION>
PRINCIPAL CUSTOMERS
BRAND PRINCIPAL PRODUCTS AND MARKETS
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Winston(R) Casual outdoor furniture, Over 800 active customers,
including chairs, chaise consisting of specialty
lounges, tables, umbrellas patio stores, full-line
and related accessories, furniture retailers and
constructed of extruded and department stores in the
tubular aluminum. residential market.
Texacraft(R) and Tropic Casual outdoor furniture, Lodging and restaurant
Craft(R) including chairs, chaise chains, country clubs,
lounges, tables, umbrellas apartment developers and
and related accessories, managers, architectural
constructed of aluminum, design firms, municipalities
wrought iron, wood and and other commercial and
fiberglass. institutional users in the
contract market.
Pompeii(R) Casual indoor and outdoor Specialty patio stores, fine
furniture, including chairs, furniture stores, design
chaise lounges, tables, showrooms and residential
umbrellas and related designers in the residential
accessories, constructed of market; and architectural
extruded and tubular design firms, commercial
aluminum. design firms and specifiers
and purchasing agents in the
contract market.
Loewenstein(R) Contemporary to traditional Lodging and restaurant
seating products, such as chains, architectural design
wood, metal and upholstered firms, sports facilities,
chairs, sofas and loveseats. schools, healthcare
facilities, office furniture
dealers, retail store
planners and other
commercial and institutional
users in the contract
market.
</TABLE>
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<TABLE>
<CAPTION>
PRINCIPAL CUSTOMERS
BRAND PRINCIPAL PRODUCTS AND MARKETS
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Gregson(R) Traditional seating Office furniture dealers and
products, such as wood, lodging chains in the
metal and upholstered contract market.
chairs, sofas and loveseats.
Southern Wood Products(R) Ready-to-assemble furniture Mass merchandisers and
products, such as book catalog wholesalers.
shelves, entertainment
centers, coffee tables, end
tables and wall units, as
well as case goods, such as
chests of drawers, changing
towers and hutches, all of
which are constructed of
wood.
</TABLE>
We market our casual furniture products, consisting principally of medium
to upper-end casual indoor and outdoor furniture, under the Winston(R),
Texacraft(R), Tropic Craft(R) and Pompeii(R) brand names. We currently
manufacture and sell over 25 separate style collections of casual furniture
products that include traditional, European, and contemporary design patterns.
Within each style collection there are multiple products including chairs,
tables, chaise lounges and accessory pieces such as ottomans, cocktail tables,
end tables, tea carts and umbrellas constructed of extruded, tubular and cast
aluminum, steel, wrought iron, wood and fiberglass. We offer chairs with glider
action, adjustable positions and rocking and swivel motions, as well as a
selection of restaurant and indoor and outdoor seating. Our casual seating
products feature cushions and vinyl strapping in a variety of colors and
patterns. All of our casual furniture products feature a durable painted finish,
which is also offered in a wide selection of colors. The suggested retail prices
for a residential table and four chairs currently range from approximately $700
to $3,500. Our casual furniture is generally used by residential customers
indoors and on patios, decks and poolsides, while our contract customers
generally use our products in restaurants and lodging, as well as for outdoor
purposes.
Our seating products are marketed under the Loewenstein(R) and Gregson(R)
brand names and include over 300 distinct models, ranging from contemporary to
traditional styles, of wood, metal and upholstered chairs, reception area love
seats, sofas and stools. We assemble wood frames and finish them with one of our
numerous standard colors or, if requested, to the customer's specification. Our
metal chairs are available in chrome or in a selection of standard powder coat
finishes. For upholstered products, the customer may select from a number of
catalog fabrics, vinyls and leathers or may specify or supply its choice of
materials. We maintain an inventory of unassembled chair components that enables
us to respond quickly to large quantity orders in a variety of finish and fabric
combinations. Our seating products have a number of commercial and institutional
uses, including seating for in-room lodging, stadium luxury sky boxes,
restaurants, lounges and classrooms. We have excellent and in many instances
long-term relationships with our diverse customer base, which includes, for
example, Marriott International. Moreover, we recently entered into a three year
contract with Marriott, effective January 1, 1999, under which we are a
preferred supplier of upholstered seating products for certain of its
affiliates, including Marriott's Lodging, Senior Living Services and Marketplace
businesses, as well as Host Marriott Services Corporation. See "Risk
Factors -- Significant Customer." In addition, we have entered into an agreement
with another national lodging chain to be a preferred supplier for its seating
products. We also provide seating for various retailers, as well as commercial
and institutional construction projects, such as professional sports stadiums
and arenas. For example, we recently were selected to provide all luxury sky box
seating for a major new professional sports arena in Los Angeles.
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We sell our ready-to-assemble products under the Southern Wood Products(R)
brand name to mass merchandisers and catalog wholesalers. Our ready-to-assemble
products include promotionally priced traditional ready-to-assemble "flatline"
and "spindle" furniture and a new line of fully assembled case goods furniture
products designed for household use. "Flatline" products include
ready-to-assemble items that are constructed of flat pieces of wood, such as
book shelves, entertainment centers and tape storage units. Our "spindle"
products include ready-to-assemble items that are constructed of flat pieces of
wood connected by decorative joints and brackets, such as coffee tables, end
tables, wall units and rolling carts. Case goods products include fully
assembled four drawer chests and three drawer chest and changing towers, with an
optional hutch.
PRODUCT DESIGN AND DEVELOPMENT
We annually update and expand our product line with new designs and styles,
as well as periodically introduce complementary products. Each year we undergo a
design process that results in the introduction of newly designed products that
make up a meaningful portion of our product offering. We use a customer oriented
design process that is based upon independent market research and the
involvement of senior management, independent designers, sales representatives,
dealers, our engineering department and suppliers. We identify trends in shapes,
colors, patterns and other design elements and provide preliminary sketches to
our manufacturing personnel and, in the case of our seating lines, our Italian
suppliers, who in turn engineer the product's construction and produce one or
more prototypes in preparation for actual full-scale production. We generally
introduce new products at national or regional furniture markets. Shipments of
our new designs generally begin in September of each year. Our custom design
capabilities also allow us to modify styles, materials and production in order
to provide customers with products that meet their particular needs.
The design process for our seating products takes advantage of our
long-standing and frequently exclusive relationships with a variety of leading
Italian design firms and manufacturers. These Italian suppliers, which provide
us with component parts for our seating products and are involved in the design
process, have extensive experience in the design, engineering, and production of
contemporary and transitional-styled chairs. They also utilize manufacturing
techniques such as steam bending of solid wood components and intricate joinery,
which are generally unavailable in the U.S. As a result, these suppliers assist
us in distinguishing our seating products from those of our competitors by
enabling us to consistently and cost effectively provide new and updated
products that incorporate unique designs and utilize unique manufacturing
capabilities.
MARKETING AND SALES
We sell our products through both independent manufacturers representatives
and internal sales staff. We sell our residential casual furniture through
approximately 25 independent sales representatives and we sell our seating
products through approximately 40 independent sales representative organizations
that employ approximately 120 sales associates. We have strong relationships
with our independent sales personnel. At Winston and Loewenstein, for example,
our independent sales representatives have been selling our products for an
average of approximately nine years. We primarily use an internal sales staff to
sell our casual furniture products into the contract market, while our
ready-to-assemble products are sold exclusively by independent sales
representatives. Senior management is also involved in the sales process for all
of our furniture products.
Each independent representative:
- promotes, solicits and sells our products in an assigned territory;
- assists in the collection of receivables; and
50
<PAGE> 56
- receives commissions based on the net sales made in his or her territory.
We determine the prices at which our products will be sold and may refuse
to accept any orders submitted by a sales representative for credit-worthiness
or other reasons. Our independent representatives do not carry directly
competing product lines.
We have developed a comprehensive marketing program to assist our
representatives in selling our products. Key elements of this program include:
- holding exhibitions at national and regional furniture markets and
leasing year-round showrooms at the Merchandise Mart in Chicago, Illinois
and High Point, North Carolina;
- providing retailers with annual four-color catalogs of our products,
sample materials illustrating available colors and fabrics, point of sale
materials and special sales brochures;
- providing information directly to representatives at annual sales
meetings attended by senior management and manufacturing personnel;
- maintaining a customer service department at each of our manufacturing
facilities which ensures that we promptly respond to the needs and orders
of our customers;
- maintaining regular contact with key retailers; and
- conducting ongoing surveys to determine dealer satisfaction.
MANUFACTURING
We produce our products at eight manufacturing facilities located
throughout the United States. See "-- Properties." We have tailored our
manufacturing processes to each business to maximize efficiencies, create high
quality products and maintain operating flexibility. Our casual furniture
facilities are vertically integrated -- we manufacture our casual furniture
products from basic raw materials such as aluminum rod and fabric. In contrast,
our seating facilities take advantage of outsourcing opportunities -- we
assemble our seating products from wood components received from our Italian and
other suppliers. In both cases, we maintain flexible manufacturing processes
that enable us to:
- minimize finished goods inventory and warehousing costs;
- efficiently expand our product lines to meet the demands of a diverse
customer base; and
- effectively control the cost, quality and production time of our
products.
We believe that our facilities are among the most modern in the furniture
industry and that the efficiencies attributable to these plants are a
significant factor in our relatively low manufacturing costs. These low
manufacturing costs, combined with our philosophy of strict cost controls in all
areas of our operations, have enabled us to continually increase gross margins
and income from operations without the necessity of significant price increases.
CASUAL FURNITURE
In the manufacturing process for our casual furniture products, we cut
extruded aluminum tubes to size and shape or bend them in specially designed
machinery. The aluminum is then welded to form a solid frame, and the frame is
subjected to a grinding and buffing process to eliminate any rough spots that
may have been caused during welding. After this process is completed, the frame
is cleaned, painted in a state-of-the-art powder coating system and heat cured.
We then add vinyl
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<PAGE> 57
strapping, cushions, fabric slings, or other accessories to the finished frame,
as appropriate. We then package the product with umbrellas, tempered glass and
other accessories, as applicable, and ship it to the customer.
We believe that we manufacture the highest quality aluminum casual
furniture in our price range. Unlike manufacturers of lower-end products that
rivet or bolt major frame components, we weld the major frame components of our
aluminum furniture, thereby increasing the durability and enhancing the
appearance of the aluminum product line. Our state-of-the-art powder coated
painting process results in an attractive and durable finish. To ensure that
only the highest quality products are shipped to customers, our quality control
department has established numerous check points where the quality of all of our
aluminum products is examined during the manufacturing process. These processes
allow us to offer a two-year frame and finish guarantee on all of our aluminum
products for residential use.
SEATING
We assemble most of our seating products to order, but do not generally
have the same level of vertical integration as is present in the manufacture of
our casual product lines. Instead, we purchase component parts from a variety of
suppliers, including a number of Italian suppliers. We utilize these component
parts because they enable us to offer sturdy and aesthetically appealing
products, which incorporate unique designs and sophisticated manufacturing
techniques that are generally unavailable or are not cost effective in the
United States. See "-- Product Design and Development" above. The principal
elements of wood chair assembly include:
- frame glue-up;
- sanding;
- seat assembly (in which upholstered seats are constructed from component
bottoms, foam padding and cloth coverings); and
- painting/lacquering.
To provide consistency and speed in this finishing process, we utilize a
state-of-the-art conveyorized paint line with electrostatic spray guns and a
three-dimensional ultraviolet drying system. In particular, Loewenstein's
finishing system applies specially formulated materials via robotic
reciprocators and utilizes three advanced technologies:
- electrostatic finish application, which is designed to ensure that a
significantly higher percentage of the actual finishing material will
adhere to the product, thereby reducing raw material costs;
- ultraviolet finishing materials, which allow a much higher solids
content, thereby reducing environmental concerns and enhancing finish
quality; and
- high-powered ultraviolet light, which can cure chairs in less than 60
seconds, thereby speeding inventory turn-over and reducing warehouse
requirements.
For upholstered products, the specified fabric cloth is stretched to the
chair frame over foam padding. We generally assemble our metal chairs from
imported components. After rework and leveling, we carton our chairs to prevent
damage in transportation. The manufacturing process also includes a number of
product inspections and other quality control procedures.
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READY-TO-ASSEMBLE FURNITURE
For the manufacture of our ready-to-assemble products, which include
"spindle," "flatline" and case goods products, we use high density particle
board, which we laminate with a variety of wood grains and solid colors. For our
"spindle" products, we turn, stain and lacquer all of the spindles and then
individually box the products with spindles and board, along with any necessary
hardware and assembly instructions. For our "flatline" products we individually
box the cut laminated particle board, along with necessary hardware and assembly
instructions. For our case goods products, the edges of the cut laminated
particle board may be "soft formed" for aesthetic value. We then assemble the
unit using glue, screws and hardware, such as self-closing drawer runners, on
all units.
RAW MATERIALS
Our principal raw materials consist of extruded aluminum tubes, woven vinyl
fabrics, paint/finishing materials, vinyl strapping, cushion filler materials,
cartons, glass table tops, component parts for seating, particle board and other
lumber products and hardware. Although we have no long-term supply contracts, we
generally maintain a number of sources for our raw materials and have not
experienced any significant problems in obtaining adequate supplies for our
operations. In addition, increases in the cost of our raw materials, such as
fluctuations in the costs of aluminum, lumber and other raw materials have not
historically had a material adverse effect on our results of operations because
we are generally able to pass through such increases in raw material costs to
our customers over time through price increases. We believe that our policy of
maintaining several sources for most supplies and our large volume purchases
contribute to our ability to obtain competitive pricing. Nevertheless, the
market for aluminum is, from time to time, highly competitive, and its price, as
a commodity, is subject to market conditions beyond our control. Accordingly,
future price increases could have a material adverse effect on our business,
financial condition, results of operations or prospects.
A significant portion of the Loewenstein raw materials consist of component
chair parts purchased from several Italian manufacturers. We view our suppliers
as "partners" and work with such suppliers on an ongoing basis to design and
develop new products. We believe that these cooperative efforts, our
long-standing relationships with these suppliers and our experience in
conducting on-site, quality control inspections provide us with a competitive
advantage over many other furniture manufacturers, including a competitive
purchasing advantage in times of product shortages. In addition, in the case of
our Italian suppliers, we generally contract for our purchases of such component
parts in such manner as to minimize our exposure to foreign currency
fluctuations. We have close working relationships with our foreign suppliers and
our future success may depend, in part, on maintaining these or similar
relationships. Given the special nature of the manufacturing capabilities of
these suppliers, in particular certain wood-bending capabilities, and sources of
specialized wood types, our Loewenstein division could experience a disruption
in operations in the event of any replacement of such suppliers. Situations
beyond our control, including political instability, significant and prolonged
foreign currency fluctuations, economic disruptions, the imposition of tariffs
and import and export controls, changes in government policies and other factors
could have a material adverse effect on our business, financial condition,
results of operations or prospects.
BACKLOG
As of September 24, 1999, our backlog of orders was approximately $27.2
million, compared to $25.3 million at September 25, 1998. In accordance with
industry practice, we generally permit orders to be canceled prior to shipment
without penalty. We do not consider backlog to be predictive of
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<PAGE> 59
future sales activity because of our short manufacturing cycle and delivery
time, and, especially in the case of casual furniture, the seasonality of sales.
COMPETITION
The furniture industry is highly competitive and includes a large number of
manufacturers, none of which dominate the market. Certain of the companies which
compete directly with us may have greater financial and other resources than we
do. Based on our extensive industry experience, we believe that competition in
casual furniture and seating is generally a function of product design,
construction quality, prompt delivery, product availability, customer service
and price. Similarly, management believes that competition in our promotional
price niche of the ready-to-assemble furniture industry is limited, and is based
primarily on price, product availability, prompt delivery and customer service.
We believe that we successfully compete in the furniture industry primarily
on the basis of our innovatively styled product offerings, our unique delivery
capabilities, the quality of our products, and our emphasis on providing high
levels of customer service. We believe that our residential casual product line
has a leading share of the casual furniture market in the geographic region east
of the Mississippi River.
While sales of imported, foreign-produced casual furniture have increased
significantly in recent years, our sales have not been adversely affected
because our products generally do not compete with such foreign products, which
are typically: (i) limited in design, styles and colors, (ii) of lesser quality
than our products, (iii) marketed in the lower-end price range and (iv) not
supported with competitive customer service and responsiveness to customers'
needs for quick delivery.
In the seating segment, we compete with many manufacturers, ranging from
large, national, publicly traded entities to small, one-product firms selling to
small, geographic markets.
TRADEMARKS AND PATENTS
We have registered the Winston(R), Loewenstein(R), Gregson(R), Pompeii(R)
and Southern Wood Products(R) trademarks with the United States Patent and
Trademark Office. We believe that our trademark position is adequately protected
in all markets in which we do business. We also believe that our various trade
names are generally well recognized by dealers and distributors, and are
associated with a high level of quality and value.
We hold several design and utility patents. However, it is no longer our
policy to apply for design and utility patents, as we do not believe that they
are of significance to our business.
ENVIRONMENTAL MATTERS
We believe that we comply in all material respects with all applicable
federal, state and local provisions relating to the protection of the
environment. The principal environmental regulations that apply to us govern air
emissions, water quality and the storage and disposition of solvents. In
particular, we are subject to environmental laws and regulations regarding air
emissions from paint and finishing operations and wood dust levels in or
manufacturing operations. As is typical of the furniture manufacturing industry,
our finishing operations use products that may be deemed hazardous and that pose
and inherent risk of environmental contamination. Compliance with environmental
protection laws and regulations has not had a material adverse impact on our
financial condition or results of operations in the past and we do not expect
compliance to have a material adverse impact in the future.
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PROPERTIES
The following table provides information with respect to each of our
properties:
<TABLE>
<CAPTION>
OWNED
LOCATION PRIMARY USE SQUARE FEET OR LEASED
- -------- ----------- ----------- ---------
<S> <C> <C> <C>
Birmingham, AL............ Corporate headquarters 9,800 Owned
Haleyville, AL............ Casual furniture manufacturing and offices 155,000 Owned
Haleyville, AL............ Casual furniture and manufacturing 218,000 Owned
Haleyville, AL............ Casual furniture warehouse 20,000 Owned
Haleyville, AL............ Casual furniture sewing plant 30,000 Owned
Chicago, IL............... Casual furniture merchandise mart showroom 12,000 Leased(1)
High Point, NC............ Casual furniture showroom 6,000 Leased(2)
Houston, TX............... Casual furniture manufacturing and offices 89,500 Leased(3)
Miami, FL................. Casual furniture manufacturing and offices 220,400 Leased(4)
Ocala, FL................. Casual furniture manufacturing and offices 49,000 Owned
Pompano Beach, FL......... Seating manufacturing and offices 100,000 Owned
Pompano Beach, FL......... Seating warehouse 6,500 Leased(5)
Liberty, NC............... Seating manufacturing and offices 126,000 Owned
Chicago, IL............... Seating merchandise mart showroom 5,500 Leased(6)
Ready-to-assemble manufacturing and
Sparta, TN................ offices 94,300 Owned
Ready-to-assemble manufacturing and
Sparta, TN................ offices 63,300 Owned
</TABLE>
- -------------------------
(1) Lease expires August 31, 2002.
(2) Lease expires March 16, 2002.
(3) Lease expires April 15, 2005.
(4) Lease expires August 1, 2018.
(5) Lease is month-to-month.
(6) Lease expires June 30, 2001.
We believe that our manufacturing facilities in the casual furniture and
seating product lines are currently operating, in the aggregate, at
approximately 75% of capacity, assuming a one-shift basis. Management considers
our present manufacturing capacity to be sufficient for the foreseeable future
and believes that, by adding multiple shift operations, we can significantly
increase the total capacity of our facilities to meet growing product demand
with minimal additional capital expenditures. In addition, we engage in an
ongoing maintenance and upgrading program, and consider our machinery and
equipment to be in good condition and adequate for the purposes for which they
are currently used.
EMPLOYEES
At September 24, 1999, we had approximately 1,215 full-time employees, of
whom 32 were employed in management, 134 in sales, general, and administrative
positions, and 1,049 in manufacturing, shipping, and warehouse positions. Our
full-time employees at September 24, 1999 included approximately 1,024 hourly
and 191 salaried employees.
The only employees subject to collective bargaining agreements are
approximately 119 of our hourly employees in Haleyville, Alabama, who are
represented by the Retail, Wholesale, and Department Store Union. The labor
agreement between WinsLoew and the union, which expires on
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July 31, 2001, provides that there shall be no strikes, slowdowns or lockouts.
We have not experienced any work stoppages, and we consider our employee
relations to be good.
LEGAL PROCEEDINGS
From time to time, we are subject to legal proceedings and other claims
arising in the ordinary course of our business. We maintain insurance coverage
against potential claims in an amount which we believe to be adequate. Based
primarily on discussions with counsel and management familiar with the
underlying disputes and except as described below, we believe that we are not
presently a party to any litigation, the outcome of which would have a material
adverse effect on our business, financial condition, results of operations or
future prospects.
We and the members of our board of directors have been named as defendants
in a lawsuit filed on March 25, 1999 in the Circuit Court of Jefferson County,
Alabama, styled Craig Smith v. WinsLoew Furniture, Inc., et al. The lawsuit
purports to be brought as a class action on behalf of all of our shareholders
prior to the merger except the defendants and was filed in connection with the
merger. However, the complaint filed in the lawsuit has not been amended to
reflect the increase in the per share merger consideration from $30.00 to $34.75
subsequent to the filing of the complaint.
The principal substantive allegations set forth in the complaint are that
(i) the individual defendants breached fiduciary duties of care and loyalty owed
by them as directors to the shareholder plaintiffs, (ii) Mr. Powell and other
members of our "management group" breached fiduciary duties owed by them as
allegedly controlling shareholders to our other shareholders by, among other
things, attempting to acquire 100% equity ownership of WinsLoew for an allegedly
"grossly inadequate price" at the alleged expense of our other shareholders,
(iii) our announcement of the initial $30.00 per share bid by Trivest Furniture
Corporation failed to disclose improving growth prospects, (iv) by virtue of the
equity holdings of our "management group" and their alleged "overwhelming
control" of our board of directors, third parties were practically precluded
from making competing bids, and (v) the initial per share merger consideration
of $30.00 per share was unconscionable, unfair and grossly inadequate and the
terms of the merger constituted an unfair and illegal business practice upon our
then minority shareholders. No other per share amount is specified in the
complaint.
The relief sought by the plaintiff is that (i) the court declare the
lawsuit to be a class action and certify the plaintiff as class representative
and his counsel as class counsel, (ii) the merger be enjoined or, if not
enjoined, that the plaintiffs be granted rescission and rescissionary damages,
(iii) the plaintiff and the alleged class be awarded damages, (iv) the plaintiff
be awarded costs and disbursements of bringing the lawsuit, together with fees
and expenses of the plaintiff's counsel and experts, and (v) the plaintiff and
the alleged class be granted such other relief as the court shall deem just and
proper. The complaint does not specify the amount of any damages sought.
We have forwarded a claim with respect to this matter to our directors' and
officers' insurance carrier and, with the approval of such carrier, have
retained legal counsel to represent us and the members of our board of
directors. We believe that the claims set forth in the lawsuit are without merit
and we intend to vigorously defend this lawsuit.
On June 14, 1999, we and the members of the board of directors filed a
motion to dismiss the lawsuit or, in the alternative, to grant summary judgment
in our favor. A hearing has been set for November 11, 1999.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF WINSLOEW
After the merger, our executive officers and directors are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Earl W. Powell.................................. 60 Chairman of the Board
Bobby Tesney.................................... 55 President, Chief Executive Officer and
Director
R. Craig Watts.................................. 46 Executive Vice President -- Seating
Jerry C. Camp................................... 33 Executive Vice President -- Casual Furniture
Vincent A. Tortorici, Jr........................ 45 Vice President and Chief Financial Officer
Rick J. Stephens................................ 45 Vice President -- Operations
William F. Kaczynski, Jr........................ 39 Director
Peter W. Klein.................................. 44 Director
David Solomon................................... 37 Director
</TABLE>
We were incorporated in September 1994, and in December 1994, acquired our
principal operating subsidiaries, Winston and Loewenstein, each of which was a
publicly held corporation whose common stock traded on the Nasdaq National
Market. Our common stock traded on the Nasdaq National Market from December 1994
through August 1999. On August 27, 1999, Trivest Furniture Corporation, a newly
formed corporation organized by an investor group led by Trivest, merged with
and into us. In the merger, the shares of Trivest Furniture Corporation were
converted to our shares, and all other shares of our common stock were converted
into the right to receive $34.75 per share in cash. As a result of the merger,
the shareholders of Trivest Furniture Corporation became our sole shareholders.
See "The Merger." Each of our directors and executive officers, other than Mr.
Solomon, were also directors or executive officers of ours and our predecessors,
Winston or Loewenstein, as described below.
Mr. Powell, our Chairman of the Board since October 1994, serves as
president and chief executive officer of Trivest, which is a private investment
firm specializing in management services and acquisitions, dispositions and
leveraged buyouts, which Mr. Powell and Phillip T. George, M.D. formed in 1981.
Mr. Powell has also served as chairman of the board of Atlantis Plastics, Inc.,
an American Stock Exchange company whose subsidiaries are engaged in the
plastics industry, since founding that company in February 1984, as chief
executive officer of Atlantis from its organization until February 1995 and as
President of Atlantis from November 1993 to February 1995. Mr. Powell has served
as chairman of the board of Biscayne Apparel, Inc., a company whose principal
subsidiaries are engaged in the apparel industry, since October 1985 and
presently serves as chief executive officer of Biscayne. Biscayne filed a
voluntary Chapter 11 bankruptcy petition in February 1999. There is no
established trading market for the common stock of Biscayne. Mr. Powell also
served as chairman of the board of Winston from December 1988 to December 1994,
chairman of the board of Loewenstein from February 1985 to December 1994 and as
Loewenstein's president and chief executive officer from May 1994 to December
1994. From 1971 until 1985, Mr. Powell was a partner with KPMG Peat Marwick,
certified public accountants, where his positions included serving as managing
partner of Peat Marwick's Miami office.
Mr. Tesney, our President, Chief Executive Officer and a director since
October 1994, served as president, chief executive officer and a director of
Winston from December 1993 to December 1994, general manager of Winston from
1985 to December 1993 and as senior vice president -- operations
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of Winston from January to December 1993. Mr. Tesney also served as vice
president of Winston from 1979 until January 1992.
Mr. Watts, our Executive Vice President -- Seating since October 1994,
served as a director of Loewenstein from December 1990 to December 1994, and
became Loewenstein's executive vice president -- seating in May 1993, after
serving as vice president since May 1991. Mr. Watts also serves as the president
and chief operating officer of our Loewenstein and Gregson divisions, and has
served in a number of management positions since joining Loewenstein in April
1981.
Mr. Camp, our Executive Vice President -- Casual Furniture since October
1999, served as our Vice President -- Casual Furniture Operations from May 1999
to October 1999, served as our Vice President -- Operations from September 1998
to May 1999, served as our Director of Safety, Environmental and Human Resources
from October 1994 to September 1998, served as director of engineering at
Winston from September 1988 to October 1994, and served in various other
capacities with Winston, including project engineer, from May 1984 to September
1988.
Mr. Tortorici, our Vice President and Chief Financial Officer since October
1994, served as Winston's vice president -- finance and administration and chief
financial officer from March 1988 to December 1994. Mr. Tortorici is a certified
public accountant and was employed by Arthur Andersen & Co. from 1976 until
March 1988.
Mr. Stephens, our Vice President -- Operations since May 1999, served as
vice president -- operations at Winston from January 1995 to May 1999 and served
as vice president and general manager at Winston from December 1993 to January
1995.
Mr. Kaczynski, a director since January 1998, has served as an executive
officer of Trivest since January 1998 and is presently a managing director. From
July 1996 until December 1997, he was chief financial officer of WebSite
Management Corp. d/b/a FlashNet Communications, an Internet service provider.
From June 1994 until June 1996, he was chief financial officer of Colorado
Mountain Express, Inc., an airport transportation company. Mr. Kaczynski was an
employee of Heller Financial, Inc. from 1986 until 1994, where he most recently
served as senior vice president -- corporate finance group, in Dallas, Texas.
Mr. Klein, a director since October 1994, served as a director of Winston
from December 1988 to December 1994 and as a director of Loewenstein from May
1993 to December 1994. Mr. Klein has served as an executive officer of Trivest
since May 1986 and is presently a managing director and general counsel. Prior
to joining Trivest, Mr. Klein practiced law in Chicago, Illinois and Cleveland,
Ohio.
Mr. Solomon, a director since September 1999, is a managing director with
Goldman, Sachs & Co. He joined Goldman, Sachs in September 1999 as co-head of
the firm's leveraged finance businesses in the Fixed Income Currencies &
Commodities division. From January 1991 until September 1999 Mr. Solomon worked
at Bear, Stearns & Co., Inc., most recently as a member of its Management &
Compensation Committee and co-head of the Investment Banking Division. Prior to
joining Bear Stearns, Mr. Solomon worked at Salomon Brothers and at Drexel
Burnham Lambert in various capacities in each firm's high yield businesses.
Prior to joining Drexel Burnham Lambert, Mr. Solomon worked for Irving Trust
Company in its financial institutions group and Irving Securities, Inc.
DIRECTOR COMPENSATION
We pay each non-employee director an annual retainer of $12,000, payable in
quarterly installments of $3,000, and a $500 fee for each meeting of the board
of directors attended. We reimburse all directors for all travel-related
expenses incurred in connection with their activities as directors.
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EXECUTIVE COMPENSATION
The following table sets forth compensation awarded to, earned by or paid
to our chief executive officer and each of our other executive officers,
including a former executive officer who was serving as an executive officer at
December 31, 1998, whose total 1998 salary and bonus was $100,000 or more. Our
Chief Executive Officer and the other executive officers are referred to herein
as the "Named Executive Officers."
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
---------------
ANNUAL COMPENSATION AWARDS
---------------------------------------------- ---------------
NAME AND FISCAL OTHER ANNUAL NUMBER OF
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS GRANTED
- ------------------ ------ -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Bobby Tesney......................... 1998 $250,150 $250,150 $88,471 --
President and Chief Executive 1997 245,000 183,750 49,221 40,000
Officer 1996 216,400 162,300 28,240 0
Stephen C. Hess(2)................... 1998 204,200 173,570 42,256 --
1997 200,000 150,000 20,935 30,000
1996 178,218 133,663 18,606 0
Jerry C. Camp........................ 1998 94,096 28,800 7,820 --
Executive Vice President -- 1997 85,770 8,900 5,908 5,000
Casual Furniture 1996 71,850 7,185 5,195 --
Vincent A. Tortorici, Jr............. 1998 148,050 96,233 12,845 --
Vice President and 1997 145,000 72,500 12,669 25,000
Chief Financial Officer 1996 129,900 64,950 8,718 0
R. Craig Watts....................... 1998 185,824 157,803 21,067 --
Executive Vice President -- Seating 1997 181,830 136,373 19,343 25,000
1996 166,138 121,103 20,357 0
Rick J. Stephens..................... 1998 123,552 61,776 9,121 0
Vice President -- Operations 1997 120,240 48,096 7,567 7,500
1996 106,124 42,565 7,277 0
</TABLE>
- -------------------------
(1) "Other Annual Compensation" represents amount paid by us on behalf of the
Named Executive Officer under our Non-Qualified Supplemental Executive
Retirement Plan established in October 1996. Under the terms of this Plan,
selected employees make after-tax contributions of their salary to one or
more investment alternatives available under such Plan. We then match the
employee contribution, up to 10% of compensation on an after-tax basis,
depending on the employee's length of service, up to 100% for 20 years of
continuous service. The employee is vested at all times in the deferred
compensation and is vested immediately in the matching contribution.
(2) Former Executive Vice President -- Casual Furniture.
STOCK OPTIONS
No stock options were granted to any Named Executive Officers in 1998. Upon
the consummation of the merger on August 27, 1999, all outstanding options were
cancelled, with holders entitled to payment of the difference between the option
exercise price and $34.75. See "The Merger." We have no stock option plans or
outstanding stock options.
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<PAGE> 65
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning unexercised
stock options held by the Named Executive Officers as of December 31, 1998. No
stock options were exercised by such persons during 1998. All "Unexercisable"
options became fully exercisable and were canceled in exchange for cash payments
as a result of our recent merger.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1998 DECEMBER 31, 1998
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Bobby Tesney......................... 73,000 52,000 $1,263,625 $922,000
Stephen C. Hess...................... 51,000 34,000 849,750 589,000
Jerry C. Camp........................ 4,500 4,000 68,063 64,000
Vincent A. Tortorici, Jr. ........... 30,000 30,000 536,250 525,000
R. Craig Watts....................... 55,175 30,000 1,020,335 525,000
Rick J. Stephens..................... 7,500 17,500 258,563 178,000
</TABLE>
401(K) PLAN
Effective January 1, 1997, we established the WinsLoew Furniture, Inc.
401(k) Plan. Our employees and our subsidiaries' employees are eligible to
participate in the 401(k) Plan following the later to occur of (i) the
employee's completion of one year of service or (ii) the employee's 21st
birthday. Eligible employees may make a salary reduction contributions to the
401(k) Plan on a pretax basis. For each calendar year, we and the other
participating employees may make matching contributions to the 401(k) Plan based
on a discretionary matching percentage to be determined each year by management.
In addition, we and the other participating employers may make a discretionary
profit sharing contribution to the plan on behalf of each participant who
completes more than 500 hours of service during the year or who is employed on
the last day of the year. This latter contribution is allocated proportionately
based on each participants compensation. An employee's vested benefits are
payable upon his retirement, death, disability, or other termination of
employment or upon the attainment of age 59 1/2. An employee is always fully
vested in his account balance attributable to his own contributions to the
401(k) Plan. The employee's interest in the account attributable to his
employers contributions and earnings thereon becomes fully vested upon the
earlier of the attainment of his normal retirement date (age 65), his death, his
permanent and total disability, or his completion of six years of service. If an
employee terminates employment for reasons other than retirement, death, or
disability, his vested interest is based on a graduated vesting schedule which
provides for 20% vesting after two years of service and 20% for each year
thereafter. Employees forfeit nonvested amounts.
LONG TERM INCENTIVE AND PENSION PLANS
We have no long term incentive or pension plans.
EMPLOYMENT AGREEMENTS
We have entered into five-year employment agreements with each of Messrs.
Tesney, Watts and Tortorici effective as of August 27, 1999. The employment
agreements provide for us to pay Mr. Tesney a 1999 base salary of $275,000, Mr.
Watts a 1999 base salary of $195,650 and Mr. Tortorici a 1999 base salary of
$162,000. The employment agreements provide for us to pay
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Mr. Tesney a 2000 base salary of $300,000, Mr. Watts a 2000 base salary of
$205,650 and Mr. Tortorici a 2000 base salary of $175,000, in each case subject
to subsequent annual cost of living adjustments. The employment agreements also
provide for annual incentive compensation payments of up to a specified portion
of the executive's then base salary, 100% in the case of Mr. Tesney, 85% in the
case of Mr. Watts, and 65% in the case of Mr. Tortorici, based on the operating
earnings, adjusted to exclude the effect of goodwill amortization, of (1)
WinsLoew, in the case of Messrs. Tesney and Tortorici, and (2) our seating
divisions, in the case of Mr. Watts. None of these officers will receive any
incentive compensation payment under his employment agreement for any particular
year unless the relevant operating earnings for such year are at least 75% of
the target earnings for such year. Each employment agreement also provides that
the executive will receive six months base salary if his employment is
terminated without cause as defined in the employment agreements, and prohibits
the executive from directly or indirectly competing with us for one year after
termination of his employment, or, if he is terminated by us without cause, six
months after termination.
SEVERANCE AGREEMENTS
On August 27, 1999 we entered into severance agreements with each of
Messrs. Tesney and Tortorici, under which we have agreed to provide them with
severance pay and benefits if their employment is terminated by us following a
change in control as defined in the agreement. Under each agreement, if we
terminate employment either for cause as defined in the agreement, because of
the employee's death, or if the employee terminates his employment other than
for good reason as defined in the agreement, following a change in control, we
must pay the employee his full base salary through the date of termination plus
all other benefits he may be entitled to under any retirement plan we may then
have.
If, on the other hand, at any time during the 180 day period following a
change in control we terminate the employee's employment other than for cause or
due to their disability, as these terms are defined in the agreement, or if the
employee terminates his employment during this period for good reason as defined
in the agreement, we must pay the employee his full base salary through the date
of termination, any accrued bonus and a lump sum severance payment equal to his
annual salary. Additionally, we must provide life, disability, accident and
group health insurance benefits substantially similar to those provided to the
employee prior to termination of employment for a period of one year after
termination, at a cost to the employee no greater than the cost prior to
termination. The employee's rights under any retirement plan we may then have
will be governed by the terms of the plan. We must also pay the employee's legal
fees and expenses incurred by him as a result of termination of his employment.
We must make these severance payments not later than the fifth day following
termination.
The agreements remain in effect through December 31, 2000 and are
automatically extended for additional one-year periods unless we provide notice
by October 1 of the preceding year that we do not wish to extend the agreements,
and provided that if a change in control occurs during the original or extended
term of the agreements, the agreements will continue in effect for not less than
180 days after the last day of the month in which the change in control
occurred.
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PRINCIPAL SHAREHOLDERS
We have outstanding 780,000 shares of common stock. The following table
sets forth information regarding the beneficial ownership of our common stock by
(1) each person known by us to beneficially own more than 5% of the outstanding
shares, (2) each of our directors who owns any shares, (3) each Named Executive
Officer, and (4) all directors and executive officers as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
OF COMMON STOCK(1)(2)
-----------------------------
NUMBER OF SHARES PERCENTAGE
---------------- ----------
<S> <C> <C>
Earl W. Powell(3)(4)........................................ 718,729 89.4%
Phillip T. George, M.D.(3)(5)............................... 321,443 40.0
Trivest II, Inc.(6)......................................... 377,081 46.9
Trivest Equities, Inc.(7)................................... 311,648 38.8
Bobby Tesney................................................ 11,580 1.4
R. Craig Watts.............................................. 9,000 1.1
Vincent A. Tortorici, Jr.................................... 7,000 0.9
Rick J. Stephens............................................ 7,000 0.9
Jerry C. Camp............................................... 2,000 0.3
All directors and executive officers as a group (7
persons)(8)............................................... 765,104 98.1%
</TABLE>
- -------------------------
(1) Except as otherwise indicated below, the address of each beneficial owner is
160 Village Street, Birmingham, Alabama 35242.
(2) Except as otherwise indicated below, all shares are owned directly and each
person has sole voting and investment power with respect to all shares. In
computing the aggregate number of shares beneficially owned by the
individual shareholders and groups of shareholders described above and the
percentage ownership of such individuals and groups, the 24,129 shares of
common stock issuable upon the exercise of the currently exercisable
warrants issued with the original notes are deemed to be outstanding.
(3) The beneficial owner's address is 2665 South Bayshore Drive, Suite 800,
Miami, Florida 33133.
(4) Includes 30,000 shares held of record directly, 377,081 shares held of
record by Trivest Furniture Partners, Ltd. and 311,648 shares held of record
by Trivest Fund II Group, Ltd. See notes (6) and (7) below.
(5) Includes 9,795 shares held of record directly and 311,648 shares held of
record by Trivest Fund II Group, Ltd. See notes (6) and (7) below.
(6) Includes 377,081 shares held of record by Trivest Furniture Partners, Ltd.,
a privately-held investment partnership. Trivest II, Inc. serves as the sole
general partner of TFP, Ltd., which in turn is the sole general partner of
Trivest Furniture Partners, Ltd. Mr. Powell is its sole director and
controlling shareholder.
(7) Includes 311,648 shares held of record by Trivest Fund II Group, Ltd., a
privately-held investment partnership. Trivest Equities, Inc. serves as the
sole general partner of Trivest Fund II Group, Ltd. Messrs. Powell and
George are executive officers and the sole directors of Trivest Equities,
Inc. Mr. Powell is its controlling shareholder.
(8) Includes 377,081 shares held of record by Trivest Furniture Partners, Ltd.
and 311,648 shares held of record by Trivest Fund II Group, Ltd. See notes
(6) and (7).
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CERTAIN TRANSACTIONS
INVESTMENT SERVICES AGREEMENT WITH TRIVEST
In December 1994, we entered into a ten-year investment services agreement
with Trivest, pursuant to which Trivest provided us with corporate finance,
strategic and capital planning and other management advice, including (1)
conducting relations on our behalf with accountants, attorneys, financial
advisors and other professionals, (2) providing reports to us with respect to
the value of our assets, and (3) rendering advice with respect to acquisitions,
dispositions, financings and refinancings. Under the investment services
agreement, Trivest received a base annual fee of $0.5 million in 1994, subject
to annual cost-of-living increases. In addition, for each additional business we
acquired, Trivest's base compensation generally increased by the greater of (1)
$0.1 million, and (2) the sum of 5% of the additional business' projected annual
earnings before income taxes, interest expense and amortization of goodwill, or
EBITA, for the fiscal year in which it was acquired, up to $2.0 million of
EBITA, plus 3.5% of EBITA in excess of $2.0 million. Moreover, subject to the
approval of our board, including a majority of disinterested directors, for each
acquisition or disposition of any business operation by us introduced or
negotiated by Trivest, we generally paid Trivest a fee of up to 3% of the
purchase price. We paid Trivest an aggregate of approximately $0.6 million in
1996, $0.6 million in 1997 and $0.9 million in 1998 under the investment
services agreement. We paid Trivest a fee of approximately $0.4 million in
connection with the closing of the Pompeii acquisition in July 1999.
MERGER WITH TRIVEST FURNITURE CORPORATION
In August 1999, Trivest Furniture Corporation merged with and into us. We
are the surviving corporation of the merger. Trivest Furniture Corporation was a
newly formed corporation organized by an investor group led by Trivest. The
members of our senior management have retained the positions they held prior to
the merger. See "Management." Pursuant to the merger agreement, each holder of
previously outstanding shares of WinsLoew common stock, other than Trivest
Furniture Corporation, received $34.75 per share in cash, without interest, and
the holder of each outstanding option received a cash payment equal to the
difference between $34.75 and the exercise price of the option. The cash merger
consideration, option cancellation payments and related fees and expenses, which
totaled approximately $282.6 million, were provided by (1) an aggregate of $78.0
million in cash and rollover equity contributions valued at $34.75 per share, to
Trivest Furniture Corporation from two private investment partnerships
affiliated with Trivest, individuals affiliated with Trivest, members of our
senior management team, other employees and additional investors, (2) aggregate
borrowings of approximately $95.0 million under our senior credit facility, (3)
the proceeds from the sale of the units consisting of original notes and
warrants and (4) cash on hand of approximately $7.1 million. The members of our
board of directors and senior management team received cash payments in respect
of common stock and options they held prior to the merger and contributed cash
and shares of our common stock to Trivest Furniture Corporation. See "The
Merger."
EMPLOYMENT AGREEMENTS AND SEVERANCE AGREEMENTS WITH MEMBERS OF MANAGEMENT
Effective with the merger, our prior employment agreements with each of
Messrs. Tesney, Watts and Tortorici terminated. We have entered into a new
employment agreement with each of Messrs. Tesney, Watts and Tortorici. In
addition, effective with the merger, we entered into severance agreements with
each of Messrs. Tesney and Tortorici providing for payments in the event of
specified change of control events. See "Management."
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MANAGEMENT AGREEMENT WITH TRIVEST
Effective with the merger, we entered into a new ten-year management
agreement with Trivest. Under the management agreement, Trivest provides us with
corporate finance, strategic and capital planning and other management advice
for an annual fee, payable quarterly in advance, of approximately $0.4 million,
subject to annual cost-of-living adjustments. Under the management agreement,
for each additional business operation we acquire that has EBITDA of $2.0
million or more, Trivest's annual base compensation will generally increase by
an amount equal to the greater of (1) $50,000 and (2) an amount determined in
good faith by Trivest and a majority of our disinterested directors. In
addition, for each acquisition of any business operation introduced or
negotiated by Trivest and for each disposition of any of our business operations
negotiated by Trivest, we generally will pay Trivest a fee equal to up to 3.0%
of the purchase price.
FINANCIAL ADVISORY FEE PAID TO TRIVEST
We paid a financial advisory fee to Trivest of $3.0 million when we
completed the merger. Trivest assisted us in (1) reviewing, analyzing and
negotiating the financial and business terms of the merger, (2) negotiating with
and selecting the initial purchasers for the offering of the original notes and
preparing the offering memorandum, (3) obtaining and negotiating our new senior
credit facility, and (4) reviewing the services provided by our attorneys,
accountants and other professionals.
INVESTOR'S AGREEMENT WITH CERTAIN INVESTORS
Effective upon the consummation of the merger, all of our shareholders
listed under "Principal Shareholders," as well as several individuals affiliated
or associated with Trivest, entered into an investors' agreement with us in
connection with the merger and his or its acquisition of our common stock. The
investors' agreement includes "right of first offer," "right of first refusal"
and other restrictions on the ability of the investors to transfer common stock.
The investors' agreement generally provides that Trivest Fund II Group, Ltd.,
one of our new Trivest investors, will afford to the other investors the right
to proportionally participate in proposed transfers of common stock. In
addition, all the other investors agree to participate in sales of common stock
and other significant corporate transactions entered into by Trivest Fund II
Group, Ltd., provided that all investors receive the same consideration for
their common stock. All of the foregoing restrictions will terminate on the date
of an underwritten public offering of common stock in which the aggregate gross
proceeds we receive are at least $20.0 million at a price per share of not less
than $10.00. The investors' agreement also provides that if, subsequent to a
qualified public offering, we determine to effect the registration of any equity
securities under the Securities Act, other than in connection with employee
benefit plans or certain reclassifications, mergers, consolidations or
acquisitions, we will be required to include in the filing, and to use all our
commercially reasonable efforts to register, all or any specified portion of the
registrable shares of common stock held by the investors or their successors or
assigns. The registration rights are subject to certain conditions and
limitations, including our right to reduce pro rata the amount of such
registrable shares included in an underwritten public offering if the
underwriter determines that the aggregate requested participation will adversely
affect the marketing of the securities to be sold. We also agree that, upon the
request of holders of at least 20% of the then outstanding registerable shares
of our common stock, so long as we are able to file a registration statement on
Form S-3 or a successor form, we will use all commercially reasonable efforts to
effect the registration on Form S-3 or any successor form of all or any
specified portion of the common stock held by such requesting shareholders. The
investors' agreement also provides board observation rights for individuals
designated by the Trivest partnerships, as well as their limited partners, which
will terminate upon a qualified public offering.
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SHAREHOLDERS AGREEMENTS WITH EACH OF OUR SHAREHOLDERS
In addition, each of our other shareholders, which are comprised of
employees and independent sales representatives, entered into a separate
shareholders' agreement with us in connection with the merger and his or her
acquisition of common stock. Under the shareholders' agreements, we have the
right to repurchase all common stock owned by the shareholder upon the
termination of his or her employment, which right may be exercised by Trivest
Fund II Group, Ltd. if we do not do so. The shareholders' agreements include
certain "right of first offer," "right of first refusal" and other restrictions
on the ability of the shareholders to transfer common stock, all of which
restrictions will terminate upon (1) a sale of all or substantially all of our
assets, (2) the sale of our common stock in a transaction or series of
transactions resulting in any person or group of affiliated persons other than
the current shareholders owning more than 50% of our common stock outstanding,
(3) the registered public sale of common stock the net proceeds of which are at
least $15.0 million, or (4) our merger or consolidation with or into another
corporation if, after giving effect to the merger or consolidation, holders of
our voting securities immediately prior thereto own voting securities of the
surviving corporation representing less than a majority of ordinary voting power
to elect directors. The shareholders' agreements also provide that the
shareholders will participate in sales of our common stock to an independent
third party approved by holders of a majority of our outstanding common stock,
as well as other significant corporate transactions, and agree to consent to and
raise no objections against the sale, as long as all shareholders receive the
same consideration for their common stock.
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DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock consists of 1,000,000 shares of common stock,
par value $.01 per share, 780,000 shares of which are outstanding on the date
hereof. The following summary description of our capital stock is qualified in
its entirety by reference to our restated articles of incorporation and bylaws,
copies of which are filed as exhibits to the registration statement of which
this prospectus is a part. See "Where You Can Find More Information."
COMMON STOCK
Each holder of common stock on the applicable record date is entitled to
receive such dividends as may be declared by the board of directors out of funds
legally available therefor, and, in the event of liquidation, to share pro rata
in any distribution of our assets after payment or providing for the payment of
liabilities. Each holder of common stock is entitled to one vote for each share
held of record on the applicable record date on all matters presented to a vote
of shareholders, including the election of directors. Holders of common stock
have no cumulative voting rights or preemptive rights to purchase or subscribe
for any stock or other securities and there are no conversion rights or
redemption or sinking fund provisions with respect to the common stock. All
outstanding shares of common stock are fully paid and nonassessable.
INVESTORS' AGREEMENT AND SHAREHOLDERS' AGREEMENTS
We have entered into an investors' agreement with our principal
shareholders providing for, among other things, registration rights and rights
relating to the transferability of shares of our common stock. In addition, we
have entered into shareholders' agreements with each of our other shareholders,
which are comprised of employees and independent sales representatives,
providing for, among other things, rights relating to the transferability of
shares of our common stock. See "Certain Transactions."
DESCRIPTION OF THE SENIOR CREDIT FACILITY
Our senior credit facility provides for borrowings of up to $155.0 million,
consisting of: Term A loans of $25.0 million; Term B loans of $62.5 million;
Term C loans of $7.5 million; revolving loans of up to $40.0 million, including
letters of credit; and acquisition loans of up to $20.0 million. Subject to
restrictions, we may use our senior credit facility for our working capital and
general corporate purposes.
REPAYMENT
The different loans under the senior credit facility are repayable as
follows:
- THE REVOLVING LOANS -- 100% December 31, 2004;
- THE ACQUISITION LOANS -- 20.0%, 30.0% and 50.0% of any amount outstanding
on December 31, 2001, in 2002, 2003 and 2004, respectively;
- THE TERM A LOANS -- 12.0% in 2000, 12.0% in 2001, 24.0% in 2002, 24.0% in
2003 and 28.0% in 2004; and
- THE TERM B LOANS -- 1.0% in each of 2000 through 2004 and 47.5% in each
of 2005 and 2006.
- THE TERM C LOANS -- 100% on June 30, 2006.
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The Term A loans, the Term B loans and the Term C loans were drawn in full
at the closing of the merger. Borrowings under the revolving loans and
outstanding letters of credit are limited to $40.0 million or, if less, the sum
of (i) 85% of eligible accounts receivable, plus (ii) 60% of eligible inventory.
The acquisition loan facility may be used to fund permitted acquisitions.
Acquisition loans are available on a revolving basis through December 31, 2001,
when all outstanding amounts will be converted into a term loan which will be
due as set forth above. Any portion of this facility not outstanding on December
31, 2001 will be canceled.
We may repay any of our outstanding loans under the senior credit facility
without paying a premium or penalty, other than payment of breakage costs and
reimbursement of the lenders' actual costs of reemploying funds under certain
circumstances.
We must repay any outstanding loans out of cash we receive from certain
events as follows:
- 100% of net cash proceeds of certain asset sales so long as our leverage
ratio is greater than or equal to 3.0:1, subject to certain exceptions,
including the right to reinvest such proceeds in our business under
certain circumstances;
- 100% of net cash proceeds of permitted debt issuances, subject to certain
exceptions;
- 100% of net cash proceeds of permitted equity issuances (50% if an
initial public offering), subject to certain exceptions; and
- 50% of annual excess cash flow (25% when our leverage ratio is less than
3.0:1).
SECURITY; GUARANTY. Each of our direct and indirect domestic subsidiaries
(and, if no adverse tax consequences result, foreign subsidiaries) are borrowers
or guarantee the borrowers' obligations under the senior credit facility. The
following secures the borrowers' obligations under the senior credit facility
and each of the guarantor's obligations under its guarantee:
- a security interest in substantially all of the borrowers' assets and the
assets of the subsidiary guarantors; and
- a pledge of all of the capital stock of each of our direct and indirect
domestic subsidiaries (or 65% of the capital stock of any foreign
subsidiary).
INTEREST. At our option, the interest rates under the senior credit
facility are either: (1) the base rate, which is the higher of the prime lending
rate or 0.5% in excess of the federal funds effective rate, plus a margin, or
(2) the adjusted Eurodollar rate plus a margin. The margins of the different
loans under the senior credit facility vary according to a pricing grid based
upon our consolidated leverage ratio as follows:
- the initial margins on the Term A loans and revolving loans (including
acquisition loans) are 1.0% over the base rate or 3.0% over the adjusted
Eurodollar rate; after December 31, 1999, these margins will range from
1.0% to 0% over the base rate and from 3.0% to 2.0% over the adjusted
Eurodollar rate; and
- the initial margins on the Term B and Term C loans are 1.5% over the base
rate and 3.5% over adjusted LIBOR; after December 31, 1999, these margins
will range from 1.5% to 1.0% over the base rate and from 3.5% to 3.0%
over the adjusted Eurodollar rate.
As of September 24, 1999, the loans are priced at the Eurodollar rate plus
margins of 3.0% for the revolving loans, Term A loans and acquisition loans and
3.5% for the Term B and Term C loans.
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FEES. We agreed to pay certain fees in connection with the senior credit
facility, including: (1) letter of credit fees; (2) agency fees; and (3)
commitment fees. Commitment fees are payable (1) at a rate per annum of 0.5% on
the undrawn amounts of the revolving loans, subject to reduction to 0.375% per
annum depending upon our consolidated leverage ratio and (2) at a rate per annum
of 0.75% on the undrawn amount of the acquisition loan facility during the
revolving period, subject to reduction to 0.50% (or 0.375% depending upon our
consolidated leverage ratio) per annum from and after the date on which at least
$10.0 million of acquisition loans are outstanding.
COVENANTS. The senior credit facility requires that we meet certain
financial tests which include a maximum leverage ratio and minimum fixed charge
and interest coverage ratios. The senior credit facility also contains covenants
which, among other things, restrict our ability, subject to certain exceptions,
to do the following:
- incur additional indebtedness;
- incur liens;
- declare dividends or redeem or repurchase capital stock, or prepay other
debt;
- make loans and investments;
- make capital expenditures;
- engage in mergers, acquisitions, consolidations and asset sales;
- acquire assets, stock or debt securities of any person;
- engage in transactions with affiliates; and
- amend our articles of incorporation.
The senior credit facility also requires that we satisfy certain customary
affirmative covenants and make certain customary indemnifications to our lenders
and the administrative agent under the senior credit facility.
EVENTS OF DEFAULT. The senior credit facility contains customary events of
default, including, without limitation, payment defaults, breaches of
representations and warranties, covenant defaults, certain events of bankruptcy
and insolvency, ERISA violations, judgment defaults, cross-defaults to certain
other indebtedness and a change in control.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
On August 24, 1999, we sold the original notes to the initial purchasers.
In connection with the sale of the original notes, we entered into a
registration rights agreement with the initial purchasers requiring us to
register the notes with the SEC and offer to exchange the original notes for
registered notes. A copy of the registration rights agreement has been filed as
an exhibit to the registration statement of which this prospectus is a part and
we urge you to read the text of the registration rights agreement. We expressly
qualify all of our discussions of the registration rights agreement by the terms
of the agreement itself. Under the registration rights agreement, we are
required to:
- file the registration statement on or before November 25, 1999;
- use our best efforts to cause the registration statement to be declared
effective on or before February 23, 2000;
- use our best efforts to keep the exchange offer open for not less than 20
days, or longer if required by applicable law, after we notify holders of
the notes of the exchange offer; and
- use our best efforts to consummate the exchange offer as soon as
practicable, but no later than 60 days after the date on which the
registration statement becomes effective.
The exchange offer being made by this prospectus is intended to satisfy our
obligations under the registration rights agreement. You may be entitled to
"shelf" registration rights. In accordance with the registration rights
agreement, we are required to file a shelf registration statement covering your
original notes for a continuous offering in accordance with Rule 415 of the
Securities Act if:
- we are not required to file the exchange offer registration statement or
permitted to effect the exchange offer because it is not permitted by
applicable law or SEC policy;
- any holder of Transfer Restricted Securities notifies us within 20
business days following the date the exchange offer is consummated that:
(1) it is prohibited by law or SEC policy from participating in the
exchange offer; or
(2) it may not resell the registered notes acquired by it in the
exchange offer to the public without delivering a prospectus and
that this prospectus is not appropriate or available for such
resales; or
(3) it is a broker-dealer and owns original notes acquired directly
from us or any of our affiliates.
For purposes of the foregoing, "Transfer Restricted Securities" means each
original note until the earliest to occur of:
- the date on which the original note has been exchanged by a person other
than a broker-dealer in the exchange offer for a registered note which is
entitled to be resold to the public without complying with the prospectus
delivery requirements of the Securities Act;
- the date on which the original note has been effectively registered under
the Securities Act and disposed of in accordance with a shelf
registration statement;
- the date on which the original note may be distributed to the public
pursuant to Rule 144 under the Securities Act; or
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- the date on which each registered note is disposed of by a broker-dealer
pursuant to the "Plan of Distribution" contemplated by this registration
statement, including the delivery of the prospectus contained herein.
In the event that we are obligated to file a shelf registration statement,
we will be required to keep the shelf registration statement effective until
August 24, 2001. Other than as described above, you will not have the right to
participate in the shelf registration or require that we register your notes in
accordance with the Securities Act.
If we fail to fulfill such obligations, the holders of outstanding original
notes are entitled to receive "Additional Interest" until we have fulfilled such
obligations, at the rate of 25% for the first 90-day period, which rate will
increase by an additional 0.50% at the beginning of each successive 90-day
period that we must pay Additional Interest, provided that any such increase in
the interest rate may not exceed 2.0%. All amounts of accrued Additional
Interest will be payable in cash on the same interest payment dates as the
notes.
EFFECT OF THE EXCHANGE OFFER
Based on interpretations by the SEC staff contained in no-action letters
issued to third parties, we believe that you may offer for resale, resell and
otherwise transfer the registered notes issued to you under the exchange offer
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that:
- you are acquiring the registered notes in the ordinary course of your
business;
- you are not engaging in and do not intend to engage in a distribution of
the registered notes;
- you do not have an arrangement or understandings with any person to
participate in a distribution of the registered notes; and
- you are not our "affiliate," as defined in Rule 405 under the Securities
Act, or an "affiliate" of any guarantor.
If you are not able to make these representations, you are a "Restricted
Holder." As a Restricted Holder, you will not be able to participate in the
exchange offer, may not rely on this interpretation of the SEC staff and may
only sell your original notes in compliance with the registration and prospectus
delivery requirements of the Securities Act as part of a registration statement
containing the selling security holder information required by Item 507 of SEC
Regulation S-K or under an exemption from the registration requirement of the
Securities Act.
In addition, each broker-dealer, other than a Restricted Holder, that
receives registered notes for its own account in exchange for original notes
that it acquired as a result of market-making or other trading activities (a
"Participating Broker-Dealer") may be a statutory underwriter and must
acknowledge in the letter of transmittal that it will deliver a prospectus
meeting the requirements of the Securities Act upon any resale of such
registered notes. The letter of transmittal states that by so acknowledging and
by delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act. Based upon
interpretations by the SEC staff, we believe that a Participating Broker-Dealer
may offer for resale, resell and otherwise transfer registered notes issued
under the exchange offer upon compliance with the prospectus delivery
requirements, but without compliance with the registration requirements, of the
Securities Act. This prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer as part of their resales.
We have agreed that, for a period of one year after the effective date of the
registration statement, we will make this prospectus available to any broker-
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dealer for use by the broker-dealer in any resale. By acceptance of this
exchange offer, each broker-dealer that receives registered notes under the
exchange offer agrees to notify us prior to using this prospectus in a sale or
transfer of registered notes. For more information, please see "Plan of
Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
To the extent original notes are tendered and accepted in the exchange
offer, the principal amount of outstanding original notes will decrease with a
resulting decrease in the liquidity in the market for the original notes. In
addition, following the completion of the exchange offer, except as provided
above and in the registration rights agreement, you will not have any further
registration rights and your original notes will continue to be subject to
certain restrictions on transfer. Accordingly, if you do not participate in the
exchange offer, your ability to sell your original notes could be adversely
affected. You may suffer adverse consequences if you fail to exchange your
original notes. See "Risk Factors -- Failure to Exchange Original Notes."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions contained in this prospectus
and in the letter of transmittal, we will accept any and all original notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on
the expiration date. As of the date of this prospectus, $105 million aggregate
principal amount at maturity of the original notes is outstanding. We will issue
$1,000 principal amount at maturity of registered notes in exchange for each
$1,000 principal amount at maturity of outstanding original notes accepted in
the exchange offer. Holders may tender some or all of their original notes under
the exchange offer; however, original notes may be tendered only in integral
multiples of $1,000.
The form and terms of the registered notes will be substantially identical
to the form and terms of the original notes, except that:
- the offering of the registered notes has been registered under the
Securities Act;
- the registered notes will not be subject to transfer restrictions;
- interest on the registered notes will accrue from the date of the
original issuance of the original notes;
- the registered notes will be issued free of any covenants regarding
registration rights and free of any provision for Additional Interest;
and
- the registered notes will evidence the same debt as the original notes
and will be entitled to the benefits of the indenture under which
original notes were, and the registered notes will be, issued.
This prospectus, together with the letter of transmittal you receive with
this prospectus, is being sent to the nominee of The Depository Trust Company
("DTC" or the "Depositary") and to others believed to have beneficial interests
in the original notes.
You do not have any appraisal or dissenters rights under law or the
indenture in the exchange offer. We intend to conduct the exchange offer in
accordance with the applicable requirements of the Securities Act and the
Exchange Act.
We will be deemed to have accepted validly tendered original notes when, as
and if we have given oral notice, promptly confirmed in writing, or written
notice of the acceptance to the exchange
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agent. The exchange agent will act as agent for the tendering holders for the
purpose of receiving the registered notes from us.
If we do not accept for exchange any tendered original notes because of an
invalid tender, the occurrence of other events described in this prospectus or
otherwise, certificates for any such unaccepted original notes will be returned
to you, without expense, as promptly as practicable after the expiration date.
If you tender original notes in the exchange offer, you will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes relating to the exchange of original
notes under the exchange offer. We will pay all charges and expenses, other than
underwriting discounts and commissions and transfer taxes, as part of the
exchange offer. See "-- Fees and Expenses."
EXPIRATION DATE, EXTENSIONS, AMENDMENTS
The term "expiration date" means 5:00 p.m., New York City time, on
, 1999, unless we, in our sole discretion, extend the exchange offer,
in which case the term "expiration date" shall mean the latest date and time to
which the exchange offer is extended.
In order to extend the exchange offer, we will notify the exchange agent of
any extension by oral notice, promptly confirmed in writing, or written notice
and will make a public announcement that we have extended the exchange offer
prior to 9:00 a.m., New York City time, on the next business day after the
previously scheduled expiration date unless otherwise required by applicable law
or regulation.
We have the right, in our reasonable discretion, (1) to delay accepting any
original notes, to extend the exchange offer or, if any of the conditions set
forth below under "Conditions" shall not have been satisfied, to terminate the
exchange offer, by giving oral or written notice of such delay, extension or
termination to the exchange agent, or (2) to amend the terms of the exchange
offer in any manner. Any such delay in acceptance, extension, termination or
amendment will be followed as promptly as practicable by a public announcement.
If we believe that we have made a material amendment of the terms of the
exchange offer, we will promptly disclose such amendment in a manner reasonably
calculated to inform the holders of the notes of such amendment and we will
extend the exchange offer to the extent required by law.
Without limiting the manner in which we may choose to make public
announcement of any delay, extension, termination or amendment of the exchange
offer, we shall have no obligation to publish, advertise or otherwise
communicate any such public announcement, other than by making a timely release
to the Dow Jones News Service.
PROCEDURES FOR TENDERING
Book-Entry Interests
The original notes were issued as global securities in fully registered
form without interest coupons. Beneficial interests in the global securities,
held by direct or indirect participants in DTC, are shown on, and transfers of
these interests are effected only through, records maintained in book-entry form
by DTC with respect to its participants.
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If you hold your original notes in the form of book-entry interests and you
wish to tender your original notes for exchange pursuant to the exchange offer,
you must transmit to the exchange agent on or prior to the expiration date
either:
(1) a written or facsimile copy of a properly completed and duly
executed letter of transmittal, including all other documents required by
such letter of transmittal, to the exchange agent at the address set forth
on the cover page of the letter of transmittal, or
(2) a computer-generated message transmitted by means of DTC's
Automated Tender Offer Program system and received by the exchange agent
and forming a part of a confirmation of book-entry transfer, in which you
acknowledge and agree to be bound by the terms of the letter of
transmittal.
In addition, in order to deliver original notes held in the form of
book-entry interests:
(A) a timely confirmation of book-entry transfer of such notes into
the exchange agent's account at DTC pursuant to the procedure for
book-entry transfers described below under "-- Book-Entry Transfer" must be
received by the exchange agent prior to the expiration date, or
(B) you must comply with the guaranteed delivery procedures described
below.
THE METHOD OF DELIVERY OF ORIGINAL NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT YOUR ELECTION AND RISK.
INSTEAD OF DELIVERY BY MAIL, WE RECOMMEND THAT YOU USE AN OVERNIGHT OR HAND
DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE
DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. YOU SHOULD NOT SEND
THE LETTER OF TRANSMITTAL OR ORIGINAL NOTES TO US. YOU MAY REQUEST YOUR BROKER,
DEALER, COMMERCIAL BANK, TRUST COMPANY, OR NOMINEE TO EFFECT THE ABOVE
TRANSACTIONS FOR YOU.
Certificated Original Notes
Only registered holders of certificated original notes may tender those
notes in the exchange offer. If your original notes are certificated notes and
you wish to tender those notes for exchange pursuant to the exchange offer, you
must transmit to the exchange agent on or prior to the expiration date, a
written or facsimile copy of a properly completed and duly executed letter of
transmittal, including all other required documents, to the address set forth
below under "-- Exchange Agent." In addition, in order to validly tender your
certificated original notes:
(1) the certificates representing your original notes must be received
by the exchange agent prior to the expiration date, or
(2) you must comply with the guaranteed delivery procedures described
below.
Procedures Applicable to all Holders
If you tender an original note and you do not withdraw the tender prior to
the expiration date, you will have made an agreement with us in accordance with
the terms and subject to the conditions set forth in this prospectus and in the
letter of transmittal.
If your original notes are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and you wish to tender your
notes, you should contact the registered holder promptly and instruct the
registered holder to tender on your behalf. If you wish to tender on your own
behalf, you must, prior to completing and executing the letter of transmittal
and delivering your original notes, either make appropriate arrangements to
register ownership of the original notes
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in your name or obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed by an eligible institution unless:
(A) original notes tendered in the exchange offer are tendered either
(1) by a registered holder who has not completed the box entitled
"Special Registration Instructions" or "Special Delivery Instructions"
on the letter of transmittal, or
(2) for the account of an eligible institution; and
(B) the box entitled "Special Registration Instructions" on the letter
of transmittal has not been completed.
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantee must be by a financial institution,
which includes most banks, savings and loan associations and brokerage houses,
that is a participant in the Securities Transfer Agents Medallion Program, the
New York Stock Exchange Medallion Program or the Stock Exchanges Medallion
Program.
If the letter of transmittal is signed by a person other than you, your
original notes must be endorsed or accompanied by a properly completed bond
power and signed by you as your name appears on those original notes.
If the letter of transmittal or any original notes or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations, or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing. Unless we waive this
requirement, in this instance you must submit with the letter of transmittal
proper evidence satisfactory to us of their authority to act on your behalf.
We will determine, in our sole discretion, all questions regarding the
validity, form, eligibility, including time of receipt, acceptance and
withdrawal of tendered original notes. This determination will be final and
binding. We reserve the absolute right to reject any and all original notes not
properly tendered or any original notes our acceptance of which would, in the
opinion of our counsel, be unlawful. We also reserve the right to waive any
defects, irregularities or conditions of tender as to particular original notes.
Our interpretation of the terms and conditions of the exchange offer, including
the instructions in the letter of transmittal, will be final and binding on all
parties.
You must cure any defects or irregularities in connection with tenders of
your original notes within the time period we will determine unless we waive
that defect or irregularity. Although we intend to notify you of defects or
irregularities with respect to your tender of original notes, neither we, the
exchange agent nor any other person will incur any liability for failure to give
this notification. Your tender will not be deemed to have been made and your
notes will be returned to you if:
(1) you improperly tender your original notes,
(2) you have not cured any defects or irregularities in your tender,
and
(3) we have not waived those defects, irregularities or improper
tender.
The exchange agent will return your notes, unless otherwise provided in the
letter of transmittal, as soon as practicable following the expiration of the
exchange offer.
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In addition, we reserve the right in our sole discretion to:
(1) purchase or make offers for, or offer registered notes for, any
original notes that remain outstanding subsequent to the expiration of the
exchange offer,
(2) terminate the exchange offer, and
(3) to the extent permitted by applicable law, purchase notes in the
open market, in privately negotiated transactions or otherwise.
The terms of any of these purchases or offers could differ from the terms
of the exchange offer.
By tendering, you will represent to us that, among other things:
(1) you are acquiring the registered notes in the exchange offer in
the ordinary course of your business,
(2) you are not engaging in and do not intend to engage in a
distribution of the registered notes to be acquired by you in the exchange
offer,
(3) you do not have an arrangement or understanding with any person to
participate in the distribution of the registered notes to be acquired by
you in the exchange offer, and
(4) you are not our "affiliate," or an "affiliate" of any guarantor,
as defined under Rule 405 of the Securities Act.
In all cases, issuance of registered notes for original notes that are
accepted for exchange in the exchange offer will be made only after timely
receipt by the exchange agent of (a) certificates for your original notes or a
timely book-entry confirmation of your original notes into the exchange agent's
account at DTC, (b) a properly completed and duly executed letter of transmittal
or a computer-generated message instead of the letter of transmittal, and (c)
all other required documents. If any tendered original notes are not accepted
for any reason set forth in the terms and conditions of the exchange offer or if
original notes are submitted for a greater principal amount than you desire to
exchange, the unaccepted or non-exchanged original notes, or original notes in
substitution therefor, will be retained without expense to you. In addition, in
the case of original notes tendered by book-entry transfer into the exchange
agent's account at DTC pursuant to the book-entry transfer procedures described
below, the non-exchanged original notes will be credited to your account
maintained with DTC, as promptly as practicable after the expiration or
termination of the exchange offer.
Guaranteed Delivery Procedures
If you desire to tender your original notes and your original notes are not
immediately available or one of the situations described in the immediately
preceding paragraph occurs, you may tender if:
(1) you tender through an eligible financial institution;
(2) on or prior to 5:00 p.m., New York City time, on the expiration
date, the exchange agent receives from an eligible institution, a written
or facsimile copy of a properly completed and duly executed letter of
transmittal and notice of guaranteed delivery, substantially in the form
provided by us; and
(3) the certificates for all certificated original notes, in proper
form for transfer, or a book-entry confirmation, and all other documents
required by the letter of transmittal, are received by
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the exchange agent within three New York Stock Exchange trading days after
the date of execution of the notice of guaranteed delivery.
The notice of guaranteed delivery may be sent by facsimile transmission,
mail or hand delivery. The notice of guaranteed delivery must set forth:
(1) your name and address;
(2) the amount of original notes you are tendering; and
(3) a statement that your tender is being made by the notice of
guaranteed delivery and that you guarantee that within three New York Stock
Exchange trading days after the execution of the notice of guaranteed
delivery, the eligible institution will deliver the following documents to
the exchange agent:
(A) the certificates for all certificated original notes being
tendered, in proper form for transfer or a book-entry confirmation of
tender,
(B) a written or facsimile copy of the letter of transmittal, or a
book-entry confirmation instead of the letter of transmittal, and
(C) any other documents required by the letter of transmittal.
BOOK-ENTRY TRANSFER
The exchange agent will establish an account with respect to the book-entry
interests at DTC for purposes of the exchange offer promptly after the date of
this prospectus. You must deliver your book-entry interest by book entry
transfer to the account maintained by the exchange agent at DTC. Any financial
institution that is a participant in DTC's systems may make book-entry delivery
of book-entry interests by causing DTC to transfer the book-entry interests into
the exchange agent's account at DTC in accordance with DTC's procedures for
transfer.
If one of the following situations occur:
(1) you cannot deliver a book-entry confirmation of book-entry
delivery of your book-entry interests into the exchange agent's account at
DTC, or
(2) you cannot deliver all other documents required by the letter of
transmittal to the exchange agent prior to the expiration date,
then you must tender your book-entry interests according to the guaranteed
delivery procedures discussed above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of original notes may be
withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration
date.
To withdraw a tender of original notes in the exchange offer, a written or
facsimile or, for a DTC participant, a computer-generated transmission notice of
withdrawal must be received by the
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exchange agent at its address listed in this prospectus prior to 5:00 p.m., New
York City time, on the expiration date. Any notice of withdrawal must:
- specify the name of the person having deposited the original notes to be
withdrawn,
- identify the original notes to be withdrawn, including the certificate
number or numbers and principal amount of such original notes,
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the original notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee with respect to the
original notes register the transfer of the original notes into the name
of the person withdrawing the tender, and
- specify the name in which any original notes are to be registered if
different from that of the person that deposited the original notes to be
withdrawn.
If the original notes have been delivered under the book-entry procedure
set forth above under "-- Procedures for Tendering," any notice of withdrawal
must specify the name and number of the participant's account at DTC to be
credited with the withdrawn original notes.
We will determine, in our sole discretion, all questions as to the
validity, form and eligibility, including time of receipt, of withdrawal
notices. Our determination shall be final and binding on all parties. Any
original notes withdrawal will be deemed not to have been validly tendered for
purposes of the exchange offer and registered notes will not be issued in
exchange for such withdrawn original notes unless the withdrawn original notes
are validly retendered. Properly withdrawn original notes may be retendered by
following one of the procedures described above under "--Procedures for
Tendering" at any time prior to the expiration date.
Any original notes that are tendered but not accepted due to withdrawal,
rejection of tender or termination of the exchange offer will be returned as
soon as practicable to the holder without cost to the holder or, in the case of
original notes tendered by book-entry transfer into the exchange agent's account
at the book-entry transfer facility under the book-entry transfer procedures
described above, these original notes will be credited to an account maintained
with such book-entry transfer facility for the original notes.
CONDITIONS
Notwithstanding any other term of the exchange offer, we are not required
to accept for exchange any original notes, and may terminate the exchange offer
as provided in this prospectus before the acceptance of any original notes, if:
- the exchange offer will violate applicable law or any applicable
interpretation or policy of the SEC staff;
- the original notes are not tendered in accordance with the exchange
offer;
- you do not represent that you are acquiring the registered notes in the
ordinary course of your business, that you are not engaging in and do not
intend to engage in and have no arrangement or understanding with any
person to participate in a distribution of the registered notes and that
you are not an affiliate of us or any guarantor; or
- any action or proceeding is instituted or threatened in any court or by
or before any governmental agency, or any injunction, order or decree has
been issued by any court or
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governmental agency, with respect to the exchange offer which, in our
judgment, would reasonably be expected to prohibit, prevent or materially
impair our ability to proceed with the exchange offer.
These conditions are for our sole benefit and we may assert them regardless
of the circumstances giving rise to any a condition or may be waived by us in
whole or in part at any time and from time to time in our reasonable discretion.
Our failure at any time to exercise any of the foregoing rights shall not be
deemed a waiver of the right and each right shall be deemed an ongoing right
which may be asserted at any time and from time to time.
If we determine in our reasonable judgment that any of the conditions are
not satisfied, we may (1) refuse to accept any original notes and return all
tendered original notes to the tendering holders or, in the case of original
notes delivered by book-entry transfer within DTC, credit any original notes to
the account maintained within DTC by the DTC participant that delivered the
notes, (2) extend the exchange offer and retain all original notes tendered
prior to the expiration of the exchange offer, subject however, to the rights of
holders to withdraw the tenders of original notes, see "Withdrawal of Tenders"
above, or (3) waive the unsatisfied conditions with respect to the exchange
offer and accept all properly tendered original notes which have not been
withdrawn.
EXCHANGE AGENT
American Stock Transfer & Trust Company has been appointed as exchange
agent for the exchange offer. Delivery of letters of transmittal and any other
required documents, questions, requests for assistance, and requests for
additional copies of this prospectus or of the letter of transmittal should be
directed to the exchange agent as follows:
By Registered or Certified Mail,
Overnight Courier or Hand Delivery:
(718) 234-5001
American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Exchange Department
By Facsimile (Eligible Institutions Only):
Attention: Exchange Department
Confirmed by Telephone: (718) 921-8200
(Originals of all documents submitted by facsimile should be sent promptly by
hand, overnight courier or registered or certified mail.)
Delivery to other than the above address or facsimile number will not
constitute a valid delivery.
FEES AND EXPENSES
We will pay expenses of soliciting tenders. The principal solicitation is
being made by mail; however, additional solicitation may be made by facsimile,
telephone or in person by our officers and regular employees.
We have not retained any dealer-manager as part of the exchange offer and
will not make any payments to brokers, dealers or others soliciting acceptance
of the exchange offer. We will, however, pay the exchange agent reasonable and
customary fees for services and will reimburse it for its reasonable
out-of-pocket expenses under the exchange offer. We will also pay the reasonable
fees and expenses of one firm acting as counsel for the initial purchasers.
Expenses include fees and expenses of the exchange agent and trustee, accounting
and legal fees and printing costs, among others.
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TRANSFER TAXES
You must pay all transfer taxes, if any, applicable to the exchange of
original notes under the exchange offer. If satisfactory evidence of payment of
the taxes or exemption therefrom is not submitted with the letter of
transmittal, the amount of the transfer taxes will be billed directly to you.
ACCOUNTING TREATMENT
The registered notes will be recorded at the same carrying value as the
original notes on the date of the exchange. Accordingly, we will recognize no
gain or loss for accounting purposes. The expenses of the exchange offer and the
unamortized expenses relating to the issuance of the original notes will be
amortized over the term of the registered notes.
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DESCRIPTION OF THE REGISTERED NOTES
GENERAL
You can find the definitions of capitalized terms used in this description
and not otherwise defined under "Certain Definitions." In this summary
description of the notes, all references to "WinsLoew," "we," "our," and "us"
are to WinsLoew Furniture, Inc., excluding its subsidiaries, unless the context
clearly indicates otherwise.
We issued the original notes under an indenture dated as of August 24, 1999
among us, our domestic subsidiaries, as guarantors, and American Stock Transfer
& Trust Company, as trustee. The terms of the original notes include those
stated in the indenture and those made part of the indenture by reference to the
Trust Indenture Act of 1939. The terms of the registered notes are substantially
identical to the terms of the original notes except that the registered notes
have no transfer restrictions or registration rights. Any original notes that
remain outstanding after the completion of the exchange offer, together with the
registered notes issued in exchange for the original notes will be treated as a
single class of debt securities under the indenture. The original notes, the
registered notes to be issued in the exchange offer and any additional notes
issued under the indenture are collectively referred to as the "notes" in this
summary description.
As discussed in detail below under "Subordination," payments on the notes
and under the guarantees will be subordinated to the payment of Senior Debt. The
indenture permits us and the guarantors to incur additional indebtedness,
including additional Senior Debt, in the future, subject to certain
restrictions.
The following description is a summary of the provisions of the indenture
we believe to be material and of interest to you. It does not restate that
agreement in its entirety. We urge you to read the indenture because the
indenture and not this description, defines your rights as holders of the
registered notes. The indenture is filed as an exhibit to the registration
statement of which this prospectus forms a part.
BRIEF DESCRIPTION OF THE NOTES AND THE GUARANTEES
THE NOTES
The notes:
(1) are our general unsecured obligations;
(2) are junior in right of payment to all our existing and future
Senior Debt;
(3) are pari passu in right of payment to any of our future senior
subordinated Indebtedness; and
(4) are unconditionally guaranteed by the guarantors.
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THE GUARANTEES
Our payment obligations under these notes are jointly and severally
guaranteed by all of our current and future domestic Restricted Subsidiaries,
which initially include our Subsidiaries listed below:
- Winston Furniture Company of Alabama, Inc.;
- Loewenstein, Inc.
- Texacraft, Inc.
- Tropic Craft, Inc.
- Winston Properties, Inc.
- Pompeii Furniture Co., Inc.
The guarantees:
(1) are general unsecured obligations of each guarantor;
(2) are junior in right of payment to all existing and future Senior
Debt of each guarantor;
(3) are pari passu in right of payment to any future senior
subordinated Indebtedness of each guarantor; and
(4) rank equally with trade payables of each guarantor.
All of our domestic Subsidiaries are designated as Restricted Subsidiaries;
however, under the circumstances described below under "Certain
Covenants -- Designation of Restricted and Unrestricted Subsidiaries," we are
permitted to designate certain of its Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries are not subject to many of the restrictive covenants
in the Indenture. All of our domestic Restricted Subsidiaries guarantee the
notes. Unrestricted Subsidiaries do not guarantee the notes.
In the event of a bankruptcy, liquidation or reorganization of any
non-guarantors, these non-guarantors must pay the holders of their debt, their
trade creditors and any preferred stockholders before they are able to
distribute any of their assets to us. The guarantors, other than Pompeii,
generated 100% of the consolidated revenues of WinsLoew in the twelve-month
period ended December 31, 1998 and the nine-month period ended September 24,
1999 and held 100% of its consolidated assets as of those dates.
PRINCIPAL, MATURITY AND INTEREST
The notes are our general, unsecured obligations. We issued $105.0 million
aggregate principal of original notes in denominations and integral multiples of
$1,000, maturing on August 15, 2007. We will issue up to the same amount of
registered notes.
Subject to the covenants described below under the caption "Certain
Covenants -- Incurrence of Indebtedness and Issuance of Preferred Stock," we may
issue additional notes (the "Additional Notes") under the indenture. The
registered notes issued in connection with the exchange offer and any Additional
Notes that we subsequently issue under the indenture would be treated as a
single class for all purposes under the indenture.
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Interest on the notes accrues at the rate of 12.75% per annum and is
payable semi-annually in arrears on February 15 and August 15 of each year,
commencing on February 15, 2000, to holders of record on the immediately
preceding February 1 and August 1.
Interest on the notes accrues from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest is computed on the basis of a 360-day year comprised of
twelve 30-day months. In addition, the amortization of the original issue
discount on the notes results in an effective yield to maturity of 13.25%.
METHODS OF RECEIVING PAYMENTS ON THE NOTES
If a holder gives wire transfer instructions to us, we will make all
principal, premium and interest payments on the holder's notes in accordance
with those instructions. All other payments on the notes are made at the office
or agency of the paying agent and registrar within the city and state of New
York unless we elect to make interest payments by check mailed to the holders at
their address set forth in the register of holders.
PAYING AGENT AND REGISTRAR FOR THE NOTES
The Trustee currently acts as paying agent and registrar. We may change the
paying agent or registrar without prior notice to the holders of the notes, and
we or any of our Subsidiaries may act as paying agent or registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange notes in accordance with the indenture.
The registrar and the trustee may require a holder, among other things, to
furnish appropriate endorsements and transfer documents and we may require a
holder to pay any taxes and fees required by law or permitted by the indenture.
We are not required to transfer or exchange any note selected for redemption.
Also, we are not required to transfer or exchange any note for a period of 15
days before a selection of notes to be redeemed.
The registered holder of a note is treated as the owner of it for all
purposes.
SUBORDINATION
The payment of principal of and premium, interest and Liquidated Damages,
if any, on the notes is subordinated in right of payment to the prior payment in
full of all our Senior Debt, whether outstanding on the date of the indenture or
incurred after that date.
The holders of our Senior Debt are entitled to receive payment in full of
all Obligations due in respect of the Senior Debt, including interest after the
commencement of any bankruptcy or insolvency proceeding at the rate specified in
the applicable Senior Debt, before the holders of notes are entitled to receive
any payment with respect to the notes, in the event of any distribution to our
creditors:
(1) in our total or partial liquidation or dissolution;
(2) in our bankruptcy, reorganization, insolvency, receivership or
similar proceeding relating to us or our property;
(3) in an assignment for the benefit of our creditors; or
(4) in any marshalling of our assets and liabilities.
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Until all Obligations with respect to Senior Debt are paid in full, any
distribution to which the holders of notes would be entitled will be made to the
holders of Senior Debt, except that holders of notes will be permitted to
receive Permitted Junior Securities and payments made from the trust described
under "-- Legal Defeasance and Covenant Defeasance."
We also are not permitted to make any payment upon or in respect of the
notes, except in Permitted Junior Securities or from the trust described under
"-- Legal Defeasance and Covenant Defeasance," if
(1) a payment default of the principal of or premium or interest on
any Designated Senior Debt occurs and is continuing beyond any applicable
period of grace; or
(2) any other default occurs and is continuing with respect to any
Designated Senior Debt that permits holders of the Designated Senior Debt
as to which the default relates to accelerate its maturity and the trustee
receives a notice of the default (a "Payment Blockage Notice") from the
holders of the Designated Senior Debt.
Payments on the notes are permitted and required to resume:
(1) in the case of a payment default, upon the date on which that
default is cured or waived; and
(2) in case of a nonpayment default, the earlier of the date on which
the nonpayment default is cured or waived or 179 days after the date on
which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Senior Debt has been accelerated.
No new Payment Blockage Notice is permitted to be delivered unless and
until:
(1) 360 days have elapsed since the effectiveness of the immediately
prior Payment Blockage Notice; and
(2) all scheduled payments of principal, premium and interest on the
notes that have come due have been paid in full in cash.
No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the trustee will be, or be made, the
basis for a subsequent Payment Blockage Notice unless the nonpayment default is
cured or waived for a period of not less than 90 consecutive days.
We must promptly notify holders of Senior Debt if payment of the notes is
accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event
of a liquidation or insolvency, holders of notes may recover less ratably than
our creditors who are holders of Senior Debt. As of September 24, 1999, we had
approximately $ million of consolidated Senior Debt outstanding. We may
incur additional Senior Debt in the future, as described under "-- Certain
Covenants -- Incurrence of Indebtedness and Issuance of Disqualified and
Preferred Stock."
GUARANTEES
Each guarantee is subordinated in right of payment to all existing and
future Guarantor Senior Debt of the guarantor to the same extent as the notes
will be subordinated to our Senior Debt as described under "-- Subordination."
As of September 24, 1999, the guarantors had no Guarantor Senior Debt
outstanding, other than their guarantees of the senior credit facility. The
guarantors are permitted to incur additional Indebtedness, including additional
Guarantor Senior Debt, subject to
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restrictions described under "-- Certain Covenants -- Incurrence of Indebtedness
and Issuance of Disqualified and Preferred Stock." The obligations of each
guarantor under its guarantee are limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors -- Fraudulent Conveyance
Matters."
No guarantor is permitted to consolidate with or merge with or into,
whether or not the guarantor is the surviving entity, another corporation,
person or entity whether or not affiliated with the guarantor unless:
(1) subject to the provisions of the following paragraph, the entity
formed by or surviving any such consolidation or merger, if other than the
guarantor, assumes all the obligations of the guarantor under the notes,
the indenture and the registration rights agreement by entering into a
supplemental indenture in form and substance reasonably satisfactory to the
trustee;
(2) immediately after giving effect to the consolidation or merger, no
Default or Event of Default exists; and
(3) we would be permitted by virtue of its pro forma Fixed Charge
Coverage Ratio, immediately after giving effect to the consolidation or
merger, to incur at least $1.00 of additional Indebtedness under the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under "-- Certain Covenants -- Incurrence of Indebtedness and
Issuance of Disqualified and Preferred Stock";
provided, however, that the merger of any guarantor with or into us or another
guarantor under circumstances where we or the guarantor, as applicable, is the
surviving entity or person will not be subject to the foregoing provisions.
The guarantee of a guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that guarantor (including by way of
merger or consolidation), if we apply the Net Proceeds of that sale or
other disposition, in accordance with the applicable provisions of the
indenture; or
(2) in connection with any sale of all of the capital stock of a
guarantor, if we apply the Net Proceeds of that sale in accordance with the
applicable provisions of the indenture; or
(3) if we designate any Restricted Subsidiary that is a guarantor as
an Unrestricted Subsidiary.
See "Redemption or Repurchase at Option of Holders -- Asset Sales."
OPTIONAL REDEMPTION
On or after August 15, 2003, we may redeem the notes at any time, in whole
or in part, upon not less than 30 nor more than 60 days' notice, at the
redemption prices (expressed as percentages of principal amount) set forth
below, plus accrued and unpaid interest and Liquidated Damages, if any, thereon
to the date fixed for redemption, if redeemed during the twelve-month period
beginning on August 15 of each year indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003........................................................ 106.375%
2004........................................................ 104.250%
2005........................................................ 102.125%
2006 and thereafter......................................... 100.000%
</TABLE>
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Notwithstanding the foregoing, on or prior to August 15, 2002, we may
redeem up to 25% of the aggregate principal amount at maturity of the notes
originally issued, and Additional Notes issued under the indenture, if any, at a
redemption price of 112.75% of the principal amount at maturity thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
fixed for redemption, with the net cash proceeds of one or more underwritten
public offerings of our Capital Stock, other than Disqualified Stock; provided,
however, that
(1) at least 75% of the original aggregate principal amount at
maturity of the notes and any Additional Notes issued under the indenture
remain outstanding immediately after the occurrence of the redemption; and
(2) each redemption occurs within 90 days after the date of the
closing of such an offering of our Capital Stock.
MANDATORY REDEMPTION
Except as set forth below under "-- Repurchase at the Option of Holders,"
we are not required to mandatorily redeem or repurchase any of the notes.
SELECTION AND NOTICE
If less than all of the notes are redeemed at any time, selection of notes
for redemption will be made by the trustee in compliance with the requirements
of the principal national securities exchange, if any, on which the notes are
listed, or, if the notes are not listed, on a pro rata basis, by lot or by any
method the trustee deems fair and appropriate; provided, however, that no notes
of $1,000 or less will be redeemed in part.
Notices of redemption will be mailed by first class mail at least 30 but
not more than 60 days before the date fixed for redemption to each holder of
notes to be redeemed at its registered address. Notices of redemption will not
be permitted to be conditional. If any note is to be redeemed in part only, the
notice of redemption that relates to that note will state the portion of the
principal amount at maturity of the note to be redeemed. A new note in principal
amount at maturity equal to the unredeemed portion of the note will be issued in
the name of the holder thereof upon cancellation of the original note.
Notes called for redemption will become due on the date fixed for
redemption. Unless we fail to make the redemption payment, on and after the date
fixed for redemption, interest will cease to accrue on notes or portions of the
notes called for redemption.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a Change of Control occurs, we are obligated to make an offer (a "Change
of Control Offer") to each holder of notes to repurchase all or any part, equal
to $1,000 or an integral multiple of $1,000, of the holder's notes at an offer
price in cash equal to 101% of the aggregate principal amount at maturity
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date fixed for repurchase (the "Change of Control Payment").
Within 30 business days following a Change of Control, we are required to
mail a notice to each holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase the notes on the
date specified in the notice, which date is no earlier than 30 days and no later
than 60 days from the date the notice is mailed (the "Change of Control Payment
Date")
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pursuant to the procedures required by the indenture and described in the
notice. We will be required to comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent those laws and regulations are applicable to the repurchase of the notes
as a result of a Change of Control.
On the Change of Control Payment Date, we are required, to the extent
lawful, to
(1) accept for payment all notes or portions of notes properly
tendered under the Change of Control Offer;
(2) deposit with the paying agent an amount equal to the Change of
Control Payment in respect of all notes or portions of the notes so
tendered; and
(3) deliver or cause to be delivered to the trustee the notes so
accepted together with an officers' certificate stating the aggregate
principal amount at maturity of notes or portions of the notes being
purchased by us.
The paying agent is required to mail promptly to each holder of notes so
tendered the Change of Control Payment for the notes, and the trustee must
promptly authenticate and mail, or cause to be transferred by book entry, to
each holder a new note equal in principal amount at maturity to any unpurchased
portion of the notes surrendered, provided, however, that each new note is in a
principal amount at maturity of $1,000 or an integral multiple of $1,000.
Prior to complying with the provisions of this covenant, but in any event
within 60 days following a Change of Control, we are required to either repay
all outstanding Senior Debt or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Debt to permit the repurchase of notes
required by this covenant. We must publicly announce the results of the Change
of Control Offer on or as soon as practicable after the Change of Control
Payment Date.
The Change of Control provisions described above are applicable whether or
not any other provisions of the indenture are applicable. Except as described
above with respect to a Change of Control, the indenture does not contain
provisions that permit the holders of the notes to require us to repurchase or
redeem the notes in the event of a takeover, recapitalization or similar
transaction.
The senior credit facility prohibits, and future credit agreements or other
agreements relating to Senior Debt to which we become a party may prohibit, us
from purchasing any notes following a Change of Control and provide that certain
change of control events with respect to us would constitute a default under
those agreements. In the event a Change of Control occurs at a time when we are
prohibited from purchasing notes, we could seek the consent of our lenders to
the purchase of notes or could attempt to refinance the indebtedness that
contains that prohibition. If we do not obtain a consent or repay that
Indebtedness, it will remain prohibited from purchasing notes. Our failure to
purchase tendered notes following a Change of Control would constitute an Event
of Default under the indenture which, in turn, would constitute a default under
our senior credit facility and possibly under our other Senior Debt. Under those
circumstances, the subordination provisions in the indenture would likely
restrict payments to the holders of notes, as described under
"-- Subordination." Our ability to repurchase the notes following a Change of
Control may also be limited by its then existing financial resources.
We are not required to make a Change of Control Offer following a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by us and purchases all
notes validly tendered and not withdrawn under the Change of Control Offer.
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ASSET SALES
We are not permitted to, and cannot permit any of our Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) we or the Restricted Subsidiary, as the case may be, receives
consideration at the time of the Asset Sale at least equal to the
fair market value, evidenced by a resolution of the Board of
Directors set forth in an officers' certificate delivered to the
trustee, of the assets or Equity Interests issued or sold or
otherwise disposed of; and
(2) at least 75% of the consideration therefor received by us or the
Restricted Subsidiary is in the form of cash or Cash Equivalents;
provided, however, that the amount of
(a) any liabilities, as shown on our or the Restricted Subsidiary's
most recent balance sheet, other than contingent liabilities and
liabilities that are by their terms subordinated to the notes or any
guarantee, that are assumed by the transferee of any of those assets
pursuant to a customary novation agreement that releases us or the
Restricted Subsidiary from further liability and
(b) any securities, notes or other obligations received by us or
the Restricted Subsidiary from the transferee that are substantially
concurrently converted by us or the Restricted Subsidiary into cash, to
the extent of the cash received, will be deemed to be cash for purposes
of this provision.
Within 365 days following the receipt of any Net Proceeds from an Asset
Sale, we will be permitted to apply the Net Proceeds, at our option,
(1) to repay Senior Debt and to correspondingly reduce commitments
with respect to repaid Senior Debt in the case of revolving borrowings; or
(2) to acquire a controlling interest in a Permitted Business; or
(3) to make a capital expenditure; or
(4) to acquire other long-term assets that are used or useful in a
Permitted Business;
provided, however, that prior to December 31, 2001, amounts repaid pursuant to
clause (1) above with the Net Proceeds from an Asset Sale involving assets
acquired with borrowings under the revolving acquisition line of our senior
credit facility will not constitute a permanent reduction of such commitment;
provided further, however, only to the extent that such repayment does not
otherwise constitute a permanent reduction of the commitment under our senior
credit facility as in effect on the date of the indenture.
Pending the final application of any Net Proceeds, we will be permitted
temporarily to reduce Indebtedness under a revolving credit facility, if any, or
otherwise invest the Net Proceeds in any manner that is not prohibited by the
indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, we will be required to make an offer to all holders of notes and all
holders of other Indebtedness that ranks equally with the notes ("pari passu
Indebtedness") containing provisions similar to those set forth in the indenture
with respect to offers to purchase or redeem the Indebtedness with the proceeds
of sales of assets (an "Asset Sale Offer") to purchase the maximum principal
amount at maturity of notes and such other pari passu Indebtedness that may be
purchased out of the Excess Proceeds. The offer price in any Asset Sale Offer is
equal to 100% of the principal amount at maturity thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date fixed for
purchase,
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and is payable in cash. If any Excess Proceeds remain after completion of an
Asset Sale Offer, we are permitted to use any remaining Excess Proceeds for any
purpose not otherwise prohibited by the indenture. If the aggregate principal
amount at maturity of notes and other pari passu Indebtedness surrendered by
holders thereof exceeds the amount of Excess Proceeds, the trustee will select
the notes to be purchased as provided above under "Selection and Notice." Upon
completion of an Asset Sale Offer, the amount of Excess Proceeds will be reset
at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
We are not permitted to, and cannot permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of our or any of our Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection
with any merger or consolidation involving us or any Restricted Subsidiary)
or to any direct or indirect holders of our Equity Interests in their
capacity as such, other than
(a) dividends or distributions payable in Equity Interests (other
than Disqualified Stock) of ours or
(b) to us or any Wholly Owned Restricted Subsidiary of ours
(2) redeem, purchase or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation involving us, any Equity Interests of ours or any direct or
indirect parent of ours, other than any Equity Interests owned by us or any
Wholly Owned Restricted Subsidiary of ours;
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness of ours
or any Restricted Subsidiary that is subordinated to the notes, except a
payment of interest or principal at Stated Maturity; or
(4) make any Restricted Investment,
(all payments and other actions set forth in the above list are collectively
referred to as "Restricted Payments"), unless, at the time of and after giving
effect to the Restricted Payment:
(1) no Default or Event of Default will have occurred and be
continuing or would occur as a consequence thereof;
(2) we, at the time of the Restricted Payment and after giving pro
forma effect thereto as if the Restricted Payment had been made at the
beginning of the applicable four-quarter period, would have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described under "-- Incurrence of Indebtedness and Issuance of Disqualified
and Preferred Stock"; and
(3) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by us and our Restricted Subsidiaries after
the date of the indenture (excluding Restricted Payments permitted by
clauses (2) and (3) of the next succeeding paragraph), is less than the sum
of
(a) 50% of our Consolidated Net Income for the period (taken as one
accounting period) from the beginning of the first fiscal quarter
commencing after the date of the
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Indenture to the end of our most recently ended fiscal quarter for which
internal financial statements are available at the time of the
Restricted Payment (or, if the Consolidated Net Income for that period
is a deficit, less 100% of the deficit), plus
(b) 100% of the aggregate net cash proceeds received by us as a
contribution to its common equity capital or from the issue or sale
since the date of the indenture of Equity Interests of ours (other than
Disqualified Stock) or of Disqualified Stock or debt securities of ours
that have been converted into Equity Interests, other than Equity
Interests (or Disqualified Stock or convertible debt securities) sold to
a Subsidiary of ours and other than Disqualified Stock or convertible
debt securities that have been converted into Disqualified Stock, plus
(c) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise liquidated
or repaid for cash, the lesser of
(i) the cash return of capital with respect to the Restricted
Investment (less the cost of disposition, if any) and
(ii) the initial amount of the Restricted Investment, plus
(d) the amount equal to the net reduction in Investments (other
than Permitted Investments) made by us or any of our Restricted
Subsidiaries in any person or entity resulting from the redesignation of
Unrestricted Subsidiaries as Restricted Subsidiaries not to exceed the
lesser of
(i) the amount of Investments (valued in each case as provided
under "Designation of Restricted Subsidiaries as Unrestricted
Subsidiaries") previously made by us or our Restricted Subsidiaries
in that Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments, and
(ii) the fair market value of the Investments in the Subsidiary
as of the date that it is redesignated an Unrestricted Subsidiary;
provided, however, that no amount shall be included under this clause
(d) to the extent it is already included in Consolidated Net Income; plus
(e) $5.0 million.
So long as no Default or Event of Default has occurred and is continuing or
would be caused thereby, the foregoing provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration the payment would have
complied with the provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any Equity Interests of ours or Indebtedness of ours or that
of any guarantor that is subordinated to the notes or the guarantee, as the
case may be, in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of ours) of,
other Equity Interests of ours (other than any Disqualified Stock);
provided, however, that the amount of any of these net cash proceeds that
are utilized for any redemption, repurchase, retirement, defeasance or
other acquisition will be excluded from clause (3)(b) of the preceding
paragraph;
(3) the redemption, repurchase, retirement, defeasance or other
acquisition of Indebtedness of ours or that of any guarantor that is
subordinated to the notes or the guarantees, as the case may be, with the
net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
and
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(4) the redemption, repurchase or other acquisition or retirement for
value of any Equity Interests of ours or any of our Restricted Subsidiaries
held by any of our or our Restricted Subsidiaries' members of management,
Board of Directors, employees or consultants pursuant to any equity
subscription agreement, stock option agreement or other similar agreement
or any successor arrangement entered into in connection with our
reorganization as a corporation; provided, however, that the successor
arrangement is on terms substantially similar to the arrangement so
replaced; provided, further, that the aggregate price paid for all
redeemed, repurchased, acquired or retired Equity Interests will not exceed
$1.0 million in any twelve month period.
The amount of all Restricted Payments, other than cash, will be the fair
market value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by us or the Restricted Subsidiary, as the
case may be, pursuant to the Restricted Payment. The fair market value of any
non-cash Restricted Payment will be determined in good faith by the Board of
Directors whose resolution with respect to that determination will be delivered
to the trustee, who will certify that the valuation was approved by a majority
of disinterested directors, if any. Not later than the date of making any
Restricted Payment, we will be required to deliver to the trustee an officers'
certificate stating that the Restricted Payment was permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED AND PREFERRED STOCK
We are not permitted to, and cannot permit any of our Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and we may not issue any shares of Disqualified Stock and we may not
permit any of its Restricted Subsidiaries to issue any Disqualified Stock or
preferred stock; provided, however, that, so long as no Default or Event of
Default has occurred and is continuing, we are permitted to incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock, and any
guarantor may incur Indebtedness, if the Fixed Charge Coverage Ratio for our
most recently ended four full fiscal quarters for which internal financial
statements are available immediately preceding the date on which the additional
Indebtedness is incurred or the Disqualified Stock is issued would have been at
least 2.0 to 1 from the date of original issuance of the notes through September
30, 2001, and 2.25 to 1 thereafter, determined on a pro forma basis (including a
pro forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock had been issued at the
beginning of that four-quarter period.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following (collectively, "Permitted Debt"):
(1) the incurrence by us and the guarantors of Indebtedness at any
time outstanding (with letters of credit being deemed to have a principal
amount equal to our maximum potential liability and that of the guarantors
thereunder) under our senior credit facility in an aggregate amount not to
exceed the greater of:
(a) $155.0 million; or
(b) the sum of
(i) $125.0 million, plus
(ii) 60% of our inventory and that of our Restricted
Subsidiaries, plus 85% of our accounts receivable and those of our
Restricted Subsidiaries, in each case determined in accordance with
GAAP as of the most recent balance sheet
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less the aggregate amount of all Net Proceeds of Asset Sales applied
to permanently repay any of this Indebtedness pursuant to
subparagraph (1) of the second paragraph under "-- Repurchase at the
Option of Holders -- Asset Sales";
(2) the incurrence by us and the guarantors of Indebtedness
represented by the notes (but not to exceed $105.0 million aggregate
principal amount at maturity for purposes of this clause (2)) and
guarantees of any notes issued under the indenture;
(3) any Existing Indebtedness of ours and our Restricted Subsidiaries
of the Existing Indebtedness;
(4) the incurrence of Indebtedness between or among us and any of our
Wholly Owned Restricted Subsidiaries; provided, however, that
(a) if we are the obligor on that Indebtedness, the Indebtedness is
expressly subordinated to the prior payment in full of all Obligations
with respect to the notes and
(b) any subsequent issuance or transfer of Equity Interests that
results in any of this Indebtedness being held by a person or entity
other than us or a Wholly Owned Restricted Subsidiary, and any sale or
other transfer of that Indebtedness to a person or entity that is not
either us or a Wholly Owned Restricted Subsidiary, will be deemed, in
each case, to constitute an incurrence of that Indebtedness by us or the
Restricted Subsidiary, as the case may be;
(5) the incurrence by us or any of our Restricted Subsidiaries of
(a) Hedging Obligations that are incurred for the purpose of fixing
or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of the indenture to be
outstanding,
(b) foreign exchange contracts or
(c) currency swap agreements or other similar agreements or
arrangements; provided, however, that the notional amount of any
currency swap agreement does not exceed the principal amount of debt to
which such currency swap agreement relates;
(6) the guarantee by us or any of the guarantors of Indebtedness that
was permitted to be incurred by another provision of this covenant;
(7) the incurrence by us or any of the Restricted Subsidiaries of
additional Indebtedness in an aggregate principal amount (or accreted
amount, as applicable) at any time outstanding under this clause, including
all Permitted Refinancing Indebtedness incurred pursuant to clause (8)
above to refund, refinance or replace any Indebtedness incurred pursuant to
this clause (7), not to exceed $15.0 million;
(8) the incurrence by us or any of its Restricted Subsidiaries of
Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Indebtedness (other than
intercompany Indebtedness) that was permitted by the indenture to be
incurred by the first paragraph of this covenant, or by clauses (2), (3),
(5), (6), (7) and (12) of this covenant;
(9) the incurrence by our Unrestricted Subsidiaries of Non-Recourse
Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, the event will be deemed
to constitute an incurrence of Indebtedness by a Restricted Subsidiary of
ours that was not permitted by this clause (9);
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(10) the accrual of interest, accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in the form of
additional Indebtedness with the same terms, and the payment of dividends
on Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock; provided, however, that in each such case, the amount
thereof is included in our Fixed Charges as accrued;
(11) the incurrence of Indebtedness represented by Capitalized Lease
Obligations, mortgage financings or purchase money obligations, in each
case, incurred for the purpose of financing our capital expenditures or
those of any of our Restricted Subsidiaries not to exceed $10.0 million at
any one time outstanding; and
(12) the incurrence by us or any of the guarantors of additional
Indebtedness in an aggregate principal amount (or accreted amount, as
applicable) at any time outstanding under this clause, including all
Permitted Refinancing Indebtedness incurred pursuant to clause (8) above to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause (12), not to exceed $15.0 million, solely for the purpose of
financing acquisitions of Permitted Businesses; provided, however, that the
Fixed Change Coverage Ratio on a pro forma basis after giving effect to
such acquisitions is at least 2.0 to 1.
For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in the list above or is entitled to be
incurred pursuant to the first paragraph of this covenant, we will, in our sole
discretion, classify that item of Indebtedness in any manner that complies with
this covenant and the item of Indebtedness will be treated as having been
incurred pursuant to only one of those clauses or pursuant to the first
paragraph of this covenant.
LIMITATION ON OTHER SENIOR SUBORDINATED DEBT
We are not permitted to incur, directly or indirectly, any Indebtedness
that is subordinate in right of payment to any Senior Debt and senior in any
respect in right of payment to the notes and no guarantor is permitted to incur
any Indebtedness that is subordinate or junior in right of payment to its
Guarantor Senior Debt and senior in any respect in right of payment to that
guarantor's guarantee of the notes.
LIENS
We are not permitted to, and cannot permit any of our Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or on any income or
profits therefrom nor to assign or convey any right to receive income therefrom,
in each case to secure Indebtedness or trade payables, except for Permitted
Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
We are not permitted to, and cannot permit any of our Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to
(1) pay (a) dividends or make any other distributions to us or any of
our Restricted Subsidiaries on its Capital Stock or with respect to any
other interest or participation in, or measured by, its profits, or (b) any
Indebtedness owed to us or any of our Restricted Subsidiaries;
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(2) make loans or advances to us or any of our Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to us or any of our
Restricted Subsidiaries.
However, the preceding restrictions does not apply to encumbrances or
restrictions existing under or by reason of
(1) Existing Indebtedness as in effect on the date of the indenture
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof; provided,
however, that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other
payment restrictions than those contained in such Existing Indebtedness, as
in effect on the date of the indenture;
(2) our senior credit facility as in effect as of the date of the
indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof;
provided, however, that the amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or refinancings
are no more restrictive with respect to dividend and other payment
restrictions than those contained in the senior credit facility as in
effect on the date of the indenture;
(3) the indenture, the notes and the guarantees;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of a person
or entity acquired by us or any of our Restricted Subsidiaries as in effect
at the time of the acquisition (except to the extent the Indebtedness was
incurred or the Capital Stock authorized and issued in connection with or
in contemplation of the acquisition), which encumbrance or restriction is
not applicable to any person or entity, or the properties or assets of any
person or entity, other than the person or entity, or the property or
assets of the person or entity, so acquired; provided, however, that, in
the case of Indebtedness or Disqualified Stock, such Indebtedness or
Disqualified Stock would have been permitted by the terms of the indenture
to be incurred or issued by us or one of our Restricted Subsidiaries;
(6) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices;
(7) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in
clause (3) of the preceding paragraph;
(8) Permitted Refinancing Indebtedness; provided, however, that the
restrictions contained in the agreements governing the Permitted
Refinancing Indebtedness are no more restrictive than those contained in
the agreements governing the Indebtedness being refinanced;
(9) any agreement for the sale or disposition of a Restricted
Subsidiary that restricts distributions by such Restricted Subsidiary
pending its sale or other disposition;
(10) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described under "-- Liens" that
limit our right or any of our Restricted Subsidiaries to dispose of the
assets subject to such Liens;
(11) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements, asset sale agreements,
stock sale agreements and other similar agreements entered into in the
ordinary course of business; and
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(12) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business.
MERGER, CONSOLIDATION OR SALE OF ASSETS
We are not permitted to, directly or indirectly: (1) consolidate or merge
with or into another person or entity, whether or not we are the surviving
corporation; or (2) sell, assign, transfer, lease, convey or otherwise dispose
of all or substantially all of its properties or assets in one or more related
transactions to another corporation, person or entity unless
(a) either (i) we are the surviving corporation or (ii) the person
or entity formed by or surviving such a consolidation or merger, if
other than us, or to which the sale, assignment, transfer, lease,
conveyance or other disposition has been made is a corporation organized
or existing under the laws of the United States, any state thereof or
the District of Columbia;
(b) the person or entity formed by or surviving such a
consolidation or merger, if other than us, or the person or entity to
which the sale, assignment, transfer, lease, conveyance or other
disposition has been made assumes all our obligations under the notes
and the indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the trustee;
(c) immediately after the transaction no Default or Event of
Default exists; and
(d) except in the case of our merger with or into one of our Wholly
Owned Restricted Subsidiaries, we or the person or entity formed by or
surviving such a consolidation or merger if other than us, or to which
the sale, assignment, transfer, lease, conveyance or other disposition
has been made
(i) has a Consolidated Net Worth immediately after the
transaction equal to or greater than our Consolidated Net Worth
immediately preceding the transaction and
(ii) at the time of the transaction and after giving pro forma
effect to the transaction as if the transaction had occurred at the
beginning of the applicable four-quarter period, is permitted to
incur at least $1.00 of additional Indebtedness under the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the
covenant described under "-- Incurrence of Indebtedness and Issuance
of Disqualified and Preferred Stock."
In addition, we may not, directly or indirectly, lease all or substantially
all of our properties or assets, in one or more related transactions, to any
other person. This "Merger, Consolidation, or Sale of Assets" covenant does not
apply to a sale, assignment, transfer, conveyance or other disposition of assets
between or among us and any of our Wholly Owned Subsidiaries or to the merger.
TRANSACTIONS WITH AFFILIATES
We are not permitted to, and cannot permit any of our Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer, convey or
otherwise dispose of any properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
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agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(1) the Affiliate Transaction is on terms that are no less favorable
to us or the Restricted Subsidiary than those that would have been obtained
in a comparable transaction by us or the Restricted Subsidiary with an
unrelated person or entity; and
(2) we deliver to the trustee
(a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.0 million, a resolution of the Board of Directors set forth in an
officers' certificate certifying that the Affiliate Transaction complies
with the immediately previous clause above and that the Affiliate
Transaction has been approved by a majority of the disinterested members
of the Board of Directors; and
(b) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$5.0 million, an opinion as to the fairness to us of the Affiliate
Transaction from a financial point of view or as to valuation issued by
an accounting, appraisal or investment banking firm of national
standing.
The following items are not deemed to be Affiliate Transactions and,
therefore, are not subject to the provisions of the prior paragraph:
(1) any employment agreement or employment arrangement,
non-competition agreement, confidentiality agreement, stock option
agreement or plan, stock ownership agreement or plan or indemnification
agreement entered into by us or any of our Restricted Subsidiaries with any
employee or director in the ordinary course of business and consistent with
us or the Restricted Subsidiary (including the issuance of any securities
or other payments, awards or grants in securities pursuant thereto) that is
approved by a majority of disinterested directors, if any, or otherwise by
a majority of our Board of Directors;
(2) transactions between or among us and/or our Restricted
Subsidiaries;
(3) payment of reasonable directors' fees to persons who are not
otherwise Affiliates of ours;
(4) any of our obligations pursuant to the Management Agreement;
(5) any Restricted Payment that is permitted by the provisions of the
indenture described above under "-- Restricted Payments;"
(6) loans and advances to our employees or any employees of our
Restricted Subsidiaries in the ordinary course of business and
consistent with past practice; and
(7) the merger or any payments made in connection with the merger.
ADDITIONAL GUARANTEES
If we or any of our Restricted Subsidiaries acquire or create another
domestic Restricted Subsidiary after the date of the indenture, or if any
domestic Unrestricted Subsidiary ceases to be an Unrestricted Subsidiary, then
that Subsidiary will be required to execute a supplemental indenture and
guarantee of the notes and deliver an opinion of counsel, within 10 business
days of the date on which it was acquired, created or ceased to be an
Unrestricted Subsidiary.
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DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
The Board of Directors is permitted to designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if that designation would not cause a Default.
In the event of that designation, all outstanding Investments by us and our
Restricted Subsidiaries, except to the extent repaid in cash, in the Subsidiary
so designated will be deemed to be an Investment at the time of the designation
and will reduce the amount available for Restricted Payments under the first
paragraph of the covenant described above under "Restricted Payments" or
"Permitted Investments," as applicable. All of these outstanding Investments
will be valued at an amount equal to the greatest of
(1) the net book value of those Investments at the time of the
designation;
(2) the fair market value of those Investments at the time of the
designation; and
(3) the original fair market value of those Investments at the time
they were made.
The designation of a Restricted Subsidiary as an Unrestricted Subsidiary is
only permitted if the Restricted Payment would be permitted at that time and if
the Restricted Subsidiary otherwise would meet the definition of an Unrestricted
Subsidiary.
Any designation by the Board of Directors of a Restricted Subsidiary as an
Unrestricted Subsidiary will be required to be evidenced by the filing with the
trustee of a certified copy of the board resolution giving effect to the
designation and an officers' certificate certifying that the designation
complied with the foregoing conditions. If, at any time, any Unrestricted
Subsidiary would fail to meet the definition of an Unrestricted Subsidiary, it
will thereafter cease to be an Unrestricted Subsidiary for purposes of the
indenture and any Indebtedness of that Subsidiary will be deemed to be incurred
by a Restricted Subsidiary of ours as of that date and, if the Indebtedness is
not permitted to be incurred as of that date under the covenant described under
"-- Incurrence of Indebtedness and Issuance of Disqualified and Preferred
Stock," we will be in default of that covenant.
Our Board of Directors is permitted to at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that
the designation will be deemed to be an incurrence of Indebtedness by a
Restricted Subsidiary of ours of any outstanding Indebtedness of the
Unrestricted Subsidiary and the designation will only be permitted if
(1) the Indebtedness is permitted under the covenant described under
"-- Incurrence of Indebtedness and Issuance of Disqualified and Preferred
Stock," calculated on a pro forma basis as if the designation had occurred
at the beginning of the four-quarter reference period; and
(2) no Default or Event of Default would be in existence immediately
following the designation.
SALE AND LEASEBACK TRANSACTION
We are not permitted to, and cannot permit any of our Restricted
Subsidiaries to, enter into any sale and leaseback transaction; provided,
however, that we and the guarantors are permitted to enter into a sale and
leaseback transaction if
(1) we or the guarantor could have
(a) incurred Indebtedness in an amount equal to the Attributable
Debt relating to the sale and leaseback transaction pursuant to the
Fixed Charge Coverage Ratio test set forth in
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the first paragraph of the covenant described above under "-- Incurrence
of Indebtedness and Issuance of Disqualified and Preferred Stock"; and
(b) incurred a Lien to secure the Indebtedness pursuant to the
covenant described above under "-- Liens;"
(2) the gross cash proceeds of the sale and leaseback transaction are
at least equal to the fair market value, as determined in good faith by the
Board of Directors and set forth in an officers' certificate delivered to
the trustee, which will certify that the valuation has been approved by a
majority of the disinterested directors, if any, of the property that is
the subject of the sale and leaseback transaction; and
(3) the transfer of assets in the sale and leaseback transaction is
permitted by, and the net proceeds of the transaction are applied in
compliance with, the covenant described above under "-- Repurchase at the
Option of Holders -- Asset Sales."
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY OWNED
SUBSIDIARIES
We cannot, and cannot permit any of our Restricted Subsidiaries to,
transfer, convey, sell, lease or otherwise dispose of any Equity Interests in
any Wholly Owned Restricted Subsidiary of ours to any person or entity, other
than us or a Wholly Owned Restricted Subsidiary of ours, unless:
(1) such transfer, conveyance, sale, lease or other disposition is of
all the Equity Interests in such Wholly Owned Restricted Subsidiary; and
(2) the cash Net Proceeds from such transfer, conveyance, sale, lease
or other disposition are applied in accordance with the covenant described
under "-- Asset Sales."
In addition, we cannot permit any Wholly Owned Restricted Subsidiary of ours to
issue any of its Equity Interests, other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares, to any person or entity
other than to us or a Wholly Owned Restricted Subsidiary of ours.
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
We cannot permit any of our Restricted Subsidiaries, directly or
indirectly, to guarantee or pledge any assets to secure the payment of any other
Indebtedness of ours unless the Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture providing for the guarantee of the payment
of the notes by such Restricted Subsidiary, which guarantee shall be senior to
or pari passu with such Restricted Subsidiary's guarantee of or pledge to secure
the other Indebtedness, unless the other Indebtedness is Senior Debt, in which
case the guarantee of the notes may be subordinated to the guarantee of such
Senior Debt to the same extent as the notes are subordinated to the Senior Debt.
Notwithstanding the preceding paragraph, the guarantees of the notes
provide by their terms that they will be automatically and unconditionally
released and discharged under the circumstances described above under
"-- Guarantees." The form of the guarantee is attached as an exhibit to the
indenture.
PAYMENTS FOR CONSENT
Neither we nor any of our Restricted Subsidiaries or Affiliates are
permitted to, directly or indirectly, pay or cause to be paid any consideration,
whether by way of interest, fee or otherwise, to any holder of any notes for or
as an inducement to any consent, waiver or amendment of any of the
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terms or provisions of the indenture or the notes unless the consideration is
offered to be paid or is paid to all holders of the notes that consent, waive or
agree to amend in the time frame set forth in the solicitation documents
relating to the consent, waiver or agreement.
BUSINESS ACTIVITIES
We are not permitted to, and cannot permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses.
REPORTS
Upon the consummation of this exchange offer or the effectiveness of the
shelf registration statement, as the case may be, whether or not required by the
rules and regulations of the SEC, so long as any notes are outstanding, we will
furnish to the holders of notes
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on Forms 10-Q and
10-K if we were required to file these Forms, including a "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
that describes the financial condition and results of operations and that
of our consolidated Subsidiaries, showing in reasonable detail, either on
the face of the financial statements or in the footnotes thereto and in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, our financial condition and results of operations and that of
our Restricted Subsidiaries separate from the financial information and
results of operations of our Unrestricted Subsidiaries and, with respect to
the annual information only, a report thereon by our certified independent
accountants; and
(2) all current reports that would be required to be filed with the
SEC on Form 8-K if we were required to file these reports.
In addition, after the exchange offer or the effectiveness of the Shelf
Registration Statement, whether or not required by the rules and regulations of
the SEC, we will file a copy of all of this information and reports with the SEC
for public availability, unless the SEC will not accept such a filing, and from
and after the date of the indenture will make this information available to
securities analysts and prospective investors upon request. In addition, we
agree that, for so long as any notes remain outstanding, we will file with the
trustee and the SEC (unless the SEC will not accept such filing) the information
required to be delivered pursuant to clauses (1) and (2) above within the time
periods specified in the SEC's rules and regulations and furnish that
information to holders of the notes, securities analysts and prospective
investors upon their request.
EVENTS OF DEFAULT AND REMEDIES
Each of the following will constitute an Event of Default under the
indenture:
(1) default for 30 days in the payment when due of interest on, or
Liquidated Damages, if any, with respect to, the notes, whether or not
prohibited by the subordination provisions of the indenture;
(2) default in payment when due of the principal of or premium, if
any, on the notes, whether or not prohibited by the subordination
provisions of the indenture;
(3) failure by us or any Restricted Subsidiary for 30 days to comply
with the provisions described under "-- Repurchase at the Option of
Holders -- Change of Control," "-- Repurchase at the Option of
Holders -- Asset Sales," "-- Certain Covenants -- Restricted Payments,"
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"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Disqualified and Preferred Stock" or "-- Certain Covenants -- Merger,
Consolidation or Sale of Assets";
(4) failure by us or any Restricted Subsidiary for 30 days after
written notice by the trustee or the holders of at least 25% in principal
amount at maturity of the then outstanding notes to comply with any of its
other agreements in the indenture or the notes;
(5) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by us or any of our Restricted
Subsidiaries, or the payment of which is guaranteed by us or any of our
Restricted Subsidiaries, whether the Indebtedness or guarantee now exists
or is created after the date of the indenture, which default;
(a) is caused by a failure to pay principal of or premium, if any,
or interest on such Indebtedness prior to the expiration of any grace
period provided for on the date of the default (a "Payment Default") or
(b) results in the acceleration of the Indebtedness prior to its
scheduled maturity
and, in each case, the principal amount of such Indebtedness, together
with the principal amount of any other Indebtedness under which there
has been a Payment Default or the maturity of which has been so
accelerated, aggregates $5.0 million or more;
(6) failure by us or any of our Restricted Subsidiaries to pay final
judgments aggregating in excess of $5.0 million, which judgments are not
paid, discharged or stayed for a period of 60 days;
(7) except as permitted by the indenture, any guarantee of the notes
is held in any judicial proceeding to be unenforceable or invalid or ceases
for any reason to be in full force and effect or any guarantor, or any
person or entity acting on behalf of any guarantor, denies or disaffirms
its obligations under its guarantee; provided, however, that this clause
(7) shall apply only to a guarantor that is a Significant Subsidiary or a
group of guarantors that, taken together, would constitute a Significant
Subsidiary; and
(8) certain events of bankruptcy or insolvency with respect to us or
any of our Restricted Subsidiaries that constitute a Significant Subsidiary
or any group our Restricted Subsidiaries that, taken together, would
constitute a Significant Subsidiary.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to us, any Restricted Subsidiary of ours
that constitutes a Significant Subsidiary or any group of our Restricted
Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding notes will become due and payable without further action or
notice. If any other Event of Default occurs and is continuing, the trustee or
the holders of at least 25% in principal amount at maturity of the then
outstanding notes are permitted to declare all the notes to be due and payable
immediately.
Holders of the notes are not permitted to enforce the indenture or the
notes except as provided in the indenture. Subject to certain limitations,
holders of a majority in principal amount at maturity of the then outstanding
notes are permitted to direct the trustee in its exercise of any trust or power.
The trustee is permitted to withhold from holders of the notes notice of any
continuing Default, except a Default relating to the payment of principal or
interest, if it determines that withholding notice is in their interest.
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The holders of a majority in aggregate principal amount at maturity of the
notes then outstanding by notice to the trustee are permitted to on behalf of
the holders of all of the notes to waive any existing Default and its
consequences under the indenture except a continuing Default in the payment of
interest, Liquidated Damages, premium on, or the principal of, the notes.
In the case of any Event of Default occurring by reason of any willful
action or inaction taken or not taken by us or on our behalf with the intention
of provoking acceleration of the notes and thereby avoiding payment of the
premium that we would have had to pay if we then had elected to redeem the notes
pursuant to the optional redemption provisions of the indenture, an equivalent
premium will also become and be immediately due and payable to the extent
permitted by law upon the acceleration of the notes.
We are required to deliver to the trustee annually a statement regarding
compliance with the indenture, and we are required, upon becoming aware of any
Default, to deliver to the trustee a statement specifying the Default.
NO PERSONAL LIABILITY OF DIRECTORS, ADVISORS, MANAGERS, OFFICERS, EMPLOYEES,
INCORPORATORS, MEMBERS AND STOCKHOLDERS
No director, advisor, manager, officer, employee, incorporator, member or
stockholder of ours or any guarantor, as such, will have any liability for any
of our obligations or those of any guarantor under the notes, the guarantees,
the indenture or for any claim based on, in respect of, or by reason of, those
obligations or their creation. Each holder of notes by accepting a note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the notes and the guarantees of the notes. Such
waiver may not be effective to waive liabilities under the federal securities
laws and it is the view of the SEC that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We are permitted to, at our option and at any time, elect to have all of
our obligations discharged with respect to the outstanding notes and to have
each guarantor's obligation discharged with respect to its guarantee ("Legal
Defeasance") except for
(1) the rights of holders of outstanding notes to receive payments in
respect of the principal of and premium, interest and Liquidated Damages,
if any, on the notes when the payments are due from the trust referred to
below;
(2) our obligations with respect to the notes concerning issuing
temporary notes, registration of notes, mutilated, destroyed, lost or
stolen notes and the maintenance of an office or agency for payment and
money for security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the trustee,
and our obligations in connection therewith; and
(4) the Legal Defeasance provisions of the indenture.
In addition, we are permitted to, at our option and at any time, elect to
have our obligations and each guarantor released with respect to certain
covenants that are described in the indenture ("Covenant Defeasance") and
thereafter any omission to comply with those obligations will not constitute a
Default with respect to the notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute Events of Default with respect to the notes.
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In order to exercise either Legal Defeasance or Covenant Defeasance
(1) we are required to deposit irrevocably with the trustee, in trust,
for the benefit of the holders of the notes, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in an amount
that will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of and premium,
interest and Liquidated Damages, if any, on the outstanding notes on the
stated maturity or on the applicable date fixed for redemption, as the case
may be, and we must specify whether the notes are being defeased to
maturity or to a particular date fixed for redemption;
(2) in the case of Legal Defeasance, we have delivered to the trustee
an opinion of counsel in the United States reasonably acceptable to the
trustee confirming that
(a) we have received from, or there has been published by, the
Internal Revenue Service a ruling or
(b) since the date of the indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that,
and based thereon, the opinion of counsel will confirm that, the holders
of the outstanding notes will not recognize income, gain or loss for
federal income tax purposes as a result of the Legal Defeasance and will
be subject to federal income tax on the same amounts, in the same manner
and at the same times as would have been the case if the Legal
Defeasance had not occurred;
(3) in the case of Covenant Defeasance, we have delivered to the
trustee an opinion of counsel in the United States reasonably acceptable to
the trustee confirming that the holders of the outstanding notes will not
recognize income, gain or loss for federal income tax purposes as a result
of the Covenant Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been
the case if the Covenant Defeasance had not occurred;
(4) no Default has occurred and be continuing on the date of the
deposit (other than a Default resulting from borrowing funds to be applied
to the deposit) and no Event of Default from bankruptcy or insolvency
events occurs, at any time in the period ending on the 123rd day after the
date of deposit;
(5) the Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any material
agreement or instrument (other than the indenture) to which we or any of
our Subsidiaries is a party or by which we or any of our Subsidiaries is
bound;
(6) we have delivered to the trustee an opinion of counsel in
customary form to the effect that after the 123rd day following the
deposit, and assuming no intervening bankruptcy or insolvency event occurs,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally;
(7) we have delivered to the trustee an officers' certificate stating
that the deposit was not made by us or with the intent of preferring the
holders of notes over our other creditors with the intent of defeating,
hindering, delaying or defrauding our creditors or others; and
(8) we have delivered to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent to the Legal
Defeasance or the Covenant Defeasance have been satisfied.
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AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, we are permitted
to amend or supplement the indenture, the notes and the guarantees with the
consent of the holders of at least a majority in principal amount at maturity of
the notes then outstanding, (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, notes),
and any existing Default or compliance with any provision of the indenture, the
notes or the guarantees may be waived with the consent of the holders of a
majority in principal amount at maturity of the then outstanding notes.
With respect to any notes held by a non-consenting holder, without the
consent of each holder affected an amendment or waiver are not permitted to
(1) reduce the principal amount at maturity of notes whose holders
must consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any note
or alter the provisions with respect to the redemption or repurchase of the
notes, other than provisions relating to the covenants described above
under "-- Repurchase at the Option of Holders";
(3) reduce the rate of or change the time for payment of interest on
any note;
(4) waive a Default in the payment of principal of or premium,
interest or Liquidated Damages, if any, on the notes, except a rescission
of acceleration of the notes by the holders of at least a majority in
aggregate principal amount at maturity of the notes and a waiver of the
payment default that resulted from the acceleration;
(5) make any note payable in currency other than that stated in the
notes;
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of holders of notes to receive
payments of principal of or premium, interest or Liquidated Damages, if
any, on the notes;
(7) waive a redemption or repurchase payment with respect to any note
(other than a payment required by one of the covenants described under
"-- Repurchase at the Option of Holders");
(8) release any guarantor from its guarantee; or
(9) make any change in the foregoing amendment and waiver provisions.
In addition, any amendment to, or waiver of, the provisions of the
indenture that relate to subordination requires the consent of both (a) the
holders of at least 75% in aggregate principal amount at maturity of the notes
then outstanding if the amendment would adversely affect the rights of holders
of notes and (b) the holders of Designated Senior Debt.
Notwithstanding the foregoing, without the consent of any holder of notes,
we, a guarantor (with respect to a guarantee or the indenture to which it is a
party) and the trustee is permitted to amend or supplement the indenture, the
notes or any guarantee:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or in place of
certificated notes;
(3) to provide for the assumption of our or any guarantor's
obligations to holders of notes in the case of a merger or consolidation;
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(4) to make any other change that would provide any additional rights
or benefits to the holders of notes or that does not adversely affect the
legal rights under the indenture of any holder; or
(5) to comply with requirements of the SEC in order to effect or
maintain the qualification of the indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The indenture contains certain limitations on the rights of the trustee,
should it become our creditor ours, to obtain payment of claims in certain
cases, or to realize on certain property received in respect of such a claim as
security or otherwise. The trustee is permitted to engage in other transactions;
however, if it acquires any conflicting interest it must eliminate the conflict
within 90 days, apply to the SEC for permission to continue or resign.
The holders of a majority in principal amount at maturity of the then
outstanding Notes have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the trustee,
subject to certain exceptions. The indenture also provides that in case an Event
of Default occurs (that cannot be or is not cured), the trustee is required, in
the exercise of its power, to use the degree of care of a prudent person in the
conduct of his or her own affairs. Subject to those provisions, the trustee is
under no obligation to exercise any of its rights or powers under the indenture
at the request of any holder of notes, unless the holder had offered to the
trustee security and indemnity satisfactory to it against any loss, liability or
expense.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full description of all of these terms, as well
as any other capitalized terms used in this "Description of the Registered
Notes" for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified person or entity,
(1) Indebtedness of any other person or entity existing at the time
the other person or entity is merged with or into becomes a Subsidiary of
the specified person or entity, including, without limitation, Indebtedness
incurred in connection with, or in contemplation of, the other person or
entity merging with or into or becoming a Subsidiary of the specified
person or entity; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
the specified person or entity.
"AFFILIATE" of any specified person or entity means any other person or
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with the specified person or entity. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any person or entity, will mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of the person or entity, whether through the ownership of voting
securities, by agreement or otherwise; provided, however, that beneficial
ownership of 10% or more of the Voting Equity Interests of a person or entity
will be deemed to be control.
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"ASSET SALE" means
(1) the sale, lease, conveyance or other disposition of any assets or
rights, including, without limitation, by way of sale and leaseback,
excluding sales of services and products in the ordinary course of business
consistent with past practices, provided that the sale, lease, conveyance
or other disposition of all or substantially all of our assets and those of
our Restricted Subsidiaries taken as a whole will be governed by the
provisions of the indenture described under "-- Repurchase at the Option of
Holders -- Change of Control" and/or the provisions described above under
"-- Certain Covenants -- Merger, Consolidation or Sale of Assets" and not
by the provisions of the Asset Sale covenant; and
(2) the issue or sale by us or any of our Subsidiaries of Equity
Interests of any of our Subsidiaries.
Notwithstanding the foregoing, none of the following will be deemed to be
an Asset Sale:
(1) any single transaction or series of related transactions that: (a)
involves assets having a fair market value of less than $2.0 million; or
(b) results in net proceeds to us and our Restricted Subsidiaries of less
than $2.0 million;
(2) a transfer of assets by us to a Wholly Owned Restricted Subsidiary
or by a Wholly Owned Restricted Subsidiary to us or to another Wholly Owned
Restricted Subsidiary;
(3) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to us or to another Wholly Owned Restricted Subsidiary;
(4) the transfer of obsolete equipment in the ordinary course of
business; and
(5) a Restricted Payment that is permitted by the covenant described
above under "-- Certain Covenants -- Restricted Payments."
"ATTRIBUTABLE DEBT" in respect of a sale and leaseback transaction means,
at the time of determination, the present value (discounted at the rate of
interest implicit in that transaction, determined in accordance with GAAP) of
the obligation of the lessee for net rental payments during the remaining term
of the lease included in the sale and leaseback transaction (including any
period for which the lease has been extended or may, at the option of the
lessor, be extended).
"BOARD OF DIRECTORS" means
(1) in respect of a limited liability company, the board of advisors
of the limited liability company;
(2) in respect of a corporation, the board of directors of the
corporation, or any authorized committee thereof; and
(3) in respect of any other person or entity, the board or committee
of that person or entity serving a similar function.
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
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"CAPITAL STOCK" means
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited); and
(4) any other interest or participation that confers on a person or
entity the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing person or entity.
"CASH EQUIVALENTS" means
(1) United States dollars;
(2) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof or
any state having maturities of not more than one year from the date of
acquisition;
(3) certificates of deposit and eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank
deposits, in each case with any domestic commercial bank or U.S. branch of
a foreign commercial bank having capital and surplus in excess of $200-$250
million and a Thompson Bank Watch Rating of "B" or better;
(4) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in subparagraphs (2) and (3)
above entered into with any financial institution meeting the
qualifications specified in subparagraph (3); and
(5) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Rating Service and in each
case maturing within 270 days after the date of acquisition.
"CHANGE OF CONTROL" means the occurrence of any of the following:
(1) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of our assets and those of our
Subsidiaries taken as a whole to any "person" (as that term is used in
Section 13(d)(3) of the Exchange Act) other than to Permitted Holders;
(2) the adoption of a plan relating to our liquidation or dissolution;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as such term is used in Section 13(d)(3) of the Exchange Act),
other than a Permitted Holder, becomes the "beneficial owner" (as that term
is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
a person will be deemed to have "beneficial ownership" of all securities
that the person has the right to acquire, whether the right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 35% of our Voting Equity
Interests (measured by voting power rather than number of shares);
(4) the first day on which a majority of the members of our Board of
Directors is not made up of Continuing Directors; or
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(5) we consolidate with, or merge with or into, any person or entity,
or any person or entity consolidates with, or merges with or into, us, in
any such event pursuant to a transaction in which any of our outstanding
Voting Equity Interests is converted into or exchanged for cash, securities
or other property, other than any such transaction where our Voting Equity
Interests outstanding immediately prior to such transaction is converted
into or exchanged for Voting Equity Interests (other than Disqualified
Stock) of the surviving or transferee person or entity constituting a
majority of the outstanding shares of such Voting Equity Interests of such
surviving or transferee person or entity immediately after giving effect to
such issuance.
"CONSOLIDATED EBITDA" means, with respect to any person or entity for any
period, the Consolidated Net Income of the person or entity for that period
plus, to the extent deducted in computing the Consolidated Net Income,
(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale; plus
(2) provision for taxes based on income or profits of such person or
entity and its Restricted Subsidiaries for such period; plus
(3) consolidated interest expense whether paid or accrued and whether
or not capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest payments, the
interest component of any deferred payment obligations, the interest
component of all payments associated with Capital Lease Obligations,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments (if
any) pursuant to Hedging Obligations); plus
(4) depreciation, amortization (including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period) and other non-cash charges (including non-cash
equity based compensation charges but excluding any non-cash charge to the
extent that it represents an accrual of or reserve for cash charges in any
future period or amortization of a prepaid cash expense that was paid in a
prior period); minus
(5) non-recurring non-cash items increasing such Consolidated Net
Income for such period. Notwithstanding the foregoing, (a) the provision
for taxes based on the income or profits of, and the depreciation and
amortization of, a Restricted Subsidiary of a person or entity will be
added to Consolidated Net Income to compute Consolidated EBITDA only to the
extent (and in the same proportion) that the Net Income of the Restricted
Subsidiary was included in calculating the Consolidated Net Income of the
person or entity and only if a corresponding amount would be permitted at
the date of determination to be dividended to us by the Restricted
Subsidiary without prior approval (that has not been obtained) pursuant to
the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to
the Restricted Subsidiary or its stockholders and (b) the Net Income (but
not loss) of any Unrestricted Subsidiary will be excluded from Consolidated
Net Income, whether or not distributed to us or one of our Restricted
Subsidiaries.
"CONSOLIDATED NET INCOME" means, with respect to any person or entity for
any period, the aggregate of the Net Income of the person or entity and its
Restricted Subsidiaries for that period, on a consolidated basis, determined in
accordance with GAAP; provided, however, that
(1) the Net Income (but not loss) of any person or entity that is not
a Restricted Subsidiary (including Unrestricted Subsidiaries) or that is
accounted for by the equity method of accounting will be included only to
the extent of the amount of dividends or distributions paid in
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cash in the relevant period to the referent person or entity or a Wholly
Owned Restricted Subsidiary of that person or entity;
(2) the Net Income of any Restricted Subsidiary will be excluded to
the extent that the declaration or payment of dividends or similar
distributions by that Restricted Subsidiary of that Net Income is not at
the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of
the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that
Restricted Subsidiary or its stockholders;
(3) the Net Income of any person or entity acquired in a pooling of
interests transaction for any period prior to the date of the acquisition
will be excluded; and
(4) the cumulative effect of a change in accounting principles will be
excluded.
"CONSOLIDATED NET WORTH" means, with respect to any person or entity as of
any date, the sum of
(1) the consolidated equity of the common stockholders or members, as
applicable, of the person or entity and its consolidated Subsidiaries as of
that date; plus
(2) the respective amounts reported on the balance sheet of the person
or entity as of that date with respect to any series of preferred stock
(other than Disqualified Stock) that by its terms is not entitled to the
payment of dividends unless the dividends may be declared and paid only out
of net earnings in respect of the year of the declaration and payment, but
only to the extent of any cash received by that person or entity upon
issuance of the preferred stock; less the sum of:
(A) all write-ups (other than write-ups resulting from foreign
currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of the
business) subsequent to the date of the indenture in the book value of
any asset owned by that person or entity by its consolidated Subsidiary;
(B) all investments as of that date in unconsolidated Subsidiaries
and in persons or entities that are not Subsidiaries; and
(C) all unamortized debt discount and expense and unamortized
deferred charges as of that date, in each case, determined in accordance
with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member
of our Board of Directors who was a member of the Board of Directors on the date
of the indenture or was nominated for election or elected to the Board of
Directors with the approval of a majority of the Continuing Directors who were
members of the Board at the time of the nomination or election.
"DEFAULT" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"DESIGNATED SENIOR DEBT" means any Indebtedness outstanding under our
senior credit facility and any other Senior Debt or Guarantor Senior Debt
permitted to be incurred under the indenture the original principal amount of
which is $25.0 million or more and that has been designated by us as "Designated
Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible or for which it is
exchangeable), or upon the happening of any event (other than as a result of an
optional call for recapitalization by the issuer), matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the
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option of the holder thereof, in whole or in part, on or prior to the date that
is 91 days after the stated maturity date of the notes. Notwithstanding the
preceding sentence, any Capital Stock that would constitute Disqualified Stock
solely because the holders thereof have the right to require us to repurchase
such Capital Stock upon the occurrence of a change of control or with the
proceeds of an asset sale shall not constitute Disqualified Stock if the terms
of such Capital Stock provide that we may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase or redemption
complies with the covenant described above under the caption "-- Certain
Covenants -- Restricted Payments."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXISTING INDEBTEDNESS" means up to $24,000 in aggregate principal amount
of Indebtedness in existence on the date of the indenture (other than
Indebtedness under our senior credit facility), until that Indebtedness is
repaid.
"FIXED CHARGE COVERAGE RATIO" means with respect to any person or entity
for any period, the ratio of the Consolidated EBITDA of the person or entity and
its Restricted Subsidiaries for that period to the Fixed Charges of the person
or entity and its Restricted Subsidiaries for the sale period. In the event that
we or any of our Restricted Subsidiaries incurs, assumes, guarantees or redeems
any Indebtedness (other than revolving credit borrowings) or issues preferred
stock subsequent to the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but prior to the date on which the event for
which the calculation of the Fixed Charge Coverage Ratio is made (the
"Calculation Date"), then the Fixed Charge Coverage Ratio will be calculated
giving pro forma effect to the incurrence, assumption, guarantee or redemption
of such Indebtedness, or the issuance or redemption of such preferred stock and
the application of the proceeds therefrom, as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge Coverage Ratio:
(1) acquisitions that have been made by the specified person or entity
or any of its Restricted Subsidiaries, including through mergers or
consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to that reference period and on
or prior to the Calculation Date will be deemed to have occurred on the
first day of the four-quarter reference period and Consolidated EBITDA for
that reference period will be calculated without giving effect to clause
(3) of the proviso set forth in the definition of Consolidated Net Income;
(2) the Consolidated EBITDA attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, will be excluded, as though such
operations had been discontinued or such operations or businesses had been
disposed of on the first day of the four-quarter reference period; and
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed
of prior to the Calculation Date, will be excluded, but only to the extent
that the obligations giving rise to the Fixed Charges will not be
obligations of the referent person or entity or any of its Restricted
Subsidiaries following the Calculation Date.
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"FIXED CHARGES" means, with respect to any person or entity for any period,
the sum, without duplication, of
(1) the consolidated interest expense of the person or entity and its
Restricted Subsidiaries for that period (before amortization or write-off
of debt issuance costs), whether paid or accrued and whether or not
capitalized, including, without limitation, original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments, if
any, pursuant to Hedging Obligations; plus
(2) the consolidated interest expense of such person or entity and its
Restricted Subsidiaries that was capitalized during the period; plus
(3) any interest expense on Indebtedness of another person or entity
that is guaranteed by the person or entity or one of its Restricted
Subsidiaries or secured by a Lien on assets of the person or entity or one
of its Restricted Subsidiaries, whether or not the guarantee or Lien is
called upon; plus
(4) the product of
(a) all dividend payments, whether or not in cash, on any series of
preferred stock of the person or entity or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests (other
than Disqualified Stock) payable solely in our Equity Interests (other
than Disqualified Stock) or to us or a Restricted Subsidiary of ours;
times
(b) a fraction, the numerator of which is one and the denominator
of which is one minus the then current combined federal, state, local
and foreign statutory tax rate of the person or entity, expressed as a
decimal,
in each case, on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as has been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
"GUARANTOR SENIOR DEBT" means with respect to any guarantor
(1) all Indebtedness of the Guarantor outstanding under our senior
credit facility and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of the guarantor permitted to be incurred
under the terms of the indenture, unless the instrument under which the
Indebtedness is incurred expressly provides that it is subordinated or
ranks equally in right of payment to the guarantee of the guarantor; and
(3) all Obligations of the guarantor with respect to the foregoing
Indebtedness.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Debt will not include
(1) any liability for federal, state, local or other taxes owed or
owing by the guarantor;
(2) any Indebtedness of the guarantor to any of its Subsidiaries or
other Affiliates;
(3) any trade payables; or
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(4) any Indebtedness that is incurred in violation of the indenture.
"HEDGING OBLIGATIONS" means, with respect to any person or entity, the
obligations of the person or entity under
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect the person or
entity against fluctuations in interest rates.
"INDEBTEDNESS" means, with respect to any person or entity, any
indebtedness of the person or entity, whether or not contingent, in respect of
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except such a balance that constitutes an accrued expense or
trade payable;
(6) representing any Hedging Obligations.
If and to the extent any of the foregoing indebtedness (other than letters
of credit and Hedging Obligations) would appear as a liability upon a balance
sheet of the person or entity prepared in accordance with GAAP. In addition, the
term "Indebtedness" includes all indebtedness of others secured by a Lien on any
asset of the person or entity, whether or not the indebtedness is assumed by
that person or entity, and to the extent not otherwise included, the guarantee
by the person or entity of any indebtedness of any other person or entity.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness issued
with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other Indebtedness.
"INVESTMENTS" means, with respect to any person or entity, all investments
by the person or entity in other persons or entities (including Affiliates) in
the form of direct or indirect loans (including guarantees of Indebtedness or
other obligations), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
Indebtedness, Equity Interests or other securities, together with all items that
are or would be classified as investments on a balance sheet of such person or
entity prepared in accordance with GAAP (excluding equity in undistributed
earnings). If we or any Subsidiary of ours sells or otherwise disposes of any
Equity Interests of any direct or indirect Subsidiary of ours such that, after
giving effect to the sale or disposition, the person or entity is no longer a
Subsidiary of ours, we will be deemed to have made an Investment on the date of
the sale or disposition equal to the fair market value of the Equity Interests
of the Subsidiary not sold or disposed of in an amount determined as provided in
the third paragraph of the covenant described under "-- Certain
Covenants -- Restricted Payments."
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of that asset,
whether or not filed, recorded or otherwise
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perfected under applicable law, including any conditional sale or other title
retention agreement, any lease in the nature thereof, any option or other
agreement to sell or give a security interest in and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction.
"MANAGEMENT AGREEMENT" means that certain Management Agreement, dated as of
the date of the indenture, between Trivest II, Inc. and us.
"NET INCOME" means, with respect to any person or entity, the net income
(loss) of the person or entity, determined in accordance with GAAP and before
any reduction in respect of changes related to preferred stock, excluding,
however:
(1) any gain (but not loss), together with any related provision for
taxes on that gain (but not loss), realized in connection with
(a) any Asset Sale (including, without limitation, dispositions
pursuant to sale and leaseback transactions); or
(b) the disposition of any securities by the person or entity or
any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of the person or entity or any of its Restricted
Subsidiaries; and
(2) any extraordinary or nonrecurring gain (but not loss), together
with any related provision for taxes on the extraordinary or nonrecurring
gain (but not loss).
"NET PROCEEDS" means the aggregate cash proceeds received by us or any of
our Restricted Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition of any non-cash
consideration received in any Asset Sale), net of:
(1) the direct costs relating to the Asset Sale, including, without
limitation, legal, accounting and investment banking fees, and sales
commissions, and any relocation expenses incurred as a result thereof,
taxes paid or payable as a result thereof, in each case after taking into
account any available tax credits or deductions and any tax sharing
arrangements; and
(2) amounts required to be applied to the repayment of Indebtedness,
other than Senior Debt, secured by a Lien on the asset or assets that were
the subject of the Asset Sale;
provided, however, if the instrument or agreement governing such Asset Sale
requires the transferor to maintain a portion of the purchase price in escrow
(whether as a reserve for adjustment of the purchase price or otherwise) or to
indemnify the transferee for specified liabilities in a maximum specified
amount, the portion of the cash or Cash Equivalents that is actually placed in
escrow or segregated and set aside by the transferor for such indemnification
obligation shall not be deemed to be Net Proceeds until the escrow terminates or
the transferor ceases to segregate and set aside such funds, in whole or in
part, and then only to the extent of the proceeds released from escrow to the
transferor or that are no longer segregated and set aside by the transferor.
"NON-RECOURSE DEBT" means Indebtedness:
(1) as to which neither we nor any of our Restricted Subsidiaries
(a) provides credit support of any kind, including any undertaking,
agreement or instrument that would constitute Indebtedness;
(b) is directly or indirectly liable, as a guarantor or otherwise;
or
(c) constitutes the lender;
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(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary) would permit upon notice, lapse of time or both any holder of
any other Indebtedness (other than the notes being offered hereby) of ours
or any of our Restricted Subsidiaries to declare a default on the other
Indebtedness or cause the payment thereof to be accelerated or payable
prior to its stated maturity; and
(3) as to which the lenders have been notified in writing that they
will not have any recourse to our stock or assets or those of any of our
Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"PERMITTED BUSINESS" will mean and include the manufacture, sale or
distribution of products furnished in the furniture manufacturing industry.
Without limiting the foregoing, "Permitted Business" will include lines of
businesses which are related or complementary to any of the above, including the
acquisition and ownership of firms which are principally but not exclusively
engaged in one or more of the above lines, and any businesses which are, in the
reasonable judgment of the Board of Directors as set forth in a resolution of
the Board of Directors, logical extensions of any of the above.
"PERMITTED HOLDER" means Trivest, Inc. and any Affiliate of Trivest, Inc.
"PERMITTED INVESTMENTS" means
(1) any Investment in us or in a Wholly Owned Restricted Subsidiary of
ours;
(2) any Investment in Cash Equivalents;
(3) any Investment by us or any Restricted Subsidiary in a person or
entity, if as a result of the Investment:
(a) the person or entity becomes a Wholly Owned Restricted
Subsidiary of ours; or
(b) the person or entity is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, or is
liquidated into, us or a Wholly Owned Restricted Subsidiary of ours;
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under "-- Repurchase at the
Option of Holders -- Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of ours;
(6) any Hedging Obligation;
(7) other Investments in any person or entity having an aggregate fair
market value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause since the date of
the indenture of not more than $12.5 million.
(8) loans and advances to our employees and officers and those of our
Restricted Subsidiaries in the ordinary course of business (including loans
to be used to purchase our Capital Stock where such loans are secured by
such Capital Stock); and
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(9) Investments in securities of trade creditors or customers received
pursuant to any plan of reorganization or similar arrangement upon the
bankruptcy or insolvency of trade creditors or customers or in good faith
settlement of delinquent obligations of trade creditors or customers.
"PERMITTED JUNIOR SECURITIES" means
(1) Equity Interests in us or any guarantor;
(2) debt securities of ours or the relevant guarantor that are
subordinated to all Senior Debt and any debt securities issued in exchange
for Senior Debt or to Guarantor Senior Debt and any debt securities issued
in exchange for Guarantor Senior Debt, as applicable, to substantially the
same extent as, or to a greater extent than, the Notes and the guarantees
will be subordinated, respectively, to Senior Debt and Guarantor Senior
Debt, as applicable.
"PERMITTED LIENS" means
(1) Liens securing Senior Debt or Guarantor Senior Debt of ours and
our Restricted Subsidiaries that was permitted by the terms of the
indenture to be incurred;
(2) Liens in favor of us or any of our Restricted Subsidiaries;
(3) Liens on property of a person or entity existing at the time the
person or entity is merged into or consolidated with us or any Restricted
Subsidiary of ours; provided, however, that the Liens were in existence
prior to the contemplation of the merger or consolidation and do not extend
to any assets other than those of the person or entity merged into or
consolidated with us or the Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by
us or any Restricted Subsidiary of ours; provided, however, that the Liens
were in existence prior to the contemplation of the acquisition and do not
extend by any assets other than the property so acquired;
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds, bids, leases, government contracts or
other obligations of a like nature incurred in the ordinary course of
business;
(6) Liens of carriers, warehousemen, mechanics, suppliers,
materialmen, repairmen and other Liens imposed by law incurred in the
ordinary course of business for sums not yet delinquent or being contested
in good faith;
(7) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(8) Liens to secure Indebtedness (including Capital Lease Obligations)
incurred in connection with the acquisition of assets by us or our
Restricted Subsidiaries permitted by the covenant described under
"-- Certain Covenants -- Incurrence of Indebtedness and Issuance of
Disqualified and Preferred Stock;" provided, however, that
(a) the Indebtedness was incurred by the prior owner of the assets
prior to the acquisition and was not incurred in connection with, or in
contemplation of, the acquisition; and
(b) each such Lien occurs only the assets acquired with that
Indebtedness
(9) Liens existing on the date of the Indenture;
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(10) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded;
provided, however, that any reserve or other appropriate provision required
in conformity with GAAP has been made;
(11) easements, rights-of-way, restrictions, minor defects or
irregularities in title and other similar charges or encumbrances that do
not interfere in any material respect with our business or the business of
any of our Restricted Subsidiaries;
(12) judgment or attachment Liens not giving rise to an Event of
Default;
(13) any interest or title of a lessor in property subject to any
Capital Lease Obligation or other lease;
(14) Liens incurred in the ordinary course of our business or that of
any Restricted Subsidiary with respect to obligations that do not exceed
$5.0 million at any one time outstanding and that
(a) are not incurred in connection with borrowing money or
Obtaining advances or credit (other than trade credit in the ordinary
course of business); and
(b) do not in the aggregate materially detract from the value of
the affected property or materially impair its use in our or such
Restricted Subsidiary's business.
"PERMITTED REFINANCING INDEBTEDNESS" means any of our Indebtedness or that
of any of our Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of ours or that of any of our Restricted Subsidiaries
(other than intercompany Indebtedness); provided, however, that:
(1) the principal amount (or accreted value, if applicable) of the
Permitted Refinancing Indebtedness does not exceed the principal amount of
(or accreted value, if applicable), plus accrued interest on, the
Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses, costs, fees and
reasonable prepayment premiums and penalties incurred in connection
therewith);
(2) the Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the notes, the
Permitted Refinancing Indebtedness is subordinated in right of payment to
the notes on terms at least as favorable to the holders of notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and
(4) the Indebtedness is incurred either by us or by the Restricted
Subsidiary that is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a person or entity means any Subsidiary of the
referent person or entity that is not an Unrestricted Subsidiary.
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"SENIOR CREDIT FACILITY" means that certain Loan and Security Agreement,
dated as of August 27, 1999 among the lenders party thereto, Heller Financial,
Inc. and CIBC, Inc. as co-agents, BankBoston, N.A., as administrative agent, and
us, including any related notes, guarantees, collateral documents, instruments
and agreements executed in connection therewith, in each case as amended,
restated, modified, supplemented, extended, renewed, replaced, refinanced or
restructured from time to time, whether represented by one or more agreements
and whether one or more Restricted Subsidiaries are added or added or removed as
borrowers or guarantors thereunder or as parties thereto.
"SENIOR DEBT" means
(1) all our Indebtedness outstanding under our senior credit facility
and all Hedging Obligations with respect thereto;
(2) any other Indebtedness of ours permitted to be incurred under the
terms of the indenture, unless the instrument under which that Indebtedness
is incurred expressly provides that it is subordinated or ranks equally in
right of payment to the notes; and
(3) all Obligations of ours with respect to the items listed in the
preceding clauses (1) and (2).
Notwithstanding anything to the contrary in the foregoing list, Senior Debt
will not include
(1) any liability for federal, state, local or other taxes owed or
owing by us;
(2) any Indebtedness of ours to any of our Subsidiaries or other
Affiliates;
(3) any trade payables; or
(4) any Indebtedness that is incurred in violation of the indenture.
"SIGNIFICANT SUBSIDIARY" means any Restricted Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Securities Act, as that Regulation is in effect on
the date hereof.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any Indebtedness, the date on which the payment of interest or
principal was scheduled to be paid in the original documentation governing the
Indebtedness, and will not include any contingent obligations to repay, redeem
or repurchase such an interest or principal prior to the date originally
scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any person or entity,
(1) any corporation, association or other business entity of which
more than 50% of the total voting power of shares of Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by the person or entity or one or more
of the other Subsidiaries of that person or entity (or a combination
thereof); and
(2) any partnership
(a) the sole general partner or the managing general partner of
which is the person or entity or a Subsidiary of the person or entity
(b) or the only general partners of which are the person or entity
or of one or more Subsidiaries of the person or entity (or any
combination thereof).
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"UNRESTRICTED SUBSIDIARY" means any Subsidiary that is designated by the
Board of Directors as an Unrestricted Subsidiary pursuant to a board resolution,
but only to the extent that the Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with us or any Restricted Subsidiary unless the terms of that
agreement, contract, arrangement or understanding are no less favorable to
us or the Restricted Subsidiary than those that might be obtained at the
time from persons or entities that are not Affiliates of ours;
(3) is a person or entity with respect to which neither we nor any of
our Restricted Subsidiaries has any direct or indirect obligation to
subscribe for additional Equity Interests or to maintain or preserve the
financial condition of the person or entity or to cause the person or
entity to achieve any specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of ours or any of our Restricted
Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of ours or any of our Restricted Subsidiaries
and has at least one executive officer that is not a director or executive
officer of ours or any of our Restricted Subsidiaries.
"VOTING EQUITY INTERESTS" of any person or entity as of any date means the
Equity Interests of the person or entity that is at the time, entitled to vote
in the election of the Board of Directors or other governing body of the person
or entity.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying:
(a) the amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof; by
(b) the number of years (calculated to the nearest one-twelfth)
that will elapse between that date and the making of the payment; by
(2) the then outstanding principal amount of the Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any person or entity means a
Restricted Subsidiary of the person or entity, 99% or more of the outstanding
Capital Stock or other ownership interests of which (other than directors'
qualifying shares) will at the time be owned by the person or entity or by one
or more Wholly Owned Restricted Subsidiaries of the person or entity and one or
more Wholly Owned Restricted Subsidiaries of the person or entity.
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BOOK-ENTRY, DELIVERY AND FORM
Registered notes initially will be represented by one or more notes in
registered, global form without interest coupons in minimum denominations of
$1,000 and integral multiples of $1,000 in excess thereof. The global notes will
be deposited upon issuance with the trustee, as custodian for DTC, in New York,
New York, and registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC as described
below.
The registered notes that are issued as described under "-- Certificated
Notes" will be issued in the form of registered definitive certificates. The
certificated notes may, unless the global notes have previously been exchanged
for certificated notes, be exchanged for an interest in a global note
representing the principal amount at maturity of registered notes being
transferred.
DTC is a limited-purpose trust company that was created to hold securities
for its participating organizations and to facilitate the clearance and
settlement of transactions in those securities between participants through
electronic book-entry changes in accounts of its participants. DTC's
participants include securities brokers and dealers (including the initial
purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to DTC's system is also available to DTC's indirect
participants, which are other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a direct or indirect custodial
relationship with a participant. Persons or entities that are not participants
will be permitted to beneficially own securities held by or on behalf of DTC
only through DTC's participants or indirect participants.
We expect that, pursuant to procedures established by DTC, ownership of the
registered notes evidenced by the global notes will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the interests of DTC's participants), DTC's participants
and the indirect participants.
Prospective purchasers are advised that the laws of some states require
that specified categories of persons or entities take physical delivery in
definitive form of securities that they own. Consequently, the ability to
transfer registered notes evidenced by the global notes will be limited to that
extent.
So long as the holder of the global notes is the registered owner of the
registered notes, the holder of the global note will be considered the sole
holder under the indenture of any registered notes evidenced by the global
notes. Beneficial owners of registered notes evidenced by the global notes will
not be considered the owners or holders thereof under the indenture, for any
purpose, including with respect to the giving of any directions, instructions or
approvals to the trustee thereunder. Neither the trustee nor we will have any
responsibility or liability for any aspect of the records of DTC or for
maintaining, supervising or reviewing any records of DTC relating to the notes.
Payments in respect of the principal of and premium, interest and
Liquidated Damages, if any, on any registered notes registered in the name of
the holder of the global note, on the applicable record date will be payable by
the trustee to or at the direction of the holder of the global note in its
capacity as the registered holder under the indenture. The trustee and we will
be permitted to treat the persons in whose names notes, including the global
notes, are registered as the owners thereof for the purpose of receiving these
payments. Consequently, neither the trustee nor we has or will have any
responsibility or liability for the payment of those amounts to beneficial
owners of notes. We believe, however, that it is currently the policy of DTC to
immediately credit the accounts of the relevant participants with these
payments, in amounts proportionate to their respective holdings of beneficial
interests in the relevant security as shown on the records on the records of
DTC. Payments by DTC's participants and indirect participants to the beneficial
owners of the notes will be governed
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by standing instructions and customary practice and will be the responsibility
of DTC's participants or indirect participants.
CERTIFICATED NOTES
Subject to certain conditions, any person having a beneficial interest in a
global note may, upon request to the trustee, exchange that beneficial interest
for registered notes, in the form of certificated notes. Upon such an issuance,
the trustee is required to register the certificated notes in the name of, and
cause the same to be delivered to, the person or persons (or the nominee of any
thereof). In addition, if
(1) we notify the trustee, in writing, that DTC is no longer willing
or able to act as a depositary and we are not able to locate a qualified
successor within 90 days; or
(2) we, at our option, notify the trustee, in writing, that we elect
to cause the issuance of registered notes in the form of certificated
notes,
then, upon surrender by the holders of the global notes, registered notes in
this form will be issued to each person that the holders of the global note and
DTC identify as being a beneficial owner of the related registered notes.
Neither the trustee nor we will be liable for any delay by any holder of
the global notes or DTC in identifying the beneficial owners of registered notes
and the trustee and we will be permitted to conclusively rely on, and will be
protected in relying on, instructions from the holder of the global notes or DTC
for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the registered notes
represented by the global notes, including principal, premium, interest and
Liquidated Damages, if any, be made by wire transfer of immediately available
funds to the accounts specified by the holder of the global note. With respect
to certificated notes, we will make all payments of dividends, distribution,
principal, premium, interest, Liquidated Damages, if any, and any other payments
by wire transfer of immediately available funds to the accounts specified by the
holders thereof or, if no account is specified, by mailing a check to each
holder's registered address.
The registered notes represented by the global notes are expected to trade
in DTC's Same-Day Funds Settlement System, and any permitted secondary market
trading activity in the registered notes will, therefore, be required by DTC to
be settled in immediately available funds. We expect that secondary trading in
the certificated notes will also be settled in immediately available funds.
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CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain U.S. federal income and
estate tax considerations relevant to acquiring, holding and disposing of a
registered note. This discussion is based on the Internal Revenue Code of 1986,
Treasury regulations promulgated hereunder, administrative positions of the
Internal Revenue Service or the IRS and judicial decisions now in effect, all of
which are subject to change, possibly with retroactive effect, or to different
interpretations. There can be no assurance that the IRS will not challenge one
or more of the conclusions described herein. We have not obtained, and do not
intend to obtain, a ruling from the IRS with respect to the U.S. federal income
tax consequences of acquiring, holding or disposing of a registered note. This
discussion does not purport to deal with all aspects of U.S. federal income
taxation that may be relevant to a particular holder in light of the holder's
circumstances (for example, a person subject to the alternative minimum tax
provisions of the Code). In addition, it is not intended to be wholly applicable
to all categories of investors, some of which (like dealers in securities,
banks, insurance companies, tax-exempt organizations, persons holding a
registered note as part of a "straddle," "hedge," "conversion transaction" or
other risk reduction transaction and persons who have a "functional currency"
other than the U.S. dollar) may be subject to special rules. The discussion also
does not address any aspect of state, local or foreign law, or U.S. federal
estate and gift tax law other than U.S. federal estate tax law as applicable to
a "Non-U.S. Holder" (as defined below). In addition, this discussion is limited
to an original holder of a registered note who acquired an original note
exchanged for the registered note on its original issue date and at its original
issue price within the meaning of Section 1273 of the Code and who will hold the
registered note as a "capital asset" within the meaning of Section 1221 of the
Code.
HOLDERS OF ORIGINAL NOTES ARE ADVISED TO CONSULT THEIR TAX ADVISERS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND DISPOSITION OF THE REGISTERED NOTES.
EXCHANGE OF NOTES
The exchange of an original note for a registered note pursuant to the
exchange offer should not be a taxable exchange for U.S. Federal income tax
purposes. Accordingly, a registered note acquired in exchange for an original
note should have the same adjusted basis, holding period, issue price, adjusted
issue price, stated redemption price at maturity, yield and accrual periods as
the original note had in the hands of its beneficial owner immediately before
the exchange. The tax consequences of ownership and disposition of a registered
note should be the same as the tax consequences of the ownership and disposition
of the original note surrendered in exchange for it.
Accordingly, in the following discussion, the U.S. Federal income tax
consequences with respect to a registered note assume that the registered note
is treated, for U.S. Federal income tax purposes, as the same note as the
original note for which it was issued and that the registered note has the same
adjusted basis, holding period, issue price, adjusted issue price, stated
redemption price at maturity, yield and accrual periods as the original note had
in the hands of its beneficial owner immediately before the exchange, and that
any amounts that accrue or are paid or payable on an original note are treated
as accruing or as paid or payable on the registered note.
U.S. HOLDERS
The following discussion is limited to a holder of a registered note that
is a "U.S. Holder." For purposes of this discussion, a "U.S. Holder" is a
beneficial owner of a registered note that for U.S. federal income tax purposes
is (i) a citizen or resident (as defined in Section 7701(b) of the Code) of the
United States, (ii) a corporation or partnership (or an entity treated as a
corporation or
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partnership) created or organized in the United States or under the law of the
United States, any state or the District of Columbia, (iii) an estate the income
of which is subject to U.S. federal income taxation regardless of source or (iv)
a trust if a U.S. court is able to exercise primary supervision over the
administration of the trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust.
TAXATION OF STATED INTEREST ON THE REGISTERED NOTES. Generally, payments
of "qualified stated interest" will be includible in a U.S. Holder's gross
income and taxable as ordinary income for U.S. federal income tax purposes at
the time they are paid or accrue in accordance with the U.S. Holder's regular
method of tax accounting. Generally, "qualified stated interest" payments
include stated interest payments that are unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually at a
single fixed rate that appropriately takes into account the length of intervals
between payments.
ORIGINAL ISSUE DISCOUNT ON THE REGISTERED NOTES. The original notes were
issued with original issue discount or "OID", and each registered note therefore
should have the same OID as the original note exchanged therefor. Accordingly,
each U.S. Holder generally will be required to include in income (regardless
whether the U.S. Holder uses a cash or accrual method of accounting for U.S.
federal income tax purposes) in each taxable year, in advance of the receipt of
the corresponding cash payments on a registered note, that portion of the OID,
computed on a constant yield basis, attributable to each day during the year on
which the U.S. Holder holds the registered note.
The amount of OID with respect to each registered note will be equal to the
excess of (i) the "stated redemption price at maturity" of the registered note
over (ii) the "issue price" of the registered note. The "stated redemption price
at maturity" of a registered note will be equal to the sum of all cash payments
required to be made on the registered note other than payments of "qualified
stated interest" (defined above). The "issue price" of a registered note will be
equal to the portion of the "issue price" of the unit that originally was issued
(which constituted an "investment unit" for U.S. federal income tax purposes
consisting of an original note and the associated warrant) allocable to the
original note based upon the relative fair market values of the original note
and the associated warrant comprising the unit. Because the unit was issued for
money, the "issue price" of the unit was the first price at which a substantial
amount of the units was sold for money. For purposes of determining the issue
price of the units, sales to bond houses, brokers, or similar persons or
organizations acting in the capacity as underwriters, placement agents or
wholesalers are ignored.
Under Treasury regulations, we have allocated the issue price of the units
between the original notes and the associated warrants. That allocation will be
binding on all holders of units, unless a holder explicitly discloses (on a form
prescribed by the IRS and attached to the holder's timely-filed U.S. federal
income tax return for the taxable year that includes the acquisition date of the
unit) that its allocation of the issue price of a unit is different from the
issuer's allocation. Our allocation is not, however, binding on the IRS. Based
on our allocation, the issue price of each original note was $962.40.
A U.S. Holder of a debt instrument issued with OID is required for U.S.
federal income tax purposes to include OID in gross income each year under a
constant yield method, regardless of the holder's regular method of tax
accounting. The amount of OID includible in income by a U.S. Holder of a
registered note in any taxable year is the sum of the "daily portions" of the
OID for all days during the taxable year in which the U.S. Holder holds the
registered note. The daily portions of OID required to be included in a U.S.
Holder's gross income in a taxable year will be determined under a constant
yield method by allocating to each day during a taxable year in which the U.S.
Holder holds the registered note a pro rata portion of the OID on that
registered note that is attributable to the "accrual period" in which that day
is included. The amount of the OID attributable to each accrual period is an
amount equal to the excess, if any, of (1) the product of the
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"adjusted issue price" of the registered note at the beginning of that accrual
period and the "yield to maturity" of the registered note (that is, the discount
rate that, when used in computing the present value of all principal and
interest payments to be made under the registered note in the manner prescribed
by Treasury regulations, produces an amount equal to the issue price of the
note) over (2) the amount of any "qualified stated interest" (defined above)
allocable to the accrual period. The "adjusted issue price" of a registered note
at the beginning of the first accrual period (which, as noted above, should be
the first accrual period of the original notes exchanged for the registered
note) will be its issue price. Thereafter, the adjusted issue price at the
beginning of any accrual period will be equal to (a) the sum of the issue price
of the registered note and the aggregate amount of OID that accrued for all
prior accrual periods minus (b) the amount of all prior payments (other than
payments of "qualified stated interest") made on or before the first day of the
accrual period. OID allocable to a final accrual period is the difference
between the amount payable at maturity (other than "qualified stated interest")
and the adjusted issue price of the registered note at the beginning of the
final accrual period. The calculation of OID for an initial short accrual period
may be determined using any reasonable method. We will report to the U.S.
Holders, on a timely basis, the reportable amount of OID and qualified stated
interest income based on our understanding of applicable law.
The registered notes may be redeemed prior to their stated maturity at our
option. For purposes of computing the yield on the registered notes, we will be
deemed to exercise or not to exercise our option to redeem the registered notes
in a manner that minimizes the yield on the registered notes. It is not
anticipated that our ability to redeem the registered notes will affect the
registered notes' yield to maturity.
According to the applicable Treasury regulations, the possibility of a
redemption or repurchase of the registered notes at a premium if there is a
Change of Control or if we sell certain assets and do not use the proceeds as
specified will not affect the amount or timing of interest income recognized by
a holder of a registered note if the likelihood of the redemption or repurchase,
as of the date the original notes were issued, is remote. We intend to take the
position that the likelihood of a redemption or repurchase, if there is a Change
of Control or if we sell certain assets and do not use the proceeds as
specified, is remote under applicable Treasury regulations and similarly do not
intend to treat those possibilities as affecting the yield to maturity of the
registered notes. Accordingly, any premium payable on either of those events
should be includible in gross income by a U.S. Holder at the time the payment is
paid or accrues in accordance with the U.S. Holder's regular method of tax
accounting.
A U.S. Holder may elect to include in gross income, on the constant yield
method, all income on a registered note (including stated interest, OID, de
minimis OID, market discount, acquisition discount, de minimis market discount
and unstated interest), as adjusted by any amortizable bond premium or
acquisition premium. In applying the constant-yield method to a registered note
with respect to which this election has been made, the issue price of the
registered note will equal the electing U.S. Holder's adjusted basis in the
registered note immediately after its acquisition, the issue date of the
registered note will be the date of its acquisition by the electing U.S. Holder,
and no payments on the registered note will be treated as payments of qualified
stated interest. This election will generally apply only to the registered note
with respect to which it is made and may not be revoked without the consent of
the IRS. Any election made with respect to an original note or a registered note
should be treated as an election made with respect to the corresponding
registered note or original note, respectively.
ADJUSTED TAX BASIS. A U.S. Holder's tax basis in a registered note will be
increased by the amount of OID that the U.S. Holder includes in income pursuant
to the foregoing rules through the day preceding the day of disposition and will
be decreased by the amount of any cash payments received on the registered note
(other than payments of qualified stated interest).
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APPLICABLE HIGH-YIELD DISCOUNT OBLIGATIONS. If the original notes were
"applicable high-yield debt obligations," or AHYDOs, the registered notes also
should be AHYDOs. In that event, we would not be entitled to deduct OID accruing
on the registered notes, to the extent the OID does not exceed the applicable
federal rate, or AFR, plus six percentage points, until we actually pay the OID.
We would permanently disallowed a deduction for any OID in excess of the AFR
plus six percentage points, and the payment of that amount would be treated as a
dividend, for which a dividends received deduction would be allowable to certain
corporate holders, to the extent it is deemed to be paid out of our current or
accumulated earnings and profits. However, based on the calculation of the issue
price and yield of the original notes, the amount of OID on the original notes
would not be "significant" within the meaning of the AHYDO rules, and therefore
the original notes, and the registered notes, would not be AHYDOs.
SALE, EXCHANGE OR RETIREMENT OF A REGISTERED NOTE. Each U.S. Holder
generally will recognize capital gain or loss upon a sale, exchange or
retirement of a registered note measured by the difference, if any, between (i)
the amount of cash and the fair market value of any property received (except to
the extent that the cash or other property received in respect of a registered
note is attributable to the payment of accrued interest on the registered note
not previously included in income, which amount will be taxable as ordinary
income) and (ii) the holder's adjusted tax basis in the instrument. In each
case, the gain or loss will be long-term capital gain or loss if the registered
note has been held for more than one year at the time of the sale, exchange,
retirement or lapse. Long-term capital gain recognized on a sale, exchange or
retirement of a registered note by certain noncorporate U.S. Holders is subject
to tax at a maximum tax rate of 20%. As noted above, a U.S. Holder's initial
basis in a registered note generally will be the portion of the amount paid for
a unit allocable to the original note based on the relative fair market values
of the original note and the associated warrant. (See "-- Original Issue
Discount on the Notes"). The tax basis in the registered notes may be adjusted
as described in "-- Adjusted Tax Basis" above.
Prospective acquirors of registered notes should be aware that the resale
of a registered note may be affected by the "market discount" rules of the Code,
under which a portion of any gain realized on the retirement or other
disposition of a registered note by a subsequent holder that acquires the
registered note at a market discount generally would be treated as ordinary
income to the extent of the market discount that accrues while that holder holds
the registered note.
POTENTIAL RECHARACTERIZATION OF ORIGINAL NOTES ISSUED BY WINSLOEW ESCROW
CORP. The original notes were issued originally by WinsLoew Escrow Corp., which
was formed solely for the purpose of completing the offering of the original
notes prior to the merger of Trivest Furniture Corporation with and into us.
WinsLoew Escrow Corp. was a wholly owned subsidiary of Trivest Furniture
Corporation and merged with and into Trivest Furniture Corporation as part of
the merger of Trivest Furniture Corporation with and into us. As discussed
above, we believe that as a result of the merger of WinsLoew Escrow Corp. with
and into us, the separate existence of WinsLoew Escrow Corp. should be
disregarded for U.S. federal income tax purposes and thus that the U.S. federal
income tax consequences to a U.S. Holder of acquiring, holding or disposing of a
registered note should be those set forth above. However, it is possible that
the separate existence of WinsLoew Escrow Corp. would not be disregarded for
U.S. federal income tax purposes. Each prospective acquiror of a registered note
is advised to consult its own tax adviser regarding the possibility of such
recharacterization and the tax consequences of such a recharacterization.
INFORMATION REPORTING AND BACKUP WITHHOLDING. A U.S. Holder of a
registered note may be subject, under certain circumstances, to information
reporting and "backup withholding" at a rate of 31% with respect to certain
"reportable payments," including interest on or principal (and premium, if any)
of a registered note and the gross proceeds from a disposition of a registered
note. The backup withholding rules apply if the holder, among other things, (i)
fails to furnish a social security number
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or other taxpayer identification number ("TIN") certified under penalties of
perjury within a reasonable time after the request therefor, (ii) furnishes an
incorrect TIN, (iii) fails to properly report the receipt of interest or
dividends or (iv) under certain circumstances, fails to provide a certified
statement, signed under penalties of perjury, that the TIN furnished is the
correct number and that the holder is not subject to backup withholding. A U.S.
Holder who does not provide us with its correct TIN also may be subject to
penalties imposed by the IRS. Backup withholding will not apply with respect to
payments made to certain holders, including corporations and tax-exempt
organizations, provided their exemptions from backup withholding are properly
established. We will report annually to the IRS and to each U.S. Holder of a
registered note the amount of any "reportable payments" and the amount of tax
withheld, if any, with respect to those payments.
Any amounts withheld under the backup withholding rules from a payment to a
U.S. Holder will be allowed as a refund or as a credit against that U.S.
Holder's U.S. federal income tax liability, provided the requisite procedures
are followed.
NON-U.S. HOLDERS
The following discussion is limited to U.S. federal income and estate tax
consequences relevant to a Non-U.S. Holder. As used herein, a "Non-U.S. Holder"
is a beneficial owner of a registered note, that, for U.S. federal income tax
purposes, is (a) a nonresident alien individual, (b) a corporation or
partnership (or an entity treated as a corporation or partnership) created or
organized in or under the law of a country (or a political subdivision thereof)
other than the United States or (c) a foreign estate or trust, which generally
is an estate or trust that is not a U.S. Holder. For purposes of the withholding
tax discussed below (other than backup withholding), a Non-U.S. Holder includes
a nonresident fiduciary of an estate or trust. This discussion does not address
tax consequences relevant to an expatriate or former long-term resident of the
United States or to a person who holds a registered note through a partnership.
A person who holds a registered note through a hybrid entity (that is, an entity
that is fiscally transparent for U.S. federal income tax purposes but not for
foreign tax purposes) may not be entitled to the benefits of a tax treaty. For
example, a person who is a partner in a foreign partnership or beneficiary of a
foreign trust or estate and who is subject to U.S. federal income tax because of
his own status, for example, as a U.S. resident or a foreign person engaged in
trade or business in the United States, may be subject to U.S. federal income
tax even though the foreign partnership, trust or estate is not itself subject
to U.S. federal income tax. For purposes of the following discussion, "U.S.
trade or business income" of a Non-U.S. Holder generally means interest or gain
on a sale, exchange or retirement of a registered note if that interest or gain
is (i) effectively connected with trade or business conducted by the Non-U.S.
Holder within the United States or (ii) in most cases of a resident of a country
with which the United States has an income tax treaty, attributable to a
permanent establishment (or fixed base) of the Non-U.S. Holder in the United
States.
STATED INTEREST AND OID ON THE REGISTERED NOTES. In general, interest (and
premium, if any) paid to, and OID paid to or accrued by, a Non-U.S. Holder of a
registered note will not be subject to U.S. withholding tax if it qualifies for
the portfolio interest exemption, and it will not otherwise be subject to U.S.
federal income tax if it is not U.S. trade or business income of the Non-U.S.
Holder. Interest and OID on a registered note qualify for the portfolio interest
exemption if (i) the Non-U.S. Holder of the registered note (a) does not own,
actually and constructively, 10% or more of the total combined voting power of
all classes of our stock entitled to vote, (b) is not a controlled foreign
corporation related, directly or indirectly, to us through stock ownership and
(c) is not a bank receiving interest on an extension of credit made pursuant to
a loan agreement made in the ordinary course of its trade or business and (ii)
either (a) the Non-U.S. Holder certifies, under penalties of perjury, to us or
the paying agent, as the case may be, that it is a Non-U.S. Holder and provides
its name and address or (b) a securities clearing organization, bank or other
financial institution that
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<PAGE> 129
holds customers' securities in the ordinary course of its trade or business (a
"Financial Institution") and holds the registered note on behalf of the Non-U.S.
Holder certifies, under penalties of perjury, that it or a Financial Institution
between it and the Non-U.S. Holder has received such a certificate and furnishes
the payor with a copy thereof. Recently adopted Treasury regulations that
generally will be effective for payments made on or after January 1, 2001
provide alternative methods for satisfying the certification requirement
described in (ii) above. The new regulations generally will require, in the case
of a registered note held by a foreign partnership, that the certificate
described in (ii) above must be provided by the partners rather than by the
foreign partnership and that the partnership must provide certain information,
including a U.S. TIN.
Interest and premium, if any, and OID paid to or accrued by a Non-U.S.
Holder that constitutes U.S. trade or business income will be subject to U.S.
federal income tax on a net income basis at graduated rates in the same manner
that a U.S. taxpayer is subject to tax and will be exempt from the withholding
tax described above. In the case of a Non-U.S. Holder that is a corporation,
U.S. trade or business income under certain circumstances also will be subject
to an additional branch profits tax at a 30% rate (or, if applicable, a lower
treaty rate). The gross amount of interest (and premium, if any) and OID paid to
a Non-U.S. Holder that does not qualify for the portfolio interest exemption and
that is not U.S. trade or business income will be subject to withholding of U.S.
federal income tax at the rate of 30%, unless a U.S. income tax treaty reduces
or eliminates withholding. To claim the benefit of a tax treaty or to claim an
exemption from withholding because income is U.S. trade or business income, a
Non-U.S. Holder must provide a properly executed Form 1001 or 4224 (or a
successor form), as applicable, prior to the payment of the income. These forms
generally must be updated periodically. Under the new regulations, a Non-U.S.
Holder claiming either of those exemptions will be required to provide an IRS
Form W-8. In addition, under the new regulations, a Non-U.S. Holder who is
claiming the benefits of a tax treaty may be required to obtain a U.S. TIN and
to provide certain documentary evidence issued by a foreign governmental
authority to prove residence in the foreign country. Special procedures are
provided in the new regulations for payments through qualified intermediaries. A
holder of an original note should consult its own tax adviser regarding the
effect, if any, of the new regulations on it.
SALE, EXCHANGE OR RETIREMENT OF A REGISTERED NOTE. Subject to the
discussion below of backup withholding, gain recognized by a Non-U.S. Holder on
a sale, exchange or retirement of a registered note generally will not be
subject to U.S. federal income tax unless (i) the gain is U.S. trade or business
income of the Non-U.S. Holder or (ii) subject to certain exceptions, the
Non-U.S. Holder is an individual who holds the registered note as a capital
asset and is present in the United States for 183 days or more in the taxable
year of the disposition.
Prospective acquirors of registered notes should be aware that the resale
of a registered note to a U.S. Holder may be affected by the "market discount"
rules of the Code, under which a portion of any gain realized on retirement or
other disposition of a registered note by a subsequent holder that is a U.S.
Holder that acquires the registered note at a market discount generally would be
treated as ordinary income to the extent of the market discount that accrues
while the U.S. Holder holds the registered note.
POTENTIAL RECHARACTERIZATION OF ORIGINAL NOTES ISSUED BY WINSLOEW ESCROW
CORP. The original notes were issued originally by WinsLoew Escrow Corp., which
was formed solely for the purpose of completing the offering of the original
notes prior to the merger of Trivest Furniture Corporation with and into us.
WinsLoew Escrow Corp. was a wholly owned subsidiary of Trivest Furniture
Corporation and merged with and into Trivest Furniture Corporation as part of
the merger of Trivest Furniture Corporation with and into us. As discussed
above, we believe that, as a result of the merger of WinsLoew Escrow Corp. with
and into us, the separate existence of WinsLoew Escrow Corp. should be
disregarded for U.S. federal income tax purposes and thus that the U.S. federal
income tax
124
<PAGE> 130
consequences to a Non-U.S. Holder of acquiring, holding or disposing of a
registered note should be those set forth above. However, it is possible that
the separate existence of WinsLoew Escrow Corp. would not be disregarded for
U.S. federal income tax purposes. Each prospective acquiror of registered notes
is advised to consult its own tax adviser regarding the possibility of such
recharacterization and the tax consequences of such a recharacterization.
FEDERAL ESTATE TAX. A registered note that is owned, or treated as owned,
by an individual who is not a citizen of the United States and who is not
domiciled in the United States at the time of death will not be subject to U.S.
federal estate tax, provided the individual did not own, actually and
constructively, 10% or more of the total combined voting power of all classes of
our stock entitled to vote and provided the income on the registered note was
not U.S. trade or business income. A registered note that is owned, or is
treated as owned, by an individual who is domiciled in the United States at the
time of death will be subject to U.S. federal estate tax regardless of whether
such holder is neither a citizen nor a resident of the United States.
INFORMATION REPORTING AND BACKUP WITHHOLDING. We must report annually to
the IRS and to each Non-U.S. Holder any interest or OID that is subject to U.S.
withholding tax or that is exempt from withholding pursuant to a tax treaty or
the portfolio interest exception. Copies of these information returns also may
be made available under the provisions of a specific treaty or agreement to the
tax authorities of the country in which the Non-U.S. Holder resides. Information
reporting and backup withholding (at a rate of 31%) do not apply to interest or
OID paid to a Non-U.S. Holder if the holder makes the requisite certification or
otherwise establishes an exemption provided that neither we nor our paying agent
has actual knowledge that the holder is not a Non-U.S. Holder or that the
conditions of any other exemption are not, in fact, satisfied.
Backup withholding and information reporting do not apply to our payments
of principal of a registered note to a Non-U.S. Holder if the holder certifies
under penalties of perjury that it is not a U.S. Holder or otherwise establishes
an exemption provided that neither we nor our paying agent has actual knowledge
that the holder is not a Non-U.S. Holder or that the conditions of any other
exemption are not, in fact, satisfied.
The payment of the proceeds from the disposition of a registered note to or
through the U.S. office of any broker, U.S. or foreign, is subject to
information reporting and possible backup withholding unless the owner certifies
under penalties of perjury that it is not a U.S. Holder or otherwise establishes
an exemption provided that the broker does not have actual knowledge that the
holder is not a Non-U.S. Holder or that the conditions of any other exemption
are not, in fact, satisfied.
The proceeds of a disposition of a registered note by a Non-U.S. Holder to
or through a foreign office of a broker will not be subject to backup
withholding. However, information reporting will apply in the case of a "U.S.
related broker" unless the broker has documentary evidence in its files of the
Non-U.S. Holder's foreign status and has no actual knowledge to the contrary or
unless the Non-U.S. Holder otherwise establishes an exemption. A broker is a
"U.S. related broker" if the broker is a United States person, a controlled
foreign corporation for U.S. federal income tax purposes, a foreign person 50%
or more of whose income from all sources for a designated period is from
activities that are effectively connected with the conduct of trade or business
within the United States or, with respect to payments made on or after January
1, 2001, a foreign partnership that, at any time during its taxable year, is
owned 50% or more (by income or capital interest) by United States persons or is
engaged in the conduct of trade or business in the United States. The new
regulations provide certain presumptions under which a Non-U.S. Holder will be
subject to backup withholding and information reporting unless the Non-U.S.
Holder provides a certification as to its status as a Non-U.S. Holder.
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<PAGE> 131
Any amounts withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a refund or as a credit against the Non-U.S.
Holder's U.S. federal income tax liability, provided the requisite procedures
are followed.
PLAN OF DISTRIBUTION
Each broker-dealer that receives registered notes for its own account in
connection with the exchange offer must acknowledge that it will deliver a
prospectus in connection with any resale of such registered notes. This
prospectus, as it may be amended or supplemented from time to time, may be used
by broker-dealers during the period referred to below in connection with resales
of the registered notes received in exchange for original notes if such original
notes were acquired by such broker-dealers for their own accounts as a result of
market-making activities or other trading activities. We have agreed that we
will make this prospectus, as it may be amended or supplemented from time to
time, available to any broker-dealer in connection with resales of registered
notes for a period ending one year after the effective date of the registration
statement, subject to extension under certain limited circumstances. A
broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the registration
rights agreement, including certain indemnification rights and obligations.
We will not receive any cash proceeds from the issuance of the registered
notes offered hereby or from the sale of registered notes by broker-dealers.
Exchange notes received by broker-dealers for their own accounts in connection
with the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the registered notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at prices related
to such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any broker-dealer
and/or the purchaser of any registered notes. Any broker-dealer that resells
registered notes that were received by it for its own account in connection with
the exchange offer and any broker or dealer that participates in a distribution
of such registered notes may be deemed to be an "underwriter" within the meaning
of the Securities Act, and any profit on any such resale of registered notes and
any commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The letter of transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of one year after the effective date of the registration
statement, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
those documents in the letter of transmittal. We have agreed to indemnify those
broker-dealers against certain liabilities, including liabilities under the
Securities Act.
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LEGAL MATTERS
The legality of the registered notes offered hereby will be passed upon for
us by Greenberg Traurig, P.A., Miami, Florida.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements at December 31, 1998 and 1997, and for each of the three
years in the period ended December 31, 1998, as set forth in their report. We've
included our financial statements in the prospectus and elsewhere in the
registration statement in reliance on Ernst & Young LLP's report, given on their
authority as experts in accounting and auditing. The financial statements as of
December 31, 1998 for Pompeii appearing in this prospectus have been audited by
Infante, Lago & Company, independent auditors, as set forth in their report
thereon appearing elsewhere herein.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WINSLOEW PAGE
- -------- ----
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1998, 1997 AND 1996
Report of Ernst & Young LLP, Independent Auditors........... F-2
Consolidated Balance Sheets as of December 31, 1998 and
1997...................................................... F-3
Consolidated Statements of Income For the Years Ended
December 31, 1998, 1997 and 1996.......................... F-4
Consolidated Statements of Stockholders' Equity For the
Years Ended December 31, 1998, 1997 and 1996.............. F-5
Consolidated Statements of Cash Flows For the Years Ended
December 31, 1998, 1997 and 1996.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE
MONTHS AND THE NINE MONTHS ENDED SEPTEMBER 24, 1999 AND
SEPTEMBER 25, 1998
Consolidated Balance Sheets as of September 24, 1999
(Unaudited) and December 31, 1998......................... F-21
Consolidated Statements of Income For the Three Months and
Nine Months Ended September 24, 1999 and September 25,
1998 (Unaudited).......................................... F-22
Consolidated Statements of Cash Flows For the Nine Months
Ended September 24, 1999 and September 25, 1998
(Unaudited)............................................... F-23
Notes to Consolidated Financial Statements (Unaudited)...... F-24
POMPEII
- -------
FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998
Report of Infante, Lago & Company, Independent Auditors..... F-31
Balance Sheet as of December 31, 1998....................... F-32
Statement of Operations for the Year Ended December 31,
1998...................................................... F-33
Statement of Stockholders' Equity for the Year Ended
December 31, 1998......................................... F-34
Statement of Cash Flows for the Year Ended December 31,
1998...................................................... F-35
Notes to Financial Statements............................... F-36
UNAUDITED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE
30, 1999 AND 1998
Balance Sheets as of June 30, 1999 (Unaudited) and December
31, 1998.................................................. F-39
Statements of Income for the Six Months Ended June 30, 1999
and 1998 (Unaudited)...................................... F-40
Statements of Cash Flows for the Six Months Ended June 30,
1999 and 1998 (Unaudited)................................. F-41
Notes to Financial Statements............................... F-42
</TABLE>
F-1
<PAGE> 134
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
STOCKHOLDERS OF WINSLOEW FURNITURE, INC.
We have audited the accompanying consolidated balance sheets of WinsLoew
Furniture, Inc. and Subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of WinsLoew
Furniture, Inc. and Subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles.
/s/ Ernst & Young LLP
Birmingham, Alabama
January 29, 1999
F-2
<PAGE> 135
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS
EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 475 $ 707
Cash in escrow.............................................. 1,000 --
Accounts receivable, less allowances for doubtful accounts
of $1,694 and $788 at December 31, 1998 and 1997,
respectively.............................................. 23,647 22,031
Inventories................................................. 12,206 10,433
Prepaid expenses and other current assets................... 4,638 7,409
Net assets of discontinued operations....................... -- 1,470
------- -------
Total current assets...................................... 41,966 42,050
Net assets of discontinued operations....................... -- 4,548
Property, plant and equipment, net.......................... 13,948 12,023
Goodwill, net............................................... 27,176 21,021
Other assets, net........................................... 1,463 772
------- -------
$84,553 $80,414
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt........................... $ 47 $ 515
Accounts payable............................................ 4,377 3,395
Other accrued liabilities................................... 9,952 8,203
Net liabilities of discontinued operations.................. 1,750 --
------- -------
Total current liabilities.............................. 16,126 12,113
Long-term debt, net of current portion...................... 1,400 15,908
Deferred income taxes....................................... 801 1,367
------- -------
Total liabilities...................................... 18,327 29,388
------- -------
Commitments and contingencies (Note 8)
Stockholders' equity:
Preferred stock, par value $.0l per share, 5,000,000
shares authorized, none issued......................... -- --
Common stock-par value $.0l per share, 20,000,000 shares
authorized, 7,294,408 and 7,526,508 shares issued and
outstanding at December 31, 1998 and 1997,
respectively........................................... 73 75
Additional paid-in capital.................................. 19,797 24,926
Retained earnings........................................... 46,356 26,025
------- -------
Total stockholders' equity............................. 66,226 51,026
------- -------
$84,553 $80,414
======= =======
</TABLE>
See accompanying notes.
F-3
<PAGE> 136
WINSLOEW FURNITURE, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales............................................ $141,360 $122,145 $117,405
Cost of sales........................................ 87,232 79,431 78,029
-------- -------- --------
Gross profit......................................... 54,128 42,714 39,376
Selling, general and administrative expenses......... 23,124 21,427 21,472
Amortization......................................... 1,122 992 1,444
-------- -------- --------
Operating income..................................... 29,882 20,295 16,460
Interest expense..................................... 635 2,296 3,083
-------- -------- --------
Income from continuing operations before income
taxes.............................................. 29,247 17,999 13,377
Provision for income taxes........................... 10,947 6,838 4,834
-------- -------- --------
Income from continuing operations............... 18,300 11,161 8,543
Loss from discontinued operations, net of taxes...... -- (718) (259)
Gain (loss) from sale of discontinued operations, net
of taxes........................................... 2,031 (8,200) --
-------- -------- --------
Net income...................................... $ 20,331 $ 2,243 $ 8,284
======== ======== ========
Basic earnings (loss) per share:
Income from continuing operations.................. $ 2.46 $ 1.49 $ 0.98
Loss from discontinued operations, net of taxes.... -- (0.09) (0.03)
Gain (loss) from sale of discontinued operations,
net of taxes.................................... 0.27 (1.10) --
-------- -------- --------
Net income...................................... $ 2.73 $ 0.30 $ 0.95
======== ======== ========
Weighted average number of shares.................... 7,450 7,484 8,724
======== ======== ========
Diluted earnings (loss) per share:
Income from continuing operations.................. $ 2.40 $ 1.48 $ 0.98
Loss from discontinued operations, net of taxes.... -- (0.10) (0.03)
Gain (loss) from sale of discontinued operations,
net of taxes.................................... 0.27 (1.08) --
-------- -------- --------
Net income...................................... $ 2.67 $ 0.30 $ 0.95
======== ======== ========
Weighted average number of shares and common stock
equivalents........................................ 7,624 7,563 8,730
======== ======== ========
</TABLE>
See accompanying notes.
F-4
<PAGE> 137
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
--------- ------ ---------- -------- -------
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995................. 8,967,112 $90 $37,640 $15,498 $53,228
Exercise of stock options.................. 25,100 -- 187 -- 187
Repurchase and cancellation of stock....... (576,925) (6) (3,958) -- (3,964)
Repurchase and cancellation of stock from
affiliated company....................... (933,504) (9) (9,326) -- (9,335)
Net income................................. -- -- -- 8,284 8,284
--------- --- ------- ------- -------
BALANCE, DECEMBER 31, 1996................. 7,481,783 75 24,543 23,782 48,400
Exercise of stock options.................. 94,725 1 872 -- 873
Repurchase and cancellation of stock....... (50,000) (1) (489) -- (490)
Net income................................. -- -- -- 2,243 2,243
--------- --- ------- ------- -------
BALANCE, DECEMBER 31, 1997................. 7,526,508 75 24,926 26,025 51,026
Exercise of stock options.................. 63,900 1 924 -- 925
Repurchase and cancellation of stock....... (296,000) (3) (6,053) -- (6,056)
Net income................................. -- -- -- 20,331 20,331
--------- --- ------- ------- -------
BALANCE, DECEMBER 31, 1998................. 7,294,408 $73 $19,797 $46,356 $66,226
========= === ======= ======= =======
</TABLE>
See accompanying notes.
F-5
<PAGE> 138
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1998 1997 1996
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $20,331 $ 2,243 $ 8,284
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 2,618 2,634 2,979
Provision for losses on accounts receivable................. 1,331 42 1,759
Change in net assets held for sale.......................... 6,743 14,710 1,591
Changes in operating assets and liabilities, net of effects
from acquisitions and dispositions:
Accounts receivable....................................... (2,210) 1,875 (617)
Inventories............................................... (1,164) 1,182 288
Prepaid expenses and other current assets................. 2,779 (3,871) 50
Other assets.............................................. 843 691 (144)
Accounts payable.......................................... 792 (591) 1,841
Other accrued liabilities................................. (357) 3,386 (497)
Deferred income taxes..................................... (566) (310) 690
------- -------- --------
Total adjustments....................................... 10,809 19,748 7,940
------- -------- --------
Net cash provided by operating activities............... 31,140 21,991 16,224
------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of disposals...................... (942) (425) (1,351)
Proceeds from disposition of business....................... -- 2,119 --
Proceeds from disposition of business held in escrow........ (1,000) -- --
Investment in subsidiary.................................... (9,323) -- --
------- -------- --------
Net cash provided by (used in) investing activities..... (11,265) 1,694 (1,351)
------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments under revolving credit agreements.............. (10,837) (19,872) (65)
Payments on long-term debt.................................. (4,139) (4,386) (4,225)
Proceeds from issuance of common stock, net................. 925 873 187
Repurchase and cancellation of stock........................ (6,056) (490) (3,964)
Repurchase and cancellation of stock from affiliated
company................................................... -- -- (9,335)
Proceeds front issuance of long-term debt................... -- -- 3,030
------- -------- --------
Net cash used in financing activities................... (20,107) (23,875) (14,372)
------- -------- --------
Net increase (decrease) in cash and cash equivalents.... (232) (190) 501
Cash and cash equivalents at beginning of year.............. 707 897 396
------- -------- --------
Cash and cash equivalents at end of year.................... $ 475 $ 707 $ 897
======= ======== ========
SUPPLEMENTAL DISCLOSURES:
Interest paid............................................... $ 695 $ 2,318 $ 3,296
Income taxes paid........................................... $ 9,579 $ 6,048 $ 3,937
======= ======== ========
Investing activities included the acquisition of Tropic
Craft in 1998. Assets acquired, liabilities assumed and
consideration paid was as follows:
Fair value of assets acquired............................. $10,078
Cash acquired............................................. (43)
Liabilities assumed....................................... (712)
-------
$ 9,323
=======
</TABLE>
See accompanying notes.
F-6
<PAGE> 139
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of WinsLoew
Furniture, Inc. ("WinsLoew") and its subsidiaries (the "Company"). All material
intercompany balances and transactions have been eliminated.
BUSINESS
WinsLoew is comprised of companies engaged in the design, manufacture and
distribution of casual, contract seating and ready-to-assemble ("RTA")
furniture. WinsLoew's casual furniture products are distributed through
independent manufacturer's representatives, and are constructed of extruded and
tubular aluminum, wrought iron and cast aluminum. These products are distributed
through fine patio stores, department stores and full line furniture stores
nationwide. WinsLoew's contract seating products are distributed to a customer
base which includes architectural design firms, restaurant and lodging chains.
WinsLoew's RTA products include promotionally priced coffee and end tables, wall
units and rolling carts. Distribution of RTA furniture products is primarily
through mass merchandisers, catalogue wholesalers and specialty retailers. The
Company performs periodic credit evaluations of its customers' financial
condition and determines if collateral is needed on a customer by customer
basis.
CASH AND CASH EQUIVALENTS
The Company classifies as cash and cash equivalents all highly liquid
investments which have maturities at the date of purchase of three months or
less. The Company maintains its cash in bank deposit accounts which, at times,
may exceed the federally insured limits. The Company has not experienced any
losses in such accounts.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
utilizing the first-in, first-out ("FIFO") and weighted average methods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. The Company provides for
depreciation on a straight-line basis over the following estimated useful lives:
building and improvements, 8 to 40 years; manufacturing equipment, 2 to 10
years; office furniture and equipment, 3 to 7 years; and vehicles, 3 to 5 years.
GOODWILL
Goodwill is amortized on a straight-line basis over forty years from the
date of the respective acquisition. The carrying value of goodwill is reviewed
if the facts and circumstances suggest it may be impaired. If the review, using
undiscounted cash flows over the remaining amortization period, indicates that
the cost of goodwill will not be recoverable, the Company's carrying value are
reduced.
F-7
<PAGE> 140
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED COSTS (OTHER ASSETS)
Loan acquisition costs and related legal fees, included in other assets,
are deferred and amortized over the respective terms of the related debt.
INCOME TAXES
Deferred income taxes are provided for temporary differences between the
basis of assets and liabilities for financial reporting purposes and the related
basis for income tax purposes in accordance with the provisions of Statement of
Financial Accounting Standards ("SFAS") No. 109, Accounting for Income Taxes.
EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods have been presented, and
where appropriate, restated to conform to SFAS No. 128 requirements.
The numerators for the earnings per share calculation are set forth on the
face of the accompanying income statements. The only difference between the
denominator for the basic and dilutive calculations are the number of shares
added to basic for the dilutive effect of employee stock options.
REVENUE RECOGNITION
Sales are recorded at time of shipment from the Company's facilities to
customers.
USE OF ESTIMATES
The preparation of the consolidated financial statements requires the use
of estimates in the amounts reported. Actual results could differ from those
estimates.
ACCOUNTING FOR STOCK-BASED COMPENSATION PLANS
The Company follows the provisions of Accounting Principles Board (APB)
Opinion No. 25, Accounting for Stock Issued to Employees and related
Interpretations to account for its stock option plan. Under provisions of APB
No. 25, no compensation expense has been recognized for stock option grants.
FOREIGN CURRENCY FORWARD CONTRACTS
The Company has exposure to losses which may result from settlement of
certain raw materials purchases denominated in a foreign currency. To reduce
this exposure, the Company has entered into forward contracts to buy foreign
currency. These forward contracts are accounted for as hedges, therefore, gains
and losses from settlement of the forward contracts are used to offset gains and
losses from settlement of the liability for the purchased raw materials. Gains
and losses are recognized in the same period in which gains or losses from the
raw material purchases are recognized. The
F-8
<PAGE> 141
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company is exposed to losses on the forward contracts in the event it does not
purchase the raw materials, however, the Company does not anticipate this event.
At December 31, 1998 the Company did not have any forward contracts
outstanding. There were no significant deferred gains or (losses) and actual
gains (losses) included in cost of sales were ($12,000), $30,000 and $15,000 for
the years ended December 31, 1998, 1997 and 1996, respectively.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARD
In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. The standard establishes principles for the
disclosure of information about operating segments in financial statements. The
adoption did not have any effect on the Company's primary financial statements,
but did effect the disclosure of segment information contained in Note 9.
2. DISCONTINUED OPERATIONS
During 1997 the Company adopted a plan to dispose of its RTA operations.
WinsLoew's RTA products included ergonomically-designed computer workstations,
which the Company denoted as "space savers", promotionally-priced coffee and end
tables, wall units and rolling carts and an extensive line of futons, futon
frames and related accessories. Distribution of RTA furniture products was
primarily through mass merchandisers, catalogue wholesalers and specialty
retailers. As a result of this decision, the Company recorded a pre-tax non-cash
charge totaling $12.4 million ($8.2 million net of taxes) in the fourth quarter
of 1997 relating to the disposal of the RTA operations. The charge can be
summarized as follows:
<TABLE>
<S> <C>
Write-off of goodwill in connection with sale of assets..... $ 3,902,000
Reduction of inventory value................................ 2,791,000
Reduction of property to net realizable value............... 2,067,000
Reduction of accounts receivable value...................... 1,390,000
Other liabilities/reserves.................................. 1,050,000
Accrual for losses through disposition...................... 1,200,000
-----------
Total.................................................. $12,400,000
===========
</TABLE>
The Company planned to sell two of the businesses and liquidate the assets
related to the futon business. During 1998 the Company sold one of the
businesses and completed the liquidation of the futon business. At the end of
1997 and during 1998, the Company attempted to sell its remaining RTA facility
but was unable to obtain a satisfactory offer. The Company devoted significant
management time to the operation resulting in improved profitability by the end
of 1998. Due to the recovery, the Company decided, during the fourth quarter of
1998, to retain Southern Wood.
As a condition of the sale mentioned above, WinsLoew is required to hold in
escrow $1.0 million of the sales proceeds to provide indemnification to the
purchaser for claims arising from the date of purchase to December 31, 1999.
F-9
<PAGE> 142
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The operating results of the discontinued operations are summarized as
follows (dollars in thousands, except for per share amounts):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Net sales.................................................. $4,432 $15,921 $26,574
Income before taxes........................................ -- (1,178) (385)
Net loss................................................... -- (718) (259)
Net loss per share -- diluted.............................. -- (0.10) (0.03)
</TABLE>
The net assets of the discontinued operations at December 31, 1998 and 1997
are as follows:
<TABLE>
<CAPTION>
1998 1997
------- ------
(IN THOUSANDS)
<S> <C> <C>
Current assets.............................................. $ -- $3,449
Current liabilities, including reserve for estimated losses
through disposal date..................................... (1,750) (1,979)
------- ------
Net assets/liabilities of discontinued operations,
current................................................ $(1,750) $1,470
======= ======
Property, net............................................... $ -- $ 478
Goodwill, net............................................... -- 4,018
Other assets................................................ -- 52
------- ------
Net assets of discontinued operations, non-current........ $ -- $4,548
======= ======
</TABLE>
Under the provisions of SFAS No. 5, Accounting for Contingencies, the
Company has evaluated the contingencies related to the sale of its discontinued
RTA operation and the liquidation of its discontinued futon operations. This
evaluation resulted in a net liability of $1,750,000 which is comprised of
$1,160,000 for the settlement of warranty claims and product returns in
accordance with the Company's warranty policy and contractual indemnity related
to the sale of the RTA operations, $200,000 in contingent liabilities related to
the closing of the sale of the RTA operations, $250,000 of litigation involving
a disputed trade name and $140,000 of miscellaneous items. The contingent
amounts are expected to be finalized by December 31, 1999 and settled during
2000.
The total assets and liabilities of the subsequently retained Southern Wood
operation for the period classified as a discontinued operation were $4.0
million and $1.1 million, respectively, at December 31, 1997.
The operating results of the subsequently retained Southern Wood operation
for each of the years the operation was reported as a discontinued operation are
summarized as follows (dollars in thousands, except for per share amounts):
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------
1998 1997 1996
------- ------ -------
<S> <C> <C> <C>
Net sales................................................... $11,689 $7,396 $10,710
Income before taxes......................................... 1,004 399 30
Net income.................................................. 611 247 18
Net income per share -- diluted............................. 0.08 0.03 --
</TABLE>
During 1998, the Company recorded pre-tax income from the disposition of
discontinued operations totaling $3.2 million ($2.0 million net of taxes). The
components are as follows:
F-10
<PAGE> 143
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C>
Gain on liquidation of Futon operations..................... $ 2,425,000
Reversal of reserves related to Southern Wood............... 1,857,000
Loss on sale of remaining RTA operation..................... (1,093,000)
-----------
Total............................................. $ 3,189,000
===========
</TABLE>
The reversal of reserves is comprised of $1,157,000 related to the
write-down of assets to net realizable values $400,000 estimated loss from
operations, and $300,000 for estimated costs of disposal. The amounts were a
reversal of the amounts accrued in 1997 for discontinued operations related to
Southern Wood.
The loss on the sale of the remaining RTA operation is the actual loss
incurred on the sale of the business in 1998.
As a result of the Board's decision to retain Southern Wood, the
consolidated financial statements for 1997 and 1996 have been reclassified to
reflect the results of operations and assets and liabilities, net of reserves
for discontinued operations, of Southern Wood as a continuing operation.
3. ACQUISITION AND DISPOSITION
During the third quarter of 1997 the Company disposed of certain assets of
its wrought iron business in the casual furniture product line. The sale
generated proceeds of $2.1 million. This business accounted for net sales of
$5.7 million and $11.0 million in the years ended December 31, 1997 and 1996,
respectively. The operating income of this business was not material to
consolidated operating income. During the third quarter of 1997, the Company
recorded approximately $230,000 of costs associated with the sale in selling,
general and administrative expenses.
In June 1998, the Company purchased all of the stock of Villella, Inc.
d/b/a Tropic Craft Aluminum Furniture Manufacturers ("Tropic Craft") for $9.3
million. In addition, the seller will be entitled to receive a contingent
purchase price payment of up to $1.0 million upon achievement of targeted
earning performance with respect to the years ending June 30, 1999 and June 30,
2000. Tropic Craft is engaged in the design and manufacture of contract casual
furniture. The acquisition resulted in goodwill of $6.9 million. Funds for the
acquisition were provided under WinsLoew's credit facility. The acquisition was
accounted for under the purchase method and, accordingly, the operating results
of Tropic Craft have been included in the consolidated operating results since
the date of acquisition.
The following unaudited pro forma information has been prepared assuming
that the acquisition of Tropic Craft occurred on January 1, 1997. Permitted pro
forma adjustments include only the effects of events directly attributable to
the transaction that are factually supportable and expected to have a continuing
impact. The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been in effect for the entire period
presented. In addition, they
F-11
<PAGE> 144
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are not intended to be a projection of future results and do not reflect any
synergies that might be achieved from combined operations.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------
1998 1997
--------- ---------
(IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C>
Net sales................................................... $144,752 $127,108
Income from continuing operations........................... 18,946 11,298
Net income.................................................. 20,977 2,380
Income from continuing operations per share -- diluted...... 2.49 1.49
Net income per share -- diluted............................. 2.76 0.32
</TABLE>
4. LONG-TERM DEBT
Long-term debt consisted of the following at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
------ -------
(IN THOUSANDS)
<S> <C> <C>
Revolving line of credit.................................... $1,400 $ 1,546
Term loan................................................... -- 2,287
Acquisition line of credit.................................. -- 12,500
Other....................................................... 47 90
------ -------
1,447 16,423
Less: current portion....................................... 47 515
------ -------
$1,400 $15,908
====== =======
</TABLE>
SENIOR CREDIT FACILITIES
The Company's Senior Credit Facility, as amended, provides for $62.5
million which matures in February 2001, and is collateralized by substantially
all of the assets of the Company. The facility consists of a working capital
revolving line of credit (maximum of $40 million), a term loan (originally $10
million) and an acquisition line of credit (maximum of $12.5 million). The
working capital revolving line of credit allows the Company to borrow funds up
to a certain percentage of eligible inventories and accounts receivable. The
term loan requires quarterly repayments. The acquisition line of credit converts
to a term loan with principal payments due in quarterly installments.
Additionally, a payment equal to 50% of cash flow, as defined, is required for
each year within 90 days of year-end. WinsLoew's amended Senior Credit Facility
provides the Company with a variable amount available under the revolving line
of credit. Effective each June 30, the maximum amount available under its
revolving line of credit is $20 million. The Company may, at its option, elect
to increase the revolving line of credit at each December 31 through the
following June 30 to a maximum of $40 million. As of December 31, 1998, WinsLoew
elected to increase the revolving line of credit to $35 million.
The WinsLoew's Senior Credit Facility allows the Company to borrow up to
$10 million under its line of credit to purchase shares of the Company's common
stock (see Note 5 below). At December 31, 1998 there was $6.1 million available
for this purpose.
F-12
<PAGE> 145
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The interest rates on the components of the Senior Credit Facility are
either the base rate plus a spread, or the LIBOR rate plus a spread, as elected
by the Company. The spread is determined by the leverage ratio, as defined, for
the twelve month period ending each quarter. At December 31, 1998, the loans are
priced at the base rate plus 0.25% (8.25% at December 31, 1998). If any LIBOR
loans had been outstanding at December 31, 1998 they would have been priced at
the LIBOR rate plus 1.25%. In addition, WinsLoew pays an unused facility fee of
.375% per annum on a quarterly basis in arrears.
The agreement requires the Company to meet certain financial ratios for
leverage, interest coverage, tangible net worth and includes other provisions
generally common in such agreements including restrictions on dividends,
additional indebtedness and capital expenditures. At December 31, 1998, the
Company was in compliance with its debt covenants. The carrying value of the
revolving line of credit approximated its fair value at December 31, 1998.
5. CAPITAL STOCK
On January 23, 1998, the Board approved a plan authorizing the repurchase
of 1,000,000 shares of the Company's stock in the open market at times and
prices deemed advantageous. During 1998, the Company retired 296,000 shares of
common stock purchased for $6.1 million. Subsequent to December 31, 1998 the
Company has purchased 92,500 shares at a cost of $2.6 million. Currently, under
the Board approved repurchase plan, there are 611,500 shares available for
repurchase.
6. INCOME TAXES
The provision (benefit) for income taxes consisted of the following:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Provision for taxes related to continuing operations.... $10,947 $6,838 $4,834
Benefit for taxes related to discontinued operations.... -- (375) (126)
Provision (benefit) for taxes related to loss on sale of
discontinued operations............................... 1,158 (4,200) --
------- ------ ------
Total provision for taxes............................. $12,105 $2,263 $4,708
======= ====== ======
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1998 1997 1996
-------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal:
Current............................................... $10,128 $3,985 $4,478
Deferred.............................................. 856 (1,936) (251)
State:
Current............................................... 989 496 542
Deferred.............................................. 132 (282) (61)
------- ------ ------
$12,105 $2,263 $4,708
======= ====== ======
</TABLE>
F-13
<PAGE> 146
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
At December 31, 1998 and 1997, deferred tax assets and liabilities
consisted of the following:
<TABLE>
<CAPTION>
1998 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Capitalized inventory costs............................... $ 173 $ 415
Reserves and accruals..................................... 2,894 3,660
State net operating loss carryforwards.................... 304 344
------- -------
Deferred tax assets.................................... 3,371 4,419
------- -------
Deferred tax liabilities:
Intangible asset basis difference......................... (191) (98)
Excess of tax over book depreciation...................... (611) (1,194)
Prepaid expenses.......................................... (94) (93)
Other..................................................... (504) (75)
------- -------
Deferred tax liabilities.................................. (1,400) (1,460)
------- -------
Deferred income taxes, net............................. $ 1,971 $ 2,959
======= =======
Included in:
Other current assets/liabilities.......................... $ 2,772 $ 4,326
Deferred income taxes..................................... (801) (1,367)
------- -------
$ 1,971 $ 2,959
======= =======
</TABLE>
The following table summarizes the differences between the federal income
tax rate and the Company's effective income tax rate for financial statement
purposes:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Federal income tax rate..................................... 35.0% 34.0% 34.0%
State income taxes.......................................... 3.4 4.7 2.2
Goodwill amortization....................................... 2.1 9.3 2.0
Other....................................................... (3.4) 2.2 (2.0)
---- ---- ----
Effective tax rate.......................................... 37.1% 50.2% 36.2%
==== ==== ====
</TABLE>
7. RELATED PARTY TRANSACTIONS
In October 1994, WinsLoew entered into a ten-year agreement (the
"Investment Services Agreement") with Trivest, Inc. ("Trivest"). Trivest and the
Company have certain common shareholders, officers and directors. Pursuant to
the Investment Services Agreement, Trivest provides corporate finance, financial
relations, strategic and capital planning and other management advice to the
Company. The base compensation is $500,000, subject to cost of living increases
and increases for additional businesses acquired. For 1998, 1997 and 1996, the
amount expensed was $641,000, $628,000 and $604,000, respectively. In 1996, the
Company retired 933,504 shares of its common stock purchased from an affiliated
company at $10 per share.
F-14
<PAGE> 147
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. COMMITMENTS AND CONTINGENCIES
LEASES
The Company leases certain office space, manufacturing facilities and
various items of equipment under operating leases. Some leases for office and
manufacturing space contain renewal options and provisions for increases in
minimum payments based on various measures of inflation. Rental expense amounted
to approximately $830,000, $769,000, and $792,000 for the years ended December
31, 1998, 1997 and 1996, respectively. Operating lease agreements in effect at
December 31, 1998, have the following remaining minimum payment obligations:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1999........................................................ $765
2000........................................................ 740
2001........................................................ 744
2002........................................................ 714
2003........................................................ 306
2004 - 2007................................................. 757
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with certain employees. The
agreements provide for minimum salary levels and bonuses based on a percentage
of pre-tax operating income, as defined in the agreements.
EMPLOYEE BENEFIT PLANS
The Company has an employee benefit plan established under the provisions
of Section 401(k) of the Internal Revenue Code. Full-time employees who meet
various eligibility requirements may voluntarily participate in the plan. The
plan provides for voluntary employee contributions through salary reduction, as
well as discretionary employer contributions. Company contributions were
$161,000 and $143,000 in 1998 and 1997, respectively.
STOCK OPTION PLAN
In 1994, the Company established a Stock Option Plan (the "Plan") as a
means to retain and motivate key employees and directors. The Compensation
Committee of the Board of Directors administers and interprets the Plan and is
authorized to grant options to all eligible employees of the Company and
non-employee directors. The Plan provides for both incentive stock options and
non-qualified stock options. Options are granted under the Plan on such terms
and at such prices as determined by the Compensation Committee, except that the
per share exercise price of incentive stock options cannot be less than the fair
market value of the Company's common stock on the date of grant. The Company has
reserved 1,500,000 shares of common stock for issuance upon exercise of stock
options. All options which have been granted have a term of ten years and vest
ratably over five years.
Pro forma net income and earnings per share have been determined as if the
Company had accounted for its employee stock options as compensation expense
based on their fair value. Fair value was estimated at the date of grant using a
Black-Scholes option pricing model for 1998, 1997 and 1996 assuming a risk-free
interest rate of 4.83%, 6.45% and 6.2% for 1998, 1997 and 1996,
F-15
<PAGE> 148
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
respectively, a volatility factor for the Company's common stock of .608, .411
and .532 in 1998, 1997 and 1996, respectively and a weighted-average expected
life of the options of six years. The pro forma information is not likely to be
representative of the effects of options on pro forma net income in future years
because the Company is required to include only options granted since 1994 in
the pro forma information.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1998 1997 1996
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Pro forma net income........................................ $20,035 $2,068 $8,198
======= ====== ======
Pro forma income (loss) per share, diluted:
Income from continuing operations......................... $ 2.36 $ 1.45 $ 0.97
Loss from discontinued operations, net of taxes........... -- (0.09) (0.03)
Gain (loss) from sale of discontinued operations, net of
taxes.................................................. 0.27 (1.08) --
------- ------ ------
Net income............................................. $ 2.63 $ 0.28 $ 0.94
======= ====== ======
</TABLE>
Information with respect to WinsLoew's Plan is as follows:
<TABLE>
<CAPTION>
1998
---------------------------------
WEIGHTED
AVERAGE EXERCISE
OPTIONS PRICE 1997 1996
-------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C>
Options outstanding at January
1.............................. 784,850 $ 9.19 671,550 738,450
Granted........................ 40,000 $20.62 250,000 25,000
Exercised...................... (63,900) $ 8.25 (94,725) (25,100)
Canceled....................... (18,050) $ 9.29 (41,975) (66,800)
-------------- -------------- --------------
Options outstanding at
December 31.................. 742,900 $ 9.89 784,850 671,550
============== ============== ==============
Exercise prices per share...... $5.88 - $23.44 $5.88 - $16.06 $5.88 - $11.63
Options exercisable at
December 31.................. 422,060 $ 9.20 407,100 480,400
============== ============== ==============
Options available for grant at
December 31.................. 573,375 595,325 803,350
============== ============== ==============
</TABLE>
F-16
<PAGE> 149
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Information with regard to options outstanding and exercise price at
December 31 is as follows:
<TABLE>
<CAPTION>
OPTIONS EXERCISABLE
AT DECEMBER 31,
WEIGHTED 1998
WEIGHTED AVERAGE --------------------
AVERAGE OPTIONS OUTSTANDING REMAINING WEIGHTED
EXERCISE --------------------------- LIFE AVERAGE
EXERCISE PRICE PRICE 1998 1997 1996 AT 12/31/98 SHARES PRICE
- -------------- -------- ------- ------- ------- ---------------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$5.88 - $6.67....................... $ 6.16 255,800 291,850 356,250 6.1 160,240 $ 6.20
8.66................................ 8.66 8,200 10,250 10,250 6.2 4,920 8.66
10.00 - 10.50....................... 10.35 240,900 284,750 158,550 7.3 104,900 10.16
11.13 - 11.63....................... 11.56 163,000 163,000 146,500 5.4 145,000 11.61
12.63............................... 12.63 20,000 20,000 -- 8.6 4,000 12.63
16.06............................... 16.06 15,000 15,000 -- 8.9 3,000 16.06
17.00............................... 17.00 17,500 -- -- 9.0 -- --
23.44............................... 23.44 22,500 -- -- 9.4 -- --
------- ------- ------- -------
Total 9.89 742,900 784,850 671,550 7.0 422,060 9.20
======= ======= ======= =======
</TABLE>
The estimated weighted average fair value of options granted in 1998 is
$12.51 per option. The weighted average remaining contractual life for options
granted in 1998 is 9.3 years.
LITIGATION AND LIABILITY CLAIMS
The Company is, from time to time, involved in routine litigation including
general liability and worker's compensation claims. It is the opinion of
management that sufficient insurance has been purchased to cover current and
potential general liability and worker's compensation claims. None of such
litigation in which the Company is presently involved is believed to be material
to its liquidity, financial position or results of operations.
9. OPERATING SEGMENTS
The Company has three segments organized and managed based on the products
sold. These reportable segments are described in Note 1.
The Company evaluates performance and allocates resources based on gross
profit. The accounting policies are the same as those described in the summary
of significant accounting policies. There are no intersegment sales/transfers.
Export revenues are not material.
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
REVENUES:
Casual products............................................ $ 59,733 $ 56,363 $ 58,066
Contract seating products.................................. 69,938 58,386 48,629
Ready to assemble products................................. 11,689 7,396 10,710
-------- -------- --------
Total revenues........................................... $141,360 $122,145 $117,405
======== ======== ========
SEGMENT GROSS PROFIT:
Casual products............................................ $ 28,227 $ 24,164 $ 23,812
Contract seating products.................................. 23,439 17,256 14,126
Ready to assemble products................................. 2,462 1,294 1,438
-------- -------- --------
Total segment gross profit............................... 54,128 42,714 39,376
</TABLE>
F-17
<PAGE> 150
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Reconciling items:
Selling and general and administrative expenses.......... 23,124 21,427 21,472
Amortization............................................. 1,122 992 1,444
-------- -------- --------
Operating income........................................... 29,882 20,295 16,460
Interest expense, net...................................... 635 2,296 3,083
-------- -------- --------
Income from continuing operations before income taxes...... $ 29,247 $ 17,999 $ 13,377
======== ======== ========
DEPRECIATION AND AMORTIZATION:
Casual products............................................ $ 1,550 $ 1,532 $ 1,956
Contract seating products.................................. 425 411 360
Ready to assemble products................................. 309 341 349
-------- -------- --------
Total.................................................... 2,284 2,284 2,665
Reconciling items:
Corporate................................................ 334 350 314
-------- -------- --------
Total depreciation and amortization...................... $ 2,618 $ 2,634 $ 2,979
======== ======== ========
</TABLE>
F-18
<PAGE> 151
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
---------------------------
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
EXPENDITURES FOR (DISPOSAL OF) LONG
LIVED ASSETS, NET:
Casual products............................................. $ (24) $ 790 $ 629
Contract seating products................................... 129 236 162
Ready to assemble products.................................. 103 (576) 61
------- ------- -------
Total.................................................. 208 450 852
Reconciling items:
Corporate................................................. 734 (25) 499
------- ------- -------
Total expenditures for long lived assets, net.......... $ 942 $ 425 $ 1,351
======= ======= =======
SEGMENT ASSETS:
Casual products............................................. $51,880 $41,964 $48,086
Contract seating products................................... 23,486 21,836 22,372
Ready to assemble products.................................. 6,496 3,974 6,246
------- ------- -------
Total.................................................. 81,862 67,774 76,704
Reconciling items:
Corporate................................................. 2,691 6,622 2,518
Assets held for sale...................................... -- 6,018 20,728
------- ------- -------
Total consolidated assets.............................. $84,553 $80,414 $99,950
======= ======= =======
</TABLE>
The Company has one contract seating customer that accounted for 17%, 16%
and 10% of consolidated revenues in the years ended December 31, 1998, 1997 and
1996, respectively.
10. SUPPLEMENTAL INFORMATION
The following balance sheet captions are comprised of the items specified
below:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Inventories:
Raw materials............................................. $ 9,288 $ 8,146
Work in process........................................... 1,521 1,089
Finished goods............................................ 1,397 1,198
-------- --------
$ 12,206 $ 10,433
======== ========
Property, plant and equipment:
Land...................................................... $ 2,628 $ 1,834
Building and improvements................................. 10,838 9,273
Manufacturing equipment................................... 9,464 9,146
Office equipment.......................................... 1,953 1,776
Construction in progress.................................. 81 74
Vehicles.................................................. 176 141
-------- --------
25,140 22,244
Accumulated depreciation.................................... (11,192) (10,221)
-------- --------
$ 13,948 $ 12,023
======== ========
</TABLE>
F-19
<PAGE> 152
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1997
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Other accrued liabilities:
Compensation, commissions and employee benefits........... $ 3,063 $ 2,324
Customer deposits......................................... 1,749 1,559
Income taxes.............................................. 1,546 971
Interest.................................................. 24 88
Other..................................................... 3,570 3,261
-------- --------
$ 9,952 $ 8,203
======== ========
</TABLE>
Depreciation expense for continuing operations was $1,496,000, $1,642,000,
and $1,535,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
Accumulated amortization at December 31, 1998 and 1997 related to goodwill
was $6,348,000 and $5,564,000, respectively. Accumulated amortization at
December 31, 1998 and 1997 related to other intangible assets was $1,110,000 and
$773,000, respectively.
11. SUBSEQUENT EVENTS
In January 1999, the Company entered into a non-binding letter of intent
(the "letter") to pursue a potential merger in which the Company's public
shareholders would receive $30.00 per share in cash. The purchasing entity would
be formed by the Chairman of the Board of Directors and other members of
management. A Special Committee of the Company's Board of Directors was
established to review the proposal and it has recommended the letter.
The letter permits the Company to solicit and consider superior proposals
subject to the payment of a termination fee to the management group upon the
acceptance of another offer. The proposed merger is subject to, among other
things, approval by the Company's shareholders and the Special Committee.
Accordingly, there can be no assurance that the merger will be consummated.
F-20
<PAGE> 153
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 24, DECEMBER 31,
1999 1998
-------------- -------------
(IN THOUSANDS EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 762 $ 475
Cash in escrow.............................................. 1,000 1,000
Accounts receivable, less allowances for doubtful
accounts.................................................. 17,720 23,647
Inventories................................................. 13,409 12,206
Prepaid expenses and other current assets................... 4,300 4,638
-------- -------
Total current assets................................... 37,191 41,966
Property, plant and equipment, net.......................... 13,847 13,948
Goodwill, net............................................... 238,950 27,176
Other assets................................................ 7,843 1,463
-------- -------
$297,831 $84,553
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt........................... $ 2,787 $ 47
Accounts payable............................................ 4,863 4,377
Other accrued liabilities................................... 14,602 9,952
Net liabilities of discontinued operations.................. 1,619 1,750
-------- -------
Total current liabilities.............................. 23,871 16,126
Long-term debt, net of current portion...................... 194,243 1,400
Deferred income taxes....................................... 911 801
-------- -------
Total liabilities...................................... 219,025 18,327
-------- -------
Commitments and contingencies............................... -- --
Stockholders' equity:
Common stock; par value $.01 per share, 1,000,000 and
20,000,000 shares authorized, 780,000 and 7,294,408
shares issued and outstanding at September 24, 1999 and
December 31, 1998, respectively........................ 8 73
Additional paid-in capital.................................. 79,392 19,797
Retained earnings (deficit)................................. (594) 46,356
-------- -------
Total stockholders' equity............................. 78,806 66,226
-------- -------
$297,831 $84,553
======== =======
</TABLE>
See accompanying notes.
F-21
<PAGE> 154
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ -----------------------------
SEPTEMBER 24, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 25,
1999 1998 1999 1998
------------- ------------- ------------- -------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net sales........................... $40,147 $36,258 $120,736 $106,726
Cost of sales....................... 24,719 22,731 72,733 66,829
------- ------- -------- --------
Gross profit........................ 15,428 13,527 48,003 39,897
Selling, general and administrative
expenses.......................... 6,048 6,943 19,318 17,673
Amortization........................ 977 319 1,611 806
------- ------- -------- --------
Operating income.................... 8,403 6,265 27,074 21,418
Interest expense.................... 2,203 137 2,280 824
------- ------- -------- --------
Income before income taxes.......... 6,200 6,128 24,794 20,594
Provision for income taxes.......... 3,373 2,337 10,433 7,731
------- ------- -------- --------
Net income........................ $ 2,827 $ 3,791 $ 14,361 $ 12,863
======= ======= ======== ========
</TABLE>
See accompanying notes.
F-22
<PAGE> 155
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS ENDED
-----------------------------
SEPTEMBER 24, SEPTEMBER 25,
1999 1998
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 14,361 $ 12,863
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization............................... 2,760 1,916
Provision for losses on accounts receivable................. 446 512
Going private transaction expenses.......................... 201 --
Change in net assets held for sale.......................... -- 8,206
Changes in operating assets and liabilities, net of effects
from acquisitions and dispositions:
Accounts receivable....................................... 5,907 4,478
Inventories............................................... 2,891 878
Prepaid expenses and other current assets................. 607 2,780
Other assets.............................................. 297 (628)
Accounts payable.......................................... (118) (10)
Other accrued liabilities................................. 3,248 2,598
Deferred income taxes..................................... 110 (622)
-------- --------
Total adjustments....................................... 16,349 20,108
-------- --------
Net cash provided by operating activities............... 30,710 32,971
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of disposals...................... (275) (1,131)
Going private transaction................................... (280,289) --
Investment in subsidiary.................................... (18,220) (9,320)
-------- --------
Net cash used in investing activities................... (298,784) (10,451)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt.................... 196,093 --
Proceeds from issuance of common stock warrants and common
stock, net................................................ 79,400 846
Deferred financing costs.................................... (6,622) --
Repurchase and cancellation of stock........................ -- (5,335)
Net payments under revolving credit agreements.............. (510) (15,297)
-------- --------
Net cash provided by (used in) financing activities..... 268,361 (19,786)
-------- --------
Net increase in cash and cash equivalents................... 287 2,734
Cash and cash equivalents at beginning of period............ 475 707
-------- --------
Cash and cash equivalents at end of period.............. $ 762 $ 3,441
======== ========
SUPPLEMENTAL DISCLOSURES:
Interest paid............................................... $ 377 $ 500
Income taxes paid........................................... $ 11,380 $ 6,189
======== ========
Investing activities included the acquisition of Pompeii in 1999 and Tropic Craft in 1998.
Assets acquired, liabilities assumed and consideration paid was as follows:
Fair value of assets acquired............................. $ 20,098 $ 11,665
Cash acquired............................................. (3) (46)
Liabilities assumed....................................... (1,875) (2,299)
-------- --------
Consideration paid........................................ $ 18,220 $ 9,320
======== ========
</TABLE>
See accompanying notes.
F-23
<PAGE> 156
WINSLOEW FURNITURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of WinsLoew
Furniture, Inc. and subsidiaries (the "Company" or "WinsLoew") do not include
all disclosures provided in the annual consolidated financial statements. These
unaudited consolidated financial statements should be read in conjunction with
the annual consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, as
filed with the Securities and Exchange Commission.
All material intercompany balances and transactions have been eliminated.
The preparation of these unaudited consolidated financial statements requires
the use of estimates in the amounts reported.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (which are of a normal recurring
nature) necessary for a fair presentation of the results for the interim
periods. The results of operations are presented for the Company's three-and
nine-month periods ended September 24, 1999 and September 25, 1998. The results
of operations for these periods are not necessarily indicative of the results to
be expected for the full year.
2. GOING PRIVATE TRANSACTION
From December 19, 1994 through August 27, 1999, WinsLoew's common stock was
traded on the NASDAQ National Market under the symbol "WLFI". On August 27,
1999, WinsLoew and Trivest Furniture Corporation (Trivest Furniture), a newly
formed Florida corporation (organized by an investor group led by Trivest II,
Inc. (Trivest), including certain private investment funds affiliated with
Trivest and certain members of WinsLoew's senior management, for the purpose of
acquiring WinsLoew) was merged with and into WinsLoew, with WinsLoew being the
surviving corporation. The merger was approved by majority vote of the
shareholders on August 27, 1999. Pursuant to the merger, each holder of the
outstanding WinsLoew common stock, other than stock held by Trivest Furniture,
received $34.75 per share in cash, without interest, and the holder of each
outstanding stock option received a cash payment equal to the difference between
$34.75 and the exercise price of the option.
Funds to pay the cash merger consideration, option cancellation payments
and related fees and expenses were provided by the following sources: (1) the
net proceeds from the sale of units consisting of 12 3/4% senior subordinated
notes due 2007 and warrants to purchase common stock; (2) borrowings of term
loans and drawings on a revolving line of credit under our senior credit
facility; (3) cash equity contributions from members of the Trivest investment
group; and (4) rollover equity contributions from members of the Trivest
investment group (see Note 4). Upon consummation of the merger, persons
affiliated or associated with Trivest beneficially owned approximately 93.8% of
WinsLoew's common stock, members of management held approximately 5.1% of
WinsLoew's common stock, and certain key employees and independent sales
representatives held approximately 1.1% of WinsLoew's common stock.
F-24
<PAGE> 157
WINSLOEW FURNITURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
WinsLoew accounted for the transaction in accordance with the purchase
method of accounting. The following tables set forth the sources and uses of the
funds for the transaction (see Notes 4 and 5).
<TABLE>
<CAPTION>
USES
--------------
(IN THOUSANDS)
<S> <C>
Cost of stock and stock options............................. $268,256
Expense of transaction...................................... 14,350
--------
Total............................................. $282,606
========
</TABLE>
<TABLE>
<CAPTION>
SOURCES
--------------
<S> <C>
Senior Subordinated Notes and Warrants...................... $102,452
Senior Credit Facility...................................... 95,000
Cash equity investment...................................... 66,167
Rollover equity investment.................................. 11,833
Available cash on hand...................................... 7,154
--------
Total............................................. $282,606
========
</TABLE>
The write-off of unamortized loan costs related to the Company's former
credit facility in the amount of $0.2 million are reflected in the accompanying
consolidated statements of income for the three and nine month periods ended
September 24, 1999.
The following unaudited pro forma information has been prepared assuming
that the transaction and the acquisitions, as discussed in Note 7, occurred on
January 1, 1998. Permitted pro forma adjustments include only the effects of
events directly attributable to the transactions that are factually supportable
and expected to have a continuing impact. The pro forma results are not
necessarily indicative of what actually would have occurred if the transaction
had been in effect for the entire period presented.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------
SEPTEMBER 24, SEPTEMBER 25,
1999 1998
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $128,864 $120,405
Net income (loss)........................................... $ 1,729 $ (572)
</TABLE>
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
SEPTEMBER 24, SEPTEMBER 25,
1999 1998
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials............................................... $ 10,272 $ 9,288
Work in process............................................. 1,305 1,521
Finished goods.............................................. 1,832 1,397
-------- --------
$ 13,409 $ 12,206
======== ========
</TABLE>
F-25
<PAGE> 158
WINSLOEW FURNITURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. LONG-TERM DEBT
Proceeds from borrowings under the Company's senior credit facility and the
sale of units, consisting of 12 3/4% senior subordinated notes due 2007 and
warrants to purchase common stock, were used to finance a portion of the
consideration in the merger of WinsLoew with Trivest Furniture (see Note 2).
SENIOR CREDIT FACILITY
In connection with the merger, WinsLoew entered into a senior credit
facility (Facility) provided by a syndicate of financial institutions. The
Facility, which matures in December 2004, provides for borrowings of up to $155
million and is collateralized by substantially all of the assets of the Company.
The Facility consists of a working capital line of credit (maximum of $40
million), term loans (aggregate of $95 million) and an acquisition line of
credit (maximum of $20 million). The working capital line of credit allows the
Company to borrow funds up to a certain percentage of eligible inventories and
accounts receivable. At September 24, 1999, the carrying value of the working
capital line of credit, $0.9 million, approximated its fair value. The term
loans consist of three term loans, with principal balances and applicable
interest rates at September 24, 1999, as follow:
<TABLE>
<CAPTION>
TERM LOAN A TERM LOAN B TERM LOAN C
----------------- ------------- -------------
<S> <C> <C> <C>
Principal balance............................ $25 million $62.5 million $7.5 million
Eurodollar rate.............................. 8.9375% 9.4375% 9.4375%
Maturity date................................ December 21, 2004 June 30, 2006 June 30, 2006
</TABLE>
At the option of the Company, the interest rates under the Facility are
either: (1) the base rate, which is the higher of the prime lending rate or 0.5%
in excess of the federal funds effective rate, plus a margin, or (2) the
adjusted Eurodollar rate plus a margin. The margins of different loans under the
Facility vary according to a pricing grid. The margins for base rate loans range
from zero to 1.0% for the working capital line of credit, term loan A and the
acquisition line of credit and from 1.0% to 1.5% for term loan B and term loan
C, in each case depending on WinsLoew's consolidated leverage ratio. The margins
for Eurodollar rate loans range from 2.0% to 3.0% for the working capital line
of credit, term loan A and the acquisition line of credit and from 3.0% to 3.5%
for term loan B and term loan C, in each case depending on WinsLoew's
consolidated leverage ratio. As of September 24, 1999, the loans are priced at
the Eurodollar rate plus a margin of 3.0% for the working capital line of
credit, term loan A and acquisition line of credit and a margin of 3.5% for the
term loan B and term loan C.
The outstanding balance of term loan A is due 12.0% in 2000, 12.0% in 2001,
24.0% in 2002, 24.0% in 2003 and 28.0% in 2004. The outstanding balance of term
loan B is due 1.0% in each of 2000, 2001, 2002, 2003 and 2004 and 47.5% in each
of 2005 and 2006. The entire outstanding balance of the term loan C is due in
2006. Amounts outstanding under the acquisition line of credit at December 31,
2001 convert to a term loan with the balance payable 20.0% in 2002, 30.0% in
2003 and 50.0% in 2004.
The Company must pay commitment fees (1) at a rate per annum equal to 0.5%
of the undrawn amounts of the working capital line of credit, subject to a
reduction to 0.375% per annum depending upon its consolidated leverage ratio and
(2) at a rate per annum of 0.75% on the undrawn amount of the acquisition line
of credit during the revolving period, subject to a reduction to 0.5% (or 0.375%
depending upon its consolidated leverage ratio) per annum from and after the
date on which at least $10.0 million is outstanding under the acquisition line
of credit.
F-26
<PAGE> 159
WINSLOEW FURNITURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The Facility contains customary covenants and restrictions on the Company's
and its subsidiaries' ability to issue additional debt or engage in certain
activities and includes customary events of default. In addition, the Facility
specifies that the Company must meet or exceed defined fixed charge and interest
coverage ratios and must not exceed defined leverage ratios. At September 24,
1999, the Company was in compliance with such covenants.
The Facility is secured by a pledge of the capital stock of all the
Company's domestic subsidiaries.
SENIOR SUBORDINATED NOTES AND WARRANTS
In connection with the merger, the Company issued 105,000 units (Units)
consisting of $105 million aggregate principal amount at maturity of 12 3/4%
senior subordinated notes due 2007 (Notes) and warrants (Warrants) to purchase
an aggregate of 24,129 shares of its capital stock. Each Unit consists of $1,000
aggregate principal amount at maturity of Notes and a warrant to purchase 0.2298
shares of common stock at an exercise price of $0.01 per share. The issue price
of each Unit was $975.73, of which the Company allocated $962.40 to the Notes
and $13.33 to the Warrant. The Notes are general unsecured obligations of the
Company and are junior in the right of payment to the Company's debt that does
not expressly provide that it ranks equally with or junior to the Notes,
including the Company's obligations under its senior credit facility. The Notes
are unconditionally guaranteed by the direct and indirect domestic subsidiaries
of WinsLoew and bear interest at 12 3/4%, which is payable semi-annually on
February 15 and August 15 beginning on February 15, 2000. The Notes will mature
on August 15, 2007.
On or after August 15, 2003, the Company may redeem the Notes, in whole or
in part, at any time at the following redemption prices:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ---- ----------
<S> <C>
2003...................................................... 106.375%
2004...................................................... 104.250%
2005...................................................... 102.125%
2006 and thereafter....................................... 100.000%
</TABLE>
The Company may, at its option, at any time prior to August 15, 2002,
redeem up to 25% of the Notes using the net proceeds of an underwritten public
offering of capital stock.
The Warrants are exercisable on or after the occurrence of certain events.
Assuming full exercise of the Warrants, the aggregate number of shares would
approximate 3% of the common stock of WinsLoew. The Warrants expire on August
15, 2007. The Company estimates the value of the Warrants at $1.4 million, which
is reflected as "additional paid-in capital" in the accompanying unaudited
consolidated balance sheet.
The indenture under which the Notes are issued requires the Company to meet
a minimum fixed charge coverage ratio and includes other provisions generally
common in such indentures including restrictions on dividends, additional
indebtedness and asset sales. At September 24, 1999, the Company was in
compliance with such covenants.
Maturities of long-term debt for the five years succeeding September 24,
1999 are $2.8 million in 2000, $3.7 million in 2001, $6.0 million in 2002, $6.7
million in 2003 and $7.5 million in 2004.
F-27
<PAGE> 160
WINSLOEW FURNITURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. CAPITAL STOCK
WinsLoew has authorized 1,000,000 shares of $0.01 par value common stock.
At September 24, 1999, there were 780,000 shares issued and outstanding.
6. DISCONTINUED OPERATIONS
At September 24, 1999, there have not been any material changes in the net
liabilities of discontinued operations as compared to December 31, 1998.
7. ACQUISITIONS
On July 23, 1999, the Company purchased the stock of Miami Metal Products
d/b/a Pompeii Furniture Industries, Inc. and its affiliate, Industrial Mueblera
Pompeii De Mexico, S.A. De C.V. (Pompeii), which are involved in the design and
manufacture of casual furniture sold in the residential and contract markets.
The purchase price of approximately $18.2 million, including fees and expenses,
was paid in cash and funded with internally generated funds. The acquisition
resulted in goodwill of approximately $14.0 million and was accounted for under
the purchase method of accounting and, accordingly, the operating results of
Pompeii have been included in the consolidated operating results since the date
of acquisition.
On June 30, 1998, the Company purchased the stock of Tropic Craft, Inc.
(Tropic Craft), a company involved in the design and manufacture of casual
furniture sold in the contract market. The purchase price of approximately $9.3
million was paid in cash and was financed under the Company's senior credit
facility. The acquisition resulted in goodwill of approximately $8.4 million and
was accounted for under the purchase method of accounting and, accordingly, the
operating results of Tropic Craft have been included in the consolidated
operating results since the date of acquisition.
Unaudited pro forma information assuming that the acquisitions of Pompeii
and Tropic Craft occurred on January 1, 1998 is presented in Note 2.
F-28
<PAGE> 161
WINSLOEW FURNITURE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
8. SEGMENT INFORMATION
The Company has three segments organized and managed based on the products
sold. The Company evaluates performance and allocates resources based on gross
profit. There are no intersegment sales/transfers. Export revenues are not
material.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 24, SEPTEMBER 25, SEPTEMBER 24, SEPTEMBER 25,
1999 1998 1999 1998
------------- ------------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
NET SALES:
Casual products.............................. $ 18,471 $ 15,898 $ 58,110 $ 47,423
Contract seating products.................... 17,913 17,431 51,485 50,833
Ready to assemble products................... 3,763 2,929 11,141 8,470
-------- -------- -------- --------
Total net sales.................... $ 40,147 $ 36,258 $120,736 $106,726
SEGMENT GROSS PROFIT:
Casual products.............................. $ 8,442 $ 7,038 $ 27,470 $ 21,754
Contract seating products.................... 6,102 5,832 17,911 16,349
Ready to assemble products................... 884 657 2,622 1,794
-------- -------- -------- --------
Total segment gross profit......... 15,428 13,527 48,003 39,897
Reconciling items:
Selling, general and administrative
expenses................................... 6,048 6,943 19,318 17,673
Amortization................................. 977 319 1,611 806
-------- -------- -------- --------
Operating Income........................... 8,403 6,265 27,074 21,418
Interest expense-net......................... 2,203 137 2,280 824
-------- -------- -------- --------
Income before income taxes................... $ 6,200 $ 6,128 $ 24,794 $ 20,594
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 24, DECEMBER 31,
1999 1998
------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
SEGMENT ASSETS:
Casual products.............................. $ 61,511 $ 51,880
Contract seating products.................... 24,021 23,486
Ready to assemble products................... 7,131 6,496
-------- --------
Total.............................. 92,663 81,862
Reconciling item:
Corporate.................................... 205,168 2,691
-------- --------
Total consolidated assets.......... $297,831 $ 84,553
======== ========
</TABLE>
F-29
<PAGE> 162
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Miami Metal Products, Inc., d/b/a Pompeii Furniture Industries
Miami, Florida
We have audited the accompanying balance sheet of Miami Metal Products,
Inc., d/b/a Pompeii Furniture Industries as of December 31, 1998, and the
related statements of operations, stockholders' equity, and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Miami Metal Products, Inc.
d/b/a Pompeii Furniture Industries as of December 31, 1998, and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
As more fully described in Note 8, certain buildings leased by the Company
do not meet local building codes and may require a significant investment by the
landlord to be in compliance with these codes. Until such time as the property
is in compliance with the building codes, the local government has the authority
to restrict the operational use of the properties involved, at which time, the
Company would need to consider an alternative location in order to continue
operations. The ultimate outcome of this situation is not determinable at this
time. Accordingly, no adjustments that may result from the final resolution of
this uncertainty have been reflected in the accompanying financial statements.
/s/ Infante, Lago & Company
July 16, 1999
F-30
<PAGE> 163
MIAMI METAL PRODUCTS, INC.
D/B/A POMPEII FURNITURE INDUSTRIES
BALANCE SHEET
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 607,613
Accounts receivable, net of allowance for doubtful
accounts of $68,246.................................... 1,093,951
Inventory................................................. 3,000,468
Prepaid expenses and other current assets................. 471,329
----------
Total Current Assets.............................. 5,173,361
Property, plant and equipment, net.......................... 265,975
Deposits and other assets................................... 13,214
----------
Total Assets...................................... $5,452,550
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $1,107,720
Customer deposits......................................... 393,393
----------
Total Current Liabilities......................... 1,501,113
----------
Stockholders' equity:
Common stock:
Class A, 5,000 shares authorized, $0.10 par value, 100
shares issued and outstanding.......................... 10
Class B 45,000 shares authorized, nonvoting, $0.10 par
value, 900 shares issued and outstanding............... 90
Additional paid in capital................................ 15,900
Retained earnings......................................... 3,935,437
----------
Total Stockholders' Equity........................ 3,951,437
----------
Total Liabilities and Stockholders' Equity........ $5,452,550
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-31
<PAGE> 164
MIAMI METAL PRODUCTS, INC.
D/B/A POMPEII FURNITURE INDUSTRIES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Sales (net)................................................. $14,512,901
Cost of Goods Sold.......................................... 8,592,312
-----------
Gross Profit...................................... 5,920,589
Operating Expenses:
General and Administrative Expenses....................... 1,069,843
Selling Expenses.......................................... 2,022,440
-----------
Total Operating Expenses.......................... 3,092,283
-----------
Income from Operations...................................... 2,828,306
Other Income (Expenses):
Interest Income (net)..................................... 24,873
Other Expenses............................................ (180,297)
-----------
Total Other Income (Expenses)..................... (155,424)
-----------
Net Income.................................................. $ 2,672,882
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE> 165
MIAMI METAL PRODUCTS, INC.
D/B/A POMPEII FURNITURE INDUSTRIES
STATEMENT OF STOCKHOLDERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
COMMON STOCK
--------------------------------------------------------
CLASS A CLASS A CLASS B
NO PAR $0.10 PAR $0.10 PAR ADDITIONAL
---------------- ---------------- ---------------- PAID-IN
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL EQUITY TOTAL
------ ------ ------ ------ ------ ------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning balance..... 50 -- -- -- $16,000 $3,808,799 $3,824,799
Stock retirement and
recapitalization.... (50) -- 100 $10 900 $90 (100) -- --
Distributions......... (2,546,244) (2,546,244)
Net income............ 2,672,882 2,672,882
---- -- --- --- --- --- ------- ---------- ----------
Ending Balance........ -- -- 100 $10 900 $90 $15,900 $3,935,437 $3,951,437
==== == === === === === ======= ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE> 166
MIAMI METAL PRODUCTS, INC.
D/B/A POMPEII FURNITURE INDUSTRIES
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C>
Operating Activities:
Net Income.................................................. $2,672,882
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation.............................................. 154,934
Loss on sale of property plant and equipment.............. 15,679
Changes in asset and liability accounts:
Increase in accounts receivable........................ (224,605)
Increase in inventory.................................. (420,461)
Increase in prepaid expenses and other current
assets................................................ (385,030)
Decrease in accounts payable and accrued expenses...... (28,830)
Decrease in customer deposits.......................... (685,674)
----------
Net Cash Provided By Operating Activities......... 1,098,895
----------
Investing Activities:
Purchase of property, plant and equipment................. (155,880)
Decrease in deposits and other assets..................... 118,064
----------
Net Cash Used In Investing Activities............. (37,816)
----------
Financing Activities:
Proceeds from sale of property, plant and equipment....... 1,500,000
Payment of distribution to stockholders................... (2,456,610)
----------
Net Cash Used In Financing Activities............. (956,610)
----------
Net Change In Cash.......................................... 104,469
Cash and cash equivalents at January 1, 1998................ 503,144
----------
Cash and cash equivalents at December 31, 1998.............. $ 607,613
==========
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 8,432
==========
Supplemental Schedule of Non-Cash Investing and Financing Activities
During 1998, the Company distributed certain equipment to its
stockholders at book value as follows:
Vehicles.................................................. $ 89,634
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE> 167
MIAMI METAL PRODUCTS, INC.
D/B/A POMPEII FURNITURE INDUSTRIES
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1998
NOTE 1 -- BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION -- Miami Metal Products, Inc. (the "Company") was organized
under the laws of the State of Florida and operates as a manufacturer and
distributor of fine furniture.
USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates that affect the reported amounts of assets, liabilities, revenues and
expenses during the reported period. Actual results could differ from those
estimates.
CASH EQUIVALENTS -- Cash equivalents are defined as highly liquid
investments with original maturities of 90 days or less.
CONCENTRATION OF CREDIT RISK -- Financial instruments that potentially
subject the Company to concentration of credit risk consist primarily of
temporary cash investments and accounts receivable.
The Company maintains its cash accounts with a high credit quality
financial institution. The total cash balance is insured by the FDIC up to
$100,000 per bank. At December 31, 1998 the Company maintained funds in excess
of the insured limit by approximately $508,000.
Concentrations of credit with respect to accounts receivable are limited
because the majority of the accounts receivable are with large retail customers
and for international customers, for which the Company maintains current letters
of credit. As of December 31, 1998, the Company had no significant concentration
of credit risk.
INVENTORIES -- Inventories are primarily composed of raw materials and
work-in-process and are stated at the lower of cost or market. Cost is
determined using the first-in, first-out method.
PROPERTY, PLANT, AND EQUIPMENT -- Property, plant, and equipment is
recorded at cost. Depreciation is calculated using accelerated methods over the
estimated useful lives of the assets, which range from five to ten years.
FAIR VALUE OF FINANCIAL INSTRUMENTS -- The estimated fair values for
financial instruments under SFAS No. 107, Disclosures about Fair Values of
Financial Instruments, are determined at discrete points in time based on
relevant market information. These estimates involve uncertainties and cannot be
determined with precision. The estimated fair values of the Company's financial
instruments, which includes all cash, accounts receivable, and accounts payable,
approximates the carrying value as reflected in the accompanying financial
statements as of December 31, 1998.
REVENUE RECOGNITION -- Revenue from the sale of furniture is recognized
when the furniture is shipped. Customer deposits represents deposits on orders
received from customers for furniture that has not been completed and shipped.
INCOME TAXES -- The Company, with the consent of its shareholders, has
elected under the Internal Revenue Code to be an S corporation. In lieu of
corporation income taxes, the shareholders of an S corporation are taxed on
their proportionate share of the Company's taxable income. Therefore, no
deferred tax asset, liability or provision for income taxes is included in the
accompanying financial statements.
FUTURE ACCOUNTING PRONOUNCEMENTS -- In June 1998, the Financial Accounting
Standards Board issued SFAS 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS 133 requires companies to recognize all derivatives
contracts as either assets or liabilities in the balance sheet and
F-35
<PAGE> 168
MIAMI METAL PRODUCTS, INC.
D/B/A POMPEII FURNITURE INDUSTRIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
to measure them at fair value. If certain conditions are met, a derivative may
be specifically designated as a hedge, the objective of which is to match the
timing of gain or loss recognition on the hedging derivative with the
recognition of (i) the changes in the fair value of the hedged asset or
liability that are attributable to the hedged risk or (ii) the earnings effect
of the hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the period of
change. SFAS 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999.
Historically, the Company has not entered into derivatives contracts either
to hedge existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standard on January 1, 2000 to affect its
financial statements.
NOTE 2 -- INVENTORY
Inventory consists of the following at December 31, 1998:
<TABLE>
<S> <C>
Raw materials............................................... $1,482,198
Work in process............................................. 1,171,644
Finished goods, includes items in the showrooms............. 346,626
----------
$3,000,468
==========
</TABLE>
NOTE 3 -- PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following at December 31,
1998:
<TABLE>
<S> <C>
Manufacturing and warehouse equipment....................... $1,358,144
Office equipment and furniture.............................. 340,683
----------
1,698,827
Less: Accumulated depreciation.............................. 1,432,852
----------
Property, plant and equipment, net.......................... $ 265,975
==========
</TABLE>
Depreciation expense for the year ended December 31, 1998 approximated
$155,000.
NOTE 4 -- COMMON STOCK
The Company was recapitalized during 1998, at which time all Class A, no
par stock, was retired. For each share of Class A, no par stock retired
stockholders received two shares of Class A, $0.10 par stock and 18 shares of
Class B, $0.10 par, non-voting stock.
NOTE 5 -- EMPLOYEE BENEFIT PLAN
The Company has a (401K) Profit Sharing Plan covering all full-time
employees who are age twenty-one or older. Each year, participants may
contribute up to 20 percent of pretax annual compensation, as defined.
Participants are immediately vested in their contribution plus actual earnings
thereon. Vesting in the Company's discretionary contribution portion of their
accounts plus actual earnings thereon is based on years of continuous service. A
participant is 100 percent vested after seven years of credited service. The
Company made matching contributions to the Plan of approximately $18,000 during
the year ended December 31, 1998.
F-36
<PAGE> 169
MIAMI METAL PRODUCTS, INC.
D/B/A POMPEII FURNITURE INDUSTRIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- COMMITMENTS
LEASES -- The Company leases various office and showroom space in Miami,
North Carolina, and Nevada under terms of operating leases. The total future
minimum lease payments are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31, AMOUNT
- ------------ ----------
<S> <C>
1999........................................................ $ 497,591
2000........................................................ 495,230
2001........................................................ 471,300
2002........................................................ 389,300
2003........................................................ 218,750
----------
$2,072,171
==========
</TABLE>
Rent expense approximated $320,000 for the year ended December 31, 1998.
LITIGATION -- The Company has been named as a defendant in several lawsuits
in the normal course of its business. The Company believes that these lawsuits
are without merit and is vigorously defending itself against all claims. In the
opinion of management, the amount of ultimate liability, if any, with respect to
these matters cannot be determined at this time. The accompanying financial
statements do not include any accruals with regard to these pending litigation.
PRODUCT WARRANTIES -- The Company sells its products with unconditional
repair or replacement warranties. Based upon the Company's experience on the
amount of claims actually made, the accompanying financial statements do not
reflect an accrual for future warranty claims.
NOTE 7 -- RELATED PARTY TRANSACTIONS
During 1998, the Company sold the land and buildings which house its
offices and factories to Nitram Partners, Ltd., ("Nitram"), a related party by
way of common management, at the approximate carrying value of the assets,
$1,500,000, which approximates fair market value. In conjunction with this sale,
the Company entered into an agreement with Nitram to lease these facilities at a
base rent of $375,000 per year for five years. The base rent is subject to
increase based on certain escalation clauses.
The Company assembles some of its product at a facility located in Mexico
which is owned by the stockholders of the Company. The facility has no other
customers or source of revenue. During 1998, the Company paid this facility
approximately $248,000 to cover the facility's expenses. The Company has
guaranteed all of the facility's liabilities.
NOTE 8 -- UNCERTAINTY
Certain buildings leased by the Company do not meet local building codes
and may require a significant investment by the landlord, a related party by
common management, to be in compliance with these codes. Until such time as the
property is in compliance with the building codes, the local government has the
authority to restrict the operational use of the properties involved, at which
time, the Company would need to consider an alternative location in order to
continue operations. The landlord has indicated that the necessary improvements
will be made to the property under lease, however, the ultimate outcome of this
situation is not determinable at this time. During 1998, the Company has paid
certain costs on behalf of the landlord in connection with the process involved
F-37
<PAGE> 170
MIAMI METAL PRODUCTS, INC.
D/B/A POMPEII FURNITURE INDUSTRIES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
with obtaining an occupational license. No adjustments that may result from the
final resolution of this uncertainty have been reflected in the accompanying
financial statements.
NOTE 9 -- OTHER EXPENSES
Other expenses consists of the following:
<TABLE>
<S> <C>
Costs related to the sale of the Company.................... $122,296
Costs incurred on behalf of landlord...................... 37,242
Loss on sale of property, plant and equipment............. 15,679
Miscellaneous............................................. 5,080
--------
$180,297
========
</TABLE>
NOTE 10 -- SUBSEQUENT EVENTS
On November 23, 1998 the Company signed an agreement to sell all the
outstanding stock of the Company. This stock purchase agreement terminates on
October 31, 1999.
NOTE 11 -- IMPACT OF YEAR 2000 (UNAUDITED)
The Company has determined that it will be required to upgrade certain
portions of its software, hardware and equipment so that its systems and
equipment will function properly with respect to dates in the year 2000 and
thereafter. The Company will use both internal and external resources to upgrade
and test certain software for year 2000 readiness. In connection with its
ongoing efforts to be year 2000 compliant, the Company has previously replaced
or modified a significant portion of its key financial and operational systems
that were not year 2000 compliant. Remaining financial and operational systems
have been assessed and detailed plans have been developed and are being
implemented to make the necessary modifications to ensure year 2000 compliance.
The financial impact of making the required system changes for year 2000 are not
expected to have a material impact on the Company's financial statements. The
Company anticipates completing the Year 2000 Project by September, 1999.
The costs for the Year 2000 Project and the date on which the Company
believes it will complete the Year 2000 modifications are based on management's
best estimates, which were derived utilizing numerous assumptions of future
events, including the continued availability of certain resources. The Company's
operating results could be materially impacted if actual costs of the Year 2000
project are significantly higher than management estimates or if the systems and
equipment of the Company or those of other companies on which it relies are not
compliant in a timely manner.
The Company has not initiated formal communications with its significant
suppliers and large payors to determine the extent to which the Company's
operations are vulnerable to those parties' failure to remediate their own Year
2000 issues. There can be no guarantee that the systems of other companies or
payors will be timely converted and would not have an adverse effect on the
Company's operations.
F-38
<PAGE> 171
MIAMI METAL PRODUCTS, INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
------------- -----------------
(IN THOUSANDS EXCEPT SHARE AND
PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $1,488 $ 607
Accounts receivable, less allowances for doubtful
accounts.................................................. 648 1,094
Inventories................................................. 3,555 3,001
Prepaid expenses and other current assets................... 686 471
------ ------
Total current assets.............................. 6,377 5,173
Property, plant and equipment, net.......................... 190 266
Other assets................................................ 13 13
------ ------
$6,580 $5,452
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses....................... $1,204 $1,108
Customer deposits........................................... 712 393
------ ------
Total current liabilities......................... 1,916 1,501
Stockholders' equity:
Class A Common stock; par value $0.10 per share, 5,000
shares authorized, 100 shares issued and outstanding... -- --
Class B Common stock; par value $0.10 per share, 45,000
shares authorized, 900 shares issued and outstanding... -- --
Additional paid-in capital................................ 16 16
Retained earnings......................................... 4,648 3,935
------ ------
Total stockholders' equity........................ 4,664 3,951
------ ------
$6,580 $5,452
====== ======
</TABLE>
See accompanying notes.
F-39
<PAGE> 172
MIAMI METAL PRODUCTS, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1999 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net sales................................................... $ 7,077 $ 7,302
Cost of sales............................................... 4,315 4,545
-------- --------
Gross profit................................................ 2,762 2,757
Selling, general and administrative expenses................ 1,832 1,657
-------- --------
Operating income............................................ 930 1,100
Interest income -- net...................................... 14 13
Other expenses.............................................. (231) --
-------- --------
Net income................................................ $ 713 $ 1,113
======== ========
</TABLE>
See accompanying notes.
F-40
<PAGE> 173
MIAMI METAL PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1999 1998
------ ------
(IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.................................................. $ 713 $1,113
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 78 102
Changes in operating assets and liabilities, net of effects
from acquisitions and dispositions:
Accounts receivable.................................... 446 (134)
Inventories............................................ (554) 396
Prepaid expenses and other current assets.............. (215) (380)
Other assets........................................... -- 118
Accounts payable and accrued expenses.................. 96 (210)
Customer deposits...................................... 319 (396)
------ ------
Total adjustments................................. 170 (504)
------ ------
Net cash provided by operating activities......... 883 609
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net of disposals...................... (2) (73)
------ ------
Net cash used in investing activities............. (2) (73)
------ ------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions............................................... -- (600)
------ ------
Net cash used in financing activities............. -- (600)
------ ------
Net increase (decrease) in cash and cash equivalents........ 881 (64)
Cash and cash equivalents at beginning of period............ 607 503
------ ------
Cash and cash equivalents at end of period.................. $1,488 $ 439
====== ======
</TABLE>
See accompanying notes.
F-41
<PAGE> 174
MIAMI METAL PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements of Miami Metal Products,
Inc. (the "Company") that are for interim periods do not include all disclosures
provided in the annual financial statements. These unaudited financial
statements should be read in conjunction with the annual financial statements
and notes thereto.
The preparation of the financial statements requires the use of estimates
in the amounts reported.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation of the results for the interim periods. The
results of operations are presented for the Company's six-month periods ended
June 30, 1999 and 1998, respectively. The results of operations for these
periods are not necessarily indicative of the results to be expected for the
full year.
2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
--------- -------------
(IN THOUSANDS)
<S> <C> <C>
Raw materials.................................... $2,067 $1,482
Work in process.................................. 1,293 1,172
Finished goods................................... 195 347
------ ------
$3,555 $3,001
====== ======
</TABLE>
3. INCOME TAXES
The Company has elected to have its income or loss reported directly to the
shareholders under provisions for S Corporations by the Internal Revenue Code.
Accordingly, no deferred tax asset, liability or provision for income taxes is
included in the accompanying financial statements.
4. OTHER EXPENSES
Other expense consists of costs related to the sale of the Company (see
Note 5).
5. SUBSEQUENT EVENTS
On November 23, 1998 the Company signed an agreement to sell all the
outstanding stock of the Company to WinsLoew Furniture, Inc. The transaction was
completed on July 30, 1999.
F-42
<PAGE> 175
- -------------------------------------------------------
- -------------------------------------------------------
You should rely only on the information provided in this prospectus or any
prospectus supplement. We have not authorized any dealer, salesperson or anyone
else to provide you with different information. We may not make an offer of the
registered notes in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date of this prospectus.
---------------------------
TABLE OF CONTENTS
---------------------------
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Where You Can Find More Information... i
Cautionary Note Regarding Forward-
Looking Statements.................. ii
Prospectus Summary.................... 1
Risk Factors.......................... 15
The Merger............................ 24
Use of Proceeds....................... 26
Capitalization........................ 27
Selected Historical Consolidated
Financial Data...................... 28
Unaudited Pro Forma Financial Data.... 30
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 33
Business.............................. 42
Management............................ 57
Principal Shareholders................ 62
Certain Transactions.................. 63
Description of Capital Stock.......... 66
Description of the Senior Credit
Facility............................ 66
The Exchange Offer.................... 69
Description of the Registered Notes... 80
Book Entry, Delivery and Form......... 117
Certain United States Federal Income
Tax Consequences.................... 119
Plan of Distribution.................. 126
Legal Matters......................... 127
Experts............................... 127
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
Until , 2000, all dealers effecting transactions in the
registered notes, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
(WINSLOEW FURNITURE, INC. LOGO)
WINSLOEW FURNITURE, INC.
OFFER TO EXCHANGE
$105,000,000
ALL OUTSTANDING ORIGINAL 12 3/4% SERIES A
SENIOR SUBORDINATED NOTES DUE 2007
FOR
REGISTERED 12 3/4% SERIES B
SENIOR SUBORDINATED NOTES DUE 2007
--------------------
PROSPECTUS
--------------------
, 1999
- -------------------------------------------------------
- -------------------------------------------------------
<PAGE> 176
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The registrant has authority under the Florida Business Corporation Act to
indemnify its directors and officers to the extent provided in that statute. The
registrant's Amended and Restated Articles of Incorporation provide that the
registrant shall indemnify its executive officers and directors to the fullest
extent permitted by law either now or hereafter. The registrant has also entered
into an agreement with each of its directors and certain of its officers wherein
it agrees to indemnify each of them to the fullest extent permitted by law. In
general, Florida law permits a Florida corporation to indemnify its directors,
officers, employees and agents, and persons serving at the corporation's request
in such capacities for another enterprise against liabilities arising from
conduct that such persons reasonably believed to be in, or not opposed to, the
best interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful.
The provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful, (b)
deriving an improper personal benefit from a transaction, (c) voting for or
assenting to an unlawful distribution, and (d) willful misconduct or a conscious
disregard for the best interests of the registrant in a proceeding by or in the
right of the registrant to procure a judgment in its favor or in a proceeding by
or in the right of a shareholder. The statute does not affect a director's
responsibilities under any other law, such as the federal securities laws or
state or federal environmental laws.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Registrant's Restated Articles of Incorporation
3.2 Registrant's Bylaws
4.1 Indenture dated as of August 24, 1999 between WinsLoew
Escrow Corp. (whose obligations have been assumed by the
Registrant) and American Stock Transfer & Trust Company,
including form of 12 3/4% Senior Subordinated Note Due 2007
4.2 Supplemental Indenture dated as of August 27, 1999 among
Trivest Furniture Corporation, the Registrant, the
Registrant's domestic subsidiaries and American Stock
Transfer & Trust Company
4.3 Registration Rights Agreement dated as of August 24, 1999
among WinsLoew Escrow Corp. (whose obligations have been
assumed by the Registrant) and Bear, Stearns & Co., Inc.,
BancBoston Robertson Stephens Inc. and First Union Capital
Markets Corp.
4.4 Form of Registered Note (included in Exhibit 4.1)
5.1 Opinion of Greenberg Traurig, P.A.
10.1 Form of Indemnification Agreement entered into between the
Registrant and each of the Registrant's executive officers
and directors
10.2 Business Lease dated November 18, 1993 between Loewenstein,
Inc. and Emanuel Vanzo
10.3 Lease Agreement commencing December 15, 1995 between
Teachers Insurance and Annuity Association and Winston
Furniture Company of Alabama, Inc.
</TABLE>
II-1
<PAGE> 177
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.4 Lease dated April, 1996 between La Salle National Trust,
N.A. and Winston Furniture Company of Alabama, Inc.
10.5 Lease dated May 24, 1996 between La Salle National Trust,
N.A. and Winston Furniture Company of Alabama, Inc.
10.6 Agreement dated August 1, 1996 between Winston Furniture
Company of Alabama, Inc. and the Retail, Wholesale and
Department Store Union, AFL-CIO
10.7 Contract for Sale and Purchase dated June 29, 1998 between
Villella, Inc. and Thomas L. Villella, as Trustee of the
Thomas L. Villella Family Trust
10.8 Stock Purchase Agreement dated June 30, 1998 between Thomas
Villella and Winston Furniture Company of Alabama, Inc.
10.9 Employment Agreement dated June 30, 1999 between Peter
Villella and Tropic Craft, Inc.
10.10 Stock Purchase Agreement dated as of June 30, 1998 between
the Registrant and Vertiflex Company
10.11 Pricing Agreement dated December 1, 1998 between
Loewenstein, Inc., Gregson Furniture Industries and Marriott
International, Inc.
10.12 Lease dated August 1, 1998 between Nitram Partners, Ltd. and
Miami Metal Products, Inc., as amended
10.13 Stock Purchase Agreement, dated as of November 23, 1998
among Winston Furniture Company of Alabama, Inc., and Miami
Metal Products, Inc., Industrial Mueblera Pompeii de Mexico,
S.A. de C.V. and certain named sellers, as amended
10.14 Lease Agreement dated March 1, 1999 between E.V. Ferrell,
Jr., Sarah T. Ferrell and Pompeii Furniture Industries
10.15 Employment Agreement dated July 30, 1999 between Winston
Furniture Company of Alabama, Inc. and Perry B. Martin
10.16 Consulting Agreement dated July 30, 1999 between Winston
Furniture Company of Alabama, Inc. and Leo Martin
10.17 Purchase Agreement dated August 19, 1999 among WinsLoew
Escrow Corp., Trivest Furniture Corporation (each of whose
obligations have been assumed by the Registrant) and Bear,
Stearns & Co. Inc., BancBoston Robertson Stephens Inc. and
First Union Capital Markets Corp.
10.18 Warrant Agreement dated as of August 24, 1999 between
WinsLoew Escrow Corp. (whose obligations have been assumed
by the Registrant) and American Stock Transfer & Trust
Company
10.19 Loan and Security Agreement dated as of August 27, 1999
among the Registrant, its domestic subsidiaries, the lenders
named therein, Bankboston, N.A. as administrative agent,
Heller Financial, Inc. and CIBC, Inc. as co-agents for the
lenders
10.20 Investors Agreement dated August 27, 1999 among Trivest
Furniture Corporation, Trivest Furniture Partners, Ltd.,
Trivest Fund II Group, Ltd., and various investors
identified therein
10.21 Exchange and Subscription Agreement dated August 27, 1999
among Trivest Furniture Corporation and various investors
identified therein
10.22 WinsLoew 1999 Key Employee Equity Plan
10.23 Form of Subscription Agreement (included in Exhibit 10.22)
10.24 Form of Shareholders' Agreement (included in Exhibit 10.22)
10.25 Management Agreement dated August 27, 1999 between the
Registrant and Trivest II, Inc.
10.26 Employment Agreement dated August 27, 1999 between the
Registrant and Bobby Tesney
10.27 Employment Agreement dated August 27, 1999 between the
Registrant and R. Craig Watts
10.28 Employment Agreement dated August 27, 1999 between the
Registrant and Vincent A. Tortorici, Jr.
10.29 Severance Agreement dated August 27, 1999 between the
Registrant and Bobby Tesney
</TABLE>
II-2
<PAGE> 178
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.30 Severance Agreement dated August 27, 1999 between the
Registrant and Vincent A. Tortorici, Jr.
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
23.2 Consent of Infante, Lago & Company
23.3 Consent of Greenberg Traurig, P.A. (included in Exhibit 5.1)
24.1 Powers of Attorney (included in signature pages)
25.1 Statement of Eligibility of Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal with respect to Exchange Offer
99.2 Form of Notice of Guaranteed Delivery
99.3 Form of Exchange Agent Agreement
99.4 Forms of Tender Instruction Letter
</TABLE>
(b) Financial Statement Schedules.
Schedules not listed above have been omitted because the information to be
set forth therein is not applicable or is shown in the financial statements or
notes thereto.
ITEM 22. UNDERTAKINGS
1. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
2. The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus (i) that is filed pursuant
to the immediately preceding paragraph, or (ii) that purports to meet the
requirements of section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-3
<PAGE> 179
3. The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
4. The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
II-4
<PAGE> 180
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, state of
Alabama on November 8, 1999.
WINSLOEW FURNITURE, INC.
By: /s/ BOBBY TESNEY
------------------------------------
Bobby Tesney
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bobby Tesney his true and lawful
attorney-in-fact with full powers of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including any post-effective amendments, to this Registration
Statement and any filings made pursuant to Rule 462 under the Securities Act,
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 said attorney-in-fact or his substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EARL W. POWELL Chairman of the Board of November 8, 1999
- ----------------------------------------------------- Directors
Earl W. Powell
/s/ BOBBY TESNEY President, Chief Executive November 8, 1999
- ----------------------------------------------------- Officer and Director
Bobby Tesney (Principal Executive
Officer)
/s/ VINCENT A. TORTORICI, JR. Vice President and Chief November 8, 1999
- ----------------------------------------------------- Financial Officer, Treasurer
Vincent A. Tortorici, Jr. and Assistant Secretary
(Principal Financial and
Accounting Officer)
/s/ WILLIAM F. KACZYNSKI, JR. Director November 8, 1999
- -----------------------------------------------------
William F. Kaczynski, Jr.
/s/ PETER W. KLEIN Director November 8, 1999
- -----------------------------------------------------
Peter W. Klein
/s/ DAVID M. SOLOMON Director November 8, 1999
- -----------------------------------------------------
David M. Solomon
</TABLE>
II-5
<PAGE> 181
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, state of
Alabama on November 8, 1999.
WINSTON FURNITURE COMPANY OF ALABAMA
By: /s/ BOBBY TESNEY
------------------------------------
Bobby Tesney
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bobby Tesney his true and lawful
attorney-in-fact with full powers of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including any post-effective amendments, to this Registration
Statement and any filings made pursuant to Rule 462 under the Securities Act,
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 said attorney-in-fact or his substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EARL W. POWELL Chairman of the Board of November 8, 1999
- ----------------------------------------------------- Directors
Earl W. Powell
/s/ BOBBY TESNEY Chief Executive Officer and November 8, 1999
- ----------------------------------------------------- Director (Principal
Bobby Tesney Executive Officer)
/s/ VINCENT A. TORTORICI, JR. Chief Financial Officer, Vice November 8, 1999
- ----------------------------------------------------- President -- Finance
Vincent A. Tortorici, Jr. and Administration
/s/ WILLIAM F. KACZYNSKI, JR. Director November 8, 1999
- -----------------------------------------------------
William F. Kaczynski, Jr.
</TABLE>
II-6
<PAGE> 182
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, state of
Alabama on November 8, 1999.
LOEWENSTEIN, INC.
By: /s/ BOBBY TESNEY
------------------------------------
Bobby Tesney
President
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bobby Tesney his true and lawful
attorney-in-fact with full powers of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including any post-effective amendments, to this Registration
Statement and any filings made pursuant to Rule 462 under the Securities Act,
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 said attorney-in-fact or his substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EARL W. POWELL Chairman of the Board of November 8, 1999
- ----------------------------------------------------- Directors
Earl W. Powell
/s/ BOBBY TESNEY President and Director November 8, 1999
- ----------------------------------------------------- (Principal Executive
Bobby Tesney Officer)
/s/ VINCENT A. TORTORICI, JR. Vice President, Treasurer and November 8, 1999
- ----------------------------------------------------- Assistant Secretary
Vincent A. Tortorici, Jr. (Principal Financial and
Accounting Officer)
/s/ WILLIAM F. KACZYNSKI, JR. Director November 8, 1999
- -----------------------------------------------------
William F. Kaczynski, Jr.
</TABLE>
II-7
<PAGE> 183
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, state of
Alabama on November 8, 1999.
TEXACRAFT, INC.
By: /s/ BOBBY TESNEY
------------------------------------
Bobby Tesney
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bobby Tesney his true and lawful
attorney-in-fact with full powers of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including any post-effective amendments, to this Registration
Statement and any filings made pursuant to Rule 462 under the Securities Act,
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 said attorney-in-fact or his substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EARL W. POWELL Chairman of the Board of November 8, 1999
- ----------------------------------------------------- Directors
Earl W. Powell
/s/ BOBBY TESNEY Chief Executive Officer and November 8, 1999
- ----------------------------------------------------- Director (Principal
Bobby Tesney Executive Officer)
/s/ VINCENT A. TORTORICI, JR. Vice President, Treasurer and November 8, 1999
- ----------------------------------------------------- Assistant Secretary
Vincent A. Tortorici, Jr. (Principal Financial and
Accounting Officer)
/s/ WILLIAM F. KACZYNSKI, JR. Director November 8, 1999
- -----------------------------------------------------
William F. Kaczynski, Jr.
/s/ JERRY C. CAMP Director November 8, 1999
- -----------------------------------------------------
Jerry C. Camp
</TABLE>
II-8
<PAGE> 184
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, state of
Alabama on November 8, 1999.
TROPIC CRAFT, INC.
By: /s/ BOBBY TESNEY
------------------------------------
Bobby Tesney
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bobby Tesney his true and lawful
attorney-in-fact with full powers of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including any post-effective amendments, to this Registration
Statement and any filings made pursuant to Rule 462 under the Securities Act,
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 said attorney-in-fact or his substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EARL W. POWELL Chairman of the Board of November 8, 1999
- ----------------------------------------------------- Directors
Earl W. Powell
/s/ BOBBY TESNEY Chief Executive Officer and November 8, 1999
- ----------------------------------------------------- Director (Principal
Bobby Tesney Executive Officer)
/s/ VINCENT A. TORTORICI, JR. Vice President -- Finance, November 8, 1999
- ----------------------------------------------------- Treasurer and Assistant
Vincent A. Tortorici, Jr. Secretary (Principal
Financial and Accounting
Officer)
/s/ WILLIAM F. KACZYNSKI, JR. Director November 8, 1999
- -----------------------------------------------------
William F. Kaczynski, Jr.
/s/ JERRY C. CAMP Director November 8, 1999
- -----------------------------------------------------
Jerry C. Camp
</TABLE>
II-9
<PAGE> 185
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, state of
Alabama on November 8, 1999.
WINSTON PROPERTIES, INC.
By: /s/ BOBBY TESNEY
------------------------------------
Bobby Tesney
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bobby Tesney his true and lawful
attorney-in-fact with full powers of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including any post-effective amendments, to this Registration
Statement and any filings made pursuant to Rule 462 under the Securities Act,
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 said attorney-in-fact or his substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EARL W. POWELL Chairman of the Board of November 8, 1999
- ----------------------------------------------------- Directors
Earl W. Powell
/s/ BOBBY TESNEY Chief Executive Officer and November 8, 1999
- ----------------------------------------------------- Director (Principal
Bobby Tesney Executive Officer)
/s/ VINCENT A. TORTORICI, JR. Vice President, Treasurer and November 8, 1999
- ----------------------------------------------------- Assistant Secretary
Vincent A. Tortorici, Jr. (Principal Financial and
Accounting Officer)
/s/ WILLIAM F. KACZYNSKI, JR. Director November 8, 1999
- -----------------------------------------------------
William F. Kaczynski, Jr.
/s/ JERRY C. CAMP Director November 8, 1999
- -----------------------------------------------------
Jerry C. Camp
</TABLE>
II-10
<PAGE> 186
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Birmingham, state of
Alabama on November 8, 1999.
POMPEII FURNITURE CO., INC.
By: /s/ BOBBY TESNEY
------------------------------------
Bobby Tesney
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Bobby Tesney his true and lawful
attorney-in-fact with full powers of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any or all
amendments, including any post-effective amendments, to this Registration
Statement and any filings made pursuant to Rule 462 under the Securities Act,
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 said attorney-in-fact or his substitutes may lawfully do or
cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BOBBY TESNEY Chief Executive Officer November 8, 1999
- ----------------------------------------------------- (Principal Executive
Bobby Tesney Officer) and Director
/s/ VINCENT A. TORTORICI, JR. Vice President, Treasurer and November 8, 1999
- ----------------------------------------------------- Assistant Secretary
Vincent A. Tortorici, Jr. (Principal Financial and
Accounting Officer)
</TABLE>
II-11
<PAGE> 187
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
3.1 Registrant's Restated Articles of Incorporation
3.2 Registrant's Bylaws
4.1 Indenture dated as of August 24, 1999 between WinsLoew
Escrow Corp. (whose obligations have been assumed by the
Registrant) and American Stock Transfer & Trust Company,
including form of 12 3/4% Senior Subordinated Note Due 2007
4.2 Supplemental Indenture dated as of August 27, 1999 among
Trivest Furniture Corporation, the Registrant, the
Registrant's domestic subsidiaries and American Stock
Transfer & Trust Company
4.3 Registration Rights Agreement dated as of August 24, 1999
among WinsLoew Escrow Corp. (whose obligations have been
assumed by the Registrant) and Bear, Stearns & Co., Inc.,
BancBoston Robertson Stephens Inc. and First Union Capital
Markets Corp.
4.4 Form of Registered Note (included in Exhibit 4.1)
5.1 Opinion of Greenberg Traurig, P.A.
10.1 Form of Indemnification Agreement entered into between the
Registrant and each of the Registrant's executive officers
and directors
10.2 Business Lease dated November 18, 1993 between Loewenstein,
Inc. and Emanuel Vanzo
10.3 Lease Agreement commencing December 15, 1995 between
Teachers Insurance and Annuity Association and Winston
Furniture Company of Alabama, Inc.
10.4 Lease dated April 1, 1996 between La Salle National Trust,
N.A. and Winston Furniture Company of Alabama, Inc.
10.5 Lease dated May 24, 1996 between La Salle National Trust,
N.A. and Winston Furniture Company of Alabama, Inc.
10.6 Agreement dated August 1, 1996 between Winston Furniture
Company of Alabama, Inc. and the Retail, Wholesale and
Department Store Union, AFL-CIO
10.7 Contract for Sale and Purchase dated June 29, 1998 between
Villella, Inc. and Thomas L. Villella, as Trustee of the
Thomas L. Villella Family Trust
10.8 Stock Purchase Agreement dated June 30, 1998 between Thomas
Villella and Winston Furniture Company of Alabama, Inc.
10.9 Employment Agreement dated June 30, 1999 between Peter
Villella and Tropic Craft, Inc.
10.10 Stock Purchase Agreement dated as of June 30, 1998 between
the Registrant and Vertiflex Company
10.11 Pricing Agreement dated December 1, 1998 between
Loewenstein, Inc., Gregson Furniture Industries and Marriott
International, Inc.
10.12 Lease dated August 1, 1998 between Nitram Partners, Ltd. and
Miami Metal Products, Inc., as amended
10.13 Stock Purchase Agreement, dated as of November 23, 1998
among Winston Furniture Company of Alabama, Inc., and Miami
Metal Products, Inc., Industrial Mueblera Pompeii de Mexico,
S.A. de C.V. and certain named sellers, as amended
10.14 Lease Agreement dated March 1, 1999 between E.V. Ferrell,
Jr., Sarah T. Ferrell and Pompeii Furniture Industries
10.15 Employment Agreement dated July 30, 1999 between Winston
Furniture Company of Alabama, Inc. and Perry B. Martin
10.16 Consulting Agreement dated July 30, 1999 between Winston
Furniture Company of Alabama, Inc. and Leo Martin
10.17 Purchase Agreement dated August 19, 1999 among WinsLoew
Escrow Corp., Trivest Furniture Corporation (each of whose
obligations have been assumed by the Registrant) and Bear,
Stearns & Co. Inc., BancBoston Robertson Stephens Inc. and
First Union Capital Markets Corp.
</TABLE>
<PAGE> 188
<TABLE>
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EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.18 Warrant Agreement dated as of August 24, 1999 between
WinsLoew Escrow Corp. (whose obligations have been assumed
by the Registrant) and American Stock Transfer & Trust
Company
10.19 Loan and Security Agreement dated as of August 27, 1999
among the Registrant, its domestic subsidiaries, the lenders
named therein, Bankboston, N.A. as administrative agent,
Heller Financial, Inc. and CIBC, Inc. as co-agents for the
lenders
10.20 Investors Agreement dated August 27, 1999 among Trivest
Furniture Corporation, Trivest Furniture Partners, Ltd.,
Trivest Fund II Group, Ltd., and various investors
identified therein
10.21 Exchange and Subscription Agreement dated August 27, 1999
among Trivest Furniture Corporation and various investors
identified therein
10.22 WinsLoew 1999 Key Employee Equity Plan
10.23 Form of Subscription Agreement (included in Exhibit 10.22)
10.24 Form of Shareholders' Agreement (included in Exhibit 10.22)
10.25 Management Agreement dated August 27, 1999 between the
Registrant and Trivest II, Inc.
10.26 Employment Agreement dated August 27, 1999 between the
Registrant and Bobby Tesney
10.27 Employment Agreement dated August 27, 1999 between th
eRegistrant and R. Craig Watts
10.28 Employment Agreement dated August 27, 1999 between the
Registrant and Vincent A. Tortorici, Jr.
10.29 Employment Agreement dated August 27, 1999 between the
Registrant and Bobby Tesney
10.30 Severance Agreement dated August 27, 1999 between the
Registrant and Vincent A. Tortorici, Jr.
12.1 Statement of Computation of Ratio of Earnings to Fixed
Charges
21.1 Subsidiaries of the Registrant
23.1 Consent of Ernst & Young LLP
23.2 Consent of Infante, Lago & Company
23.3 Consent of Greenberg Traurig, P.A. (included in Exhibit 5.1)
24.1 Powers of Attorney (included in signature pages)
25.1 Statement of Eligibility of Trustee
27.1 Financial Data Schedule
99.1 Form of Letter of Transmittal with respect to Exchange Offer
99.2 Form of Notice of Guaranteed Delivery
99.3 Forms of Tender Instruction Letters
</TABLE>
<PAGE> 1
Exhibit 3.1
RESTATED
ARTICLES OF INCORPORATION
OF
WINSLOEW FURNITURE, INC.
ARTICLE I
The name of the corporation is WINSLOEW FURNITURE, INC. (hereinafter
called the "Corporation").
ARTICLE II
The address of the principal office and the mailing address of the
Corporation is 160 Village Street, Birmingham, Alabama 35242.
ARTICLE III
The Corporation is authorized to issue an aggregate total of One
Million (1,000,000) Shares, all of which shall be designated Common Stock,
having a par value of $.01 per share.
ARTICLE IV
The Corporation shall hold a special meeting of shareholders only:
(1) On call of the board of directors or persons authorized
to do so by the Corporation's bylaws; or
(2) If the holders of not less than fifty percent of all
votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date, and deliver to the
Corporation's secretary one or more written demands for the meeting
describing the purpose or purposes for which it is to be held.
ARTICLE V
The street address of the Corporation's registered office in the State
of Florida is c/o Trivest, Inc., 2665 South Bayshore Drive, Suite 800, Miami,
Florida 33133, and the name of its registered agent at such office is Peter W.
Klein, Esq.
ARTICLE VI
The Board of Directors of the Corporation shall consist of at least
one director, with the exact number to be fixed from time to time in the manner
provided in the Corporation's bylaws.
ARTICLE VII
This Corporation shall indemnify and shall advance expenses on behalf
of its officers and directors to the fullest extent not prohibited by any law
in existence either now or hereafter.
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
WINSLOEW FURNITURE, INC.
(A FLORIDA CORPORATION)
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
ARTICLE ONE OFFICES........................................................................................1
Section 1. Registered Office..........................................................................1
Section 2. Other Offices..............................................................................1
ARTICLE TWO MEETINGS OF SHAREHOLDERS.......................................................................1
Section 1. Place......................................................................................1
Section 2. Time of Annual Meeting.....................................................................1
Section 3. Call of Special Meetings...................................................................1
Section 4. Conduct of Meetings........................................................................1
Section 5. Notice and Waiver of Notice................................................................2
Section 6. Business of Special Meeting................................................................2
Section 7. Quorum.....................................................................................2
Section 8. Voting Per Share...........................................................................3
Section 9. Voting of Shares...........................................................................3
Section 10. Proxies....................................................................................3
Section 11. Shareholder List...........................................................................4
Section 12. Action Without Meeting.....................................................................4
Section 13. Fixing Record Date.........................................................................4
Section 14. Inspectors and Judges......................................................................4
Section 15. Voting for Directors.......................................................................5
ARTICLE THREE DIRECTORS....................................................................................5
Section 1. Number, Election and Term..................................................................5
Section 2. Vacancies..................................................................................5
Section 3. Powers.....................................................................................6
Section 4. Place of Meetings..........................................................................6
Section 5. Annual Meeting.............................................................................6
Section 6. Regular Meetings...........................................................................6
Section 7. Special Meetings and Notice................................................................6
Section 8. Quorum; Required Vote; Presumption of Assent...............................................6
Section 9. Action Without Meeting.....................................................................7
Section 10. Conference Telephone or Similar Communications Equipment Meetings..........................7
Section 11. Committees.................................................................................7
Section 12. Compensation of Directors..................................................................7
Section 13. Chairman of the Board......................................................................7
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
ARTICLE FOUR OFFICERS......................................................................................8
Section 1. Positions..................................................................................8
Section 2. Election of Specified Officers by Board....................................................8
Section 3. Election or Appointment of Other Officers..................................................8
Section 4. Salaries...................................................................................8
Section 5. Term; Resignation..........................................................................8
Section 6. Chief Executive Officer....................................................................8
Section 7. President..................................................................................9
Section 8. Chief Operating Officer....................................................................9
Section 9. Vice Presidents............................................................................9
Section 10. Secretary..................................................................................9
Section 11. Treasurer..................................................................................9
Section 12. Other Officers, Employees and Agents......................................................10
ARTICLE FIVE CERTIFICATES FOR SHARES......................................................................10
Section 1. Issue of Certificates.....................................................................10
Section 2. Legends for Preferences and Restrictions on Transfer......................................10
Section 3. Facsimile Signatures......................................................................11
Section 4. Lost Certificates.........................................................................11
Section 5. Transfer of Shares........................................................................11
Section 6. Registered Shareholders...................................................................11
ARTICLE SIX GENERAL PROVISIONS............................................................................11
Section 1. Dividends.................................................................................11
Section 2. Reserves..................................................................................11
Section 3. Checks....................................................................................12
Section 4. Fiscal Year...............................................................................12
Section 5. Seal......................................................................................12
Section 6. Gender....................................................................................12
ARTICLE SEVEN AMENDMENTS OF BYLAWS........................................................................12
</TABLE>
<PAGE> 4
WINSLOEW FURNITURE, INC.
BYLAWS
ARTICLE ONE
OFFICES
Section 1. REGISTERED OFFICE. The registered office of WINSLOEW ESCROW
CORP., a Florida corporation (the "Corporation"), shall be located at 2665 South
Bayshore Drive, Suite 800, Miami, Florida 33133-5401, unless otherwise
designated by the Board of Directors.
Section 2. OTHER OFFICES. The Corporation may also have offices at such
other places, either within or without the State of Florida, as the Board of
Directors of the Corporation (the "Board of Directors") may from time to time
determine or as the business of the Corporation may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
Section 1. PLACE. All annual meetings of shareholders shall be held at
such place, within or without the State of Florida, as may be designated by the
Board of Directors and stated in the notice of the meeting or in a duly executed
waiver of notice thereof. Special meetings of shareholders may be held at such
place, within or without the State of Florida, and at such time as shall be
stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. TIME OF ANNUAL MEETING. Annual meetings of shareholders
shall be held on such date and at such time fixed, from time to time, by the
Board of Directors, provided that there shall be an annual meeting held every
year at which the shareholders shall elect a Board of Directors and transact
such other business as may properly be brought before the meeting.
Section 3. CALL OF SPECIAL MEETINGS. Special meetings of the
shareholders shall be held if called by the Board of Directors, the Chief
Executive Officer or if the holders of not less than 50 percent of all the votes
entitled to be cast on any issue proposed to be considered at the proposed
special meeting sign, date, and deliver to the Secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to be
held.
Section 4. CONDUCT OF MEETINGS. The Chairman of the Board (or in his
absence, the Chief Executive Officer or such other designee of the Chairman of
the Board) shall preside at the annual and special meetings of shareholders and
shall be given full discretion in establishing the rules and procedures to be
followed in conducting the meetings, except as otherwise provided by law or in
these Bylaws.
<PAGE> 5
Section 5. NOTICE AND WAIVER OF NOTICE. Except as otherwise provided by
law, written or printed notice stating the place, day and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) nor more than sixty
(60) days before the day of the meeting, either personally or by first-class
mail, by or at the direction of the Chief Executive Officer, the Secretary, or
the officer or person calling the meeting, to each shareholder of record
entitled to vote at such meeting. If the notice is mailed at least thirty (30)
days before the date of the meeting, it may be done by a class of United States
mail other than first-class. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail addressed to the shareholder
at his address as it appears on the stock transfer books of the Corporation,
with postage thereon prepaid. If a meeting is adjourned to another time and/or
place, and if an announcement of the adjourned time and/or place is made at the
meeting, it shall not be necessary to give notice of the adjourned meeting
unless the Board of Directors, after adjournment, fixes a new record date for
the adjourned meeting. Whenever any notice is required to be given to any
shareholder, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether signed before, during or after the time of the
meeting stated therein, and delivered to the Corporation for inclusion in the
minutes or filing with the corporate records, shall be equivalent to the giving
of such notice. Neither the business to be transacted at, nor the purpose of,
any regular or special meeting of the shareholders need be specified in any
written waiver of notice. Attendance of a person at a meeting shall constitute a
waiver of (a) lack of or defective notice of such meeting, unless the person
objects at the beginning to the holding of the meeting or the transacting of any
business at the meeting, or (b) lack of defective notice of a particular matter
at a meeting that is not within the purpose or purposes described in the meeting
notice, unless the person objects to considering such matter when it is
presented.
Section 6. BUSINESS OF SPECIAL MEETING. Business transacted at any
special meeting shall be confined to the purposes stated in the notice thereof.
Section 7. QUORUM. Shares entitled to vote as a separate voting group
may take action on a matter at a meeting only if a quorum of these shares exists
with respect to that matter. Except as otherwise provided in the Articles of
Incorporation or by law, a majority of the shares entitled to vote on the matter
by each voting group, represented in person or by proxy, shall constitute a
quorum at any meeting of shareholders, but in no event shall a quorum consist of
less than one-third (1/3) of the shares of each voting group entitled to vote.
If less than a majority of outstanding shares entitled to vote are represented
at a meeting, a majority of the shares so represented may adjourn the meeting
from time to time without further notice. After a quorum has been established at
any shareholders' meeting, the subsequent withdrawal of shareholders, so as to
reduce the number of shares entitled to vote at the meeting below the number
required for a quorum, shall not affect the validity of any action taken at the
meeting or any adjournment thereof. Once a share is represented for any purpose
at a meeting, it is deemed present for quorum purposes for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is or
must be set for that adjourned meeting.
2
<PAGE> 6
Section 8. VOTING PER SHARE. Except as otherwise provided in the
Articles of Incorporation or by law, each shareholder is entitled to one (1)
vote for each outstanding share held by him on each matter voted at a
shareholders' meeting.
Section 9. VOTING OF SHARES. A shareholder may vote at any meeting of
shareholders of the Corporation, either in person or by proxy. Shares standing
in the name of another corporation, domestic or foreign, may be voted by the
officer, agent or proxy designated by the bylaws of such corporate shareholder
or, in the absence of any applicable bylaw, by such person or persons as the
board of directors of the corporate shareholder may designate. In the absence of
any such designation, or, in case of conflicting designation by the corporate
shareholder, the chairman of the board, the president, any vice president, the
secretary and the treasurer of the corporate shareholder, in that order, shall
be presumed to be fully authorized to vote such shares. Shares held by an
administrator, executor, guardian, personal representative, or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name or the name of his
nominee. Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by such person without the transfer thereof into his name. If shares stand of
record in the names of two or more persons, whether fiduciaries, members of a
partnership, joint tenants, tenants in common, tenants by the entirety or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, unless the Secretary of the Corporation is given
notice to the contrary and is furnished with a copy of the instrument or order
appointing them or creating the relationship wherein it is so provided, then
acts with respect to voting shall have the following effect: (a) if only one
votes, in person or by proxy, his act binds all; (b) if more than one vote, in
person or by proxy, the act of the majority so voting binds all; (c) if more
than one vote, in person or by proxy, but the vote is evenly split on any
particular matter, each faction is entitled to vote the share or shares in
question proportionally; or (d) if the instrument or order so filed shows that
any such tenancy is held in unequal interest, a majority or a vote evenly split
for purposes hereof shall be a majority or a vote evenly split in interest. The
principles of this paragraph shall apply, insofar as possible, to execution of
proxies, waivers, consents, or objections and for the purpose of ascertaining
the presence of a quorum.
Section 10. PROXIES. Any shareholder of the Corporation, other person
entitled to vote on behalf of a shareholder pursuant to law, or attorney-in-fact
for such persons may vote the shareholder's shares in person or by proxy. Any
shareholder of the Corporation may appoint a proxy to vote or otherwise act for
him by signing an appointment form, either personally or by his
attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form, shall be deemed a sufficient appointment
form. An appointment of a proxy is effective when received by the Secretary of
the Corporation or such other officer or agent which is authorized to tabulate
votes, and shall be valid for up to 11 months, unless a longer period is
expressly provided in the appointment form. The death or incapacity of the
shareholder appointing a proxy does not affect the right of the Corporation to
accept the proxy's authority unless notice of the death or incapacity is
received by the secretary or other officer or agent authorized to tabulate
3
<PAGE> 7
votes before the proxy exercises his authority under the appointment. An
appointment of a proxy is revocable by the shareholder unless the appointment is
coupled with an interest.
Section 11. SHAREHOLDER LIST. After fixing a record date for a meeting
of shareholders, the Corporation shall prepare an alphabetical list of the names
of all its shareholders who are entitled to notice of the meeting, arranged by
voting group with the address of, and the number and class and series, if any,
of shares held by each. The shareholders' list must be available for inspection
by any shareholder for a period of ten (10) days prior to the meeting or such
shorter time as exists between the record date and the meeting and continuing
through the meeting at the Corporation's principal office, at a place identified
in the meeting notice in the city where the meeting will be held, or at the
office of the Corporation's transfer agent or registrar. Any shareholder of the
Corporation or his agent or attorney is entitled on written demand to inspect
the shareholders' list (subject to the requirements of law), during regular
business hours and at his expense, during the period it is available for
inspection. The Corporation shall make the shareholders' list available at the
meeting of shareholders, and any shareholder or his agent or attorney is
entitled to inspect the list at any time during the meeting or any adjournment.
Section 12. ACTION WITHOUT MEETING. Any action required by law to be
taken at a meeting of shareholders, or any action that may be taken at a meeting
of shareholders, may be taken without a meeting or notice if a consent in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted with respect to the subject
matter thereof, and such consent shall have the same force and effect as a vote
of shareholders taken at such a meeting.
Section 13. FIXING RECORD DATE. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purposes, the
Board of Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than seventy
(70) days, and, in case of a meeting of shareholders, not less than ten (10)
days, prior to the date on which the particular action requiring such
determination of shareholders is to be taken. If no record date is fixed for the
determination of shareholders entitled to notice of or to vote at a meeting of
shareholders, or shareholders entitled to receive payment of a dividend, the
date on which the notice of the meeting is mailed or the date on which the
resolutions of the Board of Directors declaring such dividend is adopted, as the
case may be, shall be the record date for such determination of shareholders.
When a determination of shareholders entitled to vote at any meeting of
shareholders has been made as provided in this Section 13, such determination
shall apply to any adjournment thereof, except where the Board of Directors
fixes a new record date for the adjourned meeting or as required by law.
Section 14. INSPECTORS AND JUDGES. The Board of Directors in advance of
any meeting may, but need not, appoint one or more inspectors of election or
judges of the vote, as the case may be, to act at the meeting or any
adjournment(s) thereof. If any inspector or inspectors, or judge or judges, are
not appointed, the person presiding at the meeting may, but need not,
4
<PAGE> 8
appoint one or more inspectors or judges. In case any person who may be
appointed as an inspector or judge fails to appear or act, the vacancy may be
filled by the Board of Directors in advance of the meeting, or at the meeting by
the person presiding thereat. The inspectors or judges, if any, shall determine
the number of shares of stock outstanding and the voting power of each, the
shares of stock represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots and consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate votes, ballots and consents, determine the
result, and do such acts as are proper to conduct the election or vote with
fairness to all shareholders. On request of the person presiding at the meeting,
the inspector or inspectors or judge or judges, if any, shall make a report in
writing of any challenge, question or matter determined by him or them, and
execute a certificate of any fact found by him or them.
Section 15. VOTING FOR DIRECTORS. Unless otherwise provided in the
Articles of Incorporation, directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
ARTICLE THREE
DIRECTORS
Section 1. NUMBER, ELECTION AND TERM. The number of directors of the
Corporation shall be fixed from time to time, within the limits specified by the
Articles of Incorporation, by resolution of the Board of Directors; provided,
however, no director's term shall be shortened by reason of a resolution
reducing the number of directors. The directors shall be elected at the annual
meeting of the shareholders, except as provided in Section 2 of this Article,
and each director elected shall hold office for the term for which he is elected
and until his successor is elected and qualified or until his earlier
resignation, removal from office or death. Directors must be natural persons who
are 18 years of age or older but need not be residents of the State of Florida,
shareholders of the Corporation or citizens of the United States. Any director
may be removed at any time, with or without cause, at a special meeting of the
shareholders called for that purpose.
Section 2. VACANCIES. A director may resign at any time by giving
written notice to the Corporation, the Board of Directors or the Chairman of the
Board. Such resignation shall take effect when the notice is delivered unless
the notice specifies a later effective date, in which event the Board of
Directors may fill the pending vacancy before the effective date if they provide
that the successor does not take office until the effective date. Any vacancy
occurring in the Board of Directors and any directorship to be filled by reason
of an increase in the size of the Board of Directors shall be filled by the
affirmative vote of a majority of the current directors though less than a
quorum of the Board of Directors, or may be filled by an election at an annual
or special meeting of the shareholders called for that purpose, unless otherwise
provided by law. A director elected to fill a vacancy shall be elected for the
unexpired term of his predecessor in office, or until the next election of one
or more directors by shareholders if the vacancy is caused by an increase in the
number of directors.
5
<PAGE> 9
Section 3. POWERS. Except as provided in the Articles of Incorporation
and by law, all corporate powers shall be exercised by or under the authority
of, and the business and affairs of the Corporation shall be managed under the
direction of, its Board of Directors.
Section 4. PLACE OF MEETINGS. Meetings of the Board of Directors,
regular or special, may be held either within or without the State of Florida.
Section 5. ANNUAL MEETING. The first meeting of each newly elected
Board of Directors shall be held, without call or notice, immediately following
each annual meeting of shareholders.
Section 6. REGULAR MEETINGS. Regular meetings of the Board of Directors
may also be held without notice at such time and at such place as shall from
time to time be determined by the Board of Directors.
Section 7. SPECIAL MEETINGS AND NOTICE. Special meetings of the Board
of Directors may be called by the Chairman of the Board or by the Chief
Executive Officer and shall be called by the Secretary on the written request of
any two directors. Written notice of special meetings of the Board of Directors
shall be given to each director at least forty-eight (48) hours before the
meeting. Except as required by statute, neither the business to be transacted
at, nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting. Notices to
directors shall be in writing and delivered personally or mailed to the
directors at their addresses appearing on the books of the Corporation. Notice
by mail shall be deemed to be given at the time when the same shall be received.
Notice to directors may also be given by telegram, teletype or other form of
electronic communication. Notice of a meeting of the Board of Directors need not
be given to any director who signs a written waiver of notice before, during or
after the meeting. Attendance of a director at a meeting shall constitute a
waiver of notice of such meeting and a waiver of any and all objections to the
place of the meeting, the time of the meeting and the manner in which it has
been called or convened, except when a director states, at the beginning of the
meeting or promptly upon arrival at the meeting, any objection to the
transaction of business because the meeting is not lawfully called or convened.
Section 8. QUORUM; REQUIRED VOTE; PRESUMPTION OF ASSENT. A majority of
the number of directors fixed by, or in the manner provided in, these bylaws
shall constitute a quorum for the transaction of business; provided, however,
that whenever, for any reason, a vacancy occurs in the Board of Directors, a
quorum shall consist of a majority of the remaining directors until the vacancy
has been filled. The act of a majority of the directors present at a meeting at
which a quorum is present when the vote is taken shall be the act of the Board
of Directors. A director of the Corporation who is present at a meeting of the
Board of Directors or a committee of the Board of Directors when corporate
action is taken shall be presumed to have assented to the action taken, unless
he objects at the beginning of the meeting, or promptly upon his arrival, to
holding the meeting or transacting specific business at the meeting, or he votes
against or abstains from the action taken.
6
<PAGE> 10
Section 9. ACTION WITHOUT MEETING. Any action required or permitted to
be taken at a meeting of the Board of Directors or a committee thereof may be
taken without a meeting if a consent in writing, setting forth the action taken,
is signed by all of the members of the Board of Directors or the committee, as
the case may be, and such consent shall have the same force and effect as a
unanimous vote at a meeting. Action taken under this section is effective when
the last director signs the consent, unless the consent specifies a different
effective date. A consent signed under this Section 9 shall have the effect of a
meeting vote and may be described as such in any document.
Section 10. CONFERENCE TELEPHONE OR SIMILAR COMMUNICATIONS EQUIPMENT
MEETINGS. Members of the Board of Directors may participate in a meeting of the
Board by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other at
the same time. Participation in such a meeting shall constitute presence in
person at the meeting, except where a person participates in the meeting for the
express purpose of objecting to the transaction of any business on the ground
the meeting is not lawfully called or convened.
Section 11. COMMITTEES. The Board of Directors, by resolution adopted
by a majority of the full Board of Directors, may designate from among its
members an executive committee and one or more other committees, each of which,
to the extent provided in such resolution, shall have and may exercise all of
the authority of the Board of Directors in the business and affairs of the
Corporation except where the action of the full Board of Directors is required
by statute. Each committee must have two or more members who serve at the
pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee shall be filled by the Board of
Directors at a regular or special meeting of the Board of Directors. The
executive committee shall keep regular minutes of its proceedings and report the
same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law.
Section 12. COMPENSATION OF DIRECTORS. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors and
may be paid a fixed sum for attendance at each meeting of the Board of Directors
or a stated salary as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
Section 13. CHAIRMAN OF THE BOARD. The Board of Directors may, in its
discretion, choose a chairman of the board who shall preside at meetings of the
shareholders and of the directors and shall be an ex officio member of all
standing committees. The Chairman of the Board shall have such other powers and
shall perform such other duties as shall be designated by the Board of
Directors. The Chairman of the Board shall be a member of the Board of Directors
but no other officers of the Corporation need be a director. The Chairman of the
Board shall
7
<PAGE> 11
serve until his successor is chosen and qualified, but he may be removed at any
time by the affirmative vote of a majority of the Board of Directors.
ARTICLE FOUR
OFFICERS
Section 1. POSITIONS. The officers of the Corporation shall consist of
a Chief Executive Officer, a President, one or more Vice Presidents, a Secretary
and a Treasurer, and, if elected by the Board of Directors by resolution, a
Chairman of the Board. Any two or more offices may be held by the same person.
Section 2. ELECTION OF SPECIFIED OFFICERS BY BOARD. The Board of
Directors at its first meeting after each annual meeting of shareholders shall
elect a Chief Executive Officer, a President, one or more Vice Presidents, a
Secretary and a Treasurer.
Section 3. ELECTION OR APPOINTMENT OF OTHER OFFICERS. Such other
officers and assistant officers and agents as may be deemed necessary may be
elected or appointed by the Board of Directors, or, unless otherwise specified
herein, appointed by the Chief Executive Officer of the Corporation. The Board
of Directors shall be advised of appointments by the Chief Executive Officer at
or before the next scheduled Board of Directors meeting.
Section 4. SALARIES. The salaries of all officers of the Corporation to
be elected by the Board of Directors pursuant to Article Four, Section 2 hereof
shall be fixed from time to time by the Board of Directors or pursuant to its
discretion. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the Chief Executive Officer of
the Corporation or pursuant to his direction.
Section 5. TERM; RESIGNATION. The officers of the Corporation shall
hold office until their successors are chosen and qualified. Any officer or
agent elected or appointed by the Board of Directors or the Chief Executive
Officer of the Corporation may be removed, with or without cause, by the Board
of Directors. Any officers or agents appointed by the Chief Executive Officer of
the Corporation pursuant to Section 3 of this Article Four may also be removed
from such officer positions by the Chief Executive Officer, with or without
cause. Any vacancy occurring in any office of the Corporation by death,
resignation, removal or otherwise shall be filled by the Board of Directors, or,
in the case of an officer appointed by the Chief Executive Officer of the
Corporation, by the Chief Executive Officer or the Board of Directors. Any
officer of the Corporation may resign from his respective office or position by
delivering notice to the Corporation. Such resignation is effective when
delivered unless the notice specifies a later effective date. If a resignation
is made effective at a later date and the Corporation accepts the future
effective date, the Board of Directors may fill the pending vacancy before the
effective date if the Board provides that the successor does not take office
until the effective date.
Section 6. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer of the
Corporation shall be the principal executive officer of the Corporation and
shall, in general, supervise and
8
<PAGE> 12
control all the business and affairs of the Corporation, unless otherwise
provided by the Board of Directors. He shall have such other powers and perform
such other duties as may, from time to time, be specified by the Board of
Directors, and all other officers and personnel of the Corporation shall report
directly or indirectly to the Chief Executive Officer. In the absence of the
Chairman of the Board or in the event the Board of Directors shall not have
designated a Chairman of the Board, the Chief Executive Officer shall preside at
meetings of the shareholders and the Board of Directors.
Section 7. PRESIDENT. The President shall have such powers and shall
discharge such duties as are generally incident to the office of the President
or as may be assigned to him from time to time by the Board of Directors. If the
President is not the Chief Executive Officer, he shall have such additional
powers and duties as may be assigned to him from time to time by the Chief
Executive Officer. In the absence of both the Chairman of the Board and the
Chief Executive Officer, he shall, when present, preside at all meetings of the
shareholders and the Board of Directors.
Section 8. CHIEF OPERATING OFFICER. If, pursuant to Article Four,
Section 3 of these Bylaws, the Board of Directors has elected or appointed a
Chief Operating Officer of the Corporation, the Chief Operating Officer shall
have such duties and responsibilities, under the general supervision of the
Chief Executive Officer, as the Chief Executive Officer or the Board of
Directors may from time to time prescribe.
Section 9. VICE PRESIDENTS. The Vice Presidents in the order of their
seniority, unless otherwise determined by the Board of Directors, shall, in the
absence or disability of the President, perform the duties and exercise the
powers of the President. They shall perform such other duties and have such
other powers as the Board of Directors shall prescribe or as the Chief Executive
Officer or the President may from time to time delegate.
Section 10. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and all meetings of the shareholders and record all the
proceedings of the meetings of the shareholders and of the Board of Directors in
a book to be kept for that purpose and shall perform like duties for the
standing committees when required. He or she shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors, and shall perform such other duties as may be prescribed by the Board
of Directors or the Chief Executive Officer, under whose supervision he shall
be. He shall keep in safe custody the seal of the Corporation and, when
authorized by the Board of Directors, affix the same to any instrument requiring
it.
Section 11. TREASURER. The Treasurer shall have the custody of
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and shall
render to the Chief Executive Officer and the Board of Directors at its regular
meetings or when the Board of Directors so
9
<PAGE> 13
requires an account of all his transactions as treasurer and of the financial
condition of the Corporation unless otherwise specified by the Board of
Directors, the Treasurer shall be the Corporation's Chief Financial Officer.
Section 12. OTHER OFFICERS, EMPLOYEES AND AGENTS. Each and every other
officer, employee and agent of the Corporation shall possess, and may exercise,
such power and authority, and shall perform such duties, as may from time to
time be assigned to him by the Board of Directors, the officer so appointing him
and such officer or officers who may from time to time be designated by the
Board of Directors to exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. ISSUE OF CERTIFICATES. The Corporation shall deliver
certificates representing all shares to which shareholders are entitled; and
such certificates shall be signed by the Chairman of the Board, the Chief
Executive Officer, the President or a Vice President, and by the Secretary or an
Assistant Secretary of the Corporation, and may be sealed with the seal of the
Corporation or a facsimile thereof.
Section 2. LEGENDS FOR PREFERENCES AND RESTRICTIONS ON TRANSFER. The
designations, relative rights, preferences and limitations applicable to each
class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on request and without charge.
Every certificate representing shares that are restricted as to the sale,
disposition, or transfer of such shares shall also indicate that such shares are
restricted as to transfer and there shall be set forth or fairly summarized upon
the certificate, or the certificate shall indicate that the Corporation will
furnish to any shareholder upon request and without charge, a full statement of
such restrictions. If the Corporation issues any shares that are not registered
under the Securities Act of 1933, as amended, and registered or qualified under
the applicable state securities laws, the transfer of any such shares shall be
restricted substantially in accordance with the following legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT BE OFFERED
FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1) REGISTRATION UNDER
THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE LAW, OR (2) AT
HOLDER'S EXPENSE, AN OPINION (SATISFACTORY TO THE CORPORATION) OF
COUNSEL (SATISFACTORY TO THE CORPORATION) THAT REGISTRATION IS NOT
REQUIRED."
10
<PAGE> 14
Section 3. FACSIMILE SIGNATURES. The signatures of the Chairman of the
Board, the Chief Executive Officer, the President or a Vice President, and the
Secretary or Assistant Secretary upon a certificate may be facsimiles, if the
certificate is manually signed by a transfer agent, or registered by a
registrar, other than the Corporation itself or an employee of the Corporation.
In case any officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the date of the issuance.
Section 4. LOST CERTIFICATES. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue of
a new certificate or certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate alleged
to have been lost or destroyed.
Section 5. TRANSFER OF SHARES. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
Section 6. REGISTERED SHAREHOLDERS. The Corporation shall be entitled
to recognize the exclusive rights of a person registered on its books as the
owner of shares to receive dividends, and to vote as such owner, and shall not
be bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Florida.
ARTICLE SIX
GENERAL PROVISIONS
Section 1. DIVIDENDS. The Board of Directors may from time to time
declare, and the Corporation may pay, dividends on its outstanding shares in
cash, property, or its own shares pursuant to law and subject to the provisions
of the Articles of Incorporation.
Section 2. RESERVES. The Board of Directors may by resolution create a
reserve or reserves out of earned surplus for any proper purpose or purposes,
and may abolish any such reserve in the same manner.
11
<PAGE> 15
Section 3. CHECKS. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the Corporation shall end on
May 31 of each year, unless otherwise fixed by resolution of the Board of
Directors.
Section 5. SEAL. The corporate seal shall have inscribed thereon the
name and state of incorporation of the Corporation. The seal may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
Section 6. GENDER. All words used in these Bylaws in the masculine
gender shall extend to and shall include the feminine and neuter genders.
ARTICLE SEVEN
AMENDMENTS OF BYLAWS
Unless otherwise provided by law, these Bylaws may be altered, amended
or repealed or new Bylaws may be adopted by action of the Board of Directors.
12
<PAGE> 1
Exhibit 4.1
WINSLOEW ESCROW CORP.
12 3/4% SENIOR SUBORDINATED NOTES DUE 2007
INDENTURE
DATED AS OF AUGUST 24, 1999
AMERICAN STOCK TRANSFER & TRUST COMPANY,
TRUSTEE
<PAGE> 2
CROSS-REFERENCE TABLE*
<TABLE>
<CAPTION>
Trust Indenture Act
Section Indenture
<S> <C>
310 (a)(1)...............................................................................................7.10
(a)(2) ..............................................................................................7.10
(a)(3)...............................................................................................N.A.
(a)(4)...............................................................................................N.A.
(a)(5)...............................................................................................7.10
(b)..................................................................................................7.10
(c)..................................................................................................N.A.
311 (a)..................................................................................................7.11
(b)..................................................................................................7.11
(c)..................................................................................................N.A.
312 (a)..................................................................................................2.05
(b).................................................................................................10.03
(c).................................................................................................10.03
313 (a)..................................................................................................7.06
(b)(2)...............................................................................................7.07
(c)..................................................................................................7.06;
10.02
314 (a)..................................................................................................4.03;
10.02
(c)(1)..............................................................................................10.04
(c)(2)..............................................................................................10.04
(c)(3)...............................................................................................N.A.
(e).................................................................................................10.05
(f)....................................................................................................NA
315 (a)..................................................................................................7.01
(b)..................................................................................................7.05,
10.02
(c)..................................................................................................7.01
(d)..................................................................................................7.01
(e)..................................................................................................6.11
316 (a)(last sentence)...................................................................................2.09
(a)(1)(A)............................................................................................6.05
(a)(1)(B)............................................................................................6.04
(a)(2)...............................................................................................N.A.
(b)..................................................................................................6.07
(c)..................................................................................................2.12
317 (a)(1)...............................................................................................6.08
(a)(2)...............................................................................................6.09
(b)..................................................................................................2.04
318 (a).................................................................................................10.01
(b)..................................................................................................N.A.
(c).................................................................................................10.01
</TABLE>
N.A. means not applicable.
*This Cross-Reference Table is not part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE............................................................1
SECTION 1.01. DEFINITIONS....................................................................................1
SECTION 1.02. OTHER DEFINITIONS.............................................................................17
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.............................................17
SECTION 1.04. RULES OF CONSTRUCTION.........................................................................18
ARTICLE 2. THE NOTES............................................................................................18
SECTION 2.01. FORM AND DATING...............................................................................18
SECTION 2.02. EXECUTION AND AUTHENTICATION..................................................................19
SECTION 2.03. REGISTRAR AND PAYING AGENT....................................................................19
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST...........................................................20
SECTION 2.05. HOLDER LISTS..................................................................................20
SECTION 2.06. TRANSFER AND EXCHANGE.........................................................................20
SECTION 2.07. REPLACEMENT NOTES.............................................................................31
SECTION 2.08. OUTSTANDING NOTES.............................................................................31
SECTION 2.09. TREASURY NOTES................................................................................32
SECTION 2.10. TEMPORARY NOTES...............................................................................32
SECTION 2.11. CANCELLATION..................................................................................32
SECTION 2.12. DEFAULTED INTEREST............................................................................32
SECTION 2.13. CUSIP NUMBERS.................................................................................33
ARTICLE 3. REDEMPTION AND PREPAYMENT............................................................................33
SECTION 3.01. NOTICES TO TRUSTEE............................................................................33
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.............................................................33
SECTION 3.03. NOTICE OF REDEMPTION..........................................................................34
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION................................................................34
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE...................................................................34
SECTION 3.06. NOTES REDEEMED IN PART........................................................................35
SECTION 3.07. OPTIONAL REDEMPTION...........................................................................35
SECTION 3.08. MANDATORY REDEMPTION..........................................................................35
SECTION 3.09. OFFER TO PURCHASE.............................................................................36
ARTICLE 4. COVENANTS............................................................................................37
SECTION 4.01. PAYMENT OF NOTES..............................................................................37
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY...............................................................38
SECTION 4.03. REPORTS.......................................................................................38
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
SECTION 4.04. COMPLIANCE CERTIFICATE........................................................................39
SECTION 4.05. TAXES.........................................................................................39
SECTION 4.06. STAY, EXTENSION AND USURY LAWS................................................................39
SECTION 4.07. RESTRICTED PAYMENTS...........................................................................40
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES................................42
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK....................................43
SECTION 4.10. ASSET SALES...................................................................................45
SECTION 4.11. TRANSACTIONS WITH AFFILIATES..................................................................46
SECTION 4.12. LIENS.........................................................................................47
SECTION 4.13. CORPORATE EXISTENCE...........................................................................47
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL....................................................47
SECTION 4.15. PAYMENTS FOR CONSENT..........................................................................48
SECTION 4.16. SALE AND LEASEBACK TRANSACTIONS...............................................................48
ARTICLE 5. SUCCESSORS...........................................................................................49
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS......................................................49
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.............................................................49
ARTICLE 6. DEFAULTS AND REMEDIES................................................................................49
SECTION 6.01. EVENTS OF DEFAULT.............................................................................49
SECTION 6.02. ACCELERATION..................................................................................51
SECTION 6.03. OTHER REMEDIES................................................................................51
SECTION 6.04. WAIVER OF PAST DEFAULTS.......................................................................51
SECTION 6.05. CONTROL BY MAJORITY...........................................................................52
SECTION 6.06. LIMITATION ON SUITS...........................................................................52
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.................................................52
SECTION 6.08. COLLECTION SUIT BY TRUSTEE....................................................................52
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM..............................................................53
SECTION 6.10. PRIORITIES....................................................................................53
SECTION 6.11. UNDERTAKING FOR COSTS.........................................................................53
ARTICLE 7. TRUSTEE..............................................................................................54
SECTION 7.01. DUTIES OF TRUSTEE.............................................................................54
SECTION 7.02. RIGHTS OF TRUSTEE.............................................................................55
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE..................................................................55
SECTION 7.04. TRUSTEE'S DISCLAIMER..........................................................................55
SECTION 7.05. NOTICE OF DEFAULTS............................................................................56
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES....................................................56
SECTION 7.07. COMPENSATION AND INDEMNITY....................................................................56
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
SECTION 7.08. REPLACEMENT OF TRUSTEE........................................................................57
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC..............................................................58
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.................................................................58
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.............................................58
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.............................................................58
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE......................................58
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE................................................................58
SECTION 8.03. COVENANT DEFEASANCE...........................................................................59
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE....................................................59
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST; OTHER
MISCELLANEOUS PROVISIONS......................................................................60
SECTION 8.06. REPAYMENT TO COMPANY..........................................................................61
SECTION 8.07. REINSTATEMENT.................................................................................61
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.....................................................................61
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES...........................................................61
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES..............................................................62
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT...........................................................63
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.............................................................63
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES..............................................................64
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC...............................................................64
ARTICLE 10. MISCELLANEOUS.......................................................................................64
SECTION 10.01. TRUST INDENTURE ACT CONTROLS..................................................................64
SECTION 10.02. NOTICES.......................................................................................64
SECTION 10.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.................................66
SECTION 10.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT............................................66
SECTION 10.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.................................................66
SECTION 10.06. RULES BY TRUSTEE AND AGENTS...................................................................66
SECTION 10.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS......................67
SECTION 10.08. GOVERNING LAW.................................................................................67
SECTION 10.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.................................................67
SECTION 10.10. SUCCESSORS....................................................................................67
SECTION 10.11. SEVERABILITY..................................................................................67
SECTION 10.12. COUNTERPART ORIGINALS.........................................................................67
SECTION 10.13. TABLE OF CONTENTS, HEADINGS, ETC..............................................................67
ARTICLE 11. SUBORDINATION.......................................................................................68
SECTION 11. 01. AGREEMENT TO SUBORDINATE......................................................................68
</TABLE>
iii
<PAGE> 6
<TABLE>
<S> <C>
SECTION 11.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY..........................................................68
SECTION 11.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.....................................................68
SECTION 11.04. ACCELERATION OF NOTES.........................................................................69
SECTION 11.05. WHEN DISTRIBUTION MUST BE PAID OVER...........................................................69
SECTION 11.06. NOTICE BY THE COMPANY.........................................................................70
SECTION 11.07. SUBROGATION...................................................................................70
SECTION 11.08. RELATIVE RIGHTS...............................................................................70
SECTION 11.09. SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY..............................................70
SECTION 11.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE......................................................71
SECTION 11.11. RIGHTS OF TRUSTEE AND PAYING AGENT............................................................71
SECTION 11.12. AUTHORIZATION TO EFFECT SUBORDINATION.........................................................71
SECTION 11.13. PAYMENT.......................................................................................71
ARTICLE 12. NOTE GUARANTEES.....................................................................................72
SECTION 12.01. GUARANTEE.....................................................................................72
SECTION 12.02. ADDITIONAL NOTE GUARANTEES....................................................................73
SECTION 12.03. LIMITATION ON GUARANTOR LIABILITY.............................................................74
SECTION 12.04. EXECUTION AND DELIVERY OF NOTE GUARANTEE......................................................74
SECTION 12.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS............................................74
SECTION 12.06. RELEASES FOLLOWING SALE OF ASSETS.............................................................75
</TABLE>
EXHIBITS
Exhibit A FORM OF NOTE
Exhibit B FORM OF CERTIFICATE OF TRANSFER
Exhibit C FORM OF CERTIFICATE OF EXCHANGE
Exhibit D FORM OF NOTATION ON NOTE RELATING TO SUBSIDIARY GUARANTEE
Exhibit E FORM OF SUPPLEMENTAL INDENTURE TO BE DELIVERED BY GUARANTORS
Exhibit F FORM OF CERTIFICATE FROM ACQUIRING INSTITUTIONAL ACCREDITED
INVESTOR
iv
<PAGE> 7
INDENTURE dated as of August 24, 1999 between WinsLoew Escrow
Corp., a Delaware corporation (the "Company"), and American Stock Transfer &
Trust Company, a New York corporation, as trustee (the "Trustee").
The Company and the Trustee agree as follows for the benefit
of each other and for the equal and ratable benefit of the Holders of the 12
3/4% Senior Subordinated Notes due 2007 (the "Initial Notes") and the 12 3/4%
Senior Subordinated Notes due 2007 to be used in exchange for such Initial
Notes in the Exchange Offer (the "Exchange Notes" and, together with the
Initial Notes and any notes that may be issued in the future in accordance with
Section 2.01(d), the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in substantially the
form of Exhibit A hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of, and registered in the name
of, the Depositary or its nominee that shall be issued in a denomination equal
to the outstanding principal amount of the Notes sold in reliance on Rule 144A.
"Accredited Investor Global Note" means a global note in
substantially the form of Exhibit A hereto bearing the Global Note Legend and
the Private Placement Legend and deposited with or on behalf of, and registered
in the name of, the Depositary or its nominee that shall be initially issued in
a denomination equal to $0, but shall thereafter be revised to represent the
outstanding principal amount of the Notes transferred to Institutional
Accredited Investors.
"Acquired Debt" means, with respect to any specified Person,
(1) Indebtedness of any other Person existing at the time such other Person is
merged with or into or becomes a Subsidiary of such specified Person, including
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person; and (2) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means any additional notes that the
Company may issue pursuant to Section 2.01(d) of this Indenture.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided, however, that beneficial ownership of 10% or more of the voting
securities of a Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer
or exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary that apply to such transfer or exchange.
<PAGE> 8
"Asset Sale" means (a) the sale, lease, conveyance or other
disposition of any assets or rights including, without limitation, by way of a
sale and leaseback, excluding sales of services and products in the ordinary
course of business consistent with past practices, provided that the sale,
lease, conveyance or other disposition of all or substantially all of the
assets of the Company and its Restricted Subsidiaries taken as a whole shall be
governed by Section 4.14 and/or Section 5.01 hereof and not by Section 4.10
hereof, and (b) the issue or sale by the Company or any of its Subsidiaries of
Equity Interests of any of the Subsidiaries. Notwithstanding the foregoing,
none of the following shall be deemed an Asset Sale: (A) a single transaction
or a series of related transactions that (i) involve assets having a fair
market of less than $2.0 million, (ii) results in net proceeds to the Company
and its Restricted Subsidiaries of less than $2.0 million, or (iii) involves a
transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (B) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (C) the transfer of obsolete equipment in the ordinary course of
business and (D) a Restricted Payment that is permitted under Section 4.07.
"Attributable Debt" in respect of a sale and leaseback
transaction means, at the time of determination, the present value (discounted
at the rate of interest implicit in that transaction, determined in accordance
with GAAP) of the obligation of the lessee for net rental payments during the
remaining term of the lease included in the sale and leaseback transaction
(including any period for which the lease has been extended or may, at the
option of the lessor, be extended).
"Average Life" means, as of the date of determination, with
respect to any Indebtedness or Preferred Stock, the quotient obtained by
dividing (i) the sum of the products of numbers of years from the date of
determination to the dates of each successive scheduled principal payment of
such Indebtedness or redemption or similar payment with respect to such
Preferred Stock multiplied by the amount of such payment by (ii) the sum of all
such payments.
"Bankruptcy Law" means Title 11, U.S. Code or any similar
federal or state law for the relief of debtors.
"Board of Directors" means (1) in respect of a limited
liability company, the board of advisors of the Company; (2) in respect of a
corporation, the board of directors of the corporation, or any authorized
committee thereof; and (3) in respect of any other Person, the board or
committee of that Person serving a similar function.
"Board Resolution" means
"Broker-Dealer" has the meaning set forth in the Registration
Rights Agreement.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any
determination thereof is to be made, the amount of the liability in respect of
a capital lease that would at such time be required to be capitalized on a
balance sheet in accordance with GAAP.
"Capital Stock" means (a) in the case of a corporation,
corporate stock, (b) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (c) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (d) any other interest or participation
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that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (a) United States dollars, (b)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than one year from the date of acquisition, (c) certificates of
deposit and eurodollar time deposits with maturities of one year or less from
the date of acquisition, bankers' acceptances with maturities not exceeding one
year and overnight bank deposits, in each case with any domestic commercial
bank or U.S. branch of a foreign commercial bank having capital and surplus in
excess of $200-250 million and a Thompson Bank Watch Rating of "B" or better,
(d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (b) and (c) above
entered into with any financial institution meeting the qualifications
specified in clause (c) above, and (e) commercial paper having the highest
rating obtainable from Moody's Investors Service, Inc. or Standard & Poor's
Rating Service and in each case maturing within 270 days after the date of
acquisition.
"Cedel" means Cedel Bank, S.A.
"Change of Control" means the occurrence of any of the
following: (a) the sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" or "group" (as such terms are
used in Section 13(d)(3) of the Exchange Act) (whether or not otherwise in
compliance with this Indenture) other than to a Permitted Holder; (b) the
adoption of a plan relating to the liquidation or dissolution of the Company;
(c) the consummation of any transaction (including, without limitation, any
merger or consolidation) the result of which is that any "person" or "group"
(as such terms are used in Section 13(d)(3) of the Exchange Act), other than a
Permitted Holder or any underwriters in connection with an underwritten public
offering, becomes the "beneficial owner" (as such term is defined in Rule 13d-3
and Rule 13d-5 under the Exchange Act), except that a person or group shall be
deemed to have "beneficial ownership" of all securities that the person or
group has the right to acquire, whether the right is currently exercisable or
is exercisable only upon the occurrence of a subsequent condition, directly or
indirectly, of more than 35% of the Voting Equity Interests of the Company
(measured by voting power rather than the number of shares); (d) the first day
on which more than a majority of the members of the Board of Directors of the
Company are not Continuing Directors; or (e) the Company consolidates with, or
merges with or into, any Person, or any Person consolidates with, or merges
with or into, the Company, in any such event pursuant to a transaction in which
any of the outstanding Voting Equity Interests of the Company is converted into
or exchanged for cash, securities or other property, other than any such
transaction where the Voting Equity Interests of the Company outstanding
immediately prior to such transaction is converted into or exchanged for Voting
Equity Interests (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Equity
Interests of such surviving or transferee Person immediately after giving
effect to such issuance.
"Company" means WinsLoew Escrow Corp., a Florida corporation,
and any and all successors thereto.
"Consolidated EBITDA" means, with respect to any Person for
any period, the sum of Consolidated Net Income of such Person for such period
plus, to the extent deducted in calculating Consolidated Net Income for such
period, (a) an amount equal to any extraordinary loss plus any net loss
realized in connection with an Asset Sale, plus (b) provision for taxes based
on income or profits of such Person and its Restricted Subsidiaries for such
period, plus (c) consolidated interest expense whether paid
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<PAGE> 10
or accrued and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount, non-cash
interest payments, the interest component of any deferred payment obligations,
the interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings, and net payments
(if any) pursuant to Hedging Obligations), plus (d) depreciation and
amortization (including amortization of goodwill and other intangibles but
excluding amortization of prepaid cash expenses that were paid in a prior
period) other non-cash charges (including non-cash equity based compensation
charges but excluding any non-cash charge to the extent that it represents an
accrual of or reserve for cash charges in any future period or amortization of
a prepaid cash expense that was paid in a prior period), minus (e)
non-recurring non-cash items increasing such Consolidated Net Income for such
period. Notwithstanding the foregoing, (i) the provision for taxes based on the
income or profits of, and the depreciation and amortization of, a Restricted
Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated EBITDA only to the extent (and in the same proportion) that the
Net Income of the Restricted Subsidiary was included in calculating the
Consolidated Net Income of the Person and only if a corresponding amount would
be permitted at the date of determination to be dividended to the Company by
the Restricted Subsidiary without prior approval (that has not been obtained)
pursuant to the terms of its charter and all agreements, instruments,
judgments, decrees, orders, statutes, rules and governmental regulations
applicable to the Restricted Subsidiary or its stockholders and (ii) the Net
Income (but not loss) of any Unrestricted Subsidiary shall be excluded from
Consolidated Net Income, whether or not distributed to the Company or one of
its Restricted Subsidiaries.
"Consolidated Net Assets" means the total assets of the
Company determined on a consolidated basis in accordance with GAAP, less
current liabilities except for notes payable and current maturities of
long-term Indebtedness, including current portions payable of Capital Lease
Obligations.
"Consolidated Net Income" means, with respect to any Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided, however, that (a) the Net Income (but not loss)
of any Person (other than the referent Person) that is not a Restricted
Subsidiary (including Unrestricted Subsidiaries) or that is accounted for by
the equity method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash in the relevant period to the
referent Person or a Wholly Owned Restricted Subsidiary thereof, (b) the Net
Income of any Restricted Subsidiary shall be excluded to the extent that the
declaration or payment of dividends or similar distributions by that Restricted
Subsidiary of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Restricted Subsidiary or its stockholders, (c)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded and (d) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as
of any date, the sum of (a) the consolidated equity of the common stockholders
or members, as applicable, of the Person and its consolidated Subsidiaries as
of that date; plus (b) the respective amounts reported on the balance sheet of
the Person as of that date with respect to any series of Preferred Stock (other
than Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless the dividends may be declared and paid only out of net
earnings in respect of the year of the declaration and payment, but only to the
extent of any cash received by that Person upon issuance of the Preferred
Stock; less the sum of: (c) all write-ups (other than write-ups resulting from
foreign currency translations and write-ups of tangible assets of a going
concern business made within 12 months after the acquisition of the business)
subsequent to the date
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<PAGE> 11
hereof in the book value of any asset owned by that Person by its consolidated
Subsidiaries; (d) all investments as of that date in unconsolidated
Subsidiaries and in Persons that are not Subsidiaries; and (e) all unamortized
debt discount and expense and unamortized deferred charges as of that date, in
each case, determined in accordance with GAAP.
"Continuing Directors" means, as of any date of
determination, any member of the Board of Directors who (a) was a member of the
Board of Directors on the date of this Indenture or (b) was nominated for
election to the Board of Directors with the approval of a majority of the
Continuing Directors who were members of the Board of Directors at the time of
such nomination or election.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 10.02 hereof or such other address
as to which the Trustee may give notice to the Company.
"Custodian" means the Trustee, as custodian with respect to
the Notes in global form, or any successor entity thereto.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Definitive Note" means a certificated Note registered in the
name of the Holder thereof and issued in accordance with Section 2.06 hereof,
in substantially the form of Exhibit A hereto except that such Note shall not
bear the Global Note Legend and shall not have the "Schedule of Exchanges of
Interests in the Global Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Notes, and any and all successors
thereto appointed as depositary hereunder and having become such pursuant to
the applicable provision of this Indenture.
"Designated Senior Debt" means any Indebtedness outstanding
under the Senior Credit Facility and any other Senior Indebtedness or Guarantor
Senior Indebtedness permitted to be incurred under this Indenture the original
principal amount of which is $25.0 million or more and that has been designated
by the Company as "Designated Senior Debt" for purposes of this Indenture.
"Disqualified Stock" means any Capital Stock that, by its
terms (or by the terms of any security into which it is convertible, or for
which it is exchangeable), or upon the happening of any event (other than as a
result of an optional call for recapitalization by the Company), matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the Holder thereof (other than as a result of a
"change of control" or asset sale), in whole or in part, on or prior to the
date that is 91 days after the stated maturity date of the Notes.
Notwithstanding the preceding sentence, any Capital Stock that would constitute
Disqualified Stock solely because the holders thereof have the right to require
the Company to repurchase such Capital Stock upon the occurrence of a change of
control or with the proceeds of an asset sale shall not constitute Disqualified
Stock if the terms of such Capital Stock provide that the Company may not
repurchase or redeem any such Capital Stock pursuant to such provisions unless
such repurchase or redemption complies with Section 4.07.
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
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<PAGE> 12
"Escrow Agreement" means the Escrow, Control and Security
Agreement, dated as of the date hereof between the Trustee and the Company with
respect to the Escrowed Funds.
"Escrowed Funds" means the $99,634,229 of the net proceeds
from the sale of the Notes, together with an additional $4,622,876 deposited
into escrow by the Company and its Affiliates, deposited into escrow with the
Trustee under the Escrow Agreement.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear systems.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means the Notes to be issued in the Exchange
Offer pursuant to Section 2.06(e) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set
forth in the Registration Rights Agreement.
"Existing Indebtedness" means up to $24,000 in aggregate
principal amount of Indebtedness (other than Indebtedness under the Senior
Credit Facility) in existence on the date of this Indenture, until that
Indebtedness is repaid.
"Fixed Charges" means, with respect to any Person for any
period, the sum, without duplication, of (a) the consolidated interest expense
of such Person and its Restricted Subsidiaries for such period (including
amortization of debt issuance costs or write-off of debt issuance costs),
whether paid or accrued and whether or not capitalized, including, without
limitation, original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), (b) the consolidated interest expense of such Person and its
Restricted Subsidiaries that was capitalized during such period, (c) any
interest expense on Indebtedness of another Person that is guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such
guarantee or Lien is called upon) and (d) the product of (i) all dividend
payments, whether or not in cash, on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, other than dividend payments on
Equity Interests (other than Disqualified Stock) payable solely in Equity
Interests (other than Disqualified Stock) of the Company or to the Company or a
Restricted Subsidiary, times (ii) a fraction, the numerator of which is one and
the denominator of which is one minus the then current combined federal, state
and local statutory tax rate of such Person, expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any
Person for any period, the ratio of the Consolidated EBITDA of such Person and
its Restricted Subsidiaries for that period to the Fixed Charges of such Person
and its Restricted Subsidiaries for the same period. In the event that the
Company or any of its Restricted Subsidiaries incurs, assumes, guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues
Preferred Stock subsequent to the commencement of the period for which the
Fixed Charge Coverage Ratio is being calculated but prior to the date on which
the event for which the calculation of the Fixed Charge Coverage Ratio is made
(the "Calculation Date"),
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<PAGE> 13
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma
effect to the incurrence, assumption, guarantee or redemption of such
Indebtedness, or the issuance or redemption of such Preferred Stock and the
application of the proceeds therefrom, as if the same had occurred at the
beginning of the applicable four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge
Coverage Ratio, (a) acquisitions that have been made by the specified Person or
any of its Restricted Subsidiaries, including through mergers or consolidations
and including any related financing transactions, during the four-quarter
reference period or subsequent to that reference period and on or prior to the
Calculation Date shall be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated EBITDA for that reference period
shall be calculated without giving effect to clause (c) of the proviso set
forth in the definition of Consolidated Net Income; (b) the Consolidated EBITDA
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall
be excluded, as though such operations had been discontinued or such operations
or businesses had been disposed of on the first day of the four-quarter
reference period; and (c) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, but only to the
extent that the obligations giving rise to the Fixed Charges shall not be
obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of this
Indenture.
"Global Note Legend" means the legend set forth in Section
2.06(f)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Global Notes" means, individually and collectively, each of
the Restricted Global Notes and the Unrestricted Global Notes in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including by way of a pledge of assets or
through letters of credit or reimbursement agreements in respect thereof), of
all or any part of any Indebtedness.
"Guarantors" means each Restricted Subsidiary formed or
organized under the laws of any state of the United States or District of
Columbia, that executes a Note Guarantee pursuant to Article 12 of this
Indenture.
"Guarantor Senior Debt" means with respect to any Guarantor
(1) all Indebtedness of the Guarantor outstanding under the Senior Credit
Facility and all Hedging Obligations with respect thereto; (2) any other
Indebtedness of the Guarantor permitted to be incurred under the terms of this
Indenture, unless the instrument under which the Indebtedness is incurred
expressly provides that it is subordinated or ranks equally in right of payment
to the Note Guarantee of the Guarantor; and (3) all
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<PAGE> 14
Obligations of the Guarantor with respect to the foregoing Indebtedness.
Notwithstanding anything to the contrary in the foregoing, Guarantor Senior
Debt shall not include (1) any liability for federal, state, local or other
taxes owed or owing by the Guarantor; (2) any Indebtedness of the Guarantor to
any of its Subsidiaries or other Affiliates; (3) any trade payables; or (4) any
Indebtedness that is incurred in violation of this Indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (b) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means a Person in whose name a Note is registered.
"Incur" means create, incur, issue, assume, guarantee or
otherwise become liable, directly or indirectly, contingently or otherwise, for
any Indebtedness. The term "Incurrence" when used as a noun shall have a
correlative meaning. The accretion of principal of a non-interest bearing or
other discount security shall not be deemed the Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person, any
indebtedness of such Person, whether or not contingent, in respect of (a)
borrowed money or (b) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in respect
thereof) or (c) banker's acceptances or (d) representing Capital Lease
Obligations or (e) the deferred and unpaid balance of the purchase price of any
property, except any such balance that constitutes an accrued expense or trade
payable, or (f) representing any Hedging Obligations if and to the extent any
of the foregoing indebtedness (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the
guarantee by such Person of any Indebtedness of any other Person. The amount of
Indebtedness outstanding as of any date shall be (a) the accreted value
thereof, to the extent any Indebtedness that does not require current payments
of interest, and (b) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness. Except as required by the prior sentence, Indebtedness shall not
include any interest or similar obligations.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with Article 9 hereof.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $105.0 million in aggregate principal
amount of Notes issued under this Indenture on the date hereof.
"Initial Purchasers" means Bear, Stearns & Co. Inc., First
Union Capital Markets Corp. and BancBoston Robertson Stephens Inc.
"Institutional Accredited Investor" means an "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act.
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<PAGE> 15
"Investments" means, with respect to any Person, all
investments by such Person in other Persons (including Affiliates) in the form
of direct or indirect loans (including Guarantees of Indebtedness or other
obligations), advances or capital contributions (excluding commission, travel
and similar advances to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of Indebtedness,
Equity Interests or other securities, together with all items that are or would
be classified as investments on a balance sheet prepared in accordance with
GAAP. If the Company or any Restricted Subsidiary of the Company sells or
otherwise disposes of any Equity Interests of any direct or indirect Restricted
Subsidiary of the Company such that, after giving effect to any such sale or
disposition, such Person is no longer a Restricted Subsidiary of the Company,
the Company shall be deemed to have made an Investment on the date of any such
sale or disposition equal to the fair market value of the Equity Interests of
such Restricted Subsidiary not sold or disposed of in an amount determined as
provided in Section 4.07.
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a payment
date is a Legal Holiday at a place of payment, payment may be made at that
place on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue on such payment for the intervening period.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law, including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction.
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Management Agreement" means that certain Investment Services
Agreement, to be dated on or about the date of the closing of the Transaction.
"Net Income" means, with respect to any Person, the net
income (loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of changes related to preferred stock, excluding, however,
(a) any gain (but not loss), together with any related provision for taxes on
such gain (but not loss), realized in connection with (i) any Asset Sale
(including dispositions pursuant to sale and leaseback transactions) or (ii)
the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (b) any extraordinary or nonrecurring gain (but
not loss), together with any related provision for taxes on such extraordinary
or nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by
the Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
(i) the direct costs relating to such Asset Sale (including legal, accounting
and investment banking fees, and sales commissions and all title and recording
taxes) and any relocation expenses incurred as a result thereof, taxes paid or
payable as a result thereof, in each case after taking into account any
available tax
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<PAGE> 16
credits or deductions and any tax sharing arrangements, and (ii) amounts
required to be applied to the repayment of Indebtedness other than Senior
Indebtedness, Indebtedness secured by a Lien on the asset or assets that were
the subject of such Asset Sale, provided, however, if the instrument or
agreement governing such Asset Sale requires the transferor to maintain a
portion of the purchase price in escrow (whether as a reserve for adjustment of
the purchase price or otherwise) or to indemnify the transferee for specified
liabilities in a maximum specified amount, the portion of the cash or Cash
Equivalents that is actually placed in escrow or segregated and set aside by
the transferor for such indemnification obligation shall not be deemed to be
Net Proceeds until the escrow terminates or the transferor ceases to segregate
and set aside such funds, in whole or in part, and then only to the extent of
the proceeds released from escrow to the transferor or that are no longer
segregated and set aside by the transferor.
"Non-Recourse Debt" means Indebtedness (i) as to which
neither the Company nor any of its Restricted Subsidiaries (a) provides credit
support of any kind (including any undertaking, agreement or instrument that
would constitute Indebtedness), (b) is directly or indirectly liable (as a
Guarantor or otherwise), or (c) constitutes the lender; and (ii) no default
with respect to which (including any rights that the holders thereof may have
to take enforcement action against an Unrestricted Subsidiary) would permit
(upon notice, lapse of time or both) any holder of any other Indebtedness
(other than the Notes) of the Company or any of its Restricted Subsidiaries to
declare a default on such Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (3) as to which the
lenders have been notified in writing that they shall not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and on the Notes, executed
pursuant to the provisions of Article 12 of this Indenture.
"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company
pursuant to the Offering Memorandum.
"Offering Memorandum" means the offering memorandum of the
Company, dated August 19, 1999, relating to the Initial Notes.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
the Controller, the Secretary, any Assistant Secretary or any Vice-President of
such Person.
"Officers' Certificate" means a certificate signed on behalf
of the Company by at least one Officer of the Company, who must be the
principal executive officer, the principal financial officer, the treasurer or
the principal accounting officer of the Company, that meets the requirements of
Sections 10.04 and 10.05 hereof.
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"Opinion of Counsel" means an opinion from legal counsel who
is reasonably acceptable to the Trustee, that meets the requirements of
Sections 10.04 and 10.05 hereof. The counsel may be an employee of or counsel
to the Company, any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary,
Euroclear or Cedel, a Person who has an account with the Depositary, Euroclear
or Cedel, respectively, and, with respect to the Depository Trust Company,
shall include Euroclear and Cedel.
"Permitted Business" shall mean and include the manufacture,
sale or distribution of products furnished in the furniture manufacturing
industry. Without limiting the foregoing, "Permitted Business" shall include
lines of businesses which are related or complementary to any of the above,
including the acquisition and ownership of firms which are principally but not
exclusively engaged in one or more of the above lines, and any businesses which
are, in the reasonable judgment of the Board of Directors as set forth in a
resolution of the Board of Directors, logical extensions of any of the above.
"Permitted Holder" means Trivest, Inc. and any Affiliate of
Trivest, Inc.
"Permitted Investments" means (a) any Investment in the
Company or in a Wholly Owned Restricted Subsidiary of the Company; (b) any
Investment in Cash Equivalents; (c) any Investment by the Company or any
Restricted Subsidiary in a Person if as a result of such Investment (i) such
Person becomes a Wholly Owned Restricted Subsidiary or (ii) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Wholly Owned Restricted Subsidiary, (d) any Investment made as a result of the
receipt of non-cash consideration from an Asset Sale that was made pursuant to
and in compliance with Section 4.10, (e) any acquisition of assets solely in
exchange for the issuance of Equity Interests (other than Disqualified Stock)
of the Company, (f) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause since the date hereof of not
more than $12.5 million; (g) loans and advances to employees and officers of
the Company and its Restricted Subsidiaries in the ordinary course of business
(including loans to be used to purchase the Company's Capital Stock where such
loans are secured by such Capital Stock); and (h) Investments in securities of
trade creditors or customers received pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of trade creditors or
customers or in good faith settlement of delinquent obligations of trade
creditors or customers.
"Permitted Junior Securities" means Equity Interests in the
Company or any Guarantor or debt securities of the Company or the relevant
Guarantor that are subordinated to all Senior Indebtedness and any debt
securities issued in exchange for Senior Indebtedness or to Guarantor Senior
Debt and any debt securities issued in exchange for Guarantor Senior Debt, as
applicable, to substantially the same extent as, or to a greater extent than,
the Notes and the guarantees shall be subordinated, respectively, to Senior
Indebtedness and Guarantor Senior Debt, as applicable.
"Permitted Liens" means (1) Liens securing Senior
Indebtedness or Guarantor Senior Indebtedness of the Company and its Restricted
Subsidiaries that was permitted by the terms of this Indenture to be incurred;
(2) Liens in favor of the Company or any of its Restricted Subsidiaries; (3)
Liens on property of a Person existing at the time the Person is merged into or
consolidated with the Company or any Restricted Subsidiary of the Company;
provided, however, that the Liens were in existence prior to the contemplation
of the merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company or the Restricted
Subsidiary; (4) Liens on property existing at the time of acquisition thereof
by the Company or any Restricted Subsidiary of the Company;
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<PAGE> 18
provided, however, that such Liens were in existence prior to the contemplation
of the acquisition and do not extend by any assets other than the property so
acquired; (5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds, bids, leases, government contracts or other
obligations of a like nature incurred in the ordinary course of business; (6)
Liens of carriers, warehousemen, mechanics, suppliers, materialmen, repairmen
and other Liens imposed by law incurred in the ordinary course of business for
sums not yet delinquent or being contested in good faith; (7) Liens incurred or
deposits made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (8)
Liens to secure Indebtedness (including Capital Lease Obligations) incurred in
connection with the acquisition of assets by the Company or its Restricted
Subsidiaries permitted by Section 4.09; provided, however, that for purposes of
this sub-clause (8), (a) the Indebtedness was incurred by the prior owner of
the assets prior to the acquisition and was not incurred in connection with, or
in contemplation of, the acquisition; and (b) each such Lien occurs only the
assets acquired with that Indebtedness; (9) Liens existing on the date hereof;
(10) Liens for taxes, assessments or governmental charges or claims that are
not yet delinquent or that are being contested in good faith by appropriate
proceedings promptly instituted and diligently concluded; provided, however,
that for purposes of this sub-clause (10), any reserve or other appropriate
provision required in conformity with GAAP has been made; (11) easements,
rights-of-way, restrictions, minor defects or irregularities in title and other
similar charges or encumbrances that do not interfere in any material respect
with the business of the Company or any of its Restricted Subsidiaries; (12)
judgment or attachment Liens not giving rise to an Event of Default; (13) any
interest or title of a lessor in property subject to any Capital Lease
Obligation or other lease; (14) Liens incurred in the ordinary course of
business of the Company or any Restricted Subsidiary with respect to
obligations that do not exceed $5.0 million at any one time outstanding and
that (a) are not incurred in connection with borrowing money or obtaining
advances or credit (other than trade credit in the ordinary course of business)
and (b) do not in the aggregate materially detract from the value of the
affected property or materially impair its use in the Company's or such
Restricted Subsidiary's business; and (15) liens under the Escrow Agreement.
"Permitted Refinancing Indebtedness" means any Indebtedness
of the Company or any of its Restricted Subsidiaries issued in exchange for, or
the net proceeds of which are used to extend, refinance, renew, replace,
defease or refund other Indebtedness of the Company or any of its Restricted
Subsidiaries (other than intercompany Indebtedness); provided, however, that
(1) the principal amount (or accreted value, if applicable) of the Permitted
Refinancing Indebtedness does not exceed the principal amount of (or accreted
value, if applicable), plus accrued interest on, the Indebtedness so extended,
refinanced, renewed, replaced, defeased or refunded (plus the amount of
reasonable expenses, costs, fees and reasonable prepayment premiums and
penalties incurred in connection therewith); (2) the Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (3) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, the Permitted Refinancing
Indebtedness is subordinated in right of payment to the Notes on terms at least
as favorable to the holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (4) the Indebtedness is incurred either by the
Company or by the Restricted Subsidiary that is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means any natural person, company, corporation,
partnership, government, agency or instrumentality of a government, or any
other entity.
"Preferred Stock" means the preferred stock of the Company.
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<PAGE> 19
"Private Placement Legend" means the legend set forth in
Section 2.06(f)(i) to be placed on all Notes issued under this Indenture except
where otherwise permitted by the provisions of this Indenture.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Refinance" means, in respect of any Indebtedness, to
refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or
to issue other Indebtedness in exchange or replacement for, such Indebtedness.
"Refinanced" or "Refinancing" shall have correlative meanings.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 24, 1999, by and among the Company and the
Initial Purchasers, as such agreement may be amended, modified or supplemented
from time to time and, with respect to any Additional Notes, one or more
registration rights agreements between the Company and the other parties
thereto, as such agreement(s) may be amended, modified or supplemented from
time to time, relating to rights given by the Company to the purchasers of
Additional Notes to register such Additional Notes under the Securities Act.
"Regulation S" means Regulation S promulgated under the
Securities Act.
"Regulation S Global Note" means a Global Note in
substantially the form of Exhibit A hereto bearing the Global Note Legend and
the Private Placement Legend and deposited with or on behalf of and registered
in the name of the Depositary or its nominee, issued in a denomination equal to
the outstanding principal amount of the Notes initially sold in reliance on
Rule 903 of Regulation S.
"Responsible Officer," when used with respect to the Trustee,
means any officer within the Corporate Trust Department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing
the Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a
Permitted Investment.
"Restricted Period" means the 40-day restricted period as
defined in Regulation S.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities
Act.
"Rule 144A" means Rule 144A promulgated under the Securities
Act.
"Rule 903" means Rule 903 promulgated under the Securities
Act.
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<PAGE> 20
"Rule 904" means Rule 904 promulgated the Securities Act.
"Sale and Leaseback Transaction"of any Person means an
arrangement with any lender or investor or to which such lender or investor is
a party providing for the leasing by such Person of any property or asset of
such Person which has been or is being sold or transferred by such Person more
than 365 days after the acquisition thereof or the completion of construction
or commencement of operation thereof to such lender or investor or to any
Person to whom funds have been or are to be advanced by such lender or investor
on the security of such property or asset. The stated maturity of such
arrangement is the date of the last payment of rent or any other amount due
under such arrangement prior to the first date on which such arrangement may be
terminated by the lessee without payment of a penalty.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means that certain Loan and Security
Agreement, to be dated on or about the date of the closing of the merger of
Trivest Furniture and WinsLoew Furniture, by and among the Company, the lenders
party thereto, Heller Financial, Inc. and Canadian Imperial Bank of Commerce as
co-agents, and BancBoston, N.A., as administrative agent, including any related
notes, guarantees, collateral documents, instruments and agreements executed in
connection therewith, in each case as amended, restated, modified,
supplemented, extended, renewed, replaced, refinanced or restructured from time
to time, whether represented by one or more agreements and whether one or more
Restricted Subsidiaries are added or added or removed as borrowers or
Guarantors thereunder or as parties thereto.
"Senior Indebtedness" means, with respect to the Company, (a)
all Indebtedness of the Company outstanding under the Senior Credit Facility
and all Hedging Obligations with respect thereto; (b) any other Indebtedness of
the Company permitted to be incurred under the terms of this Indenture, unless
the instrument under which that Indebtedness is incurred expressly provides
that it is subordinated or ranks equally in right of payment to the Notes; and
(c) all Obligations of the Company with respect to the items listed in the
preceding clauses (a) and (b). Notwithstanding anything to the contrary in the
foregoing list, Senior Indebtedness shall not include: (1) any liability for
federal, state, local or other taxes owed or owing by the Company; (2) any
Indebtedness of the Company to any of its Subsidiaries or other Affiliates; (3)
any trade payables; or (4) any Indebtedness that is incurred in violation of
this Indenture.
"Senior Subordinated Indebtedness" means the Notes and any
other Indebtedness of the Company that specifically provides that such
Indebtedness is to rank pari passu with the Notes in right of payment and is
not subordinated by its terms in right of payment to any Indebtedness or other
obligation of the Company which is not Senior Indebtedness.
"Separability Legend" has the meaning specified in Section
2.06(f).
"Separation Date" means the earliest to occur of (i) February
21, 2000, (ii) the occurrence of an Event of Default, (iii) the occurrence of
an Exercise Event, as defined in the Warrant Agreement, (iv) the date the
Exchange Offer Registration Statement or the Shelf Registration Statement is
declared effective, and (v) such other date as Bear, Stearns & Co.
Inc. shall determine in its sole discretion.
14
<PAGE> 21
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of
the Company that would be a "significant subsidiary" as defined in Article 1,
Rule 1-02 of Regulation S-X, promulgated pursuant to the Securities Act, as
such Regulation is in effect on the date of this Indenture.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subordinated Indebtedness" means any Indebtedness of the
Company (whether outstanding on the date of this Indenture or thereafter
Incurred) which is subordinate or junior in right or payment to the Notes
pursuant to a written agreement.
"Subsidiary" means, with respect to a Person, (a) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers
or trustees thereof is at the time owned or controlled, directly or indirectly,
by such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (b) any partnership (i) the sole general partner or
the managing general partner of which is such Person or a Subsidiary of such
Person or (ii) the only general partners of which are such Person or of one or
more Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Transaction" means the proposed merger of Trivest Furniture
with and into WinsLoew Furniture, to be effected pursuant to that certain
Second Amended and Restated Agreement and Plan of Merger, dated as of May 4,
1999, between such parties.
"Trivest Furniture" means Trivest Furniture Corporation, a
Florida corporation, and any and all successors thereto.
"Trivest II" means Trivest II, Inc., a Florida corporation,
and any and all successors thereto.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in
substantially the form of Exhibit A attached hereto that bears the Global Note
Legend and that has the "Schedule of Exchanges of Interests in the Global Note"
attached thereto, and that is deposited with or on behalf of and registered in
the name of the Depositary, representing a series of Notes that do not bear the
Private Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive
Notes that do not bear and are not required to bear the Private Placement
Legend.
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<PAGE> 22
"Unrestricted Subsidiary" means (i) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to
a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; and (e) has
at least one director on its board of directors that is not a director or
executive officer of the Company or any of its Restricted Subsidiaries. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
filing with the Trustee a certified copy of the Board Resolution giving effect
to such designation and an Officers' Certificate certifying that such
designation complied with the foregoing conditions and was permitted by Section
4.07. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be Incurred as of such date under Section 4.09, the Company shall
be in default of such Section 4.09). The Board of Directors of the Company may
at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided, however, that such designation shall be deemed to be an
incurrence of Indebtedness by a Restricted Subsidiary of the Company of any
outstanding Indebtedness of such Unrestricted Subsidiary and such designation
shall only be permitted if (i) such Indebtedness is permitted under Section
4.09, calculated on a pro forma basis as if such designation had occurred at
the beginning of the four-quarter reference period, and (ii) no Default would
be in existence following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o)
under the Securities Act.
"Voting Equity Interest" of any Person as of any date means
the Equity Interests of such Person that is at the time entitled to vote in the
election of the Board of Directors or other governing body of such Person.
"Warrant Agreement" means the Warrant Agreement, dated as of
August 24, 1999, by and among the Company and American Stock Transfer & Trust
Company, in its capacity as warrant agent, relating to the Warrants.
"Warrants" means warrants to purchase 24,129 shares of the
Company's common stock, par value $0.01 per share.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person, 99% or more of the outstanding Capital
Stock or other ownership interests of which (other than directors' qualifying
shares) shall at the time be owned by that Person or by one or more Wholly
Owned Restricted Subsidiaries of that Person and one or more Wholly Owned
Restricted Subsidiaries of that Person.
"WinsLoew Furniture" means WinsLoew Furniture, Inc., a
Florida corporation, and any and all successors thereto.
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<PAGE> 23
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
<S> <C>
"Affiliate Transaction"......................................................4.11
"Asset Sale Offer"...........................................................4.10
"Authentication Order".......................................................2.02
"Benefited Party"...........................................................12.01
"Blockage Notice"...........................................................11.03
"Change of Control Offer"....................................................4.14
"Change of Control Payment"..................................................4.14
"Change of Control Payment Date".............................................4.14
"Covenant Defeasance"........................................................8.03
"DTC"........................................................................2.03
"EBITDA".....................................................................4.03
"Event of Default"...........................................................6.01
"Excess Proceeds"............................................................4.10
"Legal Defeasance" ..........................................................8.02
"Offer Amount"...............................................................3.09
"Offer Period"...............................................................3.09
"pari passu Indebtedness".....................................................410
"Paying Agent"...............................................................2.03
"Payment Blockage Period"...................................................11.03
"Payment Default"............................................................6.01
"pay the Notes".............................................................11.03
"Permitted Indebtedness".....................................................4.09
"Purchase Date"..............................................................3.09
"Registrar"..................................................................2.03
"Regulation S Global Note Legend"............................................2.06
"Representative"............................................................11.03
"Repurchase Offer"...........................................................3.09
"Restricted Payments"........................................................4.07
"Special Mandatory Redemption Date"..........................................3.08
"Successor Company"..........................................................5.01
</TABLE>
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT
(a) Whenever this Indenture refers to a provision of the
TIA, the provision is incorporated by reference in and made a part of this
Indenture.
(b) The following TIA terms used in this Indenture have
the following meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means
the Trustee; and
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<PAGE> 24
"obligor" on the Notes means the Company and any
successor obligor upon the Notes.
(c) All other terms used in this Indenture that are
defined by the TIA, defined by TIA reference to another statute or defined by
SEC rule under the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
(a) Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has
the meaning assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural,
and in the plural include the singular;
(5) "including" means "including without
limitation";
(6) provisions apply to successive events and
transactions; and
(7) references to sections of or rules under the
Securities Act shall be deemed to include substitute, replacement or
successor sections or rules adopted by the SEC from time to time.
ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The
Notes may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Note shall be dated the date of its
authentication. The Notes shall be in denominations of $1,000 and integral
multiples thereof. The terms and provisions contained in the Notes shall
constitute, and are hereby expressly made, a part of this Indenture and the
Company and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions
of this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Form of Notes. Notes issued in global form shall be
substantially in the form of Exhibits A attached hereto (including the Global
Note Legend thereon and the "Schedule of Exchanges of Interests in the Global
Note" attached thereto). Notes issued in definitive form shall be substantially
in the form of Exhibit A-1 attached hereto (but without the Global Note Legend
thereon and without the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Each Global Note shall represent such of the outstanding
Notes as shall be specified therein and each shall provide that it shall
represent the aggregate principal amount of outstanding Notes from time to time
endorsed thereon and that the aggregate principal amount of outstanding Notes
represented thereby may from time to time be reduced or increased, as
appropriate, to reflect exchanges and redemptions. Any endorsement of a Global
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<PAGE> 25
Note to reflect the amount of any increase or decrease in the aggregate
principal amount of outstanding Notes represented thereby shall be made by the
Trustee or the Custodian, at the direction of the Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06 hereof.
(c) Euroclear and Cedel Procedures Applicable. The
provisions of the "Operating Procedures of the Euroclear System" and "Terms and
Conditions Governing Use of Euroclear" and the "General Terms and Conditions of
Cedel Bank" and "Customer Handbook" of Cedel Bank shall be applicable to
transfers of beneficial interests in Global Notes that are held by Participants
through Euroclear or Cedel Bank.
(d) Subject to compliance with the provisions of Section
4.09, the Company may issue Additional Notes under this Indenture.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
(a) One Officer shall sign the Notes for the Company by
manual or facsimile signature. The Company's seal may be reproduced on the
Notes and may be in facsimile form.
(b) If an Officer whose signature is on a Note no longer
holds that office at the time a Note is authenticated, the Note shall
nevertheless be valid.
(c) A Note shall not be valid until authenticated by the
manual signature of the Trustee. The signature shall be conclusive evidence
that the Note has been authenticated under this Indenture.
(d) The Trustee shall, upon a written order of the
Company signed by at least one Officer (an "Authentication Order"),
authenticate Notes for original issue up to the aggregate principal amount
stated in paragraph 4 of the Notes. The aggregate principal amount of Notes
outstanding at any time may not exceed such amount except as provided in
Section 2.07 hereof.
(e) The Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Notes. An authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. An authenticating agent has the same rights as an Agent to deal with
Holders or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
(a) The Company shall maintain an office or agency where
Notes may be presented for registration of transfer or for exchange
("Registrar") and an office or agency where Notes may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Notes and of their
transfer and exchange. The Company may appoint one or more co-registrars and
one or more additional paying agents. The term "Registrar" includes any
co-registrar and the term "Paying Agent" includes any additional paying agent.
The Company may change any Paying Agent or Registrar without notice to any
Holder. The Company shall notify the Trustee in writing of the name and address
of any Agent not a party to this Indenture. If the Company fails to appoint or
maintain another entity as Registrar or Paying Agent, the Trustee shall act as
such. The Company or any of its Subsidiaries may act as Paying Agent or
Registrar.
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<PAGE> 26
(b) The Company initially appoints The Depository Trust
Company ("DTC") to act as Depositary with respect to the Global Notes.
(c) The Company initially appoints the Trustee to act as
the Registrar and Paying Agent and to act as Note Custodian with respect to the
Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all money held by the Paying Agent for the
payment of principal, premium or Liquidated Damages, if any, or interest on the
Notes, and shall notify the Trustee of any default by the Company in making any
such payment. While any such default continues, the Trustee may require a
Paying Agent to pay all money held by it to the Trustee. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee.
Upon payment over to the Trustee, the Paying Agent (if other than the Company
or a Subsidiary) shall have no further liability for the money. If the Company
or a Subsidiary acts as Paying Agent, it shall segregate and hold in a separate
trust fund for the benefit of the Holders all money held by it as Paying Agent.
Upon any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Trustee is not the Registrar, the Company shall furnish to the Trustee at least
seven Business Days before each interest payment date and at such other times
as the Trustee may request in writing, a list in such form and as of such date
or such shorter time as the Trustee may allow, as the Trustee may reasonably
require of the names and addresses of the Holders of Notes and the Company
shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary. All Global
Notes shall be exchanged by the Company for Definitive Notes if (i) the Company
delivers to the Trustee notice from the Depositary that it is unwilling or
unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Notes (in whole but not in part) should be exchanged
for Definitive Notes and delivers a written notice to such effect to the
Trustee. Upon the occurrence of either of the preceding events in (i) or (ii)
above, Definitive Notes shall be issued in such names as the Depositary shall
instruct the Trustee. Global Notes also may be exchanged or replaced, in whole
or in part, as provided in Sections 2.07 and 2.10 hereof. Every Note
authenticated and delivered in exchange for, or in lieu of, a Global Note or
any portion thereof, pursuant to this Section 2.06 or Section 2.07 or 2.10
hereof, shall be authenticated and delivered in the form of, and shall be, a
Global Note. A Global Note may not be exchanged for another Note other than as
provided in this Section 2.06(a), although beneficial interests in a Global
Note may be transferred and exchanged as provided in Section 2.06(b), (c) or
(f) hereof.
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(b) Transfer and Exchange of Beneficial Interests in the
Global Notes. The transfer and exchange of beneficial interests in the Global
Notes shall be effected through the Depositary, in accordance with the
provisions of this Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Notes shall be subject to restrictions on
transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Notes also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred
to Persons who take delivery thereof in the form of a beneficial
interest in the same Restricted Global Note in accordance with the
transfer restrictions set forth in the Private Placement Legend;
provided, however, that prior to the expiration of the Restricted
Period, transfers of beneficial interests in the Regulation S Global
Note may not be made to a U.S. Person or for the account or benefit of
a U.S. Person (other than the Initial Purchasers). Beneficial
interests in any Unrestricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest
in an Unrestricted Global Note. No written orders or instructions
shall be required to be delivered to the Registrar to effect the
transfers described in this Section 2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of
beneficial interests that are not subject to Section 2.06(b)(i) above,
the transferor of such beneficial interest must deliver to the
Registrar either (A) (1) a written order from a Participant or an
Indirect Participant given to the Depositary in accordance with the
Applicable Procedures directing the Depositary to credit or cause to
be credited a beneficial interest in another Global Note in an amount
equal to the beneficial interest to be transferred or exchanged and
(2) instructions given in accordance with the Applicable Procedures
containing information regarding the Participant account to be
credited with such increase or (B) (1) a written order from a
Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
cause to be issued a Definitive Note in an amount equal to the
beneficial interest to be transferred or exchanged and (2)
instructions given by the Depositary to the Registrar containing
information regarding the Person in whose name such Definitive Note
shall be registered to effect the transfer or exchange referred to in
(1) above. Upon consummation of an Exchange Offer by the Company in
accordance with Section 2.06(e) hereof, the requirements of this
Section 2.06(b)(ii) shall be deemed to have been satisfied upon
receipt by the Registrar of the instructions contained in the Letter
of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Notes. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in
Global Notes contained in this Indenture and the Notes or otherwise
applicable under the Securities Act, the Trustee shall adjust the
principal amount of the relevant Global Note(s) pursuant to Section
2.06(g) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee shall take delivery in the form of
a beneficial interest in the 144A Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof; and
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(B) if the transferee shall take delivery in the form of
a beneficial interest in the Regulation S Global Note, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (2) thereof; and
(C) if the transferee shall take delivery in the form of
a beneficial interest in the Accredited Investor Global Note, then
the transferor must deliver a certificate in the form of Exhibit
B hereto, including the certifications in item (3) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note.
A beneficial interest in any Restricted Global Note may be exchanged
by any holder thereof for a beneficial interest in an Unrestricted
Global Note or transferred to a Person who takes delivery thereof in
the form of a beneficial interest in an Unrestricted Global Note if
the exchange or transfer complies with the requirements of Section
2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a beneficial interest in an Unrestricted Global Note, a
certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note, a certificate from
such holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar or the Company so requests or if the Applicable Procedures
so require, an Opinion of Counsel in form reasonably acceptable to the
Registrar or the Company, if applicable to the effect that such
exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B)
or (D) above at a time when an Unrestricted Global Note has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
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Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to
Restricted Definitive Notes. Restricted Global Notes and beneficial
interests therein shall be exchangeable for Definitive Notes if (i) the
Depositary (x) notifies the Company that it is unwilling or unable to
continue as depositary for the Restricted Global Notes and the Company
thereupon fails to appoint a successor depositary or (y) has ceased to be
a clearing agency registered under the Exchange Act and the Company fails
to appoint a successor, (ii) the Company, at its option, notifies the
Trustee in writing that it elects to cause the issuance of the Definitive
Notes or (iii) there shall have occurred and be continuing a Default with
respect to the Notes. In all cases, Definitive Notes delivered in exchange
for any Restricted Global Note or beneficial interests therein shall be
registered in the names, and issued in any approved denominations,
requested by or on behalf of the Depositary (in accordance with the
Applicable Procedures).
In such event, the Trustee shall cause the Restricted Global
Notes to be canceled accordingly pursuant to Section 2.11 hereof, and the
Company shall execute and upon receipt of an Authentication Order the
Trustee shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount. Any
Definitive Note issued in exchange for a beneficial interest in a
Restricted Global Note pursuant to this Section 2.06(c) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest in a Restricted Global
Note pursuant to this Section 2.06(c)(i) shall bear the Private Placement
Legend and shall be subject to all restrictions on transfer contained
therein.
(ii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted Definitive
Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the holder of such beneficial interest, in the case
of an exchange, or the transferee, in the case of a transfer,
certifies in the Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
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(C) such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a
Restricted Global Note proposes to exchange such beneficial interest
for a Definitive Note that does not bear the Private Placement Legend,
a certificate from such holder in the form of Exhibit C hereto,
including the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a
Restricted Global Note proposes to transfer such beneficial interest
to a Person who shall take delivery thereof in the form of a
Definitive Note that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar or the Company so requests or if the Applicable Procedures
so require, an Opinion of Counsel in form reasonably acceptable to the
Registrar or the Company, if applicable to the effect that such
exchange or transfer is in compliance with the Securities Act and that
the restrictions on transfer contained herein and in the Private
Placement Legend are no longer required in order to maintain
compliance with the Securities Act.
(iii) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. Unrestricted Global Notes and
beneficial interests therein shall be exchangeable for Definitive
Notes if (i) the Depositary (x) notifies the Company that it is
unwilling or unable to continue as depositary for the Unrestricted
Global Notes and the Company thereupon fails to appoint a successor
depositary or (y) has ceased to be a clearing agency registered under
the Exchange Act and the Company fails to appoint a successor, (ii)
the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Definitive Notes or (iii) there
shall have occurred and be continuing a Default with respect to the
Notes. In all cases, Definitive Notes delivered in exchange for any
Unrestricted Global Note or beneficial interests therein shall be
registered in the names, and issued in any approved denominations,
requested by or on behalf of the depositary (in accordance with the
Applicable Procedures). In such event, the Trustee shall cause the
Unrestricted Global Notes to be canceled accordingly pursuant to
Section 2.11 hereof, and the Company shall execute and the Trustee
shall authenticate and deliver to the Person designated in the
instructions a Definitive Note in the appropriate principal amount.
Any Definitive Note issued in exchange for a beneficial interest
pursuant to this Section 2.06(c)(iv) shall be registered in such name
or names and in such authorized denomination or denominations as the
holder of such beneficial interest shall instruct the Registrar
through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes
to the Persons in whose names such Notes are so registered. Any
Definitive Note issued in exchange for a beneficial interest pursuant
to this Section 2.06(c)(iv) shall not bear the Private Placement
Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note or to transfer such Restricted Definitive Notes
to a Person who takes delivery
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<PAGE> 31
thereof in the form of a beneficial interest in a Restricted Global
Note, then, upon receipt by the Registrar of the following
documentation:
(A) if the Holder of such Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a
Restricted Global Note, a certificate from such Holder in the
form of Exhibit C hereto, including the certifications in
item (2)(b) thereof;
(B) if such Restricted Definitive Note is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act, a certificate to the effect set forth in Exhibit B
hereto, including the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being
transferred to a Non-U.S. Person in an offshore transaction in
accordance with Rule 903 or Rule 904 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (2) thereof;
(D) if such Restricted Definitive Note is being
transferred pursuant to an exemption from the registration
requirements of the Securities Act in accordance with Rule 144
under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(E) if such Restricted Definitive Note is being
transferred to an Institutional Accredited Investor in reliance on
an exemption from the registration requirements of the Securities
Act other than those listed in subparagraphs (B) through (D)
above, a certificate to the effect set forth in Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable;
(F) if such Restricted Definitive Note is being
transferred to the Company or any of its Subsidiaries, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(b) thereof; or
(G) if such Restricted Definitive Note is being
transferred pursuant to an effective registration statement under
the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(c)
thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or cause to
be increased the aggregate principal amount of, in the case of clause (A)
above, the appropriate Restricted Global Note, in the case of clause (B) above,
the 144A Global Note, in the case of clause (C) above, the Regulation S Global
Note, and in all other cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Restricted Definitive Note to a Person
who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the
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<PAGE> 32
distribution of the Exchange Notes or (3) a Person who is an
affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Broker-Dealer pursuant
to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto,
including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the Registrar so
requests or if the Applicable Procedures so require, an Opinion of Counsel in
form reasonably acceptable to the Registrar to the effect that such exchange or
transfer is in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act. Upon
satisfaction of the conditions of any of the subparagraphs in this Section
2.06(d)(ii), the Trustee shall cancel the Definitive Notes and increase or
cause to be increased the aggregate principal amount of the Unrestricted Global
Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note
may exchange such Note for a beneficial interest in an Unrestricted
Global Note or transfer such Definitive Notes to a Person who takes
delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note at any time. Upon receipt of a request for
such an exchange or transfer, the Trustee shall cancel the applicable
Unrestricted Definitive Note and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Notes.
If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for
Definitive Notes. Upon request by a Holder of Definitive Notes and such
Holder's compliance with the provisions of this Section 2.06(d), the Registrar
shall register the transfer or exchange of Definitive Notes. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Notes duly endorsed or accompanied by
a written instruction of transfer in form satisfactory to the Registrar duly
executed by such Holder or by his attorney, duly authorized in writing. In
addition, the requesting
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<PAGE> 33
Holder shall provide any additional certifications, documents and information,
as applicable, required pursuant to the following provisions of this Section
2.06(d).
(i) Restricted Definitive Notes to Restricted Definitive Notes.
Any Restricted Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer shall be made pursuant to Rule 144A
under the Securities Act, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (1) thereof; and
(B) if the transfer shall be made pursuant to Rule 903 or
Rule 904, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item
(2) thereof; and
(C) if the transfer shall be made pursuant to any other
exemption from the registration requirements of the Securities
Act, then the transferor must deliver a certificate in 9 the form
of Exhibit B hereto, including the certifications, certificates
and Opinion of Counsel required by item (3) thereof, if
applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof
for an Unrestricted Definitive Note or transferred to a Person or
Persons who take delivery thereof in the form of an Unrestricted
Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the
applicable Letter of Transmittal that it is not (1) a
broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration
Statement in accordance with the Registration Rights Agreement;
or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes
proposes to exchange such Notes for an Unrestricted Definitive Note, a
certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes
proposes to transfer such Notes to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
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<PAGE> 34
and, in each such case set forth in this subparagraph (D), if the
Registrar or the Company so requests, an Opinion of Counsel in form
reasonably acceptable to the Registrar and the Company, if applicable,
to the effect that such exchange or transfer is in compliance with the
Securities Act and that the restrictions on transfer contained herein
and in the Private Placement Legend are no longer required in order to
maintain compliance with the Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive Notes.
A Holder of Unrestricted Definitive Notes may transfer such Notes to a
Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer,
the Registrar shall register the Unrestricted Definitive Notes pursuant to
the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange
Offer in accordance with the Registration Rights Agreement, the Company shall
issue and, upon receipt of an Authentication Order in accordance with Section
2.02, the Trustee shall authenticate (i) one or more Unrestricted Global Notes
in an aggregate principal amount equal to the principal amount of the
beneficial interests in the Restricted Global Notes tendered for acceptance by
Persons that certify in the applicable Letters of Transmittal that (x) they are
not broker-dealers, (y) they are not participating in a distribution of the
Exchange Notes and (z) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Notes in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Notes accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Notes, the Trustee shall cause the
aggregate principal amount of the applicable Restricted Global Notes to be
reduced accordingly, and the Company shall execute and the Trustee shall
authenticate and deliver to the Persons designated by the Holders of Definitive
Notes so accepted Definitive Notes in the appropriate principal amount.
(g) Legends.The following legends shall appear on the
face of all Global Notes and Definitive Notes issued under this Indenture
unless specifically stated otherwise in the applicable provisions of this
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each
Global Note and each Definitive Note (and all Notes issued in
exchange therefor or substitution thereof) shall bear the legend
in substantially the following form
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER
SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
SECTION 144A THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER"
(AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE
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<PAGE> 35
SECURITIES ACT, (c) TO CERTAIN INSTITUTIONAL ACCREDITED INVESTORS
WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN
CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
(d) FOLLOWING THE RELEASE OF PROCEEDS FROM THE ESCROW ACCOUNT, OUTSIDE
THE UNITED STATES TO A NON-UNITED STATES PERSON IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (e)
IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS UNDER THE SECURITIES ACT (AND BASED ON AN OPINION OF
COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER
WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Note or
Definitive Note issued pursuant to subparagraphs (b)(iv),
(c)(iii), (c)(iv), (d)(ii), (d)(iii) or (e) to this Section 2.06
(and all Notes issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07
OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT
OF THE COMPANY."
(iii) Separability Legend. Until the Separation Date, each Global
Note shall bear a legend in substantially the following form (the "Separability
Legend"):
"UNTIL THE SEPARATION DATE (AS DEFINED), THIS NOTE HAS BEEN ISSUED AS,
AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE ASSOCIATED
WARRANTS TO PURCHASE COMMON STOCK OF THE COMPANY. EACH UNIT CONSISTS
OF $1,000 PRINCIPAL AMOUNT OF NOTES AND A WARRANT TO PURCHASE 0.2298
SHARES OF COMMON STOCK, SUBJECT TO ADJUSTMENT UNDER CERTAIN
CIRCUMSTANCES. A COPY OF THE WARRANT AGREEMENT PURSUANT TO WHICH THE
WARRANTS HAVE BEEN ISSUED IS AVAILABLE FROM THE COMPANY UPON REQUEST."
29
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(iv) Original Issue Discount Legend. Each Global Note shall bear a
legend in substantially the following form:
"FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), THIS SECURITY HAS ORIGINAL ISSUE DISCOUNT. FOR
PURPOSES OF SECTION 1273 OF THE CODE, THE ISSUE PRICE IS $962.40 AND
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $37.60, IN EACH CASE PER
$1,000 PRINCIPAL AMOUNT OF THIS SECURITY. FOR PURPOSES OF SECTION 1275
OF THE CODE, THE YIELD TO MATURITY COMPOUNDED SEMIANNUALLY IS
13.537%."
(h) Cancellation or Adjustment of Global Notes. At such
time as all beneficial interests in a particular Global Note have been
exchanged for Definitive Notes or a particular Global Note has been redeemed,
repurchased or cancelled in whole and not in part, each such Global Note shall
be returned to or retained and cancelled by the Trustee in accordance with
Section 2.11 hereof. At any time prior to such cancellation, if any beneficial
interest in a Global Note is exchanged for or transferred to a Person who shall
take delivery thereof in the form of a beneficial interest in another Global
Note or for Definitive Notes, the principal amount of Notes represented by such
Global Note shall be reduced accordingly and an endorsement shall be made on
such Global Note by the Trustee or by the Depositary at the direction of the
Trustee to reflect such reduction; and if the beneficial interest is being
exchanged for or transferred to a Person who shall take delivery thereof in the
form of a beneficial interest in another Global Note, such other Global Note
shall be increased accordingly and an endorsement shall be made on such Global
Note by the Trustee or by the Depositary at the direction of the Trustee to
reflect such increase.
(i) General Provisions Relating to Transfers and
Exchanges.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Global Notes
and Definitive Notes upon the Company's order or at the Registrar's
request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require
payment of a sum sufficient to cover any transfer tax or similar
governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon
exchange or transfer pursuant to Sections 2.10, 3.06, 3.09, 4.10, 4.15
and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive
Notes shall be the valid obligations of the Company, evidencing the
same debt, and entitled to the same benefits under this Indenture, as
the Global Notes or Definitive Notes surrendered upon such
registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register
the transfer of or to exchange any Notes during a period beginning at
the opening of business 15 days before the day of any selection of
Notes for redemption under Section 3.02 hereof and ending at the close
of business on the day of selection, (B) to register the transfer of
or to exchange any Note so selected for redemption in whole or in
part, except the unredeemed portion of any Note being redeemed in part
or (c) to register
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the transfer of or to exchange a Note between a record date and the
next succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat
the Person in whose name any Note is registered as the absolute owner
of such Note for the purpose of receiving payment of principal of and
interest on such Notes and for all other purposes, and none of the
Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section
2.06 to effect a registration of transfer or exchange may be submitted
by facsimile.
(j) Separation of Notes and Warrants
(i) Prior to the Separation Date, no Notes may be sold, assigned
or otherwise transferred to any Person unless, simultaneously with
such transfer, the Trustee receives confirmation from the Warrant
Agent for the Warrants that the Holder of the Notes has requested a
transfer of the related Warrants to the same transferee.
(ii) On or after the Separation Date, the Holder of a Note
containing a Separability Legend may surrender such Note accompanied
by a written application to the Trustee, duly executed by the Holder,
for a new Note or Notes not containing a Separability Legend. Whether
or not the Holder obtains a new Note, from and after the Separation
Date, the Separability Legend shall have no further force and effect.
SECTION 2.07. REPLACEMENT NOTES
(a) If any mutilated Note is surrendered to the Trustee
or the Company and the Trustee receives evidence to its satisfaction of the
destruction, loss or theft of any Note, the Company shall issue and the
Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement Note if the Trustee's requirements are met. If required by the
Trustee or the Company, an indemnity bond must be supplied by the Holder that
is sufficient in the judgment of the Trustee and the Company to protect the
Company, the Trustee, any Agent and any authenticating agent from any loss that
any of them may suffer if a Note is replaced. The Company may charge for its
expenses in replacing a Note.
(b) Every replacement Note is an additional obligation of
the Company and shall be entitled to all of the benefits of this Indenture
equally and proportionately with all other Notes duly issued hereunder.
SECTION 2.08. OUTSTANDING NOTES.
(a) The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation, those reductions in the interest in a Global Note
effected by the Trustee in accordance with the provisions hereof, and those
described in this Section 2.08 as not outstanding. Except as set forth in
Section 2.09 hereof, a Note does not cease to be outstanding because the
Company or an Affiliate of the Company holds the Note; however, Notes held by
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<PAGE> 38
the Company or a Subsidiary of the Company shall not be deemed to be
outstanding for purposes of Section 3.07(b) hereof.
(b) If a Note is replaced pursuant to Section 2.07
hereof, it ceases to be outstanding unless the Trustee receives proof
satisfactory to it that the replaced Note is held by a bona fide purchaser.
(c) If the principal amount of any Note is considered
paid under Section 4.01 hereof, it ceases to be outstanding and interest on it
ceases to accrue.
(d) If the Paying Agent (other than the Company, a
Subsidiary or an Affiliate of any thereof) holds, on a redemption date or
maturity date, money sufficient to pay Notes payable on that date, then on and
after that date such Notes shall be deemed to be no longer outstanding and
shall cease to accrue interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by the Company, or by any Person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company,
shall be considered as though not outstanding, except that for the purposes of
determining whether the Trustee shall be protected in relying on any such
direction, waiver or consent, only Notes that the Trustee knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES
Until certificates representing Notes are ready for delivery,
the Company may prepare and the Trustee, upon receipt of an Authentication
Order, shall authenticate temporary Notes. Notes shall be substantially in the
form of certificated Notes but may have variations that the Company considers
appropriate for temporary Notes and as shall be reasonably acceptable to the
Trustee. Without unreasonable delay, the Company shall prepare and the Trustee
shall authenticate definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the
benefits of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment.
The Trustee upon direction by the Company and no one else shall cancel all
Notes surrendered for registration of transfer, exchange, payment, replacement
or cancellation and shall destroy cancelled Notes (subject to the record
retention requirements of the Exchange Act). Certification of the destruction
of all cancelled Notes shall be delivered to the Company. The Company may not
issue new Notes to replace Notes that it has paid or that have been delivered
to the Trustee for cancellation.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in
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Section 4.01 hereof. The Company shall notify the Trustee in writing of the
amount of defaulted interest proposed to be paid on each Note and the date of
the proposed payment. The Company shall fix or cause to be fixed each such
special record date and payment date; provided, however, that no such special
record date shall be less than 5 days prior to the related payment date for
such defaulted interest. At least 10 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders
a notice that states the special record date, the related payment date and the
amount of such interest to be paid.
SECTION 2.13. CUSIP NUMBERS.
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided, however, that any such
notice may state that no representation is made as to the correctness of such
numbers either as printed on the Notes or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such redemption shall not be affected by
any defect in or omission of such numbers. The Company will promptly notify the
Trustee of any change in the "CUSIP" numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Trustee, at least 30 days but not more than 60 days before a redemption date,
an Officers' Certificate setting forth (i) the clause of this Indenture
pursuant to which the redemption shall occur, (ii) the redemption date, (iii)
the principal amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED
If less than all of the Notes are to be redeemed or purchased
in an offer to purchase at any time, the Trustee shall select the Notes to be
redeemed or purchased among the Holders of the Notes in compliance with the
requirements of the principal national securities exchange, if any, on which
the Notes are listed or, if the Notes are not so listed, on a pro rata basis,
by lot or in accordance with any other method the Trustee considers fair and
appropriate. In the event of partial redemption by lot, the particular Notes to
be redeemed shall be selected, unless otherwise provided herein, not less than
30 nor more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of
the Notes selected for redemption and, in the case of any Note selected for
partial redemption, the principal amount thereof to be redeemed. Notes and
portions of Notes selected shall be in amounts of $1,000 or whole multiples of
$1,000; except that if all of the Notes of a Holder are to be redeemed, the
entire outstanding amount of Notes held by such Holder, even if not a multiple
of $1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
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<PAGE> 40
SECTION 3.03. NOTICE OF REDEMPTION
Subject to the provisions of Section 3.09 hereof, at least 30
days but not more than 60 days before a redemption date, the Company shall mail
or cause to be mailed, by first class mail, a notice of redemption to each
Holder whose Notes are to be redeemed at its registered address.
The notice shall identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the
principal amount of such Note to be redeemed and that, after the redemption
date upon surrender of such Note, a new Note or Notes in principal amount equal
to the unredeemed portion shall be issued upon cancellation of the original
Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Notes called for redemption ceases to accrue on and after
the redemption date;
(g) the paragraph of the Notes or Section of this Indenture
pursuant to which the Notes called for redemption are being redeemed; and
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Notes.
At the Company's request, the Trustee shall give the notice
of redemption in the Company's name and at its expense; provided, however, that
the Company shall have delivered to the Trustee, at least 45 days, or such
shorter period allowed by the Trustee, prior to the redemption date, an
Officers' Certificate requesting that the Trustee give such notice and setting
forth the information to be stated in such notice as provided in the preceding
paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION
Once notice of redemption is mailed in accordance with
Section 3.03 hereof, Notes called for redemption become irrevocably due and
payable on the redemption date at the redemption price. A notice of redemption
may not be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE
On or one Business Day prior to the redemption date, the
Company shall deposit with the Trustee or with the Paying Agent money
sufficient to pay the redemption price of and accrued interest on all Notes to
be redeemed on that date. The Trustee or the Paying Agent shall promptly return
to the Company any money deposited with the Trustee or the Paying Agent by the
Company in excess of the amounts necessary to pay the redemption price of, and
accrued interest on, all Notes to be redeemed.
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If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Trustee shall
authenticate for the Holder at the expense of the Company a new Note equal in
principal amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) On or after August 15, 2003, the Company may redeem the Notes
at any time, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the date fixed for redemption, if redeemed during the
twelve-month period beginning on August 15 of the year indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 106.375%
2004 104.250%
2005 102.125%
2006 and thereafter 100.000%
</TABLE>
(c) Notwithstanding the provisions of clauses (a) and (b) of this
Section 3.07, on or prior to August 15, 2002, the Company shall be permitted to
redeem up to 25% of the aggregate principal amount of the Notes originally
issued at a redemption price of 112.75% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
fixed for redemption, with the net cash proceeds of one or more underwritten
public offerings of Capital Stock of the Company, other than Disqualified
Stock; provided, however, that (1) at least 75% of the aggregate principal
amount of the Notes originally issued remains outstanding immediately after the
occurrence of the redemption; and (2) each redemption occurs within 90 days
after the date of the closing of such an offering of Capital Stock of the
Company.
(d) Any redemption pursuant to this Section 3.07 shall be made
pursuant to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
(a) Except as set forth in clause (b) below of this Section
3.08, the Company shall not be required to make mandatory redemption or sinking
fund payments with respect to the Notes.
(b) Special Mandatory Redemption. In accordance with the
terms and conditions of the Escrow Agreement and using the Escrowed Funds, the
Company shall redeem all of the Notes if and upon
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the earlier to occur of (a) five Business Days following termination of the
Merger Agreement in accordance with its terms and (b) September 15, 1999 (if
the Transaction has not closed on or prior to such date) (such earlier date,
the "Special Mandatory Redemption Date") at a redemption price in cash equal to
$972.024 per $1,000 principal amount at maturity, plus accrued and unpaid
interest to, but excluding, the Special Mandatory Redemption Date. Upon the
closing of the Transaction, the foregoing provisions regarding Special
Mandatory Redemption shall be null and void. The Company shall promptly give
notice to the Trustee of any termination of the Merger Agreement.
SECTION 3.09. OFFER TO PURCHASE.
In the event that, pursuant to Section 4.10 or 4.14 hereof,
the Company shall be required to commence an offer to all Holders to purchase
Notes (a "Repurchase Offer"), it shall follow the procedures specified below.
The Repurchase Offer shall remain open for a period of 20
Business Days following its commencement and no longer, except to the extent
that a longer period is required by applicable law (the "Offer Period"). No
later than five Business Days after the termination of the Offer Period (the
"Purchase Date"), the Company shall purchase the principal amount of Notes
required to be purchased pursuant to Section 4.10 hereof (the "Offer Amount")
or, if less than the Offer Amount has been tendered, all Notes tendered in
response to the Asset Sale Offer. Payment for any Notes so purchased shall be
made in the same manner as interest payments are made.
If the Purchase Date is on or after an interest record date
and on or before the related interest payment date, any accrued and unpaid
interest shall be paid to the Person in whose name a Note is registered at the
close of business on such record date, and no additional interest shall be
payable to Holders who tender Notes pursuant to the Repurchase Offer.
Upon the commencement of an Repurchase Offer, the Company
shall send, by first class mail, a notice to the Trustee and each of the
Holders, with a copy to the Trustee. The notice shall contain all instructions
and materials necessary to enable such Holders to tender Notes pursuant to the
Repurchase Offer. The Repurchase Offer shall be made to all Holders. The
notice, which shall govern the terms of the Repurchase Offer, shall state:
(a) that the Repurchase Offer is being made pursuant to this
Section 3.09 and Section 4.10 or 4.14 hereof and the length of time the
Repurchase Offer shall remain open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall
continue to accrue interest and Liquidated Damages, if any;
(d) that, unless the Company defaults in making such payment, any
Note accepted for payment pursuant to the Repurchase Offer shall cease to
accrue interest and Liquidated Damages, if any, after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an
Repurchase Offer may elect to have Notes purchased in integral multiples of
$1,000 only;
(f) that Holders electing to have a Note purchased pursuant to any
Repurchase Sale Offer shall be required to surrender the Note, with the form
entitled "Option of Holder to Elect
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Purchase" on the reverse of the Note completed, or transfer by book-entry
transfer, to the Company, a depositary, if appointed by the Company, or a
Paying Agent at the address specified in the notice at least three days before
the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if
the Company, the Depositary or the Paying Agent, as the case may be, receives,
not later than the expiration of the Offer Period, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of the Note the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered
by Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
the Offer Amount of Notes or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Notes
tendered, and shall deliver to the Trustee an Officers' Certificate stating
that such Notes or portions thereof were accepted for payment by the Company in
accordance with the terms of this Section 3.09. The Company, the Depositary or
the Paying Agent, as the case may be, shall promptly (but in any case not later
than five days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Notes tendered by such
Holder and accepted by the Company for purchase, and the Company shall promptly
issue a new Note, and the Trustee, upon written request from the Company shall
authenticate and mail or deliver such new Note to such Holder, in a principal
amount equal to any unpurchased portion of the Note surrendered. Any Note not
so accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale
Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
(a) The Company shall pay or cause to be paid the
principal of, premium, if any, and interest on the Notes on the dates and in
the manner provided in the Notes. Principal, premium, if any, and interest
shall be considered paid on the date due if the Paying Agent, if other than the
Company or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due
date money deposited by the Company in immediately available funds and
designated for and sufficient to pay all principal, premium, if any, and
interest then due. The Company shall pay all Liquidated Damages, if any, in the
same manner on the dates and in the amounts set forth in the Registration
Rights Agreement.
(b) The Company shall pay interest (including post-
petition interest in any proceeding under any Bankruptcy Law) on overdue
principal at the rate equal to 1% per annum in excess
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<PAGE> 44
of the then applicable interest rate on the Notes to the extent lawful; it
shall pay interest (including post-petition interest in any proceeding under
any Bankruptcy Law) on overdue installments of interest and Liquidated Damages
(without regard to any applicable grace period) at the same rate to the extent
lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
(a) The Company shall maintain in the Borough of
Manhattan, the City of New York, an office or agency (which may be an office of
the Trustee or an affiliate of the Trustee, Registrar or co-registrar) where
Notes may be surrendered for registration of transfer or for exchange and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company shall give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at
the Corporate Trust Office of the Trustee.
(b) The Company may also from time to time designate one
or more other offices or agencies where the Notes may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall
in any manner relieve the Company of its obligation to maintain an office or
agency in the Borough of Manhattan, the City of New York for such purposes. The
Company shall give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
(c) The Company hereby designates the Corporate Trust
Office of the Trustee as one such office or agency of the Company in accordance
with Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not the Company is required to do so by the rules
and regulations of the Commission, so long as any Notes are outstanding, the
Company shall furnish to the Holders of the Notes (a) all quarterly and annual
financial and other information with respect to the Company and its
consolidated Subsidiaries that would be required to be contained in a filing
with the Commission on Forms 10-Q and 10-K if the Company were required to file
such forms, including a "Management's Discussion and Analysis of Financial
Condition and Results of Operations" that describes the financial condition and
results of operations of the Company and its consolidated Subsidiaries, showing
in reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial information and results of operations of the Unrestricted
Subsidiaries of the Company and, with respect to the annual information only, a
report thereon by the Company's certified independent accountants, and (b) all
current reports that would be required to be filed with the Commission on Form
8-K if the Company were required to file such reports.
(b) After the Exchange Offer or the effectiveness of the Shelf
Registration Statement, whether or not required by the rules and regulations of
the Commission, the Company shall file a copy of all of the information and
reports required to be delivered pursuant to clause (a) of this Section 4.03
with the Commission for public availability, unless the Commission shall not
accept such a filing, and from and after the date hereof shall make this
information available to securities analysts and prospective investors upon
request. In addition, for so long as any Notes
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remain outstanding, the Company shall file with the Trustee and the Commission
(unless the Commission shall not accept such filing) the information required
to be delivered pursuant to clause (a) of this Section 4.03 within the time
periods specified in the Commission's rules and regulations and furnish that
information to Holders of the Notes, securities analysts and prospective
investors upon their request.
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a review of
the activities of the Company and its Subsidiaries during the preceding fiscal
year has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Indenture, and further stating, as to each such Officer
signing such certificate, that to the best of his or her knowledge the Company
has kept, observed, performed and fulfilled each and every covenant contained
in this Indenture and is not in default in the performance or observance of any
of the terms, provisions and conditions of this Indenture (or, if a Default or
Event of Default shall have occurred, describing all such Defaults or Events of
Default of which he or she may have knowledge and what action the Company is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by
a written statement of the Company's independent public accountants (who shall
be a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes
to take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its
Subsidiaries to pay, prior to delinquency, all material taxes, assessments, and
governmental levies except such as are contested in good faith and by
appropriate proceedings or where the failure to effect such payment is not
adverse in any material respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it shall not at any time insist upon, plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, extension or
usury law wherever enacted, now or at any time hereafter in force, that may
affect the
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covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law, and covenants that it shall not, by resort to any such law,
hinder, delay or impede the execution of any power herein granted to the
Trustee, but shall suffer and permit the execution of every such power as
though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly: (a) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation
involving the Company or any Restricted Subsidiary) or similar payment to the
direct or indirect holders of the Company's Equity Interests in their capacity
as such other than (i) dividends, payments or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company, or (ii) to the
Company or any Wholly Owned Restricted Subsidiary; (b) purchase, redeem or
otherwise acquire or retire for value (including, without limitation, in
connection with any merger or consolidation involving the Company) any Equity
Interests of the Company or any direct or indirect parent of the Company (other
than any such Equity Interests owned by the Company or any Wholly Owned
Restricted Subsidiary of the Company); (c) make any payment on or with respect
to, or purchase, redeem, defease or otherwise acquire or retire for value any
Indebtedness of the Company or any Restricted Subsidiary that is subordinated
to the Notes, except a payment of interest, customary fees and charges or
principal at Stated Maturity; or (d) make any Restricted Investment (all such
payments and other actions set forth in clauses (a) through (d) above being
collectively referred to as "Restricted Payments"), unless, at the time of and
after giving effect to such Restricted Payment:
(i) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(ii) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof; and
(iii) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted by
clauses (2) and (3) of the next succeeding paragraph), is less than the sum of
(A) 50% of the Consolidated Net Income of the Company for the period (taken as
one accounting period) from the beginning of the first fiscal quarter
commencing after the date hereof to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available at
the time of such Restricted Payment (or, if such Consolidated Net Income for
such period is a deficit, less 100% of such deficit), plus (B) 100% of the
aggregate net cash proceeds received by the Company from the issue or sale
since the date hereof of Equity Interests of the Company (other than
Disqualified Stock) or of Disqualified Stock or debt securities of the Company
that have been converted into such Equity Interests (other than any such Equity
Interests, Disqualified Stock or convertible debt securities sold to a
Restricted Subsidiary of the Company and other than Disqualified Stock or
convertible debt securities that have been converted into Disqualified Stock),
plus (C) to the extent that any Restricted Investment that was made after the
date hereof is (i) sold for cash or otherwise liquidated or repaid for cash or
(ii) in the case of Restricted Investments arising from guarantees by the
Company or any Restricted Subsidiary, terminated, the lesser of (x) the cash
return of capital or the amount of the terminated guarantee with respect to
such Restricted Investment (less the cost of disposition, if any) and (y) the
initial amount of such Restricted Investment, plus (D) the amount equal to the
net reduction in Investments (other than
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Permitted Investments) made by the Company or any of its Restricted
Subsidiaries in any Person resulting from the redesignation of Unrestricted
Subsidiaries as Restricted Subsidiaries not to exceed the lesser of (i) the
amount of Investments (valued in each case as provided in the definition of
"Unrestricted Subsidiary") previously made by the Company or its Restricted
Subsidiaries in that Unrestricted Subsidiary, which amount was included in the
calculation of the amount of Restricted Payments, and (ii) the fair market
value of the Investments in the Subsidiary as of the date that it is
redesignated an Unrestricted Subsidiary; provided, however, that no amount
shall be included under this clause (D) to the extent it is already included in
Consolidated Net Income; plus (E) $5.0 million.
So long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, the foregoing provisions shall not
prohibit: (1) the payment of any dividend within 60 days after the date of
declaration thereof, if at the date of declaration the payment would have
complied with the provisions of this Indenture; (2) the redemption, repurchase,
retirement, defeasance or other acquisition of any Equity Interests of the
Company or Indebtedness of the Company or any Guarantor that is subordinated to
the Notes or the guarantee, as the case may be, in exchange for, or out of the
net cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of, other Equity Interests of the Company (other
than any Disqualified Stock); provided, however, that the amount of any of
these net cash proceeds that are utilized for any redemption, repurchase,
retirement, defeasance or other acquisition shall be excluded from clause
(iii)(B) of the preceding paragraph; (3) the redemption, repurchase,
retirement, defeasance or other acquisition of Indebtedness of the Company or
any Guarantor that is subordinated to the Notes or the guarantees, as the case
may be, with the net cash proceeds from an incurrence of Permitted Refinancing
Indebtedness; and (4) other than the cash consideration to be paid in
connection with any exercise of dissenters' rights in connection with the
Transaction, the redemption, repurchase or other acquisition or retirement for
value of any Equity Interests of the Company or any Restricted Subsidiary of
the Company held by any member of the Company's or any of its Restricted
Subsidiaries' management or board of directors pursuant to any management
equity subscription agreement, stock option agreement or other similar
agreement or any successor arrangement entered into in connection with the
reorganization of the Company as a corporation; provided, however, that the
successor arrangement is on terms substantially similar to the arrangement so
replaced; provided, further, that the aggregate price paid for all redeemed,
repurchased, acquired or retired Equity Interests shall not exceed $1.0 million
in any twelve month period.
The amount of all Restricted Payments, other than cash, shall
be the fair market value on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by the Company or the
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined in
good faith by the Board of Directors whose resolution with respect to that
determination shall be delivered to the Trustee, who shall certify that the
valuation was approved by a majority of disinterested directors, if any. Not
later than the date of making any Restricted Payment, the Company shall be
required to deliver to the Trustee an Officers' Certificate stating that the
Restricted Payment was permitted and setting forth the basis upon which the
calculations required under this Section 4.07 were computed.
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SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
(a) The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction on the
ability of any Restricted Subsidiary of the Company to (1)(A) pay dividends or
make any other distributions to the Company or any of its Restricted
Subsidiaries on its Capital Stock or with respect to any other interest or
participation in, or measured by, its profits, or (B) pay any indebtedness owed
to the Company or any of its Restricted Subsidiaries, (2) make loans or
advances to the Company or any of its Restricted Subsidiaries or (3) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries.
(b) The provisions of clause (a) above shall not apply to encumbrances
or restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the date hereof and
any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof;
provided, however, that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive, taken as a whole, with respect
to such dividend and other payment restrictions than those contained
in such Existing Indebtedness, as in effect on the date of this
Indenture;
(2) the Senior Credit Facility as in effect as of the date of
this Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or
refinancings thereof; provided, however, that the amendments,
modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive with
respect to dividend and other payment restrictions than those
contained in the Senior Credit Facility as in effect on the date of
this Indenture;
(3) this Indenture, the Notes and the guarantees;
(4) applicable law;
(5) any instrument governing Indebtedness or Capital Stock of
a Person acquired by the Company or any of its Restricted Subsidiaries
as in effect at the time of the acquisition (except to the extent the
Indebtedness was incurred or the Capital Stock authorized and issued
in connection with or in contemplation of the acquisition), which
encumbrance or restriction is not applicable to any Person, or the
properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired; provided, however,
that, in the case of Indebtedness or Disqualified Stock, such
Indebtedness or Disqualified Stock would have been permitted under
Section 4.09 to be incurred or issued by the Company or one of its
Restricted Subsidiaries;
(6) customary non-assignment provisions in leases entered
into in the ordinary course of business and consistent with past
practices;
(7) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions of the nature
described in sub-clause (3) of clause (a);
(8) Permitted Refinancing Indebtedness; provided, however,
that the restrictions contained in the agreements governing the
Permitted Refinancing Indebtedness are no more restrictive than those
contained in the agreements governing the Indebtedness being
refinanced;
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(9) any agreement for the sale or disposition of a Restricted
Subsidiary that restricts distributions by such Restricted Subsidiary
pending its sale or other disposition;
(10) Permitted Liens that limit the right of the Company or
any of its Restricted Subsidiaries to dispose of the assets subject to
such Liens;
(11) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements, asset
sale agreements, stock sale agreements and other similar agreements
entered into in the ordinary course of business; and
(12) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary
course of business.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
(a) The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt), and the Company shall not issue any
shares of Disqualified Stock and the Company shall not permit any of its
Restricted Subsidiaries to issue any Disqualified Stock or preferred stock;
provided, however, that, so long as no Default or Event of Default has occurred
and is continuing, the Company shall be permitted to incur Indebtedness
(including Acquired Debt) or issue shares of Disqualified Stock, and any
Guarantor may incur Indebtedness, if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which the
additional Indebtedness is incurred or the Disqualified Stock is issued would
have been at least 2.0 to 1 through September 30, 2001 and at least 2.25 to 1
thereafter, in each case determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom, as if the additional Indebtedness
had been incurred or the Disqualified Stock had been issued at the beginning of
that four-quarter period.
(b) The provisions of clause (a) above shall not apply to the
incurrence of any of the following (collectively, "Permitted Indebtedness"):
(1) the incurrence by the Company and the Guarantors of
Indebtedness at any time outstanding (with letters of credit being
deemed to have a principal amount equal to the maximum potential
liability of the Company and the Guarantors thereunder) under the
Senior Credit Facility in an aggregate amount not to exceed the
greater of: (a) $155.0 million; or (b) the sum of (i) $125.0 million,
plus (ii) 60% of inventory of the Company and its Restricted
Subsidiaries, plus 85% of accounts receivable of the Company and its
Restricted Subsidiaries, in each case determined in accordance with
GAAP as of the most recent balance sheet, less the aggregate amount of
all Net Proceeds of Asset Sales applied to permanently repay any of
this Indebtedness pursuant to Section 4.10;
(2) the incurrence by the Company and the Guarantors of
Indebtedness represented by the Notes (but not to exceed $105.0
million aggregate principal amount for purposes of this clause (2))
and any Note Guarantee issued pursuant to Article 12;
(3) any Existing Indebtedness of the Company and its
Restricted Subsidiaries and any Guarantees of the Existing
Indebtedness;
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(4) the incurrence of Indebtedness between or among the
Company and any of its Wholly Owned Restricted Subsidiaries; provided,
however, that (a) if the Company is the obligor on that Indebtedness,
the Indebtedness is expressly subordinated to the prior payment in
full of all Obligations with respect to the Notes and (b) any
subsequent issuance or transfer of Equity Interests that results in
any of this Indebtedness being held by a Person other than the Company
or a Wholly Owned Restricted Subsidiary, and any sale or other
transfer of that Indebtedness to a Person that is not either the
Company or a Wholly Owned Restricted Subsidiary, shall be deemed, in
each case, to constitute an incurrence of that Indebtedness by the
Company or the Restricted Subsidiary, as the case may be;
(5) the incurrence by the Company or any of its Restricted
Subsidiaries of (a) Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of this
Section 4.09 to be outstanding, (b) foreign exchange contracts or (c)
currency swap agreements or other similar agreements or arrangements;
provided, however, that the notional amount of any currency swap
agreement does not exceed the principal amount of debt to which such
currency swap agreement relates;
(6) the guarantee by the Company or any of the Guarantors of
Indebtedness that was permitted to be incurred by another provision of
this Section 4.09;
(7) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted amount, as applicable) at any time outstanding
under this clause (7), including all Permitted Refinancing
Indebtedness incurred pursuant to clause (8) below to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(7), not to exceed $15.0 million;
(8) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or
the net proceeds of which are used to refund, refinance or replace
Indebtedness (other than intercompany Indebtedness) that was permitted
to be incurred by clause (a) of this Section 4.09, or by clauses (2),
(3), (5), (6), (7) and (12) of this clause (b);
(9) the incurrence by the Company's Unrestricted Subsidiaries
of Non-Recourse Debt, provided, however, that if any such Indebtedness
ceases to be Non-Recourse Debt of an Unrestricted Subsidiary, the
event shall be deemed to constitute an incurrence of Indebtedness by a
Restricted Subsidiary of the Company that was not permitted by this
clause (9);
(10) the accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness
in the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of additional
shares of the same class of Disqualified Stock; provided, however,
that in each such case, the amount thereof is included in Fixed
Charges of the Company as accrued;
(11) the incurrence of Indebtedness represented by
Capitalized Lease Obligations, mortgage financings or purchase money
obligations, in each case, incurred for the purpose of financing
capital expenditures of the Company or any of its Restricted
Subsidiaries not to exceed $10.0 million at any one time outstanding;
and
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(12) the incurrence by the Company or any of the Guarantors
of additional Indebtedness in an aggregate principal amount (or
accreted amount, as applicable) at any time outstanding under this
clause, including all Permitted Refinancing Indebtedness incurred
pursuant to clause (8) above to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (12), not to exceed
$15.0 million, solely for the purpose of financing acquisitions of
Permitted Businesses; provided, however, that the Fixed Charge
Coverage Ratio on a pro forma basis after giving effect to such
acquisitions is at least 2.0 to 1..
(c) For purposes of determining compliance with this Section 4.09,
in the event that an item of Indebtedness meets the criteria of more than one
of the categories of Permitted Indebtedness described in clause (b) above or is
entitled to be incurred pursuant to the clause (a) above, the Company shall, in
its sole discretion, classify that item of Indebtedness in any manner that
complies with this covenant and the item of Indebtedness shall be treated as
having been incurred pursuant to only one of those clauses or pursuant to
clause (a) above.
(d) Notwithstanding any other provisions of this Section 4.09, the
Company shall not be permitted to incur, directly or indirectly, any
Indebtedness that is subordinate in right of payment to any Senior Indebtedness
and senior in any respect in right of payment to the Notes and no Guarantor
shall be permitted to incur any Indebtedness that is subordinate or junior in
right of payment to its Guarantor Senior Indebtedness and senior in any respect
in right of payment to that Guarantor's guarantee of the Notes.
SECTION 4.10. ASSET SALES
(a) The Company shall not be permitted to, and shall not permit
any of its Restricted Subsidiaries to, consummate an Asset Sale unless: (1) the
Company or the Restricted Subsidiary, as the case may be, receives
consideration at the time of the Asset Sale at least equal to the fair market
value, evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Trustee, of the assets or Equity
Interests issued or sold or otherwise disposed of; and (2) at least 75% of the
consideration therefor received by the Company or the Restricted Subsidiary is
in the form of cash or Cash Equivalents; provided, however, that the amount of
(a) any liabilities, as shown on the Company's or the Restricted Subsidiary's
most recent balance sheet of the Company or the Restricted Subsidiary, other
than contingent liabilities and liabilities that are by their terms
subordinated to the Notes or any guarantee, that are assumed by the transferee
of any of those assets pursuant to a customary novation agreement that releases
the Company or the Restricted Subsidiary from further liability and (b) any
securities, notes or other obligations received by the Company or the
Restricted Subsidiary from the transferee that are substantially concurrently
converted by the Company or the Restricted Subsidiary into cash, to the extent
of the cash received, shall be deemed to be cash for purposes of this
provision.
(b) Within 365 days following the receipt of any Net Proceeds from
an Asset Sale, the Company shall be permitted to apply the Net Proceeds, at its
option, (1) to repay Senior Indebtedness and to correspondingly reduce
commitments with respect to repaid Senior Indebtedness in the case of revolving
borrowings; or (2) to acquire a controlling interest in a Permitted Business;
or (3) to make a capital expenditure; or (4) to acquire other long-term assets
that are used or useful in a Permitted Business; provided, however, that prior
to December 31, 2001, amounts repaid pursuant to clause (1) above with the Net
Proceeds from an Asset Sale involving assets acquired with borrowings under the
revolving acquisition line of the Senior Credit Facility shall not constitute a
permanent reduction of such commitment; provided further, however, only to the
extent that such repayment does not otherwise
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constitute a permanent reduction of the commitment under the Senior Credit
Facility as in effect on the date hereof.
(c) Pending the final application of any Net Proceeds, the Company
shall be permitted temporarily to reduce Indebtedness under a revolving credit
facility, if any, or otherwise invest the Net Proceeds in any manner that is
not prohibited by this Indenture. Any Net Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph
shall be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company shall be required to make an
offer to all holders of Notes and all holders of other Indebtedness that ranks
equally with the Notes ("pari passu Indebtedness") containing provisions
similar to those set forth in this Indenture with respect to offers to purchase
or redeem the Indebtedness with the proceeds of sales of assets (an "Asset Sale
Offer") to purchase the maximum principal amount of Notes and such other pari
passu Indebtedness that may be purchased out of the Excess Proceeds. The offer
price in any Asset Sale Offer shall be equal to 100% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date fixed for purchase, and shall be payable in cash. If any
Excess Proceeds remain after completion of an Asset Sale Offer, the Company
shall be permitted to use any remaining Excess Proceeds for any purpose not
otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes and other pari passu Indebtedness surrendered by holders thereof exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes to be
purchased pursuant to Section 3.09. Upon completion of an Asset Sale Offer, the
amount of Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate of the Company (each of the foregoing, an "Affiliate
Transaction"), unless (i) the Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or
such Restricted Subsidiary with an unrelated Person, (ii) if such Affiliate
Transaction or series of related Affiliate Transactions involve aggregate
consideration in excess of $2.0 million, such Affiliate Transaction shall be
approved by a majority of the disinterested members of the Board of Directors
and evidenced in a resolution of such members of the Board of Directors
certifying that that the terms of such Affiliate Transaction are at least as
favorable to the Company or the relevant Restricted Subsidiary as might
reasonably have been obtained in a comparable arm's length transaction with an
unaffiliated third party and (iii) if such Affiliate Transaction or series of
related Affiliate Transactions involves aggregate consideration in excess of
$5.0 million, the Company obtains an opinion from an accounting, appraisal or
investment banking firm of national standing to the effect that such Affiliate
Transaction is fair to the Company or the relevant Restricted Subsidiary from a
financial point of view or as the valuation.
The provisions of the foregoing paragraph shall not prohibit
(1) any employment agreement or employment arrangement, non-competition
agreement, confidentiality agreement, stock option agreement or plan, stock
ownership agreement or plan or indemnification agreement entered into by the
Company or any of its Restricted Subsidiaries with any employee or director in
the ordinary course of business and consistent with the past practice of the
Company or the Restricted Subsidiary (including the issuance of any securities
or other payments, awards or grants in securities pursuant thereto) that is
approved by a majority of disinterested directors, if any, or otherwise by a
majority of the Board of Directors of the Company; (2) transactions between or
among the Company and/or its Restricted
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Subsidiaries; (3) payment of reasonable directors' fees to persons who are not
otherwise Affiliates of the Company; (4) any obligations of the Company
pursuant to the Management Agreement; (5) any Restricted Payment that is
permitted by the provisions of Section 4.07; (6) loans and advances to
employees of the Company or any of its Restricted Subsidiaries in the ordinary
course of business and consistent with past practice; and (7) the mergers or
any payments made in connection with the Transaction.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien on any asset now owned or hereafter acquired, or on
any income or profits therefrom nor to assign or convey any right to receive
income therefrom, in each case to secure Indebtedness or trade payables, except
for Permitted Liens.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each of its Restricted Subsidiaries, in accordance with the respective
organizational documents (as the same may be amended from time to time) of the
Company or any such Restricted Subsidiary and (ii) the rights (charter and
statutory), licenses and franchises of the Company and its Restricted
Subsidiaries; provided, however, that the Company shall not be required to
preserve any such right, license or franchise, or the corporate, partnership or
other existence of any of its Restricted Subsidiaries, if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and its Restricted Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) If a Change of Control occurs, the Company shall make an offer
(a "Change of Control Offer") to each Holder to repurchase all or any part,
equal to $1,000 or an integral multiple of $1,000, of the Holder's Notes at an
offer price in cash equal to 101% of the aggregate principal amount thereof,
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
date fixed for repurchase (the "Change of Control Payment").
(b) Within 30 business days following a Change of Control, the
Company shall mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
the Notes on the date specified in the notice, which date shall be no earlier
than 30 days and no later than 60 days from the date the notice is mailed (the
"Change of Control Payment Date") pursuant to the procedures set forth in
Section 3.09 and described in the notice. The Company shall comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent those laws and regulations are
applicable to the repurchase of the Notes as a result of a Change of Control.
(c) On the Change of Control Payment Date, the Company shall, to
the extent lawful, (1) accept for payment all Notes or portions of Notes
properly tendered under the Change of Control Offer; (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Notes or portions of the Notes so tendered; and (3) deliver or cause to be
delivered to the Trustee the Notes so accepted together with an Officers'
Certificate stating the aggregate principal amount of Notes or portions of the
Notes being purchased by the Company.
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(d) The Paying Agent shall mail promptly to each holder of Notes
so tendered the Change of Control Payment for the Notes, and the Trustee shall
promptly authenticate and mail, or cause to be transferred by book entry, to
each holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, provided, however, that each new Note shall be in a
principal amount of $1,000 or an integral multiple of $1,000.
(e) Prior to complying with the provisions of this Section 4.14,
but in any event within 60 days following a Change of Control, the Company
shall either repay all outstanding Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Senior
Indebtedness to permit the repurchase of Notes required by this Section 4.14.
The Company shall publicly announce the results of the Change of Control Offer
on or as soon as practicable after the Change of Control Payment Date.
(f) The Change of Control provisions described in this Section
4.14 shall be applicable notwithstanding any other provisions of this
Indenture.
(g) The Company shall not be required to make a Change of Control
Offer following a Change of Control if a third party makes the Change of
Control Offer in the manner, at the times and otherwise in compliance with the
requirements set forth in this Section 4.14 and purchases all Notes validly
tendered and not withdrawn under the Change of Control Offer.
SECTION 4.15. PAYMENTS FOR CONSENT.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this
Indenture or the Notes unless such consideration is offered to be paid or is
paid to all Holders that consent, waive or agree to amend in the time frame set
forth in the solicitation documents relating to such consent, waiver or
agreement.
SECTION 4.16. SALE AND LEASEBACK TRANSACTIONS
The Company shall not and shall not permit any of its
Restricted Subsidiaries to enter into any Sale and Leaseback Transaction;
provided, however, that the Company and any Guarantor may enter a Sale and
Leaseback Transaction if, at the time of entering into such Sale and Leaseback
Transaction, (a) the Company or such Guarantor could have (i) incurred
Indebtedness in an amount equal to the Attributable Debt relating to such Sale
and Leaseback Transaction pursuant to the Fixed Charge Coverage Ratio under
Section 4.09 hereof; and (ii) incurred a Lien to secure such Indebtedness
pursuant to Section 4.12 hereof; (b) the gross cash proceeds of the Sale and
Leaseback Transaction are at least equal to the fair market value, as
determined in good faith by the Board of Directors and set forth in an
Officers' Certificate delivered to the Trustee, such Officers' Certificate
certifying that such valuation has been approved by a majority of the
disinterested members, if any, of the Board of Directors, of the property that
is subject of such Sale and Leaseback Transaction; and (c) the Sale and
Leaseback Transaction is permitted by, and the net proceeds of such Sale and
Leaseback Transaction are applied in compliance with Section 4.10 hereof.
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ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not consolidate or merge with or into
another Person (whether or not the Company is the surviving corporation), or
sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another Person unless (a) the Company is the surviving
corporation or Person formed by or surviving any such consolidation or merger
(if other than the Company) or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (the "Successor Company")
is a corporation organized or existing under the laws of the United States, any
state thereof or the District of Columbia, (b) the entity or Person formed by
or surviving any such consolidation or merger (if other than the Company) or
the Successor Company assumes all the obligations of the Company under the
Notes and this Indenture pursuant to a supplemental indenture in a form
reasonably satisfactory to the Trustee, (c) immediately after such transaction,
no Default or Event of Default exists and (d) except in the case of a merger of
the Company with or into a Wholly Owned Restricted Subsidiary of the Company,
the Company or the Successor Company (A) shall have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) shall, at
the time of such transaction and after giving pro forma effect thereto as if
such transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to Incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the first
paragraph of Section 4.09(a) hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment,
transfer, lease, conveyance or other disposition of all or substantially all of
the assets of the Company in accordance with Section 5.01 hereof, the successor
corporation formed by such consolidation or into or with which the Company is
merged or to which such sale, assignment, transfer, lease, conveyance or other
disposition is made shall succeed to, and be substituted for (so that from and
after the date of such consolidation, merger, sale, lease, conveyance or other
disposition, the provisions of this Indenture referring to the "Company" shall
refer instead to the successor corporation and not to the Company), and may
exercise every right and power of the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Notes except in the case
of a sale of all of the Company's assets that meets the requirements of Section
5.01 hereof. Notwithstanding any of the foregoing provisions in this Article 5,
nothing herein shall prohibit the mergers of the Company with and into Trivest
Furniture Corporation, with the latter being the surviving entity, or the
merger of Trivest Furniture Corporation with and into WinsLoew Furniture, Inc.,
with the latter being the surviving entity.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on,
or Liquidated Damages with respect to, the Notes, whether or not prohibited by
Section 4.01, and such default continues for a period of 30 days;
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(b) the Company defaults in the payment when due of principal of
or premium, if any, on the Notes, whether or not prohibited by Section 4.01;
(c) the Company or any of its Restricted Subsidiaries fails to
comply for 30 days with any of the provisions of Section 4.07, 4.09, 4.10 or
4.14 hereof;
(d) the Company or any of its Restricted Subsidiaries, for 30 days
after notice to the Company by the Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Notes fails to comply with
any of its other agreements in this Indenture or the Notes;
(e) the default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries, or the payment of which is guaranteed by the Company or any of
its Restricted Subsidiaries, whether the Indebtedness or guarantee now exists
or is created after the date hereof, which default; (i) is caused by a failure
to pay principal of or premium, if any, or interest on such Indebtedness prior
to the expiration of any grace period provided for on the date of the default
(a "Payment Default") or (ii) results in the acceleration of the Indebtedness
prior to its scheduled maturity and, in each case, the principal amount of such
Indebtedness, together with the principal amount of any other Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more;
(f) failure by the Company or any of its Significant Subsidiaries,
or a group of Restricted Subsidiaries that taken together would constitute a
Significant Subsidiary, to pay final judgments aggregating in excess of $5.0
million, which judgments are not paid, discharged or stayed for a period of 60
consecutive days;
(g) any Guarantee of the Notes is held in any judicial proceeding
to be unenforceable or invalid or ceases for any reason to be in full force and
effect or any Guarantor, or any Person acting on behalf of any Guarantor,
denies or disaffirms its obligations under its guarantee; provided, however,
that this clause (g) shall apply only to a Guarantor that is a Significant
Subsidiary or a group of Guarantors that, taken together, would constitute a
Significant Subsidiary;
(h) the Company or any of its Significant Subsidiaries or any
group of Restricted Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, pursuant to or within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against
it in an involuntary case,
(iii) consents to the appointment of a Custodian of it or
for all or substantially all of its property,
(iv) makes a general assignment for the benefit of its
creditors, or
(v) generally is not paying its debts as they become
due; and
(i) a court of competent jurisdiction enters an order or decree
under any Bankruptcy Law that:
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(i) is for relief against the Company or any of its
Significant Subsidiaries or any group of
Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary in an
involuntary case; or
(ii) appoints a Custodian of the Company or any of its
Significant Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary or for all or
substantially all of the property of the Company or
any of its Significant Subsidiaries or any group of
Restricted Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary; or
(iii) orders the liquidation of the Company or any of its
Significant Subsidiaries or any group of Restricted
Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default
specified in clause (h) or (i) of Section 6.01 hereof with respect to the
Company), occurs and is continuing, the Trustee or the Holders of at least 25%
in principal amount of the then outstanding Notes may declare all the Notes to
be due and payable immediately. Notwithstanding the foregoing, if an Event of
Default specified in clause (h) or (i) of Section 6.01 hereof occurs with
respect to the Company, all outstanding Notes shall be due and payable
immediately without further action or notice. The Holders of a majority in
aggregate principal amount of the Notes then outstanding by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy to collect the payment of principal, premium,
if any, and interest on the Notes or to enforce the performance of any
provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any
right or remedy accruing upon an Event of Default shall not impair the right or
remedy or constitute a waiver of or acquiescence in the Event of Default.
All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal
amount of the Notes then outstanding by notice to the Trustee may, on behalf of
the Holders of all of the Notes, waive an existing Default or Event of Default
and its consequences hereunder, except a continuing Default or Event of Default
in the payment of the principal of, premium and Liquidated Damages, if any, or
interest on, the Notes (including in connection with an offer to purchase)
(provided, however, that the Holders of a majority in aggregate principal
amount of the then outstanding Notes may rescind an acceleration and its
consequences, including any related payment default that resulted from such
acceleration). Upon any such waiver, such Default shall cease to exist, and any
Event of Default arising therefrom shall be deemed
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to have been cured for every purpose of this Indenture; but no such waiver
shall extend to any subsequent or other Default or impair any right consequent
thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then
outstanding Notes may direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee or exercising any
trust or power conferred on it. However, the Trustee may refuse to follow any
direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written
notice of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of
the then outstanding Notes make a written request to the Trustee to pursue the
remedy;
(c) such Holder of a Note or Holders of Notes offer and,
if requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within
60 days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority
in principal amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice
the rights of another Holder of a Note or to obtain a preference or priority
over another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Note, on or after the
respective due dates expressed in the Note (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b)
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Company for the whole
amount of principal of, premium and Liquidated Damages, if any, and interest
remaining unpaid on the Notes and interest on overdue principal and, to the
extent lawful, interest and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
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SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to
the Company (or any other obligor upon the Notes), its creditors or its
property and shall be entitled and empowered to collect, receive and distribute
any money or other property payable or deliverable on any such claims and any
custodian in any such judicial proceeding is hereby authorized by each Holder
to make such payments to the Trustee, and in the event that the Trustee shall
consent to the making of such payments directly to the Holders, to pay to the
Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any
other amounts due the Trustee under Section 7.07 hereof. To the extent that the
payment of any such compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof out of the estate in any such proceeding, shall be denied
for any reason, payment of the same shall be secured by a Lien on, and shall be
paid out of, any and all distributions, dividends, money, securities and other
properties that the Holders may be entitled to receive in such proceeding
whether in liquidation or under any plan of reorganization or arrangement or
otherwise. Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Notes or
the rights of any Holder, or to authorize the Trustee to vote in respect of the
claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article,
it shall pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Notes for principal, premium and Liquidated Damages, if
any and interest, respectively; and
Third: to the Company or to such party as a court of
competent jurisdiction shall direct.
The Trustee may fix a record date and payment date for any
payment to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to
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Section 6.07 hereof, or a suit by Holders of more than 10% in principal amount
of the then outstanding Notes.
ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision
of this Indenture that in any way relates to the Trustee is subject to
paragraphs (a), (b), (c), (e) and (f) of this Section and Section 7.02.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability
or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officers' Certificate or Opinion of Counsel. The Trustee may
consult with counsel and the written advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Indenture at the request or direction
of any of the Holders unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may
become the owner or pledgee of Notes and may otherwise deal with the Company or
any Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with
like rights and duties. The Trustee is also subject to Sections 7.10 and 7.11
hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or the Notes,
it shall not be accountable for the Company's use of the proceeds from the
Notes or any money paid to the Company or upon the Company's direction under
any provision of this Indenture, it shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and it shall not be responsible for any statement or recital herein or any
statement in the Notes or any other document in connection with the sale of the
Notes or pursuant to this Indenture other than its certificate of
authentication.
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SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to the Trustee, the Trustee shall mail to Holders of Notes a
notice of the Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or Event of Default in payment of principal of,
premium, if any, or interest on any Note, the Trustee may withhold the notice
if and so long as a committee of its Responsible Officers in good faith
determines that withholding the notice is in the interests of the Holders of
the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each May 1 beginning with May 1, 2000,
and for so long as Notes remain outstanding, the Trustee shall mail to the
Holders of the Notes a brief report dated as of such reporting date that
complies with TIA ss. 313(a) (but if no event described in TIA ss. 313(a) has
occurred within the twelve months preceding the reporting date, no report need
be transmitted). The Trustee also shall comply with TIA ss. 313(b)(2). The
Trustee shall also transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the SEC and each
stock exchange on which the Notes are listed in accordance with TIA ss.313(d).
The Company shall promptly notify the Trustee when the Notes are listed on any
stock exchange.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its acceptance of this Indenture and services
hereunder. The Trustee's compensation shall not be limited by any law on
compensation of a trustee of an express trust. The Company shall reimburse the
Trustee promptly upon request for all reasonable disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation,
disbursements and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee against any and all
losses, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture,
including the costs and expenses of enforcing this Indenture against the
Company (including this Section 7.07) and defending itself against any claim
(whether asserted by the Company or any Holder or any other person) or
liability in connection with the exercise or performance of any of its powers
or duties hereunder, except to the extent any such loss, liability or expense
or a portion thereof may be attributable to its negligence or bad faith. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations hereunder. The Company shall defend the claim
and the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent,
which consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnify against any loss liability or expense
incurred by the Trustee through the Trustee's own willful misconduct,
negligence or bad faith.
The obligations of the Company under this Section 7.07 shall
survive the satisfaction and discharge of this Indenture.
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To secure the Company's payment obligations in this Section,
the Trustee shall have a Lien prior to the Notes on all money or property held
or collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the
expenses and the compensation for the services (including the fees and expenses
of its agents and counsel) are intended to constitute expenses of
administration under any Bankruptcy Law.
The Trustee shall comply with the provisions of TIA
ss. 313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Notes of a majority in principal amount of the then outstanding
Notes may remove the Trustee by so notifying the Trustee and the Company in
writing. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order
for relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the then outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company, or the Holders of Notes of at least 10% in principal amount of the
then outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note
who has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. Subject to
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the Lien provided for in Section 7.07 hereof, the retiring Trustee shall
promptly transfer all property held by it as Trustee to the successor Trustee;
provided, however, that all sums owing to the Trustee hereunder shall have been
paid. Notwithstanding replacement of the Trustee pursuant to this Section 7.08,
the Company's obligations under Section 7.07 hereof shall continue for the
benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $10 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to
TIA ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors
evidenced by a resolution set forth in an Officers' Certificate, at any time,
elect to have either Section 8.02 or 8.03 hereof be applied to all outstanding
Notes upon compliance with the conditions set forth below in this Article
Eight.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.02, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be deemed to
have been discharged from its obligations with respect to all outstanding Notes
on the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall
be deemed to have paid and discharged the entire Indebtedness represented by
the outstanding Notes, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Indenture referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall
survive until otherwise terminated or discharged hereunder: (a) the rights of
Holders of outstanding Notes to receive solely from the trust fund described in
Section 8.04 hereof, and as more fully set forth in such Section, payments in
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respect of the principal of, premium, if any, and interest and Liquidated
Damages, if any, on such Notes when such payments are due, (b) the Company's
obligations with respect to such Notes under Article 2 and Section 4.02 hereof,
(c) the rights, powers, trusts, duties and immunities of the Trustee hereunder
and the Company's obligations in connection therewith and (d) this Article
Eight. Subject to compliance with this Article Eight, the Company may exercise
its option under this Section 8.02 notwithstanding the prior exercise of its
option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the
option applicable to this Section 8.03, the Company shall, subject to the
satisfaction of the conditions set forth in Section 8.04 hereof, be released
from its obligations under the covenants contained in Sections 4.03, 4.07,
4.08, 4.09, 4.10, 4.11, 4.12, 4.13, 4.14 and 4.15, hereof, and the operation of
Section 5.01(d) hereof, with respect to the outstanding Notes on and after the
date the conditions set forth in Section 8.04 are satisfied (hereinafter,
"Covenant Defeasance"), and the Notes shall thereafter be deemed not
"outstanding" for the purposes of any direction, waiver, consent or declaration
or act of Holders (and the consequences of any thereof) in connection with such
covenants, but shall continue to be deemed "outstanding" for all other purposes
hereunder (it being understood that such Notes shall not be deemed outstanding
for accounting purposes). For this purpose, Covenant Defeasance means that,
with respect to the outstanding Notes, the Company may omit to comply with and
shall have no liability in respect of any term, condition or limitation set
forth in any such covenant, whether directly or indirectly, by reason of any
reference elsewhere herein to any such covenant or by reason of any reference
in any such covenant to any other provision herein or in any other document and
such omission to comply shall not constitute a Default or an Event of Default
under Section 6.01 hereof, but, except as specified above, the remainder of
this Indenture and such Notes shall be unaffected thereby. In addition, upon
the Company's exercise under Section 8.01 hereof of the option applicable to
this Section 8.03 hereof, subject to the satisfaction of the conditions set
forth in Section 8.04 hereof, Sections 6.01(c) through 6.01(f) hereof shall not
constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of
either Section 8.02 or 8.03 hereof to the outstanding Notes. In order to
exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts
as shall be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest and Liquidated Damages, if any, on the outstanding Notes on the stated
date for payment thereof or on the applicable redemption date, as the case may
be, and the Company must specify whether the Notes are being defeased to
maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date of this Indenture, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Notes shall not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and shall be subject to
federal income tax on the same amounts, in
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the same manner and at the same times as would have been the case if such Legal
Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes shall not recognize income, gain or loss for federal income
tax purposes as a result of such Covenant Defeasance and shall be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall occur under Sections 6.01
(g) or 6.01(h) hereof at any time in the period ending on the 91st day after
the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result
in a breach or violation of, or constitute a default under, any material
agreement or instrument (other than this Indenture) to which the Company or any
of its Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries is bound;
(f) the Company shall have delivered to the Trustee an Opinion of
Counsel (which may be subject to customary exceptions) to the effect that on
the 123rd day following the deposit, the trust funds shall not be subject to
the effect of any applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the
intent of preferring the Holders over any other creditors of the Company or
with the intent of defeating, hindering, delaying or defrauding any other
creditors of the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the
payment, either directly or through any Paying Agent (including the Company
acting as Paying Agent) as the Trustee may determine, to the Holders of such
Notes of all sums due and to become due thereon in respect of principal,
premium, if any, and interest, but such money need not be segregated from other
funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the cash or
non-callable Government Securities deposited pursuant to Section 8.04 hereof or
the principal and interest received in respect thereof other than any such tax,
fee or other charge which by law is for the account of the Holders of the
outstanding Notes.
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Anything in this Article Eight to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon the request of the Company any money or non-callable Government
Securities held by it as provided in Section 8.04 hereof which, in the opinion
of a nationally recognized firm of independent public accountants expressed in
a written certification thereof delivered to the Trustee (which may be the
opinion delivered under Section 8.04(a) hereof), are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of,
premium, if any, or interest on any Note and remaining unclaimed for two years
after such principal, and premium, if any, or interest has become due and
payable shall be paid to the Company on its request or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured creditor, look only to the Company for payment
thereof, and all liability of the Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in The New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit
had occurred pursuant to Section 8.02 or 8.03 hereof until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 8.02 or 8.03 hereof, as the case may be; provided, however, that, if
the Company makes any payment of principal of, premium, if any, or interest on
any Note following the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money held by the Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company
and the Trustee may amend or supplement this Indenture or the Notes without the
consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place
of certificated Notes or to alter the provisions of Article 2 hereof (including
the related definitions) in a manner that does not materially adversely affect
any Holder;
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(c) to provide for the assumption of the Company's or any
Guarantor's obligations to the Holders of the Notes by a successor to the
Company pursuant to Article 5 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the
legal rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or
maintain the qualification of this Indenture under the TIA.
Upon the request of the Company accompanied by a resolution
of its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon receipt by the Trustee of the documents
described in Section 7.02 hereof, the Trustee shall join with the Company in
the execution of any amended or supplemental Indenture authorized or permitted
by the terms of this Indenture and to make any further appropriate agreements
and stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company
and the Trustee may amend or supplement this Indenture (including Section 3.09,
4.10 and 4.14 hereof) and the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
including Additional Notes, if any, then outstanding voting as a single class
(including consents obtained in connection with a tender offer or exchange
offer for, or purchase of, the Notes), and, subject to Sections 6.04 and 6.07
hereof, any existing Default or Event of Default (other than a Default or Event
of Default in the payment of the principal of, premium, if any, or interest on
the Notes, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Indenture or the Notes
may be waived with the consent of the Holders of a majority in principal amount
of the then outstanding Notes, including Additional Notes, if any, voting as a
single class (including consents obtained in connection with a tender offer or
exchange offer for, or purchase of, the Notes).
Upon the request of the Company accompanied by a resolution
of its Board of Directors authorizing the execution of any such amended or
supplemental Indenture, and upon the filing with the Trustee of evidence
satisfactory to the Trustee of the consent of the Holders of Notes as
aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.02 hereof, the Trustee shall join with the Company in the execution
of such amended or supplemental Indenture unless such amended or supplemental
Indenture directly affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise, in which case the Trustee may in its discretion,
but shall not be obligated to, enter into such amended or supplemental
Indenture.
It shall not be necessary for the consent of the Holders of
Notes under this Section 9.02 to approve the particular form of any proposed
amendment or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
becomes effective, the Company shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the
Holders of a majority in aggregate principal amount of the Notes, including
Additional Notes, if any, then outstanding voting as a single class may waive
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compliance in a particular instance by the Company with any provision of this
Indenture or the Notes. However, without the consent of each Holder affected,
an amendment or waiver under this Section 9.02 may not (with respect to any
Notes held by a non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any
Note or alter or waive any of the provisions with respect to the redemption of
the Notes except as provided above with respect to Sections 3.09, 4.10 and 4.14
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest or Liquidated Damages, if any, on
the Notes (except a rescission of acceleration of the Notes by the Holders of
at least a majority in aggregate principal amount of the then outstanding Notes
(including Additional Notes, if any) and a waiver of the payment default that
resulted from such acceleration);
(e) make any Note payable in money other than that stated in the
Notes;
(f) make any change in the provisions of this Indenture relating
to waivers of past Defaults or the rights of Holders of Notes to receive
payments of principal of or interest or Liquidated Damages, if any, on the
Notes;
(g) waive a redemption payment with respect to any Note (other
than a payment required by Sections 3.09, 4.10 and 4.14 hereof);
(h) release any Guarantor from its Guarantee; or
(i) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes
shall be set forth in a amended or supplemental Indenture that complies with
the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent
Holder of a Note may revoke the consent as to its Note if the Trustee receives
written notice of revocation before the date the waiver, supplement or
amendment becomes effective. An amendment, supplement or waiver becomes
effective in accordance with its terms and thereafter binds every Holder.
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SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Company in exchange for all Notes may issue and the Trustee shall, upon receipt
of an Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does
not adversely affect the rights, duties, liabilities or immunities of the
Trustee. The Company may not sign an amendment or supplemental Indenture until
the Board of Directors approves it. In executing any amended or supplemental
indenture, the Trustee shall be entitled to receive and (subject to Section
7.01 hereof) shall be fully protected in relying upon, in addition to the
documents required by Section 10.04 hereof, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Indenture.
ARTICLE 10.
MISCELLANEOUS
SECTION 10.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or
conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall
control.
SECTION 10.02. NOTICES.
Any notice or communication by the Company or the Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next-day delivery, to the
others' address:
If to the Company:
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WinsLoew Escrow Corp.
c/o Trivest, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 31333
Attention: General Counsel
Telecopy No.: (305) 858-1629
With copies to:
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Attention: Chief Financial Officer
Telecopy No.: (205) 408-7028
and
Greenberg & Traurig, P.A.
1221 Brickell Avenue
21st Floor
Miami, Florida 33131
Telecopier No.: (305) 579-0717
Attention: Bruce E. Macdonough, Esq.
If to the Trustee:
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Telecopier No.: (718) 331-1852
Attention: Corporate Trust Administration
The Company or the Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by
hand, if personally delivered; five Business Days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail, certified or registered, return receipt requested, or by
overnight air courier guaranteeing next day delivery to its address shown on
the register kept by the Registrar. Any notice or communication shall also be
so mailed to any Person described in TIA ss.313(c), to the extent required by
the TIA. Failure to mail a notice or communication to a Holder or any defect in
it shall not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the
addressee receives it.
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If the Company mails a notice or communication to Holders, it
shall mail a copy to the Trustee and each Agent at the same time.
SECTION 10.03 COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss.312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection
of TIA ss.312(c).
SECTION 10.04 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 10.05 hereof) stating that, in the opinion of the signers, all
conditions precedent and covenants, if any, provided for in this Indenture
relating to the proposed action have been satisfied; and
(b) an Opinion of Counsel in form and substance
reasonably satisfactory to the Trustee (which shall include the statements set
forth in Section 10.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied.
SECTION 10.05 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss.314(a)(4)) shall comply with the provisions of TIA
ss.314(e) and shall include:
(a) a statement that the Person making such certificate
or opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he
or she has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or condition
has been satisfied; and
(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been satisfied.
SECTION 10.06 RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
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SECTION 10.07 NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No past, present or future director, officer, employee,
incorporator or stockholder of the Company or any Guarantor, as such, shall
have any liability for any obligations of the Company or any Guarantor under
the Notes, the Guarantees, this Indenture or for any claim based on, in respect
of, or by reason of, such obligations or their creation. Each Holder by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes and the Guarantees.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the SEC that such a waiver is against
public policy.
SECTION 10.08 GOVERNING LAW.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE
USED TO CONSTRUE THIS INDENTURE AND THE NOTES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 10.09 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 10.10 SUCCESSORS.
All agreements of the Company in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture
shall bind its successors.
SECTION 10.11 SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 10.12 COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 10.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
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ARTICLE 11.
SUBORDINATION
SECTION 11.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by, and the payment of principal, premium, interest
and Liquidated Damages, if any, on, the Notes is subordinated in right of
payment, to the extent and in the manner provided in this Article 11, to the
prior payment in full of all Senior Indebtedness (whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed), and that
the subordination is for the benefit of the holders of Senior Indebtedness.
SECTION 11.02 LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshaling of the Company's
assets and liabilities, the holders of Senior Indebtedness shall be entitled to
receive payment in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness) before the Holders
of Notes shall be entitled to receive any payment with respect to the Notes,
and until all Obligations with respect to Senior Indebtedness are paid in full
in cash or Cash Equivalents, any distribution to which the Holders of Notes
would be entitled shall be made to the holders of Senior Indebtedness (except
that Holders of Notes may receive and retain Permitted Junior Securities and
payments made from the trust described under Article 8).
SECTION 11.03 DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not pay principal, premium, interest or Liquidated
Damages, if any, with respect to the Notes or make any deposit pursuant to the
provisions described under Article 8 and may not repurchase, redeem or
otherwise retire any Notes (collectively, "pay the Notes") if (i) any
Designated Senior Indebtedness is not paid when due or (ii) any other default
on Designated Senior Indebtedness occurs and the maturity of such Designated
Senior Indebtedness is accelerated in accordance with its terms unless, in
either case, the default has been cured or waived and any such acceleration has
been rescinded or such Designated Senior Indebtedness has been paid in full.
However, the Company may and shall pay the Notes without regard to the
foregoing if the Company and the Trustee receive written notice approving such
payment from the Representative of the Designated Senior Indebtedness with
respect to which either of the events set forth in clause (i) or (ii) of the
immediately preceding sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or
(ii) of the second preceding sentence) with respect to any Designated Senior
Indebtedness pursuant to which the maturity thereof may be accelerated
immediately without further notice (except such notice as may be required to
effect such acceleration) or the expiration of any applicable grace periods,
the Company may not pay the Notes for a period (a "Payment Blockage Period")
commencing upon the receipt by the Trustee (with a copy to the Company) of
written notice (a "Blockage Notice") of such default from the Representative of
the holders of such Designated Senior Indebtedness specifying an election to
effect a Payment Blockage Period and ending 179 days thereafter (or earlier if
such Payment Blockage Period is terminated (i) by written notice to the Trustee
and the Company from the Person or Persons who gave such Blockage Notice, (ii)
because the default giving rise to such Blockage Notice is no longer continuing
or (iii) because such Designated Senior Indebtedness has been repaid in full).
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Notwithstanding the provisions described in the immediately preceding
sentence (but subject to the provisions described in the first sentence of this
paragraph), unless the holders of such Designated Senior Indebtedness or the
representative of such holders (any such representative, a "Representative")
have accelerated the maturity of such Designated Senior Indebtedness, the
Company may resume payments on the Notes after the end of such Payment Blockage
Period. The Notes shall not be subject to more than one Payment Blockage Period
in any consecutive 360-day period, irrespective of the number of defaults with
respect to Designated Senior Indebtedness during such period. No nonpayment
default that existed or was continuing on the date of delivery of any Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent Blockage
Notice unless such default shall have been waived for a period of not less than
90 days. Following the expiration of any period during which the Company is
prohibited from making payments on the Notes pursuant to a Payment Blockage
Notice, the Company shall be obligated to resume making any and all required
payments in respect of the Notes, including any missed payments, unless the
maturity of any Designated Senior Indebtedness has been accelerated, and such
acceleration remains in full force and effect.
The Company shall give prompt written notice to the Trustee of any
default in the payment of any Senior Indebtedness or any acceleration under any
Senior Indebtedness or under any agreement pursuant to which Senior
Indebtedness may have been issued. Failure to give such notice shall not affect
the subordination of the Notes to the Senior Indebtedness or the application of
the other provisions provided in this Article 11.
SECTION 11.04 ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of a Default, the
Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 11.05 WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee receives or is holding, or any Holder
receives, any payment of any principal, premium, interest and Liquidated
Damages, if any, with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge (in the case of the Trustee as
described in Section 11.11 hereof), that such payment is prohibited by Section
11.02 or 11.03 hereof, such payment shall be held by the Trustee or such
Holder, in trust for the benefit of, and shall be paid forthwith over and
delivered to, the holders of Senior Indebtedness as their interests may appear
or their Representative under the indenture or other agreement (if any)
pursuant to which Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to the Senior Indebtedness remaining unpaid to the extent necessary to
pay such Obligations in full in accordance with their terms, after giving
effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall mistakenly pay over or
distribute to or on behalf of Holders or the Company or any other Person money
or assets to which any holders of Senior Indebtedness shall be entitled by
virtue of this Article 11, except if such payment is made as a result of the
willful misconduct or gross negligence of the Trustee.
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SECTION 11.06 NOTICE BY THE COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent of
any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 11, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article 11.
SECTION 11.07 SUBROGATION.
After all Senior Indebtedness is paid in full and until the Notes are
paid in full, Holders shall be subrogated (equally and ratably with all other
Indebtedness pari passu with the Notes) to the rights of holders of Senior
Indebtedness to receive distributions applicable to Senior Indebtedness to the
extent that distributions otherwise payable to the Holders have been applied to
the payment of Senior Indebtedness. A distribution made under this Article to
holders of Senior Indebtedness that otherwise would have been made to Holders
is not, as between the Company and Holders, a payment by the Company on the
Notes.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 11 shall have been
applied, pursuant to the provisions of this Article 11, to the payment of all
amounts payable under the Senior Indebtedness, then and in such case the
Holders shall be entitled to receive from the holders of such Senior
Indebtedness at the time outstanding any payments or distributions received by
such holders of such Senior Indebtedness in excess of the amount sufficient to
pay all amounts payable under or in respect of such Senior Indebtedness in
full; provided, however, that such payments or distributions shall be paid
first pro rata to Holders that previously paid amounts then pro rata to all
Holders.
SECTION 11.08 RELATIVE RIGHTS.
This Article 11 defines the relative rights of Holders and holders of
Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders, the
obligation of the Company, which is absolute and unconditional, to pay
principal, premium, interest and Liquidated Damages, if any, on the Notes in
accordance with their terms;
(2) affect the relative rights of Holders and creditors
of the Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Holder from exercising its
available remedies upon a Default, subject to the rights of holders and owners
of Senior Indebtedness to receive distributions and payments otherwise payable
to Holders.
If the Company fails because of this Article 11 to pay
principal, premium, interest and Liquidated Damages, if any, on a Note on the
due date, the failure is still a Default.
SECTION 11.09 SUBORDINATION MAY NOT BE IMPAIRED BY THE COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
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SECTION 11.10 DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Senior Indebtedness, the distribution may be made and the notice given to their
Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 11, the Trustee and the Holders shall be entitled to rely upon
any order or decree made by any court of competent jurisdiction or upon any
certificate of such Representative or of the liquidating trustee or agent or
other person making any distribution to the Trustee or to the Holders for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other Indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article
11.
SECTION 11.11 RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 11 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless an authorized Officer of the Trustee
shall have received at its office at least two Business Days prior to the due
date of such payment written notice of facts that would cause the payment of
any principal, premium, interest and Liquidated Damages, if any, with respect
to the Notes to violate this Article 11. Only the Company or a Representative
may give the notice. Nothing in this Article 11 shall impair the claims of, or
payments to, the Trustee under or pursuant to Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 11.12 AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of a Note by the Holder's acceptance thereof authorizes
and directs the Trustee on the Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 11, and appoints the Trustee to act as the Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, a Representative of Designated Senior Indebtedness is hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes and the Trustee shall have no liability therefor.
SECTION 11.13 PAYMENT.
A payment with respect to a Note or with respect to principal of or
interest on a Note shall include payment of principal, premium, interest and
Liquidated Damages, if any, on any Note, any payment on account of any
mandatory or optional repurchase or redemption of any Note (including payments
pursuant to Article 3 or Section 4.10 or Section 4.14 hereof) and any payment
or recovery on any claim (whether for rescission or damages and whether based
on contract, tort, duty imposed by law, or any other theory of liability)
relating to or arising out of the offer, sale or purchase of any Note provided
that any such payment, other payment or recovery (i) not prohibited pursuant to
this Article 11 at the time actually made shall not be subject to any recovery
by any holder of Senior Indebtedness or Representative therefor or other Person
pursuant to this Article 11 at any time thereafter (unless such payment is a
voluntary prepayment on the Notes made at the time a Default exists under this
Indenture)
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and (ii) made by or from any Person other than the Company shall not be subject
to any recovery by any holder of Senior Indebtedness or Representative therefor
or other Person pursuant to this Article 11 at any time thereafter except to
the extent such Person recovers any such amount paid from the Company, whether
pursuant to rights of indemnity, rescission or otherwise.
ARTICLE 12
NOTE GUARANTEES
SECTION 12.01 GUARANTEE.
Subject to this Article 12, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Holder of a Note
authenticated and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and enforceability of this
Indenture, the Notes, the Collateral Documents or the obligations of the
Company hereunder or thereunder, that: (a) the principal of premium and
Liquidated Damages, if any, and interest on the Notes shall be promptly paid in
full when due, whether at maturity, by acceleration, redemption or otherwise,
and interest on the overdue principal of and interest on the Notes, if any, if
lawful, and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder shall be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other obligations,
that same shall be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration pursuant to Section 6.02 hereof or otherwise. Failing payment when
due of any amount so guaranteed or any performance so guaranteed for whatever
reason, the Guarantors shall be jointly and severally obligated to pay the same
immediately. Each Guarantor agrees that this is a guarantee of payment and not
a guarantee of collection. Notwithstanding anything herein to the contrary, all
obligations of the Guarantors hereunder shall be subordinated to the prior
payment of Senior Indebtedness to the same extent that the Notes are
subordinated pursuant to Article 11.
Each Guarantor hereby agrees that its obligations with regard to
this Note Guarantee shall be joint and several, unconditional, irrespective of
the validity or enforceability of the Notes or the obligations of the Company
under this Indenture, the absence of any action to enforce the same, the
recovery of any judgment against the Company or any other obligor with respect
to this Indenture, the Notes or the Obligations of the Company under this
Indenture or the Notes, any action to enforce the same or any other
circumstances (other than complete performance) which might otherwise
constitute a legal or equitable discharge or defense of a Guarantor. Each
Guarantor further, to the extent permitted by law, waives and relinquishes all
claims, rights and remedies accorded by applicable law to guarantors and agrees
not to assert or take advantage of any such claims, rights or remedies,
including but not limited to: (a) any right to require any of the Trustee, the
Holders or the Company (each a "Benefited Party"), as a condition of payment or
performance by such Guarantor, to (1) proceed against the Company, any other
guarantor (including any other Guarantor) of the Obligations under the Note
Guarantees or any other Person, (2) proceed against or exhaust any security
held from the Company, any such other guarantor or any other Person, (3)
proceed against or have resort to any balance of any deposit account or credit
on the books of any Benefited Party in favor of the Company or any other
Person, or (4) pursue any other remedy in the power of any Benefited Party
whatsoever; (b) any defense arising by reason of the incapacity, lack of
authority or any disability or other defense of the Company including any
defense based on or arising out of the lack of validity or the unenforceability
of the Obligations under the Note Guarantees or any agreement or instrument
relating thereto or by reason of the cessation of the liability of the Company
from any cause other than payment in full of the Obligations under the Note
Guarantees; (c) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor
in other respects more burdensome than that of the principal; (d) any defense
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based upon any Benefited Party's errors or omissions in the administration of
the Obligations under the Note Guarantees, except behavior which amounts to bad
faith; (e)(1) any principles or provisions of law, statutory or otherwise,
which are or might be in conflict with the terms of the Note Guarantees and any
legal or equitable discharge of such Guarantor's obligations hereunder, (2) the
benefit of any statute of limitations affecting such Guarantor's liability
hereunder or the enforcement hereof, (3) any rights to set-offs, recoupments
and counterclaims and (4) promptness, diligence and any requirement that any
Benefited Party protect, secure, perfect or insure any security interest or
lien or any property subject thereto; (f) notices, demands, presentations,
protests, notices of protest, notices of dishonor and notices of any action or
inaction, including acceptance of the Note Guarantees, notices of default under
the Notes or any agreement or instrument related thereto, notices of any
renewal, extension or modification of the Obligations under the Note Guarantees
or any agreement related thereto, and notices of any extension of credit to the
Company and any right to consent to any thereof; (g) to the extent permitted
under applicable law, the benefits of any "One Action" rule and (h) any
defenses or benefits that may be derived from or afforded by law which limit
the liability of or exonerate guarantors or sureties, or which may conflict
with the terms of the Note Guarantees. Each Guarantor hereby covenants that its
Note Guarantee shall not be discharged except by complete performance of the
obligations contained in its Note Guarantee and this Indenture.
If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors or any custodian, trustee, liquidator
or other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Section 6.02
hereof for the purposes of this Note Guarantee, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby and (y) in the event of any declaration of
acceleration of such obligations as provided in Section 6.02 hereof, such
obligations (whether or not due and payable) shall forthwith become due and
payable by the Guarantors for the purpose of this Note Guarantee. The
Guarantors shall have the right to seek contribution from any non-paying
Guarantor so long as the exercise of such right does not impair the rights of
the Holders under the Note Guarantee.
SECTION 12.02. ADDITIONAL NOTE GUARANTEES.
If the Company or any of its Restricted Subsidiaries, acquires or
creates another domestic Restricted Subsidiary after the date hereof, or if any
Unrestricted Subsidiary ceases to be an Unrestricted Subsidiary, any such
Subsidiary shall execute and deliver to the Trustee (a) a supplemental
indenture, in form and substance substantially in the form of Exhibit E
attached hereto, which subjects such Person to the provisions of this Indenture
as a Guarantor, and (b) an Opinion of Counsel to the effect that such
supplemental indenture has been duly authorized and executed by such Person and
constitutes the legal, valid, binding and enforceable obligation of such Person
(subject to such customary exceptions concerning fraudulent conveyance laws,
creditors' rights and equitable principles as may be reasonably acceptable to
the Trustee).
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SECTION 12.03. LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Note Guarantee
of such Guarantor not constitute a fraudulent transfer or conveyance for
purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform
Fraudulent Transfer Act or any similar federal or state law to the extent
applicable to any Note Guarantee. To effectuate the foregoing intention, the
Trustee, the Holders and the Guarantors hereby irrevocably agree that the
obligations of such Guarantor under this Article 12 shall be limited to the
maximum amount as shall, after giving effect to such maximum amount and all
other contingent and fixed liabilities of such Guarantor that are relevant
under such laws, and after giving effect to any collections from, rights to
receive contribution from or payments made by or on behalf of any other
Guarantor in respect of the obligations of such other Guarantor under this
Article 12, result in the obligations of such Guarantor under its Note
Guarantee not constituting a fraudulent transfer or conveyance.
SECTION 12.04. EXECUTION AND DELIVERY OF NOTE GUARANTEE.
To evidence its Note Guarantee set forth in Section 12.01 hereof,
each Guarantor hereby agrees that a notation of such Note Guarantee in
substantially the form included in Exhibit D shall be endorsed by an Officer of
such Guarantor on each Note authenticated and delivered by the Trustee and that
this Indenture shall be executed on behalf of such Guarantor by its President
or one of its Vice Presidents.
Each Guarantor hereby agrees that its Note Guarantee set forth in
Section 12.01 hereof shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Note Guarantee.
If an Officer whose signature is on this Indenture or on the Note
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which a Note Guarantee is endorsed, the Note Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Note Guarantee set
forth in this Indenture on behalf of the Guarantors.
SECTION 12.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
Except as otherwise provided in Section 12.06 hereof, no Guarantor
may consolidate with or merge with or into (whether or not such Guarantor is
the surviving Person) another Person whether or not affiliated with such
Guarantor unless:
(a) subject to Section 12.06 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a Guarantor or the
Company) unconditionally assumes all the obligations of such Guarantor,
pursuant to a supplemental indenture and supplemental Collateral Documents in
form and substance reasonably satisfactory to the Trustee, under the Notes,
this Indenture, the Collateral Documents and the Note Guarantee on the terms
set forth herein or therein; and
(b) the Guarantor complies with the requirements of Article 5
hereof.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture,
executed and delivered to the Trustee and satisfactory in form to the Trustee,
of the Note Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor,
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<PAGE> 81
such successor Person shall succeed to and be substituted for the Guarantor
with the same effect as if it had been named herein as a Guarantor. Such
successor Person thereupon may cause to be signed any or all of the Note
Guarantees to be endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and delivered to the
Trustee. All the Note Guarantees so issued shall in all respects have the same
legal rank and benefit under this Indenture as the Note Guarantees theretofore
and thereafter issued in accordance with the terms of this Indenture as though
all of such Note Guarantees had been issued at the date of the execution
hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
SECTION 12.06. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, in each case to a
Person that is not (either before or after giving effect to such transactions)
a Restricted Subsidiary of the Company, then such Guarantor (in the event of a
sale or other disposition, by way of merger, consolidation or otherwise, of all
of the capital stock of such Guarantor) or the corporation acquiring the
property (in the event of a sale or other disposition of all or substantially
all of the assets of such Guarantor) shall be released and relieved of any
obligations under its Note Guarantee; provided that the Net Proceeds of such
sale or other disposition are applied in accordance with the applicable
provisions of this Indenture, including without limitation Section 4.10 hereof.
Upon delivery by the Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such sale or other disposition was made
by the Company in accordance with the provisions of this Indenture, including
without limitation Section 4.10 hereof, the Trustee shall execute any documents
reasonably required in order to evidence the release of any Guarantor from its
obligations under its Note Guarantee.
Any Guarantor not released from its obligations under its Note Guarantee shall
remain liable for the full amount of principal of and interest on the Notes and
for the other obligations of any Guarantor under this Indenture and the
Collateral Documents as provided in this Article 12.
[Signatures on following page]
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SIGNATURES
Dated as of August 24, 1999
WINSLOEW ESCROW CORP.
By: /s/ William F. Kaczynski, Jr.
-----------------------------------
Name: William F. Kaczynski, Jr.
Title: Vice President
AMERICAN STOCK TRANSFER & TRUST
COMPANY,
as Trustee
By: /s/ Joseph F. Wolf
------------------------------------
Name: Joseph F. Wolf
Title: Vice President
<PAGE> 83
EXHIBIT A
(Face of Note)
12 3/4% SENIOR SUBORDINATED NOTES DUE 2007
CUSIP _____________
NO. $
----- -------------
WINSLOEW ESCROW CORP.
promises to pay to Cede & Co. or registered assigns, the principal sum of
_________________ Dollars ($______________) on August 15, 2007.
Interest Payment Dates: February 15 and August 15, commencing February 15,
2000.
Record Dates: February 1 and August 1.
Dated: August 24, 1999
WINSLOEW ESCROW CORP.
By:
-----------------------------------
Name:
Title:
This is one of the Global Notes
referred to in the
within-mentioned Indenture:
AMERICAN STOCK TRANSFER & TRUST COMPANY,
as Trustee
By:
-----------------------------------
Authorized Signatory
A-1-1
<PAGE> 84
(Back of Note)
12 3/4% Senior Subordinated Notes due 2007
THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY
MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07
OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT
NOT IN PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS
GLOBAL NOTE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT
TO SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT
OF THE COMPANY.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
DEFINITIVE FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR
BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND
ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY SECTION 144A THEREUNDER.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF
THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) TO CERTAIN INSTITUTIONAL ACCREDITED INVESTORS
WITHIN THE MEANING OF
A-1-2
<PAGE> 85
SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES
ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH
AN INSTITUTIONAL ACCREDITED INVESTOR FOR INVESTMENT PURPOSES AND NOT
WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH ANY
DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (d) FOLLOWING THE
RELEASE OF PROCEEDS FROM THE ESCROW ACCOUNT, OUTSIDE THE UNITED STATES
TO A NON-UNITED STATES PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (e) IN ACCORDANCE
WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE
SECURITIES ACT (AND BASED ON AN OPINION OF COUNSEL IF THE COMPANY SO
REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND EACH
SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.
UNTIL THE SEPARATION DATE (AS DEFINED), THIS NOTE HAS BEEN ISSUED AS,
AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE ASSOCIATED
WARRANTS TO PURCHASE COMMON STOCK OF THE COMPANY. EACH UNIT CONSISTS
OF $1,000 PRINCIPAL AMOUNT OF NOTES AND A WARRANT TO PURCHASE 0.2298
SHARES OF COMMON STOCK, SUBJECT TO ADJUSTMENT UNDER CERTAIN
CIRCUMSTANCES. A COPY OF THE WARRANT AGREEMENT PURSUANT TO WHICH THE
WARRANTS HAVE BEEN ISSUED IS AVAILABLE FROM THE COMPANY UPON REQUEST.
FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), THIS SECURITY HAS ORIGINAL ISSUE DISCOUNT. FOR
PURPOSES OF SECTION 1273 OF THE CODE, THE ISSUE PRICE IS $962.40 AND
THE AMOUNT OF ORIGINAL ISSUE DISCOUNT IS $37.60, IN EACH CASE PER
$1,000 PRINCIPAL AMOUNT OF THIS SECURITY. FOR PURPOSES OF SECTION 1275
OF THE CODE, THE YIELD TO MATURITY COMPOUNDED SEMIANNUALLY IS 13.537%.
Capitalized terms used herein shall have the meanings
assigned to them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. WinsLoew Escrow Corp., a Florida
corporation (the "Company"), promises to pay interest on the principal amount
of this Note at 12 3/4% per annum until maturity and shall pay the Liquidated
Damages, if any, payable pursuant to Section 5 of the Registration Rights
Agreement referred to below. The Company shall pay interest and Liquidated
Damages, if any, semi-annually on February 15 and August 15 of each year, or if
any such day is not a Business Day, on the next succeeding Business Day (each
an "Interest Payment Date"). Interest on the Notes shall accrue from the most
recent date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided, however, that if there is no existing
Default in the payment of interest, and if this Note is authenticated between a
record date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such next succeeding Interest Payment
Date; provided, further, that the first Interest Payment Date shall be February
15, 2000. The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal and premium, if
any, from time to time on demand at a rate that is 1% per annum in excess of
the rate then in effect; it shall pay
A-1-3
<PAGE> 86
interest (including post-petition interest in any, proceeding under any
Bankruptcy Law) on overdue installments of interest and Liquidated Damages, if
any (without regard to any applicable grace periods) from time to time on
demand at the same rate to the extent lawful. Interest shall be computed on the
basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company shall pay interest on
the Notes (except defaulted interest) and Liquidated Damages, if any, to the
Persons who are registered Holders of Notes at the close of business on the
August 1 or February 1 next preceding the Interest Payment Date, even if such
Notes are cancelled after such record date and on or before such Interest
Payment Date, except as provided in Section 2.12 of the Indenture with respect
to defaulted interest. The Notes shall be payable as to principal, premium and
Liquidated Damages, if any, and interest at the office or agency of the Company
maintained for such purpose within or without the City and State of New York,
or, at the option of the Company, payment of interest and Liquidated Damages,
if any, may be made by check mailed to the Holders at their addresses set forth
in the register of Holders; provided, however, that payment by wire transfer of
immediately available funds shall be required with respect to principal of and
interest, premium and Liquidated Damages, if any, on, all Global Notes and all
other Notes the Holders of which shall have provided wire transfer instructions
to the Company or the Paying Agent. Such payment shall be in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts.
3. PAYING AGENT AND REGISTRAR. Initially, American
Transfer and Trust Company, the Trustee under the Indenture, shall act as
Paying Agent and Registrar. The Company may change any Paying Agent or
Registrar without notice to any Holder. The Company or any of its Subsidiaries
may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an
Indenture dated as of August 24, 1999 ("Indenture") between the Company and the
Trustee. The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (15 U.S. Code ss.77aaa-77bbbb). The Notes are subject to all such
terms, and Holders are referred to the Indenture and such Act for a statement
of such terms. To the extent any provision of this Note conflicts with the
express provisions of the Indenture, the provisions of the indenture shall
govern and be controlling. The Notes are obligations of the Company limited to
$105,000,000 in aggregate principal amount, plus amounts, if any, issued to pay
Liquidated Damages on outstanding Notes as set forth in Paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) On or after August 15, 2003, the Company may redeem the Notes at
any time, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest and Liquidated Damages, if
any, thereon to the date fixed for redemption, if redeemed during the
twelve-month period beginning on August 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2003 106.375%
2004 104.250%
2005 102.125%
2006 and thereafter 100.000%
</TABLE>
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<PAGE> 87
(c) Notwithstanding the provisions of clauses (a) and (b) of this
Section 3.07, on or prior to August 15, 2002, the Company shall be permitted to
redeem up to 25% of the aggregate principal amount of the Notes originally
issued at a redemption price of 112.75% of the principal amount thereof, plus
accrued and unpaid interest and Liquidated Damages, if any, thereon to the date
fixed for redemption, with the net cash proceeds of one or more underwritten
public offerings of Capital Stock of the Company, other than Disqualified
Stock; provided, however, that (1) at least 75% of the aggregate principal
amount of the Notes originally issued remains outstanding immediately after the
occurrence of the redemption; and (2) each redemption occurs within 90 days
after the date of the closing of such an offering of Capital Stock of the
Company.
6. MANDATORY REDEMPTION.
Except as set forth in paragraph 7 below, the Company shall
not be required to make mandatory redemption payments with respect to the
Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) If there is a Change of Control, the Company shall be
required to make an offer (a "Change of Control Offer") to repurchase all or
any part (equal to $1,000 or an integral multiple thereof) of each Holder's
Notes at a purchase price equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages, thereon, if
any, to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
setting forth the procedures governing the Change of Control Offer as required
by the Indenture.
(b) If the Company or a Restricted Subsidiary consummates
any Asset Sales, when the aggregate amount of Excess Proceeds exceeds $5.0
million in any calendar year, the Company shall commence an offer to all
Holders of Notes and all holders of other Indebtedness containing provisions
similar to those set forth in the Indenture with respect to offers to purchase
or redeem with the proceeds of sales of assets (an "Asset Sale Offer") pursuant
to Section 3.09 of the Indenture and such other Indebtedness to purchase the
maximum principal amount of Notes and such other Indebtedness that may be
purchased out of the Excess Proceeds at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date fixed for the closing of
such offer in accordance with the procedures set forth in Section 3.09 and such
other Indebtedness.
8. NOTICE OF REDEMPTION. Notice of redemption shall be
mailed at least 30 days but not more than 60 days before the redemption date to
each Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes
or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in
registered form without coupons in denominations of $1,000 and integral
multiples of $1,000. The transfer of Notes may be registered and Notes may be
exchanged as provided in the Indenture. The Registrar and the Trustee may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by the Indenture. The Company need not
exchange or register the transfer of any Note or portion of a Note selected for
redemption, except for the unredeemed portion of any Note being redeemed in
part. Also, the Company need not exchange or register the transfer of any Notes
for a period of 15 days before a
A-1-5
<PAGE> 88
selection of Notes to be redeemed or during the period between a record date
and the corresponding interest payment date.
10. PERSONS DEEMED OWNERS. The registered Holder of a
Note may be treated as its owner for all purposes.
11. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain
exceptions, the Indenture or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Notes voting as a single class, and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes voting as a single class. Without the consent of any Holder
of a Note, the Indenture or the Notes may be amended or supplemented to cure
any ambiguity, defect or inconsistency, to provide for uncertificated Notes in
addition to or in place of certificated Notes, to provide for the assumption of
the Company's obligations to Holders of the Notes in case of a merger or
consolidation, or sale of substantially all of the Company's assets to make any
change that would provide any additional rights or benefits to the Holders of
the Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, to comply with the requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act.
12. DEFAULTS AND REMEDIES. Events of Default include: (a)
default for 30 days in the payment when due of interest or Liquidated Damages,
if any, on the Notes; (b) default in payment when due of the principal of or
premium, if any, on the Notes; (c) failure by the Company to comply with the
provisions of Sections 4.07, 4.09, 4.10 or 4.14 of the Indenture, which failure
remains uncured for 30 days after notice; (d) failure by the Company or any of
its Restricted Subsidiaries for 30 days after notice to comply with any of its
other agreements in the Indenture or the Notes; (e) the nonpayment within any
applicable grace period after the final maturity, or the acceleration by the
holders because of a default, of Indebtedness of the Company or any Significant
Subsidiary, or group of Restricted Subsidiaries that taken together would
constitute a Significant Subsidiary, and the total amount of such Indebtedness
unpaid or accelerated exceeds $5.0 million; (f) failure by the Company or any
of its Significant Subsidiaries, or a group of Restricted Subsidiaries that
taken together would constitute a Significant Subsidiary, to pay final
judgments aggregating in excess of $5.0 million, which judgments are not paid,
discharged or stayed for a period of 60 consecutive days; and (g) certain
events of bankruptcy or insolvency with respect to the Company or any of its
Significant Subsidiaries. If any Event of Default occurs and is continuing, the
Trustee or the Holders of at least 25% in principal amount of the then
outstanding Notes may declare all the Notes to be due and payable.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, all outstanding Notes shall become
due and payable without further action or notice. Holders may not enforce the
Indenture or the Notes except as provided in the Indenture. Subject to certain
limitations, Holders of a majority in aggregate principal amount of the then
outstanding Notes may direct the Trustee in its exercise of any trust or power.
The Trustee may withhold from Holders of the Notes notice of any continuing
Default or Event of Default (except a Default or Event of Default relating to
the payment of principal or interest) if it determines that withholding notice
is in their interest. The Holders of a majority in aggregate principal amount
of the Notes then outstanding by notice to the Trustee may on behalf of the
Holders of all of the Notes waive any existing Default or Event of Default and
its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default, to deliver to the Trustee a statement
specifying such Default or Event of Default.
A-1-6
<PAGE> 89
13. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its
individual or any other capacity, may make loans to, accept deposits from, and
perform services for the Company or its Affiliates, and may otherwise deal with
the Company or its Affiliates, as if it were not the Trustee.
14. NO RECOURSE AGAINST OTHERS. No director, officer,
employee, incorporator or stockholder, of the Company, as such, shall have any
liability for any obligations of the Company under the Notes or the Indenture
or for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the
issuance of the Notes such waiver may not be effective to waive liabilities
under the federal securities laws and it is the view of the SEC that such a
waiver is against public policy.
15. AUTHENTICATION. This Note shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating
agent.
16. ABBREVIATIONS. Customary abbreviations may be used in
the name of a Holder or an assignee, such as: TEN COM (= tenants in common),
TEN ENT (= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
17. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL
NOTES AND RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to
Holders of Notes under the Indenture, Holders of Restricted Global Notes and
Restricted Definitive Notes shall have all the rights set forth in the
Registration Rights Agreement dated as of August 24, 1999, between the Company
and the parties named on the signature pages thereof (the "Registration Rights
Agreement").
18. CUSIP NUMBERS. Pursuant to a recommendation
promulgated by the Committee on Uniform Security Identification Procedures, the
Company has caused CUSIP numbers to be printed on the Notes and the Trustee may
use CUSIP numbers in notices of redemption as a convenience to Holders. No
representation is made as to the accuracy of such numbers either as printed on
the Notes or as contained in any notice of redemption and reliance may be
placed only on the other identification numbers placed thereon.
The Company shall furnish to any Holder upon written request
and without charge a copy of the Indenture and/or the Registration Rights
Agreement. Requests may be made to:
WinsLoew Escrow Corp.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
Attention: Chief Financial Officer
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<PAGE> 90
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
- --------------------------------------------------------------------------------
(Insert assignee's soc. sec. or tax I.D. no.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
- --------------------------------------------------------------------------------
Date:
----------------
Your Signature:
---------------------------
(Sign exactly as your name appears on the
face of this Note)
Signature Guarantee:
---------------------
A-1-8
<PAGE> 91
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the
Company pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Note purchased
by the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state
the amount you elect to have purchased: $________
Date: Your Signature:
------------- -----------------------------
(Sign exactly as your name appears on the
Note)
Signature Guarantee:
------------------------
Tax Identification No:
----------------------
A-1-9
<PAGE> 92
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a
part of another Global Note or Definitive Note for an interest in this Global
Note, have been made:
<TABLE>
<CAPTION>
Principal Amount
Amount of decrease Amount of increase of this
in in Principal Global Note Signature of
Principal Amount Amount following such authorized officer
of this of this decrease (or of Trustee or Note
Date of Exchange Global Note Global Note increase) Custodian
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
A-1-10
<PAGE> 93
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
WinsLoew Escrow Corp.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Re: 12 3/4% Senior Subordinated Notes due 2007 of WinsLoew
Escrow Corp.
Reference is hereby made to the Indenture, dated as of August
24, 1999 (the "Indenture"), between WinsLoew Escrow Corp., as issuer (the
"Company"), and American Stock Transfer & Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
______________, (the "Transferor") owns and proposes to
transfer the Note[s] or interest in such Note[s] specified in Annex A hereto,
in the principal amount of $___________ in such Note[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE 144A GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO RULE 144A. The Transfer
is being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933 (the "Securities Act"), and, accordingly, the
Transferor hereby further certifies that the beneficial interest or Definitive
Note is being transferred to a Person that the Transferor reasonably believed
and believes is purchasing the beneficial interest or Definitive Note for its
own account, or for one or more accounts with respect to which such Person
exercises sole investment discretion, and such Person and each such account is
a "qualified institutional buyer" within the meaning of Rule 144A in a
transaction meeting the requirements of Rule 144A and such Transfer is in
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with
the terms of the Indenture, the transferred beneficial interest or Definitive
Note shall be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note or the Definitive Note and in
the Indenture and the Securities Act.
2. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
THE REGULATION S GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO REGULATION S. The
Transfer is being effected pursuant to and in accordance with Rule 904 under
the Securities Act and, accordingly, the Transferor hereby further certifies
that (i) the Transfer is not being made to a person in the United States and
(x) at the time the buy order was originated, the Transferee was outside the
United States or such Transferor and any Person acting on its behalf reasonably
believed and believes that the Transferee was outside the United States or (y)
the transaction was executed in, on or through the facilities of a designated
offshore securities market and neither such Transferor nor any Person acting on
its behalf knows that the transaction was prearranged with a buyer in the
United States, (ii) no directed selling efforts have been made in contravention
of the requirements of Rule 904(b) of Regulation S under the Securities Act,
(iii) the
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<PAGE> 94
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not
being made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an Initial Purchaser). Upon consummation of the proposed transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note shall be subject to the restrictions on Transfer
enumerated in the Private Placement Legend printed on the Regulation S Global
Note and/or the Definitive Note and in the Indenture and the Securities Act.
3. [ ] CHECK AND COMPLETE IF TRANSFEREE WILL TAKE DELIVERY OF A BENEFICIAL
INTEREST IN THE IAI GLOBAL NOTE OR A DEFINITIVE NOTE PURSUANT TO ANY PROVISION
OF THE SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) [ ] such Transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [ ] such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [ ] such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act; or
(d) [ ] such Transfer is being effected to an
Institutional Accredited Investor and pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A, Rule 144
or Rule 904, and the Transferor hereby further certifies that it has not
engaged in any general solicitation within the meaning of Regulation D under
the Securities Act and the Transfer complies with the transfer restrictions
applicable to beneficial interests in a Restricted Global Note or Restricted
Definitive Notes and the requirements of the exemption claimed, which
certification is supported by (1) a certificate executed by the Transferee in
the form of Exhibit F to the Indenture and (2) if such Transfer is in respect
of a principal amount of Notes at the time of transfer of less than $250,000,
an Opinion of Counsel provided by the Transferor or the Transferee (a copy of
which the Transferor has attached to this certification), to the effect that
such Transfer is in compliance with the Securities Act. Upon consummation of
the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the IAI Global Note and/or the Definitive Notes and in the Indenture and the
Securities Act.
4. [ ] CHECK AND COMPLETE IF TRANSFEREE SHALL TAKE DELIVERY OF A
BENEFICIAL INTEREST IN A DEFINITIVE NOTE PURSUANT TO ANY PROVISION OF THE
SECURITIES ACT OTHER THAN RULE 144A OR REGULATION S. The Transfer is being
effected in compliance with the transfer restrictions applicable to beneficial
interests in Restricted Global Notes and Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act and any applicable blue
sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) such Transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
B-2
<PAGE> 95
or
(b) such Transfer is being effected to the Company or a
subsidiary thereof;
or
(c) such Transfer is being effected pursuant to an
effective registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) such Transfer is being effected to an Institutional
Accredited Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or Rule 904,
and the Transferor hereby further certifies that it has not engaged in any
general solicitation within the meaning of Regulation D under the Securities
Act and the Transfer complies with the transfer restrictions applicable to
beneficial interests in a Restricted Global Note or Restricted Definitive Notes
and the requirements of the exemption claimed, which certification is supported
by (1) an Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to the effect
that such Transfer is in compliance with the Securities Act. Upon consummation
of the proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note shall be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Definitive Notes and in the Indenture and the Securities Act.
5. [ ] CHECK IF TRANSFEREE SHALL TAKE DELIVERY OF A BENEFICIAL INTEREST IN
AN UNRESTRICTED GLOBAL NOTE OR OF AN UNRESTRICTED DEFINITIVE NOTE.
(a) [ ] CHECK IF TRANSFER IS PURSUANT TO RULE 144. (i)
The Transfer is being effected pursuant to and in accordance with Rule 144
under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note shall no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(b) [ ] CHECK IF TRANSFER IS PURSUANT TO REGULATION S.
(i) The Transfer is being effected pursuant to and in accordance with Rule 903
or Rule 904 under the Securities Act and in compliance with the transfer
restrictions contained in the Indenture and any applicable blue sky securities
laws of any state of the United States and (ii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note shall no longer be subject
to the restrictions on transfer enumerated in the Private Placement Legend
printed on the Restricted Global Notes, on Restricted Definitive Notes and in
the Indenture.
(c) [ ] CHECK IF TRANSFER IS PURSUANT TO OTHER EXEMPTION.
(i) The Transfer is being effected pursuant to and in compliance with an
exemption from the registration requirements of the
B-3
<PAGE> 96
Securities Act other than Rule 144, Rule 903 or Rule 904 and in compliance with
the transfer restrictions contained in the Indenture and any applicable blue
sky securities laws of any State of the United States and (ii) the restrictions
on transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act. Upon
consummation of the proposed Transfer in accordance with the terms of the
Indenture, the transferred beneficial interest or Definitive Note shall not be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the Restricted Global Notes or Restricted Definitive Notes
and in the Indenture.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
----------------------------------------
[Insert Name of Transferor]
By:
----------------------------------------
Name:
Title:
Dated: ___________, _______
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<PAGE> 97
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ___), or
(ii) [ ] Regulation S Global Note (CUSIP ___), or
(iii) [ ] IAI Global Note (CUSIP ___), or
(iv) [ ] a Restricted Definitive Note.
2. After the Transfer the Transferee shall hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Note (CUSIP ___), or
(ii) [ ] Regulation S Global Note (CUSIP ___), or
(iii) [ ] IAI Global Note (CUSIP ___), or
(iv) [ ] Unrestricted Global Note (CUSIP ___); or
(b) [ ] a Restricted Definitive Note; or
(c) [ ] an Unrestricted Definitive Note,
in accordance with the terms of the Indenture.
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<PAGE> 98
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
WinsLoew Escrow Corp.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Re: 12 3/4% Senior Subordinated Notes due 2007 of WinsLoew
Escrow Corp.
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of August
24, 1999 (the "Indenture"), between WinsLoew Escrow Corp., as issuer (the
"Company"), and American Stock Transfer & Trust Company, as trustee.
Capitalized terms used but not defined herein shall have the meanings given to
them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount
of $____________ in such Note[s] or interests (the "Exchange"). In connection
with the Exchange, the Owner hereby certifies that:
1. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN A
RESTRICTED GLOBAL NOTE FOR UNRESTRICTED DEFINITIVE NOTES OR BENEFICIAL
INTERESTS IN AN UNRESTRICTED GLOBAL NOTE
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN
A RESTRICTED GLOBAL NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE.
In connection with the Exchange of the Owner's beneficial interest in a
Restricted Global Note for a beneficial interest in an Unrestricted Global Note
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Notes and pursuant to and in accordance with the
United States Securities Act of 1933 (the "Securities Act"), (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the beneficial interest in an Unrestricted Global Note is being
acquired in compliance with any applicable blue sky securities laws of any
state of the United States.
(b) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN
A RESTRICTED GLOBAL NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note for
an Unrestricted Definitive Note, the Owner hereby certifies (i) the Definitive
Note is being acquired for the Owner's own account without
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<PAGE> 99
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Notes and pursuant to and in
accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Definitive
Note is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(c) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO BENEFICIAL INTEREST IN AN UNRESTRICTED GLOBAL NOTE. In connection with
the Owner's Exchange of a Restricted Definitive Note for a beneficial interest
in an Unrestricted Global Note, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to Restricted Definitive Notes and pursuant to and in accordance
with the Securities Act, (iii) the restrictions on transfer contained in the
Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act and (iv) the beneficial interest is
being acquired in compliance with any applicable blue sky securities laws of
any state of the United States.
(d) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO UNRESTRICTED DEFINITIVE NOTE. In connection with the Owner's Exchange
of a Restricted Definitive Note for an Unrestricted Definitive Note, the Owner
hereby certifies (i) the Unrestricted Definitive Note is being acquired for the
Owner's own account without transfer, (ii) such Exchange has been effected in
compliance with the transfer restrictions applicable to Restricted Definitive
Notes and pursuant to and in accordance with the Securities Act, (iii) the
restrictions on transfer contained in the Indenture and the Private Placement
Legend are not required in order to maintain compliance with the Securities Act
and (iv) the Unrestricted Definitive Note is being acquired in compliance with
any applicable blue sky securities laws of any state of the United States.
2. EXCHANGE OF RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS IN
RESTRICTED GLOBAL NOTES FOR RESTRICTED DEFINITIVE NOTES OR BENEFICIAL INTERESTS
IN RESTRICTED GLOBAL NOTES
(a) [ ] CHECK IF EXCHANGE IS FROM BENEFICIAL INTEREST IN
A RESTRICTED GLOBAL NOTE TO RESTRICTED DEFINITIVE NOTE. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Note for a
Restricted Definitive Note with an equal principal amount, the Owner hereby
certifies that the Restricted Definitive Note is being acquired for the Owner's
own account without transfer. Upon consummation of the proposed Exchange in
accordance with the terms of the Indenture, the Restricted Definitive Note
issued shall continue to be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Restricted Definitive Note and
in the Indenture and the Securities Act.
(b) [ ] CHECK IF EXCHANGE IS FROM RESTRICTED DEFINITIVE
NOTE TO BENEFICIAL INTEREST IN A RESTRICTED GLOBAL NOTE. In connection with the
Exchange of the Owner's Restricted Definitive Note for a beneficial interest in
the [CHECK ONE] "144A Global Note, Regulation S Global Note, with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance
with the Securities Act, and in
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<PAGE> 100
compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the beneficial interest issued shall be subject to
the restrictions on transfer enumerated in the Private Placement Legend printed
on the relevant Restricted Global Note and in the Indenture and the Securities
Act.
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<PAGE> 101
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company.
-----------------------------------
[Insert Name of Owner]
By:
- -------------------------------
Name:
Title:
Dated: ________________, ____
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EXHIBIT D
FORM OF NOTATION ON NOTE RELATING TO SUBSIDIARY GUARANTEE
Each Guarantor, as defined in the Indenture (the
"Indenture"), referred to in the Note upon which this notation is endorsed),
(i) has jointly and severally unconditionally guaranteed (a) the due and
punctual payment of the principal of, premium and interest and Liquidated
Damages, if any, on the Notes, whether at maturity or an interest payment date,
by acceleration, call for redemption or otherwise, (b) the due and punctual
payment of interest on the overdue principal and premium of, and interest and
Liquidated Damages, if any, on the Notes, and (c) in case of any extension of
time of payment or renewal of any Notes or any of such other obligations, the
same shall be promptly paid in full when due in accordance with the terms of
the extension or renewal, whether at stated maturity, by acceleration or
otherwise and (ii) has agreed to pay any and all costs and expenses (including
reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing
any rights under this Note Guarantee.
Notwithstanding the foregoing, in the event that the Note
Guarantor would constitute or result in a violation of any applicable
fraudulent conveyance or similar law of any relevant jurisdiction, the
liability of such Guarantor under its Note Guarantee shall be reduced to the
maximum amount permissible under such fraudulent conveyance or similar law.
No past, present or future director, officer, employee,
agent, incorporator, stockholder or agent of any Guarantor, as such, shall have
any liability for any obligations of the Company or any Guarantor under the
Notes, any Note Guarantee, Indenture, any supplemental indenture delivered
pursuant to the Indenture by such Guarantor or any Note Guarantees, or for any
claim based on, in respect of or by reason of such obligations or their
creation. Each Holder by accepting a Note waives and releases all such
liability.
This Note Guarantee shall be binding upon each Guarantor and
its successors and assigns and shall inure to the benefit of the successors and
assigns of the Trustee and the Holders and, in the event of any transfer or
assignment of rights by the Holder or the Trustee, the rights and privileges
herein conferred upon that party shall automatically extend to and be vested in
such transferee or assignee, all subject to the terms and conditions hereof.
This Note Guarantee shall not be valid or obligatory for any
purpose until the certificate of authentication on the Note upon which this
Note Guarantee is noted have been executed by the Trustee under the Indenture b
the manual signature of one of its authorized officers. Capitalized terms used
herein have the meaning assigned to them in the Indenture.
GUARANTOR
By:
---------------------------
Name:
Title:
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<PAGE> 103
EXHIBIT E
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of _____________, among ______________ (the "Guarantor"), a subsidiary of
WinsLoew Escrow Corp. (or its permitted successor), a Florida corporation (the
"Company") and American Stock Transfer & Trust Company, as trustee under the
indenture referred to below (the "Trustee").
WITNESSETH
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an indenture (the "Indenture"), dated as of August 24, 1999
providing for the issuance of an aggregate principal amount of up to $105.0
million of 12 3/4% Senior Subordinated Notes due 2007 (the "Notes");
WHEREAS, the Indenture provides that under certain
circumstances the Guarantor shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guarantor shall unconditionally
guarantee all of the Company's Obligations under the Notes and the Indenture on
the terms and conditions set forth herein (the "Note Guarantee"); and
WHEREAS, pursuant to Section 10.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Guarantor and the Trustee mutually covenant and agree for the
equal and ratable benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized Terms used herein
without definition shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor hereby agrees
as follows:
a. Along with all Guarantors, to jointly and
severally Guarantee to each Holder of a
Note authenticated and delivered by the
Trustee and to the Trustee and its
successors and assigns, irrespective of the
validity and enforceability of the
Indenture, the Notes or the Obligations of
the Company hereunder or thereunder, that:
(i) the principal of, premium, if any,
and interest and Liquidated
Damages, if any, on the Notes shall
be promptly paid in full when due,
whether at maturity, by
acceleration, redemption or
otherwise, and interest on the
overdue principal of to the extent
and interest and
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<PAGE> 104
Liquidation Damages, if any, on the
Notes to the extent lawful, and all
other Obligations of the Company to
the Holders or the Trustee hereunder
or under the Indenture shall be
promptly paid in full or performed,
all in accordance with the terms
hereof and under the Indenture;
(ii) in case of any extension of time of
payment or renewal of any Notes or
any of such other Obligations, that
same shall be promptly paid in full
when due or performed in accordance
with the terms of the extension or
renewal, whether at stated
maturity, by acceleration or
otherwise. Failing payment when due
of any amount so guaranteed or any
performance so guaranteed for
whatever reason, the Guarantors
shall be jointly and severally
obligated to pay the same
immediately.
b. The obligations hereunder shall be
unconditional, irrespective of the
validity, regularity or enforceability of
the Notes or the Indenture, the absence of
any action to enforce the same, any waiver
or consent by any Holder of the Notes with
respect to any provisions hereof or
thereof, the recovery of any judgment
against the Company, any action to enforce
the same or any other circumstance which
might otherwise constitute a legal or
equitable discharge or defense of a
guarantor.
c. The following is hereby waived: diligence
presentment, demand of payment, filing of
claims with a court in the event of
insolvency or bankruptcy of the Company,
any right to require a proceeding first
against the Company, protest, notice and
all demands whatsoever.
d. This Note Guarantee shall not be discharged
except by complete performance of the
obligations contained in the Notes and the
Indenture.
e. If any Holder or the Trustee is required by
any court or otherwise to return to the
Company, the Guarantors, or any Custodian,
Trustee, liquidator or other similar
official acting in relation to either the
Company or the Guarantors, any amount paid
by either to the Trustee or such Holder,
this Note Guarantee, to the extent
theretofore discharged, shall be reinstated
in full force and effect.
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<PAGE> 105
f. The Guarantor shall not be entitled to any
right of subrogation in relation to the
Holders in respect of any obligations
guaranteed hereby until payment in full of
all obligations guaranteed hereby.
g. As between the Guarantors, on the one hand,
the Holders and the Trustee, on the other
hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as
provided in Article 6 of the Indenture for
the purposes of this Note Guarantee,
notwithstanding any stay, injunction or
other prohibition preventing such
acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of
any declaration of acceleration of such
obligations as provided in Article 6 of the
Indenture, such obligations (whether or not
due and payable) shall forthwith become due
and payable by the Guarantors for the
purpose of this Note Guarantee.
h. The Guarantors shall have the right to seek
contribution from non-paying Guarantor so
long as the exercise of such right does not
impair the rights of the Holders under the
Note Guarantee.
i. Notwithstanding the foregoing, in the event
that this Note Guarantee would constitute
or result in a violation of any applicable
fraudulent conveyance or similar law of any
relevant jurisdiction, the liability of the
Guarantor under this Supplemental Indenture
and its Note Guarantee shall be reduced to
the maximum amount permissible under such
fraudulent conveyance or similar law.
j. Notwithstanding anything herein to the
contrary, all obligations of the Guarantor
hereunder shall be subordinated to the
prior payment of Senior Indebtedness to the
same extent that the Notes are subordinated
pursuant to Article 11 of the Indenture.
3. Execution and Delivery. Each Subsidiary Guarantor
agrees that the Guarantees shall remain in full force and effect
notwithstanding any failure to endorse on each Note a notation of such Note
Guarantee.
4. Guarantor May Consolidate, Etc. on Certain Terms.
a. Subject to Section 5 hereof, the Guarantor
may not consolidate with or merge with or
into (whether or not such Guarantor is
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<PAGE> 106
the surviving Person) another corporation,
Person or entity whether or not affiliated
with such Subsidiary Guarantor unless:
(i) subject to Section 5 hereof, the
Person formed by or surviving any
such consolidation or merger (if
other than a Guarantor or the
Company) unconditionally assumes
all the obligations of such
Guarantor, pursuant to a
supplemental indenture in form and
substance reasonably satisfactory
to the Trustee, under the Notes,
the Indenture and the Note
Guarantee on the terms set forth
herein or therein; and
(ii) immediately after giving effect to
such transaction, no Default or
Event of Default exists.
b. In case of any such consolidation, merger,
sale or conveyance and upon the assumption
by the successor corporation, by
supplemental indenture, executed and
delivered to the Trustee and satisfactory
in form to the Trustee, of the Note
Guarantee endorsed upon the Notes and the
due and punctual performance of all of the
covenants and conditions of the Indenture
to be performed by the Guarantor, such
successor corporation shall succeed to and
be substituted for the Guarantor with the
same effect as if it had been named herein
as a Guarantor. Such successor corporation
thereupon may cause to be signed any or all
of the Note Guarantees to be endorsed upon
all of the Notes issuable hereunder which
theretofore shall not have been signed by
the Company and delivered to the Trustee.
All the Note Guarantees so issued shall in
all respects have the same legal rank and
benefit under the Indenture as the Note
Guarantees theretofore and thereafter
issued in accordance with the terms of the
Indenture as though all of such Note
Guarantees had been issued at the date of
the execution hereof.
c. Except as set forth in Articles 4 and 5 of
the Indenture, and notwithstanding clauses
(i) and (ii) of Section 4(a) hereof,
nothing contained in the Indenture or in
any of the Notes shall prevent any
consolidation or merger of a Subsidiary
Guarantor with or into the Company or
another Subsidiary Guarantor, or shall
prevent any sale or conveyance of the
property of a Subsidiary Guarantor as an
entirety or substantially as an entirety to
the Company or another Subsidiary
Guarantor.
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<PAGE> 107
5. Releases.
a. In the event of a sale or other disposition
of all of the assets of any Guarantor, by
way of merger, consolidation or otherwise,
or a sale or other disposition of all to
the capital stock of any Guarantor, then
such Guarantor (in the event of a sale or
other disposition, by way of merger,
consolidation or otherwise, of all of the
capital stock of such Guarantor) or the
corporation acquiring the property (in the
event of a sale or other disposition of all
or substantially all of the assets of such
Guarantor) shall be released and relieved
of any obligations under the Supplemental
Indenture and its Note Guarantee; provided
that the Net Proceeds of such sale or other
disposition are applied in accordance with
the applicable provisions of the Indenture,
including without limitation Section 4.10
of the Indenture. Upon delivery by the
Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to
the effect that such sale or other
disposition was made by the Company in
accordance with the provisions of the
Indenture, including without limitation
Section 4.10 of the Indenture, the Trustee
shall execute any documents reasonably
required in order to evidence the release
of any Guarantor from its obligations under
its Note Guarantee.
b. Any Guarantor not released from its
obligations under its Note Guarantee shall
remain liable for the full amount of
principal of and interest on the Notes and
for the other obligations of any Guarantor
under the Indenture as provided in the
Indenture.
6. No Recourse Against Others. No past, present or
future director, officer, employee, incorporator, stockholder or agent of the
Guarantor, as such, shall have any liability for any obligations of the Company
or any Guarantor under the Notes, any Note Guarantees, the Indenture or this
Supplemental Indenture or for any claim based on, in respect of, or by reason
of, such obligations or their creation. Each Holder of Notes by accepting a
Note waives and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. Such waiver may not be effective
to waive liabilities under the federal securities laws and it is the view of
the Commission that such a waiver is against public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE
OF NEW YORK SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE
BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE
EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE
REQUIRED THEREBY.
E-5
<PAGE> 108
8. Counterparts . The parties may sign any number of
copies of this Supplemental Indenture. Each signed copy shall be an original,
but all of them together represent the same agreement.
9. Effect of Headings. The Section headings herein are
for convenience only and shall not affect the construction hereof.
10. The Trustee. The Trustee shall not be responsible in
any manner whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals contained herein,
all of which recitals are made solely by the Guarantor and the Company.
E-6
<PAGE> 109
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated:
[Guaranteeing Subsidiary]
By:
Name:
Title:
AMERICAN STOCK TRANSFER & TRUST
COMPANY, as Trustee
By:
Name:
Title:
E-7
<PAGE> 110
EXHIBIT F
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
WinsLoew Escrow Corp.
160 Village Street
Birmingham, Alabama 35242
American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Re: 12 3/4% Senior Subordinated Notes due 2007
Reference is hereby made to the Indenture, dated as of August
24, 1999 (the "Indenture"), WinsLoew Escrow Corp., as issuer (the "Company"),
and American Stock Transfer & Trust Company, as trustee. Capitalized terms used
but not defined herein shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________
aggregate principal amount of:
(a) [ ] a beneficial interest in a Global Note, or
(b) [ ] a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the
Notes or any interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound by, and not
to resell, pledge or otherwise transfer the Notes or any interest therein
except in compliance with, such restrictions and conditions and the United
States Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any accounts
for which we are acting as hereinafter stated, that if we should sell the Notes
or any interest therein, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act
to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter
and, if such transfer is in respect of a principal amount of Notes, at the time
of transfer of less than $250,000, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such transfer is in compliance
with the Securities Act, (D) outside the United States in accordance with Rule
904 of Regulation S under the Securities Act, (E) pursuant to the provisions of
Rule 144(k) under the Securities Act or (F) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing the Definitive Note or beneficial interest in
a Global Note from us in a
F-1
<PAGE> 111
transaction meeting the requirements of clauses (A) through (E) of this
paragraph a notice advising such purchaser that resales thereof are restricted
as stated herein.
3. We understand that, on any proposed resale of the
Notes or beneficial interest therein, we will be required to furnish to you and
the Company such certifications, legal opinions and other information as you
and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the Notes
purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) and have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting are each able to bear
the economic risk of our or its investment.
5. We are acquiring the Notes or beneficial interest
therein purchased by us for our own account or for one or more accounts (each
of which is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
-------------------------------------------------
[Insert Name of Accredited Investor]
By:
----------------------------------------------
Name:
Title:
Dated:
----------------------
F-2
<PAGE> 1
Exhibit 4.2
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated
as of August 27, 1999, among Trivest Furniture Corporation, a Florida
corporation (the "Temporary Survivor"), WinsLoew Furniture, Inc., a Florida
corporation (the "Company"), Winston Furniture Company of Alabama, Inc., an
Alabama corporation ("Winston"), Loewenstein Furniture Company, a Florida
corporation ("Loewenstein"), Winston Properties, Inc., an Alabama corporation
("WPI"), Texacraft, Inc., a Texas corporation ("Texacraft"), Tropic Craft, Inc.,
a Florida corporation ("Tropic Craft"), and Pompeii Furniture Co., Inc., a
Florida corporation ("Pompeii" and together with Winston, Loewenstein, WPI,
Texacraft and Tropic Craft, the "Guarantors"), all of which are direct or
indirect, wholly-owned subsidiaries of the Company, and American Stock Transfer
& Trust Company, as trustee under the indenture referred to below (the
"Trustee").
WITNESSETH:
WHEREAS, WinsLoew Escrow Corp., a Florida corporation (the
"Predecessor") has heretofore executed and delivered to the Trustee an indenture
(the "Indenture"), dated as of August 24, 1999 providing for the issuance of an
aggregate principal amount at maturity of $105.0 million of 12 3/4% Senior
Subordinated Notes due 2007 (the "Notes"); and
WHEREAS, Article 5 of the Indenture provides that upon the
occurrence of certain mergers, consolidations and sales of all or substantially
all of the assets of the Predecessor, the surviving entity or purchasers may
assume the obligations under the Indenture and the Notes by executing and
delivering to the Trustee a supplemental indenture pursuant to which the
surviving entity shall assume all of the Predecessor's Obligations under the
Notes and the Indenture; and
WHEREAS, pursuant to that certain Agreement and Plan of
Merger, adopted by Predecessor and Temporary Survivor, Predecessor has merged
with and into Temporary Survivor, with Temporary Survivor being the surviving
corporation (the "Short Form Merger"); and
WHEREAS, pursuant to that certain Second Amended and Restated
Agreement and Plan of Merger, dated as of May 4, 1999, by and between Temporary
Survivor and the Company, Temporary Survivor has merged with and into the
Company, with the Company being the surviving corporation (the "Merger"); and
WHEREAS, all of the conditions of Section 5.01 under the
Indenture have been satisfied; and
WHEREAS, the Indenture provides that under certain
circumstances the Guarantors shall execute and deliver to the Trustee a
supplemental indenture pursuant to which the Guarantors shall unconditionally
guarantee all of the Company's Obligations
<PAGE> 2
under the Notes and the Indenture on the terms and conditions set forth herein
(the "Note Guarantee"); and
WHEREAS, pursuant to Section 10.01 of the Indenture, the
Trustee is authorized to execute and deliver this Supplemental Indenture.
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, Temporary Survivor, the Company, the Guarantors and the Trustee
mutually covenant and agree for the equal and ratable benefit of the Holders of
the Notes as follows:
1. Capitalized Terms. Capitalized Terms used herein without definition shall
have the meanings assigned to them in the Indenture.
2. Assumption of Obligations. Each of Temporary Survivor, as a result and in
contemplation of the consummation of the Short Form Merger, and the
Company, as a result and in contemplation of the Merger, hereby agrees to
assume all of the Obligations of the Predecessor and Temporary Survivor,
respectively, under the Notes and the Indenture in accordance with the
provisions of Section 5.01 of the Indenture and agree to be substituted as
the successor corporation to each of the Predecessor and Temporary
Survivor, respectively, in accordance with the provisions of Section 5.02
of the Indenture.
3. Agreement to Guarantee. Each Guarantor hereby agrees as follows:
3.1. Along with all Guarantors, to jointly and severally Guarantee to each
Holder of a Note authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, irrespective of the validity
and enforceability of the Indenture, the Notes or the Obligations of
the Company hereunder or thereunder, that:
3.1.1. the principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Notes shall be promptly paid in full
when due, whether at maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal of to the
extent and interest and Liquidation Damages, if any, on the
Notes to the extent lawful, and all other Obligations of the
Company to the Holders or the Trustee hereunder or under the
Indenture shall be promptly paid in full or performed, all in
accordance with the terms hereof and under the Indenture;
3.1.2. in case of any extension of time of payment or renewal of any
Notes or any of such other Obligations, that same shall be
promptly paid in full when
2
<PAGE> 3
due or performed in accordance with the terms of the extension
or renewal, whether at stated maturity, by acceleration or
otherwise. Failing payment when due of any amount so
guaranteed or any performance so guaranteed for whatever
reason, the Guarantors shall be jointly and severally
obligated to pay the same immediately.
3.2. The obligations hereunder shall be unconditional, irrespective of the
validity, regularity or enforceability of the Notes or the Indenture,
the absence of any action to enforce the same, any waiver or consent
by any Holder of the Notes with respect to any provisions hereof or
thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of a guarantor.
3.3. The following is hereby waived: diligence presentment, demand of
payment, filing of claims with a court in the event of insolvency or
bankruptcy of the Company, any right to require a proceeding first
against the Company, protest, notice and all demands whatsoever.
3.4. This Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and the
Indenture.
3.5. If any Holder or the Trustee is required by any court or otherwise to
return to the Company, the Guarantors, or any Custodian, Trustee,
liquidator or other similar official acting in relation to either the
Company or the Guarantors, any amount paid by either to the Trustee or
such Holder, this Note Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.
3.6. Such Guarantor shall not be entitled to any right of subrogation in
relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby.
3.7. As between the Guarantors, on the one hand, the Holders and the
Trustee, on the other hand, (x) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article 6 of the
Indenture for the purposes of this Note Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in
respect of the obligations guaranteed hereby, and (y) in the event of
any declaration of acceleration of such obligations as provided in
Article
3
<PAGE> 4
6 of the Indenture, such obligations (whether or not due and payable)
shall forthwith become due and payable by the Guarantors for the
purpose of this Note Guarantee.
3.8. The Guarantors shall have the right to seek contribution from
non-paying Guarantors so long as the exercise of such right does not
impair the rights of the Holders under the Note Guarantee.
3.9. Notwithstanding the foregoing, in the event that this Note Guarantee
would constitute or result in a violation of any applicable fraudulent
conveyance or similar law of any relevant jurisdiction, the liability
of such Guarantor under this Supplemental Indenture and its Note
Guarantee shall be reduced to the maximum amount permissible under
such fraudulent conveyance or similar law.
3.10. Notwithstanding anything to the contrary herein, all obligations of
each Guarantor hereunder shall be subordinated to the prior payment of
Senior Indebtedness to the same extant that the Notes are subordinated
pursuant to Article 11 of the Indenture.
4. Execution and Delivery. Each Guarantor agrees that the Guarantees shall
remain in full force and effect notwithstanding any failure to endorse on
each Note a notation of such Note Guarantee.
5. Guarantors May Consolidate, Etc. on Certain Terms.
5.1. Except as provided in Section 6.1 hereof, each Guarantor may not
consolidate with or merge with or into (whether or not such Guarantor
is the surviving Person) another corporation, Person or entity whether
or not affiliated with such Guarantor unless:
5.1.1. subject to Section 6.1 hereof, the Person formed by or
surviving any such consolidation or merger (if other than a
Guarantor or the Company) unconditionally assumes all the
obligations of such Guarantor, pursuant to a supplemental
indenture in form and substance reasonably satisfactory to the
Trustee, under the Notes, the Indenture and the Note Guarantee
on the terms set forth herein or therein; and
5.1.2. immediately after giving effect to such transaction, no
Default or Event of Default exists.
4
<PAGE> 5
5.2. In case of any such consolidation, merger, sale or conveyance and upon
the assumption by the successor corporation, by supplemental
indenture, executed and delivered to the Trustee and satisfactory in
form to the Trustee, of the Note Guarantee endorsed upon the Notes and
the due and punctual performance of all of the covenants and
conditions of the Indenture to be performed by the Guarantor, such
successor corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein as a
Guarantor. Such successor corporation thereupon may cause to be signed
any or all of the Note Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee. All the Note Guarantees so
issued shall in all respects have the same legal rank and benefit
under the Indenture as the Note Guarantees theretofore and thereafter
issued in accordance with the terms of the Indenture as though all of
such Note Guarantees had been issued at the date of the execution
hereof.
5.3. Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding subparagraphs 5.1.1 and 5.1.2 above, nothing contained
in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the Company or
another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety
to the Company or another Guarantor.
6. Releases.
6.1. In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale
or other disposition of all to the capital stock of any Guarantor,
then such Guarantor (in the event of a sale or other disposition, by
way of merger, consolidation or otherwise, of all of the capital stock
of such Guarantor) or the corporation acquiring the property (in the
event of a sale or other disposition of all or substantially all of
the assets of such Guarantor) shall be released and relieved of any
obligations under this Supplemental Indenture and its Note Guarantee;
provided that the Net Proceeds of such sale or other disposition are
applied in accordance with the applicable provisions of the Indenture,
including without limitation Section 4.10 of the Indenture. Upon
delivery by the Company to the Trustee of an Officers' Certificate and
an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the provisions
of the Indenture, including without limitation Section 4.10 of the
Indenture, the Trustee shall execute any documents reasonably required
in order to evidence the release of any Guarantor from its obligations
under its Note Guarantee.
5
<PAGE> 6
6.2. Any Guarantor not released from its obligations under its Note
Guarantee shall remain liable for the full amount of principal of and
interest on the Notes and for the other obligations of any Guarantor
under the Indenture as provided in the Indenture.
7. No Recourse Against Others. No past, present or future director, officer,
employee, incorporator, stockholder or agent of the Guarantor, as such,
shall have any liability for any obligations of the Company or any
Guarantor under the Notes, any Note Guarantees, the Indenture or this
Supplemental Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Notes. Such
waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
8. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL
GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT
THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED
THEREBY.
9. Counterparts. The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement.
10. Effect of Headings. The Section headings herein are for convenience only
and shall not affect the construction hereof.
11. The Trustee. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental
Indenture or for or in respect of the recitals contained herein, all of
which recitals are made solely by the Guarantor and the Company.
[SIGNATURE PAGES FOLLOW]
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Supplemental Indenture to be duly executed and attested, all as of the date
first above written.
Dated: August 27, 1999
TRIVEST FURNITURE CORPORATION
By: /s/ Vincent A. Tortorici, Jr.
--------------------------------------------------
Name: Vincent A. Tortorici, Jr.
Title: Vice President and Chief Financial Officer
WINSLOEW FURNITURE, INC.
By: /s/ Vincent A. Tortorici, Jr.
--------------------------------------------------
Name: Vincent A. Tortorici, Jr.
Title: Vice President, Treasurer and Chief Financial
Officer
WINSTON FURNITURE COMPANY OF ALABAMA, INC.
By: /s/ Vincent A. Tortorici, Jr.
--------------------------------------------------
Name: Vincent A. Tortorici, Jr.
Title: Vice President-Finance & Administration,
Treasurer and Chief Financial Officer
LOEWENSTEIN, INC.
By: /s/ Vincent A. Tortorici, Jr.
-------------------------------------------------
Name: Vincent A. Tortorici, Jr.
Title: Vice President and Treasurer
S-1
<PAGE> 8
WINSTON PROPERTIES, INC.
By: /s/ Vincent A. Tortorici, Jr.
-------------------------------------------------
Name: Vincent A. Tortorici, Jr.
Title: Vice President and Treasurer
TEXACRAFT, INC.
By: /s/ Vincent A. Tortorici, Jr.
-------------------------------------------------
Name: Vincent A. Tortorici, Jr.
Title: Vice President and Treasurer
TROPIC CRAFT, INC.
By: /s/ Vincent A. Tortorici, Jr.
-------------------------------------------------
Name: Vincent A. Tortorici, Jr.
Title: Vice President-Finance and Treasurer
POMPEII FURNITURE CO., INC.
By: /s/ Vincent A. Tortorici, Jr.
-------------------------------------------------
Name: Vincent A. Tortorici, Jr.
Title: Treasurer and Chief Financial Officer
S-2
<PAGE> 9
AMERICAN STOCK TRANSFER & TRUST COMPANY, as Trustee
By: /s/ Herbert J. Lemmer
-------------------------------------------------
Name: Herbert J. Lemmer
Title: Vice President
S-3
<PAGE> 1
Exhibit 4.3
EXECUTION COPY
================================================================================
REGISTRATION RIGHTS AGREEMENT
Dated as of August 24, 1999
by and among
WinsLoew Escrow Corp.
and
Bear, Stearns & Co. Inc.,
BancBoston Robertson Stephens Inc.
First Union Capital Markets Corp.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 1 DEFINITIONS...........................................................................................1
Section 2 SECURITIES SUBJECT TO THIS AGREEMENT..................................................................3
a. Transfer Restricted Securities......................................................................3
b. Holders of Transfer Restricted Securities...........................................................3
Section 3 REGISTERED EXCHANGE OFFER.............................................................................3
Section 4 SHELF REGISTRATION....................................................................................5
a. Shelf Registration..................................................................................5
b. Provision by Holders of Certain Information in Connection with the Shelf Registration
Statement...........................................................................................5
Section 5. LIQUIDATED DAMAGES...................................................................................6
Section 6. REGISTRATION PROCEDURES..............................................................................6
a. Exchange Offer Registration Statement...............................................................6
b. Shelf Registration Statement........................................................................8
c. General Provisions..................................................................................8
Section 7. REGISTRATION EXPENSES...............................................................................14
Section 8. INDEMNIFICATION.....................................................................................15
Section 9. RULE 144A...........................................................................................18
Section 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS........................................................18
Section 11. SELECTION OF UNDERWRITERS..........................................................................19
Section 12. MISCELLANEOUS......................................................................................19
a. Remedies...........................................................................................19
b. No Inconsistent Agreements.........................................................................19
c. Adjustments Affecting the Notes....................................................................19
d. Amendments and Waivers.............................................................................19
e. Notices............................................................................................19
f. Successors and Assigns.............................................................................20
g. Counterparts.......................................................................................20
h. Headings...........................................................................................20
i. Governing Law......................................................................................20
j. Severability.......................................................................................21
k. Entire Agreement...................................................................................21
</TABLE>
i
<PAGE> 3
This Registration Rights Agreement (this "Agreement") is made
and entered into as of August 24, 1999 by and among WinsLoew Escrow Corp, a
Florida corporation (the "Company"), and Bear, Stearns & Co. Inc., BancBoston
Robertson Stephens Inc. and First Union Capital Markets Corp. (each an "Initial
Purchaser" and, collectively, the "Initial Purchasers"),subsequent to the
consummation of the transactions contemplated in that certain Purchase
Agreement, dated August 9, 1999, among the Company, Trivest Furniture
Corporation and the Initial Purchasers (the "Purchase Agreement") who have
agreed to purchase $105,000,000 aggregate principal amount at maturity of the
Company's 12 3/4% Series A Senior Subordinated Notes due 2007 (the "Series A
Notes") as Units with Warrants to purchase 24,129 shares of common stock, par
value $0.01 per share, of the Company pursuant to the Purchase Agreement (as
defined below).
This Agreement is made pursuant to the Purchase Agreement. In
order to induce the Initial Purchasers to purchase the Series A Notes, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 8 of the Purchase
Agreement.
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the following meanings:
Act: The Securities Act of 1933, as amended.
Broker-Dealer: Any broker or dealer registered under the
Exchange Act.
Broker-Dealer Transfer Restricted Securities: Series B Notes
that are acquired by a Broker-Dealer in the Exchange Offer in exchange for
Series A Notes that such Broker-Dealer acquired for its own account as a result
of market making activities or other trading activities (other than Series A
Notes acquired directly from the Company or any of its affiliates).
Closing Date: The date of this Agreement.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated"
for purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Series B Notes to be issued in the Exchange Offer, (b) the
maintenance of such Registration Statement as continuously effective and the
keeping of the Exchange Offer open for a period not less than the minimum period
required pursuant to Section 3(b) hereof and (c) the delivery by the Company to
the Registrar under the Indenture of Series B Notes in the same aggregate
principal amount as the aggregate principal
<PAGE> 4
amount of the Series A Notes that were tendered by Holders thereof pursuant to
the Exchange Offer.
Damages Payment Date: With respect to the Series A Notes, each
Interest Payment Date.
Effectiveness Target Date: As defined in Section 5.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The registration by the Company under the Act
of the Series B Notes pursuant to the Exchange Offer Registration Statement
pursuant to which the Company offers the Holders of all outstanding Transfer
Restricted Securities the opportunity to exchange all such outstanding Transfer
Restricted Securities held by such Holders for Series B Notes in an aggregate
principal amount equal to the aggregate principal amount of the Transfer
Restricted Securities tendered in such exchange offer by such Holders.
Exchange Offer Registration Statement: The Registration
Statement relating to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial
Purchasers propose to sell the Series A Notes to certain "qualified
institutional buyers," as such term is defined in Rule 144A under the Act.
Holders: As defined in Section 2(b) hereof.
Indenture: The Indenture, dated as of August 24, 1999, among
the Company, American Stock Transfer and Trust Company, as trustee (the
"Trustee"), pursuant to which the Notes are to be issued, as such Indenture is
amended or supplemented from time to time in accordance with the terms thereof.
Interest Payment Date: As defined in the Indenture and the
Notes.
Mergers: The concurrent mergers of the Company with and into
Trivest Furniture Corporation, a Florida corporation and the parent of the
Company ("Parent"), with Parent being the surviving corporation, and of Parent
with and into WinsLoew Furniture, Inc., a Florida corporation ("Target"), with
Target being the surviving corporation, the latter merger being in accordance
with the terms and conditions of that certain Second Amended and Restated
Agreement and Plan of Merger, dated as of May 4, 1999, between Parent and
Target.
NASD: National Association of Securities Dealers, Inc.
Notes: The Series A Notes and the Series B Notes.
Person: An individual, partnership, corporation, limited
liability company, trust or unincorporated organization, or a government or
agency or political subdivision thereof.
2
<PAGE> 5
Prospectus: The prospectus included in a Registration
Statement at the time such Registration Statement is declared effective by the
Commission, as amended or supplemented by any prospectus supplement and by all
other amendments thereto, including post-effective amendments, and all material
incorporated by reference into such Prospectus.
Record Holder: With respect to any Damages Payment Date
relating to Notes, each Person who is a Holder of Notes on the record date with
respect to the Interest Payment Date corresponding to such Damages Payment Date.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the
Company relating to (a) an offering of Series B pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, which is filed pursuant to the provisions of
this Agreement, in each case, including the Prospectus included therein, all
amendments and supplements thereto (including post-effective amendments) and all
exhibits and material incorporated by reference therein.
Restricted Broker-Dealer: Any Broker-Dealer that holds
Broker-Dealer Transfer Restricted Securities.
Series B Notes: The Company's 12 3/4% Series B Senior
Subordinated Notes due 2007 to be issued pursuant to the Indenture (a) in the
Exchange Offer or (b) pursuant to a Shelf Registration Statement, in each case,
in exchange for the Series A Notes.
Shelf Filing Deadline: As defined in Section 4 hereof.
Shelf Registration Statement: As defined in Section 4 hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section
77aaa-77bbbb) as in effect on the date of the Indenture.
Transfer Restricted Securities: Each Note, until the earliest
to occur of (a) the date on which such Note is exchanged in the Exchange Offer
and entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which such
Note has been effectively registered under the Act and disposed of in accordance
with a Shelf Registration Statement and (c) the date on which such Note is first
eligible to be distributed to the public pursuant to Rule 144 under the Act or
by a Broker-Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein).
Underwritten Registration or Underwritten Offering: A
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.
3
<PAGE> 6
SECTION 2. SECURITIES SUBJECT TO THIS AGREEMENT
(a) Transfer Restricted Securities. The securities entitled to
the benefits of this Agreement are the Transfer Restricted Securities.
(b) Holders of Transfer Restricted Securities. A Person is
deemed to be a holder of Transfer Restricted Securities (each, a "Holder")
whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permissible under
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with), the Company and any Guarantors shall (i)
cause to be filed with the Commission as soon as practicable after the Closing
Date, but in no event later than 90 days after the date of the consummation of
the Mergers, the Exchange Offer Registration Statement, (ii) use their best
efforts to cause such Exchange Offer Registration Statement to become effective
at the earliest possible time, but in no event later than 180 days after the
date of the consummation of the Mergers, (iii) in connection with the foregoing,
use their best efforts to file (A) all pre-effective amendments to such Exchange
Offer Registration Statement as may be necessary in order to cause such Exchange
Offer Registration Statement to become effective, (B) if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings in connection
with the registration and qualification of the Series B Notes to be made under
the Blue Sky laws of such jurisdictions as are necessary to permit Consummation
of the Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, use their best efforts to commence and Consummate the
Exchange Offer. The Exchange Offer shall be on the appropriate form permitting
registration of the Series B Notes to be offered in exchange for the Transfer
Restricted Securities and to permit resales of Notes held by Broker-Dealers as
contemplated by Section 3(c) below.
(b) The Company shall cause the Exchange Offer Registration
Statement to be effective continuously and shall keep the Exchange Offer open
for a period of not less than the minimum period required under applicable
federal and state securities laws to Consummate the Exchange Offer; provided,
however, that in no event shall such period be less than 20 business days. The
Company shall cause the Exchange Offer to comply with all applicable federal and
state securities laws. No securities other than the Notes shall be included in
the Exchange Offer Registration Statement. The Company shall use its best
efforts to cause the Exchange Offer to be Consummated on the earliest
practicable date after the Exchange Offer Registration Statement has become
effective, but in no event later than 60 business days thereafter.
(c) The Company shall include a "Plan of Distribution" section
in the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Broker-Dealer who holds the Series A Notes that are
Transfer Restricted Securities and that were acquired for its own account as a
result of market-making activities or other trading activities (other than
Transfer Restricted Securities acquired directly from the Company) may exchange
such Series A Notes pursuant to the Exchange Offer; however, such Broker-Dealer
may be
4
<PAGE> 7
deemed to be an "underwriter" within the meaning of the Act and must, therefore,
deliver a prospectus meeting the requirements of the Act in connection with any
resales of the Series B Notes received by such Broker-Dealer in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery by
such Broker-Dealer of the Prospectus contained in the Exchange Offer
Registration Statement. Such "Plan of Distribution" section shall also contain
all other information with respect to such resales by Broker-Dealers that the
Commission may require in order to permit such resales pursuant thereto, but
such "Plan of Distribution" shall not name any such Broker-Dealer or disclose
the amount of Notes held by any such Broker-Dealer except to the extent required
by the Commission as a result of a change in policy after the date of this
Agreement.
The Company and any Guarantors shall use their best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented and amended as required by the provisions of Section 6(c) below to
the extent necessary to ensure that it is available for resales of Notes
acquired by Broker-Dealers for their own accounts as a result of market-making
activities or other trading activities, and to ensure that it conforms with the
requirements of this Agreement, the Act and the policies, rules and regulations
of the Commission as announced from time to time, for a period of one year from
the date on which the Exchange Offer Registration Statement is declared
effective (which, subsequent to the Consummation of the Exchange Offer, shall be
subject to Section 6(c)(i) below).
The Company shall provide sufficient copies of the latest
version of such Prospectus to Broker-Dealers promptly upon request at any time
during such one-year period in order to facilitate such resales.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Company and any Guarantors
are not required to file an Exchange Offer Registration Statement or permitted
to consummate the Exchange Offer because the Exchange Offer is not permitted by
applicable law or Commission policy (after the procedures set forth in Section
6(a) below have been complied with) or (ii) if any Holder of Transfer Restricted
Securities notifies the Company on or prior to the 20th business day following
the Consummation of the Exchange Offer (A) that such Holder is prohibited by
applicable law or Commission policy from participating in the Exchange Offer, or
(B) that such Holder may not resell the Series B Notes acquired by it in the
Exchange Offer to the public without delivering a prospectus and that the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder, or (C) that such
Holder is a Broker-Dealer and holds the Series A Notes acquired directly from
the Company or one of its affiliates, then the Company and any Guarantors shall
use their best efforts to:
(x) File a shelf registration statement with the Commission
pursuant to Rule 415 under the Act, which may be an amendment to the
Exchange Offer Registration Statement (in any event, the "Shelf
Registration Statement") on or prior to the 60th day after the date on
which the filing obligation arises (such date being the "Shelf Filing
Deadline"), which Shelf Registration Statement shall provide for
resales of all Transfer
5
<PAGE> 8
Restricted Securities the Holders of which shall have provided the
information required pursuant to Section 4(b) hereof; and
(y) Cause such Shelf Registration Statement to be declared
effective by the Commission on or prior to the 180th day after the
Shelf Filing Deadline.
The Company and any Guarantors shall use their best efforts to keep such Shelf
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Sections 6(b) and (c) hereof to the extent
necessary to ensure that it is available for resales of Notes by the Holders of
Transfer Restricted Securities entitled to the benefit of this Section 4(a), and
to ensure that it conforms with the requirements of this Agreement, the Act and
the policies, rules and regulations of the Commission as announced from time to
time, for a period of at least two years following the Closing Date.
(b) Provision by Holders of Certain Information in Connection
with the Shelf Registration Statement. No Holder of Transfer Restricted
Securities may include any of its Transfer Restricted Securities in any Shelf
Registration Statement pursuant to this Agreement unless and until such Holder
furnishes to the Company in writing, within 20 business days after receipt of a
request therefor, such information as the Company may reasonably request for use
in connection with any Shelf Registration Statement or Prospectus or preliminary
Prospectus included therein. No Holder of Transfer Restricted Securities shall
be entitled to Liquidated Damages pursuant to Section 5 hereof unless and until
such Holder shall have used its best efforts to provide all such reasonably
requested information. Each Holder of Notes as to which any Shelf Registration
Statement is being effected, by its participation in the Shelf Registration
Statement, shall be deemed to agree to furnish promptly to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (a) any of the Registration Statements required by this
Agreement is not filed with the Commission on or prior to the date specified for
such filing in this Agreement, (b) any of such Registration Statements has not
been declared effective by the Commission on or prior to the date specified for
such effectiveness in this Agreement (the "Effectiveness Target Date"), (c) the
Exchange Offer has not been Consummated within 30 business days after the
Effectiveness Target Date with respect to the Exchange Offer Registration
Statement or (d) subject to the provisions of Section 6(c)(i) below, any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded immediately by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself promptly declared effective (each such event referred to in clauses (a)
through (d), a "Registration Default"), the Company hereby agrees to pay
liquidated damages to each Holder of Transfer Restricted Securities with respect
to the first 90-day period immediately following the occurrence of the first
Registration Default, in an amount equal to one-quarter of one percentage point
(0.25%) per annum of the principal amount of Transfer Restricted Securities held
by such Holder. The amount of the liquidated damages shall increase by an
additional one-quarter of one percent (0.25%) per annum of the principal
6
<PAGE> 9
amount of Transfer Restricted Securities with respect to each subsequent 90-day
period until all Registration Defaults have been cured, up to a maximum amount
of liquidated damages of two percent (2.00%) per annum of the principal amount
of Transfer Restricted Securities. All accrued liquidated damages shall be paid
by the Company on each Damages Payment Date to Record Holders by wire transfer
of immediately available funds or by federal funds check and to Holders of
Certificated Securities by wire transfers to the accounts specified by them or
by mailing checks to their registered addresses if no such accounts have been
specified on each Damages Payment Date, as provided in the Indenture. Following
the cure of all Registration Defaults relating to any particular Transfer
Restricted Securities, the accrual of liquidated damages with respect to such
Transfer Restricted Securities will cease.
All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with
the Exchange Offer, the Company and any Guarantors shall comply with all of the
provisions of Section 6(c) below, shall use their best efforts to effect such
exchange to permit the sale of Transfer Restricted Securities being sold in
accordance with the intended method or methods of distribution thereof, and
shall comply with all of the following provisions:
(i) If following the date hereof there has been
published a change in Commission policy with respect to exchange offers
such as the Exchange Offer such that in the reasonable opinion of
counsel to the Company there is a substantial question as to whether
the Exchange Offer is permitted by applicable law, the Company hereby
agrees to seek a no-action letter or other favorable decision from the
Commission allowing the Company and any Guarantors to Consummate an
Exchange Offer for such Series A Notes. The Company hereby agrees to
pursue the issuance of such a decision to the Commission staff level
but shall not be required to take commercially unreasonable action to
effect a change of Commission policy. The Company hereby agrees,
however, to (A) participate in telephonic conferences with the
Commission, (B) deliver to the Commission staff an analysis prepared by
counsel to the Company setting forth the legal bases, if any, upon
which such counsel has concluded that such an Exchange Offer should be
permitted and (C) diligently pursue a resolution (which need not be
favorable) by the Commission staff of such submission.
(ii) As a condition to its participation in the
Exchange Offer pursuant to the terms of this Agreement, each Holder of
Transfer Restricted Securities shall furnish, upon the request of the
Company, prior to the Consummation thereof, a written representation to
the Company (which may be contained in the letter of transmittal
contemplated by the Exchange Offer Registration Statement) to the
effect that (A) it is not an affiliate of either of the Company or any
Guarantor, (B) it is not engaged in, and does not intend to engage in,
and has no arrangement or understanding with any person to
7
<PAGE> 10
participate in, a distribution of the Series B Notes to be issued in
the Exchange Offer and (C) it is acquiring the Series B Notes in its
ordinary course of business. In addition, all such Holders of Transfer
Restricted Securities shall otherwise cooperate in the Company's
preparations for the Exchange Offer. Each Holder shall be deemed to
acknowledge and agree that any Broker-Dealer and any such Holder using
the Exchange Offer to participate in a distribution of the securities
to be acquired in the Exchange Offer (1) could not under Commission
policy as in effect on the date of this Agreement rely on the position
of the Commission enunciated in Morgan Stanley and Co., Inc. (available
June 5, 1991) and Exxon Capital Holdings Corporation (available May 13,
1988), as interpreted in the Commission's letter to Shearman & Sterling
dated July 2, 1993, and similar no-action letters (including any
no-action letter obtained pursuant to clause (i) above), and (2) must
comply with the registration and prospectus delivery requirements of
the Act in connection with a secondary resale transaction and that such
a secondary resale transaction should be covered by an effective
registration statement containing the selling security holder
information required by Item 507 or 508, as applicable, of Regulation
S-K if the resales are of Series B Notes obtained by such Holder in
exchange for Series A Notes acquired by such Holder directly from the
Company.
(iii) Prior to effectiveness of the Exchange Offer
Registration Statement, the Company and any Guarantors shall provide a
supplemental letter to the Commission (A) stating that the Company and
such Guarantors are registering the Exchange Offer in reliance on the
position of the Commission enunciated in Exxon Capital Holdings
Corporation (available May 13, 1988), Morgan Stanley and Co., Inc.
(available June 5, 1991) and, if applicable, any no-action letter
obtained pursuant to clause (i) above and (B) including a
representation that neither the Company nor any Guarantors has entered
into any arrangement or understanding with any Person to distribute the
Series B Notes to be received in the Exchange Offer and that, to the
best of the Company's and any Guarantors' information and belief, each
Holder participating in the Exchange Offer is acquiring the Series B
Notes in its ordinary course of business and has no arrangement or
understanding with any Person to participate in the distribution of the
Series B Notes received in the Exchange Offer.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and any Guarantors shall comply with all the
provisions of Section 6(c) below and shall use their best efforts to effect such
registration to permit the sale of the Transfer Restricted Securities being sold
in accordance with the intended method or methods of distribution thereof, and
pursuant thereto the Company will if required by Section 4(a), prepare and file
with the Commission a Registration Statement relating to the registration on any
appropriate form under the Act, which form shall be available for the sale of
the Transfer Restricted Securities in accordance with the intended method or
methods of distribution thereof.
(c) General Provisions. In connection with any Registration
Statement and any Prospectus required by this Agreement to permit the sale or
resale of Transfer Restricted Securities (including, without limitation, any
Registration Statement and the related Prospectus required to permit resales of
Notes by Broker-Dealers), the Company and any Guarantors shall:
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<PAGE> 11
(i) use their best efforts to keep such
Registration Statement continuously effective and provide all requisite
financial statements (including, if required by the Act or any
regulation thereunder, financial statements of any Guarantors) for the
period specified in Section 3 or 4 hereof, as applicable; upon the
occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain a material
misstatement or omission or (B) not to be effective and usable for
resale of Transfer Restricted Securities during the period required by
this Agreement, the Company shall file promptly an appropriate
amendment to such Registration Statement, in the case of clause (A),
correcting any such misstatement or omission, and, in the case of
either clause (A) or (B), use its best efforts to cause such amendment
to be declared effective and such Registration Statement and the
related Prospectus to become usable for their intended purpose(s) as
soon as practicable thereafter; provided, however, that the Company may
suspend the effectiveness of the Shelf Registration Statement (and,
subsequent to the Consummation of the Exchange Offer, the Exchange
Offer Registration Statement), without becoming obligated to pay
Liquidated Damages for periods of up to a total of 60 days in any 12
month period if the Board of Directors of the Company determines that
compliance with the disclosure obligations necessary to maintain the
effectiveness thereof at such time could reasonably be expected to have
an adverse effect on the Company or a pending corporate transaction.
(ii) prepare and file with the Commission such
amendments and post-effective amendments to the Registration Statement
as may be necessary to keep the Registration Statement effective for
the applicable period set forth in Section 3 or 4 hereof, as
applicable, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Registration Statement have been
sold; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 under the Act, and to comply fully with the applicable
provisions of Rules 424 and 430A under the Act in a timely manner; and
comply with the provisions of the Act with respect to the disposition
of all securities covered by such Registration Statement during the
applicable period in accordance with the intended method or methods of
distribution by the sellers thereof set forth in such Registration
Statement or supplement to the Prospectus;
(iii) advise the underwriter(s), if any, and selling
Holders (in the case of a Shelf Registration Statement) promptly and,
if requested by such Persons, to confirm such advice in writing, (A)
when the Prospectus or any Prospectus supplement or post-effective
amendment has been filed, and, with respect to any Registration
Statement or any post-effective amendment thereto, when the same has
become effective, (B) of any request by the Commission for amendments
to the Registration Statement or amendments or supplements to the
Prospectus or for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of
the Transfer Restricted Securities for offering or sale in any
jurisdiction, or the initiation of any proceeding for any of the
preceding purposes, (D) of the existence of any fact or the happening
of any event that makes any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or
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<PAGE> 12
supplement thereto, or any document incorporated by reference therein
untrue, or that requires the making of any additions to or changes in
the Registration Statement in order to make the statements therein not
misleading, or that requires the making of any additions to or changes
in the Prospectus in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. If at any
time the Commission shall issue any stop order suspending the
effectiveness of the Registration Statement, or any state securities
commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and any Guarantors shall use their best efforts to obtain
the withdrawal or lifting of such order at the earliest possible time;
(iv) furnish to each of the selling Holders and each
of the underwriter(s), if any, before filing with the Commission,
copies of any Registration Statement or any Prospectus included therein
or any amendments or supplements to any such Registration Statement or
Prospectus (including all documents incorporated by reference after the
initial filing of such Registration Statement), which documents will be
subject to the review and comment of such Holders and underwriter(s),
if any, for a period of at least five business days, and the Company
will not file any such Registration Statement or Prospectus or any
amendment or supplement to any such Registration Statement or
Prospectus (including all such documents incorporated by reference) to
which a selling Holder of Transfer Restricted Securities covered by
such Registration Statement or the underwriter(s), if any, shall
reasonably object within five business days after the receipt thereof.
A selling Holder or underwriter, if any, shall be deemed to have
reasonably objected to such filing if such Registration Statement,
amendment, Prospectus or supplement, as applicable, as proposed to be
filed, contains a material misstatement or omission or fails to comply
with the applicable requirements of the Act;
(v) promptly prior to the filing of any document that
is to be incorporated by reference into a Registration Statement or
Prospectus, provide copies of such document to the selling Holders and
to the underwriter(s), if any, make the Company's representatives
available (and representatives of any Guarantors) for discussion of
such document and other customary due diligence matters, and include
such information in such document prior to the filing thereof as such
selling Holders or underwriter(s), if any, reasonably may request;
(vi) subject to the execution of customary
confidentiality agreements with respect to the treatment of non-public
information, make available at reasonable times for inspection by the
selling Holders, any underwriter participating in any disposition
pursuant to such Registration Statement, and any attorney or accountant
retained by such selling Holders or any of the underwriter(s), all
financial and other records, pertinent corporate documents and
properties of the Company and any Guarantors and cause the Company's
and such Guarantors' officers, directors and employees to supply all
information reasonably requested by any such Holder, underwriter,
attorney or accountant in connection with such Registration Statement
subsequent to the filing thereof and prior to its effectiveness;
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<PAGE> 13
(vii) if requested by any selling Holders or the
underwriter(s), if any, promptly include in any Registration Statement
or Prospectus, pursuant to a supplement or post-effective amendment if
necessary, such information as such selling Holders and underwriter(s),
if any, may reasonably request to have included therein, including,
without limitation, information relating to the "Plan of Distribution"
of the Transfer Restricted Securities, information with respect to the
principal amount of Transfer Restricted Securities being sold to such
underwriter(s), the purchase price being paid therefor and any other
terms of the offering of the Transfer Restricted Securities to be sold
in such offering; and make all required filings of such Prospectus
supplement or post-effective amendment as soon as practicable after the
Company is notified of the matters to be included in such Prospectus
supplement or post-effective amendment;
(viii) cause the Transfer Restricted Securities
covered by the Registration Statement to be rated with the appropriate
rating agencies, if so requested by the Holders of a majority in
aggregate principal amount of Notes covered thereby or if the managing
underwriter, if any is of the opinion that the absence of such a rating
would adversely affect the marketing of the Transfer Restricted
Securities to be sold thereunder;
(ix) furnish to each selling Holder and each of the
underwriter(s), if any, without charge, at least one copy of the
Registration Statement, as first filed with the Commission, and of each
amendment thereto, including all documents incorporated by reference
therein and all exhibits (including exhibits incorporated therein by
reference);
(x) deliver to each selling Holder and each of the
underwriter(s), if any, without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use of the Prospectus and any amendment or
supplement thereto by each of the selling Holders and each of the
underwriter(s), if any, in connection with the offering and the sale of
the Transfer Restricted Securities covered by the Prospectus or any
amendment or supplement thereto;
(xi) enter into such agreements (including an
underwriting agreement), and make such representations and warranties,
and take all such other actions in connection therewith in order to
expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any Registration Statement contemplated by this
Agreement, all to such extent as may be reasonably requested by any
Holder of Transfer Restricted Securities or underwriter in connection
with any sale or resale pursuant to any Registration Statement
contemplated by this Agreement; and whether or not an underwriting
agreement is entered into and whether or not the registration is an
Underwritten Registration, the Company and any Guarantors shall:
(A) furnish (or in the case of paragraphs (2) and
(3), use its best efforts to furnish) to each selling Holder
and each underwriter, if any, in such substance and scope as
they may reasonably request and as are customarily made by
issuers to underwriters in primary underwritten offerings,
upon the effectiveness of the
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<PAGE> 14
Shelf Registration Statement and to each Restricted
Broker-Dealer upon Consummation of the Exchange Offer:
(1) a certificate, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, signed on behalf of the Company by
(x) the President or any Vice President and (y) a
principal financial or accounting officer of each of
the Company and any Guarantors, confirming, as of the
date thereof, that there has not been any material
adverse change, or any development that is reasonably
likely to result in a material adverse change, in the
capital stock or the long term debt, or material
increase in the short-term debt, of the Company or
any of its subsidiaries from that set forth in the
Prospectus or which could reasonably be expected to
have a material adverse effect on the Company's
business, financial condition, results of operations,
prospects or ability to satisfy the obligations under
the Notes that is not disclosed in the Prospectus and
that no stop order has been issued preventing the use
of the Prospectus or any amendment or supplement
thereto, and such other matters as such parties may
reasonably request;
(2) an opinion, dated the date of
Consummation of the Exchange Offer or the date of
effectiveness of the Shelf Registration Statement, as
the case may be, of counsel for the Company and any
Guarantors, covering customary matters similar to
those set forth in Exhibit B to the Purchase
Agreement, as applicable, and such other matters as
such parties may reasonably request, and in any event
including a statement to the effect that such counsel
has participated in conferences with officers and
other representatives of the Company and any
Guarantors, representatives of the independent public
accountants for the Company, the Initial Purchasers'
representatives and the Initial Purchasers' counsel
in connection with the preparation of such
Registration Statement and the related Prospectus and
have considered the matters required to be stated
therein and the statements contained therein,
although such counsel has not independently verified
the accuracy, completeness or fairness of such
statements; and that such counsel advises that, on
the basis of the foregoing (relying as to materiality
to the extent such counsel deems appropriate upon
facts provided to such counsel by officers and other
representatives of the Company and any Guarantors and
without independent check or verification), no facts
came to such counsel's attention that caused such
counsel to believe that the applicable Registration
Statement, at the time such Registration Statement or
any post-effective amendment thereto became
effective, and, in the case of the Exchange Offer
Registration Statement, as of the date of
Consummation, contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make
the statements therein not misleading, or that the
Prospectus contained in such Registration Statement
as of its date and,
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<PAGE> 15
in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a
material fact or omitted to state a material fact
necessary in order to make the statements therein, in
light of the circumstances under which they were
made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel
assumes no responsibility for, and has not
independently verified, the accuracy, completeness or
fairness of the financial statements, notes and
schedules and other financial data included in any
Registration Statement contemplated by this Agreement
or the related Prospectus; and
(3) a customary comfort letter, dated as of
the date of Consummation of the Exchange Offer or the
date of effectiveness of the Shelf Registration
Statement, as the case may be, from the Company's
independent accountants, in the customary form and
covering matters of the type customarily covered in
comfort letters by underwriters in connection with
primary underwritten offerings, and affirming the
matters set forth in the comfort letters delivered
pursuant to Section 8(g) of the Purchase Agreement,
without exception;
(B) set forth in full or incorporate by reference in
the underwriting agreement, if any, in connection with any
sale or resale pursuant to any Shelf Registration Statement
the indemnification provisions and procedures of Section 8
hereof with respect to all parties to be indemnified pursuant
to said Section; and
(C) deliver such other documents and certificates as
may be reasonably requested by such parties to evidence
compliance with clause (A) above and with any customary
conditions contained in the underwriting agreement or other
agreement entered into by the Company pursuant to this clause
(xi), if any.
If at any time the representations and warranties of the
Company and any Guarantors contemplated in clause (A)(1) above cease to
be true and correct, the Company or such Guarantors shall so advise the
Restricted Broker-Dealer or the underwriter(s), if any, and each
selling Holder promptly and, if requested by such Persons, shall
confirm such advice in writing;
(xii) prior to any public offering of Transfer
Restricted Securities, cooperate with the selling Holders, the
underwriter(s), if any, and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities
under the securities or Blue Sky laws of such jurisdictions as the
selling Holders or underwriter(s) may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
Shelf Registration Statement; provided, however, that neither of the
Company nor any Guarantors shall be required to register or qualify as
a foreign corporation where it is not now so qualified or to take any
action that would subject it to the service of process in
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<PAGE> 16
suits or to taxation, other than as to matters and transactions
relating to the Registration Statement, in any jurisdiction where it is
not now so subject;
(xiii) issue, upon the request of any Holder of the
Series A Notes covered by the Shelf Registration Statement, Series B
Notes, having an aggregate principal amount equal to the aggregate
principal amount of the Series A Notes surrendered to the Company by
such Holder in exchange therefor or being sold by such Holder; such
Series B Notes to be registered in the name of such Holder or in the
name of the purchaser(s) of such Notes, as the case may be; in return,
the Series A Notes held by such Holder shall be surrendered to the
Company for cancellation;
(xiv) in connection with any sale of Transfer
Restricted Securities that will results in such securities no longer
being Transfer Restricted Securities, cooperate with the selling
Holders and the underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing Transfer
Restricted Securities to be sold and not bearing any restrictive
legends; and enable such Transfer Restricted Securities to be in such
denominations and registered in such names as the Holders or the
underwriter(s), if any, may request at least two business days prior to
any sale of Transfer Restricted Securities made by such underwriter(s);
(xv) use their best efforts to cause the Transfer
Restricted Securities covered by the Registration Statement to be
registered with or approved by such other governmental agencies or
authorities as may be necessary to enable the seller or sellers thereof
or the underwriter(s), if any, to consummate the disposition of such
Transfer Restricted Securities, subject to the proviso contained in
clause (xii) above;
(xvi) subject to the provisions of Section 6(c)(i),
if any fact or event contemplated by clause (c)(iii)(D) above shall
exist or have occurred, prepare a supplement or post-effective
amendment to the Registration Statement or related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of Transfer
Restricted Securities, the Prospectus will not contain an untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading;
(xvii) provide a CUSIP number for all Transfer
Restricted Securities not later than the effective date of the
Registration Statement and provide the Trustee under the Indenture with
printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depositary Trust Company;
(xviii) cooperate and assist in any filings required
to be made with the NASD and in the performance of any due diligence
investigation by any underwriter (including any "qualified independent
underwriter") that is required to be retained in accordance with the
rules and regulations of the NASD, and use their reasonable best
efforts to cause such Registration Statement to become effective and
approved by such governmental agencies or authorities as may be
necessary to enable the Holders selling
14
<PAGE> 17
Transfer Restricted Securities to consummate the disposition of such
Transfer Restricted Securities;
(xix) otherwise use their best efforts to comply
with all applicable rules and regulations of the Commission, and make
generally available to their security holders, as soon as practicable,
a consolidated earnings statement meeting the requirements of Rule 158
(which need not be audited) for the twelve-month period (A) commencing
at the end of any fiscal quarter in which Transfer Restricted
Securities are sold to underwriters in a firm or best efforts
Underwritten Offering or (B) if not sold to underwriters in such an
offering, beginning with the first month of the Company's first fiscal
quarter commencing after the effective date of the Registration
Statement;
(xx) cause the Indenture to be qualified under the
TIA not later than the effective date of the first Registration
Statement required by this Agreement, and, in connection therewith,
cooperate with the Trustee and the Holders of Notes to effect such
changes to the Indenture as may be required for such Indenture to be so
qualified in accordance with the terms of the TIA; and execute and use
their best efforts to cause the Trustee to execute, all documents that
may be required to effect such changes and all other forms and
documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner;
(xxi) cause all Transfer Restricted Securities
covered by the Registration Statement to be listed on each securities
exchange on which similar securities issued by the Company are then
listed if requested by the Holders of a majority in aggregate principal
amount of the Series A Notes or the managing underwriter(s), if any;
and
(xxii) provide promptly to each Holder upon request
each document filed with the Commission pursuant to the requirements of
Section 13 and Section 15(d) of the Exchange Act.
Each Holder shall be deemed to agree by acquisition of a
Transfer Restricted Security that, upon receipt of any notice referenced in
Section 6(c)(i) or any notice from the Company of the existence of any fact of
the kind described in Section 6(c)(iii)(D) hereof, such Holder will forthwith
discontinue disposition of Transfer Restricted Securities pursuant to the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented or amended Prospectus contemplated by Section 6(c)(xvi) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the Prospectus may be resumed, and has received copies of any additional or
supplemental filings that are incorporated by reference in the Prospectus. If so
directed by the Company, each Holder will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Transfer Restricted
Securities that was current at the time of receipt of such notice. In the event
the Company shall give any such notice, the time period regarding the
effectiveness of such Registration Statement set forth in Section 3 or 4 hereof,
as applicable, shall be extended by the number of days during the period from
and including the date of the giving of such notice pursuant to Section 6(c)(i)
or Section 6(c)(iii)(D) hereof to and including the date when each selling
Holder covered by such Registration Statement shall have
15
<PAGE> 18
received the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xvi) hereof or shall have received the Advice.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's or any Guarantors'
performance of or compliance with this Agreement will be borne by the Company
and such Guarantors, regardless of whether a Registration Statement becomes
effective, including without limitation: (i) all registration and filing fees
and expenses (including filings made by the Initial Purchasers or any Holder
with the NASD (and, if applicable, the fees and expenses of any "qualified
independent underwriter" and its counsel that may be required by the rules and
regulations of the NASD)); (ii) all fees and expenses of compliance with federal
securities and state Blue Sky or securities laws; (iii) all expenses of printing
(including printing certificates for the Series B Notes to be issued in the
Exchange Offer and printing of Prospectuses), messenger and delivery services
and telephone; (iv) all reasonable fees and disbursements of counsel for the
Company, any Guarantors and, subject to Section 7(b) below, the Holders of
Transfer Restricted Securities; (v) all application and filing fees in
connection with listing Notes on a national securities exchange or automated
quotation system pursuant to the requirements hereof; and (vi) all fees and
disbursements of independent certified public accountants of the Company and any
Guarantors (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company and any Guarantors will, in any event, bear their
internal expenses (including, without limitation, all salaries and expenses of
their officers and employees performing legal or accounting duties), the
expenses of any annual audit and the fees and expenses of any Person, including
special experts, retained by the Company.
(b) In connection with any Registration Statement required by
this Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and any Guarantors
will reimburse the Holders of Transfer Restricted Securities being registered
pursuant to the Shelf Registration Statement for the reasonable fees and
disbursements of not more than one counsel, who shall be Weil, Gotshal & Manges
LLP or such other counsel as may be chosen by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company agrees to, and to cause any Guarantors to
jointly and severally, indemnify and hold harmless (i) each Holder, (ii) each
person, if any, who controls any Holder within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and (iii) the respective officers,
directors, partners, employees, representatives and agents of each Holder or any
controlling person to the fullest extent lawful, from and against any and all
losses, liabilities, claims, damages and expenses whatsoever (including but not
limited to attorneys' fees and any and all expenses whatsoever incurred in
investigating, preparing or defending against any investigation or litigation,
commenced or threatened, or any claim whatsoever, and any and all
16
<PAGE> 19
amounts paid in settlement of any claim or litigation), joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
otherwise, insofar as such losses, liabilities, claims, damages or expenses (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus, or in any supplement thereto or
amendment thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; provided, however, that the Company
will not be liable in any such case to the extent, but only to the extent, that
any such loss, liability, claim, damage or expense arises out of or is based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission made therein in reliance upon and in conformity with
information furnished to the Company in writing by or on behalf of such Holder
expressly for use therein; provided, further, however, that the Company shall
not be liable in any such case under the indemnity provisions of this paragraph
with respect to any preliminary prospectus to the extent that any such loss,
claim, damage or liability of such Holder results from the fact that such Holder
sold Notes to a person as to whom it is established that there was not sent or
given, at or prior to the written confirmation of such sale, a copy of the
Prospectus, or of the Prospectus as then amended or supplemented, in any case
where such delivery is required by the Act if the Company has previously
furnished copies thereof in sufficient quantity to such Holder and the loss,
liability, claim, damage or expense of such Holder results from an untrue
statement or omission of a material fact contained in the preliminary prospectus
which was corrected in the Prospectus or in the Prospectus as then amended or
supplemented. This indemnity agreement will be in addition to any liability
which the Company may otherwise have, including, under this Agreement.
(b) Each Holder, by its participation in the Exchange Offer or
Shelf Registration Statement, shall be deemed to acknowledge and agree,
severally and not jointly, to indemnify and hold harmless (i) the Company and
any Guarantors, (ii) each person, if any, who controls the Company and any
Guarantors within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act and (iii) the respective officers, directors, advisors, partners,
employees representatives and agents of each of them or any controlling party,
against any losses, liabilities, claims, damages and expenses whatsoever
(including but not limited to attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against any
investigation or litigation, commenced or threatened, or any claim whatsoever
and any and all amounts paid in settlement of any claim or litigation), joint or
several, to which they or any of them may become subject under the Act, the
Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages
or expenses (or actions in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement, preliminary prospectus or Prospectus, or in any
amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in each case to the
extent, but only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made therein in reliance upon and in
conformity with information furnished to the Company in
17
<PAGE> 20
writing by or on behalf of such Holder expressly for use therein; provided,
however, that in no case shall any Holder be liable or responsible for any
amount in excess of the dollar amount of the proceeds received by such Holder
upon the sale of the Notes giving rise to such indemnification obligation. This
indemnity will be in addition to any liability which any Holder may otherwise
have, including under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action, such
indemnified party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify each party against whom
indemnification is to be sought in writing of the commencement thereof (but the
failure so to notify an indemnifying party shall not relieve it from any
liability which it may have under this Section 8 except to the extent that it
has been prejudiced in any material respect by such failure or from any
liability which it may otherwise have). In case any such action is brought
against any indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein, and to the extent it may elect by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party. Notwithstanding the foregoing, the
indemnified party or parties shall have the right to employ its or their own
counsel in any such case, but the fees and expenses of such counsel shall be at
the expense of such indemnified party or parties unless (i) the employment of
such counsel shall have been authorized in writing by the indemnifying parties
in connection with the defense of such action, (ii) the indemnifying parties
shall not have employed counsel to take charge of the defense of such action
within a reasonable time after notice of commencement of the action, or (iii)
such indemnified party or parties shall have reasonably concluded that there may
be defenses available to it or them which are different from or additional to
those available to one or all of the indemnifying parties (in which case the
indemnifying party or parties shall not have the right to direct the defense of
such action on behalf of the indemnified party or parties), in any of which
events such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under subsection (a) or
(b) above shall only be liable for the legal expenses of one counsel (in
addition to any local counsel) for all indemnified parties in each jurisdiction
in which any claim or action is brought. Anything in this subsection to the
contrary notwithstanding, an indemnifying party shall not be liable for any
settlement of any claim or action effected without its prior written consent;
provided, however, that such consent was not unreasonably withheld.
(d) In order to provide for contribution in circumstances in
which the indemnification provided for in this Section 8 is for any reason held
to be unavailable from the Company and any Guarantors or is insufficient to hold
harmless a party indemnified hereunder, the Company and such Guarantors, on the
one hand, and each Holder (who shall be deemed to agree to these terms by its
participation in the Exchange Offer or the Shelf Registration Statement), on the
other hand, shall contribute to the aggregate losses, claims, damages,
liabilities and expenses of the nature contemplated by such indemnification
provision (including any investigation, legal and other expenses incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claims asserted, but after deducting in the case of losses,
claims, damages, liabilities and expenses suffered by the Company and any
Guarantors, any contribution received by the Company and any Guarantors from
persons, other than the
18
<PAGE> 21
Holders, who may also be liable for contribution, including persons who control
the Company and such Guarantors within the meaning of Section 15 of the Act or
Section 20(a) of the Exchange Act) to which the Company, any Guarantors and such
Holder may be subject, in such proportion as is appropriate to reflect the
relative benefits received by the Company and any Guarantors, on one hand, and
such Holder, on the other hand, or if such allocation is not permitted by
applicable law or indemnification is not available as a result of the
indemnifying party not having received notice as provided in this Section 8, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of the Company and any Guarantors,
on the one hand, and such Holder, on the other hand, in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company and any Guarantors, on one hand,
and each Holder, on the other hand, shall be deemed to be in the same proportion
as (i) the total proceeds from the offering of the Notes (net of discounts but
before deducting expenses) received by the Company and such Guarantors and (ii)
the total proceeds received by such Holder upon the sale of the Notes giving
rise to such indemnification obligation. The relative fault of the Company and
any Guarantors, on the one hand, and of each Holder, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company, any Guarantors
or such Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company agrees, and agrees to cause any Guarantors to agree, and the Holders
shall be deemed to agree by their participation in the Exchange Offer or the
Shelf Registration Statement that it would not be just and equitable if
contribution pursuant to this Section 8(d) were determined by pro rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to above. Notwithstanding the provisions
of this Section 8(d), (i) in no case shall any Holder be required to contribute
any amount in excess of the dollar amount by which the proceeds received by such
Holder upon the sale of the Notes exceeds the amount of any damages which such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 8(d), (A) each
person, if any, who controls any Holder within the meaning of Section 15 of the
Act or Section 20(a) of the Exchange Act and (B) the respective officers,
directors, partners, employees, representatives and agents of each Holder or any
controlling person shall have the same rights to contribution as such Holder,
and (A) each person, if any, who controls the Company and any Guarantors within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and
(B) the respective officers, directors, partners, employees, representatives and
agents of the Company, any Guarantors or any controlling person shall have the
same rights to contribution as the Company and such Guarantors, subject in each
case to clauses (i) and (ii) of this Section 8(d). Any party entitled to
contribution will, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this Section
8(d), notify such party or parties from whom contribution may be sought, but the
failure to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any obligation it or they may
have
19
<PAGE> 22
under this Section 8(d) or otherwise. No party shall be liable for contribution
with respect to any action or claim settled without its prior written consent;
provided, however, that such written consent was not unreasonably withheld.
SECTION 9. RULE 144A
The Company hereby agrees with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company is not subject to Section 13 or 15(d) of the Exchange Act, to make
available to any Holder or beneficial owner of Transfer Restricted Securities
upon their request in connection with any sale thereof and any prospective
purchaser of such Transfer Restricted Securities from such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and
to cause any Guarantors to comply with this Section 9.
SECTION 10. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS
No Holder may participate in any Underwritten Registration
hereunder unless such Holder (a) agrees to sell such Holder's Transfer
Restricted Securities on the basis provided in customary underwriting
arrangements entered in connection herewith and (b) completes and executes all
reasonable questionnaires, powers of attorney, indemnities, underwriting
agreements, lock-up letters and other documents required under the terms of such
underwriting arrangements. In no event, without the Company's prior written
consent, shall the number of such Underwritten Registrations exceed two.
SECTION 11. SELECTION OF UNDERWRITERS
The Holders of Transfer Restricted Securities covered by a
Shelf Registration Statement who desire to do so may sell such Transfer
Restricted Securities in an Underwritten Offering. In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the Holders of a majority
in aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company.
SECTION 12. MISCELLANEOUS
(a) Remedies. The Company agrees that monetary damages
(including the liquidated damages contemplated hereby) would not be adequate
compensation for any loss incurred by reason of a breach by it of the provisions
of this Agreement and hereby agrees to, and to cause any Guarantors to, waive
the defense in any action for specific performance that a remedy at law would be
adequate.
(b) No Inconsistent Agreements. The Company will not, and will
not permit any Guarantor to, on or after the date of this Agreement, enter into
any agreement with respect to
20
<PAGE> 23
their respective securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any of any Guarantors has previously entered into any
agreement granting any registration rights with respect to its securities to any
Person. The rights granted to the Holders hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of the
Company's securities under any agreement in effect on the date hereof.
(c) Adjustments Affecting the Notes. Neither the Company nor
any Guarantor will take any action, or permit any change to occur, with respect
to the Notes that would materially and adversely affect the ability of the
Holders to Consummate any Exchange Offer.
(d) Amendments and Waivers. The provisions of this Agreement
may not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given unless the Company has
obtained the written consent of Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities. Notwithstanding the
foregoing, a waiver or consent to departure from the provisions hereof that
relates exclusively to the rights of Holders whose securities are being tendered
pursuant to the Exchange Offer and that does not affect directly or indirectly
the rights of other Holders whose securities are not being tendered pursuant to
such Exchange Offer may be given by the Holders of a majority of the outstanding
principal amount of Transfer Restricted Securities being tendered or registered.
(e) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-class
mail (registered or certified, return receipt requested), telex, telecopier, or
air courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on
the records of the Registrar under the Indenture, with a copy to the
Registrar under the Indenture; and
(ii) if to the Company:
WinsLoew Escrow Corp.
c/o Trivest, Inc.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133
Telecopy No.: (305) 858-1629
Attention: General Counsel
21
<PAGE> 24
With copies to:
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Telecopy No.: (203) 408-7028
Attention: Chief Financial Officer
and
Greenberg Traurig P.A.
1221 Brickell Avenue, 21st Floor
Miami, Florida 33131
Telecopy No.: (305) 579-0717
Attention: Bruce Macdonough
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt acknowledged, if telecopied; and on
the next business day, if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee at
the address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities from such Holder.
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the
22
<PAGE> 25
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be affected
or impaired thereby.
(k) Entire Agreement. This Agreement, together with the other
Operative Documents (as defined in the Purchase Agreement), is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the Transfer Restricted Securities. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
[signature page follows]
23
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
WINSLOEW ESCROW CORP.
By: /s/ William F. Kaczynski, Jr.
-------------------------------------
Name: William F. Kaczynski, Jr.
Title: Vice President
BEAR, STEARNS & CO. INC.
By: /s/ Sean P. Crawley
-----------------------------------
Name: Sean P. Crawley
Title: Sr. Managing Director
BANCBOSTON ROBERTSON STEPHENS INC.
By: /s/ Theodore J. Davies
------------------------------------
Name: Theodore J. Davies
Title: Director
FIRST UNION CAPITAL MARKETS
By: /s/ Douglas J. Fink
-------------------------------------
Name: Douglas J. Fink
Title: Managing Director
<PAGE> 1
EXHIBIT 5.1
GREENBERG TRAURIG, P.A.
1221 BRICKELL AVENUE
MIAMI, FLORIDA 33131
November 8, 1999
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Ladies and Gentlemen:
We have acted as counsel to WinsLoew Furniture, Inc., a Florida
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-4, including the Prospectus constituting a part
thereof (the "Registration Statement"), to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended (the
"Securities Act"), relating to an offer to exchange (the "Exchange Offer") the
Company's outstanding original 12 3/4% Series A Senior Subordinated Notes due
2007 (the "Original Notes") for an equal principal amount of the Company's 12
3/4% Series B Senior Subordinated Notes due 2007 (the "Registered Notes"). The
Registered Notes will be guaranteed (the "Guarantees") by the Guarantors (as
defined).
The Original Notes were issued, and the Registered Notes will be
issued, pursuant to an Indenture (the "Indenture") dated as of August 24, 1999,
by and among WinsLoew Escrow Corp., whose obligations have been assumed by the
Company, certain subsidiaries of the Company party thereto (the "Guarantors")
and American Stock Transfer & Trust Company, as Trustee (the "Trustee"), as
supplemented by a Supplemental Indenture dated as of August 27, 1999.
In connection with our opinion, we have examined: (a) the Registration
Statement, including the Prospectus; (b) the Indenture; (c) the form of the
Registered Notes; (d) the form of the Guarantees; and (e) such other
proceedings, documents and records as we have deemed necessary to enable us to
render this opinion.
In our examinations of the above referenced documents, we have assumed
the genuineness of all signatures, the authenticity of all documents,
certificates and instruments submitted to us as originals and the conformity
with the originals of all documents submitted to us as copies.
Based upon the foregoing, assuming that the Indenture has been duly
authorized, executed and delivered by, and represents the valid and binding
obligation of, the Trustee, and when the Registration Statement, including any
amendments thereto, shall have become effective under the Securities Act and
having regard for such legal considerations as we deem relevant, we are of the
opinion that:
1. The Registered Notes, when duly executed and delivered by or on
behalf of the Company in the form contemplated by the Indenture upon the terms
set forth in the Registration
<PAGE> 2
Statement and authenticated by the Trustee or an authenticating agent appointed
by the Trustee in accordance with the terms of the Indenture, will be legally
issued and valid and binding obligations of the Company enforceable in
accordance with their terms; and
2. The Guarantees, when duly executed and delivered by or on behalf of
the Guarantors in the form contemplated by the Indenture upon the terms set
forth in the Registration Statement, will be legally issued and valid and
binding obligations of the Guarantors enforceable in accordance with their
terms;
except, in each case, as enforcement thereof may be limited by bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium or other comparable
laws affecting the enforcement of creditors' rights generally or the application
of equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law) and subject, in each case, to the
qualification that certain provisions thereof may be unenforceable in whole or
in part under the laws of the States of Florida and New York, as applicable, but
the inclusion of such provision does not affect the validity of the Registered
Notes or the Guarantees and each of them contain legally adequate provisions for
the realization of the principal legal rights and benefits afforded thereby.
We are qualified to practice law in the State of Florida and we do not
purport to be experts on the law of any other jurisdiction other than the
federal laws of the United States of America. In rendering our opinions with
respect to the Registered Notes and the Guarantees, we have assumed with your
permission, and without independent investigation, that the applicable laws of
the State of New York are identical in all relevant respects to the substantive
laws of the State of Florida. We express no opinion and make no representation
with respect to the law of any other jurisdiction.
This opinion is for your benefit and it may not be reprinted,
reproduced or distributed to any other person for any purpose without our prior
written consent, except that we hereby consent to the reference to our firm
under the caption "Legal Matters" in the Prospectus which is filed as part of
the Registration Statement, and to the filing of this opinion as an exhibit to
such Registration Statement. In giving this consent, we do not admit that we are
experts within the meaning of Section 11 of the Securities Act or within the
category of persons whose consent is required by Section 7 of the Securities
Act. Our opinion is expressly limited to the matters set forth above and we
render no opinion, whether by implication or otherwise, as to any other matters
relating to the Company, the Guarantors or any other person, or any other
document or agreement involved with the transactions contemplated by the
Exchange Offer. We assume no obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinions expressed herein.
Sincerely,
/s/ GREENBERG TRAURIG, P.A.
GREENBERG TRAURIG, P.A.
<PAGE> 1
Exhibit 10.1
FORM OF
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT, dated as of the ______ day of
________, 199__, between WINSLOEW FURNITURE, INC., a Florida corporation (the
"Company"), and (the "Indemnitee").
RECITALS
A. The Company desires to retain the services of the Indemnitee as of
the Company.
B. As a condition to the Indemnitee's agreement to serve the Company
as such, the Indemnitee requires that he be indemnified from liability to the
fullest extent permitted by law.
C. The Company is willing to indemnify the Indemnitee to the fullest
extent permitted by law in order to retain the services of the Indemnitee.
NOW, THEREFORE, for and in consideration of the mutual premises and
covenants contained herein, the Company and the Indemnitee agree as follows:
SECTION 1. MANDATORY INDEMNIFICATION IN PROCEEDINGS OTHER THAN THOSE BY OR IN
THE RIGHT OF THE COMPANY. Subject to Section 4 hereof, the Company shall
indemnify and hold harmless the Indemnitee from and against any and all claims,
damages, expenses (including attorneys' fees), judgments, penalties, fines
(including excise taxes assessed with respect to an employee benefit plan),
amounts paid in settlement and all other liabilities actually and reasonably
incurred or paid by him in connection with the investigation, defense,
prosecution, settlement or appeal of any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative,
investigative or otherwise (other than an action by or in the right of the
Company) and to which the Indemnitee was or is a party or is threatened to be
made a party by reason of the fact that the Indemnitee is or was an officer,
director, shareholder, employee or agent of the Company, or is or was serving
at the request of the Company as an officer, director, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan, or other enterprise, or by reason of anything done or
not done by the Indemnitee in any such capacity or capacities, provided that
the Indemnitee acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
<PAGE> 2
SECTION 2. MANDATORY INDEMNIFICATION IN PROCEEDINGS BY OR IN THE RIGHT OF THE
COMPANY. Subject to Section 4 hereof, the Company shall indemnify and hold
harmless the Indemnitee from and against any and all expenses (including
attorneys' fees) and amounts paid in settlement actually and reasonably
incurred or paid by him in connection with the investigation, defense,
prosecution, settlement or appeal of any threatened, pending or completed
action, suit or proceeding by or in the right of the Company to procure a
judgment in its favor, whether civil, criminal, administrative, investigative
or otherwise, and to which the Indemnitee was or is a party or is threatened to
be made a party by reason of the fact that the Indemnitee is or was an officer,
director, shareholder, employee or agent of the Company, or is or was serving
at the request of the Company as an officer, director, partner, trustee,
employee or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise, or by reason of anything done or not
done by the Indemnitee in any such capacity or capacities, provided that (i)
the Indemnitee acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the Company, and (ii) no
indemnification shall be made under this Section 2 in respect of any claim,
issue or matter as to which the Indemnitee shall have been adjudged to be
liable to the Company for misconduct in the performance of his duty to the
Company unless and only to the extent that the court in which such action, suit
or proceeding was brought (or any other court of competent jurisdiction) shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, the Indemnitee is fairly and
reasonably entitled to indemnity for such expenses which such court shall deem
proper.
SECTION 3. REIMBURSEMENT OF EXPENSES FOLLOWING ADJUDICATION OF NEGLIGENCE. The
Company shall reimburse the Indemnitee for any expenses (including attorney's
fees) and amounts paid in settlement actually and reasonably incurred or paid
by him in connection with the investigation, defense, settlement or appeal of
any action or suit described in Section 2 hereof that results in an
adjudication that the Indemnitee was liable for negligence, gross negligence or
recklessness (but not willful misconduct) in the performance of his duty to the
Company; provided, however, that the Indemnitee acted in good faith and in a
manner he believed to be in the best interests of the Company.
SECTION 4. AUTHORIZATION OF INDEMNIFICATION. Any indemnification under Sections
1 and 2 hereof (unless ordered by a court) and any reimbursement made under
Section 3 hereof shall be made by the Company only as authorized in the
specific case upon a determination (the "Determination") that indemnification
or reimbursement of the Indemnitee is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct set forth in Section 1, 2
or 3 hereof, as the case may be. Subject to Sections 5.6, 5.7, 5.8 and 8 of
this Agreement, the Determination shall be made in the following order of
preference:
(1) first, by the Company's Board of Directors (the "Board") by
majority vote or consent of a quorum consisting of directors ("Disinterested
Directors") who are not, at the time of the Determination, named parties to such
action, suit or proceeding; or
-2-
<PAGE> 3
(2) next, if such a quorum of Disinterested Directors cannot be
obtained, by majority vote or consent of a committee duly designated by the
Board (in which designation all directors, whether or not Disinterested
Directors, may participate) consisting solely of two or more Disinterested
Directors; or
(3) next, if such a committee cannot be designated, by any
independent legal counsel (who may be any outside counsel regularly employed by
the Company); or
(4) next, if such legal counsel determination cannot be obtained, by
vote or consent of the holders of a majority of the Company's Common Stock that
are represented in person or by proxy at a meeting called for such purpose.
4.1 No Presumptions. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the Indemnitee
did not act in good faith and in a manner that he reasonably believed to be in
or not opposed to the best interests of the Company, and with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful.
4.2 Benefit Plan Conduct. The Indemnitee's conduct with respect to an employee
benefit plan for a purpose he reasonably believed to be in the interests of the
participants in and beneficiaries of the plan shall be deemed to be conduct
that the Indemnitee reasonably believed to be not opposed to the best interests
of the Company.
4.3 Reliance as Safe Harbor. For purposes of any Determination hereunder, the
Indemnitee shall be deemed to have acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Company, or, with respect to any criminal action or proceeding, to have had no
reasonable cause to believe his conduct was unlawful, if his action is based on
(i) the records or books of account of the Company or another enterprise,
including financial statements, (ii) information supplied to him by the
officers of the Company or another enterprise in the course of their duties,
(iii) the advice of legal counsel for the Company or another enterprise, or
(iv) information or records given or reports made to the Company or another
enterprise by an independent certified public accountant or by an appraiser or
other expert selected with reasonable care by the Company or another
enterprise. The term "another enterprise" as used in this Section 4.3 shall
mean any other corporation or any partnership, joint venture, trust, employee
benefit plan or other enterprise of which the Indemnitee is or was serving at
the request of the Company as an officer, director, partner, trustee, employee
or agent. The provisions of this Section 4.3 shall not be deemed to be
exclusive or to limit in any way the other circumstances in which the
Indemnitee may be deemed to have met the applicable standard of conduct set
forth in Sections 1, 2 or 3 hereof, as the case may be.
-3-
<PAGE> 4
4.4 Success on Merits or Otherwise. Notwithstanding any other provision of
this Agreement, to the extent that the Indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding described in
Section 1 or 2 hereof, or in defense of any claim, issue or matter therein, he
shall be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection with the investigation, defense,
settlement or appeal thereof. For purposes of this Section 4.4, the term
"successful on the merits or otherwise" shall include, but not be limited to,
(i) any termination, withdrawal, or dismissal (with or without prejudice) of
any claim, action, suit or proceeding against the Indemnitee without any
express finding of liability or guilt against him, (ii) the expiration of 120
days after the making of any claim or threat of an action, suit or proceeding
without the institution of the same and without any promise or payment made to
induce a settlement, or (iii) the settlement of any action, suit or proceeding
under Section 1, 2 or 3 hereof pursuant to which the Indemnitee pays less than
$25,000.
4.5 Partial Indemnification or Reimbursement. If the Indemnitee is entitled
under any provision of this Agreement to indemnification and/or reimbursement
by the Company for some or a portion of the claims, damages, expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement by
the Indemnitee in connection with the investigation, defense, settlement or
appeal of any action specified in Section 1, 2 or 3 hereof, but not, however,
for the total amount thereof, the Company shall nevertheless indemnify and/or
reimburse the Indemnitee for the portion thereof to which the Indemnitee is
entitled. The party or parties making the Determination shall determine the
portion (if less than all) of such claims, damages, expenses (including
attorneys' fees), judgments, fines or amounts paid in settlement for which the
Indemnitee is entitled to indemnification and/or reimbursement under this
Agreement.
4.6 Limitations on Indemnification. No indemnification pursuant to Sections 1
or 2 hereof shall be paid by the Company if a judgment (after exhaustion of all
appeals) or other final adjudication determines that the Indemnitee's actions,
or omissions to act, were material to the cause of action so adjudicated and
constitute:
(a) a violation of criminal law, unless the Indemnitee had
reasonable cause to believe his conduct was lawful or had no reasonable cause to
believe his conduct was unlawful;
(b) a transaction from which the Indemnitee derived an improper
personal benefit within the meaning of Section 607.0850(7) of the Florida
Business Corporation Act;
(c) in the event that the Indemnitee is a director of the
Company, a circumstance under which the liability provisions of Section 607.0834
of the Florida Business Corporation Act are applicable; or
(d) willful misconduct or conscious disregard for the best
interests of the Company in a proceeding by or in the right of the Company to
procure a judgment in its favor or in a proceeding by or in the right of a
shareholder of the Company.
-4-
<PAGE> 5
SECTION 5. PROCEDURES FOR DETERMINATION OF WHETHER STANDARDS HAVE BEEN
SATISFIED.
5.1 Costs. All costs of making the Determination required by Section 4 hereof
shall be borne solely by the Company, including, but not limited to, the costs
of legal counsel, proxy solicitations and judicial determinations. The Company
shall also be solely responsible for paying (i) all reasonable expenses
incurred by the Indemnitee to enforce this Agreement, including, but not
limited to, the costs incurred by the Indemnitee to obtain court-ordered
indemnification pursuant to Section 8 hereof, regardless of the outcome of any
such application or proceeding, and (ii) all costs of defending any suits or
proceedings challenging payments to the Indemnitee under this Agreement.
5.2 Timing of the Determination. The Company shall use its best efforts to make
the Determination contemplated by Section 4 hereof promptly. In addition, the
Company agrees:
(a) if the Determination is to be made by the Board or a
committee thereof, such Determination shall be made not later than 15 days after
a written request for a Determination (a "Request") is delivered to the Company
by the Indemnitee;
(b) if the Determination is to be made by independent legal
counsel, such Determination shall be made not later than 30 days after a Request
is delivered to the Company by the Indemnitee; and
(c) if the Determination is to be made by the shareholders of
the Company, such Determination shall be made not later than 90 days after a
Request is delivered to the Company by the Indemnitee.
The failure to make a Determination within the above-specified time
period shall constitute a Determination approving full indemnification or
reimbursement of the Indemnitee. Notwithstanding anything herein to the
contrary, a Determination may be made in advance of (i) the Indemnitee's payment
(or incurring) of expenses with respect to which indemnification or
reimbursement is sought, and/or (ii) final disposition of the action, suit or
proceeding with respect to which indemnification or reimbursement is sought.
5.3 Reasonableness of Expenses. The evaluation and finding as to the
reasonableness of expenses incurred by the Indemnitee for purposes of this
Agreement shall be made (in the following order of preference) within 15 days
after the Indemnitee's delivery to the Company of a Request that includes a
reasonable accounting of expenses incurred:
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<PAGE> 6
(a) first, by the Board by majority vote or consent of a
quorum consisting of Disinterested Directors; or
(b) next, if such a quorum cannot be obtained, by majority
vote or consent of a committee duly designated by the Board (in which
designation all directors, whether or not Disinterested Directors, may
participate), consisting solely of two or more Disinterested Directors; or
(c) next, if such a committee cannot be designated, by any
independent legal counsel (who may be any outside counsel regularly employed by
the Company);
(d) provided, however, that if a determination as to
reasonableness of expenses is not made under any of the foregoing subsections
(a), (b) and (c), such determination shall be made, not later than 90 days after
the Indemnitee's delivery of such Request, by vote or consent of the holders of
a majority of the Company's Common Stock that are represented in person or by
proxy at a meeting called for such purpose.
All expenses shall be considered reasonable for purposes of this
Agreement if the finding contemplated by this Section 5.3 is not made within the
prescribed time. The finding required by this Section 5.3 may be made in advance
of the payment (or incurring) of the expenses for which indemnification or
reimbursement is sought.
5.4 Payment of Indemnified Amount. Immediately following a Determination that
the Indemnitee has met the applicable standard of conduct set forth in Section
1, 2 or 3 hereof, as the case may be, and the finding of reasonableness of
expenses contemplated by Section 5.3 hereof, or the passage of time prescribed
for making such determination(s), the Company shall pay to the Indemnitee in
cash the amount to which the Indemnitee is entitled to be indemnified and/or
reimbursed, as the case may be, without further authorization or action by the
Board; provided, however, that the expenses for which indemnification or
reimbursement is sought have actually been incurred by the Indemnitee.
5.5 Shareholder Vote on Determination. Notwithstanding the provisions of
Section 607.0850 of the Florida Business Corporation Act, the Indemnitee and
any other shareholder who is a party to the proceeding for which
indemnification or reimbursement is sought shall be entitled to vote on any
Determination to be made by the Company's shareholders, including a
Determination made pursuant to Section 5.7 hereof. In addition, in connection
with each meeting at which a shareholder Determination will be made, the
Company shall solicit proxies that expressly include a proposal to indemnify or
reimburse the Indemnitee. Any Company proxy statement relating to a proposal to
indemnify or reimburse the Indemnitee shall not include a recommendation
against indemnification or reimbursement.
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<PAGE> 7
5.6 Selection of Independent Legal Counsel. If the Determination required under
Section 4 is to be made by independent legal counsel, such counsel shall be
selected by the Indemnitee with the approval of the Board, which approval shall
not be unreasonably withheld. The fees and expenses incurred by counsel in
making any Determination (including Determinations pursuant to Section 5.8
hereof) shall be borne solely by the Company regardless of the results of any
Determination and, if requested by counsel, the Company shall give such counsel
an appropriate written agreement with respect to the payment of their fees and
expenses and such other matters as may be reasonably requested by counsel.
5.7 Right of Indemnitee to Appeal an Adverse Determination by Board. If a
Determination is made by the Board or a committee thereof that the Indemnitee
did not meet the applicable standard of conduct set forth in Section 1, 2 or 3
hereof, upon the written request of the Indemnitee and the Indemnitee's
delivery of $500 to the Company, the Company shall cause a new Determination to
be made by the Company's shareholders at the next regular or special meeting of
shareholders. Subject to Section 8 hereof, such Determination by the Company's
shareholders shall be binding and conclusive for all purposes of this
Agreement.
5.8 Right of Indemnitee To Select Forum For Determination. If, at any time
subsequent to the date of this Agreement, "Continuing Directors" do not
constitute a majority of the members of the Board, or there is otherwise a
change in control of the Company (as contemplated by Item 403(c) of Regulation
S-K), then upon the request of the Indemnitee, the Company shall cause the
Determination required by Section 4 hereof to be made by independent legal
counsel selected by the Indemnitee and approved by the Board (which approval
shall not be unreasonably withheld), which counsel shall be deemed to satisfy
the requirements of clause (3) of Section 4 hereof. If none of the legal
counsel selected by the Indemnitee are willing and/or able to make the
Determination, then the Company shall cause the Determination to be made by a
majority vote or consent of a Board committee consisting solely of Continuing
Directors. For purposes of this Agreement, a "Continuing Director" means either
a member of the Board at the date of this Agreement or a person nominated to
serve as a member of the Board by a majority of the then Continuing Directors.
5.9 Access by Indemnitee to Determination. The Company shall afford to the
Indemnitee and his representatives ample opportunity to present evidence of the
facts upon which the Indemnitee relies for indemnification or reimbursement,
together with other information relating to any requested Determination. The
Company shall also afford the Indemnitee the reasonable opportunity to include
such evidence and information in any Company proxy statement relating to a
shareholder Determination.
5.10 Judicial Determinations in Derivative Suits. In each action or suit
described in Section 2 hereof, the Company shall cause its counsel to use its
best efforts to obtain from the Court in which such action or suit was brought
(i) an express adjudication whether the Indemnitee is liable for negligence or
misconduct in the performance of his duty to the Company, and, if the
Indemnitee is so liable, (ii) a determination whether and to what extent,
despite the adjudication of liability but in view of all the circumstances of
the case (including this Agreement), the Indemnitee is fairly and reasonably
entitled to indemnification.
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<PAGE> 8
SECTION 6. SCOPE OF INDEMNITY. The actions, suits and proceedings described in
Sections 1 and 2 hereof shall include, for purposes of this Agreement, any
actions that involve, directly or indirectly, activities of the Indemnitee both
in his official capacities as a Company director or officer and actions taken
in another capacity while serving as director or officer, including, but not
limited to, actions or proceedings involving (i) compensation paid to the
Indemnitee by the Company, (ii) activities by the Indemnitee on behalf of the
Company, including actions in which the Indemnitee is plaintiff, (iii) actions
alleging a misappropriation of a "corporate opportunity," (iv) responses to a
takeover attempt or threatened takeover attempt of the Company, (v)
transactions by the Indemnitee in Company securities, and (vi) the Indemnitee's
preparation for and appearance (or potential appearance) as a witness in any
proceeding relating, directly or indirectly, to the Company. In addition, the
Company agrees that, for purposes of this Agreement, all services performed by
the Indemnitee on behalf of, in connection with or related to any subsidiary of
the Company, any employee benefit plan established for the benefit of employees
of the Company or any subsidiary, any corporation or partnership or other
entity in which the Company or any subsidiary has a 5% ownership interest, or
any other affiliate of the Company, shall be deemed to be at the request of the
Company.
SECTION 7. ADVANCE FOR EXPENSES.
7.1 Mandatory Advance. Expenses (including attorneys' fees, court costs,
judgments, fines, amounts paid in settlement and other payments) incurred by
the Indemnitee in investigating, defending, settling or appealing any action,
suit or proceeding described in Section 1 or 2 hereof shall be paid by the
Company in advance of the final disposition of such action, suit or proceeding.
The Company shall promptly pay the amount of such expenses to the Indemnitee,
but in no event later than 10 days following the Indemnitee's delivery to the
Company of a written request for an advance pursuant to this Section 7,
together with a reasonable accounting of such expenses.
7.2 Undertaking to Repay. The Indemnitee hereby undertakes and agrees to repay
to the Company any advances made pursuant to this Section 7 if and to the
extent that it shall ultimately be found that the Indemnitee is not entitled to
be indemnified by the Company for such amounts.
7.3 Miscellaneous. The Company shall make the advances contemplated by this
Section 7 regardless of the Indemnitee's financial ability to make repayment,
and regardless whether indemnification of the Indemnitee by the Company will
ultimately be required. Any advances and undertakings to repay pursuant to this
Section 7 shall be unsecured and interest-free.
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<PAGE> 9
SECTION 8. COURT-ORDERED INDEMNIFICATION. Regardless whether the Indemnitee
has met the standard of conduct set forth in Sections 1, 2 or 3 hereof, as the
case may be, and notwithstanding the presence or absence of any Determination
whether such standards have been satisfied, the Indemnitee may apply for
indemnification (and/or reimbursement pursuant to Section 3 or 12 hereof) to
the court conducting any proceeding to which the Indemnitee is a party or to
any other court of competent jurisdiction. On receipt of an application, the
court, after giving any notice the court considers necessary, may order
indemnification (and/or reimbursement) if it determines the Indemnitee is
fairly and reasonably entitled to indemnification (and/or reimbursement) in
view of all the relevant circumstances (including this Agreement).
SECTION 9. NONDISCLOSURE OF PAYMENTS. Except as expressly required by Federal
securities laws, neither party shall disclose any payments under this Agreement
unless prior approval of the other party is obtained. Any payments to the
Indemnitee that must be disclosed shall, unless otherwise required by law, be
described only in Company proxy or information statements relating to special
and/or annual meetings of the Company's shareholders, and the Company shall
afford the Indemnitee the reasonable opportunity to review all such disclosures
and, if requested, to explain in such statement any mitigating circumstances
regarding the events reported.
SECTION 10. COVENANT NOT TO SUE, LIMITATION OF ACTIONS AND RELEASE OF CLAIMS.
No legal action shall be brought and no cause of action shall be asserted by or
on behalf of the Company (or any of its subsidiaries) against the Indemnitee,
his spouse, heirs, executors, personal representatives or administrators after
the expiration of 2 years following the date the Indemnitee ceases (for any
reason) to serve as either an executive officer or director of the Company, and
any and all such claims and causes of action of the Company (or any of its
subsidiaries) shall be extinguished and deemed released unless asserted by
filing of a legal action within such 2-year period.
SECTION 11. INDEMNIFICATION OF INDEMNITEE'S ESTATE. Notwithstanding any other
provision of this Agreement, and regardless whether indemnification of the
Indemnitee would be permitted and/or required under this Agreement, if the
Indemnitee is deceased, the Company shall indemnify and hold harmless the
Indemnitee's estate, spouse, heirs, administrators, personal representatives
and executors (collectively the "Indemnitee's Estate") against, and the Company
shall assume, any and all claims, damages, expenses (including attorneys'
fees), penalties, judgments, fines and amounts paid in settlement actually
incurred by the Indemnitee or the Indemnitee's Estate in connection with the
investigation, defense, settlement or appeal of any action described in Section
1 or 2 hereof. Indemnification of the Indemnitee's Estate pursuant to this
Section 11 shall be mandatory and not require a Determination or any other
finding that the Indemnitee's conduct satisfied a particular standard of
conduct.
-9-
<PAGE> 10
SECTION 12. REIMBURSEMENT OF ALL LEGAL EXPENSES. Notwithstanding
any other provision of this Agreement, and regardless of the presence or
absence of any Determination, the Company promptly (but not later than 30 days
following the Indemnitee's submission of a reasonable accounting) shall
reimburse the Indemnitee for all attorneys' fees and related court costs and
other expenses incurred by the Indemnitee (but not for judgments, penalties,
fines or amounts paid in settlement) in connection with the investigation,
defense, settlement or appeal of any action described in Section 1 or 2 hereof
(including, but not limited to, the matters specified in Section 6 hereof).
SECTION 13. MISCELLANEOUS.
13.1 Notice Provision. Any notice, payment, demand or communication required or
permitted to be delivered or given by the provisions of this Agreement shall be
deemed to have been effectively delivered or given and received on the date
personally delivered to the respective party to whom it is directed, or when
deposited by registered or certified mail, with postage and charges prepaid and
addressed to the parties at the respective addresses set forth below opposite
their signatures to this Agreement, or to such other address as to which notice
is given.
13.2 Entire Agreement. Except for the Company's Articles of Incorporation, this
Agreement constitutes the entire understanding of the parties and supersedes
all prior understandings, whether written or oral, between the parties with
respect to the subject matter of this Agreement.
13.3 Severability of Provisions. If any provision of this Agreement is held to
be illegal, invalid, or unenforceable under present or future laws effective
during the term of this Agreement, such provision shall be fully severable;
this Agreement shall be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part of this Agreement; and the
remaining provisions of this Agreement shall remain in full force and effect
and shall not be affected by the illegal, invalid, or unenforceable provision
or by its severance from this Agreement. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision there shall be added automatically
as a part of this Agreement a provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible and be legal, valid, and
enforceable.
13.4 Applicable Law. This Agreement shall be governed by and construed under the
laws of the State of Florida.
13.5 Execution in Counterparts. This Agreement and any amendment may be executed
simultaneously or in two or more counterparts, each of which together shall
constitute one and the same instrument.
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<PAGE> 11
11.1 Cooperation and Intent. The Company shall cooperate in good faith with the
Indemnitee and use its best efforts to ensure that the Indemnitee is
indemnified and/or reimbursed for liabilities described herein to the fullest
extent permitted by law.
11.2 Amendment. No amendment, modification or alteration of the terms of this
Agreement shall be binding unless in writing, dated subsequent to the date of
this Agreement, and executed by the parties.
11.3 Binding Effect. The obligations of the Company to the Indemnitee hereunder
shall survive and continue as to the Indemnitee even if the Indemnitee ceases
to be a director, officer, employee and/or agent of the Company. Each and all
of the covenants, terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the successors to the Company and, upon the death
of the Indemnitee, to the benefit of the estate, heirs, executors,
administrators and personal representatives of the Indemnitee.
11.4 Gender and Number. Wherever the context shall so require, all words herein
in the male gender shall be deemed to include the female or neuter gender, all
singular words shall include the plural and all plural words shall include the
singular.
11.5 Nonexclusivity. The rights of indemnification and reimbursement provided
in this Agreement shall be in addition to any rights to which the Indemnitee
may otherwise be entitled by statute, bylaw, agreement, vote of shareholders or
otherwise.
11.6 Effective Date. The provisions of this Agreement shall cover claims,
actions, suits and proceedings whether now pending or hereafter commenced and
shall be retroactive to cover acts or omissions or alleged acts or omissions
which heretofore have taken place.
(signatures on following page)
-11-
<PAGE> 12
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
ADDRESS: THE COMPANY:
WINSLOEW FURNITURE, INC.
By:
------------------------------
ADDRESS: THE INDEMNITEE:
---------------------------------
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<PAGE> 1
Exhibit 10.2
<TABLE>
<CAPTION>
<S> <C>
Return to: (enclose self-addressed stamped envelope)
Name:
Address:
This Instrument Prepared by:
Address:
- ------------------------------------------------------------ ---------------------------------------------------------
SPACE ABOVE THIS LINE FOR PROCESSING DATA SPACE ABOVE THIS LINE FOR PROCESSING DATA
</TABLE>
BUSINESS LEASE
THIS AGREEMENT, entered into this _____________ day of
_____________________, 19__ between EMANUEL VANZO OR ASSIGNS, hereinafter called
the lessor, party of the first part, and LOWENSTEIN INC. of the County of
BROWARD and State of FLORIDA, hereinafter called the lessee or tenant, party of
the second part:
WITNESSETH, that the said lessor does this day lease unto said lessee,
and said lessee does hereby hire and take as tenant under said lessor
_____________ Space APPROXIMATELY 6448 sq.ft. OF WAREHOUSE SPACE HEREINAFTER
CALLED PREMISES LOCATED AT 1800 NORTH ANDREWS AVE., situated in POMPANO BEACH,
State of FLORIDA, to be used and occupied by the lessee as
________________________ and for no other purposes or uses whatsoever, for the
term of TWO YEARS, subject and conditioned on the provisions of clause ten of
this lease beginning the THIRD day of DECEMBER, 1993, and ending the SECOND day
of DECEMBER, 1995, at and for the agreed total rental of
________________________________________ Dollars, payable as follows:
YEAR 1 YEAR 2
BASE RENT 2,068.76 2,172.20
6% SALES TAX 124.13 130.33
TOTAL 2,192.89 2,302.53
all payments to be made to the lessor on the first day of each and
every month in advance without demand at the office of GRAVES CO., in the city
of POMPANO BEACH, FLORIDA, or at such other place and to such other person, as
the lessor may from time to time designate in writing.
The following express stipulations and conditions are made a part of
this lease and are hereby assented to by the lessee:
FIRST: The lessee shall not assign this lease, nor sub-let the
premises, or any part thereof nor use the same, or any part thereof, nor permit
the same, or any part thereof, to be used for any other purpose than as above
stipulated, nor make any alterations therein, and all additions thereto, without
the written consent of the lessor, and all additions, fixtures or improvements,
which may be made by lessee, except movable office furniture, shall become the
property of the lessor and remain upon the premises as a part thereof, and be
surrendered with the premises at the termination of this lease.
SECOND: All personal property placed or moved in the premises above
described shall be at the risk of the lessee or owner thereof, and lessor shall
not be liable for any damage to said personal property, or to the lessee arising
from the bursting or leaking of water pipes, or from any act of negligence of
any co-tenant or occupants of the building or of any other person whomsoever.
THIRD: That the tenant ______________ shall promptly execute and comply
with all statutes, ordinances, rules, orders, regulations and requirements of
the Federal, State and City Government and of any and all their Departments and
Bureaus applicable to said premises, for the correction, prevention, and
abatement of nuisances or other grievances, in, upon, or connected with said
premises during said term; and shall also promptly comply with and execute all
rules, orders and regulations of the applicable fire prevention codes for the
prevention of fires, at _____________ own cost and expense.
FOURTH: In the event the premises shall be destroyed or so damaged or
injured by fire or other casualty during the life of this agreement, whereby the
same shall be rendered untenantable, then the lessor shall have the right to
render said premises tenantable by repairs within ninety days therefrom. If said
premises are not rendered tenantable within said time, it shall be optional with
either party hereto to cancel this lease, and in the event of such cancellation
the rent shall be paid only to the date of such fire or casualty. The
cancellation herein mentioned shall be evidenced in writing.
<PAGE> 2
FIFTH: The prompt payment of the rent for said premises upon the dates
named, and the faithful observance of the rules and regulations printed upon
this lease, and which are hereby made a part of this covenant, and of such other
and further rules or regulations as may be hereafter made by he lessor, are the
conditions upon which the lease is made and accepted and any failure on the part
of the lessee to comply with the terms of said lease, or any of said rules and
regulations now in existence, or which may be hereafter prescribed by the
lessor, shall at the option of the lessor, work a forfeiture of this contract,
and all of the rights of the lessee hereunder.
SIXTH: If the lessee shall abandon or vacate said premises before the
end of the term of this lease, or shall suffer the rent to be in arrears, the
lessor may, at his option, forthwith cancel this lease or he may enter said
premises as the agent of the lessee, without being liable in any way therefor,
and relet the premises with or without any furniture that may be therein, as the
agent of the lessee, at such price and upon such terms and for such duration of
times as the lessor may determine, and receive the rent therefor, applying the
same to the payment of the rent due by these presents, and if the full rental
herein provided shall not be realized by lessor over and above the expenses to
lessor in such re-letting, the said lessee shall pay any deficiency, and if more
than the full rental is realized lessor will pay over to said lessee the excess
of demand.
SEVENTH: Lessee agrees to pay he cost of collection and ten percent
attorney's fee on any part of said rental that may be collected by suit or by
attorney, after the same is past due.
EIGHTH: The lessee agrees that he will pay all charges for rent, gas,
electricity or other illumination, and for all water used on said premises, and
should said charges for rent, light or water herein provided for at any time
remain due and unpaid for the space of five days after the same shall have
become due, the lessor may at its option consider the said lessee tenant at
sufferance and the entire rent for the rental period then next ensuing shall at
once be due and payable and may forthwith be collected by distress or otherwise.
NINTH: The said lessee hereby pledges and assigns to the lessor all the
furniture, fixtures, goods and chattels of said lessee, which shall or may be
brought or put on said premises as security for the payment of the rent herein
reserved, and the lessee agrees that the said lien may be enforced by distress
foreclosure or otherwise at the election of the said lessor, and does hereby
agree to pay attorney's fees of ten percent of the amount so collected or found
to be due, together with all costs and charges therefore incurred or paid by the
lessor.
TENTH: It is hereby agreed and understood between lessor and lessee
that in the event the lessor decides to remodel, alter or demolish all or any
part of the premises leased hereunder, or in the event of the sale or long term
lese of all or any part of the ____________________________; requiring this
space, the lessee hereby agrees to vacate same upon receipt of sixty (60) days'
written notice and the return of any advance rental paid on account of this
lease.
ELEVENTH: The lessor, or any of his agents, shall have the right to
enter said premises during all reasonable hours, to examine the same to make
such repairs, additions or alterations as may be deemed necessary for the
safety, comfort, or preservation thereof, or of said building, or to exhibit
said premises, and to put or keep upon the doors or windows thereof a notice
"FOR RENT" at any time within thirty (30) days before the expiration of this
lease. The right of entry shall likewise exist for the purpose of removing
placards, signs, fixtures, alterations, or additions, which do not conform to
this agreement or to the rules and regulations of the building.
TWELFTH: Lessee hereby accepts the premises in the condition they are
in at the beginning of this lease and agrees to maintain said premises in the
same condition, order and repair as they are at the commencement of said term,
excepting only reasonable wear and tear arising from the use thereof under this
agreement, and to make good to said lessor immediately upon demand, any damage
to water apparatus, or electric lights or any fixture, appliances or
appurtenances of said premises, or of the building, caused by any act or neglect
of lessee, or of any person or persons in the employ or under the control of the
lessee.
THIRTEENTH: It is expressly agreed and understood by and between the
parties to this agreement, that the landlord shall not be liable for any damage
or injury by water, which may be sustained by the said tenant or other person or
for any other damage or injury resulting from the carelessness, negligence, or
improper conduct on the part of any other tenant or agents, or employees, or by
reason of the breakage, leakage, or obstruction of the water, sewer or soil
pipes, or other leakage in or about the said building.
FOURTEENTH: If the lessee shall become insolvent or if bankruptcy
proceedings shall begun by or against the lessee, before the end of said term
the lessor is hereby irrevocably authorized at its option, to forthwith cancel
this lease, as for a default. Lessor may elect to accept rent from such
receiver, trustee, or other judicial officer during the term of their occupancy
in their fiduciary capacity without affecting lessor's rights as contained in
this contract, but no receiver, trustee or other judicial officer shall ever
have any right, title or interest in or to the above described property by
virtue of this contract.
FIFTEENTH: Lessee hereby waives and renounces for himself and family
any and all homestead and exemption rights he may have now, or hereafter, under
or by virtue of the constitution and laws of this State, or of any other State,
or of the United States, against the payment of said rental or any portion
hereof, or any other obligation or damage that may accrue under the terms of
this agreement.
SIXTEENTH: This contract shall bind the lessor and its assigns or
successors, and the heirs, assigns, personal representatives, or successors as
the case may be, of the lessee.
2
<PAGE> 3
SEVENTEENTH: It is understood and agreed between the parties hereto
that time is of the essence of this contract and this applies to all terms and
conditions contained herein.
EIGHTEENTH: It is understood and agreed between the parties hereto that
written notice mailed or delivered to the premises leased hereunder shall
constitute sufficient notice to the lessee and written notice mailed or
delivered to the office of the lessor shall constitute sufficient notice to the
lessor, to comply with the terms of this contract.
NINETEENTH: The rights of the lessor under the foregoing shall be
cumulative, and failure on the part of the lessor to exercise promptly any
rights give hereunder shall not operate to forfeit any of the said rights.
TWENTIETH: It is further understood and agreed between the parties
hereto that any charges against the lessee by he lessor for services or for work
done on the premises by order of the lessee or otherwise accruing under this
contract shall be considered as rent due and shall be included in any lien for
rent due and unpaid.
TWENTY-FIRST: It is hereby understood and agreed that any signs or
advertising to be used, including awnings, in connection with the premises
leased hereunder shall be first submitted to the lessor for approval before
installation of same.
TWENTY-SECOND: RADON GAS NOTIFICATION (the following notification may
be required in some states): Radon is a naturally occurring radioactive gas
that, when it has accumulated in a building in sufficient quantities, may
present health risks to persons who are exposed to it over time. Levels of radon
that exceed federal and state guidelines have been found in buildings.
Additional information regarding radon and radon testing may be obtained from
your county public health unit.
IN WITNESS HEREOF, the parties hereto have executed this instrument for
the purpose herein expressed, the day and year above written.
Signed, sealed and delivered in the presence of:
/s/ Alan E. Campbell /s/ Emanuel Vanzo
- -------------------------------- --------------------------------------------
Witness Signature (as to Lessor) Lessor Signature
Alan E. Campbell Emanuel Vanzo
- -------------------------------- --------------------------------------------
Printed Name Printed Name
/s/ Viva Silbert 1800 North Andrews Avenue Pompano Beach, FL
- -------------------------------- --------------------------------------------
Witness Signature (as to Lessor) Post Office Address
Viva Silbert
- --------------------------------
Printed Name
/s/ Alan E. Campbell /s/ George W. Campagna C.F.O.
- -------------------------------- --------------------------------------------
Witness Signature (as to Lessee) Lessee Signature
Alan E. Campbell George W. Campagna - Lowenstein, Inc.
- -------------------------------- --------------------------------------------
Printed Name Printed Name
1801 North Andrews Ave. Ext.
/s/ Cherie I. Lipham Pompano Beach, FL
- -------------------------------- --------------------------------------------
Witness Signature (as to Lessee) Post Office Address
Cherie I. Lipham
- --------------------------------
Printed Name
3
<PAGE> 4
STATE OF
COUNTY OF
I HEREBY CERTIFY that on this day, before me, an officer duly
authorized in the State aforesaid and in the County aforesaid to take
acknowledgments, personally appeared EMANUEL VANZO AND GEORGE CAMPAGNA to me
know to be the person__ described in and who executed the foregoing instrument
and they acknowledged before me that they executed same.
WITNESS my hand and official seal in the County and State last
aforesaid this 18th day of November, A.D. 1993.
Loren E. Arnoff
--------------------------------------
Notary Signature
SEAL
Loren E. Arnoff
--------------------------------------
Printed Notary Signature
My Commission Expires:
4
<PAGE> 1
EXHIBIT 10.3
LEASE AGREEMENT
STATE OF TEXAS
COUNTY OF HARRIS
This Lease Agreement, made and entered into by and between Teachers Insurance
and Annuity Association, a New York Corporation, hereinafter referred to as
"Landlord" and Winston Furniture Company of Alabama, Inc., an Alabama
Corporation, its successors, and assigns, hereinafter referred to as "Tenant",
WITNESSETH:
1. Premises and Term: In consideration of the obligation of Tenant to pay rent
as herein provided, and in consideration of other terms, provisions and
covenants hereof, Landlord hereby demises and leases to Tenant, and Tenant
hereby takes from Landlord certain premises situated within the County of
Harris, State of Texas, more particularly described as follows:
The 89,494 square foot portion, more particularly described on Exhibit A out of
the 89,494 square foot building known 601 West 6th Street, situated on that
certain 174,433 square feet of land out of a 278,537 square foot track of land
out of Blocks 271 and 272 and Abandoned Ashland Street out of Houston Heights
Addition according to the plat thereof filed at Volume 64, Page 1, Deed Records
of Harris County, Texas and being more particularly described as 601 W. 6th
Street, Houston, TX 77007.
Together with all rights, privileges, easements, appurtenances and immunities
belonging to or in any way pertaining to the said premises and together with the
buildings and other improvements erected upon said premises (the said real
property and the buildings and improvements thereon being hereinafter referred
to as the "premises").
To have and to hold the same for a term commencing on DECEMBER 15, 1999 and
ending ONE HUNDRED TWENTY-FOUR (124) months thereafter. Tenant acknowledges that
it has inspected and accepts the premises, and specifically the buildings and
improvements comprising the same, in their present condition as suitable for the
purpose for which the premises are leased, provided all improvements outlined in
Exhibit B and detailed construction drawings are completed by Landlord. Taking
of possession by Tenant shall be deemed conclusively to establish that said
buildings and other improvements are in good and satisfactory condition as of
when possession was taken. Tenant further acknowledges that no representations
as to the repair of the premises, nor promises to alter, remodel or improve the
premises have been made by Landlord, unless such are expressly set forth in this
Lease. If this Lease is executed before the premises become vacant or otherwise
available and ready for occupancy, or if any present tenant or occupant of the
premises holds over, and Landlord cannot acquire possession of the premises
prior to the date above recited as the commencement date of this Lease, Landlord
shall not be deemed to be in default hereunder, and Tenant agrees to accept
possession of the premises at such time as Landlord is able to tender the same,
which date
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shall thenceforth be deemed the "commencement date", and Landlord hereby waives
payment of rent covering any period prior to the tendering of possession to
Tenant hereunder. After the commencement date Tenant shall, upon demand, execute
and deliver to Landlord a letter of acceptance of delivery of the premises.
Interior improvements, with the exception of the "shop" restrooms and any
interior concrete work, as reflected in architectural drawings to be submitted
to the City of Houston shall be completed by December 18, 1995. In the event
such improvements are not substantially completed by such date, Landlord shall
pay to Tenant $500.00 per day as damages. The "shop" restrooms, interior
concrete work and all exterior work should be completed no later than January
15, 1996. Landlord shall provide a temporary restroom facility for the "shop"
employees during the period that such permanent "shop" restrooms are under
construction.
2. Base Rent and Security Deposit.
a) Tenant agrees to pay to Landlord rent for the premises in advance, without
demand, deduction or set off, for the entire term hereof at the rate of See
Addendum One, Item 1 Dollars ($ -- ) per month. One such monthly
installment shall be due and payable on the date hereof and a like monthly
installment shall be due and payable on or before the first day of each
calendar month succeeding the Commencement Date recited above during the
hereby demised term, except that the rental payment for any fractional
calendar month at the commencement or end of the lease period shall be
prorated.
b) Intentionally deleted.
3. Use. The demised premises shall be used only for the purpose of receiving,
storing, manufacturing, shipping and selling (other than retail; semi-annual
public sales excepted) products, materials and merchandise made and or
distributed by Tenant and for such other lawful purposes and may be
incidental thereto. Tenant shall at its own cost and expense obtain any and
all licenses and permits necessary for any such use. Tenant shall comply
with all governmental laws, ordinances and regulations applicable to the use
of the premises, and shall promptly comply with all governmental orders and
directives for the correction, prevention and abatement or nuisances in or
upon, or connected with, the premises, all at Tenant's sole expense. Tenant
shall not permit any objectionable or unpleasant odors, smoke, dust, gas,
noise or vibrations to emanate from the premises, in violation of any
permits or laws. Without Landlord's prior written consent, Tenant shall not
receive, store or otherwise handle any products, material or merchandise
which is explosive or highly inflammable. Tenant will not permit the
premises to be used for any purpose or in any manner (including without
limitation any method of storage) which would render the insurance thereon
void or the insurance risk more hazardous or cause of State
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Board of Insurance or other insurance authority to disallow any sprinkler
credits.
4. Taxes.
a) Landlord agrees to pay before they become delinquent all taxes, assessments
and governmental charges of any kind and nature whatsoever hereinafter
collectively referred to as "taxes") lawfully levied or assessed against the
building and the grounds, parking areas, driveways and alleys around the
building; provided, however that the maximum amount of taxes to be paid by
Landlord hereunder during any one real estate tax year shall be SEE ADDENDUM
ONE, ITEM 2.
b) Intentionally deleted.
c) If at any time during the term of this Lease, the present method of taxation
shall be changed so that in lieu of the whole or any part of any taxes,
assessments or govenmental charges levied, assessed or imposed on real
estate and the improvements thereon, there shall be levied, assessed or
imposed on Landlord a capital levy or other tax directly on the rents
received therefrom and/or a franchise tax, assessment, levy or charge
measured by or based, in whole or in part, upon such rents for the present
or any future building or buildings on the premises, then all such taxes,
assessments, levies or charges, or the part thereof so measured or based, in
whole or in part, upon such rents for the present or any future building or
buildings on the premises, then all such taxes, assessments, levies or
charges, or the part thereof so measured or based, shall be deemed to be
included within the term "taxes" for the purposes hereof.
d) The Landlord shall have the right to employ a tax consulting firm to attempt
to assure a fair tax burden on the building and grounds within the
applicable taxing jurisdiction. Tenant shall pay to Landlord upon demand
from time to time, as additional rent, the amount of Tenant's "proportionate
share" (as defined in subparagraph 49b) above) of the cost of such service.
e) Any payment to be made pursuant to this Paragraph 4 with respect to the real
estate tax year in which this Lease commences or terminates shall be
prorated.
5. Landlord's Repairs. Landlord shall at this expense maintain only the roof,
foundation and the structural soundness of the exterior walls of the
building in good repair, reasonable wear and tear excepted. Tenant shall
repair and pay for any damage caused by Tenant, or Tenant's employees,
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agents or invitees, or caused by Tenant's default hereunder. The term
"walls" as used herein shall not include windows, glass or plate glass,
doors, special store fronts or office entries. Tenant shall immediately give
Landlord written notice of defect or need for repairs, after which Landlord
shall have reasonable opportunity to repair same or cure such defect.
Landlord's liability with respect to any defects, repairs or maintenance for
which Landlord is responsible under any of the provisions of this lease
shall be limited to the cost of such repairs or maintenance or the curing of
such defect.
6. Tenant's Repairs
a) Tenant shall at its own cost and expense keep and maintain all parts of the
premises (except those for which landlord is expressly responsible under the
terms of this Lease) in good condition, promptly making all necessary
repairs and replacements, including but not limited to, windows, glass and
plate glass, doors, any special office entry, interior walls and finish
work, floors and floor covering, downspout, gutters, heating and air
conditioning systems, dock boards, truck doors, dock bumpers, paving,
plumbing work and fixtures, termite and pest extermination, regular removal
of trash and debris, regular mowing of any grass, trimming, weed removal and
general landscape maintenance, keeping the parking areas, driveways, alleys
and the whole of the premises in a clean and sanitary condition. Tenant
shall not be obligated to repair any damages caused by fire, tornado or
other casualty covered by the insurance to be maintained by Landlord
pursuant to subparagraph 12(a) below, except that Tenant shall be obligated
to repair all wind damage to glass except with respect to tornado or
hurricane damage.
b) Tenant shall not damage any demising wall or disturb the integrity and
support provided by any demising wall or shall, at its sole cost and
expense, promptly repair any damage or injury to any demising wall caused by
Tenant or its employees, agents or invitees.
c) Tenant and its employees, customers and licensees shall have the exclusive
right to use the parking areas. Landlord shall not be responsible for
enforcing Tenant's exclusive parking rights against any third parties.
Further, Landlord shall perform the paving and landscape maintenance,
exterior painting and common sewage line plumbing which are otherwise
Tenant's obligations under subparagraph (a) above, and Tenant shall, in lieu
of the obligations set forth under subparagraph 9a) above with respect to
such items, be liable for the cost and expense over and above the base year
expense stop outlined in Addendum One, Item 2 herein, of the care of the
grounds around the building, including but not limited to, the mowing of
grass, care of shrubs, general landscaping, maintenance of parking areas,
driveways and alleys, exterior repainting and common sewage line plumbing.
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d) Intentionally deleted.
e) Tenant shall, at its own cost and expense service all hot water, heating and
air conditioning systems and equipment within the premises and keep same in
good working condition.
7. Alterations. Tenant shall not make any alterations, additions or
improvements to the premises (including but not limited to roof and wall
penetrations) without the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed. Tenant may, without the
consent of Landlord, but at its own cost and expense and in a good
workmanlike manner erect such shelves, bins, machinery, and trade fixtures
as it may deem advisable, without altering the basic character of the
building or improvements and without overloading or damaging such building
or improvements, and in each case complying with all applicable governmental
laws, ordinances, regulations and other requirements. All alterations,
additions, improvements and partitions erected by Tenant shall be and remain
the property of Tenant during the term of this Lease and Tenant shall,
unless Landlord otherwise elects as hereinafter provided, remove all
alterations, additions, improvements and partitions erected by Tenant and
restore the premises to their original condition by the date of termination
of this Lease or upon earlier vacating of the premises; provided, however,
that if Landlord so elects prior to termination of this lease or upon
earlier vacating of the premises, such alterations, additions, improvements
and partitions shall become of property of Landlord as of the date of
termination of this Lease or upon earlier vacating of the premises and shall
be delivered up to the Landlord with premises. All shelves, bins, machinery
and trade fixtures, installed by Tenant may be removed by Tenant prior to
the termination of this Lease if Tenant so elects, and shall be removed by
the date of termination of this Lease or upon earlier vacating of the
premises if required by Landlord; upon any such removal Tenant shall restore
the premises to their original condition. All such removals and restoration
shall be accomplished in a good workmanlike manner so as not to damage the
primary structure or structural qualities of the buildings and other
improvements situated on the premises.
8. Signs. Tenant shall have the right to install signs upon the premises only
when first approved in writing by Landlord, which approval shall not be
unreasonably withheld or delayed, and subject to any applicable governmental
laws, ordinances, regulations, Landlord's architectural controls, and other
requirements. Tenant shall remove all such signs by the termination of this
Lease. Such installations and removals shall be made in such manner as to
avoid injury or defacement of the building and other improvements, and
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Tenant shall repair any injury or defacement, including without limitation
discoloration, caused by such installation and/or removal. Landlord hereby
acknowledges that monument signage, building signage and flag poles may be
installed on the building and property.
9. Inspection. Landlord and Landlord's agents and representatives shall have
the right to enter and inspect the premises at any reasonable time during
business hours, for the purpose of ascertaining the condition of the
premises or in order to make such repairs as may be required or permitted to
be made by Landlord under the terms of this Lease with twenty-four (24)
hours notice except in the case of emergencies. During the period that is
three (3) months prior to the end of the term hereof, Landlord and
Landlord's agents and representatives shall have the right to enter the
premises at any reasonable time during business hours for the purpose of
showing the promises and shall have the right to erect on the premises a
suitable sign indicating the premises are available. Tenant shall give
written notice to Landlord at least thirty (30) days prior to vacating the
premises and shall arrange to meet with Landlord for a joint inspection of
the premises prior to vacating. In the event of Tenant's failure to give
such notice or arrange such joint inspection, Landlord's inspection at or
after Tenant's vacating the premises shall be conclusively deemed correct
for purposes of determining Tenant's responsibility for repairs and
restoration.
10. Utilities. Landlord agrees to provide at its cost water, electricity, gas
and telephone service connections into the premises and all initial light
bulbs, tubes and ballasts; but Tenant shall pay for all water, gas heat,
light, power, telephone, sewer, sprinkler charges and other utilities and
services used on or from the premises, together with any taxes, penalties,
surcharges or the like pertaining thereto and any maintenance charges for
utilities and shall furnish all electric light bulbs and tubes after the
commencement date. Landlord shall in no event be liable for any interruption
or failure of utility service on the premises, unless caused by Landlord's
negligence.
11. Assignment and Subletting. Tenant will not assign this Lease, or allow same
to be assigned by operation of law or otherwise, or sublet the demised
premises or any part thereof without the prior written consent of Landlord.
Notwithstanding are permitted assignment or subletting, Tenant shall at all
times remain directly, primarily and fully responsible and liable for the
payment of the rent herein specified and for compliance with all of its
other obligations under the terms, provisions and covenants of this Lease.
Upon the occurrence of an "event of default" as hereinafter defined, if the
premises or any part thereof are then assigned or sublet, Landlord, in
addition to any other remedies herein provided or provided by law, may at
its option collect directly from such assignee or subtenant all rents
becoming due to Tenant under such assignment or
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sublease and apply such rent against any sums due to Landlord from Tenant
hereunder, and no such collection shall be construed to constitute a
novation or a release of Tenant from the further performance of Tenant's
obligations hereunder.
If Tenant shall propose to sublet or assign this Lease, it shall so notify
Landlord in writing not less than fifteen (15) days prior to the date of the
proposed assignment or subletting, such notice setting forth the name of the
proposed subtenant or assignee, the term, use, rental rate and other
particulars of the proposed subletting or assignment, including without
limitation, proof satisfactory to Landlord that the proposed subtenant or
assignee is financially responsible and will immediately occupy and
thereafter use the entire premises (or any sublet portion thereof) for the
remaining term of this Lease (or for the entire term of the sublease, if
shorter).
Except for the approximately 19,000 square feet outlined on Exhibit B
attached hereto, which Tenant has the right to sublease, Landlord shall have
the option, in the event of any proposed assignment or subletting, to cancel
this Lease as of the date of subletting or assignment described in Tenant's
notice is to be effective. The option shall be exercised, if at all, by
Landlord's giving Tenant written notice thereof within twenty (20) days
following Landlord's receipt of Tenant's written request. Upon any such
cancellation Tenant shall pay to Landlord all costs or charges which are the
responsibility of Tenant hereunder, and Tenant shall, at Tenant's own cost
and expense, discharge in full any outstanding commission obligation on the
part of Landlord with respect to this Lease. Further, upon any such
cancellation Landlord and Tenant shall have no further obligations or
liabilities to each other under this Lease, except with respect to
obligations or liabilities which accrue hereunder, as of such cancellation
date in the same manner as if such cancellation date were the date
originally fixed for the expiration of the term hereof. Without limitation,
Landlord may Lease the premises to the prospective subtenant or assignee,
without liability to the Tenant. Landlord's failure to exercise any right
hereunder shall not waive Landlord's right as to any subsequent proposed
sublease or assignment, nor shall any such failure be deemed to constitute
Landlord's approval of the proposed sublease or assignment.
Landlord agrees to approve any assignment by Tenant to any corporation
succeeding to substantially all the business and assets of Tenant by merger,
consolidation, purchase of assets or otherwise, or to any assignment or
subletting to a corporation which is an affiliate of Tenant. In other cases,
Landlord agrees not to unreasonably withhold approval of any proposed
subletting or assignment as to which Landlord declines its rights to
cancellation hereunder provided such proposed transaction is consummated
within thirty (30) days after Landlord's refusal or failure to so
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recapture, and upon the same terms and conditions disclosed to Landlord in
Tenant's notice, and with another financially responsible party whose use of
the demised premises will not depreciate the value of the premises, or the
value of the property adjacent thereto, or will not be extra hazardous with
reference to the risk of fire or other hazards. Any assignment or subletting
without Landlord's approval, where required hereunder, shall be void and of
no effect.
Tenant shall have the right to sublease up to 19,000 square feet contained
within the leased premises without obtaining prior written consent from
Landlord, provided Tenant continues to be the primary occupant of the
building and fully responsible for all obligations hereunder.
Landlord shall have the right to transfer and assign, in whole or in part,
any of its rights under this lease, and in the Building and property
referred to herein; and to the extent that such assignee assumes Landlord's
obligations hereunder, Landlord shall by virtue of such assignment be
released from such obligations.
12. Fire and Casualty Damage.
a) Landlord agrees to maintain standard fire and extended coverage insurance
covering the building of which the premises are a part in an amount not less
than 80% (or such greater percentage as may be necessary to comply with the
provisions of any co-insurance clauses of the policy) of the "replacement
cost" thereof as such term is defined in the Replacement Cost Endorsement to
be attached thereto, insuring against the perils of Fire, Lighting and
Extended Coverage, such coverages and endorsements to be as defined,
provided and limited in the standard bureau forms prescribed by the
insurance regulatory authority for the State in which the premises are
situated for use by insurance companies admitted in such state for the
writing of such insurance on risks located within such state. Subject to the
provisions of subparagraphs 12(c), 12(d) and 12(e) below, such insurance
shall be for the sole benefit of Landlord and under its sole control. Any
payment to be made pursuant to this subparagraph (a) with respect to the
year in which this Lease commences or terminates shall bear the same ratio
to the payment which would be required to be made for the full year as the
part of such year covered by the term of this Lease bears to a full year.
b) If the buildings situated upon the premises should be damaged or destroyed
by fire, tornado or other casualty, Tenant shall give immediate written
notice thereof to Landlord.
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c) If the building situated upon the premises should be totally destroyed by
fire, tornado or other casualty, or if they should be so damaged, thereby
that rebuilding or repairs cannot in Landlord's estimation be completed
within one hundred twenty (120) days after the date upon which Landlord is
notified by Tenant of such damage, this Lease shall terminate and the rent
shall be abated during the unexpired portion of this Lease, effective upon
the date of the occurrence of such damage.
d) If the building situated upon the premises should be damaged by any peril
covered by the insurance to be provided by Landlord under subparagraph 12(a)
above, but only to such extent that rebuilding or repairs can in Landlord's
estimation be completed within one hundred twenty (120) days after the date
upon which Landlord is notified by Tenant of such damage, this Lease shall
not terminate, and Landlord shall at its sole cost and expense thereupon
proceed with reasonable diligence to rebuild and repair such buildings to
substantially the condition in which they existed prior to such damage,
except that Landlord shall not be required to rebuild, repair or place any
part of the partitions, fixtures, additions and other improvements which may
have been placed in, on or about the premises by Tenant. If the premises are
untenantable in whole or in part following such damage, the rent payable
hereunder during the period in which they are untenantable shall be reduced
to such extent as may be fair and reasonable under all of the circumstances.
In the event that Landlord shall fail to complete such repairs and
rebuilding within one hundred twenty (120) days after the date upon which
Landlord is notified by Tenant of such damage, Tenant may at its option
terminate this Lease by delivering written notice of termination to Landlord
as Tenant's exclusively remedy, whereupon all rights and obligations
hereunder shall cease and terminate.
e) Intentionally deleted.
f) Each of Landlord and Tenant hereby releases the other from any loss or
damage to property caused by fire or any other perils insured through or
under them by way of subrogation or otherwise for any loss or damage to
property caused by fire or any other perils insured in policies of insurance
covering such property, even if such loss or damage shall have been caused
by the default or negligence of the other party, or anyone for whom such
party may be responsible; provided, however, that this release shall be
applicable and in force and effect only with respect to loss or damage
occurring during such times as the releasor's policies or prejudice the
right of the releasor to recover thereunder and then only to the extent of
the insurance proceeds payable under such policies. Each of the Landlord and
Tenant agrees that it will request its insurance carriers to include in its
policies such a clause or endorsement. If
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extra cost shall be charged therefor, each party shall advise the other
thereof and of the amount of the extra cost, and the other party, at its
election, may pay the same, but shall not be obligated to do so.
13. Liability. Landlord shall not be liable to Tenant or Tenant's employees,
agents, patrons or visitors, or to any other person whomsoever, for any
injury to person or damage to property on or about the premises, resulting
from and/or caused in part or whole by the negligence or misconduct of
Tenant, its agents, servants or employees, or of any other person entering
upon the premises, or caused by the buldings and improvements located on the
premises becoming out of repair, or caused by leakage of gas, oil, water or
steam or by electricity emanating from the premises, or due to any cause
whatsoever, and Tenant hereby covenants and agrees that it will at all times
indemnify and hold safe and harmless the property, the Landlord (including
without limitation the trustee and beneficiaries if Landlord is a trust),
Landlord's agents and employees from any loss, liability, claims, suits,
costs, expenses, including without limitation attorney's fees and damages,
both real and alleged, arising out of any such damage or injury; except
injury to persons or damage to property the sole cause of which is the
negligence of Landlord or the failure of Landlord to repair any part of the
premises which Landlord is obligated to repair and maintain hereunder within
a reasonable time after the receipt of written notice from Tenant of needed
repairs. Tenant shall procure and maintain throughout the term of this Lease
a policy or policies of liability insurance, as its sole cost and expense,
insuring both Landlord and Tenant against all claims, demands or actions
arising out of or in connection with: (i) the premises; (ii) the condition
of the premises; (iii) Tenant's operations in and maintenance and use of the
premises; and (iv) Tenant's liability assumed under this Lease, the limits
of such policy or policies to be in the amount of not less than $1,000,000
per occurrence in respect of injury (including death), and in the amount of
not less than $500,000 per occurrence in respect of property damage or
destruction, including loss of use thereof. All such policies shall be
procured by Tenant from responsible insurance companies satisfactory to
Landlord. Certified copies of such policies, together with receipt
evidencing payment of premium therefor, shall be delivered to Landlord prior
to the commencement date of this Lease. Not less than fifteen (15) days
prior to the expiration date of such policies certified copies of the
renewals thereof (bearing notations evidencing the payment of renewal
premiums therefor, shall be delivered to Landlord. Shall policies shall
further provide that not less than thirty (30) days written notice shall be
given to Landlord before such policy may be canceled or changed to reduce
insurance provided thereby.
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14. Condemnation
a) If the whole or any substantial part of the premises should be taken for any
public of quasi-public use under governmental law, ordinance or regulation
or by right of eminent domain, and the taking would prevent or materially
interfere with the use of the premises for the purpose for which they are
being used, this Lease shall terminate and the rent shall be abated during
the unexpired portion of this Lease, effective when the physical taking the
said premises shall occur.
b) If part of the premises shall be taken for any public or quasi-public use
under any governmental law, ordinance or regulation, or by right of eminent
domain, and this Lease is not terminated as provided in the subparagraph
above, this Lease shall not terminate but the rent payable hereunder during
the unexpired portion of this Lease shall be reduced to such extent as may
be fair and reasonable under all of the circumstances.
c) In the event of any such taking, Landlord and Tenant shall each be entitled
to receive and retain such separate awards and/or portion of Lump Sum awards
as may be allocated to their respective interests and any condemnation
proceedings.
15. Holding Over. Tenant will at the termination of this Lease by lapse of time
or otherwise, yield up immediate possession to Landlord. If Landlord agrees
in writing that Tenant may hold over after the expiration or termination of
this Lease, unless the parties hereto otherwise agree in writing on the
terms of such holding over, the hold over tenancy shall be subject to
termination by Landlord at any time upon not less than thirty (30) days
advance written notice, or by Tenant at any time upon not less than thirty
(30) days advance written notice, and all of the other terms and provisions
of this Lease shall be applicable during that period, except that Tenant
shall pay Landlord from time to time upon demand, as rental for the period
of any hold over, an amount equal to one and one-half (1-1/2) the rent in
effect on the termination date, computed on a daily basis for each day of
the hold over period. No holding over by Tenant, whether with or without
consent of Landlord shall operate to extend this Lease except as otherwise
expressly provided. The preceding provisions of this paragraph 15 shall not
be construed as Landlord's consent for Tenant to hold over.
16. Quiet Enjoyment. Landlord covenants that it now has, or will acquire before
Tenant takes possession of the premises, good title to the premises, free
and clear of all liens and encumbrances, excepting only the lien for current
taxes not yet due, such mortgage or mortgages as are permitted by the terms
of this Lease, zoning ordinances and other building and fire ordinances and
governmental regulations relating to
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the use of such property, and easements, restrictions and other conditions
of record. In the event this Lease is a sublease, then Tenant agrees to take
the premises subject to the provisions of the prior leases. Landlord
represents and warrants that it has full right and authority to enter into
this lease and that Tenant, upon paying the rental herein set forth and
performing its other covenants and agreements herein set forth, shall
peaceably and quietly have, hold and enjoy the premises for the term hereof
without hindrance or molestation from Landlord, subject to the terms and
provisions of this Lease.
17. Events of Default. The following shall be deemed to be events of default by
Tenant under this Lease:
a) Tenant shall fail to pay any installment of the rent herein reserved when
due, or any payment with respect to taxes hereunder when due, or any other
payment or reimbursement to Landlord required herein when, due, and such
failure shall continue for a period of five (4) days from receipt of notice
that such payment was past due.
b) Tenant shall become insolvent or shall make a transfer in fraud of creditor,
or shall make an assignment for the benefit of creditors.
c) Tenant shall file a petition under any section of the National Bankruptcy
Act, as amended, or under any similar law or statute of the United States or
any State thereof; or Tenant shall be adjudged bankrupt or insolvent in
proceedings filed against Tenant thereunder.
d) A receiver or trustee shall be appointed for all or substantially all of the
assets of Tenant.
e) Tenant shall desert or vacate any substantial portion of the premises and
discontinue payment of rent.
f) Tenant shall fail to comply with any term, provision or covenant of this
Lease (other than the foregoing in this Paragraph 17)j, and shall not cure
such failure within thirty (30) days after written notice thereof to Tenant.
18. Remedies. Upon the occurrence of any such events of default described in
Paragraph 17 hereof, Landlord shall have the option to pursue any or more of
the following remedies without any notice or demand whatsoever:
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a) Terminate this Lease, in which event Tenant shall immediately surrender the
premises to Landlord, and if Tenant fails so to do, Landlord may, without
prejudice to any other remedy which it may have for possession or arrearages
in rent, enter upon and take possession of the premises and expel or remove
Tenant and any other person who may be occupying such premises or any part
thereof; and Tenant agrees to pay to Landlord on demand the amount of all
loss and damage which Landlord may suffer by reason of such termination,
whether through inability to relet the premises on satisfactory terms or
otherwise.
b) Enter upon and take possession of the premises and expel ore remove Tenant
and any other person who may be occupying such premises or any part thereof,
and relet the premises and receive the rent therefor; and Tenant agrees to
pay to the Landlord on demand any deficiency that may arise by reason of
such reletting. In the event Landlord is successful in reletting the
premises at a rental in excess of that agreed to be paid by Tenant pursuant
to the terms of this Lease, Landlord and Tenant each mutually agree that
Tenant shall not be entitled, under any circumstances, to such excess
rental, and Tenant does hereby specifically waive any claim to such excess
rental.
c) Enter upon the premises, and do whatever Tenant is obligated to do under the
terms of this Lease; and Tenant agrees to reimburse Landlord on demand for
any expenses which Landlord may incur in thus effecting compliance with
Tenant's obligations under this Lease, and Tenant further agrees that
Landlord shall not be liable for any damages resulting to the Tenant from
such action, unless caused by the negligence of Landlord.
In the event Tenant fails to pay any installment of rent or any
reimbursement, additional rental, or any other payment hereunder as and when
such payment is due, to help defray the additional cost to Landlord for
processing such late payments Tenant shall pay to Landlord on demand a late
charge in an amount equal to five percent (5%) of such installment,
reimbursement, additional rental or any other payment and the failure to pay
such late charges within ten (10) days after written demand therefor shall
be an event of default hereunder. The provision for such late charge shall
be in addition to all of Landlord's other rights and remedies hereunder or
at law and shall not be construed as liquidated damages or as limiting
Landlord's remedies in any manner.
Pursuit of any of the foregoing remedies shall not preclude pursuit of any
of the other remedies herein provided or any other remedies provided by law,
nor shall pursuit of any remedy herein provided constitute a forfeiture or
waiver of
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<PAGE> 14
any rent due to Landlord hereunder or of any damages accruing to Landlord by
reason of the violation of any of the terms, provisions and covenants herein
contained. No act or thing done by the Landlord or its agents during the
term hereby granted shall be deemed a termination of this Lease or any
acceptance of the surrender of the premises, and no agreement to terminate
this Lease or accept a surrender of said premises shall be valid unless in
writing signed by Landlord of any violation or breach of any of the terms,
provisions and covenants herein contained shall be deemed or construed to
constitute a waiver of any other violation or breach of any of the terms,
provisions and covenants herein contained. Landlord's acceptance of the
payment of rental or other payment hereunder after the occurrence of an
event of default shall not be construed as a waiver of such default, unless
Landlord so notifies Tenant in writing. Forbearance by Landlord to enforce
one or more of the remedies herein provided upon an event of default shall
not be deemed or construed to constitute a waiver of such default or of
Landlord's right to enforce any such remedies with respect to such default
or any subsequent default. If, on account of any breach or default by Tenant
in Tenant's obligation under the terms and conditions of this Lease, it
shall become necessary or appropriate for Landlord to employ or consult with
an attorney concerning or to enforce or defend any of Landlord's rights or
remedies hereunder, Tenant agrees to pay any reasonable attorney's fees so
incurred.
19. Intentionally deleted.
20. Subordination. This Lease and all rights of Tenant hereunder are subject and
subordinate (1) to any mortgage or deed of trust, blanket or otherwise,
which does not or may hereafter affect the building (and which may also
affect other properties) and (ii) to any and all increases, renewals,
modifications, consolidations, replacements and extensions of any such
mortgage or deed of trust. This provision is hereby declared by Landlord and
Tenant to be self-operative and no further instruments shall be required to
effect such subordination of this Lease. Tenant shall, however, within
fifteen (15) days after written receipt, execute, acknowledge and deliver to
Landlord any and all reasonable instruments and certificates that may be
necessary or proper to more effectively subordinate this Lease and all
rights of Tenant hereunder to any such mortgage or deed of trust or to
confirm or evidence such subordination. In the event Tenant shall fail or
neglect to execute, acknowledge and deliver any such subordination agreement
or certificate, Landlord in addition to any other remedies it may have, may,
as the agent and attorney in fact of Tenant, execute acknowledge and deliver
the same and Tenant hereby irrevocably nominates, constitutes and appoints
Landlord Tenant's proper and legal agent and attorney in fact for such
purposes. Such power of attorney shall not terminate on disability of the
principal. Tenant covenants and agrees, in the event any proceedings are
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<PAGE> 15
brought for the foreclosure of any such mortgage or if the Building be sold
pursuant to any such deed or trust, to attorn to the purchaser, upon any
such foreclosure sales or trustee's sale if so requested by such purchaser
and to recognize such purchase as the landlord under this Lease. Tenant
agrees to execute and deliver upon the request of Landlord or of any
holder(s) of any of the indebtedness or other obligations secured by any of
the mortgages or deeds of trusts referred to in this paragraph, within
fifteen (15) days after written receipt, any reasonable instruments or
certificates which, in the sole judgment of the Landlord or of such
holder(s), may be necessary or appropriate in any such foreclosure
proceeding or otherwise to evidence such attornment.
21. Landlord's Default. In the event Landlord should become in default in any
payments due on any such mortgage described in Paragraph 20 hereof or in the
payment of taxes or any other items which might become a lien upon the
premises and which Tenant is not obligated to pay under the terms and
provisions of this Lease, Tenant is authorized and empowered after giving
Landlord five (5) days prior written notice of such default and Landlord's
failure to cure such default, to pay any such items for and on behalf of
Landlord, and the amount of any item so paid by Tenant for or on behalf of
Landlord, together with any interest or penalty required to be paid in
connection therewith, shall be payable on demand by Landlord to Tenant;
provided, however, that Tenant shall not be authorized and empowered to make
any payment under the terms of this Paragraph 21 unless the item paid shall
be superior to Tenant's interest hereunder. In the event Tenant pays any
mortgage debt in full, in accordance with this paragraph, it shall, at its
election, be entitled to the mortgage security by assignment or subrogation.
22. Mechanic's Lien. Tenant shall have no authority, express or implied to
create or place any lien or encumbrance of any kind or nature whatsoever
upon, or in any manner to bind, the interest of Landlord in the premises or
to charge the rentals payable hereunder for any claim in favor of any person
dealing with Tenant, including those who may furnish materials or perform
labor for any construction or repairs, and each such claim shall effect and
each such lien shall attach to, if at all, only the leasehold interest
granted to Tenant by this instrument. Tenant covenants and agrees that it
will pay or cause to be paid all sums legally due and payable by it on
account of any labor performed or materials furnished in connection with any
work performed on the premises on which any lien is or can be validly and
legally asserted against its leasehold interest in the premises or the
improvements thereon and that it will save and hold Landlord harmless from
any and all loss, cost or expense based on or arising out of asserted claims
or liens against the leasehold estate or against the right, title and
interest of the Landlord in the premises or under the terms of this Lease.
Tenant has no responsibility for any liens caused by work, improvements or
repairs caused by Landlord.
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<PAGE> 16
23. Notices. Each provision of this instrument or of any applicable governmental
laws, ordinances, regulations and other requirements with referent to the
sending mailing or delivery of any notice or the making of any payment by
Landlord to Tenant or with reference to the sending, mailing or delivery of
any notice or the making of any payment by Tenant to Landlord shall be
deemed to be complied with when and if the following steps are taken:
a) All rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at the address hereinbelow set forth
or at such other address as Landlord may specify from time to time by
written notice delivered in accordance herewith. Tenant's obligation to pay
rent and any other amounts to Landlord under the terms of this Lease shall
not be deemed satisfied until such rent and other amounts have been actually
received by Landlord.
b) All payments required to be made by Landlord to Tenant hereunder shall be
payable to Tenant at the address hereinbelow set forth, or at such other
address within the continental United States as Tenant may specify from time
to time by written notice delivered in accordance herewith.
c) Any notice or document required or permitted to be delivered hereunder shall
be deemed to be delivered whether actually received or not when deposited in
the United States Mail, postage prepaid. Certified or Registered Mail,
addressed to the parties hereto at the respective addresses set out below,
or at such other address as they have heretofore specified by written notice
delivered in accordance herewith:
<TABLE>
<CAPTION>
Landlord: Tenant:
<S> <C>
c/o Transwestern Property Company Winston Furniture Company of Alabama, Inc.,
6671 Southwest Freeway, an Alabama corporation
Suite 200 601 W. 6th Street
Houston, Texas 77074 Houston, TX 77007
And
201 Cahaba Valley Parkway
Pelham, Alabama 35124
</TABLE>
If and when included within the term "Landlord," as used in this instrument,
there are more than one person, firm or corporation, all shall jointly
arrange among themselves for their joint execution of such a notice
specifying some individual at some specific address for the receipt of
notices and payments to Landlord; if and when included within the term
"Tenant," as used in this instrument, there are more than one person, firm
or corporation, all shall jointly arrange among themselves for their joint
execution of such a notice specifying some individual at some specific
address within the continental United States for the receipt of notices and
payments to Tenant. All parties included within the terms "Landlord" and
"Tenant," respectively, shall be bound by notices given in accordance with
the provisions of this paragraph to the same effect as if each had received
such notice.
24. Miscellaneous
a) Words of any gender used in this Lease shall be held and construed to
include any other gender, and words in the singular number shall be held to
include the plural, unless the context otherwise requires.
b) The terms, provisions and covenants and conditions contained in this Lease
shall apply to, inure to the benefit of, and
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<PAGE> 17
be binding upon, the parties hereto and upon their respective heirs, legal
representatives, successors and permitted assigns, except as otherwise
herein expressly provided, Landlord shall have the right to assign any of
its rights and obligations under this Lease. Each party agrees to have the
Lease signed by a duly authorized officer of the respective companies.
c) The captions inserted in this Lease are for convenience only and in no way
define, limit or otherwise describe the scope or intent of this Lease, or
any provision hereof, or in any way affect the interpretation of this Lease.
d) Tenant agrees from time to time within ten (10) days after request of
Landlord, to deliver to Landlord, or Landlord's designee, an estoppel
certificate stating that this Lease is in full force and effect, the date to
which rent has been paid, the unexpired term of this Lease and such other
matters pertaining to this Lease as may be requested by Landlord. It is
understood and agreed that Tenant's obligation to furnish such estoppel
certificates in a timely fashion is a material inducement for Landlord's
execution of this Lease.
e) This Lease may not be altered, changed or amended except by an instrument in
writing signed by both parties hereto.
f) All obligations of Tenant hereunder not fully performed as of the expiration
or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof, including without
limitation all payments obligations with respect to taxes and insurance and
all obligations concerning the condition of the premises. Upon the
expiration or earlier termination of the term hereof, and prior to Tenant
vacating the premises, Tenant shall pay to Landlord the amount, as estimated
by Landlord, of Tenant's obligation hereunder for real estate taxes and
insurance premiums for the year in which the Lease expires or terminates.
All such amounts shall be used and held by Landlord for payment of such
obligations of Tenant hereunder, with Tenant being liable for any additional
costs therefor upon demand by Landlord, or with any excess to be returned to
Tenant after all such obligations have been determined and satisfied, as the
case may be. Any security deposit held by Landlord shall be credited against
the amount payable by Tenant under this Paragraph 24(f).
g) If any clause or provision of this Lease is illegal, invalid or
unenforceable under present or future laws effective during the term of this
Lease, then and in that event, it is the intention of the parties hereto
that the remainder of this Lease shall not be affected thereby, and it is
also the intention of the parties to this Lease that in lieu of each clause
or provision of this Lease that is illegal, invalid or unenforceable, there
be added as a part of this Lease contract a clause or provision as similar
in terms to such illegal, invalid or unenforceable clause or provision as
may be possible and be legal, valid and enforceable.
h) Because the premises are on the open market and are presently being shown,
this Lease shall be treated as an
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<PAGE> 18
offer with the premises being subject to prior lease and such offer subject
to withdrawal or non-acceptance by Landlord or Tenant or to other use of the
premises without notice, and this Lease shall not be valid or binding unless
and until accepted by Landlord and Tenant in writing.
i) All references in this Lease to "the date hereof" or similar references
shall be deemed to refer to the last date, in point of time, on which all
parties hereto have executed this Lease.
25. Exhibits and Attachment. All exhibits, attachments, riders and addenda
referred to in this Lease are incorporated in this Lease and made a part
hereof for all intents and purposes.
Executed by Landlord, this _______ day of ____________, 19____.
Teachers Insurance and Annuity
Association, a New York
corporation
Attest/Witness
/s/ Evanyeline Taylor By: /s/ Harry St. Clair
- ---------------------------------- ------------------------------
Title: REAL ESTATE ASSISTANT Title: ASSISTANT SECRETARY
Executed by Tenant, this ____
day of ________, 19____.
Winston Furniture Company of Alabama,
Inc., an Alabama corporation
Attest/Witness
/s/ [ILLEGIBLE] By: /s/ Bobby Tesney
- ---------------------------------- ------------------------------
Title: VP OPERATIONS Title: PRESIDENT
18
<PAGE> 19
ADDENDUM ONE
TO LEASE AGREEMENT BETWEEN
TEACHERS INSURANCE AND ANNUITY ASSOCIATION, A NEW YORK CORPORATION
AND
WINSTON FURNITURE COMPANY, INC.
1. The monthly base rental rate shall be as follows:
Months 1 - 4 No Rent Due
Months 5 - 28 $.23/sf or $20,584.00/mo.
Months 29 - 52 $.25/sf or $22,374.00/mo.
Months 53 - 76 $2675/sf or $23,940.00/mo.
Months 77 - 100 $.285/sf or $25,506.00/mo.
Months 101 - 124 $305/sf or $27,296.00/mo
2. In the event the operating expenses (as defined below) of Landlord for the
project of which the Leased premises are a part shall, in any calendar year
during the term of this Lease, exceed the sum of their 1996 base year level,
Tenant agrees to pay as additional rental Tenant's proportionate share of
such excess operating expenses. Tenant's proportionate share as used in this
lease shall mean a fraction, the numerator which is the space contained in
the premises and the denominator of which is the entire space contained in
the building. Landlord shall, within nine months following the close of any
calendar year for which additional rental is due under this paragraph,
invoice Tenant for the additional rental. The invoice shall include in
reasonable detail all computations of the additional rental, and Tenant
agrees to pay the additional rental within twenty days following receipt of
the invoice. If this Lease shall terminate on a day other than the last day
of a year, the amount of any additional rental payable by Tenant applicable
to the year in which such termination shall occur shall be prorated on the
ratio that the number of days from the commencement of such year to and
including such termination date bears to 365. If at any time during the term
of this Lease, Landlord has reason to believe the per square foot operating
expenses for the calendar year will exceed the sum set forth above, in the
previous year, or if no additional rental was paid in the previous year,
then Tenant shall prepay monthly one-twelfth of the amount Landlord
reasonably estimates for Tenant's additional rental for such calendar year.
If the invoice delivered within nine months following the close of a
calendar year in accordance with this subparagraph shows an amount owing by
Tenant that is less than the sum of the monthly payments made by Tenant in
the previous calendar year, the invoice shall be accompanied by a refund of
the excess by Landlord to Tenant. If such invoice shows an amount owing by
Tenant which is more than the sum of the monthly payments made by Tenant in
the previous calendar year, Tenant shall pay such deficiency to Landlord
within twenty days after receipt of the invoice. For the year in which this
Lease terminates, Landlord shall have the option to charge Tenant for
Tenant's proportionate share of the excess operating expenses based upon the
previous year's excess operating expenses; Landlord shall invoice Tenant
under this right, at its own expense and at a reasonable time, but not more
than once per
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<PAGE> 20
calendar year, to audit Landlord's books relevant to the additional rentals
due under this paragraph. All information pertaining to this subparagraph or
any billing submitted to Tenant will be prepared by Landlord or Landlord's
agent under generally accepted accounting principles.
The term "operating" expenses as used above includes all expenses incurred
with respect to the maintenance and operation of the project, including but
not limited to, common area maintenance costs referred to in Paragraphs 6
and 10, all other maintenance and repair costs, and management fees,
reasonable wages and fringe benefits payable to employees of Landlord whose
duties are connected with the operation and maintenance of the project. The
term "operating expenses" also includes all taxes and installments of
special or general assessments, upgrades, changes in, or additions to water
and sewage, including special assessments due to deed restrictions and/or
owner's associations, which accrue against the project of which the leases
premises are a part during the term of the Lease as well as all insurance
premiums Landlord is required to pay or deems appropriate to pay, including
public liability insurance, with respect to the project. The term "operating
expenses" does not include any capital improvements to the project of which
the leased premises are a part, no shall it include repairs, restoration or
other work occasioned by fire, windstorm or other casualty, income and
franchise taxes of Landlord, expenses incurred in leasing to or procuring of
tenants, leasing commissions, advertising expenses, expenses for renovating
of space for new tenants, interest or principal payments on any mortgage or
other indebtedness of Landlord, nor depreciation allowance or expense.
3. Landlord agrees to construct improvements as generally outlined on Exhibit
"B" attached hereto and detailed construction drawings to be prepared by
Thomas M. Weaver Associates. The cost of such construction and architectural
drawings shall be borne by Landlord. Such improvements shall be in
accordance with Landlord's standard specifications for improvements. In
addition, Landlord agrees to inspect the existing HVAC, electrical,
plumbing, sprinkler and mechanical systems, fans, smoke release system
(glass domes), all doors, and lighting and make any repairs necessary to put
such systems in good working order at lease commencement. Landlord agrees to
warranty all such systems for the first six (6) months of the Lease term,
with the exception of light bulbs and ballasts. Subsequent maintenance shall
be the responsibility of Tenant.
4. While this Lease is in full force and effect, provided that Tenant is not in
default of any of the terms, covenants and conditions thereof, Tenant shall
have the right or option to extend the original term of this Lease for two
(2) further terms of sixty (60) months each. Such extension or renewal shall
be on the same terms, covenants and conditions as provided for in the
original term except that the rental during the extended term shall be at
the fair market rental then in effect on equivalent properties, of
equivalent size,
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<PAGE> 21
in equivalent areas. Notice of Tenant's intention to exercise the option
must be given to Landlord in writing at least one hundred twenty (120) days
prior to lease expiration.
5. Hazardous Waste. The term "Substances", as used in this lease shall mean
pollutants, contaminants, toxic or hazardous wastes, or any other
substances, the use, storage, handling, disposal, transportation or removal
of which is regulated, restricted, prohibited or penalized by any
"Environmental Law", which term shall mean any federal, state or local, law,
ordinance or other statute of a governmental or quasi-governmental authority
relating to pollution or protection of the environment and shall
specifically include, but not be limited to, any "hazardous substance" as
that term is defined under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 and any amendments or successors in
function thereto. Tenant hereby agrees that (1) no activity will be
conducted on the premises that will produce any Substance, except for "such
activities that are part of the ordinary course of Tenant's business
activities (the "Permitted Activities") provided said Permitted Activities
are conducted in accordance with all Environmental Laws, Tenant shall be
responsible for obtaining any required permits and paying any fees and
providing any testing required by any governmental agency; (2) the premises
will not be used in any manner for the storage of any Substances except for
the temporary storage of such materials that are used in the ordinary course
of Tenant's business (the "Permitted Materials") provided such Permitted
Materials are properly stored in a manner and location meeting all
Environmental Law; Tenant shall be responsible for obtaining any required
permits and paying any fees and providing any testing required by any
governmental agency; (3) no portion of the premises will be used as a
landfill or a dump; (4) Tenant will not install any underground tanks of any
type; (5) Tenant will not allow any surface or subsurface conditions to
exist or come into existence that constitute, or with the passage of time
may constitute a public or private nuisance; (6) Tenant will not permit any
Substances to be brought onto the premises, except for the Permitted
Materials described below or upon written permission from Landlord, and if
so brought or found located thereon, the same shall be immediately removed,
with proper disposal, and all required cleanup procedures shall be
diligently undertaken pursuant to all Environmental Laws. Landlord or
Landlord's representative shall have the right but not the obligation to
enter the premises for the purposes of inspecting the storage, use and
disposal of Permitted Materials to ensure compliance with all Environmental
Laws. Should it be determined, that said Permitted Materials are being
improperly stored, used or disposed or, then Tenant shall immediately take
such corrective action. Should Tenant fail to take such corrective action
within twenty-four (24) hors, Landlord shall have the right to perform such
work and Tenant shall promptly reimburse Landlord for any and all costs
associated with said work. If at any time during or after the term of the
Lease, the prmises is found to be so contaminated or subject to said
conditions, Tenant shall
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<PAGE> 22
diligently institute proper and thorough cleanup procedures at Tenant's sole
cost, and Tenant agrees to indemnify and hold Landlord harmless from all
claims, demands, actions, liabilities, costs, expenses, damages, fines,
reimbursement, restitution, response costs, cleanup costs, and obligations
(including investigative responses and attorney's fees) of any nature
arising from or as a result of the use of the premises by Tenant. The
foregoing indemnification of the responsibilities of Tenant shall survive
the termination or expiration of this Lease.
Permitted Materials: None
6. In the event that a buyout of Tenant's current lease obligation is required
by Tenant's current landlord(s), Landlord agrees to pay such amount, not to
exceed $30,000.00. Any amount paid shall be amortized over the
non-cancellable portion of the term of this Lease (10) percent interest and
added to the monthly base rental outlined in item 1 above.
7. It is agreed and acknowledged that Jason Whittington of Lewis Partners, Inc.
is the broker of record (hereinafter referred to as "Broker") and has
represented Tenant in this Lease transaction. In consideration for the
execution of this Lease. It is agreed that Broker shall be paid a commission
of 4% of the base rental consideration of this Lease outlined in Paragraph
One of this Addendum One to the Lease. Fifty percent (50%) of such
commission payment shall be made to Broker by Landlord within fifteen (15)
days from the date of execution of this Lease and fifty percent (50%) of
such commission payment shall be made to Broker within fifteen (15) days
from Tenant's occupancy of the premises. Tenant hereby agrees to indemnify
and hold Landlord Harmless from and against any claim by any other broker,
agent or other person claiming a commission or other form of compensation by
virtue of having dealt with Tenant with regard to this Lease transaction.
8. In the event the Building is sold to a third party or if the Landlord ever
request third party financing requiring a mortgage or lien on the property,
then Landlord will use the best efforts to provide Tenant with a fully
executed Non-Disturbance Attornment Agreement signed by all appropriate
parties.
9. Landlord represents and warrants to Tenant that, to the best of its
knowledge, the Premises and Landlord are not in violation of or subject to
any existing, pending or threatened investigation or inquiry by any
governmental authority or any response costs or remedial obligations under
any law pertaining to Hazardous Materials or Hazardous Materials
Contamination and that there are no known Building or soil contaminations
and indemnifies Tenant for any pre existence of Hazardous Materials prior to
occupancy by Tenant.
10. So long as Tenant is not in default of any of the terms and conditions of
this Lease Agreement, Tenant may cancel this Lease at the end of the
eighty-eighth (88th) month of the primary term by providing written notice
to Landlord not
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<PAGE> 23
later than one hundred eighty (180) days prior to such date. The penalty
associated with such early termination shall accompany such notice, and
shall include an amount equal to the unamortized (at 10%) portion of
Landlord's upfront costs, estimated to be approximately $420,000, plus one
(1) month base rent for a combined estimated amount of approximately
$197,500.00.
23
<PAGE> 24
EXHIBIT "B"
BLACKSTONE ENTERPRISES
14925 MEMORIAL DR. BLDG.-B
SUITE 206
HOUSTON, TEXAS 77079
493-2433 PHONE
493-2028 FAX
DATE: 11/8/95
JOB NUMBER: 95139R
TRANSWESTERN PROPERTY
6671 SW FRWY
STE. 200
HOUSTON, TEXAS 77074
270-7700 (PHONE)
270-6285 (FAX
ATTN.: ROB BRYANT
JOB DESCRIPTION: TEXACRAFT
601 WEST 6TH STREET
1. As per plans submitted by Thomas Weaver & Associates 10.28.95 REV 11.2.95.
2. Final clean includes make ready clean & prep for Tenant move in & Sweep
clean whse.
3. Demolition to include removal of 1800 SW @ east section of office space &
removal of interior doors.
4. Landscaping to include relocation of irrigation and trees to install ADA
ramp.
5. Asphalt Paving & curbs to include compacted lime base & asphalt tack & top
coat for 3/4 surface area @ rear of whse., to include drive entrance &
curbing, asphalt to be graded to provide culvert for drainage, pitched to
piping on south side of paved area to connect to storm drainage. Grade
remaining area.
6. Concrete includes ten 2z2z4 footings with "L" bolt inserts for crane system
and 8" retention curbing at wash stations to include 3" PVC drain pipe
capped. Additional concrete to include repair of remaining rear dock
including retention walls as required, new 45LF ramp, 10' x 40' x 6"
dumpster pad, 10' x 40' c 6" pad for tanks and compressors, ADA ramp to
office entrance to include retention wall & railing as required, saw cut
excavate and provide new retention walls for extended interior dock, provide
new 24" interior ramp.
7. Masonry/Mortar to include 5" x 8" cast in place monument sign with 6" high
plastic lettering showing TEXACRAFT 601 W SIXTH ST." And 22' brushed alum
flag pole.
8. Structural steel to include exterior metal stairs and treads to warehouse
pedestrian entrances.
9. Fencing to include 8' high interior chain link fence with two 10' wide gates
to separate warehouse space, 8' high exterior chain link fencing with barbed
wire at the North and South ends of rear paved area to include 20' gate with
electric opener, 4' high chain link fence at ramp as required by city code.
10. Finished carpentry to include lower cabinet for bar sink and standard
shelving for copier and fax room as required. Includes cleaning and minor
repair of existing kitchen cabinets.
<PAGE> 25
11. Insulation to include miscellaneous replacement at remodeled areas.
12. Roofing to include (4) 36" & (1) 48" penetrations and roof curbing as
required for equipment ventilation.
13. Sealant to include smoke seal caulk for partitions at fiberglass shop.
14. Doors and frames to include Raco style 9' high standard office throughout to
include replacement of existing doors.
15. Special Doors - saw cut and remove two 10 x 10 sections of tilt panel wall,
supply and install 2 new 10 x 10 overhead doors, one pair of 2 hr. Fire
Rated double 4'x 9' doors at fiberglass shop.
16. Hardware - provide ADA level handle passage sets for all interior office
doors.
17. Glazing/Mirror - provide mirrors at all sink locations for interior
restrooms.
18. Drywall - provide Raco style partitions to include top track and end caps as
required for all new interior partitions and provide top trim for existing
partitions, provide Raco style cap for all partitions designated below
ceiling height.
19. Acoustical Ceiling - provide new insulated ceiling with 2 x 4 grid in office
areas and building standard ceiling tile for paint booth.
20. Vinyl Flooring/Base - provide building standard (Armstrong or equal)VCT in
kitchen and all bathrooms, break-room and prod-areas (color to be selected
by tenant), provide 4" high cove base at all partitions throughout office
space.
21. Carpet - building standard 28 oz. direct glue level loop, in non VCT covered
office areas (color to be selected by Tenant).
22. Paint - finish coat paint on all existing partitions, prime and finish coat
on all new partitions, paint type to be interior latex flat, Sherwin
Williams or equal (color to be selected by tenant).
23. Pedestrian/Traffic control - provide striping, hashes and signs as required
for ADA ramp.
24. Toilet accessories - provide new toilet partitions for all restrooms and
grab bars for restrooms designated for ADA.
25. Window coverings - provide mini blinds as required for exterior windows in
office area.
26. Equipment - provide penetration to compressor station and 2" main air lines
with tee and plug at each joint. Main to supply five stations throughout
warehouse space to include control valves as required locations designated
by tenant.
27. HVAC - clean and service existing roof top a/c units, cut back supply ducts
to demo office area, re-route ducts, furnish new ducts, registers, and
thermostat controls to accommodate new office layout. Supply and install
exhaust fans in kitchen, existing and new restrooms as required.
28. Plumbing - provide new shop sink, silk screen wash area, provide new sinks,
commodes and urinals at ADA restrooms, provide new water cooler, and provide
full size sink and rough-in plumbing for bar sink.
29. Fire protection - relocated existing sprinkler heads, add additional
sprinkler heads for new floor plan as required by fire code.
30. Electrical power - provide additional 400 AMP service and back feed existing
service to obtain a total of 800 AMPS, provide panels and 30 KVA transformer
for three 440 volt and one 220 volt distribution panels, relocated from
existing
<PAGE> 26
tenant space if possible. Provide drop feed for 24 welding stations using
ridged conduit as required. Provide additional outlets, switches as required
by new floor plan to obtain 8" spacing between outlets. Provide 10 dedicated
circuits, 34 phone/computer pulls, 4 GFI outlets (to include cut back for
demolished area).
31. Lighting - provide 1--two bulb strips in warehouse area as required to
provide adequate foot candle for lighting. Relocate existing fixtures in
office space, add 8 new 2x4 fixtures in office area, provide 2x4 fixtures in
new restrooms, 5 exit lights and 4 emergency lights.
32. Additional asphalt - provide additional 7200 SF of asphalt paving, wheel
stops and lot striping as required, to provide 17 additional spaces in NW
lot area.
ALTERNATE QUALIFICATIONS
1. Equipment distribution allowance - run conduit from distribution panels
included in base bid to equipment disconnect (location to be provided
by tenant). Pricing to include weekend premium time.
<PAGE> 1
EXHIBIT 10.4
THE MERCHANDISE MART
THIS LEASE made on April 1, 1996 between LASALLE NATIONAL TRUST N.A.,
not individually but as Trustee under a Trust Agreement dated May 27, 1981, and
known as Trust No. 104000 ("Landlord") and WINSTON FURNITURE COMPANY OF ALABAMA,
INC., a corporation organized and existing under the laws of the State of
Alabama ("Tenant").
WITNESSETH
1. DEMISED PREMISES; TERM. Landlord does hereby demise and lease to
Tenant, and Tenant accepts that certain space shown attached on Exhibit "A"
which is attached hereto and made a part hereof, commonly described as Room(s)
351 and 353 ("Premises") on the third floor(s) of the Merchandise Mart, a
building located at Merchandise Mart Plaza ("Building") constructed on property
bounded by West Kinzie Street, North Orleans Street, the Chicago River, and
North Wells Street in Chicago, Illinois (such land and Building hereinafter
referred to, together with all present and future easements, additions,
improvement and other rights and other rights appurtenant thereto, as the
"Property"), for a term beginning April 1, 1996 and ending June 30, 2001
("Term"), unless sooner terminated as provided herein, subject to the terms,
covenants and agreements herein contained.
2. USE. Tenant will use and occupy the Premises for the sale and
display of contract furnishings relating to the contract furnishings industry
which are manufactured by or sold under Winston Furniture Company of Alabama,
Inc., at wholesale only and for no other use or purpose. Tenant will not use or
permit upon the Premises anything that will invalidate any policies of insurance
now or hereafter carried on the Building or that will increase the rate of
insurance on the Premises or on the Building. Tenant will pay all extra
insurance premiums on the Building which may be caused by the use which Tenant
shall make of the Premises (other than a use stated in the first sentence
hereof). Tenant will not (a) use or permit upon the Premises anything that may
be dangerous to life or limb; (b) in any manner deface or injure the Building of
any part thereof or overload the floors of the Premises; or (c) do anything or
permit anything to be done upon the Premises in any way tending to create a
nuisance or tending to disturb any other tenant in the Building or the occupants
of neighboring property, or tending to injure the reputation of the Building.
Tenant shall further not carry-on or permit any activities which might: (1)
involve the storage, use or disposal of medical or hazardous waste substances or
the creation of an environmental hazard; or (2) impair or interfere with (i) the
structure of the Building or the operation of Building systems, (ii) the
character, reputation or appearance of the Building as a first-class building,
(iii) the furnishing of services(including utilities, telephone and
communications) to any portion of the Building, or (iv) the enjoyment by any
other occupants of the Building or the benefits of such occupancy (for example,
free of noise, odors, or vibration emanating from the Premises). The Premises
shall not be used for the purposes of any so called "office suites", schools,
employment agencies or medical treatment facilities. Unless the Premises shall
be closed because of needed repairs, revisions or decorating, Tenant shall
<PAGE> 2
otherwise keep the same open, fully lighted and available for business activity
during each and every day of the Term hereby demised, Saturdays, Sundays and
holidays as established by Landlord from time to time only excepted, and the
same shall be kept open by Tenant each day for business during the customary
business hours established in the Building which are currently from 9:00 A.M. to
5:00 P.M. and during such additional hours (including Saturdays, Sundays and
holidays established by Landlord from time to time) during market exhibitions in
the Building when such exhibitions in the Building when such exhibitions include
a type of merchandise sold by Tenant in the Premises. Tenant will fully and
promptly comply, and operate the Premises in conformity, with all applicable
federal, state and municipal laws, ordinances, codes, regulations and
requirements respecting the Premises or Tenant's use or occupancy thereof, and
activities therein, and Tenant will not use the Premises for lodging or sleeping
purposes, nor conduct or permit to be conducted on the Premises any business or
activity which is contrary to the provisions of this Lease or to any applicable
governmental laws, ordinances, codes, regulations and requirements. Tenant shall
promptly pay all taxes of whatever kind are imposed upon Tenant but which are to
be collected by Landlord. Tenant shall at no time sell food on or from the
Premises. Tenant shall at no time sell (within the meaning of the Illinois
Liquor Control Act, as now or hereafter amended) alcoholic liquor on or from the
Premises, provided, however, that Tenant may occasionally give complimentary
food and alcoholic liquor to its guests on the Premises, on condition that
Tenant shall comply with all applicable governmental requirements, and on
further condition that, prior to the giving of such alcoholic liquor, Tenant
shall procure and maintain continuously thereafter (or cause to be procured and
maintained continuously thereafter) in force a policy of host liquor liability
insurance or Dram Shop liability insurance, as set forth in Article 25 hereof.
3. BASE RENT. Tenant shall pay to Landlord an annual base rent ("Base
Rent") for the Premises as shown below for each respective period in equal
monthly installments during each respective period as follows:
PERIOD ANNUAL BASE RENT MONTHLY INSTALLMENT
- ---------------------- --------------------- ------------------------
4/1/96-3/31/97 $56,350.00 $4,695.83
4/1/97-3/31/98 $58,650.00 $4,887.50
4/1/98-3/31/99 $60,950.00 $5,079.17
4/1/99-3/31/00 $63,250.00 $5,270.83
4/1/00-3/31/01 $65,550.00 $5,462.50
4/1/01-6/30/01 $67,850.00 $5,654.17
Tenant shall pay each installment in advance on the first day of every calendar
month of the Term, except for the first month's rent which is due and payable to
Landlord or Landlord's agent and shall be made at the office of the Building or
at such other places and to such other parties at Landlord shall from time to
time by written notice appoint. Base Rent shall be payable without any prior
demand therefor and without any deductions or set-offs whatsoever. If the Term
commences on a day other than the first day of the calendar month, or ends on a
day other than the last day of the calendar month, the Base Rent for such
fractional month shall be prorated on the basis of 1/360th of the annual Base
Rent for each day of such fractional month.
-2-
<PAGE> 3
4. RENT ADJUSTMENTS. Landlord and Tenant agree that the following rent
adjustments shall be made with respect to each calendar year of the Term, or
portion thereof, including the calendar year in which this Lease begins and the
calendar year in which this Lease terminates, after the Base Year (which Base
Year for purposes of this Lease shall be the calendar year ending on the
December 31st immediately prior to the commencement date of the Term hereof).
For purposes of such rent adjustments, Tenant's Proportionate Share is agreed to
be .073%.
(A) Tenant shall pay to Landlord as additional rent an amount equal to
Tenant's Proportionate Share of the amount by which Ownership Taxes paid in any
calendar year after the Base Year exceed Ownership Taxes paid in the Base Year.
"Ownership Taxes" shall mean all taxes, assessments, impositions and
governmental charges of every kind and nature which Landlord shall pay in a
calendar year because of or in any way connected with the ownership, leasing,
management, and operation of the Building and the Property, subject to the
following:
(1) the amount of ad valorem real and personal property taxes
against Landlord's real and personal property to be included in Ownership Taxes
shall be the amount shown by the latest available tax bills required to be paid
in the calendar year in respect of which Ownership Taxes are being determined.
The amount of any tax refunds shall be deducted from Ownership Taxes in the
calendar year they are received by Landlord;
(2) the amount of special taxes and special assessments to be
included shall be limited to the amount of the installments (plus any interest,
other than penalty interest, payable thereon) of such special tax or special
assessment required to be paid during the calendar year in respect of which
Ownership Taxes are being determined;
(3) there shall be executed from Ownership Taxes all income
taxes [except for a specific tax or excise on rents or other income from the
Property (or on the value of leases thereon) or a specific gross receipts tax or
excise on rents or other income from the Property (or on the value of leases
thereon)], excess profit taxes, franchise, capital stock and inheritance or
estate taxes, except to the extent that any such tax is in lieu of, in
substitution for, or a supplement to, in whole or in part, any tax included in
Ownership Taxes; and
(4) Ownership Taxes shall also include, in the calendar year
paid, all fees, costs and expenses (including reasonable attorneys' fees)
incurred by Landlord in contesting or attempting to reduce or limit any
Ownership Taxes, regardless of whether any such reduction or limitation is
obtained.
(B) Tenant shall also pay to Landlord as additional rent an amount
equal to Tenant's Proportional Share of the amount by which Operating Expenses
for any calendar year after the Base Year exceed Operating Expenses for the Base
Year. Operating Expenses shall mean all expenses, costs and disbursements of
every kind and nature paid, incurred, or otherwise arising in respect of a
calendar year because of or in any way connected with the ownership, management,
maintenance, repair, leasing and operating of the Building and the Property.
There shall be excluded from Operating Expenses: (1) costs of alterations of
tenant spaces; (2) depreciation; (3) principal and interest payments on
mortgages, and financing or refinancing
-3-
<PAGE> 4
expenses; (4) return on investment; (5) Ownership Taxes with the respect to
which Tenant's is liable for its Proportionate Share pursuant to the preceding
paragraph (A); and (6) the cost of capital improvements and capital equipment
with the exception of governmental requirements noted below. In the event
Landlord makes any capital improvements or installs any capital equipment during
the Term hereof which results in a reduction or limitation in Operating
Expenses, the Operating Expenses for the Base Year may be comparably reduced as
determined by Landlord. In the event Landlord makes any capital improvements or
installs any capital equipment during the Term hereof required to comply with
any governmental rules, regulations or requirements applicable from time to time
to the Building or to the Property, the costs thereof, as depreciated, may be
included in Operating Expenses. If the Building shall not have been fully
occupied by tenants at any time during the Base Year or any succeeding calendar
year, the Operating Expenses for such year may be equitably adjusted to reflect
the Operating Expenses as though the Building had been fully occupied throughout
such year.
(C) If the twelve (12) month average of the Consumer Price Index for
All Urban Consumers (All Items And Commodity Groups - Chicago - Gary-Lake
County, IL-IN-WI) (1982-84=100), or such other successor or substitute area
index as may be applicable to the Chicago Metropolitan Area, as appropriately
adjusted, for the Base Year ("Base CPI") shall be less than the twelve (12)
month average of the Consumer Price Index for any calendar year subsequent to
the Base Year, Tenant shall pay Landlord as additional rent for any such
subsequent calendar year subsequent to the Base Year, Tenant shall pay Landlord
as additional rent for any such subsequent calendar year or portion thereof upon
written notice from Landlord an amount (the "CPI Adjustment") equal to the
product obtained by multiplying thirty-three and one-third percent (33 1/3%) of
the annual Base Rent in such subsequent year by the percentage by which the
twelve (12) month average of the Consumer Price Index for such subsequent year
exceeds the Base CPI.
If the manner in which the Consumer Price Index is determined by the
Department of Labor shall be substantially revised, and the effect of that
revision can be reasonably determined or approximated, an adjustment shall be
made in such revised index or if the underlying Base Year index in order to
produce results equivalent, as nearly as possible, to those which would have
been obtained if the Consumer Price Index had not been so revised. If the
1982-84 average shall no longer be used as an index of 100, or if any component
of the Consumer Price Index is changed in a material degree, such change shall
constitute a substantial revision. If the Consumer Price Index shall become
unavailable to the public because publication is discontinued, or otherwise,
Landlord will substitute therefor a comparable index based upon changes in the
cost of living or purchasing power of the consumer dollar published by any other
governmental agency, or, if no such index shall then be available, a comparable
index published by a major bank or other financial institution or by a
university or a recognized financial publication.
(D) In order to provide for current payments on account of increases in
Ownership Taxes and Operating Expenses over the Base Year and increases in the
Consumer Price Index over the Base CPI, Tenant agrees, at Landlord's request, to
pay on account to Landlord for each calendar year of the Term or portion thereof
commencing on the 1st day of January immediately
-4-
<PAGE> 5
following the commencement date of the Term hereof, Tenant's share of
adjustments due for such ensuing calendar year or portion thereof, as estimated
by Landlord from time to time, in equal monthly installments, commencing on the
first day of the month following the month in which Landlord notifies Tenant of
the amount of such estimated rent adjustments or revisions thereto. The
installments of estimated rent adjustments payable for each month of the current
calendar year prior to the date of receipt of Landlord's estimate shall be due
and payable within thirty (30) days after the receipt of such estimate. If, as
finally determined (whether in the succeeding calendar year at the time of
delivery of the statement provided for in paragraph (E) hereof, or in the
current calendar year when the final amount of any portion of Ownership Taxes
becomes known to Landlord), such rent adjustments shall be greater than or less
than the aggregate of all installments so paid on account to Landlord prior to
receipt of an invoice from Landlord, then Tenant upon receipt of such invoice
shall pay to Landlord within ten (10) days immediately following such
notification the amount of such underpayment, or, provided Tenant is not in
default hereunder. Landlord shall credit Tenant for the amount of such
overpayment, as the case may be. It is the intention hereunder to estimate from
time to time the amount of increases in Ownership Taxes and Operating Expenses
and the Consumer Price Index for each year and then to finally determine such
rent adjustments at the end of such calendar year or as soon thereafter as
possible based upon actual increases in Ownership Taxes and Operating Expenses
and the Consumer Price Index for such year.
(E) Landlord agrees to keep books and records showing the Ownership
Taxes and Operating Expenses in accordance with a system of accounts and
accounting practices consistently maintained on a year-to-year basis in
compliance with such provisions of this Lease as may affect such accounts.
Landlord shall deliver to Tenant after the close of each calendar year
(including the calendar year in which this Lease begins and the calendar year in
which this Lease terminates), a statement by an officer of Landlord's agent and
containing (1) the agent's statement that the books and records covering the
operation of the Building have been maintained in accordance with the
requirements of this paragraph (E), (2) the amounts by which the Operating
Expenses and Ownership Taxes for such calendar year exceed the Operating
Expenses and Ownership Taxes, respectively, for the Base Year, (3) the total
rent adjustments owning to Landlord due to increases in the Consumer Price Index
over the Base CPI, (4) the total of the estimated rent adjustments previously
paid by Tenant during such calendar year, and (5) the amount of any excess or
deficiency with respect to such calendar year. Failure or delay in delivering
any such statement or accompanying invoice, or failure or delay in computing the
rent adjustments pursuant to this Article 4, shall not be deemed a waiver by
Landlord of its right to deliver such items nor shall any such failure or delay
be deemed a release of Tenant's obligations with respect to any such statement
or invoice, or constitute a default hereunder. All rent adjustments payable
hereunder shall be made without any deductions or set-offs whatsoever.
(F) The obligation of Tenant with respect to the payment of Base Rent
and rent adjustments due hereunder shall survive the expiration or termination
of this Lease. Any payment, refund, or credit made pursuant to this Article
shall be made without prejudice to any right of Tenant to dispute, or in
Landlord to correct, any items as billed pursuant to the provisions hereof. In
the event that this Lease shall have been in effect for less than the full
calendar year immediately preceding Tenant's receipt of the invoices provided
for in paragraphs
-5-
<PAGE> 6
(D) and (E) hereof, the rent adjustment shall be pro rata. In no event shall any
rent adjustment result in a decrease in the Base Rent payable from time to time
hereunder.
5. CONDITION OF PREMISES. Tenant's entry into possession of all or any
part of the Premises shall be conclusive evidence as against Tenant that such
part of the Premises was in good order and satisfactory condition when Tenant
took possession. Tenant acknowledges that no promise of Landlord or its agents
to alter, remodel or improve the Premises or the Building and no representation
respecting the condition of the Premises or the Building have been made by
Landlord or its agents to Tenant other than as may be contained herein.
6. POSSESSION. In the event that possession of the Premises shall not
be delivered to Tenant on the date above fixed for the commencement of the Term,
this Lease shall nevertheless continue in full force and effect, and no
liability shall arise against Landlord out of any such delay beyond the
abatement of rent until possession of the Premises is delivered to Tenant;
provided, however, that there shall be no abatement of rent if the Premises are
not delivered to Tenant due to any delay caused by, or resulting from the fault
of, Tenant. If Tenant, with Landlord's permission, shall enter possession of all
or any part of the Premises prior to the date fixed above for the first day of
the Term, all of the covenants and conditions of this Lease shall be binding
upon the parties hereto in respect of such possession the same as if the first
day of the Term had been fixed as of the date when Tenant entered such
possession and Tenant shall pay to Landlord as rent for the period prior to the
first day of the Term a proportionate amount of the Base Rent as set forth
above. It is expressly understood that Tenant's obligation to pay rent commences
on the date that possession of the Premises is delivered to Tenant and no
liability, by abatement of rent or otherwise, shall arise against Landlord as a
result of delays in occupancy caused by decoration or other work in the
Premises, done by Landlord or Tenant, under the Lease or any other agreement.
7. REPAIRS. Tenant will, at its own expense and subject to the
provisions of Article 8 of this Lease, keep the Premises in good repair and
tenantable condition at all times during the Term of this Lease, and Tenant
shall promptly and adequately repair all damaged or broken glass (including any
glass demising walls and signs thereon), fixtures and appurtenances, under the
direct supervision and with the approval of Landlord, and within any reasonable
period of time specified by Landlord. If Tenant does not do so, or at Landlord's
election, Landlord may, but not need not, make such repairs or replacements and
the amount paid by Landlord for such repairs and replacements (including
Landlord's overhead and profit and the cost of general conditions) shall be
deemed additional rent reserved under this Lease due and payable forthwith.
Landlord may, but shall not be required so to do, enter the Premises at all
reasonable times to make such repairs or alterations, improvements and
additions, including but not limited to ducts and all other facilities for aid
conditioning service, as Landlord shall desire or deem necessary for the safety,
preservation or improvement of the Premises or the Building or any equipment
located in the Building, or as Landlord may be required to do by the City of
Chicago or by the order or decree of any court or by any other governmental
authority.
In the event Landlord or its agents or contractors shall elect or be
required to make repairs, alterations, improvements or additions to the Premises
or the Building or any equipment
-6-
<PAGE> 7
located in the Building, Landlord shall be allowed to take into and upon the
Premises all material that may be required to make such repairs, alterations,
improvements or additions and, during the continuance of any of said work, to
temporarily close doors, entryways, public space and corridors in the Building
and to interrupt or temporarily suspend Building services and facilities without
being deemed or held guilty of eviction of Tenant or for damages to Tenant's
property, business or person, and the rent reserved herein shall in no way abate
while said repairs, alterations, improvements or additions are being made, and
Tenant shall not be entitled to maintain any set-off or counterclaim for damages
of any kind against Landlord by reason thereof. Landlord may, at its option,
make all repairs, alterations, improvements and additions in and about the
Building and the Premises during ordinary business hours, but if Tenant desires
to have the same done during any other hours Tenant shall pay for all overtime
and additional expenses resulting therefrom.
8. ALTERATIONS. Tenant shall not, without the prior written consent of
Landlord in each instance obtained, make any repairs, replacements, alterations,
improvements or additions (collectively "Improvements") to the Premises. In the
event Tenant desires to make any Improvements, Tenant shall first seek
Landlord's consent therefor, and Landlord's consent to any such Improvements
shall be conditioned upon such requirements as Landlord deems appropriate,
including without limitation, the submission of detailed plans and
specifications. All such improvements shall be done at Tenant's expense by
employees or agents of Landlord or contractors hired by Landlord except to the
extent Landlord gives its prior written consent to Tenant hiring its own
contractors, and, in either event, Tenant shall pay to Landlord or its agent a
charge for supervision, general conditions, overhead, Landlord's profit and
other costs and expenses incurred by Landlord in connection with such work, as
established by Landlord form time to time.
In the event that Tenant uses its own contractors for the Improvements
Landlord may, without limitation, require Tenant to: (a) comply with such
construction standards or procedures as may be applicable from time to time for
construction activities in the Building; (b) demonstrate that the construction
of such Improvements will not jeopardize labor harmony; (c) submit satisfactory
insurance certificates; (d) obtain all necessary permits; (e) furnish
satisfactory security for the payment of all costs to be incurred in connection
with the Improvements; and (f) upon completing any such Improvements, furnish
Landlord with contractors' affidavits and full and final waivers of lien and
receipted bills covering all labor and material expended and used. There are
some asbestos-containing materials ("ACM") in some areas of the Building.
Landlord has adopted and implemented an abatement and operations and maintenance
program ("O & M Program"), a copy of which is available for review by Tenant,
which sets forth certain procedures to be followed in connection with any
improvements to be made in the Building, in order to prevent disturbance to any
ACM that may be encountered. Tenant acknowledges, and hereby expressly agrees to
cause its agents, employees and contractors to comply at all times with, the O &
M Program (as amended from time to time).
All Improvements shall comply with all insurance requirements and with
all applicable governmental laws, requirements, codes, ordinances and
regulations. All Improvements shall be constructed in a good and workmanlike
manner and only good grades of material shall be used.
-7-
<PAGE> 8
Except for Landlord's negligence, Tenant shall protect, defend, indemnify and
hold Landlord, the Building and the Property, Landlord's beneficiaries, and
their respective officers, directors, beneficiaries, partners, agents and
employees harmless from any and all liabilities of every kind and description
which may arise out of or in connection with such Improvements.
All Improvements made by Landlord or Tenant in or upon the Premises
whether temporary or permanent in character, including but not limited to wall
coverings, carpeting and other floor covering, lighting installations, built-in
or attached shelving, cabinetry, and mirrors, shall become Landlord's property
and shall remain upon the Premises at the termination of this Lease by lapse of
time or otherwise without compensation to Tenant [excepting only Tenant's
movable office furniture, trade fixtures (other than attached or installed
lighting equipment), and office equipment]; provided, however, that Landlord
shall have the right to require Tenant to remove such Improvements at Tenant's
sole cost and expense in accordance with the provisions of Article 16 of this
Lease.
9. SERVICES. Landlord shall provide the following services on all days
during the Term of this Lease excepting Sundays and holidays established by
Landlord from time to time, unless otherwise stated:
(A) Heat will be furnished whenever such heat shall, in Landlord's
judgment, be required for the comfortable occupation of the Premises.
(B) Adequate elevator service will be furnished daily as determined by
Landlord.
(C) Conditioned air will be furnished to the Premises at such time or
times at Landlord's air conditioning system is in operation for the furnishing
of conditioned air to Landlord's other tenants. Landlord represents that it
customarily operates said air conditioning equipment when required for the
purpose of furnishing cooled air during the period commencing on or about the
fifteenth day of May and ending on or about the fifteenth day of October in each
year. Whenever heat-generating machines, equipment or lighting fixtures
installed by Tenant affect the temperature otherwise maintained by Landlord in
the Premises, or whenever the electrical load in the Premises exceeds four and
one-half (4.5) watts per square foot, Landlord shall be relieved of
responsibility for maintaining air conditioning in the Premises, and in such
event Landlord further reserves the right at its option to (1) require Tenant to
discontinue use of such heat-generating machines, equipment, lighting fixtures
or excessive electrical load, or (2) install supplementary air conditioning
units in the Premises, the cost, installation, operation and maintenance of
which shall be paid by Tenant to Landlord at such rates as Landlord charges from
time to time in the Building. Tenant agrees that at all times it will cooperate
with Landlord and abide by all regulations and requirements which Landlord may
prescribe for the proper functioning of the ventilating and air conditioning
systems.
(D) Electricity will be furnished so long as Landlord shall furnish
electric current for light or power to all tenants of the Building during the
Term of this Lease. Tenant agrees to purchase such electric current from
Landlord only, and to pay Landlord for such electric current consumed (measured
by a meter or meters installed by Landlord) at the charges from time to time
customary in the Building. The charges shall be based upon the amount of current
-8-
<PAGE> 9
consumed and also the maximum demand of Tenant, both measured and computed in
the manner from time to time customary in the Building. Landlord, upon giving
Tenant not less than thirty (30) days' prior written notice, may discontinue
supplying electric current to Tenant upon connecting the Premises with another
source of supply of electric current. Upon the effective date of such
discontinuance, Tenant agrees to pay Landlord for each month of the remaining
Term of this Lease, as additional rent a sum equal to three cents ($0.03) per
rentable square foot of floor space contained in the Premises. Tenant shall not
install or operate any electrical equipment or fixtures that overload lines
servicing the Premises or which exceed the designated electrical load for the
Premises specified in Paragraph (C) above.
(E) Additional services (including after-hour cooling and ventilation
and the provision of water) may be provided on term and conditions as may be
mutually agreed upon by Landlord and Tenant.
Tenant shall apply to the applicable utility company or municipality
for gas, electricity, telephone and other utility services, other than those
provided by Landlord, required by Tenant for use in the Premises in accordance
with Article 2 hereof and, subject to Article 8 hereof, Tenant shall be
responsible for the connection and installation of same.
All charges for any services shall be deemed rent reserved under this
Lease and shall be due and payable at the same time as the installment of rent
with which they are billed, or, if billed separately, shall be due and payable
within ten (10) days after such billing. In the event Tenant shall fail to make
payment for such services Landlord may, in addition to all other remedies which
Landlord may have for the non-payment of rent and without notice to Tenant,
discontinue any or all such services (including, without limitation, electric
current for light and power in the Premises), and such discontinuance shall not
be held or pleaded as an eviction or as a disturbance shall not be held or
pleaded as an eviction or as a disturbance in any manner whatsoever of Tenant's
possession, or relieve Tenant from the payment of rent when due, or vary or
change any other provision of this Lease or render Landlord liable for damages
of any kind whatsoever.
Tenant agrees that neither Landlord nor its beneficiaries nor any of
their respective agents, partners or employees, shall be liable to Tenant, or
any of Tenant's employees, agents, customers or invitees or anyone claiming
through, by or under Tenant, for any damages, injuries, losses, expenses, claims
or causes of action, because of any interruption, diminution, delay or
discontinuance at any time in the furnishing of any of the above services or
operating, maintaining, repairing or supervising the Property when such
interruption, diminution, delay or discontinuance is occasioned, in whole or in
part, by repairs, renewals, improvements or additions, by any strike, lockout or
other labor trouble, by inability to secure gas, electric, water or other fuel
at the Building, by any accident or casualty whatsoever, by act or default of
Tenant or other parties, or by any other cause beyond Landlord's reasonable
control; nor shall any such interruption, diminution, delay or discontinuance be
deemed an eviction or disturbance of Tenant's use or possession of the Premises
or any part thereof; nor shall any such interruption, diminution, delay or
discontinuance relieve Tenant from full performance of Tenant's obligations
under this Lease.
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10. COVENANT AGAINST LIENS. Tenant agrees to pay promptly for any work
done or materials furnished by or on behalf of Tenant in or about the Premises
or to all or any part of the Property, and nothing in this Lease contained shall
authorize or empower Tenant to do any act which shall in any way encumber the
title of Landlord in and to the Premises or to the Property, nor shall the
interest or estate of Landlord therein be in any way subject to any claims by
way of lien or encumbrance whether claimed by operation of law or by virtue of
any express or implied contract of Tenant, and any claim to a lien upon the
Premises, or the Property arising from any act or omission of Tenant shall
accrue only against Tenant and shall in al respects be subordinate to the title
and rights of Landlord to the Premises and the Property. Tenant covenants and
agrees not to suffer or permit any lien or encumbrance to be placed against the
Premises, the Building or the Property with respect to work or services claimed
to have been performed for or materials claimed to have been furnished to Tenant
or he Premises and, in case of any such lien or encumbrance attaching, or claim
thereof being asserted, Tenant agrees to cause it to be immediately released and
removed of record. If Tenant has not removed any such lien or encumbrance within
fifteen (15) days after notice to Tenant by Landlord, such failure shall
constitute a default hereunder and, in addition to al other remedies available
herein, Landlord may, but shall not be obligated to, pay the amount necessary to
remove the lien or encumbrance, without being responsible for making any
investigation as to the validity thereof, and the amount so paid together with
all costs and expenses, including reasonable attorneys' fees, incurred in
connection therewith shall be deemed additional rent reserved under this Lease
due and payable forthwith.
11. WAIVER OF CLAIMS. Subject to the provisions of Article 25 hereof,
and except for the negligence of Landlord, Tenant agrees that Landlord,
Landlord's beneficiaries and their respective officers, directors,
beneficiaries, partners, agents, and employees shall not be liable for (nor
shall rent abate as a result of) any direct or consequential damage (including,
without limitation, damages claimed for actual or constructive eviction) either
to person or property sustained by Tenant or other person, due to the Building,
the Property, or any act appurtenances thereof becoming out of repair, or due to
the happening of any accident in or about the Building or the Property, or due
to any act or neglect of any tenant or occupant of the Building or the Property,
or any other person. This provisions shall apply particularly (but not
exclusively to damage caused by fire, explosion, water, snow, frost, steam,
sewerage, illuminating gas, sewer gas or odors, or by the bursting or leaking of
pipes, plumbing fixtures, or sprinkler system; without distinction as to the
person whose act or neglect was responsible for the damage and whether the
damage was due to any of the causes specifically enumerated above or to some
other cause of an entirely different kind. Tenant further agrees that all
personal property upon the Premises or brought or caused to be brought within
the Building by Tenant shall be at the risk of Tenant only and that Landlord
shall not be liable for any damage thereto or any theft thereof. Subject to the
provisions of Article 25 hereof, and except for the negligence of Landlord,
Tenant shall protect, indemnify, defend and save Landlord, its beneficiaries and
their respective officers, directors, agents, beneficiaries, partners, and
employees harmless from and against any and all liabilities, damage, costs,
claims, obligations and expenses arising out of or in connection with Tenant's
use or occupancy of the Premises or Tenant's activities in or about the Building
or the Property, or arising from any act or negligence of Tenant or its agents,
contractors, servants, employees or invitees.
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12. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord, (a) assign, convey, mortgage, pledge or otherwise
transfer this Lease, or any part thereof, or any interest hereunder; (b) permit
any assignment of this Lease, or any part thereof, by operation of law; (c)
sublet the Premises or any part thereof; or (d) permit the use of the Premises,
or any part thereof, by any parties other than Tenant, its agents and employees.
Tenant shall, by notice in writing, advise Landlord of its desire from, on and
after a stated date (which shall not be less than thirty (30) days after the
date of Tenant's notice), to assign this Lease, or any part thereof, or to
sublet any part or all of the Premises for the balance nor any part of the Term.
Tenant's notice shall: state the name and address of the proposed assignee or
subtenant and provide such financial information on the proposed assignee or
subtenant as requested by Landlord; include all of the terms of the proposed
assignment or sublease (whether contained in such assignment or sublease or in
separate agreements) and state the consideration therefor; and include a true
and complete and fully-executed copy of the proposed assignment or sublease and
any and all other agreements relating thereto. In such event, Landlord shall
have the right, to be exercised by giving written notice to Tenant within thirty
(30) days after receipt of Tenant's notice, to recapture the space therein
described in Tenant's notice and such recapture notice shall, if given, cancel
and terminate this Lease with respect to the space therein described as of the
date stated in Tenant's notice. If Tenant's notice shall cover all of the
Premises, and Landlord shall have exercised its foregoing recapture right, the
Term of this Lease shall expire and end on the date stated in Tenant's notice as
fully and completely as if that date had been herein definitely fixed for the
expiration of the Term. If, however, this Lease be cancelled with respect to
less than the entire Premises. Base Rent and rent adjustments reserved herein
shall be adjusted on the basis of the number of rentable square feet retained by
Tenant in proportion to the number of rentable square feet contained in the
Premises, as described in this Lease, and this Lease as so amended shall
continue thereafter in full force and effect.
If Landlord, upon receiving Tenant's notice with respect to any such
space, shall not exercise its right to recapture as aforesaid, and if Tenant is
no in default under the terms of this Lease, Landlord will not unreasonably
withhold its consent to Tenant's assignment of the Lease or subletting such
space to the party identified in Tenant's notice upon the terms set forth in
Tenant's notice, provided, however, that in the event Landlord consents to any
such assignment or subletting, and as a condition thereto, Tenant shall pay to
Landlord ninety percent (90%) of all profit derived by Tenant from such
assignment or subletting. For purposes of the foregoing, profit shall be deemed
to include, but shall not be limited to, the amount paid or payable to Tenant or
any other party to effect or to induce Tenant or any third party to enter into
any such transaction, and the amount paid or payable to tenant or any other
party to effect or to induce Tenant or any third party to enter into any such
transaction, and the amount of all rent and other consideration of whatever
nature payable by such assignee or sublessee or a third party in excess of the
Base Rent and rent adjustments payable by Tenant under this Lease. If a part of
the consideration for such assignment or subletting shall be payable other than
in cash, the payment to Landlord of its share of such non-cash consideration
shall be in such form as is satisfactory to Landlord.
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<PAGE> 12
Tenant shall and hereby agrees that it will furnish to Landlord upon
request from Landlord a complete statement, certified by an independent
certified public accountant, setting forth in detail the computation of all
profit derived and to be derived from such assignment or subletting, such
computation to be made in accordance with generally accepted accounting
principles. Tenant agrees that Landlord or its authorized representatives shall
be given access at all reasonable times to the books, records and papers of
Tenant relating to any such assignment or subletting, such computation to be
made in accordance with generally accepted accounting principles. Tenant agrees
that Landlord or its authorized representatives hall be given access at all
reasonable times to the books, records and papers of Tenant relating to any such
assignment or subletting, and Landlord shall have the right to make copies
thereof. The percentage of profit due Landlord hereunder shall be paid to
Landlord within two (2) days of receipt of each payment of profit made from time
to time by such assignee or sublessee to Tenant.
For purposes of the foregoing, (a) if Tenant is a partnership, any
change in the partners of Tenant, or (b) if Tenant is a corporation the voting
stock of which is not listed on a nationally recognized security exchange, any
transfer of any or all of the shares of stock of Tenant by sale, assignment,
operation of law or otherwise resulting n a change in the present control of
such corporation by the person or persons owning a majority of such shares as of
the date of this Lease, or (c) the transfer of all of the assets of Tenant,
shall be deemed to be an assignment within the meaning of this Article 12.
Landlord's consent to any assignment or sublease shall not operate as a
consent to any subsequent assignment or sublease or as a waiver of Landlord's
right to require Tenant to seek Landlord's approval of all subsequent
assignments and subleases. Any subletting or assignment hereunder shall not
release or discharge Tenant of or from any liability, whether past, present or
future, under this Lease, and Tenant shall continue fully liable thereunder. Any
subtenant or assignee shall agree in a form satisfactory to Landlord to comply
with and be bound by all of the terms, covenants, conditions, provisions and
agreements of this Lease to the extent of the space sublet or assigned, and
Tenant shall deliver to Landlord promptly after execution, an executed coy of
each such sublease or assignment and an agreement of compliance by each such
subtenant or assignee. Tenant agrees to pay to landlord, on demand, all
reasonable costs incurred by Landlord (including fees paid to consultants,
brokers, accountants, and attorneys) in connection with any request by Tenant
for Landlord to consent to any assignment or subletting by Tenant. Any sale,
assignment, mortgage, transfer, or subletting of this lease which is not in
compliance with the provisions of this Article shall be of no effect and void.
Notwithstanding any requirement for Landlord to consider, solicit or obtain a
sublease or assignment, whether statutory or otherwise, Landlord and Tenant
expressly agree that Landlord's obligation with respect to such sublease or
assignment shall arise only when Tenant submits such sublease or assignment to
Landlord in the manner set out in this Article 12.
13. EXPENSES OF ENFORCEMENT. Tenant shall pay all attorneys' fees and
expenses of Landlord injured in enforcing any of the obligations of tenant under
this Lease. In case Landlord shall, without fault on its part, be made a party
to any litigation commenced by or against Tenant, then Tenant shall pay all
cost, expense and reasonable attorney's fees incurred or paid by Landlord in
connection with such litigation.
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14. LANDLORD'S LIEN. Landlord shall have a first lien upon any and all
rents from permitted subtenants or assignees of Tenant (if any), upon the
interest of Tenant under this Lease and upon all the goods and chattels of
Tenant which may at any time be affixed to the Premises, to secure the payment
of all money due under this Lease.
15. LANDLORD'S REMEDIES. If default shall be made in the payment of the
rent or any installment thereof or in the payment of any other sum required to
be paid by Tenant under this Lease, or under the terms of any other lease or
agreement between Landlord and Tenant, and such default shall continue for ten
(10) days after written notice to Tenant or if default shall be made in the
performance of any of the other covenants or conditions which Tenant is required
to observe and perform hereunder or under any other lease or agreement between
Landlord and Tenant and such default shall continue for thirty (30) days after
written notice to Tenant or if the interest of Tenant in this Lease shall be
levied on under execution or other legal process, or if any petition shall be
filed by or against Tenant to declare Tenant a bankrupt or to delay, reduce or
modify Tenant's debts or obligations or if any petition shall be filed or other
action taken to reorganize or modify Tenant's capital structure, if Tenant be a
corporation or other entity, or if Tenant be declared insolvent according to law
or if any assignment of Tenant's property shall be made for the benefit of
creditors or if a receive or trustee is appointed for Tenant or its property or
if Tenant shall abandon or vacate the Premises during the Term of this Lease,
then Landlord may treat the occurrence of any one or more of the foregoing
events as a breach of this Leas, and thereupon at its option may, without notice
or demand of any kind to Tenant or any other person, have any one or more of the
following described remedies in addition to all other rights and remedies
provided cat law or in equity:
(a) Landlord may terminate this Lease and the Term created hereby, in
which event Landlord may forthwith repossess the Premises and be entitled to
recover forthwith as damages a sum of money equal to the value of the rent
provided to be paid by Tenant for the balance of the stated Term of the Lease,
less the fair rental value of the Premises for such period, and any other sum of
money and damages owed by Tenant to Landlord.
(b) Landlord may terminate Tenant's right of possession and may
repossess the Premises by forcible entry and detainer suit, or otherwise,
without demand or notice of any kind to Tenant and without terminating this
Lease, in which event Landlord may, but shall be under no obligation so to do,
relet all or any part of the Premises for such rent and upon such terms as shall
be satisfactory to Landlord (including the right to relet the Premises for a
term greater or lesser than that remaining under the Term of this Lease and the
right to relet the Premises as a part of a larger area and the right to change
the character or use made of the Premises). For the purpose of such reletting,
Landlord may make such repairs, changes, alterations or additions in or to the
Premises as may be necessary or convenient. If Landlord shall fail or refuse to
relet the Premises, then Tenant shall pay to landlord as damages a sum equal to
the amount of the rent reserved in this Lease for such period or periods. If the
Premises are relet and a sufficient sum shall not be realized from such
reletting after paying all of the costs and expenses of such repairs, changes,
alterations and additions and the expense of such reletting and the collection
of the rent accruing therefrom, to satisfy the rent above provided to be paid,
Tenant shall satisfy and pay any such deficiency upon demand therefor from time
to time; and Tenant agrees that Landlord may
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<PAGE> 14
file suit to recover any sums falling due under the terms of this paragraph from
time to time and that any suit or recovery of any portion due Landlord hereunder
shall be no defense to any subsequent action brought for any amount not
theretofore reduced to judgment in favor of Landlord.
16. SURRENDER OF POSSESSION. On or before the date this Lease and the
Term hereby created terminate, on or before the date Tenant's right of
possession terminates, whether by lapse of time or at the option of Landlord,
Tenant will: (a) restore the Premises to the same condition they were in at the
beginning of the Term (except for reasonable wear and tear and as otherwise
provided in Article 25 of this Lease) and remove those alterations, improvements
and additions installed by or for the benefit of Tenant (including tenant
improvements acquired by Tenant from former tenants or existing in the Premises
as of the date such space is leased to, or occupied by, Tenant) which Landlord
shall request Tenant to remove; (b) remove from the Premises and the Building
all of Tenant's personal property; and (c) surrender possession of the Premises
to Landlord. If Tenant shall fail or refuse to restore the Premises to the
above-described condition on or before the above-specified date, Landlord may
enter into and upon the Premises and put the Premises in such condition, and
recover from Tenant Landlord's cost of so doing. Without limiting the generality
of the foregoing, Tenant agrees to pay Landlord, upon demand, the cost of
restoring the walls, ceiling and floors of the Premises to the same condition
that existed prior to the date of the commencement of any alterations,
improvements, or additions made by or for Tenant's occupancy (or a prior
tenant's occupancy if such alterations, improvements or additions were acquired
by Tenant from a former tenant) of the Premises. If Tenant shall fail or refuse
to comply with Tenant's duty to remove all personal property from the Premises
and the Building on or before the above-specified date, the parties hereto agree
and stipulate that Landlord may, at its election: (1) treat such failure or
refusal as an offer by Tenant to transfer tide to such personal property to
Landlord, in which event title thereto shall thereupon pass under this Lease as
a bill of sale to and vest in Landlord absolutely without any cost either by
set-off, credit allowance or otherwise, and Landlord may remove, sell, retain,
donate, destroy, store, discard, or otherwise dispose of all or any part of said
personal property in any matter that Landlord shall choose; or (2) treat such
failure or refusal as conclusive evidence, on which Landlord and any third party
shall be entitled absolutely to rely and act, that Tenant has forever abandoned
such personal property, and without accepting title thereto, Landlord may at
Tenant's expense enter into and upon the Premises and remove, sell, retain,
donate, destroy, store, discard or otherwise dispose of all or any part thereof
in any manner that Landlord shall choose without incurring liability to Tenant
or to any other person. In no event shall Landlord ever become or accept or be
charged with the duties of a bailee (either voluntary or involuntary) of any
personal property; and the failure of Tenant to remove all personal property
from the Premises and the Building shall forever bar Tenant from bringing any
action or from asserting any liability against Landlord with respect to any such
property which Tenant fails to remove. If Tenant shall fail or refuse to
surrender possession of the premises to Landlord on or before the
above-specified date, Landlord may forthwith re-enter the Premises and repossess
itself thereof as of its former state and remove all persons and effects
therefrom, using such force as may be necessary, without being guilty of any
manner of trespass or forcible entry or detainer.
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17. HOLDOVER. Tenant will pay to Landlord an amount equal to double the
sum of the annual Base rent plus adjustments as provided in Section 9-202 of
Chapter 110 of the Illinois Revised Statutes, or any corresponding provision of
a successor statute, and in addition thereto, all actual damages, whether direct
or consequential, sustained by Landlord, for all the time Tenant shall retain
possession of the Premises or any part thereof after the termination of this
Lease, whether by lapse of time or otherwise, but the provisions, of this
Article shall not operate as a waiver by the Landlord of any right of re-entry
hereinbefore provided. At the option of Landlord, expressed in a written notice
to Tenant and not otherwise, such holding over shall constitute a renewal of the
Lease for a period of one (1) year with the Base Rent for such period in an
amount equal to the greater of the annual Base Rent plus rent adjustments
payable hereunder or the then prevailng rental rates for similar space in the
Building.
18. MERCHANDISE APPROVAL. Tenant shall not at any time during the Term
of this Lease offer for sale, display for sale, or sell (or cause, authorize or
permit any agent, representative or employee of Tenant so to do) in the Premises
any line of merchandise, except as provided in Article 2 above, without first
obtaining the written consent of Landlord.
19. NOTICE. In every case where it shall be necessary or desirable for
Tenant to give or serve upon Landlord any notice or demand, Tenant shall give
the requisite notice either (a) by delivering or causing to be delivered to
Landlord a written or printed copy of such notice or demand, or (b) by sending a
written or printed copy of such notice or demand by mail, postage prepaid,
addressed to Landlord at the address to which rental payments are made pursuant
to Article 3 hereof, and in either case by also delivering or sending a copy of
such notice or demand to the President of Landlord's agent at the Office of the
Building. In every case where under the provisions of this Lease it shall be
necessary or desirable for Landlord to give or serve upon Tenant any notice or
demand it shall be sufficient either (a) to deliver or cause to be delivered to
Tenant a written or printed copy of such notice or demand, or (b) to send a
written or printed copy of said notice on demand by mail, postage prepaid,
addressed to Tenant at the Premises, or (c) to leave a written or printed copy
of said notice or demand upon the Premises or post the same upon any door
leading into the Premises.
20. NO SOLICITATION. Tenant shall not by itself or through any officer,
salesman, employee, agent, advertisement or otherwise solicit business in the
vestibules, entrances, elevator lobbies, corridors, hallways, elevators or other
common areas of the Building.
21. CONDEMNATION. If the whole or any part of the Premises or Building
shall be taken or condemned by any competent authority for any public use or
purpose or if any adjacent property or street shall be condemned or improved in
such manner as to require the use of any part of the Premises or Building, the
term of this Lease, at the option of Landlord, shall end upon the date when the
possession of the part so taken shall be required for such use or purpose and
Landlord shall be entitled to receive the entire award, if any, without any
payment to Tenant. Current rent shall be apportioned as of the date of such
termination.
22. NONWAIVER. No waiver of any condition expressed in this Lease shall
be implied by any neglect of Landlord to enforce any remedy on account of the
violation of such
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condition if such violation be continued or repeated subsequently, and no
express waiver shall affect any condition other than the one specified in such
waiver and that one only for the time and in the manner specifically stated. The
receipt and acceptance by Landlord of a sum of money which is less than the
amount due and owning shall not, regardless of any endorsements or instructions
to the contrary, constitute an accord and satisfaction. No receipt of moneys by
Landlord from Tenant after the termination in any way of the Term hereof or of
Tenant's right of possession hereunder or after the giving of any notice shall
reinstate, continue or extent the Term or affect any notice given to Tenant
prior to the receipt of such moneys, it being agreed that after the service of
notice or the commencement of a suit or after final judgment for possession of
the Premises Landlord may receive and collect any rent due, and the payment of
such rent shall not waive or affect such notice, suit or judgment.
23. WAIVER OF NOTICE. Except as provided in Article 15 hereof, Tenant
hereby expressly waives the service of any other notice of intention to
terminate this Lease or to re-enter the Premises and waives the service of any
demand for payment of rent or for possession and waives the service of any other
notice or demand prescribed by any statute or other law.
24. FIRE OR CASUALTY. If the Premises or the Building (including
machinery and equipment used in its operations) shall be destroyed or damaged by
fire or other casualty and if the Premises or Building may be repaired and
restored within ninety (90) days (plus such additional time during which
Landlord may be prevented or delayed from completing the repairs for causes
beyond its reasonable control, including without limitation, adjustments on
insurance policies), after such damage then Landlord shall have the option to
(a) repair and restore the same with reasonable promptness; or (b) elect to
demolish the Building or cease its operation, in which event this Lease shall
automatically be cancelled and terminated as of the date of such damage. In the
event any such damage not caused by the act or neglect of Tenant, its agents,
servants, employees, guests, licenses or invitees renders the Premises
untenantable and if this Lease shall not be cancelled and terminated by reason
of such damage, then rent shall abate during the period beginning with the date
of such fire or other casualty and ending with the date Landlord's work is
substantially completed, abatement to be in an amount bearing the same ratio to
the total amount of rent for such period as the untenantable portion of the
Premises bears to the entire Premises. Landlord's work shall include, and
Landlord shall have no duty relating to, the repair or restoration of Tenant's
fixtures or tenant improvements (including tenant improvements acquired by
Tenant from former tenants or existing in the Premises as of the date such space
is leased to, or occupied by, Tenant), including, but not limited to, special
wall and floor coverings, special lighting fixtures, built-in cabinets and
bookshelves and glass demising walls.
If such damage renders the Premises untenantable, in whole or in part,
and if, in Landlord's judgment, such damage cannot reasonably be repaired and
restored within ninety (90) days (plus such additional time during which
Landlord may be prevented or delayed from completing the repairs for causes
beyond its reasonable control, including without limitation, adjustments on
insurance policies), either party shall have the right to cancel and terminate
this Lease as of the date of such damage, provided, however, that Tenant may not
elect to terminate this Lease if such damage was caused by the act or neglect of
Tenant, its agents, servants, employees, guests, licensees or invitees. Any
right to terminate or any other option provided for
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<PAGE> 17
any party in this Article 24 must be exercised by written notice to the other
party served within one hundred (100) days after such damage shall have
occurred.
25. INSURANCE. In consideration of the leasing of the Premises at the
rental stated in Articles 3 and 4, Landlord and Tenant agree to provide
insurance and allocate the risk of loss as follows:
Tenant, at its sole cost and expense, agrees to purchase and keep in
force and effect during the Term hereof (a) Property Insurance on its
merchandise, inventory, tenant improvements (including tenant improvements
acquired by Tenant from former tenants or existing in the Premises as of the
date such space is leased to, or occupied by, Tenant), contents, furniture,
fixtures, equipment and other personal property located in the Building,
protecting Landlord and Tenant from damage or other loss caused by those perils
customarily covered by an all risk policy, and in any event including without
limitation, fire or other casualty, vandalism, theft, sprinkler leakage, water
damage (however caused), explosion, malfunction and failures of heating and
cooling or similar apparatus, perils covered by extended coverage, and other
similar perils in amounts not less than the full insurable replacement value of
such property with a deductible amount not in excess of One Thousand Dollars
($1,000), and (b) broad from Comprehensive General Liability Insurance,
including blanket contractual liability, host liquor liability (if alcoholic
liquor within the meaning of the Illinois Liquor Control Act will be given to
guests), personal injury liability, and broad form property damage liability
coverages, with limits of not less than Three Million Dollars ($3,000,000) for
personal injury, bodily injury, sickness, disease or for damage or injury to or
destruction of property (including the loss of use thereof) for any one
occurrence. Tenant's Property Insurance policy shall provide that it is specific
and not contributory and shall contain a clause pursuant to which the insurance
carrier waives all rights of subrogation against Landlord with respect to losses
payable under such policy. If the potential for Dram Shop liability shall arise
due to Tenant's activities pursuant to Article 2 of this Lease, the Tenant shall
procure and maintain a policy of Dram Shop liability insurance before
undertaking such activities. Tenant's Property Insurance policy, its
Comprehensive General Liability policy and, if required, its Dram Shop liability
policy, shall each name Landlord, its beneficiaries, and their respective
officers, directors, beneficiaries, partners, agents, and employees as
additional insureds. All such insurance shall be provided by insurers of
recognized responsibility.
Landlord agrees to purchase and keep in force and effect insurance on
the Building against fire and such other risks as may be included in extended
coverage insurance from time to time in an amount not less than the greater of
80 per cent of the full insurable value of the Building or the amount sufficient
to prevent Landlord from becoming a co-insurer under the terms of the applicable
policies and shall contain a clause pursuant to which the insurance carriers
waive all rights of subrogation against the Tenant, its agents, servants and
employees, with respect to losses payable under such policies.
By this Article, Landlord and Tenant intend that the risk of loss or
damage as described above be borne by responsible insurance carriers to the
extent above provided and Landlord and Tenant hereby release each other and
agree to look solely to, and seek recovery only from, their
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respective insurance carriers in the event of a loss of a type described above
to the extent that such coverage is agreed to be provided hereunder. For this
purpose any applicable deductible amount shall be treated as though it were
recoverable under such policies. Landlord and Tenant agree that applicable
portions of all moneys collected from such insurance shall be used toward full
compliance with the obligations of Landlord and Tenant under this Lease in
connection with damage resulting from fire or other casualty.
26. CERTAIN RIGHTS RESERVED BY LANDLORD. Landlord shall have the
following rights, exercisable without notice and without liability to Tenant for
damages or injury to property, person or business and without effecting an
eviction, constructive or actual, or disturbance of Tenant's use or possession
or giving rise to any claim for set-off or abatement of rent:
(A) To change the Building's name or street address.
(B) To install, affix and maintain any and all signs on the exterior
and interior of the Building.
(C) To designate and approve, prior to installation, all types of
window shades, blinds, drapes, awnings, window ventilators and other similar
equipment, and to control all internal lighting that may be visible from the
exterior of the Building.
(D) To reserve to Landlord the exclusive right to designate, limit,
restrict and control any business or any service in or to the Building and its
tenants.
(E) To grant to anyone the exclusive right to conduct any business or
render any service in or to the Building, provided such exclusive right shall
not operate to exclude Tenant from the use expressly permitted herein.
(F) To prohibit the placing of vending or dispensing machines of any
kind in or about the Premises without the prior written permission of Landlord.
(G) To show the Premises to prospective tenants at reasonable hour
during the last twelve (12) months of the Term and if vacated during such year
to prepare the Premises for re-occupancy.
(H) To approve the weight, size and location of safes and other heavy
equipment and bulky articles in and about the Premises and the Building (so as
not to exceed the legal live load), and to require all such items and furniture
and similar terms to be moved into and out of the Building and Premises only at
such times and in such manner as Landlord shall direct in writing. Any damages
done to the Building or to other tenants in the Building by taking in or putting
out safes, furniture, and other articles or from overloading the floor in any
way shall be paid by Tenant. Furniture, boxes, merchandise or other bulky
articles shall be transported within the Building only upon or by vehicles
equipped with rubber tires and shall be carried only in a freight elevator, at
such times as the building manager shall fix. Movements of Tenant's property
into or out of the Building and within the Building are entirely at the risk and
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<PAGE> 19
responsibility of Tenant and Landlord reserves the right to require permits
before allowing any such property to be moved into or out of the Building.
Landlord reserves the right to regulate the movement of, and to inspect, all
property and packages brought into or out of the Building to enforce compliance
with the terms of this Lease and to regulate delivery and service of supplies
and the usage of loading docks, receiving areas and freight elevators.
(I) To have access for the Landlord and other Tenants of the Building
to any mail chutes located on the Premises according to the rules of the United
States Postal Service.
(J) To close the Building after regular working hours and on Saturdays,
Sundays and holidays established by Landlord from time to time subject, however,
to Tenant's right to admittance under such regulations as Landlord may prescribe
from time to time, which may include, by way of example but not of limitation,
that persons entering or leaving the Building identify themselves to a security
officer by registration or otherwise and that said persons establish their right
to enter or leave the Building.
(K) To decorate or to make repairs, alterations, additions, or
improvements, whether structural or otherwise, in and about the Building, the
Property and the Premises, or any part thereof, and for such purposes to enter
upon the Premises, and, during the continuance of any of said work, to
temporarily close doors, entryways, public space and corridors in the Building
or the Property and to interrupt or temporarily suspend Building services and
facilities, all without abatement of rent or affecting any of Tenant's
obligations hereunder, so long as the Premises are reasonably accessible for the
use provided under the Lease.
(L) To change the arrangement, configuration, size or location of
entrances, passageways, doors and doorways, corridors, stairs, toilets and other
public service portions of the Building and the Property not contained within
the Premises or any part thereof.
(M) To change the character or use of any part of the Building or the
Property.
(N) To use for itself the roof, the exterior portions of the Premises
and such areas within the Premises required for structural columns and their
enclosures and the installation of utility lines, Building systems and other
installations required to service the Building, the Property or tenants or
occupants thereof and to maintain and repair same, no rights being hereby
conferred upon Tenant, and, unless otherwise specifically provided herein, to
exercise for itself all rights to the land and improvements below the floor
level of the Premises or the air rights above the Premises and to the land and
improvements located on and within the public areas. Neither Tenant nor its
employees, invitees, guests and agents shall, without obtaining in each instance
the prior written consent of Landlord, which consent shall be conditioned upon
such requirements as Landlord deems appropriate, (1) go above or through
suspended ceilings, (2) remove any ceiling tiles or affix anything thereto,
remove anything therefrom or cut into or alter the same in any way, (3) enter
fan rooms or other mechanical spaces, or (4) open doors or remove panels
providing access to utility lines, Building systems or other installations
required to service tenants.
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<PAGE> 20
(O) At any time hereafter, provided Landlord shall first give Tenant at
least forty-five (45) days' written notice thereof, to substitute for the
Premises other premises in the Building (herein referred to as "the new
premises"), in which event the new premises will be deemed to be the Premises
for all purposes under this Lease, provided the new premises shall be similar to
the Premises in size and configuration and shall be usable for Tenant's
purposes, and such change shall be made in order to install a necessary Building
system or in the sole discretion of Landlord to alter, improve or replace common
areas or elements of the Building. If Tenant is already in occupancy of the
Premises, then, in addition (1) Landlord shall pay the expense of Tenant for
moving from the Premises to the new premises and improving the new premises so
that they are substantially similar to the Premises; and (2) such move shall be
made during evenings, weekends, or otherwise so as to avoid unreasonable
inconvenience to Tenant.
(P) To enter the Premises for the purpose of inspecting them for
general condition and state of repair or effecting repairs or modifications for
the benefit of Landlord, Tenant, or other tenants of the Building. The holder of
any mortgage of the Landlord's interest in the Property, its agents or designees
shall have the same right of entry for inspection as Landlord.
27. RULES AND REGULATIONS. Tenant agrees to observe the reservations to
Landlord in Article 26 hereof and agrees, for itself, its employees, agents,
servants, clients, customers, invitees, licensees and guests to observe and
comply, at all times, with the following rules and regulations and with such
reasonable modifications thereof and additions thereto as Landlord may make for
the Building, and that failure to observe and comply with such reservations,
rules and regulations shall constitute a default under this Lease:
(A) No sign, picture, advertisement or notice, typewritten or
otherwise, shall be displayed, inscribed, painted or affixed on any part of the
outside or inside of the Building, or on or about the Premises hereby demised,
except on glass of the doors and windows of the Premises and on the directory
board of the Building and then only of such nature, color, size, style and
material as shall be first approved by Landlord in writing.
(B) Tenant shall not, without Landlord's prior written consent, install
or operate any heating device, refrigerating or air conditioning equipment,
steam or internal combustion engine, boiler, stove, machinery or mechanical
devices upon the Premises or carry on any mechanical or manufacturing business
thereon, or use or permit to be brought into the Building flammable fluids such
as gasoline, kerosene, benzene, or naphtha or use any illumination other than
electric lights. All equipment, fixtures, lamps and bulbs shall be compatible
with, and not exceed the capacity of, the Building's electrical system. No
explosives, firearms, radioactive or toxic or hazardous substances or materials,
or other articles deemed extra hazardous to life, limb or property shall be
brought into the Building or the Premises.
(C) Tenant shall not make noises, cause disturbances or vibrations, or
use or operate any electrical or electronic devices or other devices that emit
sound or other waves or disturbances, or create odors or noxious fumes, any of
which may be offensive to other tenants and occupants of the Building or that
would interfere with the operation of any device or equipment or radio or
television broadcasting or reception from or within the Building or
-20-
<PAGE> 21
elsewhere, and shall not place or install any projections, antennae, aerials or
similar devices inside or outside of the Premises.
(D) All janitor work and the caring for the Premises, except the
exterior washing of windows, shall be paid for by Tenant. Any person or persons
employed by Tenant to do janitor work, or care for the Premises shall be subject
to and under the control and direction of the building manager while in the
Building and outside of the Premises, but not as agent of Landlord. Tenant shall
be responsible, at its sole cost and expense, for the removal of refuse and
rubbish from the Premises and the Building. Such refuse and rubbish shall be
stored and transported in containers acceptable to Landlord and shall be
deposited in locations acceptable to Landlord.
(E) Tenant shall at its expense provide artificial light for employees
of Landlord while doing work and making repairs or alterations in the Premises.
(F) All telegraph, telephone, and electric connections which Tenant may
desire shall be first approved by Landlord in writing, before the same are
installed, and the location of all wires and the work in connection therewith
shall be subject to the direction of Landlord. Landlord reserves the right to
designate and control the entity or entities providing telephone or other
communication cable installation, repair and maintenance in the Building and to
restrict and control access to telephone cabinets. In the event Landlord
designates a particular vendor or vendors to provide such cable installation,
repair and maintenance for the Building, Tenant agrees to abide by and
participate in such program.
(G) Tenant must list all furniture and fixtures to be taken from the
Building upon a form furnished by Landlord. Such list shall be presented at the
office of the Building for approval before acceptance by the security officer or
elevator operator.
(H) Tenant, its customers, invitees, licensees, agents, servants,
employees and guests shall not encumber or obstruct sidewalks, entrances,
passages, courts, corridors, vestibules, halls, elevators, stairways or other
common areas in or about the Building.
(I) No bicycle or other vehicle and no animal shall be allowed in the
showrooms, offices, halls, corridors or any other parts of the Building.
(J) Tenant shall not allow anything to be placed against or near the
glass in the partitions between the Premises and the halls or corridors of the
Building which shall diminish the light in the halls or corridors.
(K) Tenant shall not allow anything to be placed on the outer window
ledges of the Premises, nor shall anything be thrown by Tenant or its employees
out of the windows of the Building. Tenant shall keep all windows closed.
(L) No additional locks shall be placed upon any doors of the Premises
and no locks shall be changed without the prior written consent of Landlord.
Tenant will not permit any duplicate keys to be made (all necessary keys will be
furnished by Landlord), but if more than
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<PAGE> 22
two keys for any door lock are desired, the additional number must be paid for
by Tenant. Upon Termination of this Lease, Tenant shall surrender all keys of
the Premises and of the Building and give to Landlord the explanation of the
combination of all locks on safes or vault doors in the Premises.
(M) The building manager shall at all times keep a pass key and be
allowed admittance to the Premises to cover any emergency, fire or other
casualty that may arise and in other appropriate instances. Landlord and
Landlord's agents shall have the right to enter the Premises at all reasonable
hours to examine the same.
(N) Unless otherwise advised by Landlord, neither Tenant nor its
employees shall undertake to regulate the radiator controls or thermostats.
Tenant shall report to the office of the Building whenever such thermostats or
radiator controls are not working properly or satisfactorily.
(O) If Tenant desires shades or venetian blinds for outside windows,
they must be furnished and installed at the expense of Tenant, and must be of
such type, color, material and make as may be prescribed by Landlord.
(P) Tenant assumes full responsibility for protecting its space from
weather, theft, robbery and pilferage, which includes keeping doors locked and
other means of entry into the Premises closed and secured.
(Q) Tenant shall not peddle, canvass, solicit or distribute handbills
or flyers on or about the Property except as specifically authorized by
Landlord. Peddlers, solicitors and beggars shall be reported to the office of
the Building or as Landlord otherwise requests.
(R) Tenant shall not sell food of any kind or cook in the Building.
Tenant may serve complimentary foods to its guests provided that is shall first
comply with all applicable laws, ordinances, codes and regulations.
(S) Water on the Premises shall not be wasted by Tenant or its
employees by tying or wedging back the faucets of the washbowls or otherwise.
(T) Tenant shall use neither the name of the Building (except as the
address of its business) nor pictures of the Building in advertising or other
publicity or for any other purpose without Landlord's prior written consent.
(U) In the event Tenant designates non-smoking areas in the Premises,
Tenant shall also designate sufficient smoking areas within the Premises for its
employees, and in no event shall Tenant allow its employees to use the public
areas of the Building as smoking areas.
Landlord reserves the right to make such other and further reasonable
rules and regulations as in Landlord's judgment may from time to time be needful
for the safety, care and cleanliness of the Premises and the prudent operation
of the Building and for the preservation of good order therein.
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<PAGE> 23
28. MISCELLANEOUS. Tenant and Landlord further covenant with each other
that:
(A) All rights and remedies of Landlord under this Lease shall be
cumulative, and none shall exclude any other rights and remedies allowed by law.
(B) The word "Tenant" wherever used herein shall be construed to mean
tenants in all cases where there is more than one tenant, and the necessary
grammatical changes required to make the provisions hereof apply either to
corporations or individuals, men or women, shall in all cases be assumed as
though in each case fully expressed. If there is more than one tenant, all
obligations and liabilities hereunder imposed upon Tenant shall be joint and
several.
(C) This Lease and the rights of Tenant hereunder shall be and are
subject and subordinate at all times to any ground leases or master leases and
to the lien of any mortgages or deeds of trust now or hereafter in force against
the Property or the Building, or both of them, and to all advances made or
hereafter to be made upon the security thereof, and to all renewals,
modifications, amendments, consolidations, replacements and extensions thereof.
Any mortgagee or beneficiary under a deed of trust, however, may elect to have
this Lease be superior to its mortgage or deed of trust. This provision is
self-operative and no further instrument of subordination or priority shall be
required. In confirmation of such subordination or priority, Tenant shall
promptly execute such further instruments as may be requested by Landlord and in
the event Tenant fails to do so within ten (10) days after demand in writing
Tenant hereby irrevocably appoint Landlord as attorney-in-fact for Tenant with
full power and authority to execute and deliver in the name of Tenant any such
instruments.
(D) Each of the provisions of this Lease shall extend to and shall, as
the case may require, bind or inure to the benefit of, not only Landlord and
Tenant, but also their respective heirs, legal representatives, successors and
assigns, provided, this clause shall not permit any assignment contrary to the
provisions of Article 12 hereof.
(E) All of the representations and obligations of Landlord are
contained herein and no modification, waiver or amendment of this Lease or any
of its conditions or provisions shall be binding upon Landlord unless in writing
signed by a duly authorized officer of Landlord's agent.
(F) All amounts due and payable from Tenant under this Lease or under
any work order or other agreement relating to the Premises shall e considered as
rent and, if unpaid when due, shall bear interest from such date until paid at
the maximum legal rate of interest allowable on the date first above written.
(G) Submission of this instrument for examination shall not bind
Landlord in any manner, and no lease or obligation on Landlord shall arise until
this instrument is signed and delivered by Landlord and Tenant.
(H) No rights to light or air over any property, whether belonging to
Landlord or any other persons, are granted to Tenant by this Lease.
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<PAGE> 24
(I) The laws of the State of Illinois shall govern the validity,
performance and enforcement of this Lease. The invalidity or unenforceability of
any provision of this Lease shall not affect or impair any other provision.
(J) Landlord's title is and always shall be paramount to the title of
Tenant. Nothing herein contained shall empower Tenant to commit or engage in any
act which can, shall or may encumber the title of Landlord.
(K) In case Landlord or any successor owner of the Property or the
Building shall convey or otherwise dispose of any portion thereof to another
person, such other person shall in its own name thereupon be and become Landlord
hereunder and shall assume fully in writing and be liable upon all liabilities
and obligations of this Lease to be performed by Landlord which first arise
after the date of conveyance, and such original Landlord or successor owner
shall, from and after the date of conveyance, be free of all liabilities and
obligations not then incurred.
(L) Neither this Lease, nor any memorandum, affidavit or other writing
with respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant, and the recording thereof in violation of this
provision shall constitute a material breach of this Lease.
(M) Nothing contained in this Lease shall be deemed or construed by the
parties hereto or by any third party to create the relationship of principal and
agent, partnership, joint venture or any association or relationship between
Landlord and Tenant other than that of landlord and tenant.
(N) Landlord shall have the right to apply payments received from
Tenant pursuant to this Lease (regardless of Tenant's designation of such
payments) to satisfy any obligations of Tenant hereunder, in such order and
amounts as Landlord in its sole discretion may elect.
(O) All indemnities, covenants and agreements of Tenant contained
herein which inure to the benefit of Landlord shall be construed to inure also
to the benefit of Landlord's beneficiaries, and their respective officers,
directors, beneficiaries, partners, agents and employees.
29. ATTORNMENT. Upon request of the holder of any not secured by a
mortgage or deed of trust on the Building or Property, Tenant will agree in
writing that no action taken by such holder to enforce said mortgage or deed of
trust shall terminate this Lease or invalidate or constitute a breach of any of
the provisions hereof and Tenant will attorn to such mortgagee or holder, or to
any purchaser of the Property or Building, at any foreclosure sale or sale in
lieu of foreclosure, for the balance of the Term of this Lease and on all other
terms and conditions herein set forth.
30. ESTOPPEL CERTIFICATE. Tenant agrees that from time to time upon not
less than ten (10) days' prior request by Landlord, Tenant or Tenant's duly
authorized representative having knowledge of the following facts shall deliver
to Landlord a statement in writing certifying (a) that this Lease is unmodified
and in full force and effect (or if there have
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<PAGE> 25
been modifications that the Lease as modified is in full force and effect; (b)
the dates to which the rent, rent adjustments and other charges have been paid;
(c) that neither Landlord nor Tenant is in default under any provision of this
Lease, or, if in default, the nature thereof in detail; and (d) that there are
no offsets or defenses to the payment of Base Rent, additional rent or any other
sums payable under this Lease, or if there are any such offsets or defenses,
specifying such in detail. In the event, Tenant fails to deliver such statement
to Landlord within such 10-day period, Tenant hereby irrevocably appoints
Landlord as attorney-in-fact for Tenant with full power and authority to execute
and deliver in the name of Tenant any such statement, which statement shall be
binding upon Tenant and may be relief upon by Landlord and any third party.
31. BROKERS. Tenant represents and warrants to Landlord that neither it
nor its officers or agents nor anyone acting on its behalf has dealt with any
real estate in the negotiation or making of this Lease, and Tenant agrees to
indemnify and hold harmless Landlord from the claims or claims of any broker or
brokers claiming to have interested Tenant in the Building or Premises or
claiming to have caused Tenant to enter into this Lease.
32. TRUSTEE CLAUSE. It is expressly understood and agreed that this
Lease is executed on behalf of LASALLE NATIONAL TRUST, N.A., not personally but
as Trustee as aforesaid, in the exercise of the power and authority conferred
upon and invested in it as such Trustee, and under the direction of the
beneficiaries of a certain Trust Agreement dated May 27, 1981, and known as
trust No. 104000. It is further expressly understood and agreed that LASALLE
NATIONAL TRUST N.A., as Trustee aforesaid, has no right or power whatsoever to
manage, control or operate said real estate in any way or to any extent and is
not entitled at any time to collect or receive for any purpose, directly or
indirectly, the rents, issues, profits or proceeds of said real estate or any
lease or sale or any mortgage or any disposition thereof. Nothing in this Lease
contained shall be construed as creating any personal liability of the Trustee
or any of the beneficiaries of the Trust, or any of their respective officers,
directors, beneficiaries, partners, agents, and employees, and in particular,
without limiting the generality of the foregoing, there shall be no personal
liability to pay any indebtedness accruing hereunder or to perform any covenant,
either expressly or impliedly herein contained, or to keep, preserve or
sequester any property of said Trust or for said Trustee to continue as said
Trustee; and that so far as the parties herein are concerned the owner of any
indebtedness or liability accruing hereunder shall look solely to and attempt to
collect solely from the trust estate from time to time subject to the provisions
of said Trust Agreement for payment thereof, Tenant hereby expressly waiving and
releasing said personal liability and personal responsibility of the Trustee and
any of the beneficiaries of the Trust, and any of their respective officers,
directors, beneficiaries, partners, agents and employees on behalf of itself and
all persons claiming by, through or under Tenant.
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<PAGE> 26
34. RIDERS. All riders attached to this Lease and signed by Landlord
and Tenant are made a part hereof and are incorporated herein by reference.
IN TESTIMONY WHEREOF, the parties hereto have caused this instrument to
be executed in duplicate as of the day and year first above written.
TENANT: LANDLORD:
WINSTON FURNITURE COMPANY OF LASALLE NATIONAL TRUST, N.A., not
ALABAMA, INC. individually but as Trustee under a
Trust Agreement dated May 27, 1981, and
known as trust No. 10400, as aforesaid.
By: /s/ Bobby Tesney By: /s/ Joshua [Illegible]
- ----------------------------- ---------------------------------------
Vice President
Attest: /s/ [ILLEGIBLE]
- -----------------------------
CERTIFICATE
(If Tenant is a Corporation)
I, VINCENT A. TORTORICI, Assistant Secretary of WINSTON FURNITURE COMPANY OF
ALABAMA, INC., Tenant, hereby certify that the foregoing Lease has been
authorized by all necessary corporate action on behalf of Tenant, the officer(s)
executing the foregoing lease on behalf of Tenant was/were duly authorized to
act in his/their capacities as PRESIDENT and ________________________ and
his/their action(s) are the action of Tenant.
(Corporate Seal)
/s/ Vincent A. Tortorici
-----------------------------------
Assistant Secretary
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<PAGE> 27
Rider attached to and made a part of a Lease dated APRIL 1, 1996, by and
between LaSalle National Trust N.A., not individually but as Trustee under a
Trust Agreement dated May 27, 1981, and known as Trust No. 104000 (hereinafter
"Landlord") and WINSTON FURNITURE COMPANY OF ALABAMA, INC., an Alabama
corporation (hereinafter, "Tenant").
35. RENT ADJUSTMENTS. Article 4 of the Lease is hereby amended by
adding the following thereto:
"Notwithstanding anything to the contrary herein contained, it is
understood and agreed that the rent adjustments payable by Tenant pursuant to
Article 4 shall be based only upon Ownership Taxes and Operating Expenses
allocable to the "Non-Retail Section" of the Building. For purposes hereof, the
"Non-Retail Section" of the Building means the entire Building and Property
exclusive of the "Retail Center". The "Retail Center" consists of the first and
second floors of the Building, excluding those portions of the first and second
floors of the Building. In determining the Ownership Taxes and Operating
Expenses with respect to the Non-Retail Section of the Building in accordance
with the provisions of Article 4, the parties acknowledge that Landlord shall
make a reasonable allocation between the Non-Rtail Section of the Building and
the Retail Center of those items which pertain to the entire Building or which
are shared or purchased on a building-wise basis and Landlord may, but need not,
make such allocation of the basis of relative size or use."
36. ABATEMENT. In consideration of the covenants and agreements herein
contained, and so long as Tenant is not in default under the terms, covenants
and agreements contained in this Lease, it is expressly understood and agreed
that Base Rent for the period beginning April 1, 1996 and ending September 30,
1996, in the amount of Four Thousand Six Hundred Ninety-Five and 83/100 Dollars
($4,695.83) per month, for a total of Twenty Eight Thousand one Hundred Seventy
Four and 98/100 Dollars ($28,174.98) ("Abatement") shall abate and Tenant
shall have no liability therefore; provided, however, that in the event this
Lease, or Tenant's right of possession, is terminated prior tot he regularly
scheduled expiration date of the Term then in such event, in addition to all
other rights and remedies available to Landlord hereunder, Tenant agrees to pay
to landlord as additional rent under this Lease an amount equal to the
unamortized amount of the Abatement as of the date of such termination.
TENANT: WINSTON FURNITURE COMPANY OF LANDLORD: LASALLE NATIONAL TRUST, N.A.,
ALABAMA, INC. individually but as Trustee under a
Trust Agreement dated May 27, 1981, and
known as Trust No. 104000, as
aforesaid.
By: /s/ Bobby Tesney By: /s/ [ILLEGIBLE]
-------------------------------- ----------------------------------
Senior Vice President
Attest: /s/ [ILLEGIBLE]
- ------------------------------------
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<PAGE> 1
Exhibit 10.5
THE MERCHANDISE MART
This Lease made on _________________ between LASALLE NATIONAL TRUST
N.A., not individually but as Trustee under a Trust Agreement dated May 27,
1981, and known as Trust No. 104000 ("Landlord") and WINSTON FURNITURE COMPANY
OF ALABAMA, INC., a corporation organized and existing under the laws of the
State of Alabama ("Tenant").
WITNESSETH
1. DEMISED PREMISES; TERM. Landlord does hereby demise and lease to
Tenant, and Tenant accepts that certain space shown hatched on Exhibit "A" which
is attached hereto and made a part hereof, commonly described as Room(s) 1747,
1748, 1749, 1750, and 1751 ("Premises") on the seventeenth floor(s) of The
Merchandise Mart, a building located at Merchandise Mart Plaza ("Building")
constructed on property bounded by West Kinzie Street, North Orleans Street, the
Chicago River, and North Wells Street in Chicago, Illinois (such land and
Building hereinafter referred to, together with all present and future
easements, additions, improvements and other rights appurtenant thereto, as the
"Property"), for a term beginning September 1, 1996 and ending August 31, 2002
("Term"), unless sooner terminated as provided herein, subject to the terms,
covenants and agreements herein contained.
2. USE. Tenant will use and occupy the Premises for the sale and
display of summer and casual furniture at wholesale only and for no other use or
purpose. Tenant will not use or permit upon the Premises anything that will
invalidate any policies of insurance now or hereafter carried on the Building
which may be caused by the use which Tenant shall make of the Premises (other
than a use stated in the first sentence hereof). Tenant will not (a) use or
permit upon the Premises anything that may be dangerous to life or limb; (b) in
any manner deface or injure the Building or any part thereof or overload the
floors of the Premises; or (c) do anything or permit anything to be done upon
the Premises in any way tending to create a nuisance or tending to disturb any
other tenant in the Building or the occupants of neighboring property, or
tending to injure the reputation of the Building. Tenant shall further not
carry-on or permit any activities which might: (1) involve the storage, use or
disposal of medical or hazardous waste substances or the creation of an
environmental hazard; or (2) impair or interfere with (i) the structure of the
Building or the operation of Building systems, (ii) the character, reputation or
appearance of the Building as a first-class building, (iii) the furnishing of
services (including utilities, telephone and communications) to any portion of
the Building, or (iv) the enjoyment by any other occupants of the Building or
the benefits of such occupancy (for example, free of noise, odors or vibration
emanating from the Premises). The Premises shall not be used for the purposes of
any so called "office suites", schools, employment agencies or medical treatment
facilities. Unless the Premises shall be closed because of needed repairs,
revisions or decorating, Tenant shall otherwise keep the same open, fully
lighted and available for business activity during each and every day of the
Term hereby demised, Saturdays, Sundays and holidays as established by Landlord
from time to time only excepted, and the same shall be kept open by Tenant each
day for business during the customary business hours established in the Building
which are currently from 9:00 A.M. to 5:00 P.M. and during such additional hours
(including Saturdays, Sundays and holidays established by Landlord from time to
time) during market
<PAGE> 2
exhibitions in the Building when such exhibitions include a type of merchandise
sold by Tenant in the Premises. Tenant will fully and promptly comply, and
operate the Premises in conformity, with all applicable federal, state and
municipal laws, ordinances, codes, regulations and requirements respecting the
Premises or Tenant's use or occupancy thereof, and activities therein, and
Tenant will not use the Premises for lodging or sleeping purposes, nor conduct
or permit to be conducted on the Premises any business or activity which is
contrary to the provisions of this Lease or to any applicable governmental laws,
ordinances, codes, regulations and requirements. Tenant shall promptly pay all
taxes of whatever kind which are imposed upon Tenant but which are to be
collected by Landlord. Tenant shall at no time sell food on or from the
Premises. Tenant shall at no time sell (within the meaning of the Illinois
Liquor Control Act, as now or hereafter amended) alcoholic liquor on or from the
Premises, provided, however, that Tenant may occasionally give complimentary
food and alcoholic liquor to its guests on the Premises, on condition that
Tenant shall comply with all applicable governmental requirements, and on
further condition that, prior to the giving of such alcoholic liquor, Tenant
shall procure and maintain continuously thereafter (or cause to be procured and
maintained continuously thereafter) in force a policy of host liquor liability
insurance or Dram Shop liability insurance, as set forth in Article 25 hereof.
3. BASE RENT. Tenant shall pay to Landlord an annual base rent ("Base
Rent") for the Premises as shown below for each respective period in equal
monthly installments during each respective period as follows:
<TABLE>
<CAPTION>
PERIOD ANNUAL BASE RENT MONTHLY INSTALLMENT
- ----------------------------------- ------------------------- -----------------------------
<S> <C> <C>
9/1/96--8/31/02 $257,763.00 $21,480.25
</TABLE>
Tenant shall pay each installment in advance on the first day of every calendar
month of the Term, except for the first month's rent which is due and payable on
execution of this Lease. All such payments shall be made payable to Landlord or
Landlord's agent and shall be made at the office payable without any prior
demand therefor and without any deductions or set-offs whatsoever. If the Term
commences on a day other than the first day of the calendar month, or ends on a
day other than the last day of the calendar month, the Base Rent for such
fractional month shall be prorated on the basis of 1/360th of the annual Base
Rent for each day of such fractional month.
[4. OMITTED]
5. CONDITION OF PREMISES. Tenant's entry into possession of all or any
part of the Premises shall be conclusive evidence as against Tenant that such
part of the Premises was in good order and satisfactory condition when Tenant
took possession. Tenant acknowledges that no promise of Landlord or its agents
to alter, remodel or improve the Premises or the Building and no representation
respecting the condition of the Premises or the Building have been made by
Landlord or its agents to Tenant other than as may be contained herein.
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6. POSSESSION. In the event that possession of the Premises shall not
be delivered to Tenant on the date above fixed for the commencement of the Term,
this Lease shall nevertheless continue in full force and effect, and no
liability shall arise against Landlord out of any such delay beyond the
abatement of rent until possession of the Premises is delivered to Tenant;
provided, however, that there shall be no abatement of rent if the Premises are
not delivered to Tenant due to any delay caused by, or resulting from the fault
of, Tenant. If Tenant, with Landlord's permission, shall enter possession of all
or any part of the Premises prior to the date fixed above for the first day of
the Term, all of the covenants and conditions of this Lease shall be binding
upon the parties hereto in respect of such possession the same as if the first
day of the Term had been fixed as of the date when Tenant entered such
possession and Tenant shall pay to Landlord as rent for the period prior to the
first day of the Term a proportionate amount of the Base Rent as set forth
above. It is expressly understood that Tenant's obligation to pay rent commences
on the date that possession of the Premises is delivered to Tenant and no
liability, by abatement of rent or otherwise, shall arise against Landlord as a
result of delays in occupancy caused by decoration or other work in the
Premises, done by Landlord or Tenant, under the Lease or any other agreement.
7. REPAIRS. Tenant will, at its own expense and subject to the
provisions of Article 8 of this Lease, keep the Premises in good _____ and
tenantable condition at all times during the Term of this Lease, and Tenant
shall promptly and adequately repair all damages to the Premises (except for
reasonable wear and tear and as otherwise provided in Article 25 of this Lease)
and replace or repair all damaged or broken glass (including any glass demising
walls and signs thereon), fixtures and appurtenances, under the direct
supervision and with the approval of Landlord and within any reasonable period
of time specified by Landlord. If Tenant does not do so, or at Landlord's
election, Landlord may, but need not, make such repairs or replacements and the
amount paid by Landlord for such repairs and replacements (including Landlord's
overhead and profit and the cost of general conditions) shall be deemed
additional rent reserved under this Lease due and payable forthwith. Landlord
may, but shall not be required so to do, enter the Premises at all reasonable
times to make such repairs or alterations, improvements and additions, including
but not limited to ducts and all other facilities for air conditioning service,
as Landlord shall desire or deem necessary for the safety, preservation or
improvement of the Premises or the Building or any equipment located in the
Building, or as Landlord may be required to do by the City of Chicago or by the
order or decree of any court or by any other governmental authority.
In the event Landlord or its agents or contractors shall elect or be
required to make repairs, alterations, improvements or additions to the Premises
or the Building or any equipment located in the Building, Landlord shall be
allowed to take into and upon the Premises all material that may be required to
make such repairs, alterations, improvements or additions and, during the
continuance of any of said work, to temporarily close doors, entryways, public
space and corridors in the Building and to interrupt or temporarily suspend
Building services and facilities without being deemed or held guilty of eviction
of Tenant or for damages to Tenant's property, business or person, and the rent
reserved herein shall in no way abate while said repairs, alterations,
improvements or additions are being made, and Tenant shall not be entitled to
maintain any set-off or counterclaim for damages of any kind against Landlord by
reason thereof. Landlord may, at its option, make all repairs, alterations,
improvements and additions in and
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about the Building and the Premises during ordinary business hours, but if
Tenant desires to have the same done during any other hours Tenant shall pay for
all overtime and additional expenses resulting therefrom.
8. ALTERATIONS. Tenant shall not, without the prior written consent of
Landlord in each instance obtained, make any repairs, replacements, alterations,
improvements or additions (collectively "Improvements") to the Premises. In the
event Tenant desires to make any Improvements, Tenant shall first seek
Landlord's consent therefor, and Landlord's consent to any such Improvements
shall be conditioned upon such requirements as Landlord deems appropriate,
including without limitation, the submission of detailed plans and
specifications. All such Improvements shall be done at Tenant's expense by
employees or agents of Landlord or contractors hired by Landlord except to the
extent Landlord gives its prior written consent to Tenant hiring its own
contractors, and, in either event, Tenant shall pay to Landlord or its agent a
charge for supervision, general conditions, overhead, Landlord's profit and
other costs and expenses incurred by Landlord in connection with such work, as
established by Landlord from time to time.
In the event that Tenant uses its own contractors for the Improvements
Landlord may, without limitation, require Tenant to: (a) comply with such
construction standards or procedures as may be applicable from time to time for
construction activities in the Building; (b) demonstrate that the construction
of such Improvements will not jeopardize labor harmony; (c) submit satisfactory
insurance certificates; (d) obtain all necessary permits; (e) furnish
satisfactory security for the payment of all costs to be incurred in connection
with the Improvements; and (f) upon completing any such Improvements, furnish
Landlord with contractors' affidavits and full and final waivers of lien and
receipted bills covering all labor and material expended and used. There are
some asbestos-containing materials ("ACM") in some areas of the Building.
Landlord has adopted and implemented an abatement and operations and maintenance
program ("O & M Program"), a copy of which is available for review by Tenant,
which sets forth certain procedures to be followed in connection with any
Improvements to be made in the Building, in order to prevent disturbance to any
ACM that may be encountered. Tenant acknowledges, and hereby expressly agrees to
cause its agents, employees and contractors to comply at all times with, the O &
M Program (as amended from time to time).
All Improvements shall comply with all insurance requirements and with
all applicable governmental laws, requirements, codes, ordinances and
regulations. All Improvements shall be constructed in a good and workmanlike
manner and only good grades of material shall be used. Except for Landlord's
negligence, Tenant shall protect, defend, indemnify and hold Landlord, the
Building and the Property, Landlord's beneficiaries, and their respective
officers, directors, beneficiaries, partners, agents and employees harmless from
any and all liabilities of every kind and description which may arise out of or
in connection with such Improvements.
All Improvements made by Landlord or Tenant in or upon the Premises
whether temporary or permanent in character, including but not limited to wall
coverings, carpeting and other floor covering, lighting installations, built-in
or attached shelving, cabinetry, and mirrors, shall become Landlord's property
and shall remain upon the Premises at the termination of this
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Lease by lapse of time or otherwise without compensation to Tenant [excepting
only Tenant's movable office furniture, trade fixtures (other than attached or
installed lighting equipment), and office equipment]; provided, however, that
Landlord shall have the right to require Tenant to remove such Improvements at
Tenant's sole cost and expense in accordance with the provisions of Article 16
of this Lease.
9. SERVICES. Landlord shall provide the following services on all days
during the Term of this Lease excepting Sundays and holidays established by
Landlord from time to time, unless otherwise stated:
(A) Heat will be furnished whenever such heat shall, in Landlord's
judgment, be required for the comfortable occupation of the Premises.
(B) Adequate elevator service will be furnished daily as determined by
Landlord.
(C) Conditioned air will be furnished to the Premises at such time or
times as Landlord's air conditioning system is in operation for the furnishing
of conditioned air to Landlord's other tenants. Landlord represents that it
customarily operates said air conditioning equipment when required for the
purpose of furnishing cooled air during the period commencing on or about the
fifteenth day of May and ending on or about the fifteenth day of October in each
year. Whenever heat-generating machines, equipment or lighting fixtures
installed by Tenant affect the temperature otherwise maintained by Landlord in
the Premises, or whenever the electrical load in the Premises exceeds four and
one-half (4.5) watts per square foot, Landlord shall be relieved of
responsibility for maintaining air conditioning in the Premises, and in such
event Landlord further reserves the right at its option to (1) require Tenant to
discontinue use of such heat-generating machines, equipment, lighting fixtures
or excessive electrical load, or (2) install supplementary air conditioning
units in the Premises, the cost, installation, operation and maintenance of
which shall be paid by Tenant to Landlord at such rates as Landlord charges from
time to time in the Building. Tenant agrees that at all times it will cooperate
with Landlord and abide by all regulations and requirements which Landlord may
prescribe for the proper functioning of the ventilating and air conditioning
systems.
(D) Electricity will be furnished so long as Landlord shall furnish
electric current for light or power to all tenants of the Building during the
Term of this Lease. Tenant agrees to purchase such electric current from
Landlord only, and to pay Landlord for such electric current consumed (measured
by a meter or meters installed by Landlord) at the charges from time to time
customary in the Building. The charges shall be based upon the amount of current
consumed and also the maximum demand of Tenant, both measured and computed in
the manner from time to time customary in the Building. Landlord, upon giving
Tenant not less than thirty (30) days' prior written notice, may discontinue
supplying electric current to Tenant upon connecting the Premises with another
source of supply of electric current. Upon the effective date of such
discontinuance, Tenant agrees to pay Landlord for each month of the remaining
Term of this Lease, as additional rent a sum equal to three cents ($0.03) per
rentable square foot of floor space contained in the Premises. Tenant shall not
install or operate any electrical
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equipment or fixtures that overload lines servicing the Premises or which exceed
the designated electrical load for the Premises specified in Paragraph (C)
above.
(E) Additional services (including after-hour cooling and ventilation
and the provision of water) may be provided on terms and conditions as may be
mutually agreed upon by Landlord and Tenant.
Tenant shall apply to the applicable utility company or municipality
for gas, electricity, telephone and all other utility services, other than those
provided by Landlord, required by Tenant for use in the Premises in accordance
with Article 2 hereof and, subject to Article 8 hereof, Tenant shall be
responsible for the connection and installation of same.
All charges for any services shall be deemed rent reserved under this
Lease and shall be due and payable at the same time as the installment of rent
with which they are billed, or, if billed separately, shall be due and payable
within ten (10) days after such billing. In the event Tenant shall fail to make
payment for such services Landlord may, in addition to all other remedies which
Landlord may have for the non-payment of rent and without notice to Tenant,
discontinue any or all such services (including, without limitation, electric
current for light and power in the Premises), and such discontinuance shall not
be held or pleaded as an eviction or as a disturbance in any manner whatsoever
of Tenant's possession, or relieve Tenant from the payment of rent when due, or
vary or change any other provision of this Lease or render Landlord liable for
damages of any kind whatsoever.
Tenant agrees that neither Landlord nor its beneficiaries nor any of
their respective agents, partners or employees, shall be liable to Tenant, or
any of Tenant's employees, agents, customers or invitees or anyone claiming
through, by or under Tenant, for any damages, injuries, losses, expenses, claims
or causes of action, because of any interruption, diminution, delay or
discontinuance at any time in the furnishing of any of the above services or
operating, maintaining, repairing or supervising the Property when such
interruption, diminution, delay or discontinuance is occasioned, in whole or in
part, by repairs, renewals, improvements or additions, by any strike, lockout or
other labor trouble, by inability to secure gas, electricity, water or other
fuel at the Building, by any accident or casualty whatsoever, by act or default
of Tenant or other parties, or by any other cause beyond Landlord's reasonable
control; nor shall any such interruption, diminution, delay or discontinuance be
deemed an eviction or disturbance of Tenant's use or possession of the Premises
or any part thereof; nor shall any such interruption, diminution, delay or
discontinuance relieve Tenant from full performance of Tenant's obligations
under this Lease.
10. COVENANT AGAINST LIENS. Tenant agrees to pay promptly for any work
done or materials furnished by or on behalf of Tenant in or about the Premises
or to all or any part of the Property and nothing in this Lease contained shall
authorize or empower Tenant to do any act which shall in any way encumber the
title of Landlord in and to the Premises or to the Property, nor shall the
interest or estate of Landlord therein be in any way subject to any claims by
way of lien or encumbrance whether claimed by operation of law or by virtue of
any express or implied contract of Tenant, and any claim to a lien upon the
Premises or the Property arising
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from any act or omission of Tenant shall accrue only against Tenant and shall in
all respects be subordinate to the title and rights of Landlord to the Premises
and the Property. Tenant covenants and agrees not to suffer or permit any lien
or encumbrance to be placed against the Premises, the Building or the Property
with respect to work or services claimed to have been performed for or materials
claimed to have been furnished to Tenant or the Premises and, in case of any
such lien or encumbrance attaching, or claim thereof being asserted, Tenant
agrees to cause it to be immediately released and removed of record. If Tenant
has not removed any such lien or encumbrance within fifteen (15) days after
notice to Tenant by Landlord, such failure shall constitute a default hereunder
and, in addition to all other remedies available herein, Landlord may, but shall
not be obligated to, pay the amount necessary to remove the lien or encumbrance,
without being responsible for making any investigation as to the validity
thereof, and the amount so paid together with all costs and expenses, including
reasonable attorneys' fees, incurred in connection therewith shall be deemed
additional rent reserved under this Lease due and payable forthwith.
11. WAIVER OF CLAIMS. Subject to the provisions of Article 25 hereof,
and except for the negligence of Landlord, Tenant agrees that Landlord,
Landlord's beneficiaries and their respective officers, directors,
beneficiaries, partners, agents, and employees shall not be liable for (nor
shall rent abate as a result of) any direct or consequential damage (including,
without limitation, damages claimed for actual or constructive eviction) either
to person or property sustained by Tenant or other person, due to the Building,
the Property, or any part thereof or any appurtenances thereof becoming out of
repair, or due to the happening of any accident in or about the Building or the
Property, or due to any act or neglect of any tenant or occupant of the Building
or the Property, or any other person. This provision shall apply particularly
(but not exclusively) to damage caused by fire, explosion, water, snow, frost,
steam, sewerage, illuminating gas, sewer gas or odors, or by the bursting or
leaking of pipes, plumbing fixtures, or sprinkler system; without distinction as
to the person whose act or neglect was responsible for the damage and whether
the damage was due to any of the causes specifically enumerated above or to some
other cause of an entirely different kind. Tenant further agrees that all
personal property upon the Premises or brought or caused to be brought within
the Building by Tenant shall be at the risk of Tenant only and that Landlord
shall not be liable for any damage thereto or any theft thereof. Subject to the
provisions of Article 25 hereof, and except for the negligence of Landlord,
Tenant shall protect, indemnify, defend and save Landlord, its beneficiaries and
their respective officers, directors, agents, beneficiaries, partners, and
employees harmless from and against any and all liabilities, damages, costs,
claims, obligations and expenses arising out of or in connection with Tenant's
use or occupancy of the Premises or Tenant's activities in or about the Building
or the Property, or arising from any act or negligence of Tenant or its agents,
contractors, servants, employees or invitees.
12. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior
written consent of Landlord, (a) assign, convey, mortgage, pledge or otherwise
transfer this Lease, or any part thereof, or any interest hereunder; (b) permit
any assignment of this Lease, or any part thereof, by operation of law; (c)
sublet the Premises or any part thereof; or (d) permit the use of the Premises,
or any part thereof, by any parties other than Tenant, its agents and employees.
Tenant shall, by notice in writing, advise Landlord of its desire from, on and
after a
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stated date (which shall not be less than thirty (30) days after the date of
Tenant's notice), to assign this Lease, or any part thereof, or to sublet any
part or all of the Premises for the balance or any part of the Term. Tenant's
notice shall: state the name and address of the proposed assignee or subtenant
and provide such financial information on the proposed assignee or subtenant and
assignment or sublease (whether contained in such assignment or sublease or in
separate agreements) and state the consideration therefor; and include a true
and complete and fully-executed copy of the proposed assignment or sublease and
any and all other agreements relating thereto. In such event, Landlord shall
have the right, to be exercised by giving written notice to Tenant within thirty
(30) days after receipt of Tenant's notice, to recapture the space described in
Tenant's notice and such recapture notice shall, if given, cancel and terminate
this Lease with respect to the space therein described as of the date stated in
Tenant's notice. If Tenant's notice shall cover all of the Premises, and
Landlord shall have exercised its foregoing recapture right, the Term of this
Lease shall expire and end on the date stated in Tenant's notice as fully and
completely as if that date had been herein definitely fixed for the expiration
of the Term. If, however, this Lease be cancelled with respect to less than the
entire Premises, Base Rent and rent adjustments reserved herein shall be
adjusted on the basis of the number of rentable square feet retained by Tenant
in proportion to the number of rentable square feet contained in the Premises,
as described in this Lease, and this Lease as so amended shall continue
thereafter in full force and effect.
If Landlord, upon receiving Tenant's notice with respect to any such
space, shall not exercise its right to recapture as aforesaid, and if Tenant is
not in default under the terms of this Lease, Landlord will not unreasonably
withhold its consent to Tenant's assignment of the Lease or subletting such
space to the party identified in Tenant's notice and upon the terms set forth in
Tenant's notice, provided, however, that in the event Landlord consents to any
such assignment or subletting, and as a condition thereto, Tenant shall pay to
Landlord ninety per cent (90%) of all profit derived by Tenant from such
assignment or subletting. For purposes of the foregoing, profit shall be deemed
to include, but shall not be limited to, the amount paid or payable to Tenant or
any other party to effect or to induce Tenant or any third party to enter into
any such transaction, and the amount of all rent and other consideration of
whatever nature payable by such assignee or sublessee or a third party in excess
of the Base Rent and rent adjustments payable by Tenant under this Lease. If a
part of the consideration for such assignment or subletting shall be payable
other than in cash, the payment to Landlord of its share of such non-cash
consideration shall be in such form as is satisfactory to Landlord.
Tenant shall and hereby agrees that it will furnish to Landlord upon
request from Landlord a complete statement, certified by an independent
certified public accountant, setting forth in detail the computation of all
profit derived and to be derived from such assignment or subletting, such
computation to be made in accordance with generally accepted accounting
principles. Tenant agrees that Landlord or its authorized representatives shall
be given access at all reasonable times to the books, records and papers of
Tenant relating to any such assignment or subletting, and Landlord shall have
the right to make copies thereof. The Percentage of profit due Landlord
hereunder shall be paid to Landlord within two (2) days of receipt of each
payment of profit made from time to time by such assignee or sublessee to
Tenant.
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For purposes of the foregoing, (a) if Tenant is a partnership, any
change in the partners of Tenant, or (b) if Tenant is a corporation the voting
stock of which is not listed on a nationally recognized security exchange, any
transfer of any or all of the shares of stock of Tenant by sale, assignment,
operation of law or otherwise resulting in a change in the present control of
such corporation by the person or persons owning a majority of such shares as of
the date of this Lease, or (c) the transfer of all or substantially all of the
assets of Tenant, shall be deemed to be an assignment within the meaning of this
Article 12.
Landlord's consent to any assignment or sublease shall not operate as a
consent to any subsequent assignment or sublease or as a waiver of Landlord's
right to require Tenant to seek Landlord's approval of all subsequent
assignments and subleases. Any subletting or assignment hereunder shall not
release or discharge Tenant of or from any liability, whether past, present or
future, under this Lease, and Tenant shall continue fully liable thereunder. Any
subsequent or assignee shall agree in a form satisfactory to Landlord to comply
with and be bound by all of the terms, covenants, conditions, provisions and
agreements of this Lease to the extent of the space sublet or assigned, and
Tenant shall deliver to Landlord promptly after execution, an executed copy of
each such sublease or assignment and an agreement of compliance by each such
subtenant or assignee. Tenant agrees to pay to Landlord, on demand, all
reasonable costs incurred by Landlord (including fees paid to consultants,
brokers, accountants and attorneys) in connection with any request by Tenant for
Landlord to consent to any assignment or subletting by Tenant. Any sale,
assignment, mortgage, transfer, or subletting of this Lease which is not in
compliance with the provisions of this Article shall be of no effect and void.
Notwithstanding any requirement for Landlord to consider, solicit or obtain a
sublease or assignment, whether statutory or otherwise, Landlord and Tenant
expressly agree that Landlord's obligation with respect to such sublease or
assignment shall arise only when Tenant submits such sublease or assignment to
Landlord in the manner set out in this Article 12.
13. EXPENSES OF ENFORCEMENT. Tenant shall pay all attorneys' fees and
expenses of Landlord incurred in enforcing any of the obligations of Tenant
under this Lease. In case Landlord shall, without fault on its part, be made a
party to any litigation commenced by or against Tenant, then Tenant shall pay
all cost, expense and reasonable attorney's fees incurred or paid by Landlord in
connection with such litigation.
14. LANDLORD'S LIEN. Landlord shall have a first lien upon any and all
rents from permitted subtenants or assignees of Tenant (if any), upon the
interest of Tenant under this Lease and upon all the goods and chattels of
Tenant which may at any time be affixed to the Premises, to secure the payment
of all money due under this Lease.
15. LANDLORD'S REMEDIES. If default shall be made in the payment of the
rent or any installment thereof or in the payment of any other sum required to
be paid by Tenant under this Lease, or under the terms of any other lease or
agreement between Landlord and Tenant, and such default shall continue for ten
(10) days after written notice to Tenant or if default shall be made in the
performance of any of the other covenants or conditions which Tenant is required
to observe and perform hereunder or under any other lease or agreement between
Landlord and Tenant and such default shall continue for thirty (30) days after
written
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notice to Tenant or if the interest of Tenant in this Lease shall be levied on
under execution or other legal process, or if any petition shall be filed by or
against Tenant to declare Tenant a bankrupt or to delay, reduce or modify
Tenant's debts or obligations or if any petition shall be filed or other action
taken to reorganize or modify Tenant's capital structure, if Tenant be a
corporation or other entity, of if Tenant be declared insolvent according to law
or if any assignment of Tenant's property shall be made for the benefit of
creditors or if a receiver of trustee is appointed for Tenant or its property or
if Tenant shall abandon or vacate the Premises during the Term of this Lease,
then Landlord may treat the occurrence of any one or more of the foregoing
events as a breach of this Lease, and thereupon at its option may, without
notice or demand of any kind to Tenant or any other person, have any one or more
of the following described remedies in addition to all other rights and remedies
provided at law or in equity:
(a) Landlord may terminate this Lease and the Term created
hereby, in which event Landlord may forthwith repossess the Premises and be
entitled to recover forthwith as damages a sum of money equal to the value of
the rent provided to be paid by Tenant for the balance of the stated Term of the
Lease, less the fair rental value of the Premises for such period, and any other
sum of money and damages owed by Tenant to Landlord.
(b) Landlord may terminate Tenant's right of possession and
may repossess the Premises by forcible entry and detainer suit, or otherwise,
without demand or notice of any kind to Tenant and without terminating this
Lease, in which event Landlord may, but shall be under no obligation so to do,
relet all or any part of the Premises for such rent and upon such terms as shall
be satisfactory to Landlord (including the right to relet the Premises for a
term greater or lesser than that remaining under the Term of this Lease and the
right to relet the Premises as a part of a larger area and the right to change
the character or use made of the Premises). For the purpose of such reletting,
Landlord may make such repairs, changes, alterations or additions in or to the
Premises as may be necessary or convenient. If Landlord shall fail or refuse to
relet the Premises, then Tenant shall pay to Landlord as damages a sum equal to
the amount of the rent reserved in this Lease for such period or periods. If the
Premises are relet and a sufficient sum shall not be realized from such
reletting after paying all of the costs and expenses of such repairs, changes,
alterations and additions and the expense of such reletting and the collection
of the rent accruing therefrom, to satisfy the rent above provided to be paid.
Tenant shall satisfy and pay any such deficiency upon demand therefor from time
to time; and Tenant agrees that Landlord may file suit to recover any sums
falling due under the terms of this paragraph from time to time and that any
suit or recovery of any portion due Landlord hereunder shall be no defense to
any subsequent action brought for any amount not theretofore reduced to judgment
in favor of Landlord.
16. SURRENDER OF POSSESSION. On or before the date this Lease and the
Term hereby created terminate, or on or before the date Tenant's right of
possession terminates, whether by lapse of time or at the option of Landlord,
Tenant will: (a) restore the Premises to the same condition they were in at the
beginning of the Term (except for reasonable wear and tear and as otherwise
provided in Article 25 of this Lease) and remove those alterations, improvements
and additions installed by or for the benefit of Tenant (including tenant
improvements acquired by Tenant from former tenants or existing in the Premises
as of the date
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such space is leased to, or occupied by, Tenant) which Landlord shall request
Tenant to remove; (b) remove from the Premises and the Building all of Tenant's
personal property; and (c) surrender possession of the Premises to Landlord. If
Tenant shall fail or refuse to restore the Premises to the above-described
condition on or before the above-specified date, Landlord may enter into and
upon the Premises and put the Premises in such condition, and recover from
Tenant Landlord's cost of so doing. Without limiting the generality of the
foregoing, Tenant agrees to pay Landlord, upon demand, the cost of restoring the
walls, ceilings and floors of the Premises to the same condition that existed
prior to the date of the commencement of any alterations, improvements, or
additions made by or for Tenant's occupancy (or a prior tenant's occupancy if
such alterations, improvements or additions were acquired by Tenant from a
former tenant) of the Premises. If Tenant shall fail or refuse to comply with
Tenant's duty to remove all personal property from the Premises and the Building
on or before the above-specified date, the parties hereto agree and stipulate
that Landlord may, at its election: (1) treat such failure or refusal as an
offer by Tenant to transfer title to such personal property to Landlord, in
which event title thereto shall thereupon pass under this Lease as a bill of
sale to and vest in Landlord absolutely without any cost either by set-off,
credit allowance or otherwise, and Landlord may remove, sell, retain, donate,
destroy, store, discard, or otherwise dispose of all or any part of said
personal property in any manner that Landlord shall choose; or (2) treat such
failure or refusal as conclusive evidence, on which Landlord and any third party
shall be entitled absolutely to rely and act, that Tenant has forever abandoned
such personal property, and without accepting title thereof, Landlord may at
Tenant's expense enter into and upon the Premises and remove, sell, retain,
donate, destroy, store, discard or otherwise dispose of all of any part thereof
in any manner that Landlord shall choose without incurring liability to Tenant
or to any other person. In no event shall Landlord ever become or accept or be
charged with the duties of a bailee (either voluntary or involuntary) of any
personal property; and the failure of Tenant to remove all personal property
from the Premises and the Building shall forever bar Tenant from bringing any
action or from asserting any liability against Landlord with respect to any such
property which Tenant fails to remove. If Tenant shall fail or refuse to
surrender possession of the Premises to Landlord on or before the
above-specified date, Landlord may forthwith re-enter the Premises and repossess
itself thereof as of its former state and remove all persons and effects
therefrom, using such force as may be necessary, without being guilty of any
manner of trespass or forcible entry or detainer.
17. HOLDOVER. Tenant will pay to Landlord an amount equal to double the
sum of the annual Base Rent plus rent adjustments as provided in Section 9-202
of Chapter 110 of the Illinois Revised Statutes, or any corresponding provision
of a successor statute, and in addition thereto, all actual damages, whether
direct or consequential, sustained by Landlord, for all the time Tenant shall
retain possession of the Premises or any part thereof after the termination of
this Lease, whether by lapse of time or otherwise, but the provisions of this
Article shall not operate as a waiver by the Landlord of any right of re-entry
hereinbefore provided. At the option of Landlord, expressed in a written notice
to Tenant and not otherwise, such holding over shall constitute a renewal of the
Lease for a period of one (1) year with the Base Rent for such period in an
amount equal to the greater of the annual Base Rent plus rent adjustments
payable hereunder or the then prevailing rental rates for similar space in the
Building.
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18. MERCHANDISE APPROVAL. Tenant shall not at any time during the Term
of this Lease offer for sale, display for sale, or sell (or cause, authorize or
permit any agent, representative or employee of Tenant so to do) in the Premises
any line of merchandise, except as provided in Article 2 above, without first
obtaining the written consent of Landlord.
19. NOTICE. In every case where it shall be necessary or desirable for
Tenant to give or serve upon Landlord any notice or demand, Tenant shall give
the requisite notice either (a) by delivering or causing to be delivered to
Landlord a written or printed copy of such notice or demand, or (b) by sending a
written or printed copy of such notice or demand by mail, postage prepaid,
addressed to Landlord at the address to which rental payments are made pursuant
to Article 3 hereof, and in either case by also delivering or sending a copy of
such notice or demand to the President of Landlord's agent at the Office of the
Building. In every case where under the provisions of this Lease it shall be
necessary or desirable for Landlord to give or serve upon Tenant any notice or
demand it shall be sufficient either (a) to deliver or cause to be delivered to
Tenant a written or printed copy of such notice or demand, or (b) to send a
written or printed copy of said notice or demand by mail, postage prepaid,
addressed to Tenant at the Premises, or (c) to leave a written or printed copy
of said notice or demand upon the Premises or post the same upon any door
leading into the Premises.
20. NO SOLICITATION. Tenant shall not by itself or through any officer,
salesman, employee, agent, advertisement or otherwise solicit business in the
vestibules, entrances, elevator lobbies, corridors, hallways, elevators or other
common areas of the Building.
21. CONDEMNATION. If the whole or any part of the Premises or Building
shall be taken or condemned by any competent authority for any public use or
purpose or if any adjacent property or street shall be condemned or improved in
such manner as to require the use of any part of the Premises or Building, the
Term of this Lease, at the option of Landlord, shall end upon the date when the
possession of the part so taken shall be required for such use or purpose and
Landlord shall be entitled to receive the entire award, if any, without any
payment to Tenant. Current rent shall be apportioned as of the date of such
termination.
22. NONWAIVER. No waiver of any condition expressed in this Lease shall
be implied by any neglect of Landlord to enforce any remedy on account of the
violation of such condition if such violation be continued or repeated
subsequently, and no express waiver shall affect any condition other than the
one specified in such waiver and that one only for the time and in the manner
specifically stated. The receipt and acceptance by Landlord of a sum of money
which is less than the amount due and owing shall not, regardless of any
endorsements or instructions to the contrary, constitute an accord and
satisfaction. No receipt of moneys by Landlord from Tenant after the termination
in any way of the Term hereof or of Tenant's right of possession hereunder or
after the giving of any notice shall reinstate, continue or extend the Term or
affect any notice given to Tenant prior to the receipt of such moneys, it being
agreed that after the service of notice or the commencement of a suit or after
final judgment for possession of the Premises Landlord may receive and collect
any rent due, and the payment of such rent shall not waive or affect such
notice, suit or judgment.
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23. WAIVER OF NOTICE. Except as provided in Article 15 hereof, Tenant
hereby expressly waives the service of any other notice of intention to
terminate this Lease or to re-enter the Premises and waives the service of any
demand for payment of rent or for possession and waives the service of any other
notice or demand prescribed by any statute or other law.
24. FIRE OR CASUALTY. If the Premises or the Building (including
machinery and equipment used in its operation) shall be destroyed or damaged by
fire or other casualty and if the Premises or Building may be repaired and
restored within ninety (90) days (plus such additional time during which
Landlord may be prevented or delayed from completing the repairs for causes
beyond its reasonable control, including without limitation, adjustments on
insurance policies), after such damage then Landlord shall have the option to
(a) repair and restore the same with reasonable promptness; or (b) elect to
demolish the Building or cease its operation, in which event this Lease shall
automatically be cancelled and terminated as of the date of such damage. In the
event any such damage not caused by the act or neglect of Tenant, its agents,
servants, employees, guests, licensees or invitees renders the Premises
untenantable and if this Lease shall not be cancelled and terminated by reason
of such damage, then rent shall abate during the period beginning with the date
of such fire or other casualty and ending with the date Landlord's work is
substantially completed, abatement to be in an amount bearing the same ratio to
the total amount of rent for such period as the untenantable portion of the
Premises bears to the entire Premises. Landlord's work shall not include, and
Landlord shall have no duty relating to, the repair or restoration of Tenant's
fixtures or tenant improvements (including tenant improvements acquired by
Tenant from former tenants or existing in the Premises as of the date such space
is leased to, or occupied by, Tenant), including, but not limited to, special
wall and floor coverings, special lighting fixtures, built-in cabinets and
bookshelves and glass demising walls.
If such damage renders the Premises untenantable, in whole or in part,
and if, in Landlord's judgment, such damage cannot reasonably be repaired and
restored within ninety (90) days (plus such additional time during which
Landlord may be prevented or delayed from completing the repairs for causes
beyond its reasonable control, including without limitation, adjustments on
insurance policies), either party shall have the right to cancel and terminate
this Lease as of the date of such damage, provided, however, that Tenant may not
elect to terminate this Lease if such damage was caused by the act or neglect of
Tenant, its agents, servants, employees, guests, licensees or invitees. Any
right to terminate or any other option provided for any party in this Article 24
must be exercised by written notice to the other party served within one hundred
(100) days after such damage shall have occurred.
25. INSURANCE. In consideration of the leasing of the Premises at the
rental stated in Articles 3 and 4, Landlord and Tenant agree to provide
insurance and allocate the risk of loss as follows:
Tenant, at its sole cost and expense, agrees to purchase and keep in
force and effect during the Term hereof (a) Property Insurance on its
merchandise, inventory, tenant improvements (including tenant improvements
acquired by Tenant from former tenants or existing in the Premises as of the
date such space is leased to, or occupied by, Tenant), contents, furniture,
fixtures, equipment and other personal property located in the Building,
protecting
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Landlord and Tenant from damage or other loss caused by those perils customarily
covered by an all risk policy, and in any event including without limitation,
fire or other casualty, vandalism, theft, sprinkler leakage, water damage
(however caused), explosion, malfunction and failures of heating and cooling or
similar apparatus, perils covered by extended coverage, and other similar perils
in amounts not less than the full insurable replacement value of such property
with a deductible amount not in excess of One Thousand Dollars ($1,000), and (b)
broad from Comprehensive General Liability Insurance, including blanket
contractual liability, host liquor liability (if alcoholic liquor within the
meaning of the Illinois Liquor Control Act will be given to guests), personal
injury liability, and broad form property damage liability coverages, with
limits of not less than Three Million Dollars ($3,000,000) for personal injury,
bodily injury, sickness, disease or death or for damage or injury to or
destruction of property (including the loss of use thereof) for any one
occurrence. Tenant's Property Insurance policy shall provide that it is specific
and not contributory and shall contain a clause pursuant to which the insurance
carrier waives all rights of subrogation against Landlord with respect to losses
payable under such policy. If the potential for Dram Shop liability shall arise
due to Tenant's activities pursuant to Article 2 of this Lease, the Tenant shall
procure and maintain a policy of Dram Shop liability insurance before
undertaking such activities. Tenant's Property Insurance policy, its
Comprehensive General Liability policy and, if required, its Dram Shop liability
policy, shall each name Landlord, its beneficiaries, and their respective
officers, directors, beneficiaries, partners, agents, and employees as
additional insureds. All such insurance shall be provided by insurers of
recognized responsibility.
Landlord agrees to purchase and keep in force and effect insurance on
the Building against fire and such other risks as may be included in extended
coverage insurance from time to time available in an amount not less than the
greater of 80 percent of the full insurable value of the Building or the amount
sufficient to prevent Landlord from becoming a co-insurer under the terms of the
applicable policies and shall contain a clause pursuant to which the insurance
carriers waive all rights of subrogation against the Tenant, its agents,
servants and employees, with respect to losses payable under such policies.
By this Article, Landlord and Tenant intend that the risk of loss or
damage as described above be borne by responsible insurance carriers to the
extent above provided and Landlord and Tenant hereby release each other and
agree to look solely to, and seek recovery only from, their respective insurance
carriers in the event of a loss of a type described above to the extent that
such coverage is agreed to be provided hereunder. For this purpose any
applicable deductible amount shall be treated as though it were recoverable
under such policies. Landlord and Tenant agree that applicable portions of all
moneys collected from such insurance shall be used toward full compliance with
the obligations of Landlord and Tenant under this Lease in connection with
damage resulting from fire and other casualty.
26. CERTAIN RIGHTS RESERVED BY LANDLORD. Landlord shall have the
following rights, exercisable without notice and without liability to Tenant for
damages or injury to property, person or business and without effecting an
eviction, constructive or actual, or disturbance of Tenant's use or possession
or giving rise to any claim for set-off or abatement of rent:
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(A) To change the Building's name or street address.
(B) To install, affix and maintain any and all signs on the exterior
and interior of the Building.
(C) To designate and approve, prior to installation, all types of
window shades, blinds, drapes, awnings, window ventilators and other similar
equipment, and to control all internal lighting that may be visible from the
exterior of the Building.
(D) To reserve to Landlord the exclusive right to designate, limit,
restrict and control any business or any service in or to the Building and its
tenants.
(E) To grant to anyone the exclusive right to conduct any business or
render any service in or to the Building, provided such exclusive right shall
not operate to exclude Tenant from the use expressly permitted herein.
(F) To prohibit the placing of vending or dispensing machines of any
kind in or about the Premises without the prior written permission of Landlord.
(G) To show the Premises to prospective tenants at reasonable hours
during the last twelve (12) months of the Term and if vacated during such year
to prepare the Premises for re-occupancy.
(H) To approve the weight, size and location of safes and other heavy
equipment and bulky articles in and about the Premises and the Building (so as
not to exceed the legal live load), and to require all such items and furniture
and similar items to be moved into and out of the Building and Premises only at
such times and in such manner as Landlord shall direct in writing. Any damages
done to the Building or to other tenants in the Building by taking in or putting
out safes, and other articles or from overloading the floor in any way shall be
paid by Tenant. Furniture, boxes, merchandise or other bulky articles shall be
transported within the Building only upon or by vehicles equipped with rubber
tires and shall be carried only in a freight elevator, at such times as the
building manager shall fix. Movements of Tenant's property into or out of the
Building and within the Building are entirely at the risk and responsibility of
Tenant and Landlord reserves the right to require permits before allowing any
such property to be moved into or out of the Building. Landlord reserves the
right to regulate the movement of, and to inspect, all property and packages
brought into or out of the Building to enforce compliance with the terms of this
Lease and to regulate delivery and service of supplies and the usage of loading
docks, receiving areas and freight elevators.
(I) To have access for the Landlord and other Tenant of the Building to
any mail chutes located on the Premises according to the rules of the United
States Postal Service.
(J) To close the Building after regular working hours and on Saturdays,
Sundays and holidays established by Landlord from time to time subject, however,
to Tenant's right to admittance under such regulations as Landlord may prescribe
from time to time, which may include, by way of example, but not of limitation,
that persons entering or leaving the Building
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identify themselves to a security officer by registration or otherwise and that
said persons establish their right to enter or leave the Building.
(K) To decorate or to make repairs, alterations, additions, or
improvements, whether structural or otherwise, in and about the Building, the
Property and the Premises, or any part thereof, and for such purposes to enter
upon the Premises, and, during the continuance of any of said work, to
temporarily close doors, entryways, public space and corridors in the Building
or the Property and to interrupt or temporarily suspend Building services and
facilities, all without abatement of rent or affecting any of Tenant's
obligations hereunder, so long as the Premises are reasonably accessible for the
use provided under this Lease.
(L) To change the arrangement, configuration, size or location of
entrances, passageways, doors and doorways, corridors, stairs, toilets and other
public service portions of the Building and the Property not contained within
the Premises or any part thereof.
(M) To change the character or use of any part of the Building or the
Property.
(N) To use for itself the roof, the exterior portions of the Premises
and such areas within the Premises required for structural columns and their
enclosures and the installation of utility lines, Building systems and other
installations required to service the Building, the Property or tenants or
occupants and to maintain and repair same, no rights being hereby conferred upon
Tenant, and, unless otherwise specifically provided herein, to exercise for
itself all rights to the land and improvements below the floor level of the
Premises on the air rights above the Premises and to the land and improvements
located on and within the public areas. Neither Tenant nor its employees,
invitees, guests and agents shall, without obtaining in each instance the prior
written consent of Landlord, which consent shall be conditioned upon such
requirements as Landlord deems appropriate, (1) go above or through suspended
ceilings, (2) remove any ceiling tiles or affix anything thereto, remove
anything therefrom or cut into or alter the same in any way, (3) enter fan rooms
or other mechanical spaces, or (4) open doors or remove panels providing access
to utility lines, Building systems or other installations required to service
tenants.
(O) At any time hereafter, provided Landlord shall first give Tenant at
least forty-five (45) days' written notice thereof, to substitute for the
Premises other premises in the Building (herein referred to as "the new
premises"), in which event the new premises will be deemed to be the Premises
for all purposes under this Lease, provided: the new premises shall be similar
to the Premises in size and configuration and shall be usable for Tenant's
purposes, and such change shall be made in order to install a necessary Building
system or in the sole discretion of Landlord to alter, improve or replace common
areas or elements of the Building. If Tenant is already in occupancy of the
Premises, then, in addition (1) Landlord shall pay the expense of Tenant for
moving from the Premises to the new premises and improving the new premises so
that they are substantially similar to the Premises; and (2) such move shall be
made during evenings, weekends, or otherwise so as to avoid unreasonable
inconvenience to Tenant.
(P) To enter the Premises for the purpose of inspecting them for
general condition and state of repair or effecting repairs or modifications for
the benefit of Landlord, Tenant, or other
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tenants of the Building. The holder of any mortgage of the Landlord's interest
in the Property, its agents or designees shall have the same right of entry for
inspection as Landlord.
27. RULES AND REGULATIONS. Tenant agrees to observe the reservations to
Landlord in Article 26 hereof and agrees, for itself, its employees, agents,
servants, clients, customers, invitees, licensees and guests to observe and
comply, at all times, with the following rules and regulations and with such
reasonable modifications thereof and additions thereto as Landlord may make for
the Building, and that failure to observe and comply with such reservations,
rules and regulations shall constitute a default under this Lease:
(A) No sign, picture, advertisement or notice, typewritten or
otherwise, shall be displayed, inscribed, painted or affixed on any part of the
outside or inside of the Building, or on or about the Premises hereby demised,
except on glass of the doors and windows of the Premises and on the directory
board of the Building and then only of such nature, color, size, style and
material as shall be first approved by Landlord in writing.
(B) Tenant shall not, without Landlord's prior written consent, install
or operate any heating device, refrigerating or air conditioning equipment,
steam or internal combustion engine, boiler, stove, machinery or mechanical
devices upon the Premises or carry on any mechanical or manufacturing business
thereon, or use or permit to be brought into the Building flammable fluids such
as gasoline, kerosene, benzene, or naphtha or use any illumination other than
electric lights. All equipment, fixtures, lamps and bulbs shall be compatible
with, and not exceed the capacity of, the Building's electrical system. No
explosives, firearms, radioactive or toxic or hazardous substances or materials,
or other articles deemed extra hazardous to life, limb or property shall be
brought into the Building or the Premises.
(C) Tenant shall not make noises, cause disturbances or vibrations, or
use or operate any electrical or electronic devices or other devices that emit
sound or other waves or disturbances, or create odors or noxious fumes, any of
which may be offensive to other tenants and occupants of the Building or that
would interfere with the operation of any device or equipment or radio or
television broadcasting or reception from or within the Building or elsewhere,
and shall not place or install any projections, antennae, aerials or similar
devices inside or outside of the Premises.
(D) All janitor work and the caring for the Premises, except the
exterior washing of windows, shall be paid for by Tenant. Any person or persons
employed by Tenant to do janitor work, or care for the Premises shall be subject
to and under the control and direction of the building manager while in the
Building and outside of the Premises, but not as agent of Landlord. Tenant shall
be responsible, at its sole cost and expense, for the removal of refuse and
rubbish from the Premises and the Building. Such refuse and rubbish shall be
stored and transported in containers acceptable to Landlord and shall be
deposited in locations acceptable to Landlord.
(E) Tenant shall at its expense provide artificial light for employees
of Landlord while doing work and making repairs or alterations in the Premises.
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(F) All telegraph, telephone, and electric connections which Tenant may
desire shall be first approved by Landlord in writing, before the same are
installed, and the location of all wires and the work in connection therewith
shall be subject to the direction of Landlord. Landlord reserves the right to
designate and control the entity or entities providing telephone or other
communication cable installation, repair and maintenance in the Building and to
restrict and control access to telephone cabinets. In the event Landlord
designates a particular vendor or vendors to provide such cable installation,
repair and maintenance for the Building, Tenant agrees to abide by and
participate in such program.
(G) Tenant must list all furniture and fixtures to be taken from the
Building upon a form furnished by Landlord. Such list shall be presented at the
office of the Building for approval before acceptance by the security officer or
elevator operator.
(H) Tenant, its customers, invitees, licensees, agents, servants,
employees and guests shall not encumber or obstruct sidewalks, entrances,
passages, courts, corridors, vestibules, halls, elevators, stairways or other
common areas in or about the Building.
(I) No bicycle or other vehicle and no animal shall be allowed in the
showroom, offices, halls, corridors or any other parts of the Building.
(J) Tenant shall not allow anything to be placed against or near the
glass in the partitions between the Premises and the halls or corridors of the
Building which shall diminish the light in the halls or corridors.
(K) Tenant shall not allow anything to be placed on the outer window
ledges of the Premises, nor shall anything be thrown by Tenant or its employees
out of the window of the Building. Tenant shall keep all windows closed.
(L) No additional locks shall be placed upon any doors of the Premises
and no locks shall be changed without the prior written consent of Landlord.
Tenant will not permit any duplicate keys to be made (all necessary keys will be
furnished by Landlord), but if more than two keys for any door lock are desired,
the additional number must be paid for by Tenant. Upon termination of this
Lease, Tenant shall surrender the keys of the Premises and of the Building and
give to Landlord the explanation of the combination of all locks on safes or
vault doors in the Premises.
(M) The building manager shall at all times keep a pass key and be
allowed to the Premises to cover any emergency, fire or other casualty that may
arise and in other appropriate instances. Landlord and Landlord's agents shall
have the right to enter the Premises at all reasonable hours to examine the
same.
(N) Unless otherwise advised by Landlord, neither Tenant nor its
employees shall undertake to regulate the radiator controls or thermostats.
Tenant shall report to the office of the Building whenever such thermostats or
radiator controls are not working properly or satisfactorily.
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(O) If Tenant desires shades or venetian blinds for outside windows,
they must be furnished and installed at the expense of Tenant, and must be of
such type, color, material and make as may be prescribed by Landlord.
(P) Tenant assumes full responsibility for protecting its space from
weather, theft, robbery and pilferage, which includes keeping doors locked and
other means of entry into the Premises closed and secured.
(Q) Tenant shall not peddle, canvass, solicit or distribute handbills
or flyers on or about the Property except as specifically authorized by
Landlord. Peddlers, solicitors and beggars shall be reported to the office of
the Building or as Landlord otherwise requests.
(R) Tenant shall not sell food of any kind or cook in the Building.
Tenant may serve complimentary foods to its guests provided that it shall first
comply with all applicable laws, ordinances, codes and regulations.
(S) Water on the Premises shall not be wasted by Tenant or its
employees by tying or wedging back the faucets of the washbowls or otherwise.
(T) Tenant shall use neither the name of the Building (except as the
address of its business) nor pictures of the Building in advertising or other
publicity or for any other purpose without Landlord's prior written consent.
(U) In the event Tenant designates non-smoking areas in the Premises,
Tenant shall also designate sufficient smoking areas within the Premises for its
employees, and in no event shall Tenant allow its employees to use the public
areas of the Building as smoking areas.
Landlord reserves the right to make such other and further reasonable
rules and regulations as in Landlord's judgment may from time to time be needful
for the safety, care and cleanliness of the Premises and the prudent operation
of the Building and for the preservation of good order therein.
28. MISCELLANEOUS. Tenant and Landlord further covenant with each other
that:
(A) All rights and remedies of Landlord under this Lease shall be
cumulative, and none shall exclude any other rights and remedies allowed by law.
(B) The word "Tenant" wherever used herein shall be construed to mean
tenants in all cases where there is more than one tenant, and the necessary
grammatical changes required to make the provisions hereof apply either to
corporations or individuals, men or women, shall in all cases be assumed as
though in each case fully expressed. If there is more than one tenant, all
obligations and liabilities hereunder imposed upon Tenant shall be joint and
several.
(C) This Lease and the rights of Tenant hereunder shall be and are
subject and subordinate at all times to any ground leases or master leases and
to the lien of any mortgages or
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deeds of trust now or hereafter in force against the Property or the Building,
or both of them, and to all advances made or hereafter to be made upon the
security thereof, and to all renewals, modifications, amendments,
consolidations, replacements and extensions thereof. Any mortgagee or
beneficiary under a deed of trust, however, may elect to have this Lease be
superior to its mortgage or deed of trust. This provision is self-operative and
no further instrument of subordination or priority shall be required. In
confirmation of such subordination or priority, Tenant shall promptly execute
such further instruments as may be requested by Landlord and in the event Tenant
fails to do so within ten (10) days after demand in writing Tenant hereby
irrevocably appoints Landlord as attorney-in-fact for Tenant with full power and
authority to execute and deliver in the name of Tenant any such instruments.
(D) Each of the provisions of this Landlord shall extend to and shall,
as the case may require, bind or inure to the benefit of, not only Landlord and
Tenant, but also their respective heirs, legal representatives, successors and
assigns, provided, this clause shall not permit any assignment contrary to the
provisions of Article 12 hereof.
(E) All of the representations and obligations of Landlord are
contained herein and no modification, waiver or amendment of this Lease or any
of its conditions or provisions shall be binding upon Landlord unless in writing
signed by a duly authorized officer of Landlord's agent.
(F) All amounts due and payable from Tenant under this Landlord or
under any work order or other agreement relating to the Premises shall be
considered as rent and, if unpaid when due, shall bear interest from such date
until paid at the maximum legal rate of interest allowable on the date first
above written.
(G) Submission of this instrument for examination shall not bind
Landlord in any manner, and no lease or obligation on Landlord shall arise until
this instrument is signed and delivered by Landlord and Tenant.
(H) No rights to light or air over any property, whether belonging to
Landlord or any other persons, are granted to Tenant by this Lease.
(I) The laws of the State of Illinois shall govern the validity,
performance and enforcement of this Lease. The invalidity or unenforceability of
any provision of this Lease shall not affect or impair any other provision.
(J) Landlord's title is and always shall be paramount to the title of
Tenant. Nothing herein contained shall empower Tenant to commit or engage in any
act which can, shall or may encumber the title of Landlord.
(K) In case Landlord or any successor owner of the Property or the
Building shall convey or otherwise dispose of any portion thereof to another
person, such other person shall in its own name thereupon be and become Landlord
hereunder and shall assume fully in writing and be liable upon all liabilities
and obligations of this Lease to be performed by Landlord which first arise
after the date of conveyance, and such original Landlord or successor owner
shall, from and after the date of conveyance, be free of all liabilities and
obligations not then incurred.
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(L) Neither this Lease, nor any memorandum, affidavit or other writing
with respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant, and the recording thereof in violation of this
provision shall constitute a material breach of this Lease.
(M) Nothing contained in this Lease shall be deemed or construed by the
parties hereto or by any third party to create the relationship of principal and
agent, partnership, joint venture or any association or relationship between
Landlord and Tenant other than that of landlord and tenant.
(N) Landlord shall have the right to apply payments received from
Tenant pursuant to this Lese (regardless of Tenant's designation of such
payments) to satisfy any obligations of Tenant hereunder, in such order and
amounts as Landlord in its sole discretion may elect.
(O) All indemnities, covenants and agreements of Tenant contained
herein which inure to the benefit of Landlord shall be construed to inure also
to the benefit of Landlord's beneficiaries, and their respective officers,
directors, beneficiaries, partners, agents and employees.
29. ATTORNMENT. Upon request of the holder of any note secured by a
mortgage or deed of trust on the Building or Property, Tenant will agree in
writing that no action taken by such holder to enforce said mortgage or deed of
trust shall terminate this Lease or invalidate or constitute a breach of any of
the provisions hereof and Tenant will attorn to such mortgagee or holder, or to
any purchaser of the Property or Building, at any foreclosure sale or sale in
lieu of foreclosure, for the balance of the Term of this Lease and on all other
terms and conditions herein set forth.
30. ESTOPPEL CERTIFICATE. Tenant agrees that from time to time upon not
less than ten (10) days' prior request by Landlord, Tenant or Tenant's duly
authorized representative having knowledge of the following facts shall deliver
to Landlord a statement in writing certifying (a) that this Lease is unmodified
and in full force and effect (or if there have been modifications that the Lease
as modified is in full force and effect); (b) the dates to which the rent, rent
adjustments and other charges have been paid; (c) that neither Landlord nor
Tenant is in default under any provision of this Lease, or, if in default, the
nature thereof in detail; and (d) that there are no offsets or defenses to the
payment of Base Rent, additional rent or any other sums payable under this
Lease, or if there are any such offsets or defenses, specifying such in detail.
In the event Tenant fails to deliver such statement to Landlord within such
10-day period, Tenant hereby irrevocably appoints Landlord as attorney-in-fact
for Tenant with full power and authority to execute and deliver in the name of
Tenant any such statement, which statement shall be binding upon Tenant and may
be relied upon by Landlord and any third party.
31. BROKERS. Tenant represents and warrants to Landlord that neither it
nor its officers or agents nor anyone acting on its behalf has dealt with any
real estate broker in the negotiation or making of this Lease, and Tenant agrees
to indemnify and hold harmless Landlord from the claim or claims of any broker
or brokers claiming to have interested Tenant in the Building or Premises or
claiming to have caused Tenant to enter into this Lease.
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[32. omitted]
33. TRUSTEE CLAUSE. It is expressly understood and agreed that this
Lease is executed on behalf of LASALLE NATIONAL TRUST N.A., not personally but
as Trustee as aforesaid, in the exercise of the power and authority conferred
upon and invested in it as such Trustee, and under the direction of the
beneficiaries of a certain Trust Agreement dated May 27, 1981, and known as
Trust No. 104000. It is further expressly understood and agreed that LASALLE
NATIONAL TRUST N.A., as Trustee aforesaid, has no right or power whatsoever to
mange, control or operate said real estate in any way or to any extent and is
not entitled at any time to collect or receive for any purpose, directly or
indirectly, the rents, issues, profits or proceeds of said real estate or any
lease or sale or any mortgage or any disposition thereof. Nothing in this Lease
contained shall be construed as creating any personal liability or personal
responsibility of the Trustee or any of the beneficiaries of the Trust, or any
of their respective officers, directors, beneficiaries, partners, agents, and
employees, and in particular, without limiting the generality of the foregoing,
there shall be no personal liability to pay any indebtedness accruing hereunder
or to perform any covenant, either expressly or impliedly herein contained, or
to keep, preserve or sequester any property of said Trust or for said Trustee to
continue as said Trustee; and that so far as the parties herein are concerned
the owner of any indebtedness or liability accruing hereunder shall look solely
to and attempt to collect solely from the trust estate from time to time subject
to the provisions of said Trust Agreement for payment thereof. Tenant hereby
expressly waiving and releasing said personal liability and personal
responsibility of the Trustee and any of the beneficiaries of the Trust, and any
of their respective officers, directors, beneficiaries, partners, agents and
employees on behalf of itself and all persons claiming by, through or under
Tenant.
34. RIDERS. All riders attached to this Lease and signed by Landlord
and Tenant are made a part hereof and are incorporate herein by reference.
IN TESTIMONY WHEREOF, the parties hereto have caused this instrument to
be executed in duplicate as of the day and year first above written.
TENANT: LANDLORD:
WINSTON FURNITURE COMPANY OF LASALLE NATIONAL TRUST N.A., not individually
ALABAMA, INC. but as Trustee under a Trust Agreement dated
May 27, 1981, and known as Trust No. 104000,
as aforesaid.
/s/ Stephen C. Hess By:
- --------------------------- -------------------------------------
- --------------------------- _______________, Vice President
22
<PAGE> 23
CERTIFICATE
(If Tenant is a Corporation)
I, Vincent A. Tortorici, Secretary of Winston Furniture Company of Alabama,
Inc., Tenant, hereby certify that the foregoing Lease has been authorized by all
necessary corporate action on behalf of Tenant, the officer(s) executing the
foregoing Lease on behalf of Tenant was/were duly authorized to act in his/their
capacities as President and _____________ and his/their action(s) are the action
of Tenant.
(Corporate Seal)
/s/ Vincent A. Tortorici
-----------------------------------
Assistant Secretary
-------------------
23
<PAGE> 24
RIDER ATTACHED TO AND MADE AN INTEGRAL PART OF THE LEASE DATED ______________,
19__ BY AND BETWEEN LASALLE NATIONAL TRUST N.A., NOT INDIVIDUALLY BUT AS TRUSTEE
UNDER A TRUST AGREEMENT DATED MAY 27, 1981 AND KNOWN AS TRUST NO. 104000
("LANDLORD") AND WINSTON FURNITURE COMPANY OF ALABAMA, INC. ("TENANT").
- --------------------------------------------------------------------------------
35. MEMBERSHIP. Tenant is currently a member in good standing of the
Summer and Casual Furniture Manufacturers Association ("SCFMA"). SCFMA
exclusively sponsors an annual marketing event, currently known as the
International Casual Furniture Market ("ICFM") which is produced by Landlord.
SCFMA and Landlord have entered into an agreement with respect to the ICFM which
provides certain benefits for SCFMA members, including Tenant, in the Building.
It is expressly understood and agreed that such benefits apply to Tenant only so
long as Tenant continues to be a member in good standing of the SCFMA. In the
event Tenant ceases to be a member in good standing of the SCFMA during the Term
hereof, effective as of the first day of the calendar month following such
cessation: (a) the annual Base Rent payable by Tenant hereunder shall be
increased by an amount equal to the product of Three Dollars times the rentable
square footage in the Premises; (b) the limitation on the Base Rent adjustment
and any abatement noted in Article 36 below shall cease and have no further
force and effect; and (c) the provisions of Article 37 hereof shall have no
further force and effect.
36. BASE RENT ADJUSTMENT. Commencing with the second Lease Year, as
hereinafter defined, and at the start of each succeeding Lease Year, the Base
Rent shall be increased by an amount equal to the product obtained by
multiplying the then applicable annual Base Rent by the sum of (a) one percent
(1%), plus (b) the percentage of increase in the Consumer Price Index ("CPI")
for December of the prior Lease Year over the CPI for the period ending December
31, 1995. For example, if the Term commences September 1, 1996, the second Lease
Year shall begin September 1, 1997 and the CPI comparison applicable to the
second Lease Year shall be December 31, 1996 compared to December 31, 1995. The
result thus obtained shall thereafter be deemed the Base Rent for such Lease
Year, provided, in no event shall the annual Base Rent payable during any Lease
Year be less than the annual Base Rent payable during the immediately preceding
Lease Year. For purposes of this Lease, the first Lease Year shall be a period
of twelve calendar months and shall commence on the first day of the Term. Each
succeeding twelve-month period shall be a Lease Year. Notwithstanding the
foregoing, in no event shall the total Base Rent, as adjusted, for a Lease Year
be more than one hundred and four percent (104%) higher than the adjusted Base
Rent for the immediately preceding Lease Year. No base adjustment until 2001
@ 25.63 2002 @ 26.66 [initials].
For purposes of this Lease, the CPI shall mean the twelve (12) month average as
of December in any year of the Consumer Price Index for All Urban Consumers (All
Items And Commodity Groups-Chicago-Gary-Lake County, IL-IN-WI) (1982-84 = 100),
or such other successor or substitute area index as may be applicable to Chicago
Metropolitan Area, as appropriately adjusted. If the manner in which the CPI is
determined by the Department of Labor shall be substantially revised, and the
effect of that revision can be reasonably determined or approximated, an
adjustment shall be made in such revised index in order to produce results
equivalent, as nearly as possible, to those which would have been obtained if
the CPI had not
24
<PAGE> 25
been so revised. If the 1982-84 average shall no longer be used as an index of
100, or if any component of the CPI is changed in a material degree, such change
shall constitute a substantial revision. If the CPI shall become unavailable to
the public because publication is discontinued, or otherwise, Landlord will
substitute therefor a comparable index base upon changes in the cost of living
or purchasing power of the consumer dollar published by any other governmental
agency or, if no such index shall then be available, a comparable index
published by a major bank or other financial institution or by a university or a
recognized financial publication.
Landlord shall deliver to Tenant on or before the start of the applicable Lease
Year, or as soon thereafter as possible, a statement setting forth the
adjustment, if any, of Tenant's Base Rent. In the event of any such adjustment,
Tenant shall pay Landlord: (a) on or before the 10th day immediately following
such notification, that portion of any increase for the period of the current
Lease Year prior to the date of such notification; and (b) for each month
thereafter, an amount equal to 1/12 of such increase, which sum shall be added
to each monthly installment of Base Rent then being paid by Tenant.
In order to induce Tenant to enter into this Lease, Landlord agrees that so long
as Tenant is not in default under any of the terms, covenants, or agreements on
Tenant's part to be performed, any amounts payable by Tenant during the first
four (4) Lease Year(s) pursuant to this Article 36 shall abate and Tenant shall
have no liability therefore ("Abatement Amount"). Tenant agrees that in the
event this Lease, or Tenant's right of possession, is terminated prior to the
regularly scheduled expiration date due to a default by Tenant, then in addition
to all other rights and remedies available to Landlord hereunder, Tenant agrees
to repay to Landlord as additional rent the unamortized portion of the Abatement
Amount, calculated using a 9% interest factor.
37. SUCCESS FEE. Landlord, in conjunction with the SCFMA, will be
developing a new casual accessory show which will be held in The Merchandise
Mart ExpoCenter(TM) in conjunction with the ICFM. In order to encourage the
promotion of the new show by the SCFMA and its members, Landlord agrees to pay a
fee ("Success Fee") to all permanent showroom tenants in the Building who are
members of SCFMA based on an aggregate annual amount equal to $4.00 per square
foot for each foot of exhibition space sold for the new casual accessory show
during that year's ICFM. This fee will begin in the first year of the new show
and will be allocated among permanent SCFMA member showrooms in the Building as
of the first day of such market each year. Tenant will receive a prorata portion
of the Success Fee based on the rentable area of the Premises compared to the
total rentable square footage of permanent casual showrooms in the Building as
of the first day of the respective market. Any fees earned by Tenant in
accordance with this provision shall be credited against rent owing under the
Lease following the show but not affect the adjustment calculations under
Article 36 above.
It shall be a condition to Tenant's entitlement of the Success Fee from time to
time that Tenant is not in default in the payment of all rent owing under this
Lease and is not otherwise in default under any of the terms, covenants and
conditions as of the first day of the market.
25
<PAGE> 26
37. CONFIDENTIALITY. Tenant recognizes and acknowledges that the rental
and other terms contained herein reflect a significant concession on Landlord's
part and the concessions are being provided, in part, due to Tenant's membership
in SCFMA and to induce Tenant to enter into this Lease. In consideration of this
Lease, Tenant covenants and agrees that the contents of this Lease, especially
as to the rental rate and terms, shall remain strictly confidential and shall
not be disclosed by Tenant to third parties without the prior written consent of
Landlord which consent may be granted or withheld in Landlord's sole discretion.
Notwithstanding the foregoing, Tenant may in the ordinary course of its business
disclose this information to its attorneys or accountants provided that they
recognize the confidential nature of this information. Any breach of this
agreement by Tenant shall constitute a default under the terms of this Lease
entitling Landlord to exercise all rights and remedies available herein. Tenant
shall use efforts at least comparable to its other procedures with respect to
maintaining confidential information to protect the information in this Lease.
38. PRIOR LEASE. It is mutually understood and agreed that effective as
of the commencement date of the Term of this Lease ("Effective Date"), that
certain lease between Landlord and Tenant dated July 13, 1987 and covering Rooms
1747, 1748, 1749, 1750 and 1751 in the Building ("Prior Lease") shall be
terminated and canceled except that Tenant shall remain liable for any and all
obligations and liabilities due and accruing thereunder through the Effective
Date.
TENANT: LANDLORD:
WINSTON FURNITURE COMPANY OF LASALLE NATIONAL TRUST N.A., not individually
ALABAMA, INC. but as Trustee under a Trust Agreement dated
May 27, 1981, and known as Trust No. 104000,
as aforesaid.
By: /s/ Stephen C. Hess By:
---------------------------- -------------------------------
________________, Vice President
Attest: [illegible]
------------------------
26
<PAGE> 1
EXHIBIT 10.6
AGREEMENT
between
WINSTON FURNITURE
COMPANY
and
RETAIL, WHOLESALE AND
DEPARTMENT STORE UNION
AFL-CIO
Effective
August 1, 1996
through
July 31, 2001
<PAGE> 2
TABLE OF CONTENTS
AGREEMENT.................................................................1
PURPOSE...................................................................1
WITNESSETH................................................................1
ARTICLE I - RECOGNITION...................................................1
ARTICLE II - CHECK-OFF....................................................1
ARTICLE III - DISCRIMINATION..............................................2
ARTICLE IV - NO STRIKES - NO LOCKOUTS.....................................2
ARTICLE V - LEGISLATIVE...................................................2
ARTICLE VI - GRIEVANCE PROCEDURE..........................................2
ARTICLE VII - MANAGEMENT RIGHTS...........................................5
ARTICLE VIII - WORK WEEK AND HOURS OF WORK................................6
ARTICLE IX - HOLIDAYS.....................................................7
ARTICLE X - VACATIONS.....................................................9
ARTICLE XI - LEAVE OF ABSENCE............................................10
ARTICLE XII - WAGES......................................................12
ARTICLE XIII - INSURANCE.................................................12
ARTICLE XIV - PENSION PLAN...............................................12
ARTICLE XV - TRANSFERS...................................................13
ARTICLE XVI - FOREMAN....................................................13
ARTICLE XVII - SENIORITY.................................................13
ARTICLE XVIII - JOB POSTING AND BIDDING..................................15
ARTICLE XIX - HEALTH & SAFETY............................................15
ARTICLE XX - MISCELLANEOUS...............................................16
ARTICLE XXI - DURATION...................................................16
WAGE SCHEDULE - SUPPLEMENT...............................................17
WELDER - CLASS IV........................................................18
APPENDIX A...............................................................19
APPENDIX B...............................................................29
APPENDIX C...............................................................30
MEMORANDUM OF UNDERSTANDING..............................................31
<PAGE> 3
AGREEMENT
This agreement made and entered into this 1st day of August, 1996,
between Winston Furniture Company of Alabama, Inc., or its successors
(hereinafter referred to as the "Company") and the Retail, Wholesale, and
Department Store Union, AFL-CIO, (hereinafter referred to as the "Union").
PURPOSE
Section 1. The purpose of this Agreement is to promote the mutual
interest of the Company and its employees and to provide for the operation of
the Company's plant under methods which will further to the fullest extent
possible the safety and welfare of the employees, economy and efficiency of the
operations.
Section 2. It is recognized by this Agreement to be the duty and
obligation of the Company, Union, and of the employees to operate fully both
individually and collectively for the advancement of said purposes and
conditions.
WITNESSETH
That for the purpose of facilitating a peaceful adjustment of
differences that may arise from time to time, and for promoting harmony and
efficiency, to the end that the employees, the Employer and the general public
may be mutually benefited, the parties hereto contract and agree with each
other as follows:
ARTICLE I - RECOGNITION
Section 1. The Company recognizes the Union as the sole and exclusive
bargaining agent for all production, plant maintenance, and shipping and
receiving personnel.
Section 2. The word "employee" as used in the agreement does not
include watchmen, clerical or office employees, superintendents, foremen,
professional employees, engineers, technical employees, draftsman, janitors, or
employee who has the authority to employ or discharge as defined in the Act.
ARTICLE II - CHECK-OFF
Section 1. The Company agrees that upon written application duly
signed by the union member it will deduct from the wages of said employee a
uniform amount of union dues or initiation fees an pay same to the Financial
Secretary of the Union on or before the last day of the month of collection of
said money.
Section 2. The authorization to deduct dues and initiation fees from
wages shall automatically renew itself from contract year to contract year but
can be retracted by written notice to the Company and the Union during ten (10)
day period prior to each anniversary date or expiration of the contract.
<PAGE> 4
ARTICLE III - DISCRIMINATION
Section 1. The Company agrees not to discriminate, interfere with,
restrain or coerce, either directly or through their agents, any employees in
the right to form, organize, join or work for the Union. The Union and its
members agree not to solicit employees for membership in the Union on the
employer's time.
Section 2. The Company agrees not to enter into any agreement or
contract with its employees, either individually or collectively, in any way
that may conflict with the terms and provisions of this agreement.
Section 3. All parties of this Agreement affirm their intention to
avoid harassment or discrimination on account of race, color, creed, national
origin, religion or sex, veteran status, qualified handicaps and accordingly it
is the intention of all parties hereto to comply with all applicable laws
governing such matters.
ARTICLE IV
NO STRIKES - NO LOCKOUTS
Section 1. No officer or representative of the Union and no employee
shall authorize, aid or condone any strike, slowdown or work stoppage whether
the cause be an unfair labor practice or otherwise and no employee shall
participate in a strike, slowdown or work stoppage irrespective of the cause of
the same.
Section 2. There shall be no lockouts during the terms of this
Agreement. Any employee participating in a strike or unauthorized work stoppage
shall be subject to discharge, in which event the Company may select employees
participating in same without being required to discharge same or any
discipline to all employees and without a claim for discrimination in meting
out its punishment, if any, to employees.
ARTICLE V - LEGISLATIVE
If any portion of this Agreement is found to be in violation of any
federal or state laws, then the portions so found to be in violation shall be
limited or restricted so as to comply-with the law, but the provisions shall
not affect the validity of the remainder of the contract.
ARTICLE VI
GRIEVANCE - PROCEDURE
Section 1. If any controversy shall arise between the Company and the
Union or any of its employees encompassed in this bargaining unit as to the
meaning or application of any provisions of this Agreement, there shall be no
suspensions of work or slowdown on account of such difference or dispute. But
such controversy as to the meaning or application of any provision of this
Agreement, shall be treated as a grievance and settled in accordance with the
procedure hereinafter set forth.
2
<PAGE> 5
Section 2. Union Representation. The Company shall recognize the
following Union Representatives for the purpose of representing bargaining unit
employees in the grievance procedure
A. There shall be four (4) shop stewards assigned to
each plant, one (1) at upholstery. The shop stewards shall be
assigned to agree upon districts, and shall only be involved
in grievances which arise in their assigned district. In
order to be a candidate to fill the position of shop
stewards, employees must have seniority with the Company and
must be regularly assigned to the district he/she is to serve
in.
B. The Company will recognize a Union Committee of six
(6) members to function in the grievance procedure as
provided in this Agreement. The Union may at its discretion
substitute one of the other shop stewards for a regular
member of the grievance committee upon proper notice to the
Company.
C. The chairman of the grievance committee will
represent all shifts and shall be assigned to the first shift
upon election.
D. If more than one employee signs a grievance, these
employees should elect one (1) to represent the group in the
grievance procedure.
E. The grievance committee shall have the authority to
settle or withdraw a grievance in any step.
Section 3. The following procedures shall be followed in the
processing of any grievance.
FIRST STEP. The aggrieved employee shall meet with the
employee's immediate foremen within three (3) working days of the alleged event
giving rise to the grievance. The foreman shall give his answer within three
(3) days excluding Saturdays, Sundays and holidays,, from the time the
grievance was presented to him. If not settled at this step, the grievance, in
order to be considered further, shall be submitted in writing on a prescribed
form to the second step, signed by both parties, stating the incident upon
which the grievance is based, the article of the Agreement alleged to be
violated, and the relief sought. To be considered further, the grievance must
be appealed to the second step within three (3) days of the first step answer.
The foreman shall have the authority to settle grievances in the first step.
The committee chairman must be present when an hourly employee is terminated
Either party may request the presence of their shop steward at the meeting,
SECOND STEP. The second step shall be between the grievance
chairman, the aggrieved employee, and the plant manager or V.P. operations. The
plant manager or the V.P. operations shall answer the grievance in the second
step within five (5) days, excluding Saturdays, Sundays and holidays, from the
date of the second step meeting. If the grievance is not settled at this step,
in order to be considered further it must be appealed to the third step within
five (5) days of the written answer.
3
<PAGE> 6
THIRD STEP. The third step shall be between the Union
Grievance Committee and the Company Grievance Committee. A written answer to a
grievance presented at the third step meeting shall be made within six (6)
days, excluding Saturdays, Sundays, and holidays, from the date of adjournment
of the third step meeting.
FOURTH STEP. Within ten (10) days following the third step
answer, either party shall give the other party written notice of its desire to
arbitrate said grievance. Each party shall make an earnest effort to agree on
such arbitrator to hear said grievance and if they cannot agree on such
arbitrator within five (5) days after receipt of notice, either party may
request the Federal Mediation and Conciliation Service to furnish a panel of
seven arbitrators from which the Union will strike first and the Company second
until only one is left and this person shall serve as arbitrator. The expense
of the arbitrator shall be shared equally by the parties involved.
The time limits expressed in the above shall bar any grievance at any
step when it is not presented in accordance with these time limits and
procedures. Where notification in writing is required, a failure to receive
such a written notice shall bar any grievance at any step. The submission of
the grievance to the arbitrator shall not be a waiver of these time limits
unless they can be sustained in writing signed by the union and the Company.
The arbitrator shall be empowered, except as his powers are limited
below, to make a decision in case of alleged violation of rights expressly
accorded by this Agreement or any supplement hereto.
The limitations of the power of the arbitrator are as follows:
1. He shall have no power to add to or subtract from,
or modify any of the terms of any Agreement.
2. He shall have no power to substitute his discretion
for the Company's discretion in cases where the
Company has retained discretion by this Agreement or
supplemental Agreement except that where he finds
disciplinary layoff or discharge results for
manifestly arbitrary exercise of the company's
managerial judgment in fixing the extent of the
penalty, he may make appropriate modification of the
penalty.
3. He shall have no power to decide any questions
which, under this Agreement, is within the right of
management to decide. In rendering decisions, the
arbitrator shall have due regard for the rights and
responsibilities expressly conditioned by the
Agreement.
Section 4. All awards of back wages shall be limited to the amount of
wages the employee would otherwise have earned from his employment at his
straight time base rate with the company during the periods as above defined,
less any unemployment or other compensation for personal services that he may
have received from any source during this period.
4
<PAGE> 7
Section 5. The Company shall not be required to pay back wages prior
to the date a written grievance is filed with the Company.
Section 6. A decision reached at any stage of the proceeding as herein
provided shall be final and binding on both parties and shall not be subject to
reopening except by mutual agreement.
ARTICLE VII
MANAGEMENT RIGHTS
Section 1. The Company, in not exercising any function hereby reserved
to it, shall not be deemed to have waived its rights to exercise such function
or preclude the Company from exercising the same in some other way not in
conflict with the express provisions of this Agreement.
Section 2. Except as specifically limited by an express provision of
the Agreement, the Company shall continue to have the exclusive right to take
any action it deems appropriate in the management of the plant and direction of
the work force in accordance with its judgment.
Section 3. All inherent and common law management functions and
prerogatives which the Company has not expressly modified or restricted by a
specific provision of this Agreement are retained and vested exclusively in the
Company, including but not by way of limitation, the Company specifically
reserves the exclusive right in accordance with its judgment to lay off
employees because of lack of work by the Company; to suspend, discharge for
just cause or otherwise transfer, layoff and recall employees to work; to
determine the starting and quitting times and the number of hours and shifts to
be worked; to maintain the efficiency of employees; to enlarge, expand, move,
relocate and close down the plant or any part thereof, or expand, reduce,
alter, combine, transfer, assign, or cease any job, department, operation or
service to determine the work to be done by any job classification, to
eliminate job classifications, to add job classifications and to establish
rates thereof, and to require employees to work in any job classification; to
control and regulate the use of machinery, equipment and other property of the
Company; to determine the number, location and operation of plants and
divisions and departments thereof, the products to be manufactured, the
schedules of production, the assignment of work, the subcontracting of work,
and the size and composition of the work force; to make or change rules,
policies and practices not in conflict with the provisions of this Agreement;
to introduce new and improved research, development, production, maintenance,
services and distribution methods, materials, machinery and equipment, and
otherwise generally manage the plant, and operate the business in any manner
that the Company may deem to be most efficient or expedient; and to sell the
Company or any plants, or dispose of its assets and dissolve the Company, or
merge, consolidate or reorganize the Company in accordance with its judgment.
5
<PAGE> 8
ARTICLE VIII
WORK WEEK AND HOURS OF WORK
Section 1. The normal work week shall consist of five (5) days, Monday
through Friday midnight, except when voted on by a shift or plant and approved
by management. Management has the option to schedule the plant four 10-hour
days to be a normal work week. If the workweek is reduced under this four
10-hour day option to less than 40 hours (except for acts of God or equipment
failure) all hours in excess of 8 daily will be paid as overtime.
Section 2. Forty hours shall constitute a normal work week.
Section 3. When an employee is required to report for work and does
report for work as scheduled, he shall receive no less than four (4) hours
work at his base rate of pay. In order to qualify for four (4) hours pay,
however, it will be necessary for the employee to wait a minimum of one (1)
hour before leaving the designated work area, unless dismissed by a foreman or
supervisor. At management's discretion, the employees scheduled or notified to
report may be assigned to other work for which they may be qualified in lieu of
their being released. Report in pay does not apply in cases of power failure,
acts of God, or other causes beyond the control of the Company.
Section 4. A thirty minute meal period without pay will be given
approximately half way through each shift unless otherwise agreed upon.
Section 5. For purpose of definition, three shifts are defined as day,
evening, and night shifts.
Section 6. A paid rest period of ten (10) minutes away from work will
be provided on the half hour between the second and third hours of each shift.
An additional ten (10) minutes rest period will be granted at the end of each
shift to those employees who are scheduled to work longer than one (1) hour
overtime.
Section 7. Overstaying or misusing a rest period shall be cause for
discipline.
Section 8. The Company retains the right to require any employee to
work a full forty (40) hour week and to perform such work as is reasonably
required by the Company although the same may be out of his classification.
Such temporary work shall not cause any changes in employee rate, except as
defined in the contract Article XV covering transfers.
Section 9. In all cases of overtime, it shall be offered to employees
in the following sequence:
A. Employees in the job classification where work is
required starting with the senior employee on that shift.
B. Qualified employees in the department starting with the
senior employee on that shift, including lead people.
C. Qualified employees on plant wide basis starting with the
senior employee on the shift.
6
<PAGE> 9
If a sufficient number of qualified employees are not obtained under
the above procedure, the Company will assign the available work to the least
senior employee under the sequence specified and such employee will be required
to perform the overtime. If such employee refuses to work the required
overtime, he will be considered in violation of the contract.
Section 10. Overtime shall be paid at the rate of 1-1/2 times the
employee's base rate for all hours worked in excess of forty (40) hours in any
one week. Overtime shall be paid at the rate of 1-1/2 times the employee's base
rate for all hours worked in excess of eight (8) hours in any one day. There
will be no pyramiding of the daily and weekly overtime.
Overtime shall be paid at the rate of 1-1/2 times the employee's base
rate for all hours worked in excess of thirty-two (32) hours in any week in
which a holiday occurs.
Overtime shall be paid at the rate of 1-1/2 times the employee's base
rate for all hours worked in excess of twenty-four (24) hours in any week in
which two (2) holidays occur.
Overtime shall be paid at the rate of 1 1/2 times the base rate for
all hours worked on Sundays and holidays.
Overtime shall be paid at the rate of 1-1/2 times the employee's base
rate for all hours worked on Saturday providing the employee has worked forty
(40) hours during the week or has an acceptable excuse for being absent. When
an employee works his regularly scheduled shift, an acceptable excuse in this
case is agreed to be a written note from a physician, death in the immediate
family, or to allow sufficient time to report to a court summons, or approved
leave.
Section 11. When an employee is required to work overtime on any day
in the week, he shall not be required to take time off to compensate for same,
but shall work his regular shift for the remainder of the week provided
sufficient work is available.
Section 12. The Company will give notice of overtime by the end of
shift the previous day. Saturday overtime will be posted on Thursdays when
possible.
ARTICLE IX - HOLIDAYS
Section 1. The following holidays or a day on which any such holidays
are celebrated, by state or national proclamation, shall be recognized as paid
holidays.
1. New Years Day
2. Memorial Day
3. Independence Day
4. Labor Day
5. Thanksgiving Day
6. Day after Thanksgiving Day
7. 1st day of Deer Season
8. Christmas Eve Day
9. Christmas Day
7
<PAGE> 10
Section 2. Hourly employees not working on said holidays shall receive
as holiday pay the equivalent of eight hours straight time pay at their regular
hourly base rate.
Section 3. Employees who are required to work on such holidays shall
receive in addition to their said holiday pay, 1-1/2 times their straight time
hourly base rate for all hours worked on such holiday.
Section 4. When a holiday falls on Sunday, the following Monday will
be observed. If the holiday falls on Saturday, the preceding Friday will be
observed.
Section 5. If a holiday falls during a vacation period, the employee
will be paid for the holiday in addition to day's pay for vacation.
Section 6. If an agreement has been reached between the Company and
any employee that he is to work during his vacation and the holiday occurs, he
will be paid for the days worked, the days vacation at the regular rate of pay
and for the holiday at 1-1/2 times the regular rate of pay.
Section 7. Employees shall receive benefits herein set forth on the
holidays only if they meet the following conditions:
A. The employee has completed his probationary period.
B. The employee works a full shift the last scheduled work
day prior to the holiday and the next scheduled work day after the
holiday except for doctors excused absences for personal illness.
An acceptable excuse is agreed to be a written notice from a
physician, death in the immediate family, sufficient time to report
to a court summons, or an approved leave.
Section 8. If a holiday or holidays listed fall on a day peculiar to
this section it shall be observed on a day mutually agreeable to the Company
and the Union. No employee shall lose a holiday because of it falling on a day
peculiar to this section and not covered specifically.
Section 9. To qualify for holiday pay all employees laid off due to
reduction in work force must have worked one (1) eight (8) hour day in the
fifteen (15) day period before the holiday or the fifteen (15) day period after
the holiday. The employee will receive holiday pay on the 1st paycheck after
returning to work.
Section 10. Employees who are on leave of absence for a period
exceeding thirty (30) days prior to the holiday shall not receive holiday pay.
This does not apply to employees on leave due to job related injury or job
related illness.
ARTICLE X - VACATIONS
Section 1. The Company will grant an employee a vacation with pay
based upon the following:
8
<PAGE> 11
A. An employee who has attained the years of continuous
service indicated in the following table as of August 1, of the
year in which the vacation is to be taken shall receive vacation
corresponding to such years of continuous service.
Years of Service Vacation
1 Year 1 Week
3 Years 2 Weeks
12 Years 3 Weeks
18 Years 4 Weeks
B. Vacation may be scheduled by means of a plant shut down
and/or by means of individual scheduling. In the event of a plant
shut down for vacation purposes, the Company will give employees a
substantial notice prior to shut down.
The Company will normally close the plant for one week
in August. Persons entitled to one week of vacation will take it
during this shutdown. The Company will post the date of the above
shutdown two weeks prior to shutdown.
Vacation will be paid on pro rata basis for all
employees. The pro rata vacation will be paid on the basis of 1/12
of a week's pay for each full month worked between the employee's
employment date or last vacation and August 1st.
Section 2. Vacation pay is computed as follows:
A. Hourly employees shall be paid their regular or
straight time hourly base rate times forty (40) for each week of
vacation.
Section 3. In order to maintain production demands and to insure
orderly operation of the plant, the Company has the final right to granting the
time of any vacation. Employees with more than one week vacation will take the
additional vacation either in January, February, March or between July 1 and
December 31. Vacations during the months of March and July are restricted to
one person per department. The company will post a vacation roster the first
fifteen (15) working days starting December 1 and June 1 of each year.
Vacations will be granted by seniority. No more than two (2) people in a
department may take a vacation at one time, unless for insufficient business.
Any person taking vacation during January and February who leaves the Company
prior to August 1 will have all unearned portions of their vacation pay
deducted from their final paycheck.
Section 4. In the event that one of the Company's paid holidays fall
during an employee's vacation such employee shall be paid an additional eight
(8) hours holiday pay at his base rate.
9
<PAGE> 12
Section 5. In the event an employee quits or is terminated for any
reason, except being discharged for just cause, such employee will be paid a
pro rated vacation for the amount of vacation he has earned but not yet taken.
The pro rated vacation will be paid on the basis of 1/12 of the amount the
employee would have received for a full vacation in accordance with his
eligibility for each full month he has worked since his last vacation. This
section applies to all full time employees with at least thirty (30) days of
continuous service at the time the employee quits or is terminated. Any
employee eligible for a pro rated vacation pay shall receive pay for any
vacation he has earned in accordance with the schedule set forth in Section (1)
of this Article at the time he receives his final pay from the Company. If an
employee fails to give a one (1) week notice in writing that he is quitting, no
pro rated vacation will be paid.
No employee shall receive, be entitled to, or earn more than one
vacation or vacation pay period within any calendar year.
Section 6. The Company may, due to operating requirements and
employment conditions, arrange with the consent of the employee that such
employee receive vacation allowance in lieu of actual vacation.
Section 7. Vacations must be taken in year in which it is earned, and
must be taken in complete week periods.
ARTICLE XI - LEAVE OF ABSENCE
Section 1. Personal Leave of Absence - The company agrees that upon
request and approval, employees shall be entitled to a leave of absence without
pay for illness or injury, including pregnancy. Such leave to be of the
necessary time as is required by the condition of the employee, but limited in
time as specified below. This shall apply to any illness or injury, including
pregnancy, regardless of whether such illness or injury, including pregnancy,
is unique or peculiar to one gender or another. Employee returning from medical
leave of absence shall return to work in their classification and shift if
possible. If not, they will be allowed to bump the least senior employee in the
plant. They will be allowed to return to their previous classification at the
first available opening. They will receive their previous base rate of pay
while working out of their previous classification. The personnel manager will
keep the union president informed as to all leaves.
The Company agrees to grant leaves of absence up to thirty (30) days
for proper causes to the employees. Upon written request and approval, the
employees will be granted a leave of absence without pay for the urgent illness
in his family, hardship cases, union activities, or for urgent and just reasons
not provided for in this Agreement but agreed to by the Company. Thirty (30)
additional days will be granted upon written request and approval.
Employees will retain but not accrue seniority and length of service
benefits during leaves or extension, with the exception of military draft or
occupational injury/illness.
10
<PAGE> 13
Return to work prior to termination date of approved leave must be
requested in writing and approved by the Company.
Failure to report at the end of a leave of approved extension shall be
considered voluntary resignation.
Section 2. Military Leave of Absence - Any employee who is drafted
into active service in the armed forces of the United States will be granted a
leave of absence without pay and without loss of seniority right for the
duration of such service. Upon termination of such service, the employee will
be offered work in line with his seniority, provided he applies for employment
within sixty days of the date of his discharge.
Section 3. Occupational Injury/Illness Leave - The Company agrees to
grant leave of absence due to occupation injury/illness for the period of time
employee is under care of physician. During such leave continuous service will
accrue. Periodic written proof of disability will be required from the
employee's attending physician during the leave. The employee will lose all
seniority rights if he fails to return to work upon release by physician to
return to work.
Section 4. Funeral Leave - Funeral Leave will be granted members of
the bargaining unit for three (3) consecutive calendar days in the event of the
death of mother, father, brother or sister, spouse, children, spouse's mother,
or father, son or daughter-in-law. Sister or brother-in-law, grandparents,
grandchildren, and stepfather, and stepmother, death, a one (1) day funeral
leave shall apply. The last day of such leave may not be taken later than the
day after the funeral. If any of these days are working days, the employee
shall suffer no loss in pay. No employee shall receive pay for any part of
funeral leave that occurs during regular time off, or when the employee is
absent from work for other reasons. Proof of death must be presented if
required by the Company.
Section 5. Union Leave - A leave of absence without pay may be granted
to not more than three (3) employees at any one time to attend meetings or
conventions of the International Union, the District Council, or the State
AFL-CIO. It is agreed that the Union will cooperate in selecting such employee
so as not to interfere with plant operations.
Section 6. Jury Duty - An employee who is called for jury service
shall be excused from work for any day or days on which he serves and shall
receive for each day of jury duty on which he otherwise would have worked, the
difference between eight (8) hours pay at his straight time rate plus the
applicable shift differential, and the payment he received for jury service.
The employee shall present proof of jury service before and after the service
and must present proof of amount of pay received for the service.
ARTICLE XII - WAGES
Section 1. The standard hourly wage scale or rates for the respective
jobs shall be those set forth in the rate schedule, Appendix A, attached hereto
and made a part of this Agreement.
11
<PAGE> 14
Section 2. The evening shift differential will be 15 cents per hour
and the night shift differential shall be 20 cents per hour.
Section 3. If, during the life of this Agreement, a new job is created
or substantial changes are made in an existing job, the Company shall develop
and install an appropriate job class and hourly rate. Should the Union disagree
with the hourly rate, that disagreement may be processed through the grievance
procedure set forth in this Agreement.
ARTICLE XIII - INSURANCE
The Company reserves the right to select the carrier providing such
coverage and from time to time change carriers as necessary to maintain the
coverage at the lowest cost.
The Company agrees to maintain all other coverage for the term of the
Agreement. The Company reserves the right to periodically review all insurance
programs, benefits, and coverage for the purpose of determining the best plan
or benefits with the lowest premium and the best service.
The Company reserves the right to select, at its sole discretion, the
insurance fund, carrier, or company that will provide the coverage under this
Agreement.
The Company reserves the right to increase the stop/loss ratio to a
maximum of $1,000.00 per member, in order to maintain the present level of
benefits.
Employees eligible for coverage under the Company insurance program
shall contribute as follows: Single $6.00 or Family $11.00 per week.
ARTICLE XIV - PENSION PLAN
Winston will offer a 401(k) program. Winston will match $.50 on the
$1.00 up to 3% of salary for qualified employees.
ARTICLE XV - TRANSFERS
Section 1. Temporary Transfers - In the event of emergencies or
production problems, the Company reserves the right to require an employee to
transfer from one job to another, either in his own, or a higher or lower job
classification on a temporary basis, subject to the following stipulations:
A. Temporary is defined as "not to exceed five (5)
consecutive working days."
B. No employee can refuse a temporary transfer.
12
<PAGE> 15
C. If any employee works in a higher rated classification
for one (1) full day, he shall receive the higher rate of pay. If
an employee works in a lower classification, he shall receive his
usual rate of pay.
Section 2. Quality Control - All inspectors are hired to work in the
quality control department. There will be no specific job for any inspector.
Inspectors will work at any station assigned by management to maintain a
quality product. Shift selection will be by seniority.
ARTICLE XVI - FOREMAN
Section 1. A foreman or supervisor shall not work overtime for the
purpose of taking the place of an employee; neither shall he do work which
hourly paid employees have been performing unless regular employees are absent.
The foregoing does not apply during period of plant shutdowns caused by
insufficient business to maintain basic operations.
ARTICLE XVII - SENIORITY
Section 1. Seniority shall apply on a plant wide basis as long as all
operations are based in Haleyville, Alabama. There will be no rolling of
maintenance personnel unless employee qualifies for the job. If compulsory
transfer is required into or out of these departments, the employee will carry
his company seniority.
Section 2. All seniority under this Agreement shall be computed from
the date of last hiring except employees having identical employment dates
shall be determined on the basis of alphabetical order of surnames at the date
of employment.
Section 3. The Company will furnish the Union a length of continuous
service list of all employees in the bargaining unit within ten (10) days after
the effective date of this Agreement, and the Company will submit a list of new
employees and their effective date of hire within thirty (30) days after the
employee is hired. The Company will notify the Union in writing of the
employees who have completed the probationary period and are leaving employment
of the Company for any reason.
Section 4. Rolling shall be permitted only in the event of layoff for
a period longer than three (3) working days. In such cases, employees whose
jobs are being cut back will be permitted to exercise their seniority against
any job of equal or lower rate of pay which the employee has previously
performed satisfactorily and which is being operated by a less senior employee.
If there are no jobs available as outlined above, the employee will be
permitted to exercise his seniority against the least senior employee in the
Company providing the Company believes that the senior employee can perform the
job satisfactorily after only a brief familiarization period not to exceed
three (3) days.
Section 5. Seniority shall be broken upon the happening of any of the
following events:
13
<PAGE> 16
A. Termination
B. Voluntary quitting
C. Failure of an employee on layoff status to return to
work within three (3) working days after written notice actually
received, actual notice given to employee or notice sent by
certified mail to the last address on Company records.
D. Absence for any reason which exceeds twelve (12)
months, except for military leave or occupational injury/illness.
Section 6. An employee shall be considered a probationary employee for
a maximum of sixty (60) working days after his hiring date. All probationary
employees will be reviewed after thirty (30) days for job performance by the
Company and the Union. No probationary employee shall be subject to any of the
terms, benefits and provisions of this Agreement, nor shall probationary
employees have any rights under the grievance procedure of this Agreement.
After the probationary period, an employee shall be entitled to all rights and
privileges of this Agreement. The name of such employee shall be entered on the
seniority list as of date of his or her original hiring (last date of
employment) by the Company.
There shall be no seniority among probationary employees.
Section 7. Seniority is defined as:
A. Length of continuous service of employee.
B. Skill and ability to perform the work, past
performance, and physical fitness.
Seniority shall apply only in cases of layoff, recall and promotions.
Only when the factors set forth in (b) are relatively equal shall length of
continuous service govern. In case of job bids, the Company shall review the
bidder's qualifications and shall reward the job in accordance with seniority
as defined above, As defined in Article XVIII, Section 2 - "Job Posting and
Bidding". However, the Company and the Union joined may disqualify the
successful bidder in a new job situation if he fails to demonstrate sufficient
skill and ability and/or physical fitness to perform the requirements of the
job.
ARTICLE XVIII - JOB POSTING
AND BIDDING
Section 1. When a job vacancy occurs and there is a requirement to
fill that job, the Company will post notice, accessible to the employees, for a
period of three (3) working days, showing job description, job classification,
and top rate of pay, and award the job in accordance with seniority to those
bidding whose names appear on the bid notice upon closing bids.
14
<PAGE> 17
Section 2. The successful bidder will be given a five (5) working day
trial period on the new job and an additional ten (10) days to qualify for
production before being disqualified. If an employee is promoted and falls to
quality for the new job within fifteen (15) working days, he will be returned
to his original job and the second most qualified bidder will be given a five
(5) working day trial period and an additional ten (10) days to qualify for
production before being disqualified. If the second bidder fails to qualify
within fifteen (15) days, he will return to his original job and the Company
will fill the vacancy at its discretion, and will consider other bidders. Only
two (2) vacancies will be posted for any one (1) original vacancy, and the
Company will fill any remaining jobs. If there is no bidder, the Company will
fill the job at its discretion within five (5) days, the employee bidding on a
vacancy, may return to his previous job. An employee cannot be permitted to bid
on another for a period of three (3) months after disqualification of himself
Section 3. Without the express consent of the Company,
A. No employee can bid on a vacancy in a lower
classification;
B. Probationary employees cannot bid on a job.
ARTICLE XIX - HEALTH & SAFETY
Section 1. The Company will provide such medication and equipment as
is necessary for the first aid of injured employees.
Section 2. The Company will provide sanitary drinking fountains.
Section 3. No employee shall be required to take out or operate
equipment that is mechanically unsafe. Should a question arise as to the safety
of equipment, supervisory personnel and the safety committee will make the
determination as to the hazard involved, if any, and take such steps as
necessary to correct defective equipment prior to use.
Section 4. Should any employee receive an injury at the plant of such
serious nature as to require an ambulance to convey him to a doctor's office or
hospital, said ambulance expense will be borne by the Company. If the injury is
of a less serious nature, not requiring an ambulance, other transportation will
be furnished the injured employee by the Company. In the event an employee is
injured and returns to work promptly after treatment the same day, he shall not
lose any pay for time involved in travel and treatment. The employee will
receive one (1) additional visit to the doctor for required treatment. Any
other time off for doctor's visits shall be without pay. A doctor's written
notice must be presented before injury pay is to be allowed.
Section 5. It is agreed that the Company and Union will select from
the bargaining unit a Safety Committee to meet with management monthly for the
purpose of pointing out unsafe conditions and safety practices and for making
suggestions on correcting these conditions and practices. The Union will select
three (3) persons for the Safety Committee each six (6) months and will rotate
the committee members.
15
<PAGE> 18
Section 6. Maintain sanitary rest rooms and supplies.
ARTICLE XX - MISCELLANEOUS
Section. 1. The Union may post on the Company bulletin board notices
of union meetings.
Section 2. Union representatives may, for a reasonable time and on
reasonable notice, see employees in the Company office when visiting the plant.
Section 3. Each employee shall receive their paycheck no later than 30
minutes before end of the scheduled work period.
ARTICLE XXI - DURATION
This Agreement shall become effective on the 1st day of August, 1996
and shall expire at midnight on the 31st day of July, 2001 being for a five (5)
year term. This Agreement shall, however, continue in full force and effect
thereafter from year to year unless either party shall notify the other, in
writing of its desire to change or terminate this Agreement, not more than 90
or less than 60 days prior to the anniversary date of the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by the duly authorized officers and/or representatives.
Accepted this 1st day of August, 1996.
16
<PAGE> 19
WAGE SCHEDULE - SUPPLEMENT
All newly hired painters shall be classified as Class "B" Painters. In
order to obtain Class "A" rates, the following requirements must be met:
1. Employment period of at least three (3) continuous
months.
2. Good attendance record.
3. Ability to effectively perform any job in the paint
department.
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<PAGE> 20
WELDER - CLASS IV
All newly hired welders shall be classified as Class "C" Welders. In
order to obtain Class "B" rates, the following requirements must be met:
1. Employment period of at least three (3) continuous
months as a Class "C" Welder.
2. Good attendance record.
3. Ability to weld effectively on at least four (4) jigs.
4. Ability to maintain daily outputs of 85 - 100% of
production rates at an acceptable quality level. This
article has been amended as of letter dated August 1,
1990. See Appendix "C".
In order to earn Class "A" rates, the following is required:
1. Employment period of six (6) continuous months with at
least three months of this time as a Class "B" Welder.
2. Good attendance record.
3. Ability to weld effectively on any jig.
4. Ability to maintain a daily output of above 100%
production rates at an acceptable level quality. This
article has been amended as of letter dated August 1,
1990. See Appendix "C".
If at any time an employee fails to maintain the productivity and/or
quality standards as outlined above, his rate of pay will be reduced to that of
the next lower class. All circumstances requiring in the employee's substandard
performance will be investigated and reviewed with the Employer prior to
reducing the rate.
Management has the right and responsibility to determine if an
employee has met and is maintaining all qualifications necessary for a higher
rate of pay in the Painter and Welder Classification.
18
<PAGE> 21
PLANT RATE SCHEDULE
APPENDIX A
EFFECTIVE AUGUST 1, 1996
Employees hired after January 1, 1991.
CLASS I
-------
MATERIAL HANDLER START $7.00
SWEEPER 30 DAYS $7.33
CUSHION
FINISHING
CLASS II
--------
MACHINE OPERATOR START $7.20
CLEANER/GRINDER 30 DAYS $7.53
LEVELER
CUSHION TACKER
CARTON SETUP
BRISTOL PACKER
CUSHION PACKER
CRANE OPERATOR
CLASS III
---------
TRUCK DRIVER START $7.30
STRAPPER 30 DAYS $7.63
CHECK-SHIPPER
ALUM. GRINDER
INSPECTOR
FORK LEFT DRIVER
FABRIC CUTTER
L.T.L. CO-ORDINATOR
CLASS IV
--------
WELDER-HELIARC START $7.65
WELDER-MIG 30 DAYS
PAINTER
MACHINE SET UP
CLASS B WELDER & CLASS A WELDER
CLASS A PAINTER 30 DAYS $8.33
30 DAYS $8.08
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<PAGE> 22
CLASS V
-------
MAINTENANCE START $8.00
MECH 30 DAYS $8.33
FIXTURE
R&D
+ .09 IF APPLICABLE TO UNION MEMBERS BY 12/90,
*PROMOTIONS OF MORE THAN ONE GRADE WILL MOVE TO THE PAY RATE WHICH ASSURES THE
PROMOTED EMPLOYEE A MINIMUM OF A 10 CENT PAY INCREASE.
*GROUP LEADERS WILL BE A TOP RATE OF .30 CENT ABOVE THE HIGHEST RATED PERSON
THEY LEAD EXCEPT OVER WELDING. THIS WILL BE 15 CENT ABOVE THE CLASS A.
20
<PAGE> 23
PLANT RATE SCHEDULE
APPENDIX A
EFFECTIVE AUGUST 1, 1997
Employees hired after January 1, 1991.
CLASS I
-------
MATERIAL HANDLER START $7.00
SWEEPER 30 DAYS $7.49
CUSHION
FINISHING
CLASS II
--------
MACHINE OPERATOR START $7.20
CLEANER/GRINDER 30 DAYS $7.69
LEVELER
CUSHION TACKER
SEWING MACHINE OPER
CARTON SETUP
BRISTOL PACKER
CUSHION PACKER
CRANE OPERATOR
CLASS III
---------
TRUCK DRIVER START $7.30
STRAPPER 30 DAYS $7.79
CHECK-SHIPPER
PACKAGING CHECKER
ALUM. GRINDER
INSPECTOR
FORK LIFT DRIVER
FABRIC CUTTER
CONVEYOR SCHEDULER
L.T.L. CO-ORDINATOR
CLASS IV
--------
WELDER-HELIARC START $7.65
WELDER-MIG
PAINTER
MACHINE SET UP
21
<PAGE> 24
CLASS B WELDER & CLASS A WELDER
CLASS A PAINTER 30 DAYS $8.49
30 DAYS $8.24
CLASS V
-------
MAINTENANCE START $8.00
MECH 30 DAYS $8.49
FIXTURE MAN
R&D
+ .09 IF APPLICABLE TO UNION MEMBERS BY 12/90.
*PROMOTIONS OF MORE THAN ONE GRADE WILL MOVE TO THE PAY RATE WHICH ASSURES THE
PROMOTED EMPLOYEE A MINIMUM OF A 10 CENT PAY INCREASE.
*GROUP LEADERS WELL BE A TOP RATE OF.30 CENT ABOVE THE HIGHEST RATED PERSON
THEY LEAD EXCEPT OVER WELDING. THIS WELL BE 15 CENT ABOVE THE CLASS A.
22
<PAGE> 25
PLANT RATE SCHEDULE
APPENDIX A
EFFECTIVE AUGUST 1, 1998
Employees hired after January 1, 1991.
CLASS I
-------
MATERIAL HANDLER START $7.00
SWEEPER 30 DAYS $7.61
CUSHION
FINISHING
CLASS II
--------
MACHINE OPERATOR START $7.20
CLEANER/GRINDER 30 DAYS $7.81
LEVELER
CUSHION TACKER
SEWING MACHINE OPER
CARTON SETUP
BRISTOL PACKER
CUSHION PACKER
CRANE OPERATOR
CLASS III
---------
TRUCK DRIVER START $7.30
STRAPPER 30 DAYS $7.91
CHECK-SHIPPER
PACKAGING CHECKER
ALUM. GRINDER
INSPECTOR
FORK LIFT DRIVER
FABRIC CUTTER
CONVEYOR SCHEDULER
L.T.L. CO-ORDINATOR
CLASS IV
--------
WELDER-HELIARC START $7.65
WELDER-MIG
PAINTER
MACHINE SET UP
23
<PAGE> 26
CLASS B WELDER & CLASS A WELDER
CLASS A PAINTER 30 DAYS $8.61
30 DAYS $8.36
CLASS V
-------
MAINTENANCE START $8.00
MECH 30 DAYS $8.61
FIXTURE MAN
R&D
+.09 IF APPLICABLE TO UNION MEMBERS BY 12/90.
*PROMOTIONS OF MORE THAN ONE GRADE WILL MOVE TO THE PAY RATE WHICH ASSURES THE
PROMOTED EMPLOYEE A MINIMUM OF A 10 CENT PAY INCREASE.
*GROUP LEADERS WELL BE A TOP RATE OF.30 CENT ABOVE THE HIGHEST RATED PERSON
THEY LEAD EXCEPT OVER WELDING. THIS WILL BE 15 CENT ABOVE THE CLASS A.
24
<PAGE> 27
PLANT RATE SCHEDULE
APPENDIX A
EFFECTIVE AUGUST 1, 1999
Employees hired after January 1, 1991.
CLASS I
-------
MATERIAL HANDLER START $7.00
SWEEPER 30 DAYS $7.73
CUSHION
FINISHING
CLASS II
--------
MACHINE OPERATOR START $7.20
CLEANER/GRINDER 30 DAYS $7.93
LEVELER
CUSHION TACKER
SEWING MACHINE OPER
CARTON SETUP
BRISTOL PACKER
CUSHION PACKER
CRANE OPERATOR
CLASS III
---------
TRUCK DRIVER START $7.30
STRAPPER 30 DAYS $8.03
CHECK-SHIPPER
PACKAGING CHECKER
ALUM. GRINDER
INSPECTOR
FORK LEFT DRIVER
FABRIC CUTTER
CONVEYOR SCHEDULER
L.T.L. CO-ORDINATOR
CLASS IV
--------
WELDER-HELIARC START $7.65
WELDER-MIG
PAINTER
MACHINE SET UP
25
<PAGE> 28
CLASS B WELDER & CLASS A WELDER
CLASS A PAINTER 30 DAYS $8.73
30 DAYS $8.48
CLASS V
-------
MAINTENANCE START $8.00
MECH 30 DAYS $8.73
FIXTURE MAN
R&D
* .09 IF APPLICABLE TO UNION MEMBERS BY 12/90.
*PROMOTIONS OF MORE THAN ONE GRADE WILL MOVE TO THE PAY RATE WHICH ASSURES THE
PROMOTED EMPLOYEE A MINIMUM OF A 10 CENT PAY INCREASE.
*GROUP LEADERS WILL BE A TOP RATE OF.30 CENT ABOVE THE HIGHEST RATED PERSON
THEY LEAD EXCEPT OVER WELDING. THIS WILL BE 15 CENT ABOVE THE CLASS A.
26
<PAGE> 29
PLANT RATE SCHEDULE
APPENDIX A
EFFECTIVE AUGUST 1, 2000
Employees hired after January 1, 1991.
CLASS I
-------
MATERIAL HANDLER START $7.00
SWEEPER 30 DAYS $7.85
CUSHION
FINISHING
CLASS II
--------
MACHINE OPERATOR START $7.20
CLEANER/GRINDER 30 DAYS $8.05
LEVELER
CUSHION TACKER
SEWING MACHINE OPER
CARTON SETUP
BRISTOL PACKER
CUSHION PACKER
CRANE OPERATOR
CLASS III
---------
TRUCK DRIVER START $7.30
STRAPPER 30 DAYS $8.15
CHECK-SHIPPER
PACKAGING CHECKER
ALUM. GRINDER
INSPECTOR
FORK LIFT DRIVER
FABRIC CUTTER
CONVEYOR SCHEDULER
L.T.L. CO-ORDINATOR
CLASS IV
--------
WELDER-HELIARC START $7.65
WELDER-MIG
PAINTER
MACHINE SET UP
27
<PAGE> 30
CLASS B WELDER & CLASS A WELDER
CLASS A PAINTER 30 DAYS $8.85
30 DAYS $8.60
CLASS V
-------
MAINTENANCE START $8.00
MECH 30 DAYS $8.85
FIXTURE MAN
R&D
* .09 IF APPLICABLE TO UNION MEMBERS BY 12/90.
*PROMOTIONS OF MORE THAN ONE GRADE WILL MOVE TO THE PAY RATE WHICH ASSURES THE
PROMOTED EMPLOYEE A MINIMUM OF A 10 CENT PAY INCREASE.
*GROUP LEADERS WILL BE A TOP RATE OF.30 CENT ABOVE THE HIGHEST RATED PERSON
THEY LEAD EXCEPT OVER WELDING. THIS WILL BE 15 CENT ABOVE THE CLASS A.
28
<PAGE> 31
APPENDIX B
EFFECTIVE-JULY 31, 1996
BONUS RATES ARE AS FOLLOWS:
Yearly Increase TOTAL
7/31/96 $.12 $1.17
7/31/97 $.12 $1.29
7/31/98 $.08 $1.37
7/31/98 $.08 $1.45
7/31/2000 $.08 $1.53
29
<PAGE> 32
APPENDIX C
Amendment to the Agreement between Winston Furniture Company, Inc. and the
Retail, Wholesale and Department Store Union, dated August 1, 1990 through
July 31, 1993.
Wage Schedule - Supplement
As agreed upon between the company and the union, the following amendment is
being made:
Effective November 18, 1991 a class "C" rate is being established for the
welding department. This rate will be a minimum 73% of standard to a maximum of
85% of standard. It is also agreed upon that all senior employees transferring
into the welding department will have 30 working days to obtain and maintain no
less than "C" class. If they fail to do so they will go back to their
previously held job. Any welder who fails to maintain at least a "C" rate will
be given the opportunity to bump probationary employees, provided they have a
good attendance record, good attitude, and good work habits.
/s/ Bobby Tesney
------------------------------------
------------------------------------
/s/ Radford Tidwell
------------------------------------
30
<PAGE> 33
MEMORANDUM OF UNDERSTANDING
WHEREFORE, Winston Furniture Company and the Retail, Wholesale and Department
Store Union, AFL-CIO, desire to promote their mutually beneficial Collective
Bargaining relationship, improve production and promote efficiency; and
WHEREFORE, the parties accordingly desire to extend and modify the current
Collective Bargaining Agreement as hereinafter provided;
NOW, THEREFORE, the parties do hereby mutually agree as follows:
1. The expiration date of the current Collective Bargaining Agreement
shall be extended from midnight July 31, 1996 until midnight, July 31,, 2001.
2. During the term of this Collective Bargaining Agreement, as
extended, the Standard Base Wage Rates for each classification shall be as they
appear on "Plant Wage Schedule, Appendix "A" which is attached hereto and
incorporated herein by reference.
NOTE {Appendix A should be exactly the same as current Appendix A not in
effect, i.e., page 42 of Contract.}
3. Effective midnight July 31, 1992, an employee who reports for and
works each scheduled shift during the work week for which the employee is
scheduled, including, any scheduled overtime hours, shall be eligible for an
attendance bonus which will be applied to and be in addition to the Standard
Base Wage Rate set forth in Appendix A.
4. To be entitled to the attendance bonus an eligible employee may not
be absent for any scheduled shift, work day, or any portion thereof (i.e.,
cannot arrive late or leave early, for any reason considered "unexcused" under
the company's attendance policy, the attendance bonus will be based on daily
attendance, not the week as a whole.
4.1 In the event of a missed day due to sickness, for a doctor's
excuse to be considered an excused absence as it relates to the attendance
bonus, the following will be required: a copy of the doctor's notes and/or
prescribed treatment including an original signature by the doctor.
5. Determinations under the Company's attendance policy, for the
purpose of attendance bonus eligibility, shall be at the discretion of the
Company.
6. The attendance bonus earned by an eligible employee will be paid
together with the regular pay earned for that week subject to all usual payroll
deductions.
7. The amount and calculation of the attendance bonus shall be as set
forth in Appendix B attached hereto and incorporated herein by reference.
31
<PAGE> 34
8. Upon execution of this Memorandum of Understanding, the Company
shall print new contract booklets incorporating the modifications contained in
this Memorandum of Understanding.
32
<PAGE> 35
WINSTON FURNITURE COMPANY
/s/ Bobby Tesney
- -----------------------------------------------------
/s/ Jerry C. Camp, Jr.
- -----------------------------------------------------
RETAIL, WHOLESALE AND DEPARTMENT
STORE UNION, AFL-CIO
/s/ Radford Tidwell 8-23-96
- -----------------------------------------------------
/s/ Robert E.
- -----------------------------------------------------
/s/ [Illegible]
- -----------------------------------------------------
/s/ Kathy Hall
- -----------------------------------------------------
/s/ Betty Smith
- -----------------------------------------------------
/s/ Louise Frazier
- -----------------------------------------------------
33
<PAGE> 1
Exhibit 10.7
CONTRACT FOR SALE AND PURCHASE
PARTIES: THOMAS L. VILLELLA, AS TRUSTEE OF THE THOMAS L. VILLELLA FAMILY
TRUST DATED AUGUST 5, 1991("Seller"),of 4251 South Pine Avenue, Ocala, FL
34480(Phone)(352) 368-6993, and VILLELLA, INC., a Florida corporation
("Buyer") c/o WINSTON FURNITURE COMPANY OF ALABAMA, INC., of 201 Cahaba Valley
Parkway, Pelham, AL 35124(Phone)(205 )987-3399, ,
hereby agree that Seller shall sell and Buyer shall buy the following Real
Property and Personal Property (collectively "Property") upon the following
terms and conditions, which INCLUDE Standards for Real Estate Transactions
("Standard(s)") printed on the reverse side or attached hereto and Riders and
Addenda to this Contract for Sale and Purchase ("Contract").
I. DESCRIPTION:
(a) Legal description of Real Property located in Marion County,
Florida and more particularly described on Exhibit "A" attached hereto and made
a part hereof, consisting of one (1) page ("Property"), in its "as is"
condition, and Seller makes no warranties or representations, except as set
forth in Exhibit "B" hereto.
(b) Street address, city, zip, of the Property is: 4251 South
Pine Avenue, Ocala, Florida 34480
(c) Personal Property: All personal property now located on the
Property in its "as is" condition, with the exception of one of two overhead
cranes now located on the Property. Seller shall have the option of selecting
which of the two overhead cranes Seller wishes to remove from the Property
prior to closing. In the event Seller does not remove the selected overhead
crane prior to closing, Seller shall have the right to enter upon the Property
after the closing for the purpose of removing the selected overhead crane,
which Seller's right shall survive the closing. .
II. PURCHASE PRICE $900,000.00
PAYMENT:
(a) Deposit(s) to be held in escrow by Abrams, Anton Trust
Account
in the amount of $N/A
(b) Balance to close including third-party loan proceeds (U.S.
cash, LOCALLY DRAWN certified or cashier's check), or federal funds
received in Seller's attorneys' trust account, subject to
adjustments and prorations $900,000.00
III. TIME FOR ACCEPTANCE OF OFFER; EFFECTIVE DATE; FACSIMILE: If this
offer is not executed by and delivered to all parties OR FACT OF EXECUTION
communicated in writing between the parties on
<PAGE> 2
or before June 29, 1998, the deposit(s) will, at Buyer's option, be returned to
Buyer and this offer withdrawn. The date of Contract ("Effective Date") will be
the date when the last one of the Buyer and Seller has signed this offer. A
facsimile copy of this Contract and any signatures hereon shall be considered
for all purposes as originals.
IV. THIS PARAGRAPH INTENTIONALLY DELETED.
V. TITLE EVIDENCE:(CHECK ONLY ONE): G Seller shall, at Seller's expense,
deliver to Buyer or Buyer's attorney, or G Buyer shall, at Buyer's expense,
obtain in accordance with Standard A, (CHECK ONLY ONE): G abstract of title; or
G title insurance commitment (with legible copies of instruments listed as
exceptions) and, after closing, an owner's policy of title insurance; or G an
existing title insurance policy, qualified as a base for reissuance of coverage
on said property at the purchase price, together with a computer update, name
search of all entries reflecting all documents affecting the property from the
effective date of the Policy, and a computer tax search prepared by attorney.
VI. CLOSING DATE: This transaction shall be closed and the deed and other
closing papers delivered on June 30, 1998, unless extended by other provisions
of this Contract.
VII. RESTRICTIONS; EASEMENTS; LIMITATIONS: Buyer shall take title subject
to: comprehensive land use plans, zoning, restrictions, prohibitions and other
requirements imposed by governmental authority; restrictions and matters
appearing on the plat or otherwise common to the subdivision; public utility
easements of record (easements are to be located contiguous to Real Property
lines and not more than 10 feet in width as to the rear or front lines and 7
and one half feet in width as to the side lines, unless otherwise stated
herein); taxes for year of closing and subsequent years; assumed mortgages and
purchase money mortgages, if any; (if other matters, see Paragraph XV);
provided, that there exists at closing no violation of the foregoing and none
of them prevents use of the Property for commercial purpose(s).
VIII. OCCUPANCY: Seller warrants that there are no parties in occupancy
other than Seller, except for the tenant under a lease between Seller and
Villella, Inc., which lease shall be canceled as of the date of closing; but,
if Property is intended to be rented or occupied beyond closing, the fact and
terms thereof shall be stated herein and the tenant(s) or occupants disclosed
pursuant to Standard F. Seller shall deliver occupancy of Property at time of
closing unless otherwise stated herein. If occupancy is to be delivered before
closing, Buyer assumes all risk of loss to Property from date of occupancy,
shall be responsible and liable for maintenance from that date, and shall be
deemed to have accepted Property in its existing condition as of time of taking
occupancy unless otherwise stated herein or in a separate writing.
IX. TYPEWRITTEN OR HANDWRITTEN PROVISIONS: Typewritten or hand-written
provisions shall control all printed provisions of this Contract in conflict
with them.
X. THIS PARAGRAPH INTENTIONALLY DELETED.
XI. ASSIGNABILITY: (CHECK ONLY ONE): Buyer G may assign and thereby be
released from further liability under this Contract; G
<PAGE> 3
may assign but not be released from liability under this Contract; or G may not
assign this Contract.
XII. TIME: Time is of the essence of this Contract.
XIII. THIS PARAGRAPH INTENTIONALLY DELETED.
XIV. THIS PARAGRAPH INTENTIONALLY DELETED.
XV. RADON GAS: Radon is naturally occurring radioactive gas that, when it
has accumulated in a building in sufficient quantities, may present health
risks to persons who are exposed to it over time. Levels of Radon that exceed
federal and state guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may be obtained from
your county public health unit.
XVI. THIS PARAGRAPH INTENTIONALLY DELETED.
XVII. SPECIAL CLAUSES: If additional space is required, attach
Addendum and CHECK HERE G.
(a) This Contract for Sale and Purchase may be executed in
counterparts by the parties hereto and each shall be considered an original
insofar as the parties hereto are concerned but together said counterparts
shall comprise only one Contract for Sale and Purchase.
(b) Seller and Buyer represent that no broker is involved in this
transaction.
Approval does not constitute an opinion that any of the terms and conditions in
this Contract should be accepted by the parties in a particular transaction.
Terms and conditions should be negotiated based upon the respective interests,
objectives and bargaining positions of all interested persons.
BUYER:
SELLER:
VILLELLA, INC. a Florida
corporation
By: /s/ Thomas L. Villella
------------------------------
-------------------- /s/ Thomas L. Villella
- ----------- -------------------------
THOMAS L. VILLELLA, President THOMAS L. VILLELLA, as
Trustee of the Thomas L.
Villella Family Trust
dated August 5, 1991
Date: June 29, 1998 Date: June 27, 1998
Tax I.D. #591784459 Social Security or
Tax I.D. ####-##-####
STANDARDS FOR REAL ESTATE TRANSACTIONS
A. EVIDENCE OF TITLE: (1) An abstract of title prepared or brought current
by a reputable and existing abstract firm (if not existing then certified as
correct by an existing firm) purporting to be an accurate synopsis of the
instruments affecting title to the Real Property recorded in the public records
of the county wherein Real Property is located through Effective Date and which
shall commence with the earliest public
<PAGE> 4
records, or such later date as may be customary in the county. Upon closing of
this transaction, the abstract shall become the property of Buyer, subject to
the right of retention thereof by first mortgagee until fully paid. (2) A title
insurance commitment issued by a Florida licensed title insurer agreeing to
issue to Buyer, upon recording of the deed to Buyer, an owner's policy of title
insurance in the amount of the purchase price insuring Buyer's title to the
Real Property, subject only to liens, encumbrances, exceptions or
qualifications set forth in this Contract and those which shall be discharged
by Seller at or before closing. Seller shall convey marketable title subject
only to liens, encumbrances, exceptions or qualifications specified in this
Contract. Marketable title shall be determined according to applicable Title
Standards adopted by authority of The Florida Bar and in accordance with law.
Buyer shall have 30 days, if abstract, or 1 day, if title commitment, from date
of receiving evidence of title to examine it. If title is found defective,
Buyer shall, within 3 days thereafter, notify Seller in writing specifying
defect(s). If the defect(s) render title unmarketable, Seller will have 30 days
from receipt of notice to remove the defect, failing which Buyer shall within
five (5) days after expiration of the thirty (30) day period, deliver written
notice to Seller either: (1) extending the time within which Seller shall use
diligent effort to remove the defects for a reasonable period not to exceed 120
days; or (2) requesting a refund of deposit(s) paid which shall immediately be
returned to Buyer, whereupon, Buyer and Seller shall be released of all further
obligations under the Contract. If Buyer fails to so notify Seller, Buyer shall
be deemed to have accepted title as it then is. Seller shall, if title is found
unmarketable, use diligent effort to correct defect(s) in the title within the
time provided therefor. SEE PARAGRAPH V.
B. THIS PARAGRAPH INTENTIONALLY DELETED.
C. THIS PARAGRAPH INTENTIONALLY DELETED.
D. SURVEY: Buyer, at Buyer's expense, within time allowed to deliver evidence
of title and to examine same, may have the Property surveyed and certified by a
registered Florida surveyor. If survey shows encroachment on Real Property or
that improvements located on Real Property encroach on setback lines,
easements, lands of others or violate any restrictions, Contract covenants or
applicable governmental regulation, the same shall constitute a title defect.
E. THIS PARAGRAPH INTENTIONALLY DELETED.
F. INGRESS AND EGRESS: Seller warrants and represents that there is
ingress and egress to the Real Property sufficient for its intended use as
described in Paragraph VII hereof, title to which is in accordance with
Standard A.
G. THIS PARAGRAPH INTENTIONALLY DELETED.
H. LIENS: Seller shall furnish to Buyer at time of closing an affidavit
attesting to the absence, unless otherwise provided for herein, of any
financing statement, claims of lien or potential lienors known to Seller and
further attesting that there have been no improvements or repairs to the
Property for 90 days immediately preceding date of closing. If Property has
been improved or repaired within that time, Seller shall deliver releases or
waivers of construction liens executed by all general contractors,
subcontractors, suppliers and materialmen in addition to Seller's lien
affidavit setting forth the names of
<PAGE> 5
all such general contractors, subcontractors, suppliers and materialmen and
further affirming that all charges for improvements or repairs which could
serve as a basis for a construction lien or a claim for damages have been paid
or will be paid at closing of this Contract.
I. PLACE OF CLOSING: Closing shall be held at the office of the attorney
for the Seller.
J. TIME PERIOD: In computing time periods of less than six (6) days,
Saturdays, Sundays and state or national legal holidays shall be excluded. Any
time periods provided for herein which shall end on a Saturday, Sunday or a
legal holiday shall extend to 5:00 p.m. of the next business day.
K. DOCUMENTS FOR CLOSING: Seller shall furnish the deed, bill of sale,
owner's affidavit and corrective instruments. Buyer shall furnish the closing
statement.
L. EXPENSES: Documentary stamps on the deed and recording of corrective
instruments shall be paid by Seller. Recording of the deed shall be paid by
Buyer.
M. PRORATIONS; CREDITS: Taxes, assessments, insurance and other expenses
and revenue of Property shall be prorated through day before closing. Buyer
shall have the option of taking over any existing policies of insurance, if
assumable, in which event premiums shall be prorated. Cash at closing shall be
increased or decreased as may be required by prorations. Prorations will be
made through day prior to occupancy if occupancy occurs before closing. Taxes
shall be prorated based on the current year's tax with due allowance made for
maximum allowable discount, homestead and other exemptions. If closing occurs
at a date when the current year's millage is not fixed, and current year's
assessment is available, taxes will be prorated based upon such assessment and
the prior year's millage. If current year's assessment is not available, then
taxes will be prorated on the prior year's tax. If there are completed
improvements on the Real Property by January 1st of year of closing, which
improvements were not in existence on January 1st of the prior year, then taxes
shall be prorated based upon the prior year's millage and at an equitable
assessment to be agreed upon between the parties, failing which, request will
be made to the County Property Appraiser for an informal assessment taking into
consideration available exemptions. Any tax proration based on an estimate
shall, at request of either Buyer or Seller, be subsequently readjusted upon
receipt of tax bill on condition that a statement to that effect is in the
closing statement.
N. SPECIAL ASSESSMENT LIENS: Certified, confirmed and ratified special
assessment liens as of date of closing (not as of Effective Date) are to be
paid by Seller. Pending liens as of date of closing shall be assumed by Buyer.
If the improvement has been substantially completed as of Effective Date, such
pending lien shall be considered certified, confirmed or ratified and Seller
shall, at closing, be charged an amount equal to the last estimate of
assessment for the improvement by the public body.
O. THIS PARAGRAPH INTENTIONALLY DELETED.
P. RISK OF LOSS: If the Property is damaged by fire or other casualty
before closing and cost of restoration does not exceed 3% of the assessed
valuation of the Property so damaged, cost of restoration shall be an
obligation of the Seller and closing
<PAGE> 6
shall proceed pursuant to the terms of this Contract with restoration costs
escrowed at closing. If the cost of restoration exceeds 3% of the assessed
valuation of the improvements so damaged, Buyer shall have the option of either
taking Property as is, together with either the 3% or any insurance proceeds
payable by virtue of such loss or damage, or of canceling this Contract and
receiving return of deposit(s).
Q. PROCEEDS OF SALE; CLOSING PROCEDURE: The deed shall be recorded upon
clearance of funds. If abstract, evidence of title shall be continued at
Buyer's expense to show title in Buyer, without any encumbrances or change
which would render Seller's title unmarketable from the date of the last
evidence. Proceeds of the sale shall be held in escrow by Seller's attorney or
by another mutually acceptable escrow agent for a period of not longer than 5
days from and after closing date. If Seller's title is rendered unmarketable,
through no fault of Buyer, Buyer shall, within the 5-day period, notify Seller
in writing of the defect and Seller shall have 30 days from date of receipt of
such notification to cure the defect. If Seller fails to timely cure the
defect, all deposit(s) and closing funds shall, upon written demand by Buyer
and within 5 days after demand, be returned to Buyer and simultaneously with
such repayment, Buyer shall return the Personal Property, vacate the Real
Property and reconvey the Property to Seller by special warranty deed and bill
of sale. If Buyer fails to make timely demand for refund, Buyer shall take
title as is, waiving all rights against Seller as to any intervening defect
except as may be available to Buyer by virtue of warranties contained in the
deed or bill of sale. If a portion of the purchase price is to be derived from
institutional financing or refinancing, requirements of the lending institution
as to place, time of day and procedures for closing, and for disbursement of
mortgage proceeds shall control over contrary provision in this Contract.
Seller shall have the right to require from the lending institution a written
commitment that it will not withhold disbursement of mortgage proceeds as a
result of any title defect attributable to Buyer-mortgagor. The escrow and
closing procedure required by this Standard may be waived if title agent
insures adverse matters pursuant to Section 627.7841, F.S. (1991), as amended.
R. ESCROW: Any escrow agent ("Agent") receiving funds or equivalent is
authorized and agrees by acceptance of them to deposit them promptly, hold same
in escrow and, subject to clearance, disburse them in accordance with terms and
conditions of Contract. Failure of clearance of funds shall not excuse Buyer's
performance. If in doubt as to Agent's duties or liabilities under the
provisions of Contract, Agent may, at Agent's option, continue to hold the
subject matter of the escrow until the parties mutually agree to its
disbursement or until a judgment of a court of competent jurisdiction shall
determine the rights of the parties or Agent may deposit same with the clerk of
the circuit court having jurisdiction of the dispute. Upon notifying all
parties concerned of such action, all liability on the part of Agent shall
fully terminate, except to the extent of accounting for any items previously
delivered out of escrow. If a licensed real estate broker, Agent will comply
with provisions of Chapter 475, F.S. (1991), as amended. Any suit between Buyer
and Seller wherein Agent is made a party because of acting as Agent hereunder,
or in any suit wherein Agent interpleads the subject matter of the escrow,
Agent shall recover reasonable attorney's fees and costs incurred with the fees
and costs to be paid from and out of the escrowed funds or equivalent and
charged and awarded as court costs in favor of the prevailing party. Parties
<PAGE> 7
agree that Agent shall not be liable to any party or person for misdelivery to
Buyer or Seller of items subject to this escrow, unless such misdelivery is due
to willful breach of this Contract or gross negligence of Agent.
S. THIS PARAGRAPH INTENTIONALLY DELETED.
T. FAILURE OF PERFORMANCE: If Buyer fails to perform this Contract within
the time specified, Buyer and Seller shall be relieved of all obligations under
this Contract; or Seller, at Seller's option, may proceed in equity to enforce
Seller's rights under this Contract. If, for any reason other than failure of
Seller to make Seller's title marketable after diligent effort, Seller fails,
neglects or refuses to perform this Contract, the Buyer may seek specific
performance. There is no right of damages.
U. CONTRACT NOT RECORDABLE; PERSONS BOUND; NOTICE: Neither this Contract,
nor any notice of it shall be recorded in any public records. This Contract
shall bind and inure to the benefit of the parties and their successors in
interest. Whenever the context permits, singular shall include plural and one
gender shall include all. Notice given by or to the attorney for any party
shall be as effective as if given by or to that party.
V. CONVEYANCE: Seller shall convey title to the Real Property by statutory
warranty, trustee's, personal representative's or guardian's deed, as
appropriate to the status of Seller, subject only to matters contained in
Paragraph VII and those otherwise accepted by Buyer. Personal Property shall,
at request of Buyer, be transferred by an absolute bill of sale with warranty
of title, subject only to such matters as may be otherwise provided for herein.
W. OTHER AGREEMENTS: No prior or present agreements or representations
shall be binding upon Buyer or Seller unless included in this Contract. No
modification or change in this Contract shall be valid or binding upon the
parties unless in writing and executed by the party or parties intended to be
bound by it.
X. THIS PARAGRAPH INTENTIONALLY DELETED.
Y. The closing of this transaction is contingent upon WINSTON FURNITURE
COMPANY OF ALABAMA, INC., an Alabama corporation, closing on the purchase of
the stock interest of Thomas L. Villella in Villella, Inc.
GUARANTY:
The undersigned hereby unconditionally guarantees the representations,
warranties and obligations of the Seller under the terms and conditions of this
Contract
Dated: June ____, 1998
------------------------------
- ---
THOMAS L. VILLELLA
ADDENDUM TO
CONTRACT FOR SALE AND PURCHASE
1. Seller and Buyer hereby agree that $25,000 of the
<PAGE> 8
Purchase Price will be held in escrow by Abrams Anton P.A.Trust Account pending
the receipt by Buyer of a survey (the "Survey") of the Property and
improvements certified to Buyer in such form as to allow any survey exception
to be removed from the Title Policy to be delivered by Seller to Buyer
hereunder. Buyer and Seller agree that the cost of the Survey shall be split
equally among Buyer and Seller.
2. Should the Survey reveal any existing encroachment on any
property adjacent to the Property, Seller, at its sole cost and expense, shall
remedy such encroachment to the reasonable satisfaction of Buyer.
Dated June 29, 1998
SELLER:
/s/ Thomas L. Villella
-------------------------------
THOMAS L. VILLELLA AS
TRUSTEE OF THE THOMAS L.
VILLELLA FAMILY TRUST
DATED AUGUST 5, 1991
/s/ Thomas L. Villella
-------------------------------
THOMAS L. VILLELLA
BUYER:
VILLELLA, INC.
By:
/s/ Thomas L. Villella
-------------------------------
Its: Pres.
<PAGE> 9
REPRESENTATIONS AND WARRANTIES OF SELLER
1. Zoning. Seller hereby represents and warrants to Buyer that
the Property is in compliance with all applicable building, zoning, and other
land use and similar laws, codes ordinances, rules, regulations and orders.
2. Encumbrances. Seller hereby represents and warrants to Buyer
that there are no encumbrances affecting the Property other than (i) those
reflected on the Title Commitment to be delivered to Buyer pursuant to this
Agreement and (ii) as reflected on the November 12, 1996 Specific Purpose
Survey for Thomas Villella prepared by Daniel M. Croft, P.L.S. (the "1996
Survey").
3. Construction. Seller hereby represents and warrants to Buyer
that any and all construction performed on the Property since the date of the
1996 Survey was performed in accordance with all applicable building, zoning
and other land use and similar laws, codes, ordinances, rules, regulations and
orders and that such construction is within the lot lines or boundary lines of
the Property and does not encroach upon any adjoining property.
Dated: June 30, 1998
/s/ Thomas L. Villella
-------------------------
Thomas L. Villella
The above representations and warranties shall survive for nine months from
closing.
/s/ Thomas L. Villella
-------------------------
Thomas L. Villella
<PAGE> 1
EXHIBIT 10.8
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
STOCK PURCHASE AGREEMENT
by and between
THOMAS VILLELLA
and
WINSTON FURNITURE COMPANY OF ALABAMA, INC.
dated as of June 30, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions 1
2. Purchase and Sale of Shares 8
(a) Basic Transaction 8
(b) Purchase Price 8
(c) Payment of Purchase Price 8
(d) Funded Indebtedness 9
(e) Earnout 9
(f) Minimum Shareholders Equity Purchase
Price Adjustment 12
(g) Funded Indebtedness. 14
(h) Excluded Assets 14
(i) The Closing 14
(j) Deliveries at the Closing 15
(k) Transfer Taxes 15
3A. Representations and Warranties of the Seller
as to Seller Matters 15
(a) Capacity 15
(b) Binding Obligation 15
(c) Noncontravention 15
(d) Ownership of Common Stock. The 15
(e) Brokers Fees 15
3B. Representations and Warranties of the Seller With
Respect to the Company 16
(a) Organization/Power and Authority to Conduct
Business 16
(b) Noncontravention 16
(c) Brokers Fees 16
(d) Capitalization 16
(e) Financial Statements 17
(f) Absence of Certain Developments 17
(g) Undisclosed Liabilities 19
(h) Legal Compliance 19
(i) Company Permits 19
(j) Tax Matters 19
(k) Certain Business Relationships with the Company 20
(l) Title to Tangible Assets Other than Real Property
Interests 21
(m) Title to Real Property 21
(n) Intellectual Property 21
(o) Material Contracts 22
(p) Powers of Attorney 22
(q) Insurance 23
(r) Litigation 23
(s) Labor Relations 23
(t) Employee Benefits 23
(u) Environmental, Health and Safety Matters 25
(v) Customers and Suppliers 26
(w) Inventory 26
(x) Accounts Receivable 26
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
(y) List of Accounts 27
(z) Product Warranty 27
(aa) Product Liability 27
4. Representations and Warranties of the Purchaser 27
(a) Organization 27
(b) Authorization of Transaction 27
(c) Noncontravention 27
(d) Brokers Fees 28
(e) Acquisition of Shares for Investment 28
5. Pre-Closing Covenants 28
(a) General 28
(b) Operation of Business 28
(c) Preservation of Business 28
(d) Full Access 29
(e) Notice of Developments 29
6. Post-Closing Covenants 29
(a) General 29
(b) Transition 29
(c) Litigation Support 29
(d) Noncompetition 29
(e) Non-Solicitation of Employees 30
(f) Confidentiality 31
(g) "Section" 338(h)(10) Election 31
7. No Shop 32
8. Conditions to Obligation to Close 32
(a) Conditions to Obligation of the Purchaser 32
(b) Conditions to Obligation of the Seller 34
9. Remedies for Breaches of This Agreement 35
(a) Survival of Representations and Warranties 35
(b) Indemnification 35
(c) Treatment of Indemnification Payments 37
(d) Escrow 37
10. Termination 37
(a) Termination of Agreement 37
(b) Effect of Termination 38
11. Miscellaneous 38
(a) Press Releases and Public Announcements 38
(b) No Third-Party Beneficiaries 38
(c) Entire Agreement 38
(d) Succession and Assignment 38
(e) Counterparts 39
(f) Headings 39
(g) Notices 39
(h) Governing Law; Venue 40
(i) Amendments and Waivers 40
(j) Severability 40
(k) Expenses 40
(l) Construction 40
(m) Incorporation of Disclosure Schedule 41
(n) Equitable Remedies 41
(o) Waiver of Jury Trial 41
(p) Prevailing Parties 41
Schedule I - Seller Stock Information
Exhibit A - Form of Escrow Agreement
</TABLE>
<PAGE> 4
Exhibit B - Form of Employment Agreement
Exhibit C - Form of Contract for Purchase and Sale
Disclosure Schedule
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of June 30,
1998, by and between Winston Furniture Company of Alabama, Inc., an Alabama
corporation (the "Purchaser"), and Thomas Villella (the "Seller"). The Purchaser
and the Seller are each referred to in this Agreement as a "Party" and
collectively as the "Parties".
The Seller directly owns all of the outstanding capital
stock of Villella, Inc., a Florida corporation (the "Company").
This Agreement contemplates a transaction in which the
Purchaser will purchase from the Seller, and the Seller will sell to the
Purchaser, all of the outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and
the mutual promises herein made, and in consideration of the representations,
warranties and covenants herein contained, the Parties agree as follows.
1. Definitions.
"Accounts Receivable" means all of the Company's accounts,
instruments, drafts, acceptances and other forms of receivables and all rights
earned under the Company's contracts to sell goods or render services.
"Actual EBITAM Amount" has the meaning set forth in
"section" 2(e)(iv)(C) below.
"Actual Net Shareholders Equity Amount" has the meaning set
forth in "section"2(f)(ii)(C) below.
"Affiliate" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the
meaning of "section"1504 of the Code.
"Allocation Schedule" has the meaning set forth in
"section"6(g)(iii) below.
"Authority" means any federal, state, local or foreign governmental
regulatory agency, commission, bureau, authority, court or arbitration tribunal.
"Available Cash" means all Cash held by the Company as of midnight
on the business day before the Closing Date less an amount of Cash necessary to
cover outstanding checks (which are not otherwise stale) which have been issued
by the Company but have not cleared.
"Business of the Company" means the casual contract
furniture business.
"Cash" means cash and cash equivalents (including marketable
securities and short term investments) calculated in accordance
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<PAGE> 5
with GAAP applied on a basis consistent with the preparation of the Financial
Statements.
"CERCLA" has the meaning set forth in "section"3B(u)(vi) below.
"Charter" and "bylaws," respectively, mean with respect to
any corporation, those instruments that, among other things, (a) define its
existence, as filed or recorded with the applicable Authority, including,
without limitation, such corporation's Articles or Certificate of Incorporation,
and (b) otherwise govern its internal affairs, in each case as amended,
supplemented, or restated.
"Closing" has the meaning set forth in "section"2(g) below.
"Closing Balance Sheet" has the meaning set forth in
"section"2(f)(i) below.
"Closing Date" has the meaning set forth in "section"2(g) below.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the Common Stock, par value $5.00 per
share, of the Company.
"Company" has the meaning set forth in the preface above.
"Company Permits" has the meaning set forth in "section"3B(i) below.
"Confidential Information" means data and information relating to
the business of the Company (which does not rise to the level of a Trade Secret)
and which has value to the Company and is not generally known to its
competitors. Confidential Information does not include any data or information
that has been voluntarily disclosed to the public by the Company or that has
been independently developed and disclosed by others, or that otherwise enters
the public domain through lawful means.
"Disclosure Schedule" means the Disclosure Schedule
accompanying this Agreement.
"Earnout" has the meaning set forth in "section"2(e)(i) below.
"EBITAM" means has the meaning set forth in "section"2(e)(ii) below.
"EBITAM Dispute Accounting Firm" has the meaning set forth
in "section"2(e)(iv) below.
"EBITAM Statement" has the meaning set forth in "section"2(e)(iv)
below.
"Employee Benefit Plan" has the meaning set forth in "section"3B(t)
below.
"Employee Pension Benefit Plan" has the meaning set forth in
ERISA "section"3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in
ERISA "section"3(1).
"Employment Agreement" has the meaning set forth in
"section"8(a)(xii) below.
"Environmental, Health and Safety Requirements" means all
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<PAGE> 6
federal, state, local, regional and foreign statutes, regulations and ordinances
concerning workplace health and safety and pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes.
"Environmental Claim" means any written notice or claim by any
person or any Authority alleging potential liability (including, without
limitation, potential liability for investigatory costs, cleanup costs,
governmental response costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (i)
the presence, release or threatened release into the environment, of any
Material of Environmental Concern at any location, whether or not owned, leased
or operated by the Company, or (ii) any violation, or alleged violation, of any
Environmental, Health and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" means any Person that would be aggregated with the
Company under "section"414(b), (c), (m) or (o) of the Code.
"Escrow Account" has the meaning set forth in "section" 2(c)(ii).
"Escrow Agent" has the meaning set forth in "section" 2(c)(ii).
"Escrow Funds" has the meaning set forth in "section" 2(c)(ii).
"Final EBITAM Determination Date" has the meaning set forth in
"section" 2(e)(iv) below.
"Final Closing Balance Sheet Determination Date" has the meaning set
forth in "section"2(f)(ii) below.
"Final Return" has the meaning set forth in "section" 6(h) below.
"Financial Statements" has the meaning set forth in "section"3B(e)
below.
"Funded Indebtedness" means the aggregate amount (including the
current portions thereof) of all (i) indebtedness for money borrowed from others
and purchase money indebtedness of the Company (including capitalized lease
obligations), (ii) indebtedness of the type described in clause (i) above
guaranteed, directly or indirectly, in any manner by the Company, or in effect
guaranteed, directly or indirectly, in any manner by the Company, through an
agreement, contingent or otherwise, to supply funds to, or in any other manner
invest in, the debtor, or to purchase indebtedness, or to purchase and pay for
property if not delivered or to pay for services if not performed, primarily for
the purpose of enabling the debtor to make payment of the indebtedness or to
assure the owners of the indebtedness against loss, but excluding endorsements
of checks and other instruments in the ordinary course, (iii) indebtedness of
the type described in clause (i) above secured by any Lien upon property owned
by the Company, even though the Company has not in any manner become liable for
the payment of such indebtedness and (iv) interest expense accrued but unpaid,
and all prepayment premiums, on or relating to any of such indebtedness.
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<PAGE> 7
"GAAP" means United States generally accepted accounting principles
as in effect from time to time.
"High EBITAM Amount" has the meaning set forth in
"section"2(e)(iv)(B) below.
"High Net Shareholders Equity Amount" has the meaning set
forth in "section"2(f)(ii)(B) below.
"Indemnified Party" has the meaning set forth in "section"9(b)(v)
below.
"Indemnifying Party" has the meaning set forth in "section"9(b)(v)
below.
"Individual Representations and Warranties" has the meaning
set forth in "section"9(a) below.
"Initial Payment" has the meaning set forth in "section"2(c)(i)
below.
"Intellectual Property" means all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all goodwill
associated therewith (including all translations, adaptations, derivations and
combinations of the foregoing); copyrights and copyrightable works;
registrations, applications and renewals for any of the foregoing; trade secrets
and confidential information (including, without limitation, ideas,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, business and marketing plans, and customer and
supplier lists and related information); and computer software (including,
without limitation, data, data bases and documentation).
"IRS" means the Internal Revenue Service.
"Inventory" means all of the inventories of the Company, including
without limitation, raw materials, work in progress, finished goods, packaging
goods and other like items.
"Knowledge" (and the related phrase "to the Knowledge of") means,
with respect to either Party when modifying any representation or warranty, that
such Party has no knowledge that such representation or warranty is not true and
correct to the same extent as provided in the applicable representation and
warranty, and that (i) in the case of the Seller, the Seller has made
appropriate investigations and inquiries of the officers and responsible
employees of the Company, and (ii) nothing has come to the Seller's attention in
the course of such investigation and inquiries or otherwise which would cause
the Seller, in the exercise of due diligence, to believe that such
representation and warranty is not true in all material respects.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or
other security interest, whether or not related to the extension of credit or
the borrowing of money.
"Leased Real Property" has the meaning set forth in "section"3B(m)
below.
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<PAGE> 8
"Loss" or "Losses" means all damages, dues, penalties, fines,
reasonable amounts paid in settlement, Taxes, costs, obligations, losses,
expenses, and fees (including court costs and reasonable attorneys' fees and
expenses), including, as the context may require, any of the foregoing which
arise out of or in connection with any actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees or rulings.
"Low EBITAM Amount" has the meaning set forth in
"section"2(e)(iv)(A) below.
"Low Net Shareholders Equity Amount" has the meaning set
forth in "section"2(f)(ii)(B) below.
"Material Adverse Change" or "Material Adverse Effect" means any
change or effect that is materially adverse to the business, assets, financial
condition, results of operations or prospects of the Company.
"Material Contract" means any contract or agreement whether written
or oral to which the Company is a party, or by which the Company or any of its
assets is bound, and which (a) relates to Funded Indebtedness or is a letter of
credit, pledge, bond or similar arrangement running to the account of or for the
benefit of the Company, (b) relates to the purchase, maintenance or acquisition
of, or sale or furnishing of, materials, supplies, merchandise, machinery,
equipment, parts or any other property or services (excluding any such contract
made in the Ordinary Course of Business and which is expected to be fully
performed within 90 days of the date hereof or which involves revenues or
expenditures of less than $10,000), (c) is a collective bargaining agreement,
(d) obligates the Company not to compete with any business, or which otherwise
restrains or prevents the Company from carrying on any lawful business or which
restricts the right of the Company to use or disclose any information in its
possession (excluding in each case customary restrictive covenants contained in
agreements entered into in the Ordinary Course of Business), (e) relates to (i)
employment, compensation, severance, or consulting between the Company and any
of its officers or directors, or (ii) between the Company and any other
employees or consultants of the Company who are entitled to compensation
thereunder in excess of $25,000 per annum, (f) is a lease or sublease of real
property, or a lease, sublease or other title retention agreement or conditional
sales agreement involving annual payments in excess of $10,000 individually or
$50,000 in the aggregate for any machinery, equipment, vehicle or other tangible
personal property (whether the Company is a lessor or lessee), (g) is a contract
for capital expenditures or the acquisition or construction of fixed assets for
or in respect of any real property involving payments to be made after the date
hereof in excess of $10,000, (h) is a contract granting any Person a Lien on any
of the assets of the Company, in whole or in part (other than Permitted Liens),
(i) is a contract by which the Company retains any manufacturer's
representatives, broker or other sales agent, distributor or representative or
through which the Company is appointed or authorized as a sales agent,
distributor or representative, (j) is a joint venture or partnership contract or
a limited liability company operating agreement with the Seller, or with any
Affiliate of the Seller, (k) is (i) an agreement for the storage,
transportation, treatment and disposal of any materials subject to regulation
under any Environmental Health and Safety Requirements, or (ii) a contract for
storage, transportation or similar services with carriers or warehousemen
(excluding any such contract entered into in the Ordinary Course of Business and
involving aggregate
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<PAGE> 9
annual expenditures not exceeding $25,000), (l) is an agreement or arrangement
with any Affiliate of the Seller, or (m) any other agreement (or group of
related agreements) the performance of the executory portion of which involves
consideration in excess of $25,000 or which cannot be terminated by the Company
upon 90 days notice.
"Materials of Environmental Concern" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products in each case with respect to which liability or standards of
conduct are imposed pursuant to any Environmental, Health and Safety
Requirements.
"Most Recent Balance Sheet" means the balance sheet
contained within the Most Recent Financial Statements.
"Most Recent Financial Statements" has the meaning set forth
in "section"3B(e) below.
"Most Recent Fiscal Month End" has the meaning set forth in
"section"3B(e) below.
"Most Recent Fiscal Year End" has the meaning set forth in
"section"3B(e) below.
"Multiemployer Plan" has the meaning set forth in ERISA
"section"3(37).
"Net Shareholders Equity" means the total assets of the Company
minus the total liabilities of the Company.
"Net Shareholders Equity Dispute Accounting Firm" has the meaning
set forth in "section"2(f)(ii) below.
"Notice of Disagreement With EBITAM Statement" has the
meaning set forth in "section"2(e)(iv) below.
"Notice of Disagreement With Closing Balance Sheet" has the meaning
set forth in "section"2(f)(ii) below.
"Ordinary Course of Business" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"Party" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Permitted Liens" means (i) Liens for Taxes not yet due and payable
or being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established, (ii) mechanic's, materialman's,
supplier's, vendor's, landlord's or similar Liens arising in the Ordinary Course
of Business securing amounts which are not delinquent and (iii) purchase money
Liens and Liens securing rental payments under capital lease arrangements.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
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<PAGE> 10
"Pre-Closing Tax Period" means any tax period (including partial
periods) that ends on or prior to the Closing Date.
"Property" or "Properties" has the meaning set forth in
"section"3B(m) below.
"Purchaser" has the meaning set forth in the preface above.
"Purchase Price" has the meaning set forth in "section"2(b) below.
"Purchase Price Adjustment" has the meaning set forth in
"section"2(f)(iii) below.
""section"338(h)(10) Election" has the meaning set forth in
"section"6(g)(i) below.
"Restricted Area" has the meaning set forth in "section"6(d) below.
"Securities Act" means the Securities Act of 1933, as
amended.
"Securities Exchange Act" means the Securities Exchange Act
of 1934, as amended.
"Seller" has the meaning set forth in the preface above.
"Shares" has the meaning set forth in "section"2(a) below.
"Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns, directly or indirectly, a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
"Target Amounts" has the meaning set forth in "section" 2(e) below.
"Taxes" means all federal, state, local and foreign taxes
(including, without limitation, income or profits taxes, premium taxes, excise
taxes, sales taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem
taxes, severance taxes, capital levy taxes, transfer taxes, value added taxes,
employment and payroll-related taxes, property taxes, business license taxes,
occupation taxes, import duties and other governmental charges and assessments),
of any kind whatsoever, including interest, additions to tax and penalties with
respect thereto.
"Tax Return" means any return, declaration, report, claim for refund
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in "section"9(b)(v)
below.
"Trade Secrets" means information relating to the Company, without
regard to form, including, but not limited to, technical or nontechnical data,
formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which is not commonly known by or
available to the public and which (a) derives economic value, actual or
potential, from not being known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its disclosure
or use, and (b) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
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<PAGE> 11
"Unrestricted Representations and Warranties" has the
meaning set forth in "section"9(a) below.
"1999 EBITAM" has the meaning set forth in "section" 2(e) below.
"2000 EBITAM" has the meaning set forth in "section" 2(e) below.
2. Purchase and Sale of Shares.
(a) Basic Transaction. On and subject to the terms and conditions
of this Agreement, the Purchaser agrees to purchase from the Seller, and the
Seller agrees to sell to the Purchaser, free and clear of all restrictions on
transfer, Liens, claims and demands, all of the shares of Common Stock owned by
the Seller (the "Shares") as set forth in Schedule I hereto, for the
consideration specified below in this "section"2.
(b) Purchase Price. The aggregate purchase price to be paid by the
Purchaser for all of the Shares (the "Purchase Price") shall be (i) $8,000,000,
minus (ii) the amount of Funded Indebtedness as of the Closing Date (after
giving effect to any reduction of such Funded Indebtedness on the Closing Date
by application of Available Cash); (iii) any Purchase Price Adjustment made
pursuant to "section"2(f) below, plus (iv) any Earnout payments made pursuant to
"section"2(e) below.
(c) Payment of Purchase Price. On the Closing Date, the Purchaser
shall make payment of the Purchase Price as follows:
(i) To the Seller, by wire transfer of immediately available funds,
the aggregate sum of $7,500,000 (the "Initial Payment"), to the account or
accounts designated in writing by the Seller at least two business days prior to
the Closing Date. The Seller may direct the Purchaser to deliver a portion of
the Initial Payment to certain third parties for fees, expenses, costs or other
obligations arising out of or in connection with the transactions contemplated
in this Agreement.
(ii) To SunTrust Bank Atlanta, as escrow agent (the "Escrow Agent")
pursuant to the terms of the Escrow Agreement, the sum of $500,000 (the "Escrow
Funds"). As provided in the Escrow Agreement, the Escrow Funds shall be held in
an account (the "Escrow Account") to provide indemnification to the Purchaser as
provided in "section" 9 hereof.
(d) Funded Indebtedness. As soon as practical before the Closing,
the Purchaser and/or the Company (as determined by the Purchaser) shall deliver
to the holders of Funded Indebtedness an amount sufficient to repay all Funded
Indebtedness outstanding immediately prior to the Closing (in connection with
which the Seller shall cause the Company to apply Available Cash to the
reduction of Funded Indebtedness), with the result that immediately following
the Closing there will be no further obligations of the Company, monetary or
otherwise, with respect to any Funded Indebtedness outstanding immediately prior
to the Closing. Prior to the Closing Date, the Seller will provide the Purchaser
with customary pay-off letters from all holders of Funded Indebtedness
outstanding immediately prior to the Closing, and make arrangements reasonably
satisfactory to the Purchaser for such holders to provide to the Purchaser
recordable
8
<PAGE> 12
form mortgage and lien releases, canceled notes, trademark and patent
assignments and other documents reasonably requested by the Purchaser
simultaneously with the Closing. If the Purchaser directs the Company to pay any
Funded Indebtedness, it shall provide the Company with sufficient funds to do
so.
(e) Earnout.
(i) The Seller will be entitled to receive a contingent purchase
price payment of up to $1,000,000 (the "Earnout") in accordance with the
provisions of this "section"2(e). The Earnout shall be payable with respect to
the fiscal years ending June 30, 1999 and June 30, 2000 and the amount of the
Earnout payment for each such fiscal year will be equal to the amount (if any)
by which the Company's EBITAM for such fiscal year exceeds the following amounts
(the "Target Amounts"); provided, however, that in no event shall the Earnout
amount for either fiscal year be more than $500,000:
Fiscal Year Ending EBITAM TARGET AMOUNT
--------------------
June 30, 1999 $ 1,775,000
June 30, 2000 $ 1,955,000
The Earnout payment (if any) for either such fiscal year will be paid upon the
final determination of the EBITAM Statement for such fiscal year in accordance
with this "section"2(e), by wire transfer of immediately available funds to an
account or accounts designated by the Seller in writing. Should the Company's
EBITAM for the fiscal year ended June 30, 1999 (the "1999 EBITAM") not exceed
the June 30, 1999 Target Amount as set forth above, Seller shall not be entitled
to any Earnout payment for the fiscal year ended June 30, 1999, unless the 1999
EBITAM when added to the Company's EBITAM for the fiscal year ended June 30,
2000 (the "2000 EBITAM") exceed the sum of the 1999 and 2000 Target Amounts. In
such event, Seller shall be entitled to the Earnout payment for both such fiscal
years.
Should the Company's 2000 EBITAM not exceed the 2000 Target Amount, Seller shall
not be entitled to any Earnout payment for the fiscal year ended June 30, 2000
unless the 2000 EBITAM when added to the 1999 EBITAM exceed the sum of the 1999
and 2000 Target Amounts.
(ii) For purposes of this Agreement, "EBITAM" for either such
fiscal year means the Company's earnings for the twelve months ending on the
last day of such fiscal year, before taking into account (i) any interest on
indebtedness and any financing and related fees and expenses, (ii) all fees or
expenses incurred in connection with the transactions contemplated by this
Agreement, (iii) income Taxes, (iv) any amortization or depreciation to the
extent attributable to the purchase accounting "write-up" resulting from the
transactions contemplated hereby and (v) management or other fees charged by the
Purchaser and/or its Affiliates.
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<PAGE> 13
(iii) Except as otherwise expressly provided herein, any amount or
calculation to be made in connection with the Earnout shall be determined or
made (A) in accordance with GAAP, (B) using the same revenue, income and expense
recognition policies and practices as have been used by the Company prior to the
Closing, unless such policies and practices are determined not to have been
prepared in accordance with GAAP; and (C) based on the unaudited financial
statements of the Company utilized in connection with the preparation of the
audited consolidated financial statements of the Purchaser and its Subsidiaries.
(iv) Promptly (but in no event later than sixty (60) after the end
of each such fiscal year, the Purchaser at its expense shall prepare and deliver
to the Seller a statement of the EBITAM of the Company for the fiscal year then
ended (the "EBITAM Statement"). During the 30 days immediately following receipt
of the EBITAM Statement by the Seller, the Seller and his accountants shall be
entitled to review the EBITAM Statement and any working papers, trial balances
and similar materials relating to the EBITAM Statement prepared by the Purchaser
or its accountants, and the Purchaser shall provide the Seller and his
accountants with timely access, during normal business hours, to the personnel,
properties, books and records of the Company and the Purchaser. The EBITAM
Statement shall become final and binding upon the parties on the 31st day
following delivery thereof unless the Seller gives written notice to the
Purchaser of his disagreement with the EBITAM Statement (a "Notice of
Disagreement With EBITAM Statement") prior to such date. Any Notice of
Disagreement With EBITAM Statement shall specify in reasonable detail the nature
of any disagreement so asserted. If a timely Notice of Disagreement With EBITAM
Statement is received by the Purchaser with respect to the EBITAM Statement,
then the EBITAM Statement (as revised in accordance with clause (A) or (B)
below), shall become final and binding upon the parties on the earlier of (A)
the date the Purchaser and the Seller resolve in writing any differences they
have with respect to any matter specified in a Notice of Disagreement With
EBITAM Statement, or (B) the date any matters in dispute are finally resolved in
writing by the EBITAM Dispute Accounting Firm in the manner described below (the
date on which the EBITAM Statement so becomes final and binding being
hereinafter referred to as the "Final EBITAM Determination Date"). During the 30
days immediately following the delivery of any Notice of Disagreement With
EBITAM Statement, the Purchaser and the Seller shall seek in good faith to
resolve in writing any differences which they may have with respect to any
matter specified in such Notice of Disagreement With EBITAM Statement. During
such period, the Seller and his accountants shall each have access to the
Company's working papers, trial balances and similar materials (including the
working papers, trial balances and similar materials of the Purchaser's
accountants) prepared in connection with the Purchaser's preparation of the
EBITAM Statement. At the end of such 30-day period, the Seller and Purchaser
shall submit to an independent "Big 6" public accounting firm (the "EBITAM
Dispute Accounting Firm") for review and resolution any and all matters which
remain in dispute and which were included in any Notice of Disagreement With
EBITAM Statement (it being understood that the EBITAM Dispute Accounting Firm
shall act as an arbitrator to determine, based solely on presentations by the
Purchaser and the Seller (and not by independent review), only those matters
which remain in
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<PAGE> 14
dispute), and the EBITAM Dispute Accounting Firm shall reach a final, binding
resolution of all matters which remain in dispute, which final resolution shall
be (A) in writing, (B) furnished to the Purchaser and the Seller as soon as
practicable after the items in dispute have been referred to the EBITAM Dispute
Accounting Firm, (C) made in accordance with this Agreement, and (D) conclusive
and binding upon the Parties to this Agreement and not subject to collateral
attack for any reason. The EBITAM Statement, with any adjustments necessary to
reflect the EBITAM Dispute Accounting Firm's resolution of the matters in
dispute, shall become final and binding on the Parties on the date the EBITAM
Dispute Accounting Firm delivers its final resolution to the Parties. The EBITAM
Dispute Accounting Firm shall be mutually selected by the Purchaser and the
Seller, or, if the Purchaser and the Seller cannot so agree within the 30-day
period referred to above, by lot from among the independent "Big 6" public
accounting firms (after excluding Crippen, Crippen and Trice and the Purchaser's
independent public accountants) willing to act. Each Party shall pay its own
costs and expenses incurred in connection with such arbitration; provided, that
the fees and expenses of the EBITAM Dispute Accounting Firm shall be borne as
follows:
(A) if the EBITAM Dispute Accounting Firm
resolves all of the remaining objections in favor of the Purchaser (the amount
of the EBITAM so determined is referred to herein as the "Low EBITAM Amount"),
the Seller will be responsible for all of the fees and expenses of the EBITAM
Dispute Accounting Firm;
(B) if the EBITAM Dispute Accounting Firm
resolves all of the remaining objections in favor of the Seller (the amount of
the EBITAM so determined is referred to herein as the "High EBITAM Amount"), the
Purchaser will be responsible for all of the fees and expenses of the EBITAM
Dispute Accounting Firm; and
(C) if the EBITAM Dispute Accounting Firm
resolves some of the remaining objections in favor of the Purchaser and the rest
of the remaining objections in favor of the Seller (the amount of the EBITAM so
determined is referred to herein as "Actual EBITAM Amount"), the Seller will be
responsible for that fraction of the fees and expenses of the EBITAM Dispute
Accounting Firm equal to (1) the difference between the High Amount and the
Actual Amount over (2) the difference between the High Amount and the Low
Amount, and the Purchaser will be responsible for the remainder of the fees and
expenses.
(v) If the Purchaser has determined that an Earnout payment is
payable with respect to either of the fiscal years ending June 30, 1999 and June
30, 2000, the Purchaser shall pay such Earnout payment when it delivers the
EBITAM Statement for such fiscal year (even if the Seller dispute the amount of
such Earnout payment as determined by the Purchaser). If the amount of the
Earnout payment is in dispute, and the Earnout payment that is ultimately
determined to be payable pursuant to "section"2(e)(iv) is (A) greater than the
amount (if any) paid pursuant to the previous sentence, then the Purchaser shall
pay the difference within three business days after such determination, or (B)
less than the amount (if any) paid
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pursuant to the previous sentence, then the Seller shall repay the difference
within three business days after such determination. Payment of the Earnout
shall be made by the Purchaser to the Seller by wire transfer of immediately
available funds to the account or accounts designated in writing by the Seller.
Payment of any amounts payable to the Purchaser pursuant to clause (B) of this
paragraph (v) shall be made by wire transfer of immediately available funds to
the account designated in writing by the Purchaser.
(f) Minimum Shareholders Equity Purchase Price Adjustment.
(i) Within 30 days after the Closing Date, the Purchaser shall
prepare and deliver to the Seller (a) a balance sheet of the Company as of the
close of business on the Closing Date (the "Closing Balance Sheet") and (B) the
Purchaser's calculation of the Net Shareholders Equity of the Company at such
time. The Closing Balance Sheet (including, without limitation, such calculation
of Net Shareholders Equity) shall be prepared in accordance with GAAP applied in
a manner consistent with the same accounting principles and methodologies used
in preparing the Financial Statements except that no effect shall be given to
(x) any transaction occurring between the actual time of Closing and the close
of business on the Closing Date between the Company and the Purchaser or its
Affiliates or relating to the Purchaser's financing of either the Company or any
of the transactions contemplated hereby or (y) any purchase accounting or other
similar adjustments resulting from the consummation of the transactions
contemplated herein.
(ii) During the 30 days immediately following receipt of the Closing
Balance Sheet by the Seller, the Seller and his accountants shall be entitled to
review the Closing Balance Sheet and any working papers, trial balances and
similar materials relating to the Closing Balance Sheet prepared by the
Purchaser or its accountants, and the Purchaser shall provide the Seller and his
accountants with timely access, during the Company's normal business hours, to
the Company's personnel, properties, books and records. The Closing Balance
Sheet shall become final and binding upon the parties on the 31st day following
delivery thereof unless the Seller gives written notice to the Purchaser of his
disagreement with the Closing Balance Sheet (a "Notice of Disagreement With
Closing Balance Sheet") prior to such date. Any Notice of Disagreement shall
specify in reasonable detail the nature of any disagreement so asserted. If a
timely Notice of Disagreement With Closing Balance Sheet is received by the
Purchaser with respect to the Closing Balance Sheet, then the Closing Balance
Sheet (as revised in accordance with clause (A) or (B) below), shall become
final and binding upon the parties on the earlier of (a) the date the Purchaser
and the Seller resolve in writing any differences they have with respect to any
matter specified in a Notice of Disagreement With Closing Balance Sheet, or (B)
the date any matters in dispute are finally resolved in writing by the Purchase
Price Adjustment Dispute Accounting Firm in the manner described below (the date
on which the Closing Balance Sheet so becomes final and binding being
hereinafter referred to as the "Final Closing Balance Sheet Determination
Date"). During the 30 days immediately following the delivery of any Notice of
Disagreement With Closing Balance Sheet, the Purchaser and the Seller shall
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<PAGE> 16
seek in good faith to resolve in writing any differences which they may have
with respect to any matter specified in such Notice of Disagreement With Closing
Balance Sheet. During such period, the Seller and his accountants shall each
have access to the Purchaser's and the Company's working papers, trial balances
and similar materials (including the working papers, trial balances and similar
materials of their respective accountants) prepared in connection with the
preparation of the Closing Balance Sheet. At the end of such 30-day period, the
Seller and the Purchaser shall submit to the Purchase Price Adjustment Dispute
Accounting Firm for review and resolution any and all matters which remain in
dispute and which were included in any Notice of Disagreement With Closing
Balance Sheet (it being understood that the Purchase Price Adjustment Dispute
Accounting Firm shall act as an arbitrator to determine, based solely on
presentations by the Purchaser and the Seller (and not by independent review),
only those matters which remain in dispute), and the Purchase Price Adjustment
Dispute Accounting Firm shall reach a final, binding resolution of all matters
which remain in dispute, which final resolution shall be (a) in writing, (B)
furnished to the Purchaser and the Seller as soon as practicable after the items
in dispute have been referred to the Purchase Price Adjustment Dispute
Accounting Firm, (C) made in accordance with this Agreement, and (D) conclusive
and binding upon the Parties and not subject to collateral attack for any
reason. The Closing Balance Sheet, with any adjustments necessary to reflect the
Purchase Price Adjustment Dispute Accounting Firm's resolution of the matters in
dispute, shall become final and binding on the Parties on the date the
Accounting Firm delivers its final resolution to the Parties, which shall be no
later than 90 days after the Closing Date. The Purchase Price Adjustment Dispute
Accounting Firm shall be mutually selected by the Purchaser and the Seller or,
if the Purchaser and the Seller cannot so agree within the 30-day period
referred to above, by lot from among the independent "Big 6" public accounting
firms (after excluding Crippen, Crippen and Trice and the Purchaser's
independent public accountants) willing to act (the "Purchase Price Adjustment
Dispute Accounting Firm"). Each Party shall pay its own costs and expenses
incurred in connection with such arbitration, provided that the fees and
expenses of the Purchase Price Adjustment Dispute Accounting Firm shall be borne
as follows:
(A) if the Purchase Price Adjustment Dispute
Accounting Firm resolves all of the remaining objections in favor of the
Purchaser (the amount of the Net Shareholders Equity so determined is referred
to herein as the "Actual Net Shareholders Equity Amount"), the Seller will be
responsible for all of the fees and expenses of the Purchase Price Adjustment
Dispute Accounting Firm;
(B) if the Purchase Price Adjustment Dispute
Accounting Firm resolves all of the remaining objections in favor of the Seller
(the amount of the Net Shareholders Equity so determined is referred to herein
as the "Actual Net Shareholders Equity Amount"), the Purchaser will be
responsible for all of the fees and expenses of the Purchase Price Adjustment
Dispute Accounting Firm; and
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<PAGE> 17
(C) if the Purchase Price Adjustment Dispute
Accounting Firm resolves some of the remaining objections in favor of the
Purchaser and the rest of the remaining objections in favor of the Seller (the
amount of the Net Shareholders Equity so determined is referred to herein as
"Actual Net Shareholders Equity Amount"), the Seller will be responsible for
that fraction of the fees and expenses of the Purchase Price Adjustment Dispute
Accounting Firm equal to (i) the difference between the High Amount and the
Actual Amount over (ii) the difference between the High Amount and the Low
Amount, and the Purchaser will be responsible for the remainder of the fees and
expenses.
(iii) Upon the final determination of the Closing Balance
Sheet in accordance with this "section"2(f), if Net Shareholders Equity is less
than $650,000, the Seller shall pay to the Purchaser the amount of such
deficiency. Any required reduction to the Purchase Price pursuant to this
section 2(f) shall be referred to as the "Purchase Price Adjustment".
(g) OMITTED
(h) Excluded Assets. Notwithstanding the foregoing, the
following transfers by the Company will occur prior to Closing:
(i) The Company will transfer ownership of the
1979 Piper Aztec aircraft to Seller in consideration for the payment by Seller,
in cash, of the cash value of such aircraft as set forth in "section" 2(h)(i) of
the Disclosure Schedule.
(ii) The Company will transfer the ownership of
the vehicle of the Company set forth in "section" 2(h)(ii) of the Disclosure
Schedule to the Seller in consideration of the payment, in cash, of the amounts
set forth in "section" 2(h)(ii) of the Disclosure Schedule. All accompanying
automobile insurance of the Company shall be canceled prior to Closing.
(i) The Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") are taking place on the date
hereof and concurrently with the execution and delivery of this Agreement. (the
"Closing Date").
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(j) Deliveries at the Closing. At the Closing, (i) the
Seller will deliver to the Purchaser the various certificates and documents
referred to in "section"8(a) below, (ii) the Purchaser will deliver to the
Seller the various certificates and documents referred to in "section"8(b)
below, (iii) the Seller will deliver to the Purchaser stock certificates
representing all of the Shares being purchased from him pursuant to
"section"2(a) above, duly endorsed in blank or accompanied by duly executed
assignment documents, sufficient in form and substance to convey to the
Purchaser good title to such Shares, free and clear of all restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), Liens, claims and demands and (iv) the Purchaser will deliver to the
Seller the Initial Payment.
(k) Transfer Taxes. The Seller shall be responsible for the
payment of all sales and transfer Taxes, if any, which may be payable with
respect to the transactions contemplated by this Agreement.
3A. Representations and Warranties of the Seller as to
Seller Matters. The Seller represents and warrants to the Purchaser as follows:
(a) Capacity. The Seller has full capacity to
execute and deliver this Agreement and to perform his obligations
hereunder.
(b) Binding Obligation. This Agreement
constitutes the valid and legally binding obligation of the Seller enforceable
in accordance with its terms.
(c) Noncontravention. Neither the execution and
the delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) violate any statute, regulation, rule, injunction,
judgment, order, decree or ruling of any Authority to which the Seller is
subject, or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under any
agreement, contract, lease, license or instrument to which the Seller is a party
or by which the Seller is bound or to which any of the Seller's assets is
subject. The Seller is not required to give any notice to, make any filing with,
or obtain any authorization, consent or approval of any Authority in order for
the Seller to consummate the transactions contemplated by this Agreement.
(d) Ownership of Common Stock. The Seller holds
of record and owns beneficially the number of Shares set forth on Schedule I
attached hereto and has good title to such Shares, free and clear of any
restrictions on transfer, Liens, claims, and demands. The Seller is not a party
to any option, warrant, purchase right, or other contract or commitment that
could require the Seller to sell, transfer, or otherwise dispose of any capital
stock of the Company (other than this Agreement). The Seller is not a party to
any voting trusts, proxies, or other agreements or understandings with respect
to the voting of any capital stock of the Company.
(e) Brokers Fees. Except as set forth in
"section" 3A(e) of the Disclosure Schedule, the Seller has no liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the
Purchaser or the Company (with respect to periods following the Closing) could
become liable or obligated. Seller shall indemnify and hold Purchaser and the
Company
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harmless from any and all demands and claims which now or hereafter may be
asserted against Purchaser or the Company as to brokerage fees, commissions or
similar types of compensation with respect to the purchase of the Shares or the
Business of the Company from brokers engaged by the Seller.
3B. Representations and Warranties of the Seller With
Respect to the Company. The Seller represents and warrants to
the Purchaser as follows:
(a) Organization/Power and Authority to Conduct
Business. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of Florida. The Company is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect. "section"3B(a) of the
Disclosure Schedule sets forth a list of each jurisdiction in which the Company
is licensed or qualified to do business as a foreign corporation. The Company
has full corporate power and authority to carry on the businesses in which it is
engaged and to own and use the properties owned and used by it.
(b) Noncontravention. Neither the execution
and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any statute, regulation, rule, injunction,
judgment, order, decree or ruling of any Authority to which the Company is
subject or any provision of the charter or bylaws of the Company or (ii) except
as set forth under section 3B(b) of the Disclosure Schedule, conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license or instrument
to which the Company is a party or by which it is bound or to which any of its
assets is subject. The Company is not required to give any notice to, make any
filing with, or obtain any authorization, consent or approval of any Authority
in order for the Company to consummate the transactions contemplated by this
Agreement.
(c) Brokers Fees. The Company does not have any
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement.
(d) Capitalization. The Common Stock
constitutes the Company's only authorized class of capital stock. "section"3B(d)
of the Disclosure Schedule sets forth for the Company (i) the number of shares
of authorized Common Stock and (ii) the number of issued and outstanding shares
of Common Stock, the names of the holders of record thereof, and the number of
shares held by each such holder. All of the issued and outstanding shares of
capital stock of the Company have been duly authorized, are validly issued,
fully paid and nonassessable and were not issued in violation of the preemptive
rights of any Person or any agreement or law by which the Company at the time of
issuance was bound. There are no outstanding or authorized subscriptions,
warrants, options or, except for this Agreement, other agreements or rights of
any kind to purchase or otherwise receive or be issued, or securities or
obligations of any kind convertible into, any shares of capital stock or any
other security of the Company; there are no dividends which have accrued or been
declared but are unpaid on the capital stock of the Company; and are no
outstanding or authorized stock appreciation, phantom stock or
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similar rights with respect to the Company. The Company does not have any
Subsidiary, and does not own, directly or indirectly, any capital stock or other
equity interests in any corporation, partnership or other entity.
(e) Financial Statements. Set forth in
"section"3B(e) of the Disclosure Schedule are the following financial statements
(collectively the "Financial Statements"): (i) unaudited balance sheets and
statements of income and statements of shareholders equity and cash flows as of
and for the fiscal year ended June 30, 1997 (the "Most Recent Fiscal Year End")
for the Company; and (ii) unaudited balance sheet and statement of income and
statement of cash flows (the "Most Recent Financial Statements") as of and for
the nine months ended March 31, 1998 (the "Most Recent Fiscal Month End") for
the Company. The Financial Statements (including the notes thereto) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of the
Company as of such dates and the results of operations of the Company for such
periods; provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which will not be material, individually
or in the aggregate). The Company has no material debt, liability or obligation
of any nature, whether accrued, absolute, contingent or otherwise, and whether
due or to become due, that is not reflected, and reserved against or disclosed
in the Financial Statements.
(f) Absence of Certain Developments. Except as
otherwise contemplated by this Agreement and except as set forth in section
3B(f) of the Disclosure Schedule, since the Most Recent Fiscal Year End, the
Company has conducted its business only in the Ordinary Course of Business and
there has not been any Material Adverse Change with respect to the Company.
Without limiting the generality of the foregoing, since that date, the Company
has not:
(i) borrowed any amount or incurred any liabilities, except
liabilities incurred in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of or was caused by any breach
of contract, breach of warranty, tort, infringement or violation of law);
(ii) mortgaged, pledged or subjected to any Lien any of its
assets, except for Permitted Liens, or entered into any conditional sale or
other title retention agreement with respect to any property or asset;
(iii) sold, assigned or transferred any of its tangible
assets, except for sales of Inventory in the Ordinary Course of Business;
(iv) sold, assigned or transferred any patents, trademarks or
trade names or any material copyrights, trade secrets or other intangible
assets;
(v) suffered any extraordinary losses or canceled,
compromised, waived or released any right or claim (or series of related rights
and claims) outside the Ordinary Course of Business or involving more than
$10,000 in the aggregate;
(vi) made any capital expenditures or commitments therefor in
excess of $10,000 individually or $25,000 in the aggregate;
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(vii) entered into any material agreement, contract, lease or
license outside the Ordinary Course of Business;
(viii) suffered any theft, damage, destruction or
casualty loss in excess of $25,000 to its property, whether
or not covered by insurance;
(ix) entered into any agreement with any labor union or
association representing any employee, or made any wage or salary increase or
bonus, or increase in any other direct or indirect compensation, for or to any
of its officers, directors or employees, or otherwise made any material change
in employment terms for any of its directors, officers and employees;
(x) made any change in its accounting methods,
principles or practices;
(xi) made any increase in or established any bonus,
insurance, deferred compensation, pension, retirement, profit-sharing, stock
option (including the granting of stock options, stock appreciation rights,
performance awards or restricted stock awards or the amendment of any existing
stock options, stock appreciation rights, performance awards or restricted stock
awards), stock purchase or other employee benefit plan or agreement or
arrangement;
(xii) made any payment (including any dividends or other
distributions with respect to the Common Stock) to the Seller or any Affiliate
of the Seller (other than compensation otherwise payable in the Ordinary Course
of Business or forgiven any indebtedness due or owing from the Seller or any
Affiliate of the Seller to the Company;
(xiii) reclassified, combined, split, subdivided or redeemed or
otherwise repurchased any capital stock of the Company, or created, authorized,
issued, sold, delivered, pledged or encumbered any additional capital stock
(whether authorized but unissued or held in treasury) or other securities
equivalent to or exchangeable for capital stock, or granted or otherwise issued
any options, warrants or other rights with respect thereto;
(xiv) acquired or agreed to acquire by merging or
consolidating with, or by purchasing any portion of the capital stock,
partnership interests or assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, association or other
business organization or division thereof;
(xv) made any loan or advance (whether in cash or other
property), or made any investment in or capital contribution to, or extended any
credit to, any Person, except (i) short-term investments pursuant to customary
cash management policies, and (ii) advances to employees made in the Ordinary
Course of Business;
(xvi) (A) except in the Ordinary Course of Business liquidated
Inventory or accepted product returns, (B) accelerated receivables, (C) delayed
payables, or (D) changed in any material respect the Company's practices in
connection with the payment of payables in respect of raw materials purchases;
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(xvii) made or pledged to make any charitable contribution; or
(xviii) committed to do any of the foregoing.
(g) Undisclosed Liabilities. The Company does not have any
liability (whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for Taxes) and there is no basis
for any present or future action, suit, proceeding, hearing, investigation,
charge, complaint, claim or demand against the Company giving rise to any such
liability, except for (i) liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto), (ii) executory liabilities
under agreements, contracts, leases, licenses and other arrangements to which
the Company or any of its assets may be bound (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach
thereof or violation of law), (iii) liabilities reflected on the Disclosure
Schedule, and (iv) liabilities which have arisen in the Ordinary Course of
Business since the Most Recent Fiscal Month End (none of which results from,
arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement or violation of law).
"section"3B(g) of the Disclosure Schedule sets forth as of the Most Recent
Fiscal Month End a true and correct listing of the indebtedness of the Company
described in clauses (i), (ii) and (iii) of the definition of Funded
Indebtedness.
(h) Legal Compliance. The Company is in compliance with all
applicable statutes, laws, ordinances, rules, orders and regulations of all
Authorities, except where the failure to comply would not have a Material
Adverse Effect or prevent or materially delay the consummation of the
transactions contemplated hereby. Except as set forth in "section"3B(h) of the
Disclosure Schedule, the Company has not received any written communication
from any Authority that alleges that the Company is not in compliance with any
foreign, federal, state or local laws, rules or regulations.
(i) Company Permits. The Company holds all permits, licenses,
variances, exemptions, orders and approvals of all Authorities necessary for
the lawful conduct of its business (the "Company Permits.") The Company is in
compliance with the terms of the Company Permits. "section"3B(i) of the
Disclosure Schedule sets forth a list of the Company Permits.
(j) Tax Matters.
(i) The Company has elected (with the consent of all of its
shareholders), in compliance with all applicable legal requirements, to be
taxed under Subchapter S of the Code and corresponding provisions under any
applicable state and local Laws, and such elections are in effect for the
Company. No action has been taken by the Company or any shareholder of the
Company that may result in the revocation of any such elections. The Company
has no "Subchapter C earnings and profits" as defined in "section"1362(d) of
the Code. The Company has no "net unrealized built-in gain" as such term is
defined in section 1374(d)(1) and 1374(d)(8) of the Code. The Company has no
liability, absolute or contingent, for the payment of any income Taxes under
the Code or under the laws of such states or localities which afford tax
treatment similar to that under Subchapter S of the Code. The Company
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has filed all Tax Returns required to be filed by it (taking into account any
extensions of due dates). The Company has paid all Taxes required to be paid by
it (without regard to whether a Tax Return is required), except Taxes for which
an adequate reserve has been established on the Most Recent Financial
Statements.
(ii) No Tax Return of the Company is under audit or examination by
any taxing authority, and no written notice of such an audit or examination has
been received by the Company. Each deficiency resulting from any audit or
examination relating to Taxes by any taxing authority has been paid, except for
deficiencies being contested in good faith. The Tax Returns of the Company have
not been examined by and settled with any taxing authority.
(iii) There is no agreement or other document extending, or having
the effect of extending, the period of assessment or collection of any Taxes.
(iv) The Company is not a party to or bound by any tax sharing
agreement, tax indemnity obligation or similar agreement with respect to Taxes
(including any advance pricing agreement, closing agreement or other agreement
relating to Taxes with any taxing authority).
(v) The Company will not be required to include in a taxable
period ending after the Closing Date taxable income attributable to income that
accrued in a prior taxable period but was not recognized in any prior taxable
period as a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of accounting, the
cash method of accounting or section 481 of the Code with respect to a change
in method of accounting occurring before the Closing Date or comparable
provisions of state, local or foreign tax law.
(vi) The Company has not filed a consent pursuant to or agreed to
the application of "section"341(f) of the Code.
(vii) The Company has not, during the fiv--year period ending on the
Closing Date, been a personal holding company within the meaning of
"section"541 of the Code.
(viii) The Company has never filed or been included in any combined
or consolidated tax return with any other person or been a member of an
Affiliated Group filing a consolidated federal income Tax Return.
(ix) The Company has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder or other third party.
(k) Certain Business Relationships with the Company. Except as
set forth under "section"3B(k) of the Disclosure Schedule and except for normal
advances to employees consistent with past practice, payment of compensation
for employment to employees consistent with past practice, and participation in
Employee Benefit Plans by employees, the Company has not purchased, acquired or
leased any property or services from, or sold, transferred or leased any
property or services to, or loaned or advanced any money to, or borrowed any
money from, or entered into or been subject to any management, consulting or
similar
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agreement with (i) any officer, director or shareholder of the Company, or (ii)
any of their respective Affiliates. Except as set forth under "section"3B(k) of
the Disclosure Schedule, no Affiliate of the Company is indebted to the Company
for money borrowed or other loans or advances, and the Company is not indebted
to any such Affiliate for money borrowed or other loans or advances.
(l) Title to Tangible Assets Other than Real Property Interests.
Except as set forth in "section"3B(l) of the Disclosure Schedule, the Company
has good and valid title to, or a valid leasehold interest in, all the tangible
assets (other than real property or interests in real property) used or useful
in the conduct of the Company's business, except Inventory sold since the date
hereof in the Ordinary Course of Business, free and clear of any Liens other
than Permitted Liens. The machinery and equipment used regularly in the conduct
of the Company's business are in good operating condition and repair (subject
to normal wear and tear), and are suitable for the purposes for which they are
presently used. Except for interests and rights in property pursuant to any
lease, license or other agreement described in "section"3B(l) of the Disclosure
Schedule or pursuant to any lease, license or other agreement not required to
be described in "section"3B(l) of the Disclosure Schedule and except for
property supplied by any customer or supplier in connection with the purchase
or sale of products or services from or to such customer or supplier in the
Ordinary Course of Business, there is no tangible personal property owned by
any third party which is used by the Company in the operation of its business.
"section"3B(l) of the Disclosure Schedule lists all machinery, equipment,
vehicles, furniture and other tangible personal property of any kind and
description (other than Inventory) owned or leased by the Company.
(m) Title to Real Property. The Company does not own any real
property. All real property and interests in real property that are leased by
the Company are referred to herein as "Leased Real Property". "section"3B(m) of
the Disclosure Schedule identifies all Leased Real Property. The Company has
good title to the leasehold estates in all Leased Property (each Leased Real
Property being sometimes referred to herein individually as a "Property" and
collectively as the "Properties"), free and clear of any Liens other than
Permitted Liens. There are no pending condemnation, expropriation, eminent
domain or similar proceedings affecting all or any portion of such Properties
and, to the knowledge of Seller, no such proceedings are contemplated. There
are no leases, subleases, licenses, concessions or other agreements, written or
oral, granting to any party or parties the right of use or occupancy of any
portion of any Property. The Leased Real Property is zoned to permit the uses
for which each parcel of Leased Real Property is presently used or intended to
be used. The Leased Real Property is in compliance with all applicable
building, zoning, and other land use and similar laws, codes ordinances, rules,
regulations and orders, including without limitation, the Americans with
Disabilities Act.
(n) Intellectual Property.
(i) Section 3B(n)(i) of the Disclosure Schedule identifies each
patent, pending patent application or registered Intellectual Property owned or
used by the Company, and each material written license agreement (excluding
off-the-shelf or "shrink-wrap" software license agreements) pursuant to which
the Company has granted to any third party, or received from any third party a
grant of, any rights in any of the Intellectual Property owned or used by the
Company.
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The Company owns, or possesses adequate and enforceable licenses or rights
(free of Liens other than Permitted Liens) to use all Intellectual Property and
any other material intellectual property rights (including, without limitation,
patents, pending patent applications, inventions, drawings, trade secrets,
know-how and confidential information) currently used by the Company, or
necessary to permit the Company to conduct its business as now conducted.
(ii) Except as set forth on "section"3B(n)(ii) of the Disclosure
Schedule, with respect to each item identified in "section"3B(n)(i) of the
Disclosure Schedule:
(A) the Company possesses all right, title and interest, free and
clear of any Lien (other than Permitted Liens), license or other restriction
(B) such item is not subject to any outstanding injunction,
judgment, order, decree, ruling or charge;
(C) no action, suit, proceeding, hearing, investigation, written
claim or written demand is pending or, to the Knowledge of the Seller, is
threatened which challenges the legality, validity, enforceability, use or
ownership of the item;
(D) neither the Company nor, to the Knowledge of the Seller, any
other party to any license agreement is in breach or default and no event has
occurred which with notice or lapse of time would constitute a breach or
default or permit termination, modification or acceleration thereunder;
(E) to the Knowledge of the Seller, no party to any license
agreement has repudiated any material provision thereof;
(F) no claims are pending or, to the Knowledge of the Seller,
threatened that the Company is infringing on or otherwise violating the rights
of any person with regard to any such item; and
(G) to the Knowledge of the Seller, no person is infringing on or
otherwise violating any right of the Company with respect to such item.
(O) Material Contracts. "section" 3B(o) of the Disclosure Schedule
lists the Material Contracts to which the Company is a party. The Company has
made available to the Purchaser a correct and complete copy of each Material
Contract listed in "section"3B(o) of the Disclosure Schedule. With respect to
each such Material Contract: (A) the Material Contract is legal, valid, binding,
enforceable and in full force and effect; (B) neither the Company nor, to the
Knowledge of the Seller, any other party is in breach or default, and no event
has occurred which with notice or lapse of time would constitute a breach or
default, or permit termination, modification, or acceleration, under the
Material Contract; (C) no party has repudiated any provision of the Material
Contract, (D) there are no disputes or forbearance programs in effect with
respect to the Material Contract.
(P) Powers of Attorney. There are no outstanding powers of
attorney executed on behalf of the Company.
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(q) Insurance. "section"3B(q) of the Disclosure Schedule
describes each insurance policy maintained by the Company. All of such
insurance policies are in full force and effect and the Company is not in
default with respect to its obligations under any of such insurance policies.
Such policies are sufficient for compliance with all requirements of law and
Material Contracts to which the Company is a party. Since the respective dates
of such policies, no notice of cancellation or non-renewal with respect to any
such policy has been received by the Company. "section"3B(q) of the Disclosure
Schedule sets forth a list of all pending claims with respect to all such
policies.
(r) Litigation. "section"3B(r) of the Disclosure Schedule sets
forth each instance in which the Company (i) is subject to any outstanding
injunction, judgment, order, decree or ruling or (ii) is a party or, to the
Knowledge of the Seller, is threatened to be made a party, to any action, suit,
proceeding, hearing or investigation of, in or before any Authority.
(s) Labor Relations. The Company is not and has never been a
party to a collective bargaining agreement. Except as set forth under
"section"3B(s) of the Disclosure Schedule, (i) the Company has not been
involved in or, to the Knowledge of the Seller, threatened with any strike,
slowdown or work stoppage, (ii) the Company has not been involved in or, to the
Knowledge of the Seller, threatened with any unfair labor practice charge,
arbitration, suit or administrative proceeding relating to labor matters
involving its employees, (iii) there are no actions, proceedings or claims
pending or, to the Knowledge of the Seller, threatened against the Company
under any laws relating to employment, including any provisions thereof
relating to wages, hours, collective bargaining, withholding or the payment of
social security or other Taxes, equal employment opportunity, workmen's
compensation, occupational safety and health or any other state or federal law,
rule or regulation governing employment matters, and (iv) the Company is
currently in compliance with all applicable state and federal laws, rules and
regulations governing employment, including, wages and hour, child labor,
workmen's compensation, immigration, equal employment opportunity, family and
medical leave, and occupational safety and health.
(t) Employee Benefits. "section"3B(t) of the Disclosure Schedule
sets forth (a) all of the current Employee Pension Benefit Plans, Employee
Welfare Benefit Plans and all other employee benefit, fringe benefit plans and
programs maintained or contributed to by the Company or any ERISA Affiliate
with respect to current or former employees of the Company (the "Employee
Benefit Plans").
(i) With respect to each Employee Benefit Plan:
(A) each such Employee Benefit Plan (and each related trust,
insurance contract or fund) complies in form and, to the Knowledge of the
Seller, in operation with the applicable requirements of ERISA, the Code and
other applicable laws (including, without limitation, all reporting and
disclosure requirements), and has been operated in all material respects in
accordance with its terms;
(B) all contributions (including all employer contributions and
employee salary reduction contributions, if any) which are due have been paid
to each such Employee Benefit Plan which is an Employee
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<PAGE> 27
Pension Benefit Plan, and there are no accumulated funding deficiencies with
respect to any such Employee Pension Benefit Plan;
(C) each such Employee Benefit Plan which is an Employee Pension
Benefit Plan intended to so qualify under "section"401(a) of the Code so
qualifies and has received a favorable determination letter from the IRS as to
its qualification under "section"401(a) of the Code;
(D) no "prohibited transaction" (as such term is defined in
"section"406 of ERISA or "section"4975 of the Code) has occurred with respect
to any such Employee Benefit Plan which is an Employee Pension Benefit Plan (or
its related trust) which could subject the Company or any officer, director or
employee of the Company, to any Tax or penalty imposed under "section"4975 of
the Code or liability under "section"406 of ERISA;
(E) the Company has delivered to the Purchaser correct and
complete copies of the plan documents and summary plan descriptions, the most
recent determination letter received from the IRS, the most recent Form 5500
Annual Report and all accompanying schedules, the most recent actuarial
valuation (if any), and all related trust agreements, insurance contracts and
other funding arrangements which implement each such Employee Benefit Plan;
(F) no such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or has been the
subject of a "reportable event" (as defined in "section"4043 of ERISA) as to
which notices would be required to be filed with the PBGC. To the Knowledge of
the Seller, no proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan (other than a Multiemployer Plan) has been instituted;
(G) the Company has not incurred, and will not incur as a result
of any existing condition or the transactions contemplated by this Agreement,
any liability to the PBGC (except for required premium payments, if any), or
otherwise under Title IV of ERISA (including any withdrawal liability) or under
the Code with respect to any such Employee Benefit Plan which is an Employee
Pension Benefit Plan and, as of the Closing Date, the assets of each such
Employee Pension Benefit Plan are at least equal in value to the present value
of accrued benefits of the Plan, based on actuarial methods, tables and
assumptions reasonably satisfactory to the Purchaser; and
(H) no action, suit, proceeding, hearing or investigation with
respect to the administration or the investment of assets of any such Employee
Benefit Plan (other than routine claims for benefits) is pending or, to the
Knowledge of the Seller, threatened.
(ii) The Company does not contribute to any Multiemployer Plan or
have any liability (including withdrawal liability) under any Multiemployer
Plan.
(iii) The Company does not have any obligation to provide health or
other welfare benefits to former, retired or terminated employees, except as
specifically required
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under "section"4980B of the Code. Section 3B(t) of the Disclosure Schedule
lists the names of (A) each employee and each dependent of any employee who has
experienced a "Qualifying Event", as defined in Part 6 of Subtitle B of Title I
of ERISA and "section" 4980B of the Code, with respect to an Employee Benefit
Plan who is eligible for "Continuation Coverage" as defined in "section"
603(1), (2) (4) or (6) of ERISA and (B) each employee of the Company and each
dependent who has notified the Company of a "Qualifying Event" as defined in
"section" 603(3) or (5) of ERISA, and whose maximum period for continuation
coverage has not expired. With respect to all of its past and present
employees, the Company has complied in all material respects with the notice
and continuation requirements of Part 6 of Subtitle B of Title I of ERISA and
of section 4980B of the Code.
(iv) The Company has no liability for or relating to any Employee
Benefit Plan or arrangement sponsored, maintained or contributed to by an ERISA
Affiliate.
(v) The consummation of the transactions contemplated by this
Agreement will not entitle any individual to any severance pay, and will not
accelerate the time of payment or vesting, or increase the amount of any
compensation due to any individual, and will not be the direct or indirect
cause of any amount payable under any Employee Benefit Plan being classified as
an "excess parachute payment" under "section"280G of the Code.
(u) Environmental, Health and Safety Matters. Except as disclosed
in "section"3B(u) of the Disclosure Schedule:
(i) The Company has not disposed of or released any substance,
arranged for the disposal of any substance, knowingly exposed any employee or
other individual to any substance or condition, or owned or operated its
businesses or any property or facility so as to give rise to any liability or
corrective or remedial obligation of the Company under any Environmental,
Health and Safety Requirement.
(ii) The Company is in compliance with all Environmental Health and
Safety Requirements and the Company has not received any written communication
from any Authority that alleges that the Company is not in such compliance.
(iii) There is no Environmental Claim of which the Company has
received written notice or, to the Knowledge of the Seller, threatened or
recently filed against the Company, nor, to the Knowledge of the Seller, is
there any Environmental Claim against any Person whose liability for any
Environmental Claim the Company has retained or assumed contractually.
(iv) No underground storage tanks, friable and damaged
asbestos-containing materials, or pcb-containing equipment or fluids are
present on any of the Leased Real Property.
(v) There are no Liens arising under any Environmental, Health and
Safety Requirement on any of the Leased Real Property arising as a result of
any actions taken or omitted to be taken by the Company and, to the Knowledge
of the Seller, no actions have been taken by any Authority with respect to any
of the Leased Real Property to
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<PAGE> 29
impose an environmental Lien with respect to the Leased Real Property as a
result of any such actions.
(vi) No real property presently or, to the Knowledge of the Seller,
heretofore owned or operated by the Company is currently listed on the National
Priorities List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any analogous state list.
(vii) To the Knowledge of the Seller, no off-site location at which
the Company has disposed or arranged for the disposal of any waste is listed on
the National Priorities List or on any analogous state list.
(v) Customers and Suppliers. "section"3B(v) of the Disclosure
Schedule contains a complete and accurate list of the names of the 10 largest
(by volume) customers and suppliers of the Company for the fiscal year ended
June 30, 1998. The Company maintains good relations with each of such customers
and, except as set forth under "section"3B(v) of the Disclosure Schedule, since
the Most Recent Fiscal Year End no event has occurred that would materially
adversely affect the Company's relations with such customers. Except as set
forth under "section"3B(v) of the Disclosure Schedule, since the Most Recent
Fiscal Year End, no customer which accounted for more than 5% of the Company's
aggregate sales revenues during the last twelve months has canceled, terminated
(or, to the Knowledge of the Seller, made any threat to the Company to cancel
or terminate), or materially decreased its usage of the Company's services or
products. Other than the contract with VAW Aluminum which is to be terminated
prior to Closing pursuant to "section" 8(a)(xv), the Company is not a party to
any contract, oral or written, with any supplier or vendor of the Company
obligating the Company to any particular volume of purchases or purchase
price(s).
(w) Inventory. Subject to the reserve for Inventory writedown
disclosed on the face of the Most Recent Balance Sheet as adjusted for the
passage of time through the Closing in accordance with the past custom and
practice of the Company, the Inventory of the Company is merchantable and fit
for the purpose for which it was procured or manufactured and none of such
Inventory is slow-moving, obsolete, damaged or defective. The Inventory of the
Company is valued at the lower of cost (on a first-in-first-out basis) or
market in accordance with GAAP on a basis consistent with prior periods.
(x) Accounts Receivable. All of the Accounts Receivable of the
Company are properly reflected on its books and records and arose from bona
fide transactions in the Ordinary Course of Business, are valid receivables
subject to no setoffs or counterclaims, are current and collectible and will be
collected in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto), as adjusted for the passage
of time in accordance with the past custom and practice of the Company. The
reserve for bad debts set forth on the face of the Most Recent Balance Sheet
has been determined in accordance with GAAP on a basis consistent with the past
custom and practice of the Company.
(y) List of Accounts. "section"3B(y) of the Disclosure Schedule
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<PAGE> 30
sets forth a list of all bank and securities accounts, and all safe deposit
boxes, maintained by the Company and a listing of the persons authorized to
draw thereon or make withdrawals therefrom or, in the case of safe deposit
boxes, with access thereto.
(z) Product Warranty. Each of the products manufactured, sold,
and delivered by the Company have conformed in all material respects with all
applicable contractual commitments and all express and implied warranties, and
the Company has no material liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement thereof or other damages in connection therewith, subject
only to the reserve for product warranty claims set forth on the face of the
Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the
past custom and practice of the Company. Substantially all of the products
manufactured, sold, and delivered by the Company are subject to standard terms
and conditions of sale. The Seller knows of no pending or asserted warranty
claims or claims for return of the Company's products in excess of $10,000.
(aa) Product Liability. The Company has no liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) arising out of any injury to individuals or
property as a result of the ownership , possession, or use of any product
manufactured, sold or delivered by any of the Company. "section"3B(aa) of the
Disclosure Schedule sets forth a true and correct list and brief description of
all product liability claims that have been filed against the Company since
December 31, 1992.
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Seller as follows:
(a) Organization. The Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of Alabama.
(b) Authorization of Transaction. The Purchaser has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Purchaser, enforceable in accordance with its
terms.
(c) Noncontravention Neither the execution and the delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) violate any statute, regulation, rule, injunction, judgment, order,
decree or ruling of any Authority to which the Purchaser is subject or any
provision of its charter or bylaws or other organizational document, as the
case may be, or (ii) except as set forth under "section"4(c) of the Disclosure
Schedule conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify or cancel, or require any notice under any agreement,
contract, lease, license or instrument to which the Purchaser is a party or by
which it is bound or to which any of its assets is subject. The Purchaser is
not required give any notice to, make any filing with, or obtain any
authorization, consent or approval
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<PAGE> 31
of any Authority in order for it to consummate the transactions contemplated by
this Agreement.
(d) Brokers Fees. Except as set forth in section 4(d) of the
Disclosure Schedule, the Purchaser does not have any liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Seller or the Company
(prior to the Closing) could become liable or obligated. Purchaser shall
indemnify and hold Seller harmless from any and all demands and claims which
now or hereafter may be asserted against Seller as to brokerage fees,
commissions or similar types of compensation with respect to the purchase of
the Shares or the Business of the Company from brokers engaged by the
Purchaser.
(e) Acquisition of Shares for Investment. The Shares to be
purchased by the Purchaser pursuant to this Agreement are being acquired for
investment only and not with a view to any public distribution thereof, and the
Purchaser will not offer to sell or otherwise dispose of the Shares so acquired
by it in violation of any of the registration requirements of the Securities
Act or any comparable state laws.
5. Pre-Closing Covenants. The Parties agree as follows with
respect to the period between the execution of this Agreement and the Closing:
(a) General. Subject to the terms and conditions of this
Agreement, each of the Parties will use commercially reasonable efforts to take
all action and to do all things necessary, proper or advisable in order to
consummate and make effective the transactions contemplated by this Agreement,
including, without limitation, (i) obtaining all permits, authorizations,
consents and approvals of any Authority or other Person which are required for
or in connection with the consummation of the transactions contemplated hereby,
(ii) taking any and all actions necessary to satisfy, but not waive, all of the
conditions to such party's obligations hereunder as set forth in "section"8
below, and (iii) executing and delivering all agreements and documents required
by the terms hereof to be executed and delivered by such Party on or prior to
the Closing. Nothing in this Agreement shall be construed as an attempt or an
agreement by the Company to assign or cause the assignment of any contract or
agreement which is by Law nonassignable without the consent of the other party
or parties thereto, unless such consent shall have been given.
(b) Operation of Business. The Seller will cause the Company not
to engage in any practice, take any action, or enter into any transaction of
the sort described in "section"3B(f) above; provided, however, that the Company
may make a dividend distribution of cash to the Seller if, at the Closing, (i)
the Company shall have no Funded Indebtedness; and (ii) the Net Shareholders
Equity, after giving effect to such dividend distribution, is not less than
$650,000. In addition, the Seller will cause the Company to continue to conduct
its business in the Ordinary Course of Business and not to (i) except in the
Ordinary Course of Business liquidate Inventory or accept product returns, (ii)
accelerate receivables, or (iii) delay payables.
(c) Preservation of Business. The Seller will cause the Company
to use commercially reasonable efforts to maintain its business and properties,
including its present operations, physical facilities, working conditions, and
relationships with
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lessors, licensors, suppliers, customers, distributors and employees.
(d) Full Access. The Seller will cause the Company to permit
representatives of the Purchaser to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company, to the premises, properties, personnel, customers, suppliers,
distributors, books, records (including tax records), contracts and documents
of or pertaining to the Company. The Purchaser reaffirms its obligations under
the Confidentiality Agreement.
(e) Notice of Developments. Each Party will promptly give notice
to the other Party of its or his discovery of any material adverse development
which, had such development been in existence on the date hereof, would
constitute a breach of the representations and warranties contained in
"section"3A or "section"3B (in the case of the Seller) or "section"4 (in the
case of the Purchaser). No disclosure by either Party pursuant to this
"section"5(e) shall be deemed to amend or supplement the Disclosure Schedules
or to prevent or cure any misrepresentation or breach of warranty.
6. Post-Closing Covenants. The Parties agree as follows with
respect to the period following the Closing:
(a) General. In the event that at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party may
reasonably request, all at the sole cost and expense of the requesting Party;
provided, however, that the cost of taking of any action necessary to execute
or deliver to the Purchaser any stock powers and such other instruments of
transfer as may be necessary to transfer ownership of the Shares by the Seller
shall be borne by the Seller.
(b) Transition. The Seller will not take any action that is
designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier or other business associate of the Company from maintaining
the same business relationships with the Company after the Closing as it
maintained with the Company prior to the Closing.
(c) Litigation Support. In the event and for so long as either
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, occurrence,
event, incident, action, failure to act, or transaction on or prior to the
Closing Date involving the Company, each of the Parties will cooperate with the
contesting or defending Party and its or his counsel in the contest or defense,
all at the sole cost and expense of the contesting or defending Party (except
to the extent that the contesting or defending party is entitled to
indemnification therefor under this Agreement).
(d) Noncompetition. In order to induce the Purchaser to enter
into this Agreement, the Seller expressly covenants and agrees that, for a
period of five years from and after the Closing Date, the Seller will not,
directly or indirectly, within the Restricted Area (defined below) engage in or
have any
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<PAGE> 33
interest in any sole proprietorship, partnership, corporation, limited
liability company or business or any other Person (other than the Purchaser or
any of its Subsidiaries), whether as an employee, officer, director, partner,
agent, security holder, consultant or otherwise, that directly or indirectly is
engaged in the Business of the Company as conducted by the Company as of
Closing; provided, however, that nothing herein shall be deemed to prevent the
Seller from acquiring through market purchases and owning, solely as an
investment, less than three percent in the aggregate of the equity securities
of any class of any issuer whose shares are registered under "section"12(b) or
12(g) of the Securities Exchange Act, and are listed or admitted for trading on
any United States national securities exchange or are quoted on the National
Association of Securities Dealers Automated Quotations System, or any similar
system of automated dissemination of quotations of securities prices in common
use, so long as neither of them is a member of any "control group" (within the
meaning of the rules and regulations of the United States Securities and
Exchange Commission) of any such issuer. The Seller acknowledges and agrees
that the covenants provided for in this "section"6(d) are reasonable and
necessary in terms of time, area and line of business to protect the
Purchaser's legitimate business interests as a buyer of the Common Stock and in
protecting the Company's Trade Secrets. The Seller further acknowledges and
agrees that such covenants are reasonable and necessary in terms of time, area
and line of business to protect the Purchaser's other legitimate business
interests, which include its interests in protecting the Company's (i) valuable
confidential business information, (ii) substantial relationships with
customers throughout the Restricted Area and (iii) customer goodwill associated
with the Company's ongoing business. The Seller expressly authorize the
enforcement of the covenants provided for in this "section"6(d) by (A) the
Purchaser and its Subsidiaries, (B) the Purchaser's permitted assigns and (C)
any successors to the Company's business. To the extent that the covenant
provided for in this "section"6(d) may later be deemed by a court to be too
broad to be enforced with respect to its duration or with respect to any
particular activity or geographic area, the court making such determination
shall have the power to reduce the duration or scope of the provision, and to
add or delete specific words or phrases to or from the provision. The provision
as modified shall then be enforced.
For purposes of this Agreement, "Restricted Area" shall mean the
states of Alabama, Alaska, Arizona, Arkansas, California, Colorado,
Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New
Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee,
Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin and
Wyoming.
(e) Non-Solicitation of Employees. In order to induce the
Purchaser to enter into this Agreement, the Seller expressly covenants and
agrees that for a period of five years from and after the Closing Date, the
Seller will not, directly or indirectly, solicit for employment or employ (or
attempt to solicit for employment or employ), for himself or herself or on
behalf of any sole proprietorship, partnership, corporation, limited liability
company or business or any other Person (other than the Purchaser or any of its
Subsidiaries), any employee or former employee of the Company or encourage any
such employee to
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<PAGE> 34
leave his or her employment with the Company. To the extent that the covenant
provided for in this "section"6(e) may later be deemed by a court to be too
broad to be enforced with respect to its duration or with respect to any
particular activity or geographic area, the court making such determination
shall have the power to reduce the duration or scope of the provision, and to
add or delete specific words or phrases to or from the provision. The provision
as modified shall then be enforced.
(f) Confidentiality. In order to induce the Purchaser to enter
into this Agreement, the Seller expressly covenants and agrees that from and
after the Closing Date, neither the Seller nor any of the Seller's Affiliates
(to the extent any such Affiliate has received Confidential Information or
Trade Secrets) will disclose, divulge, furnish or make accessible to anyone
(other than the Purchaser or any of its Affiliates or representatives) any
Confidential Information or Trade Secrets, or in any way use any Confidential
Information or Trade Secrets in the conduct of any business; provided, however,
that nothing in this section 6(f) will prohibit the disclosure of any
Confidential Information or Trade Secrets (i) which is required to be disclosed
by the Seller or any such Affiliate in connection with any court action or any
proceeding before any Authority, (ii) in connection with the enforcement of any
of the rights of the Seller hereunder, or (iii) in connection with the defense
by the Seller of any claim asserted against him hereunder; provided, however,
that in the case of a disclosure contemplated by clause (i), no disclosure
shall be made until the Seller shall give notice to the Purchaser of the
intention to disclose such Confidential Information or Trade Secrets so that
the Purchaser may contest the need for disclosure, and the Seller will
cooperate (and will cause his Affiliates and their respective representatives
to cooperate) with the Purchaser in connection with any such proceeding.
Notwithstanding any provision of this Agreement which may be to the contrary
(x) the foregoing provisions restricting the use of Confidential Information
shall survive the Closing for a period of five years, and (y) the foregoing
provisions restricting the use of Trade Secrets shall survive the Closing for
so long as permitted by the Florida Trade Secrets Act, Florida Statutes Chapter
688.
(g) "Section"338(h)(10) Election.
(i) The Seller will join with the Purchaser in making an election
under "section"338(h)(10) of the Code and Treasury Regulations
"section"1.338(h)(10)-1(d) (and any corresponding elections under any
applicable state and local Laws) (collectively, a ""section"338(h)(10)
Election") with respect to the purchase and sale of the Shares from the Seller
hereunder. The Seller agrees to pay any Tax attributable to the making of the
"section"338(h)(10) Election and the Seller will indemnify the Purchaser and
the Company from and against any Losses arising out of any failure to pay such
Tax.
(ii) The Seller will be responsible for preparing and filing all
income or franchise Tax Returns of the Company relating to Pre-Closing Tax
Periods. The Purchaser will be responsible for preparing and filing all income
and franchise Tax Returns of the Company relating to periods other than
Pre-Closing Tax Periods. After the Closing has occurred, the Purchaser will
cause the Company to provide, or cause to be provided, to the Seller, without
charge, any information that may reasonably be requested by the Seller in
connection with the preparation of any Tax Returns relating to Pre-Closing Tax
Periods. The Seller will allow
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the Purchaser an opportunity to review and comment on such Tax Returns
(including any amended Returns). The Seller will take no positions on the Tax
Returns of the Company that relate to Pre-Closing Tax Periods that would
adversely affect the Company after the Closing Date. The income of the Company
will be apportioned to the period up to the Closing Date and the period from
and after the Closing Date in accordance with the provisions of
"section"1362(e)(6) of the Code by closing the books of the Company as of the
close of business on the last calendar day immediately preceding the Closing
Date.
(iii) "Section"6(g)(iii) of the Disclosure Schedule sets forth a
preliminary allocation of the "Modified Adjusted Deemed Sales Price", as
defined in Treasury Regulations "section"1.338(h)(10)-(f), among the assets of
the Company (the "Allocation Schedule"). Within 45 days after the Closing Date,
the Seller and the Purchaser shall exchange completed and executed copies of
IRS Form 8023-A (or other applicable form), required schedules thereto, and any
similar forms required by any state or local Tax Authority. If any changes are
required to these forms as a result of information which is first available
after the Closing Date, the Seller and the Purchaser will in good faith use
commercially reasonable efforts to promptly agree on such changes. The Seller
and the Purchaser each agree to file all Tax Returns in accordance with the
Allocation Schedule.
7. No Shop. From the date of this Agreement until the earlier of
(a) the Closing Date, or (b) the termination of this Agreement, the Seller
shall not, and the Seller shall cause the Company and its officers, directors,
employees and other agents not to, directly or indirectly, take any action to
(i) solicit, initiate or encourage any offer or proposal or indication of
interest in a merger, consolidation or other business combination involving any
capital stock in, or a substantial portion of the assets of the Company, other
than in connection with the transactions contemplated by this Agreement, or
(ii) participate in any discussions or negotiations regarding, furnish any
information with respect to, assist or participate in, or facilitate in any
other manner any effort or attempt by any Person to do or seek any of the
foregoing. The Seller shall notify Purchaser immediately if any Person makes
any proposal, offer, inquiry, or contract with respect to any of the foregoing.
8. Conditions to Obligation to Close.
(a) Conditions to Obligation of the Purchaser. The obligation of
the Purchaser to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in "section"3A
and "section"3B above that are qualified as to their materiality shall be true
and correct and any such representations and warranties that are not so
qualified shall be true and correct in all material respects at and as of the
Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement);
(ii) the Seller shall have performed and complied with all of his
covenants hereunder in all material respects through the Closing;
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<PAGE> 36
(iii) there shall not be any injunction, judgment, order, decree,
ruling or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement, and no action, suit, claim or proceeding shall
be pending before any Authority which seeks to prohibit or enjoin the
consummation of the transactions contemplated by this Agreement;
(iv) the Seller shall have delivered to the Purchaser a certificate
to the effect that the conditions specified above in "section"8(a)(i) and (ii)
have been satisfied in all respects;
(v) all of the directors and officers of the Company designated by
the Purchaser prior to the Closing shall have delivered duly signed
resignations effective at the time of the Closing (or the Seller shall have
taken such other action as is necessary to ensure that such persons are not
directors or officers of the Company at the time of the Closing);
(vi) the Purchaser shall have received the consents of Heller
Financial, Inc. to the transactions contemplated by this Agreement;
(vii) the Seller and the Company shall have obtained all
authorizations, consents, waivers and approvals from parties to contracts or
other agreements to which any of them is a party, or by which any of them or
any of their respective assets are bound, as may be required to be obtained by
them in connection with the consummation of the transactions contemplated
hereby and in order for the Purchaser to operate the business of the Company in
the Ordinary Course of Business after the Closing Date;
(viii) all filings that are required to have been made by the
Company with any Authority in order to carry out the transactions contemplated
by this Agreement and in order for the Purchaser to operate the business of the
Company in the ordinary course after the Closing Date shall have been made;
all authorizations, consents, approvals and Permits from all Authorities
required for the Company to carry out the transactions contemplated by this
Agreement and in order for the Purchaser to operate the business of the
Company in the Ordinary Course of Business after the Closing Date shall have
been received and all statutory waiting periods (or extensions thereof) in
respect thereof shall have expired;
(ix) the Purchaser shall have received a certificate issued by the
Secretary of State of the State of Florida and of each state in which the
Company is qualified as a foreign entity, as of a date reasonably acceptable to
the Purchaser, as to the good standing (or non-dissolution, as applicable) of
the Company in such states;
(x) the Seller shall have delivered to the Purchaser (a) a copy of
the Company's Charter, as amended to date, certified as of the recent date by
the Secretary of State of the State of Florida, and (b) all minute books, stock
transfer books, blank stock certificates and corporate seals of the Company;
(xi) all proceedings, corporate or other, to be taken in connection
with the transactions contemplated by this Agreement by the Company, and all
documents incident thereto, shall be reasonably satisfactory in form and
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<PAGE> 37
substance to the Purchaser, and the Seller shall have made available to the
Purchaser for examination the originals or true and correct copies of all
documents the Purchaser may reasonably request in connection with the
transactions contemplated by this Agreement;
(xii) Peter Villella shall have executed and delivered the
Employment Agreement between him and the Company in the form of Exhibit B
hereto (the "Employment Agreement");
(xiii) the Company shall have acquired the Leased Real Property
pursuant to the Contract for Sale and Purchase attached in the form of Exhibit
C hereto;
(xiv) Purchaser shall have received at Seller's expense a Phase I
Environmental Site Assessment of the Leased Real Property satisfactory to
Purchaser; and
(xv) The contract between the Company and VAW Aluminum shall have
been terminated.
The Purchaser may waive any condition specified in this "section"8(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Seller. The obligation of the
Seller to consummate the transactions to be performed by him in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in "section"4
above that are qualified as to their materiality shall be true and correct and
any such representations and warranties that are not so qualified shall be true
and correct in all material respects at and as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement);
(ii) the Purchaser shall have performed and complied with all of
its covenants hereunder in all material respects through the Closing;
(iii) there shall not be any injunction, judgment, order, decree,
ruling or charge in effect preventing consummation of any of the transactions
contemplated by this Agreement, and no action, suit, claim or proceeding shall
be pending before any Authority which seeks to prohibit or enjoin the
consummation of the transactions contemplated by this Agreement;
(iv) the Purchaser shall have delivered to the Seller a certificate
to the effect that each of the conditions specified above in "section"
"section"8(b)(i) and (ii) has been satisfied in all respects;
(v) all filings that are required to have been made by the
Purchaser with any Authority in order to carry out the transactions
contemplated by this Agreement shall have been made; all authorizations,
consents and approvals from all Authorities required for the Purchaser to carry
out the transactions contemplated by this Agreement shall have been received
and all statutory waiting periods (or extensions thereof) in respect thereof
shall have expired;
(vi) the Seller shall have received a certificate
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<PAGE> 38
issued by the Secretary of State of the State of Alabama, as of a date
reasonably acceptable to the Seller, as to the good standing (or
non-dissolution, as applicable) of the Purchaser in such state;
(vii) the Purchaser shall have delivered to the Seller a copy of the
Purchaser's Charter, as amended to date, certified as of the recent date by the
Secretary of State of the State of Alabama; and
(viii) all proceedings, corporate or other, to be taken in connection
with the transactions contemplated by this Agreement by the Purchaser, and all
documents incident thereto, shall be reasonably satisfactory in form and
substance to the Seller, and the Purchaser shall have made available to the
Seller for examination the originals or true and correct copies of all
documents the Seller may reasonably request in connection with the transactions
contemplated by this Agreement.
The Seller may waive any condition specified in this "section"8(b) if he
executes a writing so stating at or prior to the Closing.
9. Remedies for Breaches of This Agreement.
(a) Survival of Representations and Warranties.
The representations and warranties of the Seller contained in
"section"3A above (the "Individual Representations and Warranties") and in
"section" "section"3B(c), 3B(d), 3B(j) and 3B(t) above (the "Unrestricted
Representations and Warranties"), and of the Purchaser contained in section 4
shall survive the Closing and continue in full force and effect for the statute
of limitations applicable thereto. The representations and warranties of the
Seller contained in "section"3B (other than the Unrestricted Representations
and Warranties) shall survive the Closing and continue in full force and effect
until March 31, 2001. Any claim for which either Party shall have given proper
notice in accordance with the terms of this Agreement on or prior to the
expiration of the applicable survival period shall survive until such claim is
resolved pursuant to the terms of this Agreement. To preserve any claim for
breach of any such representation or warranty, the Party claiming a breach
shall be obligated to notify the party claimed to be in breach in writing of
any such breach, or facts that can reasonably be expected to give rise to such
breach, before termination of the applicable survival period in respect of such
representation or warranty; otherwise, such Party's claim for breach shall be
forever barred.
(b) Indemnification.
(i) Subject to "section"9(a) above and the conditions set forth in
this "section"9(b), subsequent to the Closing Date the Seller shall indemnify,
defend and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which Purchaser or the Company shall suffer, sustain or
become subject to by virtue of or which arise out of, or result from, any
breach of the representations and warranties of the Seller set forth in
"section"3B above (other than the Unrestricted Representations and Warranties);
provided, however, that: (A) the Purchaser shall not be entitled to
indemnification with respect to any Losses under this "section"9(b)(i) until
all such Losses exceed, in the aggregate, $25,000, and (B) the Seller shall not
be liable for any such
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<PAGE> 39
Losses to the extent that they exceed, in the aggregate, the sum of $8,000,000
plus any Earnout payments made pursuant to "section"2(e) above.
(ii) Subject to "section"9(a) above and the conditions set forth in
this "section"9(b), subsequent to the Closing Date the Seller shall indemnify,
defend and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which Purchaser or the Company shall suffer, sustain or
become subject to by virtue of or which arise out of, or result from, any
breach of any of (A) the Unrestricted Representations and Warranties, (B) the
representations and warranties of the Seller set forth in "section"3A above,
and (C) any breach by the Seller of his covenants and agreements set forth in
this Agreement.
(iii) Subsequent to the Closing Date, the Seller shall indemnify,
defend and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which the Purchaser or the Company shall suffer, sustain
or become subject to by virtue of or which arise out of, or result from (A) the
operation of the Business of the Company prior to Closing; (B) any defect,
alleged defect, recall or warranty claim relating to or arising from the nylon
ratchet backrest assemblies which were discontinued by the Company in 1992 and
which were the subject of a U.S. Consumer Product Safety Commission voluntary
recall, (C) violations or penalties under the Company's Buyers Access Agreement
attributable to actions of the Company prior to Closing and (D) any warranty
claims or returns for any product of the Company shipped prior to Closing.
Notwithstanding "section" 9(a), the indemnification obligations set forth in
this "section" 9(b)(iii) shall survive the Closing, indefinitely.
(iv) Subject to "section"9(a) above and the conditions set forth in
this "section"9(b), subsequent to the Closing Date the Purchaser shall
indemnify, defend and hold harmless the Seller and his estate, heirs, personal
representatives or successors from, against and in respect of any Losses which
the Seller shall suffer, sustain or become subject to by virtue of or which
arise out of, or result from (a) any breach by the Purchaser of its
representations, warranties covenants and agreements set forth in this
Agreement or (B) the operation of the Business of the Company after the
Closing.
(v) Promptly after the assertion by any third party of any claim,
demand or notice (a "Third Party Claim") against any Person or Persons entitled
to indemnification under this "section"9(b) (the "Indemnified Parties") that
results or may result in the incurrence by such Indemnified Parties of any
Losses for which such Indemnified Parties would be entitled to indemnification
pursuant to this Agreement, such Indemnified Parties shall promptly notify the
parties from whom such indemnification could be sought (the "Indemnifying
Parties") of such Third Party Claim. Thereupon, the Indemnifying Parties shall
have the right, upon written notice (the "Defense Notice") to the Indemnified
Parties within 30 days after receipt by the Indemnifying Parties of notice of
the Third Party Claim (or sooner if such claim so requires) to conduct, at
their own expense, the defense against the Third Party Claim in their own names
or, if necessary, in the names of the Indemnified Parties. The Defense Notice
shall specify the counsel the Indemnifying
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<PAGE> 40
Parties shall appoint to defend such Third Party Claim (the "Defense Counsel")
and the Indemnified Parties shall have the right to approve the Defense
Counsel, which approval shall not be unreasonably withheld. In the event the
Indemnified Parties and the Indemnifying Parties cannot agree on such counsel
within 10 days after the Defense Notice is given, then the Indemnifying Parties
shall propose an alternate Defense Counsel, which shall be subject again to the
Indemnified Parties' approval which approval shall not be unreasonably
withheld. Any Indemnified Party shall have the right to employ separate counsel
in any such Third Party Claim and/or to participate in the defense thereof, but
the fees and expenses of such counsel shall not be included as part of any
Losses incurred by the Indemnified Party unless (a) the Indemnifying Parties
shall have failed to give the Defense Notice within the prescribed period, (B)
such Indemnified Party shall have received an opinion of counsel, reasonably
acceptable to the Indemnifying Parties, to the effect that the interests of the
Indemnified Party and the Indemnifying Parties with respect to the Third Party
Claim are sufficiently adverse to prohibit the representation by the same
counsel of both parties under applicable ethical rules, or (C) the employment
of such counsel at the expense of the Indemnifying Parties has been
specifically authorized by the Indemnifying Parties. The Party or Parties
conducting the defense of any Third Party Claim shall keep the other Party
apprised of all significant developments and shall not enter into any
settlement, compromise or consent to judgment with respect to such Third Party
Claim unless the Company and the Seller consent, such consent not to be
unreasonably withheld.
(c) Treatment of Indemnification Payments. All indemnification
payments under this "section"9 shall be deemed adjustments to the Purchase
Price.
(d) Escrow. Seller acknowledges and agrees that the Escrow Funds
deposited with the Escrow Agent secure the obligations of Seller under this
"section" 9. Notwithstanding the foregoing, the provisions in this "section"
9(d) and "section" 2(c)(ii) providing for an Escrow Fund shall not limit in any
way the liability of Seller pursuant to this "section" 9, it being expressly
understood and agreed that resort to the Escrow Fund to satisfy any Loss for
which Purchaser is entitled to indemnification hereunder shall not constitute
an election of remedies by Purchaser except to the extend any such Loss, or any
part thereof, is in fact actually satisfied from the Escrow Fund.
10. Termination.
(a) Termination of Agreement. Certain of the Parties may
terminate this Agreement as provided below:
(i) the Purchaser and the Seller may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) the Purchaser may terminate this Agreement by giving written
notice to the Seller at any time prior to the Closing in the event the Seller
has within the then previous 10 business days given the Purchaser any notice
pursuant to "section"5(e) above;
(iii) the Purchaser may terminate this Agreement by
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<PAGE> 41
giving written notice to the Seller at any time prior to the Closing (A) in the
event that the Seller has breached any representation, warranty or covenant
contained in this Agreement (other than the representations and warranties in
"section"3B(e)-(aa) above) in any material respect, the Purchaser has notified
the Seller of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before July 31, 1998, by reason of the failure of any
condition precedent under "section"8(a) hereof (unless the failure results
primarily from the Purchaser breaching any representation, warranty or covenant
contained in the Agreement); and
(iv) the Seller may terminate this Agreement by giving written
notice to the Purchaser at any time prior to the Closing (A) in the event the
Purchaser has breached any material representation, warranty or covenant
contained in this Agreement in any material respect, the Seller has notified
the Purchaser of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if the Closing shall not
have occurred on or before July 31, 1998, by reason of the failure of any
condition precedent under "section"8(b) hereof (unless the failure results
primarily from the Seller breaching any representation, warranty or covenant
contained in this Agreement).
(b) Effect of Termination. If either Party terminates this
Agreement pursuant to "section"10(a) above, all rights and obligations of the
Parties hereunder shall terminate without any liability of either Party to the
other Party (except for any liability of any Party then in breach).
11. Miscellaneous.
(a) Press Releases and Public Announcements. Neither Party shall
issue any press release or public announcement relating to the subject matter
of this Agreement prior to the Closing without the prior written approval of
the other Party.
(b) No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof, other than the Confidentiality Agreement, which shall
remain in full force and effect.
(d) Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
heirs, personal representatives, successors and permitted assigns. No Party may
assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of the other Party; provided,
however, that, unless expressly prohibited hereunder, the Purchaser may (i)
assign any or all of its rights and interests hereunder to one or more of its
wholly-owned Subsidiaries and (ii) designate one or more of its wholly-owned
Subsidiaries to perform its obligations hereunder and (iii) after the Closing
is effected,
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<PAGE> 42
any or all of the rights and interests of Purchaser hereunder (A) may be
assigned to any purchaser of substantially all of the assets of Purchaser, (B)
may be assigned as a matter of law to the surviving entity in any merger of the
Purchaser, and (C) may be assigned as collateral security to any lender or
lenders (including any agent for any such lender or lenders) providing
financing to the Purchaser in connection with the transactions contemplated
hereby, or to any assignee or assignees of any such lender, lenders or agent
(it being understood that in any or all of the cases described in clauses (i),
(ii) and (iii) above the Purchaser nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(e) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth below:
If to the Seller:
Thomas Villella
700 S.E. 123 Street Road
Ocala, Florida 34480
With copies to (which shall not constitute notice to the Seller):
Gene K. Glasser, Esq.
Abrams Anton, P.A.
2021 Tyler Street
P. O. Box 229010
Hollywood, Fl 33022-9010
Fax: (954) 925-7013
If to the Purchaser:
Winston Furniture of Alabama, Inc.
201 Cahaba Valley Parkway
Pelham, Alabama 35124
Attention: Mr. Steve Hess, President
Fax: (205) 403-0403
With copies to (which shall not constitute notice to the Purchaser):
c/o Trivest, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Attention: Peter W. Klein, Esq.
Facsimile: (305) 858-1629
39
<PAGE> 43
Either Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient.
Either Party may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other
Party notice in the manner herein set forth.
(h) Governing Law; Venue. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Alabama without
giving effect to any choice or conflict of law provision or rule (whether of
the State of Alabama or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Alabama.
The Parties agree that any and all actions arising under or in respect of this
Agreement shall be litigated in any federal or state court of competent
jurisdiction located in the Northern District of the State of Alabama. By
execution and delivery of this Agreement, each Party irrevocably submits to the
personal and exclusive jurisdiction of such courts for itself or himself, and
in respect of its or his property with respect to such action. Each Party
agrees that venue would be proper in any of such courts, and hereby waives any
objection that any such court is an improper or inconvenient forum for the
resolution of any such action. The Parties further agree that the mailing by
certified or registered mail, return receipt requested, to the addresses
specified for notice in this Agreement, of any process or summons required by
any such court shall constitute valid and lawful service of process against
them, without the necessity for service by any other means provided by statute
or rule of court.
(i) Amendments and Waivers. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Purchaser and the Seller. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(k) Expenses. Except as otherwise provided in this Agreement,
each of the Parties will bear their own costs and expenses (including legal and
investment advisory fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Seller agrees that the
Company has not borne and will not bear any of the costs and expenses of the
Seller (including any of his legal and investment advisory fees and expenses)
in connection with this Agreement or any of the transactions contemplated.
(l) Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event
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<PAGE> 44
an ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the Parties and no presumption or
burden of proof shall arise favoring or disfavoring any Party by virtue of the
authorship of any of the provisions of this Agreement. Any reference to any
federal, state, local or foreign statute or law shall be deemed also to refer
to all rules and regulations promulgated thereunder, unless the context
requires otherwise. The specification of any dollar amount in the
representations and warranties or otherwise in this Agreement or in the
Disclosure Schedule is not intended and shall not be deemed to be an admission
or acknowledgment of the materiality of such amounts or items, nor shall the
same be used in any dispute or controversy between the parties to determine
whether any obligation, item or matter (whether or not described herein or
included in any schedule) is or is not material for purposes of this Agreement.
(m) Incorporation of Disclosure Schedule. The Disclosure
Schedule identified in this Agreement is incorporated herein by reference and
made a part hereof.
(n) Equitable Remedies. The Seller acknowledges and agrees that
the Purchaser would not have an adequate remedy at law in the event any of the
provisions of "section"6(d), " section"6(e) and "section"6(f) of this Agreement
are not performed in accordance with their specific terms or are breached.
Accordingly, the Seller agrees that the Purchaser shall be entitled to an
injunction or injunctions to prevent breaches of "section"6(d), "section"6(e)
and "section"6(f) of this Agreement and to enforce specifically the terms and
provisions thereof in any action instituted in any court of competent
jurisdiction, in addition to any other remedies which may be available to it.
(o) Waiver of Jury Trial. EACH PARTY HERETO HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT SUCH PARTY MAY LEGALLY AND
EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
HEREUNDER.
(p) Prevailing Parties. In the event of any litigation with
regard to this Agreement, the prevailing Party shall be entitled to receive
from the nonprevailing Party and the nonprevailing Party shall pay all
reasonable fees and expenses of counsel for the prevailing Party.
SIGNATURES BEGIN ON FOLLOWING PAGE
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement
as of the date first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ Stephen C. Hess
------------------------------
Stephen C. Hess
Its: President/CEO
(SEAL)
/s/ Thomas Villella
-------------------------------
THOMAS VILLELLA
41
<PAGE> 1
Exhibit 10.9
EMPLOYMENT AGREEMENT
DRAFT [SIC]
This Employment Agreement ("Agreement") is made and entered into as of
June 30, 1998 by and between Tropicraft a Florida Corporation (the "Company"),
and Peter Villella (the Executive).
RECITALS
The Executive is currently employed as Vice President of Tropicraft,
Inc., a Division of Winston Furniture Company, Inc.
The Executive possesses inmate knowledge of the business and affairs of
the Predecessor, its policies, methods and personnel.
The Company recognizes that the Executive has contributed to the growth
and success of the Predecessor, and desires to assure the Executive's employment
by the Company following the Merger and to compensate him therefore pursuant to
this Agreement.
The Executive is willing to make has services available to the Company
on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 General. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
1.2 DUTIES OF EXECUTIVE. During the term of this agreement,
the Executive shall serve as Vice President of the Company, shall diligently
perform all services as may be assigned to him by the Company's President and
Chief Executive Officer and/or the Company's Board of Directors or any
authorized Committee of the Board of Directors (the full Board or such
Committee, as the case any be, is referred to herein as the "Board"), and shall
exercise such power and authority as may from time to time be delegated to him
by the Board. The Executive shall devote his full time and attention to the
business and affairs of the Company, render such services to the best of his
ability, and use his best efforts to promote the interests of the Company.
2. TERM.
2.1 TERM. The term of this Agreement, and the employment of
the Executive hereunder, shall commence on the date of closing of the
anticipated stock purchase acquisition of
<PAGE> 2
Tropic Craft, Inc. by Winston furniture Company of Alabama, Inc., and shall
continue for a period of sixty months (5 years) unless sooner terminated by
mutual agreement or in accordance with Article 5, "Termination." In the event
this agreement is terminated prior to the expiration of its initial sixty month
(5 year) term, the Company shall have no further obligation to the Executive of
any nature whatsoever, or for any reason except as specifically set forth in
Article 5 and the executive shall have no further obligation to the company,
except as set forth in Article 6, "Restrictive Covenants."
3. COMPENSATION.
3.1 BASE SALARY. The Executive shall receive a base salary at
the annual rate of not less than $150,000.00 (the "Base Salary") during the
Term of this Agreement, with such Base Salary payable in installments consistent
with the Company's normal payroll schedule, subject to applicable withholding
and other taxes. The Base Salary may be adjusted annually to reflect, at a
minimum, any increase from the previous year in the national Consumer Price
Index. The Base Salary shall also be reviewed, at least annually, for merit
increases and may, by action and in the discretion of the Board, be increased at
any time or from time to time. The Base Salary, if so increased, shall not
thereafter be decreased for any reason. Additionally, $7,000 added per annum
for car allowance - $7,000 not considered in Bonus calculation.
3.2 INCENTIVE COMPENSATION.
(a) In addition to the Base Salary, the Executive
shall be entitled to receive annual incentive compensation ("Incentive
Compensation"), in the amount determined pursuant to the Section 3.2, for each
fiscal year ending during the term of this Agreement for which the Company has
Operating Earnings (as hereafter defined) of at least Seventy five percent (75%)
of the Target Earnings (as hereinafter defined) of the Company for such year.
For purposes of this Section 3.2, "Operating Earnings" shall mean the
consolidation operating earnings of the Company as determined in accordance with
generally accepted accounting principals ("GAAP"), consistently applied with the
Company's past practices, provided, however, that such Operating Earnings shall
not reflect (i.e., shall not be reduced by) any amortization of goodwill. The
determination of Operating Earnings made by the Company shall be final and
binding on the parties to this Agreement. For purposes of this Section 3.2, the
"Target Earnings" for fiscal 1998 is $ , and the
"Target earnings" or each subsequent year shall be determined by the
Compensation Committee of the Board of Directors. The Compensation Committee
shall have the right to modify, at any time and in its sole discretion, any
previously established "Target Earnings" for reasons such as, but not limited
to, any acquisition, disposition, merger, reorganization, liquidation,
dissolution or other transaction involving the Company or any of its
subsidiaries, or other extraordinary or significant events or changes in
circumstances relating to the company or any of its subsidiaries, businesses or
operations.
(b) The amount of the Executive's Incentive
Compensation for each fiscal year shall be determined as follows:
I. If the Operating Earnings for the year do
not exceed the Target Earnings for one year, the Incentive Compensation shall be
calculated by (A) multiplying
2
<PAGE> 3
(I) forty percent (40%) of the Executive's Base Salary for the year (the
"Maximum Bonus") by (ii) the remainder of (w) the fraction obtained by dividing
the Operating Earnings by the Target Earnings less (x) 0. , and then
(B) multiplying the resulting product by two (2), then adding % of the
Maximum Bonus; provided, however, that in no event shall the Incentive
Compensation for any year exceed the Maximum Bonus.
II. If the Operating Earnings for the first
year exceed the Target Earnings for the year, the Incentive Compensation shall
be calculated by (A) multiplying (1) the maximum Bonus by (ii) the remainder of
(y) the fraction obtained by dividing the Operating Earnings by the Target
Earnings, Less (z) 1.0, and then (B) multiplying the resulting product by two
(2), then adding % of the Maximum Bonus; provided, however, that in no event
shall the Incentive Compensation for any year exceed the Maximum Bonus.
III. For Example, (A) if Operating Earnings
are 75% of the applicable Target Earnings or less, the Executive's Incentive
Compensation for that year would be I (B) if Operating Earnings are 90% of the
Applicable Target Earnings, the Executive's Incentive Compensation for that year
would be % of the Maximum Bonus, (C) if Operating Earnings are 100% of the
Target Earnings, the Executive's Incentive Compensation for that year would be
_____% of the Maximum Bonus, (D) if the Operating Earnings are 110% of the
Target Earnings, the Executive's Incentive Compensation for that year would be
_____% of the Maximum Bonus, and (E) if the Operating Earnings are 120% of the
Target Earnings, the Executive's Incentive Compensation for that year would be
limited to % of the Maximum Bonus.
(c) For purposes of this Agreement, the amount of
Incentive Compensation payable with respect to any fiscal year (net of any tax
or other amount properly withheld therefrom) shall be paid by the Company to
Executive within one hundred twenty (120) days after the end of the fiscal year;
provided, however, that any amount paid shall be subject to increase or
decrease based upon the results of any audited financial statements, with
respect to such year.
4. EXPENSES REIMBURSEMENT AND OTHER BENEFITS.
4.1 REIMBURSABLE EXPENSES. During the term of the Executive's
employment hereunder, the Company, upon the submission of proper substantiation
by the Executive, shall reimburse the Executive for all reasonable expenses
actual and necessarily paid or incurred by the Executive in the course of and
pursuant to the business of the Company.
4.2 OTHER BENEFITS. The Executive shall be entitled to
participate in all medical and hospitalization, group life insurance, and any
and all other plans as are presently and hereinafter provided by the Company to
its executives. The Executive shall be entitled to vacations in accordance with
the Company's prevailing policy for its executives; provided, however, that in
no event may a vacation be taken at a time when to do so could, in the
reasonable judgment by the Board, adversely affect the Company's business.
3
<PAGE> 4
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. The Company shall at all times have
the right, upon written notice to the Executive, to terminate the Executive's
employment hereunder for "Cause" (as defined below in this paragraph 5. 1). Upon
any termination pursuant to this termination and the Company shall have no
further liability hereunder other than for reimbursement for reasonable business
expenses incurred prior to the date of termination, subject, however to the
provisions of Section 4.1). For purposes of this Agreement, the term "Cause"
shall mean (i) the willful failure or refusal of the Executive to perform the
duties or render the services assigned to him from time to time by the Board,
(ii) gross negligence or misconduct by the Executive in the performance of his
duties to the Company (iii) the charging or indictment of the Executive in
connection with a felony, (iv) the association, directly or indirectly, of the
Executive for his profit or financial benefit, with any person, firm,
partnership, association, entity or corporation that competes, in any material
way, with the Company, (v) the disclosing or using of any material trade secret
or confidential information of the Company at any time by the Executive, except
as required in connection with his duties to the Company, or (vi) the breach by
the Executive of his fiduciary duty or duty of trust to the Company, (vii) any
breach or unsatisfactory performance by the Executive of any of the terms or
provisions of this Agreement or any other agreement with the Company or any of
its subsidiaries (whether written or oral), which is not cured within twenty
(20) business days after the Company gives written notice of such breach or
unsatisfactory performance to the Executive.
5.2 DISABILITY. The Company shall at all times have the right,
upon written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, become unable to perform his duties hereunder
for in excess of ninety (90) days in any 12-month period. Upon any termination
pursuant to this Section 5.2, the Company shall pay to the Executive any unpaid
amounts of his Base Salary and Incentive Compensation accrued through the
effective date of termination and the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions of
Section 4.1).
5.3 DEATH. In the event of the death of the Executive during
the ten-n of his employment hereunder, the Company shall pay to the estate of
the deceased Executive any unpaid amounts of his Base Salary and Incentive
Compensation accrued through the date of his death and the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expensed incurred prior to the date of the Executive's death, subject,
however to the provisions of Section 4.1).
5.4 TERMINATION WITHOUT CAUSE. At any time the Company shall
have the right to terminate the Executive's employment hereunder by written
notice to the Executive; provided, however, that the Company shall (i) pay to
the Executive any unpaid Base Salary and Incentive Compensation accrued through
the effective date of termination specified in such notice.
4
<PAGE> 5
6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. While employed by the Company and for a
period of one year (except that such period shall be six months if Executive's
employment is terminated pursuant to Section 5.4 hereof) following later of the
date his employment is terminated hereunder or, if applicable, the Severance
Date, the Executive shall not, directly or indirectly, engage in or have any
interest in sole proprietorship, partnership, corporation or business or any
person or entity (whether as an employee officer, director, partner, agent,
security holder, creditor, consultant or otherwise) that directly or indirectly
engages in competition with the Company in any state, country commonwealth,
territory or other place in which the Company sells its products (it being
agreed that for all purposes of this Section 6, "the Company" shall include all
of its subsidiaries).
6.2 NONDISCLOSURE. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit of any other
person or persons, or misuse in any way, any confidential information pertaining
to the business of the Company. Any confidential information or data now known
or hereafter acquired by the Executive with respect to the business of the
Company (which shall include, but not limited to, information concerning the
Company's financial condition, prospects, customers, source of leads, methods of
doing business, and the manner of design, manufacture, financing, marketing and
distribution of the Company's products) shall be deemed a valuable, special and
unique asset of the Company that is received by the Executive in confidence and
as a fiduciary, and Executive shall remain a fiduciary to the Company with
respect to all such information.
6.3 NONSOLICITATION OF EMPLOYEES AND CUSTOMERS. While employed
by the Company and for a period of three years (except that the period with
respect to the prohibitions in clause (ii) hereof shall be six months if
Executive's employment is terminated pursuant to Section 5.4 hereof) following
the later of the date his employment is terminated hereunder or, if applicable,
the Severance Date, the Executive shall not , directly or indirectly, for
himself or for any person, firm, corporation, partnership, association or other
entity, (i) attempt to employ or enter into any contractual arrangement with any
employee or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in excess of six
months, and/or (ii) call on or solicit any of the actual or targeted prospective
customers or clients of the Company, nor shall the Executive make known the
names and address of such customers or any information relating in any manner to
the Company's trade or business relationships with such customers.
6.4 BOOKS AND RECORDS. All books, records, and accounts
relating in any manner to the customers or clients of the Company, whether
prepared by the Executive or otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and shall be returned immediately
to the Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will
5
<PAGE> 6
cause irreparable harm and damage to the Company, the monetary amount of which
may be virtually impossible to ascertain. As a result, the Executive recognizes
and hereby acknowledges that the Company shall be entitled to and injunction
from any court of competent jurisdiction enjoining and restraining any violation
of any or all of the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other remedies the Company may possess.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Alabama.
9. ENTIRE AGREEMENT. This agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
the commencement of the Term of this Agreement, shall supersede all prior
arrangements, understandings, both oral and written, between the Executive and
the Company or the Predecessor (or any of their respective affiliates) with
respect to such subject matter, including the Executive's Employment Agreement
with the Predecessor dated (the "Prior Employment
Agreement"). Except for the obligation to pay all accrued but unpaid salary and
other compensation due the Executive under the Prior Employment Agreement
through the commencement of the Term of this Agreement all such prior agreements
(including the Prior Employment Agreement), understandings and arrangements for
the provisions of services by the Executive to the Predecessor or the Company
and the compensation of the Executive in any form shall automatically terminate
upon the commencement of the Initial Term of this Agreement, and each party
shall thereupon and thereby, without any further action, release and forever
discharge the other (and the other's affiliates) from any and all such prior
agreements, understandings or arrangements. This Agreement may not be modified
in any way unless by a written instrument signed by both the Company and the
Executive.
10. NOTICES.
Any notice required or permitted to be given hereunder shall be deemed
given when delivered by hand or when deposited in the United States mail, by
registered or certified mail, return receipt requested, postage prepaid, (i) if
to the Company, to the address of the Company's principal offices in Birmingham,
Alabama (with a copy to Trivest, Inc., 2665 South Bayshore Drive, Eighth Floor,
Miami Florida 33133, Attention: Peter W. Klein, Vice President and General
Counsel), and (ii) if to the Executive, to his address as reflected on the
payroll to the Executive, to his address as reflected on the payroll records of
the Company, or to such other address as either party hereto may from time to
time give notice of to the other.
11. BENEFITS, BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representative, legal representations, successors and where applicable, assigns,
including, without limitation, any successor to the Company, whether by merger,
consolidation, sale of stock, sale of assets or otherwise: provided, however
that the Executive shall not delegate his employment obligations hereunder, or
any portion thereof, to any other person.
6
<PAGE> 7
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or section contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or areas which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or for the injunction of
any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
cost and attorney's fees of the other.
15. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
WINSTON FURNITURE COMPANY
By: /s/ Steve Hess
-------------------------------------
Steve Hess
President and Chief Executive Officer
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<PAGE> 8
Executive
/s/ Peter Villella
--------------------------------------
Peter Villella
Vice President Sales & Marketing
Tropicraft
/s/ SH, PV Tropic Craft
[NOTARIAL ACKNOWLEDGEMENT]
6/27/98 /s/ Judith C. Cooke Comm. Exp.
Personally Known -------------------------- 4/6/02
Ocala, Florida
Marion County
8
<PAGE> 1
EXHIBIT 10.10
STOCK PURCHASE AGREEMENT
BETWEEN
WINSLOEW FURNITURE, INC.
AND
VERTIFLEX COMPANY
(Sale of Continental Engineering Group, Inc.)
Dated as of June 30, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. Definitions 1
2. PURCHASE AND SALE OF COMPANY SHARES 8
(a) BASIC TRANSACTION 8
(b) PURCHASE PRICE 8
(c) PAYMENT OF PURCHASE PRICE 8
(d) SATISFACTION OF FUNDED INDEBTEDNESS 9
(e) THE CLOSING 9
(f) DELIVERIES AT THE CLOSING 9
(g) POST-CLOSING PURCHASE PRICE ADJUSTMENT 10
3A. REPRESENTATIONS AND WARRANTIES OF THE SELLER AS TO SELLER MATTERS 12
(a) ORGANIZATION 12
(b) AUTHORIZATION OF TRANSACTION 12
(c) NONCONTRAVENTION 12
(d) OWNERSHIP OF COMMON STOCK 13
(e) BROKERS FEES 13
3B. REPRESENTATIONS AND WARRANTIES OF THE SELLER WITH RESPECT TO THE COMPANY 13
(a) ORGANIZATION AND STANDING 13
(b) AUTHORITY TO DO BUSINESS 13
(c) CHARTER AND BYLAWS; CORPORATE RECORDS 13
(d) NO SUBSIDIARIES 14
(e) CAPITALIZATION 14
(f) FINANCIAL STATEMENTS 14
(g) ABSENCE OF CERTAIN DEVELOPMENTS 15
(h) UNDISCLOSED LIABILITIES 17
(i) TANGIBLE PERSONAL PROPERTY 17
(j) REAL PROPERTY 18
(k) INSURANCE 18
(l) LABOR RELATIONS 18
(m) COMPANY PERMITS; COMPLIANCE WITH LAW 19
(n) LITIGATION 19
(o) LIST OF ACCOUNTS 19
(p) LIST OF PERSONNEL 19
(q) EMPLOYEE BENEFITS 20
(r) TAX MATTERS 22
</TABLE>
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<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(s) ENVIRONMENTAL MATTERS 23
(t) INTELLECTUAL PROPERTY 24
(u) MATERIAL CONTRACTS 25
(v) TRANSACTIONS WITH AFFILIATES 25
(w) POWERS OF ATTORNEY 25
(x) INVENTORY 25
(y) ACCOUNTS RECEIVABLE 26
(z) CUSTOMERS AND SUPPLIERS 26
(aa) TRAILING SALES COMMISSIONS 26
(bb) FULL DISCLOSURE 26
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER 26
(a) ORGANIZATION 26
(b) AUTHORIZATION OF TRANSACTION 26
(c) NONCONTRAVENTION 26
(d) BROKERS FEES 27
(e) ACQUISITION OF SHARES FOR INVESTMENT 27
(f) FULL DISCLOSURE 27
5. POST-CLOSING COVENANTS 27
(a) GENERAL 27
(b) LITIGATION SUPPORT 27
(c) PUBLICITY 27
(d) CERTAIN TAX MATTERS 28
(e) FINANCIAL REPORTING COOPERATION 30
(f) 401(K) PLAN 30
(g) NON-COMPETITION 30
6. CONDITIONS TO OBLIGATION TO CLOSE 31
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER 31
(b) CONDITIONS TO OBLIGATION OF THE SELLER 33
7. REMEDIES FOR BREACHES OF THIS AGREEMENT 34
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES 34
(b) INDEMNIFICATION 34
(c) LIMITATION OF RECOURSE 37
8. DISPUTE RESOLUTION 38
(a) DISPUTE DEFINED 38
(b) DISPUTE RESOLUTION PROCEDURES 38
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
(c) PROVISIONAL REMEDIES 39
(d) TOLLING STATUTE OF LIMITATIONS 39
(e) PERFORMANCE TO CONTINUE 39
(f) EXTENSION OF DEADLINES 39
(g) ENFORCEMENT 39
(h) COSTS 39
(i) REPLACEMENT 40
9. MODIFICATION AND WAIVERS 40
(a) MODIFICATION 40
(b) WAIVERS 40
10. ADDITIONAL AGREEMENTS 40
(a) PROPORTIONATE SHARE 41
(b) STOCK ADJUSTMENTS 41
(c) SELLER'S GUARANTEE OF ACCOUNTS RECEIVABLE 42
(d) SEVERANCE OBLIGATIONS 43
(e) MICROCENTRE DISPUTE 43
(f) PRE-CLOSING WORKERS COMPENSATION CLAIMS 43
(g) VACATION ACCRUAL 43
11. MISCELLANEOUS 44
(a) NO THIRD-PARTY BENEFICIARIES 44
(b) ENTIRE AGREEMENT 44
(c) SUCCESSION AND ASSIGNMENT 44
(d) COUNTERPARTS 44
(e) HEADINGS 44
(f) NOTICES 44
(g) GOVERNING LAW; VENUE 46
(h) AMENDMENTS AND WAIVERS 46
(i) SEVERABILITY 46
(j) EXPENSES 46
(k) CONSTRUCTION 46
(l) INCORPORATION OF DISCLOSURE SCHEDULE 46
(m) WAIVER OF JURY TRIAL 47
(n) PREVAILING PARTIES 47
(o) EQUITABLE REMEDIES 47
</TABLE>
EXHIBIT A -- Escrow Agreement
Schedule I -- Shares
Schedule II -- Accounting Policies and Procedures
Disclosure Schedule
-iii-
<PAGE> 5
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made and entered into as of
June 30, 1998, by and between VERTIFLEX COMPANY, an Illinois corporation (the
"PURCHASER"), and WINSLOEW FURNITURE, INC., a Florida corporation (the
"SELLER"). The Purchaser and the Seller are each referred to in this Agreement
as a "PARTY" and collectively as the "PARTIES".
The Seller directly owns all of the outstanding capital stock of
Continental Engineering Group, Inc., a California corporation (the "COMPANY").
This Agreement contemplates a transaction in which the Purchaser will
purchase from the Seller, and the Seller will sell to the Purchaser, all of the
outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the representations, warranties
and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCOUNTING FIRM" has the meaning set forth in section 2(g)(ii) below.
"ACCOUNTS RECEIVABLE" means all accounts, instruments, drafts,
acceptances and other forms of receivables relating to the Company's business,
and all rights earned under the Company's contracts to sell goods or render
services.
"ACQUIRED BUSINESS" has the meaning set forth in section 5(g)(ii)
below.
"ACTUAL AMOUNT" has the meaning set forth in section 2(g)(ii)(C) below.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
section 1504 of the Code.
"AUTHORITY" means any federal, state, local or foreign governmental
regulatory agency, commission, bureau, authority, court or arbitration tribunal.
"AGREEMENT" means this Stock Purchase Agreement together with all
exhibits and schedules contemplated hereby.
"ASSIGNED RECEIVABLES" has the meaning set forth in section 10(c)(ii)
below.
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<PAGE> 6
"BASIS" means any past or present fact, situation, circumstance,
status, condition, activity, practice, plan, occurrence, event, incident,
action, failure to act, or transaction that forms or could form the basis for
any specified consequences.
"BASKET" has the meaning set forth in section 7(b)(i) below.
"CERCLA" has the meaning set forth in section 3B(s)(iV) below.
"CHANGE OF CONTROL" has the meaning set forth in section 5(g)(i) below.
"CHARTER" and "BYLAWS," respectively, mean with respect to any
corporation, those instruments that, among other things, (a) define its
existence, as filed or recorded with the applicable Authority, including,
without limitation, such corporation's Articles or Certificate of Incorporation,
and (b) otherwise govern its internal affairs, in each case as amended,
supplemented, or restated.
"CLOSING" has the meaning set forth in section 2(e) below.
"CLOSING BALANCE SHEET" has the meaning set forth in section 2(g)(i)
below.
"CLOSING DATE" has the meaning set forth in section 2(e) below.
"CODE" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"COMMON STOCK" means the Common Stock of the Company, no par value.
"COMPANY" has the meaning set forth in the preface above.
"COMPANY PERMITS" means all licenses, franchises, permits, orders,
approvals, registrations, authorizations, qualification filings with all
Authorities required in connection with the operation of the business of the
Company.
"COMPANY FINANCIAL STATEMENTS" has the meaning set forth in section
3B(f)(i) below.
"COMPANY INTERIM FINANCIAL STATEMENTS" has the meaning set forth in
section 3B(f)(i) below.
"COMPETING BUSINESS" has the meaning set forth in section 5(g)(ii)
below.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in section 11(b)
below.
"CONTROLLED GROUP OF CORPORATIONS" has the meaning set forth in section
1563 of the Code.
"CPR" has the meaning set forth in section 8(b)(ii) below.
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<PAGE> 7
"DISPUTE" has the meaning set forth in section 8(a) below.
"EMPLOYEE BENEFIT PLAN" has the meaning set forth in section 3B(q)
below.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
section 3(1).
"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" means all federal,
state, local and foreign statutes, regulations, ordinances and judicial and
administrative orders and determinations to which the Company is a party
concerning workplace health and safety and pollution or protection of the
environment, including, without limitation, all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control or cleanup of any Materials of Environmental
Concern.
"ENVIRONMENTAL CLAIM" means any written notice or claim by any person
or any Authority alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (i) the presence,
release or threatened release into the environment, of any Material of
Environmental Concern at any location, whether or not owned, leased or operated
by the Company, or (ii) any violation, or alleged violation, of any
Environmental, Health and Safety Requirement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" means any Person that would be aggregated with the
Company under section 414(b), (c), (m) or (o) of the Code.
"ESCROW ACCOUNT" has the meaning set forth in section 2(c)(ii) below.
"ESCROW AGREEMENT" means the Escrow Agreement, in the form of EXHIBIT A
hereto, to be entered into on the Closing Date by the Purchaser, the Seller and
the Escrow Agent.
"ESCROW AGENT" has the meaning set forth in section 2(c)(ii) below.
"ESCROW FUNDS" has the meaning set forth in section 2(c)(ii) below.
"FINAL CLOSING BALANCE SHEET DETERMINATION DATE" has the meaning set
forth in section 2(g)(ii) below.
"FUNDED INDEBTEDNESS" means the aggregate amount (including the current
portions thereof) of all (i) indebtedness for money borrowed from others and
purchase money indebtedness (other than
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<PAGE> 8
accounts payable in the ordinary course) of the Company, (ii) indebtedness of
the type described in clause (i) above guaranteed, directly or indirectly, in
any manner by the Company, or in effect guaranteed, directly or indirectly, in
any manner by the Company, through an agreement, contingent or otherwise, to
supply funds to, or in any other manner invest in, the debtor, or to purchase
indebtedness, or to purchase and pay for property if not delivered or pay for
services if not performed, primarily for the purpose of enabling the debtor to
make payment of the indebtedness or to assure the owners of the indebtedness
against loss, but excluding endorsements of checks and other instruments in the
ordinary course, (iii) indebtedness of the type described in clause (i) above
secured by any Lien upon property owned by the Company, even though the Company
has not in any manner become liable for the payment of such indebtedness, and
interest expense accrued but unpaid, and all prepayment premiums, on or relating
to any of such indebtednesection
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"HIGH AMOUNT" has the meaning set forth in section 2(g)(ii)(B) below.
"INCOME TAX" means any federal, state, local or foreign Tax based on,
measured by or with respect to income, net worth or capital, including any
interest, penalty or addition thereto.
"INDEMNIFIED PARTY" has the meaning set forth in section 7(b)(v) below.
"INDEMNIFYING PARTY" has the meaning set forth in section 7(b)(v)
below.
"INITIAL PAYMENT" has the meaning set forth in section 2(c)(i) below.
"INTELLECTUAL PROPERTY" has the meaning set forth in section 3B(t)
below.
"INTELLECTUAL PROPERTY LICENSES" has the meaning set forth in section
3B(t) below.
"IRS" means the Internal Revenue Service.
"INVENTORY" means all of the Company's inventories, including without
limitation, raw materials, work in progress, finished goods, spare parts,
supplies, packaging goods and other like items.
"KNOWLEDGE" (and the related phrase "TO THE KNOWLEDGE OF"), (a) when
applied to the Seller means the actual knowledge of Bobby Tesney, Vincent A.
Tortorici, Jr., Jerry Camp and Rick Lee, after reasonable investigations and
inquiries of the officers and responsible employees of the Company (including,
without limitation, Zoeann Gamboa, Randy Gastelum, Terry King, John Latta and
David Capodiece), and (b) when applied to the Purchaser means the actual
knowledge after reasonable investigation of the executive officers of the
Purchaser.
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"LABOR DISPUTE" has the meaning set forth in section 7(b)(iii) below.
"LIEN" means any lien, charge, claim, restriction, encumbrance,
security interest or pledge of any kind whatsoever.
"LISTED INTELLECTUAL PROPERTY" has the meaning set forth in section
3B(t) below.
"LOSS" or "LOSSES" means all damages, dues, penalties, fines,
reasonable amounts paid in settlement, Taxes, costs, obligations, losses,
expenses, and fees (including court costs and reasonable attorneys' fees and
expenses), including, as the context may require, any of the foregoing which
arise out of or in connection with any actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees or rulings.
"LOW AMOUNT" has the meaning set forth in section 2(g)(ii)(A) below.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change
or effect that is materially adverse to the business, assets, financial
condition or results of operations of the Company.
"MATERIAL CONTRACT" means any contract or agreement whether written or
oral (including any and all amendments thereto) to which the Company is a party,
or by which the Company or any of its assets is bound, and which (a) relates to
Funded Indebtedness or is a letter of credit, pledge, bond or similar
arrangement running to the account of or for the benefit of the Company, (b)
relates to the purchase, maintenance or acquisition, or sale or furnishing of
materials, supplies, merchandise, machinery, equipment, parts or any other
property or services (excluding any such contract made in the Ordinary Course of
Business and which is expected to be fully performed within 30 days of the date
hereof or which involves revenues or expenditures of less than $25,000), (c) is
a collective bargaining agreement, (d) obligates the Company not to compete with
any business, or to conduct any business with only certain parties, or which
otherwise restrains or prevents the Company from carrying on any lawful business
or which restricts the right of the Company to use or disclose any information
in its possession, (e) relates to (i) employment, compensation, severance, or
consulting between the Company and any of its officers or directors, or (ii)
other employees or consultants who are entitled to compensation thereunder in
excess of $25,000 per annum, (f) is a lease or sublease of real property, or a
lease, sublease or other title retention agreement or conditional sales
agreement for any machinery, equipment, vehicle or other tangible personal
property (whether the Company is a lessor or lessee), (g) is a contract for
capital expenditures or the acquisition or construction of fixed assets for or
in respect of any real property involving payments in excess of $25,000, (h) is
a contract granting any Person a Lien on any of the assets of the Company, in
whole or in part (other than Permitted Liens), (i) is a contract by which the
Company retains any manufacturer's representatives, broker or other sales agent,
distributor or representative, or advertising or marketing entity or through
which the Company is appointed or authorized as a sales agent, distributor or
representative, (j) is a contract under which the Company has granted or
received a license or sublicense or under which the Company is obligated to pay
or has the right to receive a royalty,
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<PAGE> 10
license fee or similar payment (other than software licenses for purchased
software), (k) is a joint venture or partnership contract or a limited liability
company operating agreement, (l) is (i) an agreement for the storage,
transportation, treatment and disposal of any materials subject to regulation
under any Environmental Health and Safety Requirements, or (ii) a contract for
storage, transportation or similar services with carriers or warehousemen
(excluding any such contract entered into in the Ordinary Course of Business and
involving annual expenditures not exceeding $50,000), (m) is an agreement or
arrangement with the Seller or any Affiliate of the Seller, or (n) other than
the insurance policies and binders set forth in section 3B(k) of the Disclosure
Schedule, is otherwise material to the assets, business, operations or financial
condition of the Company.
"MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, toxic chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum and petroleum products, pesticides, asbestos, polychlorinated
biphenyls, in each case with respect to which liability or standards of conduct
are imposed pursuant to any Environmental, Health and Safety Requirements.
"MEDIATION REQUEST" has the meaning set forth in section 8(b)(ii)
below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA section 3(37).
"NET WORKING CAPITAL" means the total current assets of the Company
(which current assets shall exclude the current portion of deferred tax assets,
cash (except the Company's cash in its payroll account and its bank account in
England and the Company's petty cash), and prepaid insurance) and (b) the total
current liabilities of the Company (which current liabilities shall exclude the
current portion of any Funded Indebtedness, income taxes and accrued insurance),
in each case determined as of the close of business on June 26, 1998 and by
reference to the amounts set forth on the face (but not the notes) of the
Closing Balance Sheet..
"90 AND OVER ACCOUNTS RECEIVABLE" has the meaning set forth in section
10(c) below.
"NON-COMPETITION AREA" has the meaning set forth in section 5(g)(i)
below.
"NOTICE OF DISAGREEMENT WITH CLOSING BALANCE SHEET" has the meaning set
forth in section 2(g)(ii) below.
"OPINION OF SELLER'S COUNSEL" means the opinion of Gordon & Einstein,
Ltd., counsel to the Seller, dated as of the Closing Date, addressed to the
Purchaser, in form and substance reasonably satisfactory to the Purchaser and
its lender.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
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<PAGE> 11
"OTHER TAXES" means all Taxes other than Income Taxes.
"PARTY" has the meaning set forth in the preface above.
"PERMITTED INVESTMENT" has the meaning set forth in section 5(g)(ii)
below.
"PERMITTED LIENS" means (a) Liens set forth on the Disclosure Schedule
and which are identified as Permitted Liens, (b) Liens for Taxes not yet due and
payable and as to which appropriate reserves have been reflected on the Company
Interim Financial Statements, (c) workers or unemployment compensation Liens
arising in the Ordinary Course of Business and as to which appropriate reserves
have been reflected on the Most Recent Balance Sheet or adequate provision has
been made therefor by the Seller, and (d) mechanic's, materialman's, supplier's,
vendor's or landlord's Liens arising in the ordinary course of business securing
amounts which are not delinquent or being contested.
"PERSON" means any natural person, corporation, limited liability
company, unincorporated organization, partnership, association, joint-stock
company, joint venture, trust or government, or any agency or political
subdivision of any government.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PRE-CLOSING TAX PERIOD" means any tax period (including partial
periods) that ends on or prior to the Closing Date.
"PROPORTIONATE SHARE" has the meaning set forth in section 10(a)(i)
below.
"PURCHASED BUSINESS" has the meaning set forth in section 5(g)(i)
below.
"PURCHASER" has the meaning set forth in the preface above.
"PURCHASE PRICE" has the meaning set forth in section 2(b) below.
"PURCHASE PRICE ADJUSTMENT" has the meaning set forth in section
2(g)(iii) below.
"REAL PROPERTY" has the meaning set forth in section 3B(j) below.
"REPLACEMENT" has the meaning set forth in section 8(i) below.
"RETURN" means any return, declaration (including any declaration of
estimated Taxes), report, claim for refund, or information return or statement
relating to Taxes with respect to any income, assets or properties of the
Company, including any schedule or attachment thereto.
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<PAGE> 12
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"SELLER" has the meaning set forth in the preface above.
"SHARES" has the meaning set forth in section 2(a) below.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns, directly or indirectly, a majority of the
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"TAX ASSESSMENT" has the meaning set forth in section 5(d) below.
"TAX NOTICE" has the meaning set forth in section 5(d) below.
"TAXES" means all federal, state, local and foreign taxes (including,
without limitation, income or profits taxes, premium taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem taxes,
severance taxes, capital levy taxes, transfer taxes, value added taxes,
employment and payroll-related taxes, property taxes, real estate taxes,
business license taxes, occupation taxes, import duties and other governmental
charges and assessments), of any kind whatsoever, including interest, additions
to tax and penalties with respect thereto.
"THIRD PARTY CLAIM" has the meaning set forth in section 7(b)(v) below.
"UNRESTRICTED REPRESENTATIONS AND WARRANTIES" has the meaning set forth
in section 7(a) below.
2. PURCHASE AND SALE OF COMPANY SHARES.
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, the Purchaser agrees to purchase from the Seller, and the Seller
agrees to sell to the Purchaser, free and clear of any and all restrictions on
transfer, Liens, claims and demands, all of the shares of Common Stock owned by
the Seller (the "SHARES") as set forth in SCHEDULE I hereto, for the
consideration specified below in this section 2.
(b) PURCHASE PRICE. The aggregate purchase price to be paid by the
Purchaser for all of the Shares (the "PURCHASE PRICE") shall be (i) $7,875,000,
plus or MINUS (ii) any Purchase Price Adjustment made pursuant to section 2(g)
below.
(c) PAYMENT OF PURCHASE PRICE. On the Closing Date, the Purchaser shall
make payment of the Purchase Price as follows:
(i) To the Seller, by wire transfer of immediately available
funds, the sum of $6,874,250 (the "INITIAL PAYMENT"), to the account
designated in writing by the Seller on the
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<PAGE> 13
Closing Date. The Seller may direct the Purchaser to deliver a portion
of the Initial Payment to certain third parties for fees, expenses,
costs or other obligations arising out of or in connection with the
transactions contemplated in this Agreement.
(ii) To American National Bank and Trust Company of Chicago,
as escrow agent (the "ESCROW AGENT") pursuant to the terms of the
Escrow Agreement, the sum of $1,000,000 (the "ESCROW FUNDS"), together
with $750.00, representing the Seller's share of the first 12 months'
escrow fees, for a total payment to the Escrow Agent of $1,000,750. As
provided in the Escrow Agreement, the Escrow Funds shall be held in an
account (the "ESCROW ACCOUNT") to provide indemnification to the
Purchaser as provided in section 7(b) hereof.
(d) SATISFACTION OF FUNDED INDEBTEDNESS. On the Closing Date, the
Seller, at its expense, shall take such steps as shall be necessary such that,
concurrently with the Closing, there will be no further obligations of the
Company, monetary or otherwise, with respect to any Funded Indebtedness
outstanding immediately prior to the Closing. The Seller will make arrangements
reasonably satisfactory to the Purchaser for all holders of Funded Indebtedness
outstanding immediately prior to the Closing to provide to the Purchaser
recordable form mortgage and lien releases, canceled notes, trademark and patent
assignments and other documents reasonably requested by the Purchaser
simultaneously with or promptly following the Closing. If, after the Closing,
the Purchaser discovers that the Seller failed to eliminate, concurrently with
the Closing, all obligations of the Company, monetary or otherwise, with respect
to any Funded Indebtedness outstanding immediately prior to the Closing, the
Seller, at its expense, will take those actions reasonably requested by the
Purchaser to remove such obligations.
(e) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Schwartz & Freeman,
401 North Michigan, Suite 1900, Chicago, Illinois 60611 (or at such other
location as the Parties may agree), commencing at 10:00 a.m. local time on June
30, 1998 or such other date as the Seller and the Purchaser may mutually
determine (the "CLOSING DATE"). The Closing when completed shall be deemed to
have been effective at 11:59 p.m. on June 26, 1998.
(f) DELIVERIES AT THE CLOSING. At the Closing, (i) the Seller will
deliver to the Purchaser the various certificates and documents referred to in
section 6(a) below, (ii) the Purchaser will deliver to the Seller the various
certificates and documents referred to in section 6(b) below, (iii) the Seller
will deliver to the Purchaser stock certificates representing all of the Shares
being purchased pursuant to section 2(a) above, duly endorsed in blank or
accompanied by duly executed assignment documents, sufficient in form and
substance to convey to the Purchaser good title to such Shares, free and clear
of all restrictions on transfer, Liens, claims and demands and (iv) the
Purchaser will deliver to the Seller the Initial Payment.
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<PAGE> 14
(g) POST-CLOSING PURCHASE PRICE ADJUSTMENT.
(i) At the Closing, the Seller shall prepare and deliver to
the Purchaser (A) a balance sheet of the Company as of June 26, 1998
(the "CLOSING BALANCE SHEET") and (B) the Seller's calculation of the
Net Working Capital of the Company as of such time. The Seller shall
deliver to Purchaser a draft of the Closing Balance Sheet and its
calculation of Net Working Capital two days prior to the Closing Date.
Except as provided in SCHEDULE II hereto, the Closing Balance Sheet
(including, without limitation, such calculation of Net Working
Capital) shall be prepared (A) in accordance with GAAP applied in a
manner consistent with the same accounting principles and methodologies
used in preparing the Company Financial Statements and (B) in
accordance with the principles and procedures set forth on SCHEDULE II
hereto.
(ii) During the 45 days immediately following receipt of the
Closing Balance Sheet by the Purchaser, the Purchaser and its
accountants shall be entitled to review the Closing Balance Sheet and
the calculation of Net Working Capital and any working papers, trial
balances and similar materials relating thereto prepared by the Seller
or its accountants, and the Seller shall provide the Purchaser and its
accountants with timely access, during the Company's normal business
hours, to the Company's personnel, properties, books and records and to
the Seller's personnel, properties, books and records to the extent
related to the preparation of the Closing Balance Sheet's calculation
of Net Working Capital. The Seller shall use reasonable commercial
efforts to cause its accountants to make available to the Purchaser any
working papers, trial balances and similar materials prepared by such
accountants in connection with the preparation of the Closing Balance
Sheet's calculation of Net Working Capital; PROVIDED, HOWEVER, that the
Purchaser acknowledges and agrees that such accountants may require the
Purchaser to execute customary undertakings in connection with such
accesection The Closing Balance Sheet's calculation of Net Working
Capital shall become final and binding upon the Parties on the 46th day
following delivery thereof unless the Purchaser gives written notice to
the Seller of its disagreement with the Closing Balance Sheet's
calculation of Net Working Capital (a "NOTICE OF DISAGREEMENT WITH
CLOSING BALANCE SHEET") prior to such date. Any Notice of Disagreement
With Closing Balance Sheet shall specify in reasonable detail the
nature of any disagreement so asserted. If a timely Notice of
Disagreement With Closing Balance Sheet is received by the Seller with
respect to the Closing Balance Sheet's calculation of Net Working
Capital , then the Closing Balance Sheet's calculation of Net Working
Capital (as revised in accordance with clause (A) or (B) below), shall
become final and binding as to the calculation of Net Working Capital
upon the Parties on the earlier of (A) the date the Purchaser and the
Seller resolve in writing any differences they have with respect to any
matter specified in a Notice of Disagreement With Closing Balance
Sheet, or (B) the date any matters in dispute are finally resolved in
writing by the Accounting Firm in the manner described below (the date
on which the Closing Balance Sheet's calculation of Net Working Capital
becomes final and binding being hereinafter referred to as the "FINAL
CLOSING BALANCE SHEET DETERMINATION DATE"). During the 30 days
immediately following the delivery of any Notice of
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<PAGE> 15
Disagreement With Closing Balance Sheet, the Purchaser and the Seller
shall seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in such Notice of
Disagreement With Closing Balance Sheet. During such period, the
Purchaser and its accountants shall each have access to the Seller's
and the Company's working papers, trial balances and similar materials
(including the working papers, trial balances and similar materials of
their respective accountants) prepared in connection with the
preparation of the Closing Balance Sheet and the calculation of Net
Working Capital. At the end of such 30 day period, the Seller and the
Purchaser shall submit to an Accounting Firm for review and resolution
any and all matters which remain in dispute and which were included in
any Notice of Disagreement With Closing Balance Sheet (it being
understood that the Accounting Firm shall act as an arbitrator to
determine, based solely on presentations by the Purchaser and the
Seller (and not by independent review), only those matters which remain
in dispute), and the Accounting Firm shall reach a final, binding
resolution of all matters which remain in dispute, which final
resolution shall be (A) in writing, (B) furnished to the Purchaser and
the Seller as soon as practicable after the items in dispute have been
referred to the Accounting Firm, (C) made in accordance with this
Agreement, and (D) conclusive and binding upon the Parties and not
subject to collateral attack for any reason. The Closing Balance Sheet,
with any adjustments necessary to reflect the Accounting Firm's
resolution of the matters in dispute, shall become final and binding as
to the calculation of Net Working Capital on the Parties on the date
the Accounting Firm delivers its final resolution to the Parties, which
shall be no later than 90 days after the Closing Date. The Accounting
Firm shall be mutually selected by the Purchaser and the Seller, or, if
the Purchaser and the Seller cannot so agree within the 30-day period
referred to above, by lot from among the independent "Big 6" public
accounting firms (after excluding the Seller's independent public
accountants and the Purchaser's independent public accountants) willing
to act (the "ACCOUNTING FIRM"). Each Party shall pay its own costs and
expenses incurred in connection with such arbitration, provided that
the fees and expenses of the Accounting Firm shall be borne as follows:
(A) if the Accounting Firm resolves all of
the remaining objections in favor of the Purchaser (the amount
of the Net Working Capital so determined is referred to herein
as the "LOW AMOUNT"), the Seller will be responsible for all
of the fees and expenses of the Accounting Firm;
(B) if the Accounting Firm resolves all of
the remaining objections in favor of the Seller (the amount of
the Net Working Capital so determined is referred to herein as
the "HIGH AMOUNT"), the Purchaser will be responsible for all
of the fees and expenses of the Accounting Firm; and
(C) if the Accounting Firm resolves some of
the remaining objections in favor of the Purchaser and the
rest of the remaining objections in favor of the Seller (the
amount of the Net Working Capital so determined is referred to
herein as "ACTUAL AMOUNT"), the Seller will be responsible for
that fraction of the fees
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<PAGE> 16
and expenses of the Accounting Firm equal to (i) the
difference between the High Amount and the Actual Amount over
(ii) the difference between the High Amount and the Low
Amount, and the Purchaser will be responsible for the
remainder of the fees and expenses.
(iii) Upon the final determination of the Closing Balance
Sheet in accordance with this section 2(g), the following amounts will
be payable:
(A) if Net Working Capital is greater than
$2,800,000.00, the Purchaser shall pay to
the Seller the amount by which the amount of
the Net Working Capital exceeds such amount;
and
(B) if Net Working Capital is less than
$2,800,000.00, the Seller shall pay to the
Purchaser the amount by which the amount of
the Net Working Capital is less than such
amount.
Any required adjustment to the Purchase Price pursuant to this section
2(g) shall be referred to as the "PURCHASE PRICE ADJUSTMENT".
(iv) Within 48 days after the receipt by the Purchaser of the
Closing Balance Sheet in accordance with section 2(g)(i) above, the
Seller, if section 2(g)(iii)(B) is applicable, shall make the payment
required by section 2(g)(iii)(B) above with respect to any undisputed
amounts constituting a portion of the Purchase Price Adjustment. If
section 2(g)(iii)(A) is applicable, the Purchaser shall make payments
to Seller of the Purchase Price Adjustment out of 60% of its collection
of accounts receivable until the Purchase Price Adjustment is paid in
full. With respect to any items that are the subject of a Notice of
Disagreement With Closing Balance Sheet, payment shall be made within
three business days after the Final Closing Balance Sheet Determination
Date.
3A. REPRESENTATIONS AND WARRANTIES OF THE SELLER AS TO SELLER MATTERS.
The Seller represents and warrants to the Purchaser as follows:
(a) ORGANIZATION. The Seller is a corporation duly organized, validly
existing, and in good standing under the laws of Florida.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full corporate power
and authority to execute and deliver this Agreement and the Escrow Agreement and
to perform its obligations hereunder and thereunder. This Agreement constitutes
and the Escrow Agreement, when executed and delivered, will constitute the valid
and legally binding obligations of the Seller, enforceable in accordance with
their respective terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Escrow Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will
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<PAGE> 17
(i) violate any statute, regulation, rule, injunction, judgment, order, decree
or ruling of any Authority to which the Seller is subject or any provision of
its charter or bylaws or other organizational document, as the case may be, or
(ii) except as set forth under section 3A(c) of the Disclosure Schedule conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require any notice under any agreement, contract, lease, license
or instrument to which the Seller is a party or by which it is bound or to which
any of its assets is subject. The Seller is not required to give any notice to,
make any filing with, or obtain any authorization, consent or approval of any
Authority in order for it to consummate the transactions contemplated by this
Agreement.
(d) OWNERSHIP OF COMMON STOCK. The Seller holds of record and owns
beneficially the number of Shares set forth on SCHEDULE I attached hereto and
has good title to such Shares, free and clear of any restrictions on transfer,
Liens, claims, and demands. The Seller is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the Seller to
sell, transfer, or otherwise dispose of any capital stock of the Company (other
than this Agreement). The Seller is not a party to any voting trusts, proxies,
or other agreements or understandings with respect to the voting of any capital
stock of the Company. The Shares represent all of the issued and outstanding
capital stock of the Company.
(e) BROKERS FEES. The Seller does not have any liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Company or the
Purchaser could become liable or obligated. Without limitation as to the
foregoing, the Seller shall pay all fees and expenses of Mann, Armistead &
Epperson, Ltd. in connection with the transactions contemplated hereby.
3B. REPRESENTATIONS AND WARRANTIES OF THE SELLER WITH RESPECT TO THE
COMPANY. The Seller represents and warrants to the Purchaser as follows:
(a) ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation.
(b) AUTHORITY TO DO BUSINESS The Company has all requisite corporate
power and authority to own, lease and operate its properties and to conduct its
business in the manner where now conducted and is duly licensed or qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its properties and assets or the conduct of
its business requires it to be so licensed or qualified, except where the
failure to be in good standing or to be duly licensed or qualified to do
business would not have a Material Adverse Effect. section 3B(b) of the
Disclosure Schedule sets forth a list of each jurisdiction in which the Company
is licensed or qualified to do business as a foreign corporation. The Company is
not required to be licensed or qualified to transact business as a foreign
corporation in the District of Columbia or England.
(c) CHARTER AND BYLAWS; CORPORATE RECORDS. Copies of the Charter and
bylaws of the Company and all amendments thereto as in effect on the date hereof
have been delivered to the
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<PAGE> 18
Purchaser and are complete and correct as of the date hereof. A copy of the
corporate minutes and stock records of the Company have been delivered to the
Purchaser. With respect to all periods from and after March 24, 1995, such
corporate minutes contain a complete record of the meetings of the sole
shareholder and the board of directors (and any committees thereof) of the
Company. With respect to all periods prior to March 24, 1995, to the Knowledge
of the Seller such corporate minutes contain a complete record of the meetings
of the sole shareholder and the board of directors (and any committees thereof)
of the Company.
(d) NO SUBSIDIARIES. The Company has no direct or indirect equity
interest by stock ownership or otherwise in any other corporation, partnership,
joint venture, firm, association or business enterprise.
(e) CAPITALIZATION. The Company's authorized capital stock consists
solely of 1,000,000 shares of Common Stock, of which 1,000 shares are issued and
outstanding. All of the issued and outstanding shares of capital stock of the
Company (i) are duly authorized, validly issued, fully paid and nonassessable,
(ii) are held beneficially and of record by the Seller, and (iii) were not
issued in violation of the preemptive rights of any person or any agreement or
law by which the Company at the time of issuance was bound. No shares of Common
Stock are held by the Company in its treasury. There are no outstanding or
authorized subscriptions, warrants, options or, except for this Agreement, other
agreements or rights of any kind to purchase or otherwise receive or be issued,
or securities or obligations of any kind convertible into, any shares of capital
stock or any other security of the Company; there is no outstanding contract or
other agreement of the Seller, the Company or any other person to purchase,
redeem or otherwise acquire any outstanding shares of the capital stock of the
Company, or securities or obligations of any kind convertible into any shares of
the capital stock of the Company; there are no dividends which have accrued or
been declared but are unpaid on the capital stock of the Company, and there are
no outstanding or authorized stock appreciation, phantom stock, profit sharing,
stock plans or similar rights with respect to the Company.
(f) FINANCIAL STATEMENTS.
(i) The Seller has delivered to the Purchaser copies of the
Company's unaudited balance sheet at March 27, 1998 (the "MOST RECENT
BALANCE SHEET") and the related statements of income, stockholders'
equity and cash flow for the three fiscal months then ended (the
"COMPANY INTERIM FINANCIAL STATEMENTS"), and for the fiscal years ended
December 31, 1995, December 31, 1996 and December 31, 1997, which
financial statements together with the Company Interim Financial
Statements are collectively referred to herein as the "COMPANY
FINANCIAL STATEMENTS". The Company Financial Statements (i) have been
prepared from the books and records of the Company, (ii) present fairly
the financial condition of the Company and its results of operations as
at and for the respective periods then ended, and (iii) have been
prepared in accordance with GAAP applied consistently throughout the
periods indicated; PROVIDED, HOWEVER, that the Interim Company Interim
Financial Statements are subject to normal, non-material year-end
adjustments and lack footnotes and other presentation items.
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<PAGE> 19
(ii) The Seller has delivered to the Purchaser copies of (i)
the unaudited consolidated balance sheet and related consolidated
statements of income, stockholders' equity and cash flows of the Seller
and its subsidiaries for the three fiscal months ended March 27, 1998,
and (ii) the audited consolidated balance sheets of the Seller and its
subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997, with
the report thereon of Ernst & Young LLP.
(g) ABSENCE OF CERTAIN DEVELOPMENTS. Except as otherwise contemplated
by this Agreement, since the date of the Most Recent Balance Sheet, the Company
has conducted its business only in the Ordinary Course of Business and there has
not been any Material Adverse Change with respect to the Company. Without
limiting the generality of the foregoing, since that date, the Company has not,
except as set forth in section 3B(g) of the Disclosure Schedule:
(i) borrowed any amount or incurred any liabilities, except
liabilities incurred in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of or was
caused by any breach of contract, breach of warranty, tort,
infringement or violation of law);
(ii) mortgaged, pledged or subjected to any Lien any of its
assets, except for Permitted Liens, or entered into any conditional
sale or other title retention agreement with respect to any property or
asset;
(iii) sold, assigned or transferred any of its tangible
assets, except for (A) sales of Inventory in the Ordinary Course of
Business and (B) sales of immaterial assets (having an aggregate value
of not more than $10,000) not used nor useful in the business of the
Company;
(iv) sold, assigned, transferred or granted any interest
(other than Liens in respect of Funded Indebtedness) in any patents,
trademarks or trade names or any material copyrights, trade secrets or
other intangible assets;
(v) made any capital expenditures or commitments therefor in
excess of $25,000 individually or $100,000 in the aggregate (all
capital expenditures being in the Ordinary Course of Business), except
for the purchase of the packaging line which, except for amounts
included in accounts payable on the Closing Balance Sheet, has been
paid for in full
(vi) entered into any agreement, contract, lease or license
outside the Ordinary Course of Business or involving in excess of
$25,000;
(vii) suffered any theft, damage, destruction or casualty loss
(in excess of $25,000 in the aggregate) to its property, whether or not
covered by insurance;
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<PAGE> 20
(viii) entered into any agreement with any labor union or
association representing any employee, or made any wage or salary
increase or bonus, or increase in any other direct or indirect
compensation, for or to any of its officers, directors or employees;
(ix) made any change in its accounting methods, principles or
practices;
(x) made any increase in or established any bonus, insurance,
deferred compensation, pension, retirement, profit-sharing, stock
option (including the granting of stock options, stock appreciation
rights, performance awards or restricted stock awards or the amendment
of any existing stock options, stock appreciation rights, performance
awards or restricted stock awards), stock purchase or other employee
benefit plan or agreement or arrangement;
(xi) reclassified, combined, split, subdivided or redeemed or
otherwise repurchased any capital stock of the Company, or created,
authorized, issued, sold, delivered, pledged or encumbered any
additional capital stock (whether authorized but unissued or held in
treasury) or other securities equivalent to or exchangeable for capital
stock, or granted or otherwise issued any options, warrants or other
rights with respect thereto;
(xii) acquired or agreed to acquire by merging or
consolidating with, or by purchasing any portion of the capital stock,
partnership interests or assets of, or by any other manner, any
business or any corporation, partnership, limited liability company,
association or other business organization or division thereof;
(xiii) made any loan or advance (whether in cash or other
property), or made any investment in or capital contribution to, or
extended any credit to, any Person, except (i) short-term investments
pursuant to customary cash management policies, and (ii) advances made
in the Ordinary Course of Business to employees;
(xiv) cancelled, compromised, waived or released any right or
claim (or series of related rights and claims) outside the Ordinary
Course of Business or involving more than $25,000 in the aggregate;
(xv) made or pledged to make any charitable contribution;
(xvi) (A) except in the Ordinary Course of Business liquidated
Inventory or accepted product returns, (B) accelerated receivables or
(C) delayed payables;
(xvii) declared or set aside or paid any dividend in kind or
made any distribution in kind with respect to its capital stock or
redeemed, purchased or otherwise acquired any of its capital stock;
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<PAGE> 21
(xviii) incurred any obligation to pay any management fee or
other fees or reimbursements to Affiliates of the Company, except for
obligations which will be paid prior to Closing; or
(xix) committed to do any of the foregoing.
(h) UNDISCLOSED LIABILITIES. The Company does not have any liability
(whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due, including any liability for Taxes) (and, to the Knowledge of the Seller,
there is no Basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand against the Company giving
rise to any liability), except for (i) liabilities reflected in the Company
Financial Statements, (ii) contractual obligations of the Company which are to
be performed in the Ordinary Course of Business under agreements, contracts,
leases, licenses and other arrangements to which the Company or any of its
assets are bound (none of which results from, arises out of, relates to, is in
the nature of or was caused by any breach of contract, breach of warranty, tort,
infringement or violation of law), (iii) liabilities reflected in section 3B(h)
of the Disclosure Schedule and (iv) liabilities which have arisen in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet
(none of which results from, arises out of, relates to, is in the nature of or
was caused by any breach of contract, breach of warranty, tort, infringement or
violation of law). The Company has received no notice of any potential returns
from customers; however, based upon the past custom and practice of the Company,
there may be returns from United Stationers, S.P. Richards and Office Depot.
(i) TANGIBLE PERSONAL PROPERTY.
(i) Except as set forth in section 3B(i) of the
Disclosure Schedule and except for Inventory disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance
Sheet, the Company has (x) good and marketable title to all of the
tangible personal property and assets which are used in the operation
of its business and which it owns or purports to own, and (y) valid
leasehold interests in all leases of tangible personal property which
it leases or purports to lease, in each case free and clear of any
Liens, other than Permitted Liens. The Company owns or leases all
buildings, machinery, equipment, and other tangible assets necessary
for the conduct of its businesses as presently conducted. Each such
tangible asset has been maintained in accordance with normal industry
practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently
is used.
(ii) The Company enjoys peaceful and undisturbed
possession under all of such leases of personal property under which it
is operating. There are no existing defaults, or events which with the
passage of time or the giving of notice, or both, would constitute
defaults by the Company or, to the Knowledge of the Seller, by any
other party to any such lease, except defaults which could not
reasonably be expected to have a Material Adverse Effect.
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<PAGE> 22
(j) REAL PROPERTY.
(i) The Company does not own any real property. section 3B(j)
of the Disclosure Schedule sets forth a list of all real property
leased, subleased or otherwise occupied by the Company, indicating the
nature of its interest therein and setting forth a brief description of
the buildings and improvements located thereon (collectively, the "REAL
PROPERTY"). The Seller has delivered a complete copy of all leases to
the Purchaser. The Company has valid leasehold interests in all leases
of Real Property which it leases or purports to lease, free and clear
of any Liens, other than Permitted Liens. To the Knowledge of the
Seller, there are no pending condemnation, expropriation, eminent
domain or similar proceedings affecting all or any portion of such Real
Property and, to the Knowledge of Seller, no such proceedings are
contemplated.
(ii) The Company enjoys peaceful and undisturbed possession
under all of such Real Property leases under which it is operating. All
of such leases are valid, subsisting and in full force and effect, no
notice of termination has been received by the Company with respect
thereto, and there are no existing defaults, or events which with the
passage of time or the giving of notice, or both, would constitute
defaults by the Company or, to the Knowledge of the Seller, by any
other party thereto, except for defaults which could not reasonably be
expected to have a Material Adverse Effect.
(iii) The Real Property is in compliance with the American
with Disabilities Act.
(k) INSURANCE. Section 3B(k) of the Disclosure Schedule sets forth a
list of all insurance policies currently in effect which are owned or held by
the Company, insuring the products, properties, assets, business and operations
of the Company and its potential liabilities to third parties, and all general
liability policies maintained by the Company. All such policies are in full
force and effect and all premiums due and payable in respect thereof have been
paid, except to the extent set forth in section 3B(k) of the Disclosure
Schedule. Since the respective dates of such policies, no notice of cancellation
or non-renewal with respect to any such policy has been received by the Company.
Such policies are sufficient for compliance with all requirements of law and
Material Contracts to which the Company is a party. Since the respective dates
of such policies, no notice of cancellation or non-renewal with respect to any
such policy has been received by the Company. Section 3B(k) of the Disclosure
Schedule sets forth a list of all pending claims with respect to all such
policies.
(l) LABOR RELATIONS.
(i) The Company is not now, nor has it ever been, a party to
or otherwise bound by any labor or collective bargaining agreement.
Except as set forth in section 3B(l) of the Disclosure Schedule, as of
the date hereof (A) the Company is not involved in or, to the Knowledge
of the Seller, threatened with any labor dispute, strike, slowdown,
work stoppage, grievance, unfair labor practice charge, arbitration,
suit or administrative
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<PAGE> 23
proceeding relating to labor matters involving its employees, (B) there
are no actions, proceedings or claims pending or, to the Knowledge of
the Seller, threatened against the Company under any laws relating to
employment, including any provisions thereof relating to wages, hours,
collective bargaining, withholding or the payment of social security or
other Taxes, and (C) the Company has not conducted negotiations with
respect to any future contract with or commitment to any labor union or
association and, to the Knowledge of the Seller, there are no current
or threatened attempts to organize or establish any labor union or
association or employee association with respect to the Company.
(ii) The Company is not involved in or, to the Knowledge of
the Company, threatened with any grievance, unfair labor practice
charge, arbitration, suit or administrative proceeding relating to
labor matters involving its employees or independent contractors
(including, without limitation, any dispute, grievance, charge or
proceeding relating to sexual harassment or age, sex, race or other
discrimination).
(m) COMPANY PERMITS; COMPLIANCE WITH LAW. The Company holds and is in
compliance with all Company Permits and is in substantial compliance with all
requirements of law. Except as set forth in section 3B(m) of the Disclosure
Schedule, no notice, citation, summons or order has been received by the
Company, no complaint has been filed and served on it, no penalty has been
assessed and, to the Knowledge of the Seller, no investigation, proceeding or
review is pending or threatened (i) with respect to any alleged violation by the
Company of any law or Company Permit, or (ii) with respect to any alleged
failure by the Company to have any Permit. A true and correct list of all
Company Permits is set forth in section 3B(m) of the Disclosure Schedule.
(n) LITIGATION. Section 3B(n) of the Disclosure Schedule sets forth a
list of all actions, suits, claims or proceedings pending or, to the Knowledge
of the Seller, threatened against or involving the Company, or any of its assets
or properties. There are no outstanding orders, judgments, injunctions,
stipulations, awards or decrees of any Authority against the Company, or any of
its assets or properties.
(o) LIST OF ACCOUNTS. Section 3B(o) of the Disclosure Schedule sets
forth a list of all bank and securities accounts, and all safe deposit boxes,
maintained by the Company and a listing of the persons authorized to draw
thereon or make withdrawals therefrom or, in the case of safe deposit boxes,
with access thereto.
(p) LIST OF PERSONNEL. Section 3B(p) of the Disclosure Schedule sets
forth (i) the name and total compensation of each officer and director of the
Company and each other employee of the Company whose total compensation for the
twelve months ended December 31, 1997 exceeded $25,000, (ii) all wage or salary
increases or bonuses received by such persons since December 31, 1997, and any
accrual for such increases or bonuses, and (iii) all commitments or agreements
by the Company to increase the wages or modify the conditions or terms of
employment of any of its employees.
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<PAGE> 24
(q) EMPLOYEE BENEFITS. Section 3B(q) of the Disclosure Schedule sets
forth (i) all of the current Employee Pension Benefit Plans, Employee Welfare
Benefit Plans and all other employee benefit, fringe benefit plans and programs
maintained or contributed to by the Company or any ERISA Affiliate with respect
to current or former employees of the Company (the "EMPLOYEE BENEFIT PLANS").
(i) With respect to each Employee Benefit Plan:
(1) each such Employee Benefit Plan (and each
related trust, insurance contract or fund)
complies in form and, to the Knowledge of
the Seller, in operation with the applicable
requirements of ERISA, the Code and other
applicable laws (including, without
limitation, all reporting and disclosure
requirements), and has been operated in all
material respects in accordance with its
terms;
(2) all contributions (including all employer
contributions and employee salary reduction
contributions, if any) which are due have
been paid to each such Employee Benefit Plan
which is an Employee Pension Benefit Plan,
and there are no accumulated funding
deficiencies with respect to any such
Employee Pension Benefit Plan;
(3) each such Employee Benefit Plan which is an
Employee Pension Benefit Plan intended to so
qualify under section 401(a) of the Code so
qualifies and has received a favorable
determination letter from the IRS as to its
qualification under section 401(a) of the
Code;
(4) no "prohibited transaction" (as such term is
defined in section 406 of ERISA or section
4975 of the Code) has occurred with respect
to any such Employee Benefit Plan which is
an Employee Pension Benefit Plan (or its
related trust) which could subject the
Company or any officer, director or employee
of the Company, to any Tax or penalty
imposed under section 4975 of the Code or
liability under section 406 of ERISA;
(5) the Company has delivered to the Purchaser
correct and complete copies of the plan
documents and summary plan descriptions
which implement each such Employee Benefit
Plan;
(6) no such Employee Benefit Plan which is an
Employee Pension Benefit Plan has been
completely or partially terminated or has
been the subject of a "reportable event" (as
defined in section 4043 of ERISA) as to
which notices would be required to be filed
with the PBGC. To the Knowledge of the
Seller, no proceeding by the PBGC to
terminate
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<PAGE> 25
any such Employee Pension Benefit Plan
(other than a Multiemployer Plan) has been
instituted;
(7) the Company has not incurred, and will not
incur as a result of any existing condition
or the transactions contemplated by this
Agreement, any liability to the PBGC (except
for required premium payments, if any), or
otherwise under Title IV of ERISA (including
any withdrawal liability) or under the Code
with respect to any such Employee Benefit
Plan which is an Employee Pension Benefit
Plan and, as of the Closing Date, the assets
of each such Employee Pension Benefit Plan
are at least equal in value to the present
value of accrued benefits of the Plan, based
on actuarial methods, tables and assumptions
reasonably satisfactory to the Purchaser;
and
(8) no action, suit, proceeding, hearing or
investigation with respect to the
administration or the investment of assets
of any such Employee Benefit Plan (other
than routine claims for benefits) is pending
or, to the Knowledge of the Seller,
threatened.
(ii) The Company does not contribute to any Multiemployer Plan
or have any liability (including withdrawal liability) under any
Multiemployer Plan.
(iii) The Company does not have any obligation to provide
health or other welfare benefits to former, retired or terminated
employees, except as specifically required under section 4980B of the
Code. With respect to all of its past and present employees, the
Company has complied in all material respects with the notice and
continuation requirements of Part 6 of Subtitle B of Title I of ERISA
and of section 4980B of the Code.
(iv) The Company has no liability for or relating to any
Employee Benefit Plan or arrangement sponsored, maintained or
contributed to by an ERISA Affiliate.
(v) The consummation of the transactions contemplated by this
Agreement will not entitle any individual to any severance pay, and
will not accelerate the time of payment or vesting, or increase the
amount of any compensation due to any individual, and will not be the
direct or indirect cause of any amount payable under any Employee
Benefit Plan being classified as an "excess parachute payment" under
section 280G of the Code.
(vi) The Company has no obligation under any dental plan to
pay any portion of its employees' dental insurance or deductible.
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<PAGE> 26
(r) TAX MATTERS.
(i) All Income Tax Returns and all material Other Tax Returns
required to be filed with respect to the business and assets of the
Company have been duly and timely (within any applicable extension
periods) filed with the appropriate Authorities in all jurisdictions in
which such Returns are required to be filed. The Company has paid all
Taxes required to be paid by it (without regard to whether a Tax Return
is required), except Taxes which are not delinquent and for which an
adequate reserve has been established on the Company Interim Financial
Statements.
(ii) The unpaid Taxes of the Company (i) did not as of the
date of the Most Recent Balance Sheet, exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and tax income) disclosed on
the face of the Most Recent Balance Sheet, and (ii) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the custom of the Company.
(iii) Except as set forth in section 3B(r) of the Disclosure
Schedule, there is no claim or assessment pending or, to the Knowledge
of the Seller, threatened against the Company for any alleged
deficiency in Income Taxes or any material alleged deficiency in Other
Taxes.
(iv) Except as set forth in section 3B(r) of the Disclosure
Schedule, the Company has not (a) filed any consent to the application
of Section 341(f) of the Code, (b) executed a waiver or consent
extending any statute of limitations for the assessment or collection
of any Income Taxes or Other Taxes which remain outstanding, (c)
applied for a ruling relative to Income Taxes or Other Taxes, (d)
entered into a closing agreement with any Tax Authority, or (e) filed
an election under Section 338(g) or 338(h)(10) of the Code or caused or
permitted a deemed election under Section 338(e) of the Code.
(v) Except as set forth in section 3B(r) of the Disclosure
Schedule, no Income Tax Return or Other Tax Return of the Company has
been audited by any Tax Authority at any time since March 24, 1995 and
to the Seller's Knowledge, no Income Tax Return or Other Tax Return of
the Company was audited prior to March 24, 1995.
(vi) The Company is not a party to any written agreement
providing for the allocation or sharing of Taxes.
(vii) The Company has no liability for the Income Taxes of any
other Person other than the Seller and its subsidiaries under Treasury
Regulations Section 1.1502-6 (or any similar provision of state,
foreign or local law).
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<PAGE> 27
(viii) The Company has not been a member of an Affiliated
Group filing a consolidated federal Income Tax Return other than an
Affiliated Group of which the common parent is the Seller.
(ix) The Company has not changed its tax method of accounting
or tax practice from January 1, 1997 through the Closing Date, except
for the adoption of mark to market rules for accounts receivable. The
Company's taxable income for the year ending December 31, 1998
attributable to the adoption of such mark to market rules will not
exceed $50,000.
(s) ENVIRONMENTAL MATTERS. Except as disclosed in section 3B(s) of the
Disclosure Schedule:
The Company has not disposed of or released any substance,
arranged for the disposal of any substance, knowingly exposed any employee or
other individual to any substance or condition, or owned or operated its
businesses or any property or facility so as to give rise to any liability or
corrective or remedial obligation of the Company under any Environmental, Health
and Safety Requirement.
(i) The Company has not, since March 24, 1995 and, to the
Knowledge of the Seller, in any period prior thereto, disposed of or
released any substance, arranged for the disposal of any substance,
knowingly exposed any employee or other individual to any substance or
condition, or owned or operated its businesses or any property or
facility so as to give rise to any liability or corrective or remedial
obligation of the Company under any Environmental, Health and Safety
Requirement. The Company is in compliance with all Environmental Health
and Safety Requirements and, to the Knowledge of the Seller, has been
in compliance with all Environmental Health and Safety Requirements
since March 24, 1995.
(ii) There is no Environmental Claim of which the Company has
received written notice or, to the Knowledge of the Seller, threatened
or filed since March 14, 1995 against the Company or against any Person
whose liability for any Environmental Claim the Company has retained or
assumed either contractually or by operation of law, or against any
real or personal property or operations which the Company owns, leases
or operates.
(iii) There are no environmental Liens on any of the Real
Property arising as a result of any actions taken or omitted to be
taken by the Company and, to the Knowledge of the Seller, no actions
have been taken by any Authority with respect to any of the Real
Property or are in process or pending, to impose an environmental Lien
with respect to the Real Property as a result of any such actions.
(iv) No Real Property presently or heretofore owned or
operated by the Company is currently listed on the National Priorities
List or the Comprehensive Environmental Response, Compensation and
Liability Information System, both promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
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<PAGE> 28
amended ("CERCLA"), or on any comparable state list, and the Company
has not received any written notice of potential liability from any
Person under or relating to CERCLA or any comparable state or local
law.
(v) To the Knowledge of the Seller, no underground storage
tanks, friable and damaged asbestos-containing materials, or
pcb-containing equipment or fluids are present on any of the Real
Property.
(vi) To the Knowledge of the Seller, no off-site location at
which the Company has disposed or arranged for the disposal of any
waste is listed on the National Priorities List or on any comparable
state list and the Company has not received any written notice from any
Person with respect to any such off-site location, of potential or
actual liability or a written request for information from any Person
under or relating to CERCLA or any comparable state or local law.
(vii) The Company has investigated all recommendations in the
Phase I Environmental Assessment and Environmental Compliance Audit
dated December 20, 1994 prepared by The Forrester Group, Inc. and the
Seller has determined either that the Company has complied with or was
in compliance with all such recommendations. The Company has not
changed its environmental compliance and procedures except to come into
compliance with such recommendations and Environmental, Health and
Safety Requirements and has not taken any action which would cause it
not to be in compliance with such recommendations.
(t) INTELLECTUAL PROPERTY. Section 3B(t) of the Disclosure Schedule
hereto sets forth a list of all patents, pending patent applications,
trademarks, service marks, pending trademark or service mark applications and
trade names licensed to, applied for or registered in the name of, the Company,
or in which the Company has or purports to have any rights, and all material
copyright registrations or pending applications for registrations of the
Company, or in which the Company has or purports to have any rights, including
the nature (E.G., patent, trademark, etc.) of the intellectual property, the
application or registration number, the jurisdiction and the record owner (the
"LISTED INTELLECTUAL PROPERTY"). Except as set forth in section 3B(t) of the
Disclosure Schedule, with respect to the ListeD Intellectual Property, no
registration relating thereto (if any) has lapsed, expired or been abandoned or
canceled or is the subject of cancellation proceedings. The Company owns or
possesses adequate and enforceable licenses (free of Liens other than Permitted
Liens) to use all Listed Intellectual Property and any other material
intellectual property rights (including, without limitation, drawings, trade
secrets, know-how and confidential information) currently used by the Company,
or necessary to permit the Company to conduct its business as now conducted (the
Listed Intellectual Property and the other intellectual property rights are
collectively called the "INTELLECTUAL PROPERTY"). Section 3B(t) of the
Disclosure Schedule sets forth all licenses to which the Company is a party
relating to the Intellectual Property (the "INTELLECTUAL PROPERTY LICENSES").
Except as set forth in section 3B(t) of the Disclosure Schedule, to the
Knowledge of the Seller the Company has not infringed on or misappropriated and
is not now infringing on or misappropriating any Intellectual Property right
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<PAGE> 29
belonging to any Person, and no claim is pending or, to the Knowledge of the
Seller, threatened to the effect that any Intellectual Property is invalid or
unenforceable. To the Knowledge of the Seller, except as set forth section 3B(t)
of the Disclosure Schedule, no Person is infringing upon or violating any of the
Listed Intellectual Property. Each item of Intellectual Property owned or used
by the Company prior to the Closing hereunder (other than any intellectual
property rights owned by the Seller or any Subsidiary of the Seller other than
the Company and not necessary or useful to the conduct of the Company's business
as now conducted) will be owned or available for use by the Company on identical
terms and conditions immediately subsequent to the Closing hereunder. Except as
set forth section 3B(t) of the Disclosure Schedule, to the Knowledge of the
Seller, since 1991 the Company has never received any charge, complaint, claim,
demand or notice alleging any such interference, infringement, misappropriation
or violation with any intellectual property rights of third parties except as
disclosed in section 3B(n) of the Disclosure Schedule. The loss of the
Microcentre name will not cause a breach or default by the Company under any
Material Contract.
(u) MATERIAL CONTRACTS. Section 3B(u) of the Disclosure Schedule sets
forth a list of all Material Contracts. Except as set forth section 3B(u) of the
Disclosure Schedule, all of the Material Contracts are valid and binding and in
full force and effect and there are no defaults thereunder or events which with
notice or the passage of time would constitute a default by the Company or, to
the Knowledge of the Seller, by any other party thereto, except for defaults
which could not reasonably be expected to have a Material Adverse Effect. The
Seller has delivered to the Purchaser a correct and complete copy of each
Material Contract.
(v) TRANSACTIONS WITH AFFILIATES. Except as set forth in section 3B(v)
of the Disclosure Schedule and except for normal advances to employees
consistent with past practices, payment of compensation for employment to
employees consistent with past practices, and participation in Employee Benefit
Plans by employees, the Company has not purchased, acquired or leased any
property or services from, or sold, transferred or leased any property or
services to, or loaned or advanced any money to, or borrowed any money from or
entered into or been subject to any management, consulting or similar agreement
with, any officer, director or shareholder of the Company or any of their
respective Affiliates. No Affiliate of the Company is indebted to the Company
for money borrowed or other loans or advances, and the Company is not indebted
to any such Affiliate.
(w) POWERS OF ATTORNEY. Except as set forth in section 3B(w) of the
Disclosure Schedule, the Company has not granted any power of attorney to any
Person for any purpose whatsoever, which power of attorney is currently in
force.
(x) INVENTORY. The Inventory consists in all material respects of items
usable and saleable in the ordinary and usual course of business, subject to the
reserve for Inventory writedown set forth on the Most Recent Balance Sheet as
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company. The Inventory is valued on the Most
Recent Balance Sheet at the lower of cost (on a first-in-first-out basis) or
market pursuant to GAAP, consistently applied with prior periods.
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<PAGE> 30
(y) ACCOUNTS RECEIVABLE. All of the Accounts Receivable are properly
reflected on the books and records of the Company, arose from bona fide
transactions in the ordinary course of business and are valid receivables
subject to no setoffs or counterclaims, subject only to the reserves set forth
on the Most Recent Balance Sheet. section 3B(y) of the Disclosure Schedule sets
forth a current aging of the Company's accounts receivable.
(z) CUSTOMERS AND SUPPLIERS. Section 3B(z) of the Disclosure Schedule
sets forth a list of the names and addresses of the 10 largest (by volume)
customers and suppliers of the Company for the fiscal years ended December 31,
1997 and December 31, 1996. The Company maintains satisfactory relations with
each of such customers and suppliers. Except as set forth in section 3B(z) of
the Disclosure Schedule, no customer, or group of customers, which accounted for
more than 5% of the Company's aggregate sales revenues during the last twelve
months has canceled, terminated or, to the Knowledge of the Seller, made any
threat to the Company to cancel or otherwise terminate, or to materially
decrease its usage of the Company's services or products, and no supplier, or
any group of suppliers, which accounted for more than 5% of the aggregate
supplies purchased by the Company during the last twelve months, has canceled,
terminated or, to the Knowledge of the Seller, made any threat to the Company to
cancel or otherwise terminate, or to materially decrease the provision of
services or supplies to the Company.
(aa) TRAILING SALES COMMISSIONS. If any independent sales
representative of the Company is terminated after Closing, he shall not be
entitled to any commissions for any sales which are made after the date of
termination of such sales representative.
(bb) FULL DISCLOSURE. The representations and warranties of the Seller
contained in this Agreement do not contain any untrue statement of a material
fact and do not omit to state any material fact required to be stated to make
the statements contained herein not false or misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants to the Seller as follows:
(a) ORGANIZATION. The Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of Illinois.
(b) AUTHORIZATION OF TRANSACTION. The Purchaser has full corporate
power and authority to execute and deliver this Agreement and the Escrow
Agreement and to perform its obligations hereunder and thereunder. This
Agreement constitutes and the and the Escrow Agreement, when executed and
delivered, will constitute the valid and legally binding obligations of the
Purchaser, enforceable in accordance with their respective terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Escrow Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will (i) violate any statute, regulation, rule,
injunction, judgment, order, decree or ruling of any Authority to which the
Purchaser is subject or any provision of its charter or bylaws or other
organizational
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document, as the case may be, or (ii) except as set forth under section 4(c) of
the Disclosure Schedule conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify or cancel, or require any notice under any
agreement, contract, lease, license or instrument to which the Purchaser is a
party or by which it is bound or to which any of its assets is subject. The
Purchaser is not required to give any notice to, make any filing with, or obtain
any authorization, consent or approval of any Authority in order for it to
consummate the transactions contemplated by this Agreement.
(d) BROKERS FEES. The Purchaser does not have any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the Seller
or the Company (prior to the Closing) could become liable or obligated.
(e) ACQUISITION OF SHARES FOR INVESTMENT. The Shares to be purchased by
the Purchaser pursuant to this Agreement are being acquired for investment only
and not with a view to any public distribution thereof, and the Purchaser will
not offer to sell or otherwise dispose of the Shares so acquired by it in
violation of any of the registration requirements of the Securities Act or any
comparable state laws.
(f) FULL DISCLOSURE. The representations and warranties of the
Purchaser contained in this Agreement do not contain any untrue statement of a
material fact and do not omit to state any material fact required to be stated
to make the statements contained herein not false or misleading.
5. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In the event that at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party may reasonably
request, all at the sole cost and expense of the requesting Party.
(b) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, occurrence,
event, incident, action, failure to act, or transaction on or prior to the
Closing Date involving the Company, each of the Parties will cooperate with the
contesting or defending Party and its counsel in the contest or defense, all at
the sole cost and expense of the contesting or defending Party (except to the
extent that the contesting or defending Party is entitled to indemnification
therefor under this Agreement).
(c) PUBLICITY. No publicity release or announcement concerning this
Agreement or the transactions contemplated hereby shall be made without advance
approval thereof by the Purchaser and the Seller (which shall not be
unreasonably withheld or delayed). The Parties agree to cooperate
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in issuing any press release or other public announcement concerning this
Agreement or the transactions contemplated hereby. Whenever practicable, each
Party shall furnish to the other Party drafts of all such press releases or
announcements prior to their release. Nothing contained in this section 5(c)
shall prevent either Party from at any time furnishing any information to any
Authority or from making any disclosures required under the Securities Exchange
Act of 1934, as amended, or under the rules and regulations of any national
securities exchange on which such Party's shares of capital stock are listed.
(d) CERTAIN TAX MATTERS.
(i) Upon the condition that the Closing be effected, the
Seller will indemnify and hold harmless the Purchaser and the Company
from, against and in respect of any Losses the Purchaser or the Company
may suffer resulting from, arising out of, relating to, in the nature
of, or caused by any liability of the Company for Income Taxes of any
other Person under Treasury Regulation Section 1.1502-6 (or any similar
provision of state, local or foreign law).
(ii) The Seller will include the income of the Company
(including any deferred income included in income pursuant to Treasury
Regulation Sections 1.1502-13 and 1.1502- 14 and any excess loss
accounts taken into income under Treasury Regulation Section 1.1502-19)
on the Seller's consolidated federal Income Tax Returns for all Pre-
Closing Tax Periods and will pay all federal Income Taxes attributable
to such income. The Seller shall be responsible for and shall pay all
Taxes which relate to the period prior to the Closing Date, including
any transfer, sales or use tax caused by the sale of the Shares to the
Purchaser. The Purchaser will cause the Company to provide, or cause to
be provided, to the Seller, without charge (except for reasonable
out-of-pocket expenses), such information as may reasonably be
requested by the Seller in connection with the preparation of any such
Tax Returns relating to Pre-Closing Tax Periods. The income of the
Company will be apportioned to the period up to and including the
Closing Date and the period after the Closing Date by closing the books
of the Company as of the end of the Closing Date.
(iii) If a notice shall be given by any Tax Authority with
respect to a potential Tax liability of the Company which, if
sustained, would result in a payment by the Seller to the Purchaser
pursuant to section 7(b)(ii) below (a "TAX ASSESSMENT"), the Purchaser
shall, after receipt of such notice, promptly notify the Seller in
writing (a "TAX NOTICE"). The Seller may, by written notice to the
Purchaser given within 30 days after the receipt by the Seller of a Tax
Notice, at the Seller's sole cost and expense (except as hereinafter
provided), participate fully in the defense of all Tax Assessments with
respect to which the Seller may become liable pursuant to the Seller's
indemnification obligations hereunder. The Purchaser shall diligently
prosecute such defense in cooperation and consultation with the Seller
and shall provide written notice to the Seller of all conferences,
meetings, proceedings and appearances before all Authorities with
respect to the defense of any such Tax Assessment. If the Seller elects
to participate in the defense of a Tax Assessment, the Purchaser shall
provide, or shall cause
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the Company to provide, to the Seller (at no cost to the Seller, except
for reasonable out-of-pocket expenses) such information as may be
required in connection with such defense as reasonably requested by the
Seller. If the Seller elects to participate in the defense of a Tax
Assessment, the Purchaser shall give the Seller written notice of any
proposed resolution or settlement of such Tax Assessment not less than
15 business days before the Purchaser accepts or intends to accept such
proposed resolution or settlement. The Purchaser shall have the right
to settle or otherwise to resolve any Tax Assessment for which the
Seller would become liable pursuant to its indemnification obligations
hereunder upon the written consent of the Seller, which consent shall
not be unreasonably withheld or delayed.
(iv) The Seller shall have no liability with respect to any
Taxes resulting by reason of any election made or deemed to be made by
the Purchaser or the Company subsequent to the Closing, whether express
or implied, under Section 338 of the Code. Upon the condition that the
Closing be effected, the Purchaser and the Company, jointly and
severally, will indemnify and hold harmless the Seller from, against
and in respect of any Losses the Seller may suffer resulting from,
arising out of, relating to, in the nature of, or caused by any
election made or deemed to be made by the Purchaser or the Company
subsequent to the Closing, whether express or implied, under Section
338 of the Code.
(v) The Seller shall be entitled to any and all refunds of
Taxes attributable to any Pre-Closing Tax Period. If the Purchaser or
the Company voluntarily amends any Return (other than as required by
any Tax Authority) for a taxable period which includes any Pre- Closing
Tax Period, or, without the Seller's consent, enters into any agreement
or settlement with any Tax Authority relating to a taxable period
ending after the Closing Date, and such agreement or settlement affects
any item of deduction, loss, credit, income or gain with respect to any
Pre-Closing Tax Period, then notwithstanding any provision of this
Agreement which may be to the contrary, the Seller shall have no
liability for any Losses with respect to any Taxes attributable to any
change in tax liability effected by such amended Return, agreement or
settlement.
(vi) Notwithstanding any provision of this Agreement which may
be to the contrary, the Purchaser and the Company shall preserve all
Returns, books and records in their control relating to any liabilities
for Taxes due with respect to any Pre-Closing Tax Period until the
expiration of all applicable statutes of limitation and extensions
thereof with respect to Taxes for any such period.
(vii) In the event of any inconsistency between the provisions
of this section 5(d) and section 7(b) below, the provisions of this
section 5(d) shall be controlling.
(viii) If a notice shall be given by any Tax Authority to the
Seller with respect to a potential Tax liability of the Company, the
Seller shall, after receipt of such notice, promptly notify the
Purchaser in writing.
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(e) FINANCIAL REPORTING COOPERATION. The Purchaser shall cause to be
prepared and delivered to the Seller, to the extent not already prepared and
delivered, in the normal time frame followed by the Seller consistent with past
practice, the financial reporting package for the Company (but only in respect
of periods ending on or prior to the Closing Date) for the closing for the
Seller's fiscal quarter ending June 26, 1998.
(f) 401(K) PLAN. The Seller shall retain all liability for the
Company's existing 401(k) Plan.
(g) NON-COMPETITION.
(i) In order to induce the Purchaser to enter into this
Agreement, the Seller expressly covenants and agrees that for a period
of three years from and after the Closing Date, neither it nor any of
its Subsidiaries will, except in the case of a Permitted Investment,
directly or indirectly own, manage, operate, join, control, or
participate in the management, control or operation of, any Person that
engages in the manufacture, sale or distribution of ergonomically
designed space savers, which consist of ready to assemble computer work
stations as currently manufactured by the Company (the "PURCHASED
BUSINESS") in the continental United States (the "NON-COMPETITION
AREA"). The obligations of the Seller and its Subsidiaries under this
section 5(g)(i) shall terminate and be of no further force or effect
upon the occurrence of a Change in Control. For purposes hereof, the
term "CHANGE OF CONTROL" shall mean the occurrence of any event whereby
Affiliates of Trivest, Inc., collectively, cease to beneficially own
(within the meaning of Rule 13d-3 under the Securities Exchange Act) at
least 5% of the outstanding shares of common stock of the Seller
(determined on a fully diluted basis, giving effect to the conversion,
exchange or exercise of any rights to acquire shares from the Seller,
other than any such rights owned by such Persons).
(ii) For purposes of this section 5(g), a "PERMITTED
INVESTMENT" means an acquisition after the date hereof of a Person, all
or any portion of its equity interests or certain of its businesses
(the entity or businesses acquired being herein called the "ACQUIRED
BUSINESS"), if that portion of the Acquired Business that competes with
the Purchased Business or any portion thereof (the "COMPETING
BUSINESS") accounted for 15% or less of the total revenues of the
Acquired Business during the most recently completed fiscal year of the
Acquired Business preceding the date of the acquisition; PROVIDED,
HOWEVER, that if such Competing Business generated more than $5,000,000
in total revenues during such fiscal year, the Seller shall be required
to use its best efforts to sell, transfer, divest or otherwise dispose
of (or cause its Subsidiary proposing to acquire the Acquired Business
to use its best efforts to sell, transfer, divest or otherwise dispose
of) such Competing Business to an unaffiliated third party within 12
months of such acquisition.
(iii) The Parties acknowledge and agree that no portion of the
Purchase Price shall be allocated to the covenants and agreements of
the Seller set forth in this section 5(g). To the extent that any part
of this section 5(g) may be invalid, illegal or unenforceable for any
reason, it
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is intended that such part shall be enforceable to the extent that a
court of competent jurisdiction shall determine that such part if more
limited in scope would have been enforceable and such part shall be
deemed to have been so written and the remaining parts shall as written
be effective and enforceable in all events.
(iv) In the event of the Seller's breach of the provisions of
section 5(g)(i), and provided that, if the Seller has a Dispute with
the Purchaser whether such a breach has occurred that the Dispute is
fully and finally resolved in accordance with the provisions of section
8 of this Agreement, then the Purchaser shall be entitled to recover
its Losses from the Escrow Funds; PROVIDED, HOWEVER, that such payments
shall not be subject to the Basket; PROVIDED, FURTHER, that if no
Escrow Funds remain (either because the Escrow Agreement has terminated
or Losses for which the Purchaser is entitled to indemnification under
section 7(b)(i), together witH amounts paid from the Escrow Account
pursuant to this section 5(g) and sections 10(a), 10(b), 10(c)
And 10(d) exceed $1,000,000), the Purchaser shall be entitled to
recover its Losses from the Seller.
6. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in section 3A
and section 3B above that are qualified as to their materiality shall
be true and correct and any such representations and warranties that
are not so qualified shall be true and correct in all material respects
at and as of the Closing Date;
(ii) the Seller shall have performed and complied with all of
the covenants to be performed by it hereunder in all material respects
through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement, and no action, suit,
claim or proceeding shall be pending before any Authority which seeks
to prohibit or enjoin the consummation of the transactions contemplated
by this Agreement or which could reasonably be expected to adversely
impact the Company's right to own it assets and operate its business as
presently conducted;
(iv) the Seller shall have delivered to the Purchaser a
certificate to the effect that the conditions specified above in
section section 6(a)(i) and (ii) have been satisfied in all respects;
(v) all of the directors and officers of the Company shall
have delivered duly signed resignations effective at the time of the
Closing (or the Seller shall have taken such
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other action as is necessary to ensure that such persons are not
directors and officers of the Company at the time of the Closing);
(vi) all filings that are required to have been made by the
Company with any Authority in order to carry out the transactions
contemplated by this Agreement and in order for the Purchaser to
operate the business of the Company in the ordinary course after the
Closing Date shall have been made; all authorizations, consents,
approvals and permits from all Authorities required for the Company to
carry out the transactions contemplated by this Agreement and in order
for the Purchaser to operate the business of the Company in the
Ordinary Course of Business after the Closing Date shall have been
received and all statutory waiting periods (or extensions thereof) in
respect thereof shall have expired;
(vii) the Purchaser shall have received a certificate issued
by the Secretary of State of the State of Florida, as of a date
reasonably acceptable to the Purchaser, as to the good standing of the
Seller in such state;
(viii) the Purchaser shall have received a certificate issued
by the Secretary of State of the State of California and of each state
in which the Company is qualified as a foreign entity, as of a date
reasonably acceptable to the Purchaser, as to the good standing (or
non- dissolution, as applicable) of the Company in such states;
(ix) the Seller shall have delivered to the Purchaser (a) a
copy of the Company's Charter, as amended to date, certified as of the
recent date by the Secretary of State of the State of California, and
(b) all minute books, stock transfer books, blank stock certificates
and corporate seals of the Company;
(x) all proceedings, corporate or other, to be taken in
connection with the transactions contemplated by this Agreement by the
Seller, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Purchaser, and the Seller
shall have made available to the Purchaser for examination the
originals or true and correct copies of all documents the Purchaser may
reasonably request in connection with the transactions contemplated by
this Agreement;
(xi) all conditions precedent to the funding of the loans
contemplated by the financing commitments heretofore issued to
Purchaser for the financing of the transactions contemplated hereby
shall have been satisfied;
(xii) the Seller and the Escrow Agent shall have executed and
delivered the Escrow Agreement;
(xiii) the Purchaser shall have received the Opinion of
Seller's counsel; and
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(xiv) the Seller shall have received a consent to the
assignment of the Real Property lease of the Company's facility located
at 5300 N. Irwindale Avenue, Irwindale, California, together with an
estoppel certificate, in form and substance reasonably satisfactory to
the Purchaser and its counsel.
The Purchaser may waive any condition specified in this section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLER. The obligation of the
Seller to consummate the transactions to be performed by it in connection with
the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in section 4
above that are qualified as to their materiality shall be true and
correct and any such representations and warranties that are not so
qualified shall be true and correct in all material respects at and as
of the Closing Date;
(ii) the Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement, and no action, suit,
claim or proceeding shall be pending before any Authority which seeks
to prohibit or enjoin the consummation of the transactions contemplated
by this Agreement;
(iv) the Purchaser shall have delivered to the Seller a
certificate to the effect that each of the conditions specified above
in sections 6(b)(i) and (ii) has been satisfied in all respects;
(v) all filings that are required to have been made by the
Purchaser with any Authority in order to carry out the transactions
contemplated by this Agreement shall have been made; all
authorizations, consents and approvals from all Authorities required
for the Purchaser to carry out the transactions contemplated by this
Agreement shall have been received and all statutory waiting periods
(or extensions thereof) in respect thereof shall have expired;
(vi) the Seller shall have received a certificate issued by
the Secretary of State of the State of Illinois, as of a date
reasonably acceptable to the Seller, as to the good standing (or
non-dissolution, as applicable) of the Purchaser in such state;
(vii) the Purchaser shall have delivered to the Seller a copy
of the Purchaser's Charter, as amended to date, certified as of the
recent date by the Secretary of State of the State of Illinois;
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<PAGE> 38
(viii) all proceedings, corporate or other, to be taken in
connection with the transactions contemplated by this Agreement by the
Purchaser, and all documents incident thereto, shall be reasonably
satisfactory in form and substance to the Seller, and the Purchaser
shall have made available to the Seller for examination the originals
or true and correct copies of all documents the Seller may reasonably
request in connection with the transactions contemplated by this
Agreement; and
(ix) the Purchaser and the Escrow Agent shall have executed
and delivered the Escrow Agreement.
The Seller may waive any condition specified in this section 6(b) if they
execute a writing so stating at or prior to the Closing.
7. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Seller contained in section 3A, section 3B(d), section 3B(e),
section 3B(l)(ii), section 3B(q) and section 3B(R) (the "UNRESTRICTED
REPRESENTATIONS AND WARRANTIES"), and of the Purchaser contained in section 4
shall survive the Closing and continue in full force and effect for the statute
of limitations applicable thereto. The representations and warranties of the
Company contained in section 3B (other than the Unrestricted Representations and
Warranties) shall survive the Closing and continue in full force and effect
until December 31, 1999. Any claim (including a then unliquidated claim which a
Party asserts (in the good faith discretion of such Party) could reasonably be
expected to become owing (taking into account any applicable statutes of
limitations)) for which any Party shall have given proper notice in accordance
with the terms of this Agreement (and the Escrow Agreement) on or prior to the
expiration of the applicable survival period shall survive until such claim is
resolved pursuant to the terms of this Agreement or the Escrow Agreement. To
preserve any claim for breach of any such representation or warranty, the Party
claiming a breach shall be obligated to notify the Party claimed to be in breach
in writing of any such breach, or facts that can reasonably be expected to give
rise to such breach, before termination of the applicable survival period in
respect of such representation or warranty; otherwise, such Party's claim for
breach shall be forever barred.
(b) INDEMNIFICATION.
(i) Pursuant to the terms of the Escrow Agreement and subject
to section 7(a) above and the conditions set forth in this section
7(b), subsequent to the Closing Date the Seller shall indemnify, defend
and hold harmless the Purchaser and the Company from, against and in
respect of any Losses which Purchaser or the Company shall suffer,
sustain or become subject to by virtue of or which arise out of, or
result from, any breach of the representations and warranties of the
Seller set forth in this Agreement (other than the Unrestricted
Representations and Warranties); PROVIDED, HOWEVER, that: (A) the
Company's right to indemnification with respect to such breaches under
this section 7(b)(i) shall be satisfied only by recourse to the funds
deposited and remaining in the Escrow Account and the Seller shall not
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<PAGE> 39
have any personal liability to the Purchaser or the Company with
respect to any such breach, (B) neither the Purchaser nor the Company
shall be entitled to indemnification with respect to any Losses under
this section 7(b)(i) until all such Losses exceed, in the aggregate,
$75,000 (the "BASKET")in which case the Purchaser or the Company, as
the case may be, shall be entitled to indemnification (subject to
clause (A) hereof) to the full extent such Losses relating back to the
first dollar. As provided in the Escrow Agreement and in section 7(a)
hereof, the Purchaser may assert a then unliquidated claim (in the good
faith discretion of the Purchaser) which could reasonably be expected
to become owing (taking into account any applicable statutes of
limitations).
(ii) Subject to section 7(a) above and the conditions set
forth in this section 7(b), subsequent to the Closing Date the Seller
shall indemnify, defend and hold harmless the Purchaser and the Company
from, against and in respect of any Losses which Purchaser or the
Company shall suffer, sustain or become subject to by virtue of or
which arise out of, or result from, any breach of any of the
Unrestricted Representations and Warranties. If the Purchaser or the
Company has experienced any Losses which it is entitled to
indemnification under this section 7(b)(ii), subject to final
resolution of the amount of such Losses pursuant to section 8, the
Purchaser may withhold its consent to the release of funds from the
Escrow until the Purchaser receives the indemnification to which the
Purchaser is entitled.
(iii) Subject to section 7(a) above and the conditions set
forth in this section 7(b), subsequent to the Closing Date the Seller
shall indemnify, defend and hold harmless the Purchaser and te Company
from, against and in respect of any Losses which Purchaser or the
Company shall suffer, sustain or become subject to by virtue of or
which arise out of, or result from any breach by the Seller of its
covenants and agreements set forth in this Agreement including, but not
limited to, section 10 hereof. If, after the Closing, any grievance,
unfair labor practice charge, arbitration, suit or administrative
proceeding relating to labor matters involving employees or independent
contractors of the Company (including, without limitation, any dispute,
grievance, charge or proceeding relating to sexual harassment or age,
sex, race or other discrimination) (the foregoing is collectively
referred to herein as a "LABOR DISPUTE") is filed against the Company
as a result of any alleged action, alleged omission to act or alleged
circumstances existing or occurring prior to Closing, the Seller shall
indemnify, defend and hold harmless the Purchaser and the Company from,
against and in respect of any Losses which Purchaser or the Company
shall suffer, sustain or become subject to by virtue of such Labor
Dispute. If the Purchaser or the Company has experienced any Losses
which it is entitled to indemnification under this section 7(b)(iii),
subject to final resolution of the amount of such Losses pursuant to
section 8, the Purchaser may withhold its consent to the release of
funds from the Escrow until the Purchaser receives the indemnification
to which the Purchaser is entitled.
(iv) Subject to section 7(a) above and the conditions set
forth in this section 7(b), subsequent to the Closing Date the
Purchaser shall indemnify, defend and hold harmless the Seller and its
successors and assigns from, against and in respect of, any Losses
which any such Person shall suffer, sustain or become subject to by
virtue of or which arise out of, or result from,
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<PAGE> 40
any breach by the Purchaser of any of representations, warranties or
covenants set forth in this Agreement.
(v) A Party (which, if the Purchaser is to be indemnified,
shall be deemed to include the Company) seeking indemnification
pursuant to this section 7(b) (the "INDEMNIFIed PARTY") shall
immediately notify the Party from whom such indemnification is sought
(the "INDEMNIFYING PARTY") in the event that any person not a Party to
this Agreement shall make any demand or claim, or file or threaten to
file any lawsuit (a "THIRD PARTY CLAIM"), which Third Party Claim may
cause liability to the Indemnifying Party pursuant to the
indemnification provisions of this Agreement. In any such event, the
Indemnifying Party shall have the right, exercisable by notice to the
Indemnified Party within 20 days after notice by the Indemnified Party
to the Indemnifying Party of the commencement or assertion of such
Third Party Claim, to retain counsel, at the cost and expense of the
Indemnifying Party, to defend any such Third Party Claim. The
Indemnified Party shall be permitted to employ separate counsel and to
participate in the defense of such Third Party Claim, but the fees and
expenses of such counsel shall be borne by the Indemnified Party. In
the event that the Indemnifying Party shall fail to respond within 20
days after receipt of notice from the Indemnified Party of the
commencement or assertion of any such Third Party Claim, then the
Indemnified Party shall retain counsel and conduct the defense of such
Third Party Claim as it or he may in its or his discretion deem proper,
at the cost and expense of the Indemnifying Party.
(vi) Unless and until an Indemnifying Party assumes the
defense of a Third Party Claim as provided in section (v), the
Indemnified Party may defend against the Third Party Claim in any
manner it may reasonably deem appropriate.
(vii) The Indemnifying Party, if it shall have assumed the
defense of any Third Party Claim, shall not have the right to consent
to the entry of judgment with respect to, or otherwise settle such
Third Party Claim without the prior written consent of the Indemnified
Party (which consent shall not be unreasonably withheld or delayed),
unless the judgment or proposed settlement involves only the payment of
money damages and does not impose an injunction or other equitable
relief upon the Indemnified Party. In no event will the Indemnified
Party consent to the entry of any judgment with respect to, or
otherwise settle any such Third Party Claim without the prior written
consent of the Indemnifying Party (which consent shall not be
unreasonably withheld or delayed).
(viii) The Parties shall cooperate in the defense of any Third
Party Claim and shall furnish such records, information and testimony,
and attend at such conferences, discovery proceedings, hearings, trials
and appeals as may be reasonably requested in connection therewith.
(ix) The amount of any Losses subject to indemnification under
section 7(b)(i), (ii) or (iii) shall be calculated net of any amounts
which have been previously recovered by the
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Indemnified Party under insurance policies or other collateral sources
(such as contractual indemnities of any Person which are contained
outside this Agreement), and each of the Parties hereby covenants that
it will not release any such collateral sources from any obligations
they may have. In the event any such amounts recovered or recoverable
under insurance policies or other collateral sources are not received
before any claim for indemnification is paid pursuant to this section
7(b) and the Escrow Agreement, then the Indemnified Party shall pursue
such insurance policies or collateral sources with reasonable diligence
(unless the Indemnified Party determines that it is not in its best
interests to do so, in which case the Indemnified Party shall permit
the Indemnifying Party to pursue such recoveries on its behalf), and in
the event it receives any recovery, the amount of such recovery shall
be applied FIRST, to reimburse the Indemnified Party for its
out-of-pocket expenses (including reasonable attorneys' fees) expended
in pursuing such recovery, SECOND, to refund any payments made by the
Indemnifying Party pursuant to this section 7(b) and the Escrow
Agreement which would not have been so paid had such recovery been
obtained prior to such payment, and THIRD, any excess to the
Indemnifying Party. If the Indemnified Party fails or elects not to
pursue any such insurance policies or collateral sources with
reasonable diligence, then the Indemnifying Party shall have the right
of subrogation to pursue such insurance policies or collateral sources
and may take any reasonable actions necessary to pursue such rights of
subrogation in its name or the name of the party from whom subrogation
is obtained. The Indemnified Party shall reasonably cooperate with the
Indemnifying Party to pursue a subrogation claim. Any recovery obtained
by the Indemnifying Party shall be applied FIRST, to reimburse the
Indemnifying Party for its out-of-pocket expenses (including reasonable
attorney's fees) expended in pursuing such recovery, SECOND, to refund
any payments made by the Indemnifying Party pursuant to this Section
9.2 with respect to the Losses for which the collateral source was also
responsible, and THIRD, any excess to the Indemnified Party. In
addition, all Losses subject to indemnification hereunder shall be
calculated net of any tax benefits which have been actually realized by
the Indemnified Party as a result thereof.
(x) Any payment made by the Seller pursuant to its
indemnification obligations under section 5(d)(i) above or this section
7(b) shall constitute a reduction in the Purchase Price hereunder. Any
payment made by the Purchaser pursuant to the Purchaser's
indemnification obligations under this section 7(b) or section 5(d)(iv)
above shall constitute an addition to the Purchase Price hereunder.
(c) LIMITATION OF RECOURSE. The rights of the Parties for
indemnification relating to this Agreement or the transactions contemplated
hereby shall be strictly limited to those contained in section 5(d) and section
7(b) hereof, and subject to the last sentence hereof, such indemnification
rights shall be the exclusive remedies of the Parties subsequent to the Closing
Date with respect to any matter in any way relating to this Agreement or arising
in connection herewith. To the maximum extent permitted by law, the Purchaser
hereby waives and shall cause its Affiliates to waive all other rights and
remedies with respect to any such matter, whether under any laws (including,
without limitation, any right or remedy under CERCLA or any other Environmental
Health and Safety Requirements),
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at common law or otherwise. Except as provided in this Agreement, no claim,
action or remedy shall be brought or maintained subsequent to the Closing Date
by the Purchaser or the Company or their respective Affiliates, successors or
permitted assigns against the Seller, and no recourse shall be brought or
granted against the Seller, by virtue of or based upon any alleged misstatement
or omission respecting an inaccuracy in or breach of any of the representations,
warranties or covenants of the Seller set forth or contained in this Agreement,
except to the extent that the same shall have been the result of fraud by any
such Person.
8. DISPUTE RESOLUTION
(a) DISPUTE DEFINED. As used in this Agreement, "DISPUTE"
shall (i) mean any dispute or disagreement between the Parties concerning the
interpretation of this Agreement, the validity of this Agreement, any breach or
alleged breach by any Party under this Agreement, any claim by either Party for
indemnification under this Agreement or any other matter relating in any way to
this Agreement, and (ii) exclude any dispute or disagreement between the
Purchaser and the Seller concerning the determination of Net Working Capital as
of the Closing Date, which shall be resolved pursuant to the provisions of
section 2(g) of this Agreement.
(b) DISPUTE RESOLUTION PROCEDURES.
(i) If a Dispute arises, the Parties shall follow the
procedures specified in this section 8. The Parties shall promptly
attempt to resolve any Dispute by negotiations between themselves.
Either the Purchaser or the Seller may give the other Party written
notice of any Dispute not resolved in the normal course of
businesection The Purchaser and the Seller shall meet at a mutually
acceptable time and place within 15 calendar days after delivery of
such notice, and thereafter as often as they reasonably deem necessary,
to exchange relevant information and to attempt to resolve the Dispute.
If the Dispute has not been resolved by the Parties within 30 calendar
days of the disputing Party's notice, or if the Parties fail to meet
within such 15 calendar days, either the Purchaser or the Seller may
initiate mediation in Chicago, Illinois as provided in Section section
8(b)(ii) of this Agreement. If a negotiator intends to be accompanied
at a meeting by legal counsel, the other negotiator shall be given at
least three business days' notice of such intention and may also be
accompanied by legal counsel.
(ii) If the Dispute is not resolved by negotiations pursuant
to section 8(b)(i), the Purchaser and the Seller shall attempt in good
faith to resolve any such Dispute by nonbinding mediation. Either the
Purchaser or the Seller may initiate a nonbinding mediation proceeding
by a request in writing to the other Party (the "MEDIATION REQUEST"),
and both disputing Parties will then be obligated to engage in a
mediation. The proceeding will be conducted in accordance with the then
current Center for Public Resources ("CPR") Model Procedure for
Mediation of Business Disputes, with the following exceptions:
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(A) if the Parties have not agreed within 30 calendar
days of the Mediation Request on the selection of a mediator
willing to serve, CPR, upon the request of either the
Purchaser or the Seller, shall appoint a member of the CPR
Panels of Neutrals as the mediator; and
(B) efforts to reach a settlement will continue until
the conclusion of the proceedings, which shall be deemed to
occur upon the earliest of the date that: (1) a written
settlement is reached, or (2) the mediator concludes and
informs the Parties in writing that further efforts would not
be useful, or (3) the Purchaser and the Seller agree in
writing that an impasse has been reached, or (4) a period of
60 calendar days has passed since the Mediation Request and
none of the events specified in the foregoing clauses (1) (2)
or (3) has occurred. No Party may withdraw before the
conclusion of the proceeding.
(iii) If a Dispute is not resolved by negotiation pursuant to
section 8(b)(i) of this Agreement or by mediation pursuant to section
8(b)(ii) of this Agreement within 100 calendar days after initiation of
the negotiation process pursuant to section 8(b)(i), such Dispute and
any other claims arising out of or relating to this Agreement may be
heard, adjudicated and determined in an action or proceeding filed in
any state or federal court specified in section 11(g).
(c) PROVISIONAL REMEDIES. At any time during the procedures specified
in sections 8(b)(i) and 8(b)(ii) of this Agreement, a Party may seek a
preliminary injunction or other provisional judicial relief if in its judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo. Despite such action, the parties will continue to participate in good faith
in the procedures specified in sections 8(b)(i) and 8(b)(ii). .
(d) TOLLING STATUTE OF LIMITATIONS. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled while the
procedures specified in sections 8(b)(i) and 8(b)(ii) of this Agreement
are pending. The Parties will take such action, if any, as is required to
effectuate such tolling.
(e) PERFORMANCE TO CONTINUE. Each Party shall continue to perform its
or his obligations under this Agreement pending final resolution of any Dispute.
(f) EXTENSION OF DEADLINES. All deadlines specified in this section 8
may be extended by mutual agreement between the parties.
(g) ENFORCEMENT. The Parties regard the obligations in this section 8
to constitute an essential provision of this Agreement and one that is legally
binding on them. In case of a violation of the obligations in this section 8 by
either Party hereto, the other Party may bring an action to seek enforcement of
such obligations in any state or federal court specified in section 11(g).
(h) COSTS. The Parties shall pay their own costs, fees, and expenses
incurred in connection with the application of the provisions of sections
8(b)(i) and 8(b)(ii) of this Agreement. In addition, the fees and expenses of
CPR and the mediator in connection with the application of the provisions of
section 8(b)(ii) of this Agreement shall be borne 50% by the Purchaser and 50%
by the Seller.
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(i) REPLACEMENT. If CPR is no longer in business or is unable or
refuses or declines to act or to continue to act under section 8(b)(ii) of this
Agreement for any reason, then the functions specified in section 8(b)(ii) to be
performed by CPR shall be performed by another Person engaged in a business
equivalent to that conducted by CPR as is agreed to by the Purchaser and the
Seller (the "REPLACEMENT"). If the Purchaser and the Seller cannot agree on the
identity of the Replacement within 10 calendar days after a Request, the
Replacement shall be selected by the Chief Judge of the United States District
Court for the Northern District of Illinois upon application. If a Replacement
is selected by either means, section 8(b)(ii) shall be deemed appropriately
amended to refer to such Replacement.
9. MODIFICATION AND WAIVERS.
(a) MODIFICATION. The Parties may, by mutual consent, amend, modify or
supplement this Agreement in such manner as may be agreed upon by them in
writing at any time.
(b) WAIVERS. The Purchaser, by an instrument in writing, may extend the
time for or waive the performance of any of the obligations of the Seller or
waive compliance by the Seller with any of the covenants or conditions of the
Seller contained herein, and the Seller, by an instrument in writing, may extend
the time for or waive the performance of any of the obligations of the Purchaser
or waive compliance by the Purchaser with any of the covenants or conditions of
the Purchaser contained herein.
10. ADDITIONAL AGREEMENTS. The Parties agree that any claim for payment
pursuant to sections 10(a), 10(b) and 10(c) must be made by the Purchaser
on or before April 15, 1999. To preserve any claim for payment, the Purchaser
shall be obligated to notify the Seller in writing of any claim, together with
supporting documentation, on or before April 15, 1999, otherwise, the
Purchaser's claim shall be forever barred. The Parties further agree that any
payments required to be made pursuant to sections 10(a), 10(b), 10(c) and
10(d) may be made from funds deposited in the Escrow Account; PROVIDED, HOWEVER,
that such payments shall not be subject to the Basket; PROVIDED, FURTHER, that
to the extent Losses for which the Purchaser is entitled to indemnification
under section 7(b)(i), together with amounts paid from the Escrow Account
pursuant to sections 5(g)(iv), 10(a), 10(b), 10(c) and 10(d) exceed
$1,000,000, Seller shall pay the Purchaser the deficiency within 30 days of the
Purchaser's request. The following are provided by way of example and not by way
of limitation:
Assume that $250,000 in payments required to be made pursuant to this
section 10(a) are paid from funds deposited in the Escrow Account and
the Purchaser is entitled to indemnification for $800,000 in Losses
which arise out of the representations and warranties of the Seller set
forth in this Agreement (other than the Unrestricted Representations
and Warranties) under section 7(b)(i). In addition to the $250,000
already paid from funds deposited in the Escrow Account, the Seller
shall be required to pay the Purchaser the difference between $800,000
and the funds remaining in the Escrow Account ($750,000 and any accrued
earnings thereon) and the Purchaser shall receive the funds remaining
in the Escrow Account.
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Assume that $250,000 in payments required to be made pursuant to this
section 10(a) are paid from funds deposited in the Escrow Account and
the Purchaser incurs $1,100,000 in Losses which arise out of the
representations and warranties of the Seller set forth in this
Agreement (other than the Unrestricted Representations and Warranties).
Since the Purchaser's indemnification under section 7(b)(i) is limited
to $1,000,000, in addition to the $250,000 already paid from funds
deposited in the Escrow Account, the Seller shall only be required to
pay the Purchaser the difference between $1,000,000 and the funds
remaining in the Escrow Account ($750,000 and any accrued earnings
thereon) and the Purchaser shall receive the funds remaining in the
Escrow Account.
(a) PROPORTIONATE SHARE. The percentage used to calculate certain
bonuses to independent sales representatives of the Company increases after
certain dollar thresholds are exceeded or the bonus does not become effective
until certain thresholds are exceeded.. In addition, the percentage used to
calculate rebates for certain of the Company's customers increases as the
customer's volume of purchases increases or the rebate is not effective until
certain thresholds are exceeded. It is the intent of the parties that the Seller
and the Purchaser share in the cost of such items based on the proportion of
sales prior to and after Closing. To the extent the accrual on the Company's
Closing Balance Sheet for such rebates and bonuses is less than the Seller's
Proportionate Share of such rebates and bonuses, the Seller shall pay the
Purchaser the deficiency within 30 days of the Purchaser's request provided such
request contains supporting documentation and provided that any Dispute
regarding payment is first resolved pursuant to section 8 of this Agreement. By
way of example, if a customer is entitled to a two percent (2%) rebate for
purchases up to $1,000,000 and a three percent (3%) rebate for all subsequent
purchases and the customer purchased $1,000,000 in products prior to Closing and
$1,000,000 after Closing, the Seller and the Purchaser are each responsible for
$25,000 of the rebate. To the extent the accrual on the Company's Closing
Balance Sheet was less than $25,000, the Seller shall pay the Purchaser for the
deficiency. Seller's "PROPORTIONATE SHARE" shall equal the amount of sales for
the applicable period prior to Closing divided by the total sales for the
applicable period.
(b) STOCK ADJUSTMENTS. It is customary, from time to time, for the
Company to provide stock adjustments (returned merchandise which is discontinued
or after the end of the catalog season) and for the Company to resell such
returned merchandise. To the extent the accrual on the Company's Closing Balance
Sheet for stock adjustments was insufficient for (1) the difference between the
original sales price of the returned merchandise and the resale price thereof,
(2) re-work costs and shipping costs, but specifically excluding any commissions
due on the resale of the returned merchandise which shall be the obligation of
the Company and which shall not be the responsibility of the Seller under this
section 10(b), and (3) the cost of any returned merchandise which was sold prior
to Closing and which is not resold by the Company, Seller shall pay Purchaser
the deficiency within thirty (30) days of Purchaser's request, provided that (i)
the Purchaser causes the Company to use its best efforts to resell the returned
merchandise in the Ordinary Course of Business, (ii) such request contains
supporting documentation, including evidence of the Purchaser's compliance with
the immediately preceding subparagraph (i), and (iii) any Dispute regarding
payment is first resolved pursuant to section 8 of this Agreement.
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(c) SELLER'S GUARANTEE OF ACCOUNTS RECEIVABLE.
(i) With respect to accounts receivable on the Closing Balance
Sheet which as of the Closing are 90 days or over (the "90 AND OVER
ACCOUNTS RECEIVABLE"), Seller guarantees the collectibility of $60,000
of the 90 and Over Accounts Receivable in full.
(ii) The Purchaser agrees to use efforts consistent with the
Company's past custom and practice to cause the Company to collect all
90 and Over Accounts Receivable, but shall not be obligated to resort
to litigation. Any sums payable by account debtors on account of any
accounts receivable of such account debtors shall be credited to the
earliest invoices of the Company to such account debtors, unless
specifically directed otherwise by the account debtor. Subject to the
foregoing, to the extent any 90 and Over Accounts Receivable existing
at the Closing are unpaid for a period of 60 days after the Closing,
the Purchaser shall send written notice to the Seller indicating the
specific account debtors, the amount of the unpaid invoices
representing 90 and Over Accounts Receivable to each such account
debtor and the total of all such unpaid 90 and Over Accounts
Receivable. The Seller shall pay the amount of all 90 and Over Accounts
Receivable, not to exceed $60,000 within 30 days of the receipt of any
notice pursuant to this section 10(c)(ii) on the condition that the
Purchaser shall simultaneously cause the Company to assign such unpaid
90 and Over Accounts Receivable (the "ASSIGNED RECEIVABLES") to the
Seller. Such assignment shall include the right to sue as an assignee
of the Company. In the event that after such assignment the Company
receives any payment on the Assigned Receivables, the Purchaser shall
cause the Company to promptly remit such amount to the Seller.
Thereafter, the Seller, as owner of the Assigned Receivables, may take
any action the Seller deems necessary to collect the Assigned
Receivables and any collections shall be the property of the Seller.
The Purchaser agrees to cooperate and shall cause the Company to
cooperate with the Seller in any action the Seller wishes to take to
collect the Assigned Receivables consistent with the Company's past
custom and practice . In the event the Purchaser does not want to
assign any Account Receivable to the Seller because it does not want
the Seller to initiate collection action thereon, the Seller shall be
relieved of any liability under this section 10(c) with respect to such
90 and Over Account Receivable.
(iii) In the event any 90 and Over Account Receivable is
subject to a valid dispute by the account debtor and/or the Purchaser
wishes to grant a discount on any 90 and Over Account Receivable, the
Purchaser shall send written notice or notices to the Seller indicating
the specific account debtors and the amount of the dispute or discount.
The Purchaser shall consult with the Seller with respect to the
resolution of any dispute and/or the amount of any discount and shall
not settle any such dispute or grant any discount without the consent
of the Seller, which consent shall not be unreasonably withheld. Where
consent is given to the settlement of any dispute and/or the granting
of any discount, subject to the total amount paid by the Seller
pursuant to section 10(c) not exceeding $60,000, the Seller shall pay
the Purchaser the difference between the original amount of the 90 and
Over Account Receivable and the amount actually received by the
Purchaser after settlement or discount, with payment to be made within
30 days after the settlement or granting of the
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discount. Where consent is withheld by the Seller, the Purchaser may
either assign the 90 and Over Account Receivable, or settle the dispute
or grant the discount at its own expense and the Seller shall be
relieved of any liability under this section 10(c) with respect to such
90 and Over Account Receivable.
(d) SEVERANCE OBLIGATIONS.
(i) If the Purchaser terminates any of the Company's employees
after Closing, none of such employees are entitled to any severance
packages, except (A) as provided in section 10(d)(ii) and except as may
be required under applicable law as a result of action taken by the
Purchaser or the Company after Closing.
(ii) At the Purchaser's request, the Seller will cause the
Company to terminate Rick Lee immediately prior to Closing. The Seller
agrees (A) to be responsible for and to pay any severance obligation to
Rick Lee and (B) to indemnify, defend and hold the Purchaser and the
Company harmless from any Losses incurred as a result of any claim by
Rick Lee resulting from such termination; PROVIDED, HOWEVER, if the
Purchaser or the Company retains Rick Lee as an employee or consultant
to the Company following Closing, such indemnification shall not apply
with respect to any obligations of the Company to Rick Lee under such
employment or consulting arrangement or any Losses incurred by the
Company or the Purchaser as a result of its termination of such
employment or consulting arrangement.
(e) MICROCENTRE DISPUTE. The Seller agrees to continue to try to
resolve the pending disputes between the Company and Micro Electronics, Inc.
regarding the Company's trademark "MICROCENTRE" on the basis of the current
settlement terms being discussed by the Company and Micro Electronics, Inc., and
shall be responsible for all costs of resolving such disputes, including,
without limitation, attorneys' fees and court costs. In the event the disputes
cannot be resolved on the basis of the current draft of the Settlement
Agreement, as modified by the terms of the attachment to the Gordon & Einstein,
Ltd. letter dated June 29, 1998, the Seller agrees to continue to defend the
litigation at its sole cost and expense and to indemnify, defend and hold the
Purchaser and the Company harmless with respect to all Losses incurred in
connection with such disputes. Upon resolution of the dispute on substantially
the same terms as set forth in the current draft of the Settlement Agreement, as
modified by the terms of the attachment to Gorden & Einstein, Ltd.'s letter
dated June 29, 1998, the Purchaser agrees to immediately cause the Company to
execute the Settlement Agreement submitted by the Seller or its counsel.
(f) PRE-CLOSING WORKERS COMPENSATION CLAIMS. The Seller agrees to be
responsible for and to cause to be paid all workers compensation claims which
relate to pre-Closing periods.
(g) VACATION ACCRUAL. To the extent the accrual on the Company's
Closing Balance Sheet for vacation is less than the amount which should have
properly been accrued in accordance with GAAP, the Purchaser shall be entitled
to indemnification for the deficiency in accordance with and subject to the
provisions of Section 7(b)(i).
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11. MISCELLANEOUS.
(a) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(b) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof, other than the confidentiality agreement between the Purchaser and Mann
Armistead & Epperson, Ltd. executed in connection with the transactions
contemplated hereby (the "CONFIDENTIALITY AGREEMENT"), which shall remain in
full force and effect until the Closing has occurred.
(c) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; PROVIDED, HOWEVER, that, the Purchaser may (i) assign any or
all of its rights and interests hereunder to one or more of its wholly-owned
Subsidiaries and (ii) designate one or more of its wholly-owned Subsidiaries to
perform its obligations hereunder and (iii) after the Closing is effected, any
or all of the rights and interests of Purchaser hereunder (A) may be assigned to
any purchaser of substantially all of the assets of Purchaser, (B) may be
assigned as a matter of law to the surviving entity in any merger of the
Purchaser, and (C) may be assigned as collateral security to any lender or
lenders (including any agent for any such lender or lenders) providing financing
to the Purchaser in connection with the transactions contemplated hereby, or to
any assignee or assignees of any such lender, lenders or agent (it being
understood that in any or all of the cases described in clauses (i), (ii) and
(iii) above the Purchaser nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(d) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(e) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
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If to the Seller:
WinsLoew Furniture, Inc.
201 Cahaba Valley Parkway
Pelham, Alabama 35124
Attention: Mr. Bobby Tesney, President and
Chief Executive Officer
Fax: (205) 403-0403
With copies to (which shall not constitute notice to the Seller):
Peter W. Klein, Esq.
Managing Director and General Counsel
Trivest, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Fax: (305) 858-1629
If to the Purchaser:
Vertiflex Company
630 West 41st Street
Chicago, Illinois 60609-2678
Attention: Mr. Sheldon G. Karras, Executive Vice President
Fax: (973) 927-3986
With copies to (which shall not constitute notice to the Purchaser):
Stuart Duhl, Esq.
Schwartz & Freeman
Suite 1900
401 North Michigan Avenue
Chicago, Illinois 60611
Fax: (312) 222-0818
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
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(g) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Illinois without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Illinois. The Parties agree
that any and all actions arising under or in respect of this Agreement shall be
litigated in any federal or state court of competent jurisdiction located in the
County of Cook, State of Illinois. By execution and delivery of this Agreement,
each Party irrevocably submits to the personal and exclusive jurisdiction of
such courts for itself or himself, and in respect of its or his property with
respect to such action. Each Party agrees that venue would be proper in any of
such courts, and hereby waives any objection that any such court is an improper
or inconvenient forum for the resolution of any such action.
(h) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Purchaser and the Seller. No waiver by any Party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(i) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(j) EXPENSES. Except as otherwise provided in this Agreement, each of
the Parties will bear their own costs and expenses (including legal and
investment advisory fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(k) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
specification of any dollar amount in the representations and warranties or
otherwise in this Agreement or in the Disclosure Schedule is not intended and
shall not be deemed to be an admission or acknowledgment of the materiality of
such amounts or items, nor shall the same be used in any dispute or controversy
between the Parties to determine whether any obligation, item or matter (whether
or not described herein or included in any schedule) is or is not material for
purposes of this Agreement.
(l) INCORPORATION OF DISCLOSURE SCHEDULE. The Disclosure Schedule
identified in this Agreement is incorporated herein by reference and made a part
hereof.
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(m) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT SUCH PARTY MAY LEGALLY AND
EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING ARISING
HEREUNDER.
(n) PREVAILING PARTIES. In the event of any litigation with regard to
this Agreement, the prevailing Party or Parties shall be entitled to receive
from the nonprevailing Party or Parties and the nonprevailing Party or Parties
shall pay all reasonable fees and expenses of counsel for the prevailing Party
or Parties.
(o) EQUITABLE REMEDIES. The Seller acknowledges and agrees that the
Purchaser would not have an adequate remedy at law in the event any of the
provisions of section 5(g) of this Agreement are not performed in accordance
with their specific terms or are breached. Accordingly, the Seller agrees that
the Purchaser shall be entitled to an injunction or injunctions to prevent
breaches of section 5(g) of this Agreement and to enforce specifically the terms
and provisions thereof in any action instituted in any court of competent
jurisdiction, in addition to any other remedies which may be available to it.
SIGNATURES APPEAR ON FOLLOWING PAGE
-47-
<PAGE> 52
IN WITNESS WHEREOF, the Parties hereto have each executed and delivered
this Agreement as of the day and year first above written.
WINSLOEW FURNITURE, INC.
By: /s/ Bobby Tesney
-------------------------------------
Bobby Tesney
President and Chief Executive Officer
VERTIFLEX COMPANY
By: /s/ Sheldon G. Karras
-------------------------------------
Sheldon G. Karras
Executive Vice President
-48-
<PAGE> 1
EXHIBIT 10.11
[MARRIOTT LETTERHEAD]
December 1, 1998
Mr. Craig Watts, President
Loewenstein, Inc./Gregson Furniture Industries
1801 North Andrews Ave. Ext.
Pompano Beach, FL 33069
Re: Pricing Agreement 90000483-90010104
Dear Craig:
Marriott International, Inc. is pleased to acknowledge acceptance of your
pricing proposal of December 1, 1998 (Exhibit I). This pricing agreement
(hereinafter Agreement) is between Marriott International, Inc. (hereinafter
Marriott) and Loewenstein, Inc./Gregson Furniture Industries (hereinafter
Vendor).
Items covered under this Agreement include, but are not limited to: Upholstered
Seating as manufactured and/or supplied by Vendor.
The Unit Price Schedule/List dated December 1, 1998, Labeling Instructions,
Routing Guide and General Specifications (Exhibits I, IV, V and VI) shall govern
all products sold and purchases made under this Agreement.
Vendor will purchase customer specified fabric/material. Vendor will ensure and
verify that specified upholstery meets Marriott's ACT standards (Exhibit VII).
Vendor will manage the delivery of fabric to ensure final delivery dates are
met. Marriott will extend its negotiated prices for fabrics to the Vendor for
Marriott products only. Vendor must submit Upholstered Fabric Specification form
(Exhibit VIII) to our approved fabric Vendors to receive Marriott negotiated
prices. Vendor will communicate any handling charge to the Commodity Manager for
approval.
Shipments shall be F.O.B. destination all packaging/preparation included.
Freight terms shall be third party billed per freight guide included with
orders.
A definitive purchase shall be initiated by either Marriott or an Account as
defined in the Addendum by the issuance of a Purchase Order, using a form
similar to the attached purchase order (Exhibit II). All terms and conditions of
a purchase by Marriott shall be governed by this Agreement and the Purchase
Order, regardless of the terms of any acknowledgment, or other form issued by
Vendor to the contrary.
Marriott's purchase order must be acknowledged by the Vendor in writing within
one week of date of order. Prices indicated on the Marriott purchase order shall
be binding and any provision or alteration contained in the Vendor's
acknowledgment or other form, which are a variance to the Marriott purchase
order, are not binding, unless accepted in writing by Marriott, before Vendor's
order entry.
<PAGE> 2
Pricing Agreement
Page 2
Unless otherwise indicated on the Purchase Order, invoices from Vendor
referencing the Purchase Order number shall be mailed to:
Marriott International
Design and Construction Services Inc.
Department 70/105.09
1 Marriott Drive
Washington, D.C. 20058
Invoice payment terms are: Net 30 Days
Marriott, by entering into this Agreement, offers no guarantee of minimum
quantities or dollar volume to be purchased under this Agreement. Bi-weekly
status reports of issued Purchase Orders will be submitted by Vendor to
Marriott, attention Expediting Department, Dept. 70/105.01.
Vendor warrants all products purchased under this Agreement to be free from
defects in materials, workmanship, and production for a period of one (1) year
from the date of delivery to the property. Vendor agrees to repair or replace,
without charge to the Buyer, any product or part that fails as a result of a
defect or fails to conform to the terms of the warranty or the terms of the
specifications.
If commercially reasonable, "samples" of products developed by the Vendor for
Marriott will be provided at no charge for inspections, sample rooms, trade
shows, and testing, as development continues to refine the products. The
providing of "samples" at no charge will not be considered commercially
reasonable if excessive tooling and other costs, including air freight, are
involved. The Vendor and Marriott will discuss and agree to specific project
situations as they occur.
As a condition precedent to Marriott's issuance of any Purchase Orders, Marriott
will require the execution and delivery of the attached Indemnity Agreement form
(Exhibit I). Further, the certificate of insurance described in the Indemnity
Agreement form should be delivered to the undersigned on or before January 1,
1999.
This Agreement is effective beginning January 1, 1999, and shall continue in
full force and effect until December 31, 2001. Thirty (30) days prior to
expiration of this Agreement, Marriott and Vendor shall review the terms of this
Agreement and determine if the Agreement should be extended or terminated. If it
is determined that this Agreement shall remain in effect, the parties shall
acknowledge the continuation in writing and this Agreement shall be amended to
reflect the new expiration date. This Agreement constitutes the entire
understanding and agreement between the Buyer and Vendor as to the subject
matter hereof, supersedes all other prior and
<PAGE> 3
Pricing Agreement
Page 3
contemporaneous understandings of the parties in connection herewith, and may
not be modified except by an agreement in writing executed by both parties
hereto.
All questions regarding this Agreement are to be submitted to the Commodity
Manager indicated below.
Please acknowledge your acceptance of this Agreement by having the appropriate
officer sign the space provided below, the Indemnity (Exhibit III), and the
Addendum (Exhibit IX), and returning the original copy of this letter, the
Indemnity and the Addendum to Janet Desjardins, Commodity Manager.
Through our combined efforts, I am sure that we can form a business relationship
beneficial to both parties.
Sincerely,
/s/ Janet Desjardins
- ----------------------------
Janet Desjardins
Commodity Manager
Marriott International
Phone: (301) 380-4278
Fax: (301) 380-4185
Accepted by Vendor
By:
--------------------------
Title:
-----------------------
Date:
------------------------
Exhibit I: Price List On File
Exhibit II: Purchase Order
Exhibit III: Indemnity Agreement
Exhibit IV: Labeling Instructions
Exhibit V: Routing Guide
Exhibit VI: General Specifications - Upholstered Seating - 9/2/98
Exhibit VII: Marriott's ACT Standards
Exhibit VIII: Upholstery Fabric Specification
Exhibit IX: Addendum to Agreement
<PAGE> 4
EXHIBIT II
PURCHASE ORDER
SAMPLE ONLY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> >C?
---------------- ------------------- ----------------- ---------------- ---------
Purchase Order# Date Original Buyer Page 1
Marriott International, Inc. (BUYER'S PARENT)
Marriott Drive ---------------- ------------------- ----------------- ---------------- ---------
Washington, D.C. 20058 USA Payment Terms Freight Terms Sales Order Ship Via
FOB Destination
Net 30 3rd Party Billed Mark VII
---------------- ------------------- ----------------- ---------------- ---------
</TABLE>
Marriott International Design & Construction PROJECT ID/PROPERTY:
Services, Inc. ("MIDCS") certifies that the SHIP TO: (ADDRESS LINE 1)
purchased property described below is purchased by (ADDRESS LINE 2)
MIDCS'_______ for the below referenced property. (ADDRESS LINE 3)
MIDCS, in its capacity as agent is not taking (ADDRESS LINE 4)
title to the purchased property unless otherwise
named herein. Unless otherwise specified, mail
all invoices in duplicate to:
<TABLE>
<CAPTION>
<S> <C>
MARRIOTT INTERNATIONAL FOR SHIPMENTS OTHER THAN UPS, FREIGHT CARRIER MUST BE SPECIFIED
MARRIOTT DRIVE BY CALLING MARK VII AT 800-445-2057
DEPT. 70/105.09, ROOM 229
WASHINGTON, D.C. 20058 USA QUESTIONS REGARDING THIS ORDER SHOULD BE DIRECTED TO:
(BUYER'S NAME)
Vendor: PHONE (BUYER'S PHONE #)
(ADDRESS LINE 1) FAX (BUYER'S FAX #)
(ADDRESS LINE 2)
(ADDRESS LINE 3)
(ADDRESS LINE 4)
(address line 5)
</TABLE>
<TABLE>
<CAPTION>
- ------------------ ---------------- ---------------- --------------- ------------------ ------------------ -----------
<S> <C> <C> <C> <C> <C> <C>
___-Schd Item ID Description Quantity/UOM Unit Price Extended Amount Due Date
- ------------------ ---------------- ---------------- --------------- ------------------ ------------------ -----------
</TABLE>
Packaging included in cost of goods unless otherwise noted below.
Please accept, sign and return a copy of this order with the estimated ship date
to the attention of the buyer shown above.
Vendor acknowledges that it is bound by the Terms and Conditions which accompany
this Purchase Order, or which are part of the Master Purchasing Agreement
between Marriott and the Vendor.
Due date is the required delivery date at the delivery address(es) shown, not
the shipping date. Other than UPS shipments, all deliveries require 48-hour
advance notice to the contact shown in the delivery address. Call the buyer
listed on this Purchase Order immediately if there are any questions regarding
fulfillment of the order.
Side mark cartons, invoices, packing lists and bills of lading with:
(1) Marriott's Item ID shown on each line of this order.
(2) Marriott's Purchase Order Number and Project ID shown at the top of
this page.
Follow any additional side-marking instructions specified for each line item of
this Purchase Order.
(BELOW IS AN EXAMPLE OF HOW THE FIELDS WILL LOOK ON AN ORDER)
Total P.O. Amount
- -------------------------------------- -----------------------------------------
ACCEPTED FOR VENDOR BY: ESTIMATED SHIP DATE:
VENDOR ORDER NUMBER:
- -------------------------------------- -----------------------------------------
<PAGE> 5
MARRIOTT INTERNATIONAL
PURCHASE ORDER TERMS AND CONDITIONS
1. ACKNOWLEDGMENTS; ACCEPTANCES OF ORDER; MODIFICATION. The purchase order
must be acknowledged by the seller in writing. The acknowledgment will
confirm the delivery date specified in the purchase order. The vendor
must return the Marriott acknowledgment within one week after receipt
of the purchase order. The vendor's reference number should be clearly
written on the acknowledgment. The quantity, packs or unit size of
goods ordered will not be changed without buyer's written consent. No
charges for additions or improvements to products or services ordered
hereunder will be paid by buyer unless approved in writing by buyer.
Seller's acknowledgment of Purchase Order or acceptance by buyer of
delivery of goods or services ordered herein shall constitute
acceptance by seller of all terms and conditions set forth herein.
Buyer shall not be bound by any provision or alteration contained in
seller's acknowledgment or in any other communication, printed or
otherwise, which is in variance with the purchase order, unless
accepted in writing by buyer.
2. PRICES. Unless otherwise noted herein, prices indicated on purchase
order include all charges for seller's packing and crating, and are not
subject to revision by seller.
3. DELIVERY. Time is of the essence in the purchase order. If in the
reasonable judgment of the buyer, the seller has failed or will fail or
if the seller has refused or will refuse to expeditiously proceed with
delivery and installation pursuant to the terms of the purchase order,
then buyer may terminate the whole or any part of the purchase order,
provided buyer gives seller three (3) days prior written notice of such
termination and purchase elsewhere and hold seller accountable for any
and all damages sustained by buyer as a result of such termination.
Buyer has the right, at any time, to change the place and/or time of
delivery. Any claim by seller for adjustment because of a change in
place and/or time of delivery will be deemed waived unless asserted in
writing within ten (10) days after receipt by seller of the request for
change.
4. PACKAGING/SHIPPING. All goods shall be suitably packed or otherwise
prepared by the seller for shipment to prevent damage, to obtain the
lowest transportation and insurance rates, and to meet the carrier's
requirements. Goods must be shipped in accordance with instructions on
the purchase order and expenses incurred in handling due to failure to
comply with these terms will be billed to seller. Source name, complete
ship to address, purchase order number, and material ID number must
appear on all invoices, bills of lading, packing slips, cartons and
correspondence. Bills of lading are to be attached to invoices
submitted, showing carrier and date of shipment. Packing slips will
accompany all shipments listing contents of shipment in detail and
shall be clearly identified and assessable so as to be first off
carrier. Freight is to be third party billed to Marriott. See attached
routing guide for carrier selection.
<PAGE> 6
5. RIGHTS OF INSPECTION. Unless otherwise agreed, title shall pass on
unloading at destination, subject to buyer's right of inspection,
approval and acceptance within a reasonable time after arrival. Rejects
may be returned at seller's expense provided seller is given reasonable
amount of time to advise disposition. Buyer does not assume
responsibility for 100% inspections. If this is necessary as indicated
by partial inspections, the entire shipment may be rejected. Buyer may
charge seller for the costs of inspecting goods rejected. Buyer may
inspect material or equipment in seller's plant during production
without waiving right to subsequent rejection for undiscovered or
latent defects.
6. RISK OF LOSS OR DAMAGE. Irrespective of F.O.B. point or unless
otherwise agreed, during the period that the goods are in possession of
seller or in transit, all risks of loss or damage to the material and
equipment shall be on the seller.
7. WARRANTY. Seller expressly represents and warrants that all goods and
services furnished hereunder conform to applicable specifications,
drawings, part numbers, samples, prototypes or other rendered
descriptions, that they will be fit and suitable for their intended
use, that they are merchantable, of good quality and free from defects,
whether patent or latent, in materials, workmanship, design and
production. Seller also warrants that, to the extent applicable, all
goods comply with the provisions of any federal, state or local law
pertinent to the manufacture or intended use thereof including, without
limitation, the provisions of OSHA. Further, seller expressly warrants
that it has good title to the goods supplied and that they are free
from all liens and encumbrances. All warranties shall succeed to buyer,
its successors, assigns, and all persons, including subsidiaries of
buyer, to whom the goods may be resold or loaned. If the goods or any
part of them shall not comply with the foregoing, buyer shall have the
right to reject them or to cancel this purchase order without prejudice
to any right to damages for such breach or to any other rights arising
therefrom, or to retain the goods or recover the damages from the
seller for such breach of warranty. In such event, continued use of
such goods by buyer shall not constitute a waiver of seller's breach of
warranty.
8. BUYER MATERIAL. All drawings, blueprints, dyes, patterns, tools,
printing plates, jigs, fixtures, etc., and any other property furnished
to seller by buyer and [sic] may not be used in the production,
manufacture or design of articles not for buyer's use without written
consent of buyer. Said drawings, etc., shall be held at seller's risk.
Upon completion of deliveries hereunder or upon termination of this
contract, said drawings, etc., shall be delivered to buyer at seller's
expense. Prices set forth in this purchase order include charges for
all such articles.
9. INVOICES. Invoices shall be submitted in duplicate, and shall contain
the following information: purchase order number, material ID number,
vendor item number, description of goods or services, sizes,
quantities, unit prices and extended totals. Unless otherwise
specified, payment will be made on partial deliveries accepted when the
amount due on such deliveries so warrants. Discount time shall be
computed from date
<PAGE> 7
of receipt of correct invoice or receipt of goods, whichever is later.
Payment is made for the discount purposes when the check is mailed.
10. PRICE PROTECTION. Seller represents the prices specified herein are as
low as any net price given by seller at time purchase order is extended
to any other customer for like goods and quantity.
11. PATENT PROTECTION. Seller will hold harmless and defend buyer, at
seller's cost, in all suits, action or proceedings in which buyer is
made a defendant for actual or alleged infringement of any United
States or foreign patent, trademark, copyright, and like, resulting
from the use or sale of the goods purchased hereunder seller will also
pay and discharge any and all judgments or decrees which may be
rendered in any such suit, action or proceedings against buyer if buyer
is enjoined from using the goods sold hereunder, seller shall, at
seller's expense, either procure for buyer the right to continue using
said goods purchased or modify said goods purchased to become
non-infringing, or repurchase them from buyer at the original purchase
price and the transportation, installation (if any), and all other
costs relating to the purchase thereof.
12. CANCELLATION WITH CAUSE. Buyer reserves the right to cancel this
purchase order, wholly or in part, if (1) the materials or work
specified fail to conform to the warranty as to quality, (2) seller
fails to make deliveries as specified in the purchase order or buyer's
supplemental schedules or (3) seller breaches any other term or
condition of the purchase order. Also, buyer may immediately cancel the
purchase order if any of the following occurs: (1) insolvency of
seller; (2) filing of voluntary petition in bankruptcy by seller; (3)
filing of an involuntary petition to have seller declared bankrupt
unless such petition is vacated within thirty (30) days from the date
of filing; (4) appointment of a receiver or trustee for seller unless
such appointment is vacated within thirty (30) days after the date of
such appointment; or (5) execution by seller of an assignment for the
benefit of creditors. In event of any such cancellation, buyer, without
prejudice to any other rights available to buyer for breach of
contract, shall have the right: (1) to refuse to accept delivery of
material or performance of work; (2) to return to seller any materials
already accepted and recover from seller all payments made therefore
and for freight, storage, handling and other expense incurred by buyer
and to be relieved from liability for any future payments to seller;
(3) to recover any advance payments to seller for undelivered or
returned materials or work to be performed; and (4) to purchase
elsewhere and charge seller with any resultant losses. No returned
material will be replaced without buyer's written replacement order.
13. CANCELLATION AND SUSPENSION WITHOUT CAUSE. Buyer reserves the right to
cancel the purchase order, in whole or in part, at any time, without
cause or default of seller, and to make changes in specifications of
requirements. Seller shall, upon buyer's request, immediately suspend
shipments of material and performance of work for reasonable periods.
Any extensions in times of delivery and performance, and any losses or
damages to seller resulting from such cancellations and suspensions,
shall be equitably
<PAGE> 8
adjusted between buyer and seller and the purchase order modified
accordingly. However, buyer shall not be liable for failure to accept
materials ordered or work to be performed arising from causes beyond
buyer's reasonable control, such as floods, fires, court orders,
strikes, work stoppages, or act of governmental authorities.
14. INDEMNIFICATION. If seller is required to enter premises owned, leased,
occupied by, or under the control of buyer during the performance of
services hereunder or during delivery of articles herein contemplated,
seller will indemnify and save harmless buyer, its officers, employees
and agents from all costs, loss, expense, damages, claims, suits, or
liability resulting from injury, including death, to persons or
property arising from or in any manner growing out of actions of seller
or its subcontractors, or their respective employees; and seller agrees
to maintain and require its subcontractors to maintain: (1) public
liability and property damage insurance (both general and vehicle) in
amounts satisfactory to buyer, to cover the obligations set forth
above; and (2) proper Worker's Compensation insurance covering all
employees engaged in the performance of such services and/or delivery.
Upon buyer's request, seller shall furnish to buyer certificates in
duplicate evidencing such insurance, and such certificates shall
provide that no expiration, termination or modification of the
insurance coverage shall take place without the insurance company
giving thirty (30) days prior written notice thereof to buyer.
15. REMEDIES. Remedies herein reserved to buyer shall be cumulative and
additional to any other further remedies provided in law or equity and
no waiver by buyer of a breach of any provision of the purchase order
shall constitute a waiver of any other breach, or of such provision.
16. COMPENSATING ACTS. Seller accepts exclusive liability for any and all
payroll taxes or contributions imposed by the Federal Social Security
Act, Unemployment Compensation Act, Worker's Compensation Act, or any
corresponding state law or laws with respect to individuals whose
compensation for services is paid by seller.
17. FEDERAL REGULATIONS. Unless this contract is exempted by the Rules and
Regulations of the Secretary of Labor issued pursuant to Section 201 of
Executive Order 11246, there is incorporated herein by reference
paragraphs 1-7 of the Contract Law set forth in Section 202 of the
Executive Order 11246.
18. ASSIGNMENT. Any assignment of rights or delegation of duties arising
under this purchase order, without the prior written consent of buyer,
shall be void.
19. CONFIDENTIAL. Seller shall neither disclose, advertise, nor publish the
fact that seller has contracted to furnish buyer the articles mentioned
herein, nor disclose any details connected with the purchase order to a
third party.
20. GOVERNING LAW. The rights and duties of the parties hereto shall be
determined by the laws of the State of Maryland. Any provision of the
purchase order prohibited by the
<PAGE> 9
laws of any state shall, as regards the state, be effective to the
extent of such prohibition without invalidating the remaining
provisions of the purchase order.
21. AFFIRMATIVE ACTION AND EQUAL OPPORTUNITY COMPLIANCE. Unless this
contract is exempted by the Rules and Regulations of the Secretary of
Labor issued pursuant to Section 201 of Executive Order 11246, there is
incorporated herein by reference, subsections 1-7 of Section 202 of
Executive Order 11246, and the provisions set forth at 41 C.F.R.
60-741, 5(a) and 41 C.F.R. 60-250. Vendor, by execution of this
Agreement, hereby certifies it is in full compliance with Executive
Order 11246, as amended, and 41 C.F.R. 60-250, 60-741, and that it will
remain in full compliance for the term of this Agreement.
22. ENTIRE AGREEMENT. This purchase order represents the entire agreement
between the parties and supersedes all proposals or prior agreements,
oral and written, and all other communications between the parties
relating to the subject matter of this purchase order.
<PAGE> 10
EXHIBIT III
INDEMNITY AGREEMENT
For and in consideration of the purchase or use by Marriott
International, Inc., its customers, and its and their subsidiaries, affiliates,
franchisors, licensors, licensees, successors, and assigns (hereinafter "BUYER")
of goods manufactured by or distributed by or for the undersigned, its
subsidiaries and affiliates (hereinafter "SELLER"), SELLER does hereby agree for
the express benefit of BUYER as follows:
1. FEDERAL FOOD, DRUG AND COSMETICS ACT. SELLER hereby guarantees that no
article comprising any shipment or other delivery hereafter made by
SELLER to or on the order of BUYER, is, as of the date of such purchase
or delivery, adulterated or misbranded, or unsafe, within the meaning
of the Federal Food, Drug, and Cosmetic Act, with all revisions and
amendments pertaining thereto (including the Pesticide and Food
Additive Amendment of 1958) or within the meaning of any substantially
similar state or municipal law, or is an article which may not under
any federal, state or municipal law be introduced into interstate or
intrastate commerce.
2. WARRANTY. SELLER warrants to BUYER that the goods to be supplied under
this Agreement are fit and sufficient for the purpose intended; that
they are merchantable, of good quality, and free from defects, whether
patent or latent, in material or workmanship; that it has good title to
the goods supplied; that the goods are free and clear of all liens and
encumbrances; and that any services rendered by SELLER shall be
performed in a professional and workmanlike manner in conformity with
applicable federal and state laws and the highest standards of quality
in the industry and in a manner so as to ensure the safety of all
persons and the preservation of property. The foregoing warranties
shall be in addition to all other warranties made by SELLER, express or
implied.
3. INDEMNITY. SELLER hereby agrees to indemnify, defend, and hold BUYER
harmless from and against any claim, demand, cause of action,
liability, loss, damage, cost, or expense which directly or indirectly
arises out of or is in any way associated with (a) a breach of the
guaranty or warranty set forth above, or (b) any goods heretofore or
hereafter received by BUYER from SELLER, including the sale, delivery,
and use thereof, to the extent not due to the sole negligence of BUYER.
4. COSTS AND EXPENSES. SELLER further agrees to pay all costs and
expenses, including reasonable attorneys' fees, which may be incurred
by BUYER in enforcing any of the covenants and agreements of this
indemnification.
5. INSURANCE. SELLER shall, at all times, maintain commercial general
liability insurance, including premises, operations, products and
contractual liability, with a combined single limit of not less than
Five Million Dollars ($5,000,000.00) per occurrence for personal injury
and property damage. This insurance shall name BUYER as an additional
insured under an "Additional Insured Vendors" endorsement, shall be
primary over any insurance maintained by BUYER, and shall provide that
BUYER will be given at least thirty (30) days prior written notice of
any cancellation or reduction in coverage. Upon execution of
<PAGE> 11
this Agreement, and annually thereafter, SELLER shall provide BUYER
with a Certificate of Insurance evidencing the coverages herein
required, and identifying the "Certificate Holder" as Marriott
International, Inc., Dept. 825.15, Marriott Drive, Washington, DC
20058.
6. CONTINUING AGREEMENT. This is a continuing Agreement, subject to
revocation only after receipt by BUYER of prior written notice of
intent to revoke effective as of a certain stated future date.
Agreed to this day of , 19 .
--- ------- --
SELLER:
--------------------------------
By:
------------------------------------
Title:
<PAGE> 12
EXHIBIT IV
MARRIOTT INTERNATIONAL, INC.
SUBJECT: LABELING INSTRUCTIONS
A. Every shipping label must:
1. Have letters at least 3/8" high, the larger the better.
2. Notate your company name and shipping address.
3. Notate the Marriott receiving location and complete address.
4. Notate the Marriott Purchase Order Number. (Note: This number must
also be notated on your Bills of Lading or airway bills).
5. Be placed on two (2) adjacent sides of your carton (if possible).
6. Be a minimum of ten (10) square inches in area, the larger the
better.
7. Be securely attached with glue or equally good adhesive.
B. Sidemark as indicated on the Purchase Order.
1. Sidemark to be printed or stenciled on two (2) adjacent sides of
every carton.
2. Letters must not be less than one inch (1") in height, the larger
the better.
3. Notation must be clear and legible, using inks or paints which are
both waterproof and capable of withstanding normal transportation
abrasion. Marking ink or paint color must provide a definite
contrast to the color of the surface being marked.
4. If you master pack, you must notate the total number of pieces by
Material I.D. Number in each carton.
C. To aid in accurate, timely reporting on material receipt at its
destination, we ask that a copy of the packing list be attached to the
shipping documents carried by the truck driver. The packing list must
be broken down by number of pieces per Marriott Purchaser Order and
Material I.D. Number.
Failure to comply with these instructions will result in a VENDOR CHARGEBACK to
your account at a labor rate of $25.00 per man hour for field identification of
items.
<PAGE> 13
EXHIBIT V
MARRIOTT INTERNATIONAL, INC.
ROUTING GUIDE
EXPEDITED SHIPMENTS:
UPS: UPS Red or Blue Label has been assigned in those cases where the UPS or RPS
ground transit is too slow for our requirements. Unless specified, UPS air
services must be approved by the buyer.
LTL: Notations on the Bill of Lading such as "HOT RUSH" and "TAILGATING
REQUESTED" can often improve performance by 24 to 48 hours. These services
are offered at no additional charge and should be requested as needed.
TL: Expedited service or team drivers may be available at a premium. Buyer
approval required.
AIR: Deferred air may result in satisfactory transit time and lower freight
charges. Buyer approval required.
GENERAL INSTRUCTIONS:
THE "MEMO BILL OF LADING" MUST BE GIVEN TO THE CARRIER AT TIME OF PICK-UP AND
F.O. NUMBER MUST BE SHOWN THEREON.
Make all shipments at full or actual value. DO NOT describe freight as released
value (RVNX).
Shipment descriptions should be consistent with the descriptions contained in
the National Motor Freight Classifications.
Tender all shipments to one destination on one day and one Bill of Lading.
Do not split orders into individual shipments without buyer approval.
24 hour notice is required before delivery. Note on your "Bill of Lading
Appointment Required before Delivery."
Truckload Shipments should be noted "Tailgate Delivery Required."
Packing list must be attached to the shipment and clearly marked.
P.O. and Material Identification Numbers must be marked on each package/carton.
Bill: Consult the Purchase Order for billing terms.
Transit Times: Vendors must be familiar with the transit times standards for
each mode of transport (e.g., LTL, TL, Air) in determining whether the routing
instructions will allow delivery by the required date.
<PAGE> 14
Delivery Dates: These instructions in no way relieve the vendor from meeting the
delivery date specified on the Purchase Order. You are encouraged to trace and
expedite delivery as needed.
EXCEPTIONS TO INSTRUCTIONS:
Failure to follow these instructions may result in chargebacks to your company.
If circumstances dictate you cannot follow these instructions, contact the
Physical Distribution Department at (301) 380-4282, or the appropriate Marriott
buyer (cited on Purchase Order) for approval.
<PAGE> 15
EXHIBIT V
MARRIOTT INTERNATIONAL, INC.
A&C DIVISION
ROUTING GUIDE
REVISED JULY 1, 1997
APPLICATION FOR ALL ORDERS WHEN MARRIOTT PAYS FREIGHT DIRECTLY TO THE CARRIER.
These routing instructions supplement the instructions contained on the Marriott
purchase order. Previous routing guides should be discarded.
BILLING INSTRUCTIONS:
Freight charges are to be third party billed by the carrier. Vendor must not
execute Section 7 on the Bill of Lading. Vendor must note Marriott P.O. Number
and Material I.D. Number (when applicable) on the Bill of Lading.
Please mark your Bill of Lading prepaid and note:
BILL FREIGHT CHARGES TO:
MARRIOTT INTERNATIONAL, INC.
C/O MARK VII
2823 HIGHWAY 31W
SUITE 500
WHITE HOUSE, TN 37188
P.O. #: ______________
STANDARD ROUTING:
RPS OR UPS
Any shipment within the size and weight restrictions as set forth by RPS or UPS
should be routed by them.
LTL OR TL
Please contact Mark VII Transportation, Harriet Wetzel, at 800/445-2057 to route
Less Than Load and Truckload Shipments.
<PAGE> 16
EXHIBIT VI
GENERAL SPECIFICATIONS - UPHOLSTERED SEATING
REVISED 9/2/98
FRAME
Exposed wood frame shall be constructed of solid hardwoods, kiln dried to a
moisture content of 7-9%. Solid hardwoods shall be #1 common grade. Curved
frames shall use steam bent hardwood construction (or plywood in non-exposed
areas) in curved areas of frame with kiln dried hardwood frame used in all other
frame components. All frames are to be warranted for commercial use. Stretchers
shall be used, where necessary, to provide support to the legs (i.e., dining and
desk chairs). Exposed Wood frames - wood species shall be Maple or European
Beech.
FINISH
Finish shall be catalyzed lacquer or ultra violet cured finish to match approved
finish samples. All finishes are to be tested and warranted for commercial use.
JOINTS
Major joints shall be double doweled or mortise and tendon construction with
corner blocks that are screwed and glued. Metal fasteners should be used where
appropriate to ensure commercial frame strength.
SPRINGS
Sinuous wire springs shall be used in seats and backs of all seating. Seat
springs shall be 8 gauge, back springs shall be 11 gauge. Springs shall be
attached using steel clips. Seat springs shall be covered with a steel wire
flexolator or equal product. Springs shall be of sufficient number to ensure
even weight distribution during use. Seat decking (not self deck) shall be used.
A woven synthetic material shall be used to cover back springs with foam applied
on top. Springs shall be of sufficient quality to retain 95% memory for five (5)
years.
FOAM
All foam used for seat cushions shall be a minimum 1.8 density, ILD 22-26. Foam
used for the backs shall be a minimum of 1.5 density, ILD 15. All foam shall
pass the requirements of California Bulletin 117. Foam shall be covered in one
inch layer of Dacron Batting. Foam shall be of sufficient quality to retain 85%
memory for five (5) years.
SEATS
Desk/dining chairs - seat may be constructed using one of the three following
methods:
1. Solid hardwood plywood with foam padding (1.8 density, 22-26 ILD)
covered by Dacron batting and fabric.
<PAGE> 17
2. Cut out plywood with synthetic webbing covered with foam, batting
and fabric. Webbing shall be of sufficient quality to retain 95%
memory for five (5) years.
3. Sinuous wire springs covered with foam, batting and fabric. Note:
pressboard/ fiberboard/flakeboard is not acceptable.
SEAMS
Seams are to be of sufficient depth and stitches to be of sufficient number per
inch to prevent seam slippage. Thread used in stitching is to be of sufficient
quality for contract use. Seating supplier shall test fabrics for seam slippage
prior to production sewing.
ARMS
Inside arms shall be reinforced with a cardboard or a synthetic woven fabric
padded with one inch of foam. Outside arms shall be covered with synthetic woven
fabric covered by fabric.
OUTBACK
Shall be microfoam padded and covered with fabric.
SLEEPER
Contract quality sleeper mechanism shall be used. The approved mechanism shall
be Leggett & Platt Classic 3500 with anti-tilt mechanism. Alternate products
must be submitted with detailed specifications, and approved, prior to use.
Mechanism shall have operating instruction label in English and Spanish
permanently applied to the webbing.
MATTRESS
DIMENSIONS: 36"Wx72"Lx5"H Coil Count: (184 coils)
DIMENSIONS: 40"Wx72"Lx5"H Coil Count: (207 coils)
DIMENSIONS: 48"Wx72"Lx5"H Coil Count: (253 coils)
DIMENSIONS: 52"Wx72"Lx5"H Coil Count: (253 coils)
DIMENSIONS: 60"Wx72"Lx5"H Coil Count: (299 coils)
Ticking - Top and Sides - Beige, Fire Retardant Cover
TOP QUILTING: FOAM 1/2" THICK, CA117, 1.3 DENSITY 30 LB COMPRESSION
Top Pad/Insulator: 2 oz synthetic
Toper: FOAM 1" THICK 1.3 DENSITY, 18 LB COMPRESSION
Corner padding: MINIMUM 3 1/2" foam, 2 PER CORNER.
Sideborder Quilting: .25" foam, 1/2" thick, 30 lb. compression.
Springs: 3 1/2", 13 gauge
Bottom Padding: 1/4" thick batting pad
Bottom Filler Cloth
Note: All foam meets CA 117
Ties: Two - for attachment to spring decks.
<PAGE> 18
Top deck assembly is ring stapled to every other coil spring on sides and ends
for frequent folding in contract use.
GLIDES
Plastic only
FABRICS
Fabrics specified by Marriott are to be supplied by seating supplier. Seating
supplier is to ensure that all proposed fabrics are suitable for contract
upholstery and meets the Marriott ACT Standards, attached. All exceptions must
be approved in writing by Marriott.
FINISHING AND FIRE CODE REQUIREMENTS
Seating supplier shall have the ability to finish, or have finished, fabrics as
selected by Marriott International. These finishes include, but are not limited
to, water and soil, CA 117, acrylic or latex backing and lamination.
Supplier shall have the ability to supply seating to meet fire codes, as
provided by Marriott International. These include, but are not limited to,
California TB-133, New York Port Authority and Boston fire codes. Supplier shall
have the facilities, or access to facilities, to provide certified testing of
fire codes. All products must be labeled with said certification.
PACKAGING
All items are to be cartoned. The cost of cartoning is to be included in the
cost of goods. All items shall be wrapped in 2 ml. plastic bags prior to
cartoning. Cartoning shall meet or exceed the NMFC regulations for strength as
required for shipments via common carriers. Lounge chairs shall be packed one
per carton. Desk chairs may be packed two per carton. All cartons will be
labeled in accordance with Marriott International labeling instructions.
<PAGE> 19
EXHIBIT VII
MARRIOTT INTERNATIONAL
ACT Specifications (Association of Contract Textiles)
ABRASION RESISTANCE
Wyzenbeck: Back -&-Forth; Martindale: Circular (#10 Duck)
Light: 15,000 Double Rubs; Heavy Duty: 20,000 Double Rubs (Marriott)
FLAMMABILITY
upholstery: CA117; Drapery: NFPA 701 Small Scale
Wall Coverings: ASTM-E84; Upholstered Seating TB-133 (CA, Boston)
COLORFASTNESS TO LIGHT
Drapery: 60 Hours, Class 4, ASTM D3691, 1974 or 16E
All others: 40 others, Class 4
WET AND DRY CROCKING
4.0 or Better, Wet or Dry
PILL
ASTMD3511, Class 5: No Pilling or Fuzzing
SEAM SLIPPAGE
Fabric Pulls apart near the seam, Warp or Fill Upholstery & Panel
Fabrics: 25 lbs.
Drapery: 15 lbs.
TENSILE STRENGTH
Upholstery: 50 lbs; Panel: 35 lbs, 25 lbs for Over 6 ounce/yd squared
Drapery and 15 lbs. For Under 6 Ounce
<PAGE> 20
EXHIBIT VIII
[MARRIOTT LETTERHEAD]
UPHOLSTERY FABRIC SPECIFICATION
This request is submitted by
Phone ___________________________ Fax ______________________________
MARRIOTT Project Name _________________________ Number _____________
DESIGNER/FIRM ______________________________________________________
FABRIC SUPPLIER:____________________________________________________
FABRIC NAME:___________________________ COLOR:______________________
Width:___________ Ounces per yard ____________ Roll Size Range _____________
Minimum Order _____________________________ Lead Time ___________________
Repeats: Vertical ____________________ Horizontal __________________
Fiber Content:__________________________________________________________________
Backing: Yes______ Method_______________ (i.e. acrylic, etc.) No__________
TREATMENTS: FR(CA11)_________________________________________
WATER____________________________________________
DOUBLE RUBS:_______________________________________
COLOR FAST TO LIGHT_______________________________
CLEANING CODE_____________________________________ _________ Dry
SEAM SLIPPAGE:____________________________________ ____ Pounds Fill
TENSILE STRENGTH: ____ Pounds Fill
Submitted by____________________________________________________________________
Date ________________
Price - cut yards______________________________________ Expires ____________
(including all treatments shown above)
THE PRICE ON THIS PROPOSAL IS PROPRIETARY TO AND FOR PURCHASES PROVIDED BY
MARRIOTT INTERNATIONAL OR ITS AUTHORIZED AGENTS ONLY.
IN ACCORDANCE WITH MARRIOTT CONTRACT, PRICING WILL BE PROVIDED WITHIN 24 HOURS
<PAGE> 21
EXHIBIT IX
ADDENDUM
THIS ADDENDUM, dated November 19, 1998, is between LOEWENSTEIN/GREGSON
("Vendor") and MARRIOTT INTERNATIONAL, INC., on behalf of its subsidiaries and
affiliates ("Marriott").
W I T N E S S E T H:
WHEREAS, Vendor and Marriott entered into a certain Agreement dated
November 19, 1998 ("Agreement") (a copy of which Agreement is attached to this
Addendum), pursuant to which Vendor will provide certain products described in
the Agreement; and
WHEREAS, Vendor and Marriott now desire to amend the Agreement.
NOW, THEREFORE, in consideration of the promises herein contained and
for other good and valuable consideration, the parties hereto agree as follows:
1. RECITALS. The parties agree that the above recitals are true and
correct and are hereby incorporated herein as though set forth in full.
2. EFFECT OF ADDENDUM. Except as specifically set forth in this
Addendum, all terms and conditions of the Agreement shall remain unmodified and
in full force and effect and shall be binding upon the parties; provided,
however, that in the event of any conflict between the provisions of the
Agreement and this Addendum, the provisions of this Addendum shall prevail.
Capitalized terms used in this Addendum and not defined herein shall have the
meaning ascribed to them in the Agreement.
3. DEFINITION OF ACCOUNTS. The products that are the subject of the
Agreement and this Addendum ("Products") may be purchased at the prices set
forth in the Agreement by Marriott approved distributors, contractors, and
customers of or facilities operated, managed, licensed, or franchised by (i)
Marriott's Lodging, Senior Living Services, or Marketplace businesses, (ii) Host
Marriott Services Corporation and its subsidiaries, and (iii) such additional
operations of Marriott or any of its licensees, franchisees, or affiliates as
Marriott may choose to add from time to time during the term of this Agreement.
4. PREFERRED VENDOR ALLOWANCE. During the term of the Agreement,
Marriott shall be entitled to participate in the preferred vendor allowance
program offered by Vendor. Vendor represents and warrants that all funds
advanced under this program are also available on a proportionally equal basis
to all customers of Vendor which compete with Marriott. Marriott agrees that
Vendor shall be a preferred supplier designated by The Marketplace by Marriott
to supply Accounts with upholstered seating that are the subject of this
Agreement, it being understood, however, that there is no guarantee by Marriott
that Accounts will not obtain these or similar products from other sources.
<PAGE> 22
5. PAYMENT. Payment shall be made in accordance with the terms of the
Agreement. Vendor shall ensure that billing reflect all shortages and defective,
damaged, rejected, unordered, and returned Products and that a credit shall be
extended to the ordering Account for any such Products or shortages.
6. LIABILITY OF ACCOUNTS. All accounts and contract distributors shall
establish their own creditworthiness with Vendor, it being understood that
Marriott shall not be responsible for any acts or obligations of the Accounts or
contract distributors.
7. COUNTERPARTS. This Addendum may be executed in counterparts, each of
which shall be deemed an original and all of which, when taken together,
constitute one and the same instrument, binding on the parties. This signature
of any party to any counterpart shall be deemed a signature to, and may be
appended to, any other counterpart.
8. EFFECTIVE DATE. This Addendum shall be effective as of the Effective
Date of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date first set forth above.
MARRIOTT: VENDOR:
MARRIOTT INTERNATIONAL, INC.
-----------------------------------
By: By:
----------------------------------- -------------------------------
Name (printed): Janet Desjardins Name (printed):
--------------------
<PAGE> 23
EXHIBIT IX
ADDENDUM
THIS ADDENDUM, dated December 1, 1998, is between LOEWENSTEIN,
INC./GREGSON FURNITURE INDUSTRIES ("Vendor") and MARRIOTT INTERNATIONAL, INC.,
on behalf of its subsidiaries and affiliates, ("Marriott").
W I T N E S S E T H:
WHEREAS, Vendor and Marriott entered into a certain Agreement dated
December 1, 1998, ("Agreement") (a copy of which Agreement is attached to this
Addendum), pursuant to which Vendor will provide certain products described in
the Agreement; and
WHEREAS, Vendor and Marriott now desire to amend the Agreement.
NOW, THEREFORE, is consideration of the promises herein contained and
for other good and valuable consideration, the parties hereto agree as follows:
1. RECITALS. The parties agree that the above recitals are true and
correct and are hereby incorporated herein as though set forth in full.
2. EFFECT OF ADDENDUM. Except as specifically set forth in this
Addendum, all terms and conditions of the Agreement shall remain unmodified and
in full force and effect and shall be binding upon the parties; provided,
however, that in the event of any conflict between the provisions of the
Agreement and this Addendum, the provisions of this Addendum shall prevail.
Capitalized terms used to this Addendum and not defined herein shall have the
meaning ascribed to them in the Agreement.
3. DEFINITION OF ACCOUNTS. The products that are the subject of the
Agreement and this Addendum ("Products") may be purchased at the prices set
forth in the Agreement by Marriott approved distributors, contractors, and
customers of or facilities operated, managed, licensed, or franchised by (i)
Marriott's Lodging, Senior Living Services, or Marketplace businesses, (ii) Host
Marriott Services Corporation and its subsidiaries, and (iii) such additional
operations of Marriott of any of its licensees, franchisees, or affiliates as
Marriott may choose to add from time to time during the term of this Agreement.
4. PREFERRED VENDOR ALLOWANCE. During the term of the Agreement,
Marriott shall be entitled to participate in the preferred vendor allowance
program offered by Vendor. Vendor represents and warrants that all funds
advanced under this program are also available on a proportionally equal basis
to all customers of Vendor which compete with Marriott. Marriott agrees that
Vendor shall be a preferred supplier designated by The Marketplace by Marriott
to supply Accounts with upholstered seating that are the subject of this
Agreement, it being understood, however, that there is no guarantee by Marriott
that Accounts will not obtain these or similar products from other sources.
<PAGE> 24
a. Vendor shall pay to Marriott an allowance which shall be a
percentage of the total dollar amount invoiced by Vendor to
Accounts during each calendar quarter for the term of the
Agreement.
(i) For orders which are placed by Marriott on a purchase
order similar to Exhibit II the allowance shall be
calculated as follows: three percent (3%) of the
total dollar amount invoiced by Vendor to all
Accounts up to and including an amount of twenty-one
million dollars ($21,000,000) per calendar year and
six percent (6%) of the total dollar amount invoiced
by Vendor to all Accounts which exceed twenty-one
million dollars ($21,000,000) per calendar year.
For example, if between January 1, 1999 and March 31,
1999, the Vendor invoiced the Accounts a total of
$5,000,000 dollars, Vendor would pay to Marriott an
allowance of $150,000 for the first quarter, being 3%
of $5,000,000. If between April 1, 1999 and June 30,
1999, Vendor invoice the Accounts a total of
$20,000,000, then Vendor would pay to Marriott an
allowance of $720,000, being the sum of $480,000
($16,000,000 multiplied by 3%) plus $240,000
($4,000,000 multiplied by 6%). If between July 1,
1999, and September 30, 1999, Vendor invoiced the
Accounts a total of $10,000,000, the Vendor would pay
to Marriott an allowance of $600,000, being 6% of
$10,000,000.
(ii) For orders which are placed directly by Accounts (and
not placed by Marriott on a purchase order similar to
Exhibit II), Vendor shall pay to Marriott an
allowance which shall be calculated as follows: five
percent (5%) of the total dollar amount invoiced by
Vendor to all Accounts.
b. All payments required to be made to Marriott under the
Agreement and this Addendum shall be made by check payable to
The Marketplace by Marriott, LLC, and delivered to the
following address: The Marketplace by Marriott, Marriott
Drive, Washington, DC 20058, Attn: Dept. 55/934.26 Janet
Desjardins. Payment shall be made within thirty (30) days
after the end of each calendar quarter.
5. TERM AND TERMINATION. The Agreement shall be effective January 1,
1999, (the "Effective Date"), and shall terminate on December 31, 2001, unless
extended or earlier terminated in accordance with the terms hereof. The
Agreement may be terminated by either party for cause upon thirty (30) days'
prior written notice and by Marriott without cause upon sixty (60) days' prior
written notice. This provision supersedes all provisions regarding the term and
termination rights in the Agreement, if any.
6. PAYMENT. Payment shall be made in accordance with the terms of the
Agreement. Vendor shall ensure that billings reflect all shortages and
defective, damaged, rejected, unordered, and returned Products and that a credit
shall be extended to the ordering Account for any such Products or shortages.
<PAGE> 25
7. LIABILITY OF ACCOUNTS. All Accounts and contract distributors shall
establish their own creditworthiness with Vendor, it being understood that
Marriott shall not be responsible for any act or obligations of the Accounts or
contract distributors.
8. COUNTERPARTS. This Addendum may be executed in counterparts, each of
which shall be deemed an original and all of which, when taken together,
constitute one and the same instrument, binding on the parties. This signature
of any party to any counterpart shall be deemed a signature to, and may be
appended to, any other counterpart.
9. EFFECTIVE DATE. This Addendum shall be effective as of the Effective
Date of the Agreement.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
date first set forth above.
MARRIOTT: VENDOR:
MARRIOTT INTERNATIONAL, INC.
------------------------------------
By: /s/ Janet Desjardins By
----------------------------------- ---------------------------------
Name (printed): Janet Desjardins Name (printed):
---------------------
<PAGE> 1
EXHIBIT 10.12
LEASE
This lease agreement is made as of this 1st day of August, 1998,
between NITRAM PARTNERS, LTD., a Florida limited partnership, herein after
referred to as the "Landlord", and MIAMI METAL PRODUCTS, INC., a Florida
corporation d/b/a POMPEII FURNITURE INDUSTRIES, hereinafter referred to as the
"Tenant."
1. DEMISED DESCRIPTION.
Landlord does hereby lease to Tenant, and Tenant does hereby lease
from Landlord those properties comprised of approximately 220,468 rentable
square feet, more particularly described in Exhibit "N" attached hereto and
incorporated herein by reference (the "Premises"). The final determination of
the rentable square feet in the Premises shall be determined by Landlord's
architect and the same shall be used for all computations involving square
footage under this lease.
2. TERM.
The term of this lease shall be for five (5) years commencing on the
1st day of August, 1998 (the "Lease Commencement Date").
Tenant, at its discretion, may renew this lease for a maximum of
three consecutive additional five (5) year terms, for a maximum duration of
twenty (20) years. Tenant shall exercise its renewal rights by providing written
notice to Landlord of its intent. to renew no later than forty-five (45) days
prior to the expiration of the then current lease term.
3. RENT AND SECURITY.
A. Tenant agrees to and shall pay to Landlord, as rent for the
Premises, rent in equal monthly installments at the rate of $31,250.00 per
month, plus applicable sales tax, in advance on the first day of each month
commencing on the 1st day of August 1998 and monthly thereafter. Upon the
commencement of each five (5) year renewal period hereunder, the square foot
rent rate shall be adjusted by increasing (and never decreasing) the square foot
rent rate of the last completed lease term by an amount equal to the percentage
increase in the CPI between the first and last month of the last completed lease
term. For purposes of this lease, CPI is defined as the Consumer Price Index for
All Urban Consumers, AU Items (Base year 1982-84 =100) published by the United
States Department of Labor, Bureau of Labor Statistics. If the Bureau of Labor
Statistics substantially revises the manner in which the CPI is determined, if
practicable an adjustment shall be made in the revised index which would produce
results equivalent, as nearly as possible to those which would produce results
equivalent to those that would be produced if the CPI were not so revised. If an
adjustment required by the preceding sentence is not practicable, or if the CPI
become unavailable to the public because publication is discontinued, or
otherwise, Landlord shall substitute therefor a comparable index based upon
changes in the cost of living or purchasing power of the consumer dollar
published by a
<PAGE> 2
governmental agency, major bank, other financial institution, university or
recognized financial publisher.
B. Applicable sales tax shall also be paid by the Tenant to Landlord
with each rent payment due under the terms of this lease and on all taxable
items payable by Tenant, including without limitation ad valorem taxes paid by
or reimbursed from Tenant.
C. Tenant, concurrently with the execution of this lease, has
deposited with Landlord the sum of $ -none- receipt of which is hereby
acknowledged by Landlord, which sum shall be retained by Landlord as security
for the payment by Tenant of the rents herein agreed to be paid by Tenant and
for the faithful performance by Tenant of the terms and covenants of this lease.
If Tenant fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Landlord may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default or for the payment of any other sum to which Landlord may
become obligated by reason of Tenant's default, or to compensate Landlord for
any loss or damage which Landlord may suffer thereby. If Landlord so uses or
applies all or any portion of said deposit, Tenant shall within ten (10) days
after written demand therefor deposit cash with Landlord in an amount sufficient
to restore said deposit to the full amount hereinabove stated and Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall not be
required to keep said deposit separate from its general accounts. If Tenant
performs all of Tenant's obligations hereunder, said deposit, or so much thereof
as has not theretofore been applied by Landlord, shall be returned, without
payment of interest or other increment for its use, to Tenant (or at Landlord's
option, to the last assignee, if any, of Tenant's interest hereunder) at the
expiration of the term hereof, and after Tenant has vacated the Premises. No
trust relationship is created herein between Landlord and Tenant with respect to
said Security Deposit.
4. USE.
Tenant shall use and occupy the Premises for the purpose of
conducting the business and affairs of the tenant as conducted immediately
before the effective date of this Lease and for no other purposes except those
authorized in writing by Landlord, which authority shall be exercised by
Landlord in its sole discretion.
5. UTILITIES, MAINTENANCE AND TAXES.
Tenant shall pay all charges for water, electricity, gas, telephone
and other utility services furnished to the Premises during the term of this
lease. Any expenses for utilities used at the Premises and billed to Landlord by
such utility companies shall be made by Tenant to Landlord within thirty days
after receipt of Landlord's written statement setting forth the amount of the
expenditures incurred by Landlord for such services.
Landlord shall pay all taxes, assessments and charges which
may be assessed and levied upon the Premises during the term of this lease as
they shall become due; provided, however, that Tenant shall reimburse Landlord
and pay as additional rent, the amount of the real property ad valorem taxes
applicable to the Premises for each year during the term hereof.
2
<PAGE> 3
Such payments shall be made by Tenant to Landlord within thirty days after
receipt of Landlord's written statement setting forth the amounts of such
expenditures and real estate taxes paid by the Landlord. Tenant's liability for
taxes for a partial tax year shall be prorated on a daily basis.
Tenant shall pay all taxes, assessments and charges which may be
assessed and levied upon any improvements erected on the Premises by Tenant as
they shall become due.
6. ALTERATIONS, ADDITIONS, INSTALLATIONS AND REMOVAL THEREOF.
Tenant may, at its own expense, either at the commencement of or
during the term of this lease, make such alterations in and/or additions to the
Premises as may be necessary to fit the same for its business, upon first
obtaining the written approval of Landlord as to the materials to be used and
the manner of making such alterations and/or additions. Landlord covenants not
to unreasonably withhold approval of alterations and/or additions proposed to be
made by Tenant. Tenant may also, at its own expense, install such counters,
partitions, walls, shelving, fixtures, fittings, machinery and equipment upon or
within the Premises as Tenant may consider necessary to the conduct of its
business. At any time prior to the expiration or earlier termination of the term
of this lease, Tenant may remove any or all such alterations, additions or
installations in such manner as will not substantially injure the Premises, or
the portion or portions affected by such removal, and the Premises shall be
restored to the same condition as existed prior to the making of such
alteration, addition, or installation, ordinary wear and tear, damage or
destruction by fire, flood, storm, civil commotion, or other unavoidable cause
excepted. All alterations, additions, or installations not so removed by Tenant
shall become the property of Landlord without liability on Landlord's part to
pay for the same.
Tenant shall be allowed reasonable access to the Premises prior to
the Lease Commencement Date to install its equipment without Tenant incurring
any rent obligation, provided, however, that all other terms and conditions of
this lease shall be in effect. All work and access to the Premises shall be
coordinated through the Landlord.
Tenant shall pay, when due, all claims for labor or materials
furnished to or for Tenant at or for use in the Premises, which claims are or
may be secured by any mechanics' or materialmen's lien against the Premises or
any interest therein. Tenant shall give Landlord not less then ten days' written
notice prior to commencement of any work in the Premises, and Landlord shall
have the right to post notices of non-responsibility in or on the Premises as
provided by law. Tenant may, in good faith, contest the validity of any such
lien, claim or demand, in which case Tenant shall, at its sole expense defend
itself and Landlord against the same and shall pay and satisfy any such adverse
judgment that may be rendered thereon before the enforcement thereof against the
Landlord or the Premises. In addition, Landlord may require Tenant to pay
Landlord's reasonable attorney's fees and costs in participating in such action
if Landlord shall decide it is in its best interest to do so.
3
<PAGE> 4
7. TRADE FIXTURES; PERSONAL PROPERTY.
All articles of personal property and all business and trade
fixtures, machinery and equipment, furniture and moveable partitions owned by
Tenant or installed by Tenant at its expense in the Premises shall be and remain
the property of Tenant and may be removed by Tenant at any time during the term
of this lease provided Tenant is not in default hereunder, and provided further
that Tenant shall repair any damage caused by such removal.
8. MAINTENANCE AND REPAIR.
Except as hereinafter provided, Tenant shall maintain and keep
Tenant's door and the interior of the Premises in good repair, free of refuse
and rubbish and shall return the same at the expiration or termination of the
term of this lease in as good condition as received by Tenant, ordinary wear and
tear, damage or destruction by fire, flood, storm, civil commotion or other
unavoidable cause excepted; provided, however, that if alterations, additions,
and/or installations shall have been made by Tenant as provided for in this
lease, Tenant shall not be required to restore the Premises to the condition in
which they were prior to such alterations, additions and/or installations unless
requested to do so by Landlord within thirty days following the expiration or
termination of the term of this lease. Tenant shall be responsible for
maintenance and repair of equipment on the Premises and shall replace all broken
glass. Tenant shall be solely responsible to maintain and make all necessary
repairs to the foundations, structure, load bearing walls, roof, gutters,
downspouts, landscape, parking areas, common areas, and loading docks, if any,
on or appurtenant to the Premises. Tenant shall reimburse Landlord and pay as
additional rent any such expenses incurred by the Landlord in the maintenance of
the parking areas (including driveways) and for the maintenance of the
landscaped areas appurtenant to the building in which the Premises is located or
any other repairs. Such payments shall be made by Tenant to Landlord within
thirty days after receipt of Landlord's written statement setting forth the
amount of such expenses due from Tenant.
Tenant shall be responsible for the maintenance of the heating/air
conditioning systems, and the Tenant shall be responsible for the replacement,
if necessary, of such systems.
9. COMMON AREAS.
Tenant shall have the nonexclusive right in common with other
tenants in the building which includes the Premises (the "Building"), and
subject to any reasonable rules and regulations enacted by the Landlord, to use
during the term of this lease the common entrances, walkways, sidewalks,
lobbies, rest room elevators, stairways and accessways, loading docks, ramps,
drives and platforms and any passageways and service ways thereto, parking
facilities and common pipes, conduits, wires and appurtenant equipment serving
the Premises.
10. INDEMNITY.
Tenant agrees to indemnify and hold Landlord harmless against all
claims, demands, costs and expenses, including reasonable attorney's fees for
the defense thereof, as the same are incurred, arising from the conduct,
occupancy or management of Tenant's
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business or its use of the Building and parking areas or from construction of
improvements by Tenant, or from any breach on the part of the Tenant of any
conditions of this lease, or from any act or negligence of Tenant, its agents,
servants, contractors or employees, in or about the Premises; provided, however,
that the foregoing provision shall not be construed to make Tenant responsible
for loss, damage, liability or expense resulting from injuries caused by
negligence or intentional misconduct of Landlord, its agents, servants, or
employees. In case of any action or proceeding brought against Landlord by
reason of a claim for which Tenant has agreed to indemnify Landlord, Tenant,
upon notice from Landlord, will defend such action or proceeding by counsel
reasonably acceptable to Landlord.
11. INSURANCE.
Landlord covenants and agrees that throughout the term of this lease
it will insure the Building and the Building improvements (excluding any
property with respect to which Tenants are obligated to insure) against damage
by fire including extended coverage, vandalism and malicious mischief and
comprehensive general liability insurance in such amounts as would be carried by
a prudent owner of a similar building in the geographic area; provided, however,
that Tenant shall reimburse the Landlord and pay as additional rent, the amount
of the insurance premium applicable to the Premises for each year during the
term hereof Such payments shall be made by Tenant within thirty days after
receipt of Landlord's written statement setting forth the amount of such
insurance premium. Tenant's liability for such premiums for a partial insurance
period shall be prorated on a day basis.
Tenant covenants and agrees that throughout the term of this lease
it will insure the Premises and its improvements against damage by fire
including extended coverage, vandalism and malicious mischief and comprehensive
general liability insurance with limits of at least $1,000,000/$2,000,000 for
injury to person and $500,000 for damage to property. Tenant shall also carry
insurance against the occurrence of an environmental hazard created by Tenant at
the Premises. The Tenant shall provide Landlord with certificates evidencing the
aforesaid insurance coverages prior to occupancy and thereafter upon request and
all the said policies shall name Tenant as insured party and Landlord as
additional insured. Said policies shall also provide that the insurer shall
provide thirty days notice to Landlord prior to cancellation.
Landlord and Tenant hereby mutually waive their respective rights of
recovery against each other for any loss insured by fire, extended coverage and
other property insurance policies existing for the benefit of the respective
parties. Each party shall obtain any special endorsements, if required by their
insurer, to evidence compliance with the aforementioned waiver.
12. COMPLIANCE WITH LAWS.
The Tenant acknowledges that no trade or occupation shall be
conducted in the Premises or use made thereof which will be unlawful, improper,
excessively noisy or offensive, or contrary to any law or any municipal by-law
or ordinance in force in the state, city or town in which the Premises are
situated.
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A. Tenant shall give prompt notice to Landlord of any written notice
it receives of the violation of any law or requirement, of public authority, and
at its own expense shall comply with all laws and requirements, of public
authorities which shall, with respect to the Premises or the use and occupation
thereof, or the abatement of any nuisance, impose any obligation, order or duty
on Landlord or Tenant arising from (i) Tenant's use of the Premises, (ii) the
manner of conduct of Tenant's business or operation of its installations,
equipment or other property, (iii) any cause or condition created by or at the
instance of Tenant, other than by Landlord's performance of any work for or on
behalf of Tenant, or (iv) breach of any obligation of Tenant under this lease.
Tenant, however, shall not be so required to make any structural or other
substantial change in the Premises. Furthermore, Tenant need not comply with any
such law or requirement of public authority so long as Tenant shall be
contesting the validity thereof or the applicability thereof to the Premises, in
accordance with subdivision B. of this Paragraph. Landlord, at his expense,
shall comply with such other laws and requirements of public authority as shall
affect the Premises (except those arising out of Tenant's preparation of the
Premises for its use), but may similarly contest the same subject to conditions
reciprocal to sections (i), (ii), and (iii) of subdivisions of this Paragraph.
B. Tenant may, at its expense (and if necessary in the name of, but
without expense to, Landlord) contest, by appropriate proceedings prosecuted
diligently and in good faith, the validity, or applicability to the Premises, of
any law or requirement of public authority and Landlord shall cooperate with
Tenant in such proceedings, provided that:
(i) Landlord shall not be subject to any liability, fine or
criminal penalty or to prosecution for a crime nor shall the Premises or any
part of the Building be subject to being condemned or vacated, or a lien, by
reason of noncompliance or otherwise by reason of such contest.
(ii) Tenant shall defend, indemnify, and hold harmless the
Landlord against all liability, loss or damage which Landlord shall suffer by
reason of such noncompliance or contest, including reasonable attorney's fees
and other expenses reasonably incurred by Landlord.
(iii) Tenant shall keep Landlord advised upon landlord's request
from time to time as to the status of and any facts concerning such proceedings.
13. SIGNS.
During the term of this lease, Tenant shall have the right to erect,
affix or display on exterior or interior walls, doors, windows of the Building
on the Premises, such signs or sign advertising its business as Tenant may
consider necessary or desirable, subject to the consent of Landlord, whose
consent shall not be unreasonably withheld, and applicable zoning and other
governmental regulations.
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14. CASUALTY LOSS.
In the event that the Premises are damaged by fire or other
casualty, Landlord shall forthwith proceed to restore the Premises to the end
that space of the same size and utility are available as expeditiously as
possible. Tenant's rent shall be abated in just proportion during the period of
the impaired use of the Premises. If more than 50% of the inside space of the
Building area or the Premises is damaged, either Landlord or Tenant may cancel
the term of this lease on thirty days' notice within thirty days following such
casualty in which case rent shall be apportioned as of the date the casualty. If
a registered engineer or architect jointly acceptable to Landlord and Tenant
shall notify them within thirty days after such fire or casualty that in his
opinion the damage to the Premises cannot be repaired so as to substantially
restore the Premises to their former condition within 180 days after such fire
or casualty, or if the Premises are in fact not restored to substantially the
same condition as prior to such fire or casualty within 180 day after such
occurrence, then the term of this lease may be terminated by either Landlord or
Tenant in which case rent shall be apportioned as of the date of such
termination. The rights of cancellation and termination afforded to the parties
by this paragraph shall not be affected or extended by reason of the happening
of any event described in Paragraph 21.
15. CONDEMNATION.
In the event the Premises shall be taken for public use by the city,
state, federal government, public authority or other corporation having the
power of eminent domain, then the term of this lease shall terminate as of the
date on which possession thereof shall be taken for such public use, or, at the
option of Tenant, as of the date on which the Premises shall become unsuitable
for Tenant's regular business by reason of such taking; provided, however, that
if only a part of the Premises shall be so taken, such termination shall be at
the option of Tenant only. If such a taking of only a part of the Premise occurs
and Tenant elects not to terminate the term of the lease, there shall be a
proportionate reduction of the rent to be paid under this lease from and after
the date such possession is taken for public use. Tenant shall have the right to
participate, directly or indirectly, in any award for such public taking on
account of such public taking.
16. DEFAULT.
The occurrence of any one or more of the following events shall
constitute a material default and breach of this lease by Tenant:
A. The abandonment of the Premises by Tenant, or the vacating of the
Premises by Tenant for ten business days without Landlord's prior written
consent which Landlord may withhold in its sole discretion.
B. The failure by Tenant to make any payment of rent within three
(3) days of receipt of written notice that such rent is past due.
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C. The failure by Tenant to make any payment other than rent which
payment is required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of three days after written notice thereof
from Landlord to Tenant.
D. The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this lease to be observed or performed by Tenant,
other than the failure to pay rent described in subdivision B. above, where such
failure shall continue for a period of thirty days after written notice thereof
from Landlord to Tenant; provided, however, that if the nature of Tenant's
default is such that more than thirty days are reasonably required for its cure,
then Tenant shall not be deemed to be in default if Tenant commenced such cure
within said thirty-day period and thereafter diligently prosecutes such cure to
completion.
E. (i) The making by Tenant of any general arrangement or assignment
for the benefit of creditors; (ii) Tenant becomes a "debtor" as defined in 11
U.S.C. Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Tenant, the same if dismissed within sixty days); (iii)
the appointment of a trustee or receiver to take possession of substantially all
of Tenant's assets located at the Premises or of Tenant's interest in this
lease, where possession is not restored to Tenant within thirty days; or (iv)
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this lease,
where such seizure is not discharged within thirty days. Provided, however, in
the event that any provision of this Paragraph 16.E. is contrary to any
applicable law, such provision shall be of no force or effect.
F. The discovery by Landlord that any financial statement given to
Landlord by Tenant, or any guarantor of Tenant's obligation hereunder, and any
of them, was materially false.
In the event of any such default or breach by Tenant, Landlord may
at any time thereafter, with or without notice or demand and without limiting
Landlord in the exercise of any right or remedy which Landlord may have by
reason of such default or breach:
A. Terminate Tenant's right to possession of the Premises by any
lawful means, in which case the term of this lease shall terminate and Tenant
shall immediately surrender possession of the Premises to Landlord. In such
event Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises to return the Premises to
the condition it was in at the commencement of the term of this Lease,
reasonable attorney's fees, and any reasonable real estate commission actually
paid, the worth at the time of award by the court having jurisdiction thereof of
the amount by which the unpaid rent for the balance of the term after the time
of such award exceeds the amount of such rental loss for the same period that
Tenant proves could be reasonably avoided, and that portion of the leasing
commission paid by Landlord pursuant to Paragraph 31 applicable to the unexpired
term of this lease.
B. Maintain Tenant's right to possession in which case the term of
this lease shall continue in effect whether or not Tenant shall have abandoned
the Premises. In such
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event Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this lease, including the right to recover the rent as it becomes
due hereunder.
C. Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the State of Florida. Unpaid
installments of rent and other unpaid monetary obligations of Tenant under the
terms of this lease shall bear interest from the date due at the maximum rate
allowed by law.
17. LANDLORD'S RIGHT TO ENTER PREMISES.
Tenant shall permit Landlord or its agent to enter at all reasonable
times and upon reasonable notice (and in case of emergency, at any time) to make
such alterations or repairs therein as may be necessary for the safety or the
preservation thereof, or for any other reasonable purposes. Tenant shall also
permit Landlord or its agents, on or after one hundred twenty days next
preceding the expiration of the term of this lease, to show the Premises to
prospective tenants or purchasers at reasonable times, and to place notices on
the front of the Premises or Building, or on any part thereof, offering the
Premises or Building for lease or for sale.
18. ASSIGNMENT, SUBLETTING.
Tenant shall not assign this lease or sublet the whole or any part
of the Premises without the prior written consent of Landlord, which authority
Landlord may exercise in its sole discretion. Prior to any such assignment,
Tenant shall deliver to Landlord a written agreement from the assignee agreeing
with Landlord to perform the terms, covenants, and conditions of Tenant
contained in this lease, but no such assignment shall release Tenant from the
terms, covenants and conditions of this lease.
19. HOLDING OVER.
If Tenant or anyone claiming under Tenant shall remain in possession
of the Premises or any part thereof after the expiration or termination of the
term of this lease with the consent of Landlord but without any further
agreement in writing between the Landlord and Tenant with respect thereto, then,
in the event that Landlord shall accept rent from such person remaining in
possession, the person shall be deemed a month-to-month tenant at a rental rate
equal to one hundred and fifty percent of the rent in effect upon the date of
such expiration or termination until such tenancy is terminated in a manner
provided by law.
20. ESTOPPEL CERTIFICATES.
Upon not less than thirty days prior written request, each of
Landlord and Tenant agrees, in favor of the other, to execute, acknowledge and
deliver a statement in writing certifying that this lease is unmodified and in
full force and effect (or if there have been any modifications, that the same
are in full force and effect as modified and stating the modifications), and the
dates to which the rent and other
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charges have been paid and any other information reasonably requested. Any such
statement delivered pursuant to this Paragraph may be relied upon by any
prospective purchaser, mortgagee or lending source.
A. ACTS OF GOD.
In any case where either party hereto is required to do any act,
delays caused by or resulting from Acts of God, war, civil commotion, fire,
flood or other casualty, labor difficulties, shortages of labor, materials or
equipment, unusual government regulations, unusually severe weather, or other
causes beyond such party's reasonable control shall not be counted in
determining the time during which such act shall be completed, whether such time
be designated by a fixed date, a fixed time or "a reasonable time", and such
time shall be deemed to be extended by the period of such delay. The provisions
of this paragraph shall not be applied, however, to affect another party's right
to terminate the term of this lease under Paragraphs 14 and 23.
21. MORTGAGE SUBORDINATION.
Tenant agrees that upon the request of Landlord in writing, it will
subordinate this lease and the lien thereof to the lien of any future mortgage
or mortgages upon the Premises, irrespective of the time of execution or time of
recording of any such mortgage or mortgages, provided that the holder or any
assignee thereof, agrees that this lease and the rights of Tenant hereunder
shall continue in full force and effect and shall not be terminated or disturbed
except in accordance with the provisions of this lease. Tenant agrees that if
requested by the holder of any such mortgage, it will be a party to said
agreement and will agree in substance that if the mortgagee or any person
claiming under the mortgagee (including a purchaser at foreclosure sale, its
successors, and assigns) shall succeed to the interest of Landlord in this
lease, it will recognize said mortgagee or person and its successors and assigns
as its Landlord under the terms of this lease. Tenant agrees that it will, upon
the request of Landlord, execute, acknowledge and deliver any and all
instruments necessary or desirable to give effect to or notice of such
subordination. The word "mortgage" as used herein includes mortgages, deeds of
trust, or other similar instruments, and modifications, consolidations,
extensions, renewals, replacements and substitutes therefor.
22. QUIET ENJOYMENT.
Landlord agrees that if Tenant pays the rent and performs and
observes the agreements, conditions and other provisions on its part to be
performed and observed, Tenant shall and may peaceably and quietly have, hold
and enjoy the Premises during the term of this lease without any manner of
hindrance or molestation from Landlord or anyone claiming under Landlord,
subject, however, to the terms of this lease and any instruments having a prior
lien. Tenant shall have the right to terminate this lease by notice to Landlord
for breach of any covenant contained in this Paragraph.
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23. NOTICE.
Whenever in this lease it is provided that notice shall or may be
given to or served upon either of the parties by the other and whenever either
of the parties shall desire to give or serve upon the other any notice with
respect to this lease of the Premises, each such notice shall be in writing, and
any law or statute to the contrary notwithstanding, shall not be effective for
any purpose unless the same shall be given or served as follows:
A. if given or served by Landlord, by sending same by facsimile and
thereafter mailing a copy of same, or by mailing a copy of same, to Tenant by
registered or certified mail, return receipt requested, addressed to Tenant at
the Premises, or such other address as Tenant may from time to time designate by
notice given to Landlord; or
B. If given or served by Tenant, by sending same by facsimile and
mailing a copy of same, or by mailing a copy of same, to Landlord by registered
or certified mail, return receipt requested, addressed to Landlord at 2127
Brickell Avenue, Suite 3602, Miami, Florida, or such other address as Landlord
may from time to time designate by notice given to Tenant.
C. The date of the sending of any such facsimile and the
confirmation of the receipt of same shall be the date of notice for purposes of
the provisions of this lease, or if notice is given by mailing without sending a
facsimile, the date of mailing in accordance with these provisions shall be the
date of notice for purposes of this lease.
24. SELF-HELP.
If Tenant shall default in the performance or observance of any
agreement or condition in this lease contained on its part to be performed or
observed, other than an obligation to pay money, and shall not cure such default
as provided herein, Landlord may, at its option, without waiving any claim for
damages for breach of this lease, at any time thereafter, cure such default for
the account of Tenant and any amount paid, or any liability incurred by Landlord
in so doing shall be deemed paid or incurred for the account of Tenant, and
Tenant agrees to reimburse Landlord thereafter and save Landlord harmless
therefrom.
If Landlord shall default in the performance or observance of any
agreement or condition in this lease contained on its part to be performed or
observed and shall not cure such default as provided herein, Tenant may, at its
option, without waiving any claim of damages for breach of this lease, at any
time thereafter, cure such default for the account of Landlord and any amount
paid or any liability incurred by Tenant in so doing shall be deemed paid or
incurred for the breach of this lease, at any time thereafter, cure such default
for the account of Landlord and any amount paid or any liability incurred by
Tenant in so doing shall be deemed paid or incurred for the account of Landlord
and Landlord agrees to reimburse Tenant thereafter and save Tenant harmless
therefrom.
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25. CONTINGENCY.
The Tenant shall have the opportunity to have the Premises
inspected by Tenant's architect and engineer during a fourteen day period after
the execution hereof by the parties. In the event that Tenant's architect and
engineer reasonably conclude that the Premises are unsuitable for Tenant's
purposes or would not comply with local and state code regulations and notify
Landlord of such conclusion in writing within such period of fourteen days
after such execution hereof, this lease shall terminate and neither party shall
have any further obligation to the other party.
26. HAZARDOUS MATERIAL.
Landlord represents and warrants that as of the commencement
of the term of this lease, it has no knowledge of any hazardous or toxic
material of whatever nature at the Premises, or the land upon which the
Premises are located. In the event that hazardous or toxic material of whatever
kind or nature and wherever located, including, but not limited to soil, water,
building components, above ground storage containers, are found to be present
at the Premises (or land upon which the Premises are located), Landlord will
indemnify, defend and hold Tenant harmless from any and all claims or liability
as result of the existence of said materials, except as to hazardous or toxic
material released onto the Premises (or land upon which the Premises are
located) by Tenant, and with respect to such material released by Tenant,
Tenant will indemnify, defend and hold Landlord harmless from any and all
claims or civil liability as a result of the existence of such materials.
27. MISCELLANEOUS.
A. This lease shall be governed by and construed in
accordance with the laws of the State of Florida, and if any provision of this
lease shall to any extent be invalid, the remainder of this lease shall not be
affected thereby.
B. There are no oral or written agreements between Landlord
and Tenant affecting this lease. This lease may be amended only by instruments
in writing executed by Landlord and Tenant.
C. The titles of the several paragraphs contained herein are
for convenience only and shall not be considered in construing this lease.
28. RECORDING MEMORANDUM OF LEASE.
Tenant shall, upon request of the Landlord, execute, acknowledge and
deliver to Landlord a "short form" memorandum of this lease for recording
purposes.
29. REAL ESTATE COMMISSION.
A. Landlord hereby represents and warrants to Tenant that Landlord
has not engaged any agent, broker or finder in regard to this lease. Landlord
agrees to indemnify Tenant and agrees to hold Tenant free and harmless from and
against any and all liability, loss, cost, damage and expense, including, but
not limited to, reasonable attorney's fees and costs of litigation, both prior
to and on appeal, which Tenant shall ever suffer or incur because of any claim
by any agent, broker or finder, engaged by Landlord, whether or not meritorious,
for any fee, commission or other compensation with respect to this lease.
B. Tenant hereby represents and warrants to Landlord that Tenant has
not engaged any agent, broker or finder in regard to this lease. Tenant agrees
to indemnify Landlord and agrees to hold Landlord free and harmless from and
against any and all liability, loss, cost, damage and expense, including but not
limited to reasonable attorney's fees and costs of litigation, both prior to and
on appeal, which Landlord shall ever suffer or incur because of any claim by any
agent, broker or finder engaged by Tenant, whether or not meritorious, for any
fee, commission or other compensation with respect to this lease.
30. ATTORNEY'S FEES.
If either party brings an action to enforce the terms hereof or
declare rights hereunder, the prevailing party in any such action, on trial or
appeal, shall be entitled to its reasonable attorney's fees to be paid by the
losing party as fixed by the court.
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IN WITNESS WHEREOF, the parties hereto have executed this lease as of the day
and year first above written.
Witnesses: MIAMI METAL PRODUCTS, INC., a Florida
corporation
By: /s/ Leo Martin
- ------------------------------- ---------------------------------------
LEO MARTIN, President
- -------------------------------
Witnesses: NITRAM PARTNERS, LTD., a Florida limited
partnership
By: /s/ Leo Martin
- ------------------------------- ---------------------------------------
LEO MARTIN as President of
NITRAM HOLDINGS, INC., General Partner
- -------------------------------
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EXHIBIT A
---------
Folio No.: 01-3125-034-0420
Legal Description: Lot 40, less the North 5 feet for Street, of CORRECTED MAP OF
SPAULDING SUBDIVISION, according to the Plat thereof, as recorded in Plat Book
3, at Page 161.
Property Address: 250 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0400
Legal Description: The East 5 feet of Lot 36, and All of Lots 37, 38 and 39,
less the North 5 feet for street purposes, of CORRECTED MAP OF SPAULDING
SUBDIVISION, according to the Plat thereof, as recorded in Plat Book 3, at Page
161.
Property Address: 310-314 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0320
Legal Description: All of Lots 33 and 34, and the West 50 Feet of Lot 35, less
the North 5 feet, and Lot 62, less the South 7.5 feet for Street, CORRECTED MAP
OF SPAULDING SUBDIVISION, according to the Plat thereof, as recorded in Plat
Book 3, at Page 161.
Property Address: 350-360-370-380 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0020
Legal Description: Lot 2, of CORRECTED MAP OF SPAULDING SUBDIVISION, according
to the Plat thereof, as recorded in Plat Book 3, at Page 161.
Property Address: 215 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0030
Legal Description: Lot 3, of CORRECTED MAP OF SPAULDING SUBDIVISION, according
to the Plat thereof, as recorded in Plat Book 3, at Page 161.
Property Address: 219 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0040
Legal Description: Lot 4 less the South 5 feet, CORRECTED MAP OF SPAULDING
SUBDIVISION, according to the Plat thereof, as recorded in Plat Book 3, at Page
161.
Property Address: 227 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0050
Legal Description: Lot 5, of CORRECTED MAP OF SPAULDING SUBDIVISION, according
to the Plat thereof, as recorded in Plat Book 3, at Page 161.
Property Address: 237 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0060
Legal Description: Lot 6, of CORRECTED MAP OF SPAULDING SUBDIVISION, according
to the Plat thereof, as recorded in Plat Book 3, at Page 161.
Property Address: 247 NW 24th Street, Miami, FL
<PAGE> 15
Folio No.: 01-3125-034-0070
Legal Description: Lot 7, of CORRECTED MAP OF SPAULDING SUBDIVISION, according
to the Plat thereof, as recorded in Plat Book 3, at Page 161.
Property Address: 255 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0080
Legal Description: Lots 8 and 9, of CORRECTED MAP OF SPAULDING SUBDIVISION,
according to the Plat thereof, as recorded in Plat Book 3, at Page 161.
Property Address: 267 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0110
Legal Description: Lots 10, 11 and 12, of CORRECTED MAP OF SPAULDING
SUBDIVISION, according to the Plat thereof, as recorded in Plat Book 3, at Page
161.
Property Address: 325 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0130
Legal Description: Lot 13, of CORRECTED MAP OF SPAULDING SUBDIVISION, according
to the Plat thereof, as recorded in Plat Book 3, at Page 161.
Property Address: 339 NW 24th Street, Miami, FL
Folio No.: 01-3125-033-0360
Legal Description: Lots 46 and 47, of WOODLAWN TRACT, according to the Plat
thereof, as recorded in Plat Book 1, at Page 148.
Property Address: 240 NW 25th Street, Miami, FL
Folio No.: 01-3125-033-0350
Legal Description: Lot 45, of WOODLAWN TRACT, according to the Plat thereof, as
recorded in Plat Book 1, at Page 148.
Property Address: 252 NW 25th Street, Miami, FL
Folio No.: 01-3125-033-0310
Legal Description: Lot 41, 42 and 43, and Lot 44 less the North 7.5 fee thereof,
of WOODLAWN TRACT, according to the Plat thereof, as recorded in Plat Book 1, at
Page 148.
Property Address: 260 NW 25th Street, Miami, FL
Folio No.: 01-3125-033-0300
Legal Description: Lot 40, of WOODLAWN TRACT, according to the Plat thereof, as
recorded in Plat Book 1, at Page 148.
Property Address: 282 NW 25th Street, Miami, FL
Folio No.: 01-3125-033-0290
Legal Description: Lot 39, of WOODLAWN TRACT, according to the Plat thereof, as
recorded in Plat Book 1, at Page 148.
Property Address: 292 NW 25th Street, Miami, FL
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Folio No.: 01-3125-033-0040
Legal Description: Lots 8 and 9, less the South 10 feet for R/W, of WOODLAWN
TRACT, according to the Plat thereof, as recorded in Plat Book 1, at Page 148.
Property Address; 255 NW 25th Street, Miami, FL
Folio No.: 01-3125-033-0050
Legal Description: Lot 10 less the South 10 feet for Right of Way, of WOODLAWN
TRACT, according to the Plat thereof, as recorded in Plat Book 1, at Page 148.
Property Address: 275 NW 25th Street, Miami, FL 33125
Folio No.: 01-3125-033-0060
Legal Description: Lot 11 less the South 10 feet for Right of Way, of WOODLAWN
TRACT, according to the Plat thereof, as recorded in Plat Book 1, at Page 148.
Property Address: 281 NW 25th Street, Miami, FL
Folio No.: 01-3125-034-0180
Legal Description: Lot 17 and the East 5 feet of Lot 18, of CORRECTED MAP OF
SPAULDING SUBDIVISION, according to the Plat thereof, as recorded in Plat Book
3, at Page 161.
Property Address: 373 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0170
Legal Description: West 45 feet of Lot 18, less the South 5 feet, of CORRECTED
MAP OF SPAULDING SUBDIVISION, according to the Plat thereof, as recorded in Plat
Book 3, at Page 161.
Property Address: 375 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0190
Legal Description: Lots 19 and 20, less the South 5 feet, of CORRECTED MAP OF
SPAULDING SUBDIVISION, according to the Plat thereof, as recorded in Plat Book
3, at Page 161.
Property Address: 391 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0590
Legal Description: Lot 69 of CORRECTED MAP OF SPAULDING SUBDIVISION, according
to the Plat thereof, as recorded Plat Book 3, at Page 161.
Property Address: 301 NW 23rd Street, Miami, FL
Folio No.: 01-3125-034-0600
Legal Description: Lot 61 less the South 7.5 feet for Street, of CORRECTED MAP
OF SPAULDING SUBDIVISION, according to the Plat thereof, as recorded in Plat
Book 3, at Page 161.
Property Address: 311 NW 23rd Street, Miami, FL
3
<PAGE> 17
Folio No.: 01-3125-034-0350
Legal Description: East 45 feet of Lot 35, less the North 5 feet for Street, of
CORRECTED MAP OF SPAULDING SUBDIVISION, according to the Plat thereof, as
recorded in Plat Book 3, at Page 161.
Property Address: 338 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0360
Legal Description: C 55 feet of Lot 35, of CORRECTED MAP OF SPAULDING
SUBDIVISION, according to the Plat thereof, as recorded in Plat Book 3, at Page
161.
Property Address: 342 NW 24th Street, Miami, FL
Folio No.: 01-3125-034-0430
Legal Description: Lot 41 of CORRECTED MAP OF SPAULDING SUBDIVISION, according
to the Plat thereof as recorded in Plat Book 3, at Page 161, of the Public
Records of Dade County, Florida.
Property Address: 240 NW 24th Street
Folio #01-3125-034-0560
LEGAL DESCRIPTION LOT 57 OF CORRECTED MAP OF SPAULDING SUBDIVISION, ACCORDING TO
THE PLAT THEREOF, AS RECORDED IN PLAT BOOK 3, PAGE 161, OF THE PUBLIC RECORDS OF
DADE COUNTY FLORIDA.
PROPERTY ADDRESS: 289 NW 23RD STREET
FOLIO #01-3125-034-0570
LEGAL DESCRIPTION LOTS 58 & 59 OF CORRECTED MAP OF SPAULDING SUBDIVISION,
ACCORDING TO THE PLAT THEREOF, AS RECORDED IN PLAT BOOK 3, PAGE 161, OF THE
PUBLIC RECORDS OF DADE COUNTY FLORIDA.
PROPERTY ADDRESS: 297 NW 23RD STREET
FOLIO #01-3125-034-0380
LEGAL DESCRIPTION W50FT LOT 36 LESS ST OF CORRECTED MAP OF SPAULDING
SUBDIVISION, ACCORDING TO THE PLAT THEREOF, AS RECORDED IN PLAT BOOK 3 PAGE 161,
OF THE PUBLIC RECORDS OF DADE COUNTY FLORIDA.
PROPERTY ADDRESS: 320 NW 24TH STREET
"RENTAL TUCKER LERNER"
4
<PAGE> 18
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT ("AMENDMENT"), effective as of
July 30, 1999, is entered into by NITRAM PARTNERS, LTD., a Florida limited
partnership ("LANDLORD"), and MIAMI METAL PRODUCTS, INC., a Florida corporation,
d/b/a POMPEII FURNITURE INDUSTRIES ("TENANT").
A. This Amendment entered into in connection with the Stock Purchase
Agreement, dated as of November 23, 1998, as amended (the "PURCHASE AGREEMENT"),
whereby Winston Furniture Company of Alabama, Inc. is purchasing all of the
capital stock of Tenant.
B. Landlord and Tenant entered into a Lease Agreement dated August 1,
1998 (the "LEASE") for the Premises described in Exhibit "A" to the Lease.
C. Landlord and Tenant desire to modify certain provisions thereof,
all on the terms and conditions set forth in this Amendment.
D. Capitalized terms used herein and not otherwise defined shall have
the same meaning as set forth in the Lease.
In consideration of the premises and the mutual covenants and
agreements contained herein, it is agreed as follows:
1. DEMISED PREMISES DESCRIPTION. Section 1 of the Lease is hereby
amended in its entirety and restated as follows:
"1. DEMISED PREMISES DESCRIPTION. Landlord does hereby lease to Tenant
and Tenant does hereby lease from Landlord those properties comprised of
approximately 220,468 gross square feet of real estate, including land and
buildings, more particularly described in Exhibit "A" attached hereto and
incorporated herein by reference (the "Premises")."
2. TERM. Section 2 of the Lease is hereby amended in its entirety and
restated as follows:
"2. TERM.
The initial terms of the lease was for five (5) years commencing on the
1st day of August, 1998 (the "Lease Commencement Date"). The initial term
of this Lease shall be changed from five (5) years to ten (10) years and,
for purposes of Tenant's renewal options as provided in the succeeding
paragraph, the Lease Commencement Date shall be the date of this Amendment.
5
<PAGE> 19
Tenant, at its discretion, may renew this Lease for a maximum of two
consecutive additional five (5) year terms, for a maximum duration of
twenty (20) years from the Lease Commencement Date. Tenant shall exercise
renewal rights by providing written notice to landlord of its intent to
renew no later than 18 months prior to expiration of the then current lease
term."
3. RENT AND SECURITY.
3.1 The first two sentences at Section 3A of the Lease are hereby
amended to read as follows:
"Tenant agrees to and shall pay to Landlord, as rent for the Premises, rent
in equal monthly installments at the rate of $31,250.00 per month, as
adjusted pursuant to the provisions of this Section 3A and Section 3D, plus
applicable sales tax, in advance on the first day of each month commencing
on the 1st day of August 1998 and monthly thereafter. Upon the commencement
of each lease year on the anniversary date of this Amendment, the rent
shall be adjusted by increasing (and never decreasing) the rent of the last
completed lease year by an amount equal to the percentage increase in the
CPI between the first and last month of the last completed lease year."
3.2 The following new Section 3D is hereby added to the Lease:
"D. Landlord is being required to correct certain code violations with
respect to the Premises by the City of Miami. As a result of Landlord's
expenditures to correct such violations, Tenant agrees to increase the
annual rent paid hereunder by $125,000.00, with such increase to be
effective in accordance with the following provisions. On a quarterly basis
commencing November 1, 1999, Landlord shall (i) certify to Tenant the
amount paid toward the corrections, together with the total cost of the
corrections to be made and (ii) provide Tenant with supporting
documentation reasonably acceptable to Tenant evidencing the amount paid.
Tenant agrees to pay as increased annual rent $125,000.00 times a fraction,
the numerator of which is the amount paid to date on the corrections and
the denominator of which is the total cost of the corrections to be made,
as determined in advance by the parties based upon a good faith estimate of
the costs or as stated in a fixed price construction contract, with
payments to be made in monthly installments together with the monthly rent
required to be paid pursuant to Section 3A; PROVIDED, HOWEVER, if any
amounts are paid by Landlord prior to the date of this First Amendment, the
increased rent shall be effective as of the date hereof; PROVIDED, FURTHER,
the additional amounts paid pursuant to this Section 3D shall be subject to
the CPI adjustment as provided in
6
<PAGE> 20
Section 3A. The provisions of this Section 3D are illustrated by the
following example:
EXAMPLE: On or before November 1, 1999 Landlord certifies to Tenant that it
has paid $300,000 of the $3,000,000 total cost of the corrections.
Effective November 1, 1999, in addition to the monthly rent paid pursuant
to Section 3A, Tenant will pay $1,041.66, computed as follows:
($125,000 x $ 300,000 = $12,500 (divided by) 12)
----------
$3,000,000
Further, on or before February 1, 2000 Landlord certifies to Tenant that it
has paid $500,000 of the $3,000,000 total cost of the corrections (such
amount including the initial $300,000 included in the November 1, 1999
certification). Effective February 1, 2000, in addition to the monthly rent
paid pursuant to Section 3A, Tenant will pay $1,736.08, computed as
follows:
($125,000 x $ 500,000 = $20,833 (divided by) 12)"
----------
$3,000,000
4. MAINTENANCE AND REPAIR. Notwithstanding the provisions of the third
sentence of Section 8 of the Lease, the Landlord shall be solely responsible to
maintain and make all necessary repairs to the foundations, structures, load
bearing walls, roofs (except as modified in this First Amendment), gutters,
downspouts, landscape, parking areas, common areas, and loading docks, if any,
on or appurtenant to the Premises; however, Tenant shall be responsible for
repairs for damages to the walls, ceiling, roof, floors, electrical system,
plumbing system and HVAC system, if such damage was caused by Tenant in its
operations. Landlord represents and warrants that the roof will be free Of
unreasonable leaks, as has been customary.
Landlord and Tenant agree that an inspection will be made of the Premises
prior to the closing date of the transactions contemplated by the Purchase
Agreement and that the parties will cause a punch list to be prepared, signed by
Landlord or its agent and Tenant, of existing repairs needed to the Premises.
Landlord agrees to promptly correct ail defects noted on such punch list.
5. INSURANCE. The first two paragraphs of Section 11 of the Lease are
hereby amended and restated in their entirety to read as follows:
"Landlord covenants and agrees that throughout the term of this lease it
will insure the Building and Building improvements (excluding any property
with respect to which Tenant is obligated to insure) against damage by fire
including extended coverage, vandalism and malicious mischief and
comprehensive general liability insurance in such amounts
7
<PAGE> 21
as would be carried by a prudent owner of a similar building in the
geographic area.
Tenant covenants and agrees that throughout the term of this lease it
will insure its improvements and property against damage by fire including
extended coverage, vandalism and malicious mischief and comprehensive
general liability insurance with limits of at least $1,000,000/$2,000,000
for injury to person and $500,000 for damage to property. Tenant shall
provide Landlord with certificates evidencing the aforesaid insurance
coverages prior to occupancy and thereafter upon request and all the said
policies shall name Tenant as insured party and Landlord as additional
insured. Said policies shall also provide that the insurer shall provide
thirty days notice to landlord prior to cancellation."
6. ASSIGNMENT, SUBLETTING. Section 18 of the Lease is hereby amended and
restated in its entirety to read as follows:
"Tenant shall be permitted to sublet any portion of the Premises,
provided that (a) Tenant shall remain liable for the rent on the subleased
premises, (b) any rent earned by the Tenant in excess of the rent paid to
Landlord hereunder for such subleased premises shall be paid to Landlord;
and (c) the subtenant will use the subleased premises for purposes
reasonably acceptable to Landlord. Prior to any such to any such
assignment, Tenant shall deliver to Landlord a written agreement from the
assignee agreeing with Landlord to perform the terms, covenants and
conditions of Tenant contained in this Lease."
7. MORTGAGE SUBORDINATION. In the seventh line of Section 22 the words "it
will be a party to said agreement" are hereby deleted.
8. HAZARDOUS MATERIAL. Section 27 is amended and restated in its entirety
to read as follows:
"ENVIRONMENTAL MATTERS.
DEFINITIONS. As used in this Lease:
(i) "Landlord Parties" means any officer, member, contractor,
agent, employee, customer, guest, licensee or invitee of the
Landlord.
(ii) "Environmental Contamination" means the violation of any
Environmental Law either presently in effect or hereafter
enacted or promulgated; the use, generation, release,
transportation, storage or disposal of any Regulated
Materials in violation of any Environmental Laws either
presently in effect or hereafter enacted or promulgated; the
existence of any condition on the Property in violation or
the presence of any Regulated Material
8
<PAGE> 22
on the Property in violation of any Environmental Laws either
presently in effect or now or hereafter enacted or
promulgated.
(iii) "Environmental Law" means any Laws relating to underground or
petroleum storage tanks; the protection of human health or
the environment; wetlands; soil, air or water quality; or the
use, generation, release, transportation, storage or disposal
of Regulated Materials, including, but not limited to, the
Comprehensive Environmental Response, Compensation and
Liability Act; the Resource Conservation and Recovery Act;
the Solid Waste Disposal Act; the Clean Air Act; the Clean
Water Act; the Federal Insecticide, Fungicide and Rodenticide
Act; the National Environmental Policy Act; the Endangered
Species Act of 1973; any analogous state laws; and any
regulations promulgated under any of the foregoing.
(iv) "Regulated Material" means any substance that is regulated by
or controlled under any Environmental Laws; that is or
becomes defined as a solid, toxic or hazardous waste,
substance or material or a pollutant or contaminate under any
Environmental Laws; that is flammable, explosive, corrosive,
radioactive, reactive, or carcinogenic; or that contains
petroleum, polychlorinated bypheynols, asbestos or urea
formaldehyde foam insulation.
(v) "Tenant Parties" means any officer, member, contractor,
agent, employee, customer, guest, licensee or invitee of the
Tenant.
LANDLORD REPRESENTATION. Landlord restates, ratifies and
affirms all representations, warranties and agreement made
with respect to the environmental condition of the property
which the Premises are a part of as set forth in Section
3B(v) of the Stock Purchase Agreement by and among THE NAMED
SELLERS and WINSTON FURNITURE COMPANY OF ALABAMA, INC. and
MIAMI METAL PRODUCTS, INC. and INDUSTRIAL MUEBLERA POMPEII de
MEXICO, S.A. de C.V. dated as of November 23, 1998, and
further represents and warrants that there is no
Environmental Contamination wit respect to the Premises and
that the Premises are in compliance with all Environmental
Laws.
INDEMNIFICATION. Landlord shall indemnify, defend and hold
Tenant harmless from and against any and all claims caused
by, alleged to be caused by, arising out of or relating to
(i) any inaccuracy in the representations or warranties of
the Landlord relating to the environmental condition of the
Premises contained
9
<PAGE> 23
in either the Purchase Agreement or this Lease; (ii) any
Environmental Contamination of the Premises existing on or
before the date of this Lease Amendment or caused, in whole
or in part, by Landlord, by any Landlord Parties or any party
other than Tenant or the Tenant Parties; (iii) any condition
existing on the Premises as of the date of this Lease
Amendment or caused or created by Landlord or any Landlord
Parties or any party other than Tenant or the Tenant Parties
that constitutes a violation of any Environmental Laws or
that may, in the future, constitute a violation of any
Environmental Laws; (iv) any matters identified in the Phase
I Environmental Site Assessment dated July 24, 1998 as
prepared by Environmental Control, Inc. and (v) any failure
by Landlord or any Landlord Party to clean up and remediate
any Environmental Contamination on the Premises in accordance
with all applicable laws.
TENANT OBLIGATIONS. Tenant shall not violate and shall, at
Tenant's expense, fully comply with, all Environmental Laws
applicable to Tenant and its business, except to the extent
that Landlord has agreed to comply with such Environmental
Laws as provided in the Purchase Agreement and this Lease
Amendment or to the extent that such compliance is
necessitated or required because of a violation of any
Environmental Law before the date of execution of this Lease
Amendment or because of a condition that existed before the
date of execution of this Lease Amendment."
9. The following new Section 32 is added to the Lease:
"32. ADA COMPLIANCE.
Landlord represents and warrants that the Premises and common
areas of the building comply with the Americans With Disabilities
Act and agrees that it shall be responsible for all costs and
expenses required for such compliance."
10. The following new Section 33 is added to the Lease:
"33. LANDLORD REPRESENTATION
Except as set forth in Section 38(j) of the Disclosure
Schedule to the Purchase Agreement, Landlord represents and warrants
that (a) it has not received any notice of noncompliance with
federal, state, county and city laws, ordinances and regulations
with respect to the Premises and (b) it has all appropriate licenses
and
10
<PAGE> 24
certificates necessary to conduct its operations and such licenses
and certificates are current."
11. RATIFICATION OF REMAINING PROVISIONS OF LEASE. The remaining
provisions of the Lease are hereby ratified and affirmed.
IN WITNESS WHEREOF, the undersigned have executed this First Amendment
to Lease Agreement as of the 30th day of July, 1999.
TENANT: LANDLORD:
MIAMI METAL PRODUCTS, INC. NITRAM PARTNERS, LTD.
By: Nitram Holdings, Inc.,
its General Partner
By: /s/ Leo Martin, President By: /s/ Leo Martin, President
--------------------------- ----------------------------
Leo Martin, President Leo Martin, President
11
<PAGE> 1
EXHIBIT 10.13
STOCK PURCHASE AGREEMENT
by and among
THE NAMED SELLERS
and
WINSTON FURNITURE COMPANY OF ALABAMA, INC.
and
MIAMI METAL PRODUCTS, INC.
and
INDUSTRIAL MUEBLERA POMPEII de MEXICO, S.A. de C.V.
dated as of November 23, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. DEFINITIONS..............................................................................1
2. PURCHASE AND SALE OF COMPANY SHARES AND IMP SHARES......................................10
(a) BASIC TRANSACTION..............................................................11
(b) PURCHASE PRICE.................................................................11
(c) PAYMENT OF COMPANY PURCHASE PRICE AND IMP PURCHASE PRICE.......................11
(d) FUNDED INDEBTEDNESS ...........................................................12
(e) EARNOUT........................................................................12
(f) POST-CLOSING COMPANY PURCHASE PRICE ADJUSTMENT.................................16
(g) THE CLOSING....................................................................18
(h) DELIVERIES AT THE CLOSING......................................................18
(i) TRANSFER TAXES.................................................................18
(j) NET CASH PAYMENT TO SELLERS....................................................18
3A. REPRESENTATIONS AND WARRANTIES OF THE SELLERS...........................................19
(a) CAPACITY.......................................................................19
(b) BINDING OBLIGATION.............................................................19
(c) NONCONTRAVENTION...............................................................19
(d) OWNERSHIP OF COMMON STOCK AND IMP STOCK .......................................19
(e) BROKERS' FEES..................................................................20
3B. REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE COMPANY AND IMP.......20
(a) ORGANIZATION/POWER AND AUTHORITY TO CONDUCT BUSINESS ..........................20
(b) AUTHORIZATION OF TRANSACTION...................................................20
(c) NONCONTRAVENTION...............................................................20
(d) BROKERS' FEES..................................................................21
(e) CAPITALIZATION.................................................................21
(f) FINANCIAL STATEMENTS...........................................................22
(g) ABSENCE OF CERTAIN DEVELOPMENTS................................................22
(h) UNDISCLOSED LIABILITIES........................................................24
(i) LEGAL COMPLIANCE...............................................................24
(j) COMPANY AND IMP PERMITS........................................................24
(k) TAX MATTERS....................................................................25
(l) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY AND IMP........................26
(m) TITLE TO TANGIBLE ASSETS OTHER THAN REAL PROPERTY INTERESTS....................27
(n) REAL PROPERTY..................................................................27
(o) INTELLECTUAL PROPERTY..........................................................28
(p) CONTRACTS......................................................................29
(q) POWERS OF ATTORNEY.............................................................29
(r) INSURANCE......................................................................29
(s) LITIGATION.....................................................................29
(t) LABOR RELATIONS................................................................30
(u) EMPLOYEE BENEFITS..............................................................30
(v) ENVIRONMENTAL, HEALTH AND SAFETY MATTERS.......................................32
</TABLE>
- i -
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(w) CUSTOMERS AND SUPPLIERS........................................................33
(x) INVENTORY......................................................................33
(y) ACCOUNTS RECEIVABLE............................................................33
(z) LIST OF ACCOUNTS...............................................................34
(aa) PRODUCTS LIABILITY.............................................................34
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.........................................34
(a) ORGANIZATION...................................................................34
(b) AUTHORIZATION OF TRANSACTION...................................................34
(c) NONCONTRAVENTION...............................................................34
(d) BROKERS' FEES..................................................................34
(e) ACQUISITION OF SHARES FOR INVESTMENT...........................................35
5. PRE-CLOSING COVENANTS...................................................................35
(a) GENERAL........................................................................35
(b) NOTICES AND CONSENTS...........................................................35
(c) OPERATION OF BUSINESS .........................................................35
(d) PRESERVATION OF BUSINESS ......................................................35
(e) FULL ACCESS ...................................................................36
(f) NOTICE OF DEVELOPMENTS.........................................................36
(g) NO ADDITIONAL REPRESENTATIONS OR WARRANTIES....................................36
6. POST-CLOSING COVENANTS..................................................................36
(a) GENERAL........................................................................36
(b) SECTION 338(h)(10) ELECTION....................................................37
(c) TRANSITION.....................................................................38
(d) LITIGATION SUPPORT.............................................................38
(e) NONCOMPETITION.................................................................38
(f) NON-SOLICITATION...............................................................39
(g) CONFIDENTIALITY................................................................39
7. NO SHOP.................................................................................40
8. CONDITIONS TO OBLIGATION TO CLOSE.......................................................40
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER......................................40
(b) CONDITIONS TO OBLIGATION OF THE SELLERS........................................41
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.................................................42
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES.....................................42
(b) INDEMNIFICATION................................................................43
(c) TREATMENT OF INDEMNIFICATION PAYMENTS..........................................46
(d) EXCLUSIVE REMEDY...............................................................46
(e) ASSIGNMENT BY PURCHASER........................................................46
(f) NO CONTRIBUTION FROM COMPANY OR IMP............................................46
10. DISPUTE RESOLUTION......................................................................46
(a) DISPUTE DEFINED................................................................46
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(b) DISPUTE RESOLUTION PROCEDURES..................................................47
(c) PROVISIONAL REMEDIES...........................................................48
(d) TOLLING OF STATUTE OF LIMITATIONS..............................................48
(e) PERFORMANCE TO CONTINUE........................................................48
(f) EXTENSION OF DEADLINES.........................................................48
(g) ENFORCEMENT....................................................................48
(h) COSTS..........................................................................48
11. ADDITIONAL AGREEMENTS...................................................................48
(a) PRODUCT RETURNS................................................................49
(b) SELLERS' GUARANTEE OF ACCOUNTS RECEIVABLE......................................49
(c) VACATION AND HOLIDAY ACCRUAL...................................................50
(d) EPCRA FILINGS..................................................................51
(e) LITIGATION.....................................................................51
12. TERMINATION.............................................................................51
(a) TERMINATION OF AGREEMENT.......................................................51
(b) EFFECT OF TERMINATION..........................................................52
13. WINSLOEW FURNITURE GUARANTY.............................................................52
14. MISCELLANEOUS...........................................................................52
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS........................................52
(b) NO THIRD-PARTY BENEFICIARIES...................................................52
(c) ENTIRE AGREEMENT...............................................................52
(d) SUCCESSION AND ASSIGNMENT......................................................52
(e) COUNTERPARTS...................................................................53
(f) HEADINGS.......................................................................53
(g) NOTICES........................................................................53
(h) GOVERNING LAW; VENUE...........................................................54
(i) AMENDMENTS AND WAIVERS.........................................................54
(j) SEVERABILITY...................................................................55
(k) EXPENSES.......................................................................55
(l) CONSTRUCTION...................................................................55
(m) INCORPORATION OF DISCLOSURE SCHEDULE...........................................55
(n) EQUITABLE REMEDIES.............................................................55
(o) WAIVER OF JURY TRIAL...........................................................56
(p) PREVAILING PARTIES.............................................................56
</TABLE>
Exhibit A -- Escrow Agreement
Exhibit B -- Employment Agreement With Perry Martin
Exhibit C -- Consulting Agreement With Leo Martin
Exhibit D -- Lease Amendment With Nitram Partners, Ltd.
Exhibit E -- Joinder Agreement With Sherry Mittleman and Lisa Schneiderman
Disclosure Schedule
-iii-
<PAGE> 5
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is made as of November __, 1998,
by and among WINSTON FURNITURE COMPANY OF ALABAMA, INC., an Alabama corporation
(the "PURCHASER"), MIAMI METAL PRODUCTS, INC., D/B/A POMPEII FURNITURE
INDUSTRIES, a Florida corporation (the "COMPANY"), INDUSTRIAL MUEBLERA POMPEII
DE MEXICO, S.A. DE C.V., a Mexican corporation ("IMP") and the following selling
shareholders, LEO MARTIN ("L. MARTIN"), GLORIA MARTIN ("G. MARTIN"), DONALD R.
TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE LEO MARTIN RETAINED ANNUITY TRUST
AGREEMENT I, DONALD R. TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE LEO MARTIN
RETAINED ANNUITY TRUST AGREEMENT II, DONALD R. TESCHER, TRUSTEE AND NOT
INDIVIDUALLY OF THE LEO MARTIN RETAINED ANNUITY TRUST AGREEMENT III, DONALD R.
TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE GLORIA MARTIN RETAINED ANNUITY
TRUST AGREEMENT I, DONALD R. TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE GLORIA
MARTIN RETAINED ANNUITY TRUST AGREEMENT II, and DONALD R. TESCHER, TRUSTEE AND
NOT INDIVIDUALLY OF THE GLORIA MARTIN RETAINED ANNUITY TRUST AGREEMENT III
(collectively, the "SELLERS" and individually, a "SELLER"). The Purchaser, the
Company, IMP and the Sellers are each referred to in this Agreement as a "PARTY"
and collectively as the "PARTIES". WinsLoew Furniture, Inc. and Perry B. Martin
are parties to this Agreement solely for the purpose of agreeing to the
provisions set forth above their respective signatures.
The Sellers directly own all of the outstanding capital stock
of the Company. L. Martin and G. Martin directly own all of the outstanding
capital stock of IMP.
This Agreement contemplates a transaction in which (i) the
Purchaser will purchase from the Sellers, and the Sellers will sell to the
Purchaser, all of the outstanding capital stock of the Company and (ii) the
Purchaser will purchase from L. Martin and G. Martin, and L. Martin and G.
Martin will sell to the Purchaser, all of the outstanding capital stock of IMP.
NOW, THEREFORE, in consideration of the premises and the
mutual promises herein made, and in consideration of the representations,
warranties and covenants herein contained, the Parties agree as follows.
1. DEFINITIONS.
"ACCOUNTING FIRM" has the meaning set forth in section 2(e)(vi) below.
"ACCOUNTS RECEIVABLE" means all of the Company's accounts, instruments,
drafts, acceptances and other forms of receivables and all rights earned under
the Company's contracts to sell goods or render services, including, but not
limited to, rights to any letters of credit which back any Account Receivable.
- 1 -
<PAGE> 6
"ADJUSTED EBITAM" means has the meaning set forth in section 2(e)(iv)
below.
"ADJUSTED EBITAM STATEMENT" has the meaning set forth in section
2(e)(vi) below.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"AFFILIATED GROUP" means any affiliated group within the meaning of
section 1504 of the Code.
"ALLOCATION SCHEDULE" has the meaning set forth in section 6(b)(iv)
below.
"ASSIGNED RECEIVABLES" has the meaning set forth in section 11(b)(ii)
below.
"AUTHORITY" means any federal, state, local or foreign governmental
regulatory agency, commission, bureau, authority, court or arbitration tribunal.
"AVAILABLE CASH" means all Cash held by the Company as of midnight on
the day before the Closing Date less (i) an amount of Cash necessary to cover
outstanding checks (which are not otherwise stale) which have been mailed or
otherwise delivered by the Company but have not cleared and (ii) the amount
necessary to comply with the provisions of section 8(a)(xiv).
"BUSINESS OF THE COMPANY AND IMP" means the manufacture of high-end
metal-frame furniture for residential and hospitality industries.
"CASH" means cash and cash equivalents (including marketable securities
and short term investments) calculated in accordance with GAAP applied on a
basis consistent with the preparation of the Financial Statements.
"CERCLA" has the meaning set forth in section 3B(v)(vi) below.
"CLOSING" has the meaning set forth in section 2(g) below.
"CLOSING BALANCE SHEET" has the meaning set forth in section 2(f)(i)
below.
"CLOSING DATE" has the meaning set forth in section 2(g) below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the preface above.
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<PAGE> 7
"COMPANY COMMON STOCK" means the Class A Common Stock, $.10 par value,
and the Class B Common Stock, $.10 par value, of the Company.
"COMPANY PERMITS" has the meaning set forth in section 3B(j)(i) below.
"COMPANY PRO RATA SHARE" means with respect to any Seller a fractional
multiplier of which the numerator is the number of shares of Company Common
Stock held by such Seller and the denominator is the total number of shares of
Company Common Stock held by all Sellers.
"COMPANY PURCHASE PRICE" has the meaning set forth in section 2(b)(i)
below.
"COMPANY PURCHASE PRICE ADJUSTMENT" has the meaning set forth in
section 2(f)(iii) below.
"COMPANY PURCHASE PRICE ADJUSTMENT ESCROW ACCOUNT" has the meaning set
forth in section 2(c)(ii) below
"COMPANY SHARES" has the meaning set forth in section 2(a) below.
"CONFIDENTIALITY AGREEMENT" has the meaning set forth in section 121(b)
below.
"CONFIDENTIAL INFORMATION" means data and information relating to the
Business of the Company and IMP (which does not rise to the level of a Trade
Secret) which is not generally known to their competitors and which (a) derives
economic value, actual or potential, from not being known to, and not being
readily ascertainable by proper means by, other persons who can obtain economic
value from its disclosure or use, and (b) is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy. Confidential
Information does not include any data or information that has been voluntarily
disclosed to the public by the Company or IMP or that has been independently
developed and disclosed by others, or that otherwise enters the public domain
through lawful means.
"CONSULTING AGREEMENT" means the Consulting Agreement to be entered
into between the Purchaser and Leo Martin in the forms of EXHIBIT C hereto.
"DEDUCTIBLE" has the meaning set forth in section 9(b)(i) below.
"DEFENSE COUNSEL" has the meaning set forth in section 9(b)(v) below.
"DEFENSE NOTICE" has the meaning set forth in section 9(b)(v) below.
"DETERMINATION NOTICE" has the meaning set forth in section 2(e)(ii)
below.
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<PAGE> 8
"DISCLOSURE SCHEDULE" means the Disclosure Schedule accompanying this
Agreement.
"DISPUTE" has the meaning set forth in section 10(a) below.
"EARNOUT" has the meaning set forth in section 2(e)(i) below.
"EARNOUT ACTUAL AMOUNT" has the meaning set forth in section
2(e)(vi)(C) below.
"EARNOUT HIGH AMOUNT" has the meaning set forth in section 2(e)(vi)(B)
below.
"EARNOUT LOW AMOUNT" has the meaning set forth in section 2(e)(vi)(A)
below.
"EMPLOYEE BENEFIT PLAN" has the meaning set forth in section 3B(u)
below.
"EMPLOYEE BENEFIT PLAN REPRESENTATIONS AND WARRANTIES" has the meaning
set forth in section 9(a) below.
"EMPLOYEE PENSION BENEFIT PLAN" has the meaning set forth in ERISA
section 3(2).
"EMPLOYEE WELFARE BENEFIT PLAN" has the meaning set forth in ERISA
section 3(1).
"EMPLOYMENT AGREEMENT" means the Employment Agreement to be entered
into between the Purchaser and Perry B. Martin in the form of EXHIBIT B hereto.
"ENVIRONMENTAL, HEALTH AND SAFETY REQUIREMENTS" means all federal,
state, local, regional and foreign statutes, regulations and ordinances
concerning workplace health and safety and pollution or protection of the
environment, including all those relating to the presence, use, production,
generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control or cleanup of any hazardous materials, substances or wastes.
"ENVIRONMENTAL CLAIM" means any written notice or claim by any Person
or any Authority alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on or resulting from (i) the presence,
release or threatened release into the environment, of any Material of
Environmental Concern at any location, whether or not owned, leased or operated
by the Company or IMP, or (ii) any violation, or alleged violation, of any
Environmental, Health and Safety Requirement.
"ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES" has the meaning set
forth in section 9(a) below.
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<PAGE> 9
"EPCRA" has the meaning set forth in section 3B(v)(ii) below.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGREEMENT" means the Escrow Agreement, in the form of EXHIBIT A
hereto, to be entered into on the Closing Date by the Company, the Sellers, the
Sellers' Representative and the Escrow Agent.
"ESCROW AGENT" has the meaning set forth in section 2(c)(ii) below.
"ESCROW FUND" has the meaning set forth in section 2(c)(ii) below.
"FINAL ADJUSTED EBITAM DETERMINATION DATE" has the meaning set forth in
section 2(e)(vi) below.
"FINAL CLOSING BALANCE SHEET DETERMINATION DATE" has the meaning set
forth in section 2(f)(ii) below.
"FINANCIAL STATEMENTS" has the meaning set forth in section 3B(f)
below.
"FUNDED INDEBTEDNESS" means the aggregate amount (including the current
portions thereof) of all (i) indebtedness for money borrowed from others and
purchase money indebtedness of the Company and IMP, (ii) indebtedness of the
type described in clause (i) above guaranteed, directly or indirectly, in any
manner by the Company or IMP, or in effect guaranteed, directly or indirectly,
in any manner by the Company or IMP, through an agreement, contingent or
otherwise, to supply funds to, or in any other manner invest in, the debtor, or
to purchase indebtedness, or to purchase and pay for property if not delivered
or to pay for services if not performed, primarily for the purpose of enabling
the debtor to make payment of the indebtedness or to assure the owners of the
indebtedness against loss, but excluding endorsements of checks and other
instruments in the ordinary course, (iii) indebtedness of the type described in
clause (i) above secured by any Lien upon property owned by the Company or IMP,
even though neither the Company nor IMP has in any manner become liable for the
payment of such indebtedness and (iv) interest expense accrued but unpaid, and
all prepayment premiums, on or relating to any of such indebtedness.
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"G. MARTIN" has the meaning set forth in the preface above.
"GENERAL INDEMNIFICATION ESCROW ACCOUNT" has the meaning set forth in
section 2(c)(ii) below
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<PAGE> 10
"HART-SCOTT-RODINO ACT" means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended.
"IMP" has the meaning set forth in the preface above.
"IMP PERMITS" has the meaning set forth in section 3B(j)(ii) below.
"IMP PRO RATA SHARE" means with respect to L. Martin and G. Martin a
fractional multiplier of which the numerator is the number of shares of IMP
Stock held by such Person and the denominator is the total number of shares of
IMP Stock held by both L. Martin and G. Martin.
"IMP PURCHASE PRICE" has the meaning set forth in section 2(b)(ii)
below.
"IMP SHARES" has the meaning set forth in section 2(a) below.
"IMP STOCK" means the Series B Stock of IMP.
"INDEMNIFIED PARTIES" has the meaning set forth in section 9(b)(v)
below.
"INDEMNIFYING PARTIES has the meaning set forth in section 9(b)(v)
below.
"INITIAL PAYMENT" has the meaning set forth in section 2(c)(i) below.
"INTELLECTUAL PROPERTY" means all trademarks, service marks, trade
dress, logos, trade names and corporate names, together with all goodwill
associated therewith (including all translations, adaptations, derivations and
combinations of the foregoing); copyrights and copyrightable works;
registrations, applications and renewals for any of the foregoing; trade secrets
and confidential information (including, without limitation, ideas,
compositions, know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs, plans,
proposals, technical data, business and marketing plans, and customer and
supplier lists and related information); and computer software (including,
without limitation, data, data bases and documentation).
"IRS" means the Internal Revenue Service.
"INVENTORY" means all of the inventories of the Company and IMP,
including without limitation, raw materials, work in progress, finished goods,
packaging goods and other like items.
"JOINDER AGREEMENT" means the Joinder Agreement to be entered into by
Sherry Mittleman and Lisa Schneiderman in the form of EXHIBIT E hereto.
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<PAGE> 11
"KNOWLEDGE" means, with respect to the Sellers (for the Company) and L.
Martin and G. Martin (for IMP), the actual knowledge, after reasonable
investigation, of any of L. Martin, Perry B. Martin, Larry Schroeder and J.L.
Emery.
"L. MARTIN" has the meaning set forth in the preface above.
"LEASE AMENDMENT" means the First Amendment to Lease Agreement to be
entered into between the Company and Nitram Partners, Ltd. in the form of
EXHIBIT D hereto.
"LIEN" means any mortgage, pledge, lien, encumbrance, charge or other
security interest, whether or not related to the extension of credit or the
borrowing of money.
"LOSS" or "LOSSES" means all damages, dues, penalties, fines,
reasonable amounts paid in settlement, Taxes, costs, obligations, losses,
expenses, and fees (including court costs and reasonable attorneys' fees and
expenses), including, as the context may require, any of the foregoing which
arise out of or in connection with any actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees or rulings.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means any change
or effect that is materially adverse to the business, financial condition or
results of operations of the Company or IMP.
"MATERIAL CONTRACT" means any contract or agreement whether written or
oral to which either the Company or IMP is a party, or by which the Company or
IMP or any of their respective assets is bound, and which (a) relates to Funded
Indebtedness or is a letter of credit, pledge, bond or similar arrangement
running to the account of or for the benefit of the Company or IMP, (b) relates
to the purchase, maintenance or acquisition of, or sale or furnishing of,
materials, supplies, merchandise, machinery, equipment, parts or any other
property or services (excluding any such contract made in the Ordinary Course of
Business and which is expected to be fully performed within 90 days of the date
hereof or which involves revenues or expenditures of less than $50,000), (c) is
a collective bargaining agreement, (d) obligates the Company or IMP not to
compete with any business, or which otherwise restrains or prevents the Company
or IMP from carrying on any lawful business or which restricts the right of the
Company or IMP to use or disclose any information in its possession (excluding
in each case customary restrictive covenants contained in agreements entered
into in the Ordinary Course of Business), (e) relates to (i) employment,
compensation, severance, or consulting between the Company or IMP and any of
their respective officers or directors, or (ii) between the Company or IMP and
any other employees or consultants of the Company or IMP who are entitled to
compensation thereunder in excess of $35,000 per annum, (f) is a lease or
sublease of real property, or a lease, sublease or other title retention
agreement or conditional sales agreement involving annual payments in excess of
$25,000 individually or $100,000 in the aggregate for any machinery, equipment,
vehicle or other tangible personal property (whether the Company or IMP
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<PAGE> 12
is a lessor or lessee), (g) is a contract for capital expenditures or the
acquisition or construction of fixed assets for or in respect of any real
property involving payments to be made after the date hereof in excess of
$50,000, (h) is a contract granting any Person a Lien on any of the assets of
the Company or IMP, in whole or in part (other than Permitted Liens), (i) is a
contract by which the Company or IMP retains any manufacturer's representatives,
broker or other sales agent, distributor or representative or through which the
Company or IMP is appointed or authorized as a sales agent, distributor or
representative, (j) is a joint venture or partnership contract, a limited
liability company operating agreement or an agreement or arrangement with any
Seller, or with any Affiliate of any Seller, (k) is (i) an agreement for the
storage, transportation, treatment and disposal of any materials subject to
regulation under any Environmental Health and Safety Requirements, or (ii) a
contract for storage, transportation or similar services with carriers or
warehousemen (excluding any such contract entered into in the Ordinary Course of
Business and involving aggregate annual expenditures not exceeding $50,000), or
(l) any other agreement (or group of related agreements) the performance of the
executory portion of which involves consideration in excess of $50,000 or which
cannot be terminated by the Company or IMP upon 90 days notice.
"MATERIALS OF ENVIRONMENTAL CONCERN" means chemicals, pollutants,
contaminants, wastes, toxic substances, hazardous substances, petroleum and
petroleum products in each case with respect to which liability or standards of
conduct are imposed pursuant to any Environmental, Health and Safety
Requirements.
"MEDIATION REQUEST" has the meaning set forth in section 10(b)(ii)
below.
"MOST RECENT BALANCE SHEET" means the balance sheet contained within
the Most Recent Financial Statements.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning set forth in section
3B(f) below.
"MOST RECENT FISCAL MONTH END" has the meaning set forth in section
3B(f) below.
"MOST RECENT FISCAL YEAR END" has the meaning set forth in section
3B(f) below.
"MULTIEMPLOYER PLAN" has the meaning set forth in ERISA section 3(37).
"NET WORKING CAPITAL" means the total current assets of the Company
(which current assets may include Cash but which shall not include any prepaid
recruiting expense) MINUS the total current liabilities of the Company (which
current liabilities shall exclude the current portion of any Funded
Indebtedness), in each case determined as of the close of business on the day
before the Closing Date.
"NET WORKING CAPITAL THRESHOLD AMOUNT" has the meaning set forth in
section 2(f)(iii) below.
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<PAGE> 13
"90 AND OVER ACCOUNTS RECEIVABLE" has the meaning set forth in section
11(b)(1) below.
"NOTICE OF DISAGREEMENT WITH ADJUSTED EBITAM STATEMENT" has the meaning
set forth in section 2(e)(vi) below.
"NOTICE OF DISAGREEMENT WITH CLOSING BALANCE SHEET" has the meaning set
forth in section 2(f)(ii) below.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERMITTED LIENS" means (i) Liens for Taxes not yet due and payable or
being contested in good faith by appropriate proceedings and as to which
adequate reserves have been established, (ii) workers or unemployment
compensation claims and/or Liens arising in the Ordinary Course of business,
(iii) mechanic's, materialman's, supplier's, vendor's, landlord's or similar
Liens arising in the Ordinary Course of Business securing amounts which are not
delinquent, and (iv) purchase money Liens and Liens securing rental payments
under capital lease arrangements.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"POST-CLOSING TAX PERIOD" means any tax period (including partial
periods) that ends after the Closing Date.
"PRE-CLOSING TAX PERIOD" means any tax period (including partial
periods) that ends on or prior to the Closing Date.
"PRODUCTS LIABILITY REPRESENTATIONS AND WARRANTIES" has the meaning set
forth in section 9(a) below.
"PURCHASER" has the meaning set forth in the preface above.
"REAL PROPERTY" has the meaning set forth in section 3B(n) below.
"RESTRICTED AREA" has the meaning set forth in section 6(e) below.
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<PAGE> 14
"Section 338(h)(10) ELECTION" has the meaning set forth in section
6(b)(i) below.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SELLER" or "SELLERS" has the meaning set forth in the preface above.
"SELLERS' REPRESENTATIVE" means L. Martin.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns, directly or indirectly, a majority of the
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"TAXES" means all federal, state, local and foreign taxes (including,
without limitation, income or profits taxes, premium taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, ad valorem taxes,
severance taxes, capital levy taxes, transfer taxes, value added taxes,
employment and payroll-related taxes, property taxes, business license taxes,
occupation taxes, import duties and other governmental charges and assessments),
of any kind whatsoever, including interest, additions to tax and penalties with
respect thereto.
"TAX REPRESENTATIONS AND WARRANTIES" has the meaning set forth in
section 9(a) below.
"TAX RETURN" means any return, declaration, report, claim for refund or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"THIRD PARTY CLAIM" has the meaning set forth in section 9(b)(v) below.
"TRADE SECRETS" means information relating to the Company and IMP,
without regard to form, including, but not limited to, technical or nontechnical
data, formulas, patterns, compilations, programs, devices, methods, techniques,
drawings, processes, financial data, financial plans, product plans or lists of
actual or potential customers or suppliers which is not commonly known by or
available to the public and which (a) derives economic value, actual or
potential, from not being known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value from its disclosure
or use, and (b) is the subject of efforts that are reasonable under the
circumstances to maintain its secrecy.
"TRANSACTION REPRESENTATIONS AND WARRANTIES" has the meaning set forth
in section 9(a) below.
2. PURCHASE AND SALE OF COMPANY SHARES AND IMP SHARES.
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<PAGE> 15
(a) BASIC TRANSACTION. On and subject to the terms and conditions of
this Agreement, (i) the Purchaser agrees to purchase from each of the Sellers,
and each of the Sellers agrees to sell to the Purchaser, free and clear of all
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Liens, claims and demands, all of the shares of Company
Common Stock owned by each of the Sellers as set forth in section 3B(E) OF THE
DISCLOSURE SCHEDUle (thE "COMPAny SHARES") for the consideration specified below
in this section 2 and (ii) the Purchaser agrees to purchase from each of L.
Martin and G. Martin, and each of L. Martin and G. Martin agrees to sell to the
Purchaser, free and clear of all restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), Liens, claims
and demands, all of the shares of IMP Stock owned by each of L. Martin and G.
Martin as set forth in section 3B(e) OF THE DISCLOSURE SCHEDULE (the "IMP
SHARES") for the consideration specified below in this section 2.
(b) PURCHASE PRICE.
(i) The aggregate purchase price to be paid by the Purchaser
for the all of the Company Shares (the "COMPANY PURCHASE PRICE") shall
be $16,400,000, MINUS (A) the amount of Funded Indebtedness as of the
Closing Date (after giving effect to any reduction of such Funded
Indebtedness on the Closing Date by application of Available Cash) and
MINUS (B) any Company Purchase Price Adjustment made pursuant to
section 2(f) below, PLus (C) any Earnout payments made pursuant to
section 2(e) below. The amount of the Company Purchase Price to be
received by each Seller shall be the Seller's Company Pro Rata Share
thereof.
(ii) The aggregate purchase price to be paid by the Purchaser
for the all of the IMP Shares (the "IMP PURCHASE PRICE") shall be
$50,000. The amount of the IMP Purchase Price to be received by each of
L. Martin and G. Martin shall be such Person's IMP Pro Rata Share
thereof.
(c) PAYMENT OF COMPANY PURCHASE PRICE AND IMP PURCHASE PRICE. On the
Closing Date, the Purchaser shall make payment of the Company Purchase Price and
the IMP Purchase Price as follows:
(i) To the Sellers, by wire transfer of immediately available
funds, the sum of $13,900,000 [$16,400,000 MINUS (A) the amount of
Funded Indebtedness as of the Closing Date (after giving effect to any
reduction of such Funded Indebtedness on the Closing Date by
application of Available Cash) and (B) $2,500,000 to be deposited as
the Escrow Fund pursuant to section 2(c)(ii) below] (thE "INITIAL
PAYMENt"), to the account designated in writing by the Sellers'
Representative at least two business days prior to the Closing Date.
(ii) To SunTrust Bank, Atlanta, as escrow agent (the "ESCROW
AGENT") pursuant to the terms of the Escrow Agreement, the sum of
$2,500,000 (the "ESCROW FUND"). As provided in the Escrow Agreement,
the Escrow Fund shall be divided into two accounts as
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<PAGE> 16
follows: (A) $50,000 thereof shall be held in an account (the "COMPANY
PURCHASE PRICE ADJUSTMENT ESCROW ACCOUNT") to be utilized to fund the
Company Purchase Price Adjustment as described in section 2(f) hereof,
and (B) $2,450,000 thereof shall be held in an account (the "GENERAL
INDEMNIFICATION ESCROW ACCOUNT") to provide indemnification to the
Purchaser as provided in section 9(b) hereof.
(iii) To L. Martin and G. Martin, by wire transfer of
immediately available funds, the sum of $50,000 to the account
designated in writing by the Sellers' Representative at least two
business days prior to the Closing Date.
(d) FUNDED INDEBTEDNESS. At the Closing, the Purchaser and/or the
Company (as determined by the Purchaser) shall deliver to the holders of Funded
Indebtedness an amount sufficient to repay all Funded Indebtedness outstanding
immediately prior to the Closing (in connection with which the Company shall
apply Available Cash to the reduction of Funded Indebtedness), with the result
that immediately following the Closing there will be no further monetary
obligations of the Company with respect to any Funded Indebtedness outstanding
immediately prior to the Closing. On the Closing Date, the Company will provide
the Purchaser with customary pay-off letters from all holders of Funded
Indebtedness outstanding immediately prior to the Closing, and make arrangements
reasonably satisfactory to the Purchaser for such holders to provide to the
Purchaser recordable form mortgage and lien releases, canceled notes, trademark
and patent assignments and other documents reasonably requested by the Purchaser
simultaneously with the Closing.
(e) EARNOUT.
(i) The Sellers will be entitled to receive a contingent
purchase price payment of up to $1,000,000 (the "EARNOUT") in
accordance with the provisions of this section 2(e). The Earnout shall
be payable with respect to the Company's fiscal year ending December
31, 1998 and the amount of the Earnout payment for such fiscal year
will be equal to two times the amount (if any) by which the Company's
Adjusted EBITAM for such fiscal exceeds $2,200,000; PROVIDED, HOWEVER,
that in no event shall the Earnout amount for such fiscal year be more
than $1,000,000. The amount of the Earnout to be received by each
Seller shall be the Seller's Company Pro Rata Share thereof.
(ii) Within a reasonable time after the conclusion of the
fiscal year ending December 31, 1998, but no later than 30 days
following the end of such fiscal year, the Purchaser shall deliver to
the Sellers' Representative a written notice which shall set forth an
estimate of the amount of the Company's Adjusted EBITAM for such fiscal
year and an estimate of the Earnout (if any) earned and all
calculations made in the determination of such amounts (the
"DETERMINATION NOTICE"). The chief financial officer of the Purchaser
shall
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<PAGE> 17
certify the amounts determined and calculations made as set forth in
the Determination Notice are true and correct to the best of his
knowledge and belief.
(iii) The Earnout shall be payable as follows. 75% of the
Earnout (if any) for any such fiscal year will be paid within three
business days of the Sellers' Representative's receipt of the
Determination Notice, by wire transfer of immediately available funds
to an account or accounts designated by the Sellers' Representative in
writing. The remaining Earnout (if any) will be paid upon the final
determination of the Adjusted EBITAM Statement for the fiscal year
ending December 31, 1998 in accordance with this section 2(e), by wire
transfer of immediately available funds to an account or accounts
designated by the Sellers' Representative in writing. If the amount of
the Earnout that is ultimately determined to be payable pursuant to
section 2(e)(vi) is less than the amount paid based upon the
Determination Notice, then the Sellers shall repay the difference
within three business days after such determination.
(iv) For purposes of this Agreement, "ADJUSTED EBITAM" for the
Company's fiscal year ending December 31, 1998 means the unaudited net
income (excluding extraordinary gains or losses) of the Company
(including IMP) for the twelve months ending on the last day of such
fiscal year, PLUS (A) any interest on indebtedness and any financing
and related fees and expenses deducted in determining net income, (B)
all fees or expenses incurred in connection with the transactions
contemplated by this Agreement deducted in determining net income, (C)
income Taxes deducted in determining net income, (D) any amortization
to the extent attributable to the purchase accounting "write-up"
resulting from the transactions contemplated hereby and deducted in
determining net income, (E) management or other fees charged by the
Purchaser and/or its Affiliates and (F) expenses of a non-recurring
nature that may occur subsequent to the Closing Date as mutually agreed
upon by the Purchaser and the Sellers' Representative.
(v) Except as otherwise expressly provided herein, any amount
or calculation to be made in connection with the Earnout shall be
determined or made (A) in accordance with GAAP applied in a manner
consistent with the same accounting principles and methodologies used
in the preparation of the Financial Statements, and (B) using the same
revenue, income and expense recognition policies and practices as have
been used by the Company prior to the Closing.
(vi) Within 90 days following the Closing, the Purchaser at
its expense shall prepare and deliver to the Sellers' Representative a
statement of the actual Adjusted EBITAM of the Company for such fiscal
year (the "ADJUSTED EBITAM STATEMENT"). The chief financial officer of
the Purchaser shall certify the amounts determined and calculations
made as set forth in the Adjusted EBITAM Statement are true and correct
to the best of his knowledge and belief. During the 30 days immediately
following receipt of the Adjusted
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<PAGE> 18
EBITAM Statement by the Sellers' Representative, the Sellers'
Representative and his accountants shall be entitled to review the
Adjusted EBITAM Statement and any working papers, trial balances and
similar materials relating to the Adjusted EBITAM Statement prepared by
the Purchaser or its accountants, and the Purchaser shall provide the
Sellers' Representative and his accountants with timely access, during
normal business hours, to the personnel, properties, books and records
of the Company. The Adjusted EBITAM Statement shall become final and
binding upon the parties on the 31st day following delivery thereof
unless the Sellers' Representative gives written notice to the
Purchaser of his disagreement with the Adjusted EBITAM Statement (a
"NOTICE OF DISAGREEMENT WITH ADJUSTED EBITAM STATEMENT") prior to such
date. Any Notice of Disagreement With Adjusted EBITAM Statement shall
specify in reasonable detail the nature of any disagreement so
asserted. If a timely Notice of Disagreement With Adjusted EBITAM
Statement is received by the Purchaser with respect to the Adjusted
EBITAM Statement, then the Adjusted EBITAM Statement (as revised in
accordance with clause (A) or (B) below), shall become final and
binding upon the Parties on the earlier of (A) the date the Purchaser
and the Sellers' Representative resolve in writing any differences they
have with respect to any matter specified in a Notice of Disagreement
With Adjusted EBITAM Statement, or (B) the date any matters in dispute
are finally resolved in writing by the Accounting Firm in the manner
described below (the date on which the Adjusted EBITAM Statement so
becomes final and binding being hereinafter referred to as the "FINAL
ADJUSTED EBITAM DETERMINATION DATE"). During the 30 days immediately
following the delivery of any Notice of Disagreement With Adjusted
EBITAM Statement, the Purchaser and the Sellers' Representative shall
seek in good faith to resolve in writing any differences which they may
have with respect to any matter specified in such Notice of
Disagreement With Adjusted EBITAM Statement. During such period, the
Sellers' Representative and his accountants shall each have access to
the Company's working papers, trial balances and similar materials
(including the working papers, trial balances and similar materials of
the Company's accountants) prepared in connection with the Purchaser's
preparation of the Adjusted EBITAM Statement. At the end of such 30-day
period, the Sellers' Representative and the Purchaser shall submit to
an independent "Big 6" public accounting firm (the "ACCOUNTING FIRM")
for review and resolution any and all matters which remain in dispute
and which were included in any Notice of Disagreement With Adjusted
EBITAM Statement (it being understood that the Accounting Firm shall
act as an arbitrator to determine, based solely on presentations by the
Purchaser and the Sellers' Representative (and not by independent
review), only those matters which remain in dispute), and the
Accounting Firm shall reach a final, binding resolution of all matters
which remain in dispute, which final resolution shall be (W) in
writing, (X) furnished to the Purchaser and the Sellers' Representative
as soon as practicable after the items in dispute have been referred to
the Accounting Firm, (Y) made in accordance with this Agreement, and
(Z) conclusive and binding upon the Parties to this Agreement and not
subject to collateral attack for any reason. The Adjusted EBITAM
Statement, with any adjustments necessary to reflect the Accounting
Firm's resolution of the
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<PAGE> 19
matters in dispute, shall become final and binding on the Parties on
the date the Accounting Firm delivers its final resolution to the
Parties. The Accounting Firm shall be mutually selected by the
Purchaser and the Sellers' Representative, or, if the Purchaser and the
Sellers' Representative cannot so agree within the 30-day period
referred to above, by lot from among the independent "Big 6" public
accounting firms (after excluding the Purchaser's independent public
accountants) willing to act. Each Party shall pay its own costs and
expenses incurred in connection with such arbitration, provided that
the fees and expenses of the Accounting Firm shall be borne as follows:
(A) if the Accounting Firm resolves all of
the remaining objections in favor of the Purchaser (the amount
of the Earnout so determined is referred to herein as the
"EARNOUT LOW AMOUNT"), the Sellers will be responsible for all
of the fees and expenses of the Accounting Firm (PRO RATA
based on each Seller's Company Pro Rata Share);
(B) if the Accounting Firm resolves all of
the remaining objections in favor of the Sellers (the amount
of the Earnout so determined is referred to herein as the
"EARNOUT HIGH AMOUNT"), the Purchaser will be responsible for
all of the fees and expenses of the Accounting Firm; and
(C) if the Accounting Firm resolves some of
the remaining objections in favor of the Purchaser and the
rest of the remaining objections in favor of the Sellers (the
amount of the Earnout so determined is referred to herein as
"EARNOUT ACTUAL AMOUNT"), the Sellers will be responsible for
that fraction of the fees and expenses of the Accounting Firm
(PRO RATA based on each Seller's Company Pro Rata Share) equal
to (i) the difference between the Earnout High Amount and the
Earnout Actual Amount over (ii) the difference between the
Earnout High Amount and the Earnout Low Amount, and the
Purchaser will be responsible for the remainder of the fees
and expenses.
(vii) If the Purchaser has determined that any remaining
Earnout payment is payable with respect to the fiscal year ending
December 31, 1998, the Purchaser shall pay such remaining Earnout
payment when it delivers the Adjusted EBITAM Statement for such fiscal
year (even if the Sellers' Representative disputes the amount of such
Earnout payment as determined by the Purchaser). If the amount of the
Earnout payment is in dispute, and the Earnout payment that is
ultimately determined to be payable pursuant to section 2(e)(vi) is (A)
greater than the amount (if any) paid pursuant to the previous sentence
and section 2(e)(iii), then the Purchaser shall pay the difference
within three business days after such determination, or (B) less than
the amount (if any) paid pursuant to the previous sentence and section
2(e)(iii), then the Sellers shall repay, the difference within three
business days after such determination. Payment of any remaining
Earnout pursuant to clause (A) of this paragraph (vii) shall be
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<PAGE> 20
made by the Purchaser to the Sellers by wire transfer of immediately
available funds to the account or accounts designated in writing by the
Sellers' Representative. Payment of any amounts payable to the
Purchaser pursuant to clause (B) of this paragraph (vii) shall be made
by wire transfer of immediately available funds to the account
designated in writing by the Purchaser.
(f) POST-CLOSING COMPANY PURCHASE PRICE ADJUSTMENT.
(i) Within 10 days following the Closing, the Seller's
Representative shall prepare and deliver to the Purchaser (A) a balance
sheet of the Company as of the close of business on the day preceding
the Closing Date (the "CLOSING BALANCE SHEET") and (B) the Seller's
Representative's calculation of the Net Working Capital of the Company
as of such time. The Closing Balance Sheet (including, without
limitation, such calculation of Net Working Capital) shall be prepared
in accordance with GAAP applied in a manner consistent with the same
accounting principles and methodologies used in preparing the Financial
Statements.
(ii) During the 30 days immediately following receipt of the
Closing Balance Sheet by the Purchaser, the Purchaser and its
accountants shall be entitled to review the Closing Balance Sheet and
any working papers, trial balances and similar materials relating to
the Closing Balance Sheet prepared by the Seller's Representative or
his accountants, and the Purchaser and its accountants shall also have
with timely access, during the Company's normal business hours, to the
Company's personnel, properties, books and records to the extent
related to the preparation of the Closing Balance Sheet. The Seller's
Representative shall use reasonable commercial efforts to cause his
accountants to make available to the Purchaser any working papers,
trial balances and similar materials prepared by such accountants in
connection with the preparation of the Closing Balance Sheet; PROVIDED,
HOWEVER, that the Purchaser acknowledges and agrees that such
accountants may require the Purchaser to execute customary undertakings
in connection with such accesection The Closing Balance Sheet and the
calculation of Net Working Capital shall become final and binding upon
the Parties on the 31st day following delivery thereof unless the
Purchaser gives written notice to the Seller of its disagreement with
the Closing Balance Sheet as it affects the calculation of Net Working
Capital (a "NOTICE OF DISAGREEMENT WITH CLOSING BALANCE SHEET") prior
to such date. Any Notice of Disagreement With Closing Balance Sheet
shall specify in reasonable detail the nature of any disagreement so
asserted. If a timely Notice of Disagreement With Closing Balance Sheet
is received by the Seller's Representative with respect to the Closing
Balance Sheet, then the Closing Balance Sheet (as revised in accordance
with clause (A) or (B) below), shall become final and binding as to the
calculation of Net Working Capital upon the Parties on the earlier of
(A) the date the Purchaser and the Seller's Representative resolve in
writing any differences they have with respect to any matter specified
in a Notice of Disagreement With Closing Balance Sheet, or
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<PAGE> 21
(B) the date any matters in dispute are finally resolved in writing by
the Accounting Firm in the manner described below (the date on which
the Closing Balance Sheet so becomes final and binding being
hereinafter referred to as the "FINAL CLOSING BALANCE SHEET
DETERMINATION DATE"). During the 30 days immediately following the
delivery of any Notice of Disagreement With Closing Balance Sheet, the
Purchaser and the Seller shall seek in good faith to resolve in writing
any differences which they may have with respect to any matter
specified in such Notice of Disagreement With Closing Balance Sheet.
During such period, the Parties and their respective accountants shall
each have access to the Company's working papers, trial balances and
similar materials (including the working papers, trial balances and
similar materials of their respective accountants) prepared in
connection with the preparation of the Closing Balance Sheet. At the
end of such 30-day period, the Seller's Representative and the
Purchaser shall submit to an Accounting Firm for review and resolution
any and all matters which remain in dispute and which were included in
any Notice of Disagreement With Closing Balance Sheet (it being
understood that the Accounting Firm shall act as an arbitrator to
determine, based solely on presentations by the Purchaser and the
Seller's Representative (and not by independent review), only those
matters which remain in dispute), and the Accounting Firm shall reach a
final, binding resolution of all matters which remain in dispute, which
final resolution shall be (w) in writing, (x) furnished to the
Purchaser and the Seller's Representative as soon as practicable after
the items in dispute have been referred to the Accounting Firm, (y)
made in accordance with this Agreement, and (z) conclusive and binding
upon the Parties and not subject to collateral attack for any reason.
The Closing Balance Sheet, with any adjustments necessary to reflect
the Accounting Firm's resolution of the matters in dispute, shall
become final and binding on the Parties on the date the Accounting Firm
delivers its final resolution to the Parties, which shall be no later
than 90 days after the Closing Date. Each Party shall pay its own costs
and expenses incurred in connection with such arbitration, provided
that the fees and expenses of the Accounting Firm shall be borne as
follows:
(A) if the amount of the Net Working Capital
is below the Net Working Capital Threshold Amount after the
resolution of all remaining objections by the Accounting Firm,
the Sellers will be responsible for all of the fees and
expenses of the Accounting Firm (PRO RATA based on each
Seller's Company Pro Rata Share); or
(B) if the amount of the Net Working Capital
is equal to or above the Net Working Capital Threshold Amount
after the resolution of all remaining objections by the
Accounting Firm, the Purchaser will be responsible for all of
the fees and expenses of the Accounting Firm.
(iii) Upon the final determination of the Closing Balance
Sheet in accordance with this section 2(f), if Net Working Capital is
less than $3,077,000.00 (the "NET WORKING CAPITAL
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<PAGE> 22
THRESHOLD AMOUNT"), the Sellers shall pay to the Purchaser the amount
by which the amount of the Net Working Capital is less than such amount
(PRO RATA based on each Seller's Company Pro Rata Share). Any required
adjustment to the Company Purchase Price pursuant to this section 2(f)
shall be referred to as the "COMPANY PURCHASE PRICE ADJUSTMEnt".
(iv) Within 33 days after the receipt by the Purchaser of the
Closing Balance Sheet in accordance with section 2(f)(i) above, the
Sellers' Representative and the Purchaser shall jointly instruct the
Escrow Agent to make the disbursements of Company Purchase Price
Adjustment Escrow Account with respect to any undisputed amounts
constituting a portion of the Company Purchase Price Adjustment. With
respect to any items that are the subject of a Notice of Disagreement
With Closing Balance Sheet, joint disbursement instructions shall be
given to the Escrow Agent within three business days after the Final
Closing Balance Sheet Determination Date.
(g) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Cypen & Cypen, 825
Arthur Godfrey Road, Miami Beach, Florida 33140 (or at such other location as
the Parties may agree), commencing at 10:00 a.m. local time on or before March
31, 1999 or such other date as the Sellers' Representative and the Purchaser may
mutually determine (the "CLOSING DATE").
(h) DELIVERIES AT THE CLOSING. At the Closing, (i) the Sellers will
deliver to the Purchaser the various certificates and documents referred to in
section 8(a) below, (ii) the Purchaser will deliver to the Sellers the various
certificates and documents referred to in section 8(b) below, (iii) each of the
Sellers will deliver to the Purchaser stock certificates representing all of his
or her Company Shares, duly endorsed in blank or accompanied by duly executed
assignment documents, sufficient in form and substance to convey to the
Purchaser good title to the Sellers' Company Shares, free and clear of all
restrictions on transfer (other than restrictions under the Securities Act and
state securities laws), Liens, claims and demands, (iv) each of L. Martin and G.
Martin will deliver to the Purchaser stock certificates representing all of his
or her IMP Shares, duly endorsed in blank or accompanied by duly executed
assignment documents, sufficient in form and substance to convey to the
Purchaser good title to the IMP Shares, free and clear of all restrictions on
transfer (other than restrictions under the Securities Act and state securities
laws), Liens, claims and demands, (v) the Purchaser will deliver to the Sellers
the Initial Payment, (v) the Purchaser will deliver to the Escrow Agent the
Escrow Fund and (vi) the Purchaser will deliver to L. Martin and G. Martin the
IMP Purchase Price.
(i) TRANSFER TAXES. The Sellers shall be responsible for the payment of
all sales and transfer taxes, if any, which may be payable with respect to the
transactions contemplated by this Agreement.
(j) NET CASH PAYMENT TO SELLERS. Immediately prior to the Closing, the
Sellers will cause the Company to pay to the Sellers in an aggregate amount
equal to the excess (if any) of (i) the
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<PAGE> 23
Available Cash less $1.00 MINUS (ii) the Funded Indebtedness as of the Closing
Date (after giving effect to any reduction of such Funded Indebtedness on the
Closing Date by application of Available Cash) .
3A. REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the Sellers,
severally as to himself or herself only (and not jointly), represents and
warrants (subject to the exceptions set forth in the Disclosure Schedule) to the
Purchaser as follows:
(a) CAPACITY. The Seller has full capacity to execute and deliver this
Agreement and the Escrow Agreement and to perform his or her obligations
hereunder and thereunder.
(b) BINDING OBLIGATION. This Agreement constitutes and the Escrow
Agreement, when executed and delivered, will constitute the valid and legally
binding obligations of the Seller enforceable in accordance with their terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement or the Escrow Agreement, nor the consummation of the transactions
contemplated hereby or thereby, will (i) violate any statute, regulation, rule,
injunction, judgment, order, decree or ruling of any government, governmental
agency or court to which the Seller is subject, or (ii) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create
in any party the right to accelerate, terminate, modify or cancel, or require
any notice under any agreement, contract, lease, license or instrument to which
the Seller is a party or by which the Seller is bound or to which any of the
Seller's assets is subject. Except as set forth in section 3A(c) OF THE
DISCLOSURE SCHEDULE, the Sellers are not required to give any notice to, make
any filing with, or obtain any authorization, consent or approval of any
government or governmental agency in order for the Sellers to consummate the
transactions contemplated by this Agreement.
(d) OWNERSHIP OF COMPANY COMMON STOCK AND IMP STOCK.
(i) The Seller holds of record and owns beneficially the
number of Company Shares set forth next to the Seller's name in section
3B(e) OF THE DISCLOSURE SCHEDULE and has good title to such Company
Shares, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws),
Liens, claims, and demands. The Seller is not a party to any option,
warrant, purchase right, or other contract or commitment that could
require the Seller to sell, transfer, or otherwise dispose of any
capital stock of the Company (other than this Agreement). The Seller is
not a party to any voting trusts, proxies, or other agreements or
understandings with respect to the voting of any capital stock of the
Company.
(ii) L. Martin and G. Martin hold of record and own
beneficially the number of IMP Shares set forth next to such Person's
name in section 3B(e) OF THE DISCLOSURE SCHEDULE and
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<PAGE> 24
has good title to such IMP Shares, free and clear of any restrictions
on transfer (other than restrictions under the Securities Act and state
securities laws), Liens, claims, and demands. Neither L. Martin or G.
Martin is a party to any option, warrant, purchase right, or other
contract or commitment that could require such Person to sell,
transfer, or otherwise dispose of any capital stock of the IMP (other
than this Agreement). Neither L. Martin or G. Martin is a party to any
voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of IMP.
(e) BROKERS' FEES. The Seller has no liability or obligation to pay any
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Purchaser or the
Company (with respect to periods following the Closing) could become liable or
obligated.
3B. REPRESENTATIONS AND WARRANTIES OF THE SELLERS WITH RESPECT TO THE
COMPANY AND IMP. The following representations and warranties made to the
Purchaser with respect to the Company are made by the Sellers jointly and
severally (subject to the exceptions set forth in the Disclosure Schedule) and
the following representations and warranties made to the Purchaser with respect
to IMP are made by L. Martin and G. Martin jointly and severally (subject to the
exceptions set forth in the Disclosure Schedule):
(a) ORGANIZATION/POWER AND AUTHORITY TO CONDUCT BUSINESS. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of Florida. IMP is a corporation duly organized, validly existing, and
in good standing under the laws of Mexico. Each of the Company and IMP is duly
authorized to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not have a Material Adverse Effect. section 3B(A) OF THE
DISCLOSURE SCHEDUle sets forth a list of each jurisdiction in which the Company
and IMP are licensed or qualified to do business as a foreign corporation. Each
of the Company and IMP has full corporate power and authority to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it. Neither the Company nor IMP has any Subsidiary, and does not own,
directly or indirectly, any capital stock or other equity interests in any
corporation, partnership or other entity.
(b) AUTHORIZATION OF TRANSACTION. Each of the Company and IMP has full
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligations of the Company and IMP, enforceable in accordance
with its terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, injunction, judgment, order, decree
or ruling of any government, governmental agency or court to which the Company
or IMP is subject or any provision of the charter or bylaws of the Company or
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<PAGE> 25
the charter documents of IMP or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license or instrument to which the Company
or IMP is a party or by which either the Company or IMP is bound or to which any
of the assets of either the Company or IMP is subject. Neither the Company nor
IMP is required to give any notice to, make any filing with, or obtain any
authorization, consent or approval of any government or governmental agency in
order for the Company and IMP to consummate the transactions contemplated by
this Agreement.
(d) BROKERS' FEES. Neither the Company nor IMP has any liability or
obligation to pay any fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement.
(e) CAPITALIZATION.
(i) The Company Common Stock constitutes the Company's only
authorized classes of capital stock. section 3B(e) OF THE DISCLOSURE
SCHEDULE sets forth for the Company (A) the number of shares of
authorized Company Common Stock, (ii) the number of issued and
outstanding shares of Company Common Stock, the names of the holders of
record thereof, and the number of shares held by each such holder, and
(iii) the number of shares of Company Common Stock (if any) held in
treasury. All of the issued and outstanding shares of capital stock of
the Company have been duly authorized, are validly issued, fully paid
and nonassessable and were not issued in violation of the preemptive
rights of any Person or any agreement or law by which the Company at
the time of issuance was bound. There are no outstanding stock
appreciation, phantom stock or similar rights with respect to the
Company, and the Company is not a party to any option, warrant,
purchase right, or other contract or commitment that could require the
Company to issue, sell, transfer or otherwise dispose of any capital
stock of the Company.
(ii) The IMP Stock constitutes IMP's only authorized classes
of capital stock. section 3B(e) OF THE DISCLOSURE SCHEDULE sets forth
for IMP (A) the number of shares of authorized IMP Stock, (ii) the
number of issued and outstanding shares of IMP Stock, the names of the
holders of record thereof, and the number of shares held by each such
holder, and (iii) the number of shares of IMP Stock (if any) held in
treasury. All of the issued and outstanding shares of capital stock of
IMP have been duly authorized, are validly issued, fully paid and
nonassessable and were not issued in violation of the preemptive rights
of any Person or any agreement or law by which IMP at the time of
issuance was bound. There are no outstanding stock appreciation,
phantom stock or similar rights with respect to IMP, and IMP is not a
party to any option, warrant, purchase right, or other contract or
commitment that could require IMP to issue, sell, transfer or otherwise
dispose of any capital stock of IMP.
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<PAGE> 26
(f) FINANCIAL STATEMENTS. Set forth in section 3B(f) OF THE DISCLOSURE
SCHEDULE are the following financial statements (collectively the "FINANCIAL
STATEMENTS"): (i) audited balance sheets and statements of income and statements
of shareholders equity and cash flows as of and for the fiscal year ended
December 31, 1997 (the "MOST RECENT FISCAL YEAR END") for the Company; and (ii)
unaudited balance sheet and statement of income and statement of cash flows (the
"MOST RECENT FINANCIAL STATEMENTS") as of and for the eight months ended August
31, 1998 (the "MOST RECENT FISCAL MONTH END") for the Company, with all
operations of IMP reflected in the Most Recent Financial Statements. Except as
set forth in section 3B(f) OF THE DISCLOSURE SCHEDULE, the Financial Statements
(including the notes thereto) have been prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby and present fairly
the financial condition of the Company and IMP as of such dates and the results
of operations of the Company and IMP for such periods; PROVIDED, HOWEVER, that
the Most Recent Financial Statements are subject to normal year-end adjustments
(which will not be material, individually or in the aggregate) and lack
footnotes and other presentation items.
(g) ABSENCE OF CERTAIN DEVELOPMENTS. Except as otherwise contemplated
by this Agreement, since the Most Recent Fiscal Year End, the Company and IMP
have conducted their business only in the Ordinary Course of Business and there
has not been any Material Adverse Change with respect to the Company or IMP.
Without limiting the generality of the foregoing, since that date, neither the
Company nor IMP has:
(i) borrowed any amount or incurred any liabilities, except
liabilities incurred in the Ordinary Course of Business;
(ii) mortgaged, pledged or subjected to any Lien any of its
assets, except for Permitted Liens, or entered into any conditional
sale or other title retention agreement with respect to any property or
asset;
(iii) except as set forth in section 3B(g)(iii) OF THE
DISCLOSURE SCHEDULE, sold, assigned, transferred or removed any of its
tangible assets, except for sales of Inventory in the Ordinary Course
of Business;
(iv) sold, assigned or transferred any patents, trademarks or
trade names or any material copyrights, trade secrets or other
intangible assets;
(v) suffered any extraordinary losses or waived any rights of
material value;
(vi) except as set forth in section 3B(g)(vi) OF THE
DISCLOSURE SCHEDULE, made any capital expenditures or commitments
therefor in excess of $25,000 individually or $100,000 in the
aggregate;
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<PAGE> 27
(vii) entered into any material agreement, contract, lease or
license outside the Ordinary Course of Business;
(viii) suffered any theft, damage, destruction or casualty
loss in excess of $50,000 to its property, whether or not covered by
insurance;
(ix) entered into any agreement with any labor union or
association representing any employee;
(x) made any wage or salary increase or bonus, or increase in
any other direct or indirect compensation, for or to any of its
officers, directors or employees, or otherwise made any material change
in employment terms for any of its directors, officers and employees;
(xi) made any change in its accounting methods, principles or
practices;
(xii) made any increase in or established any bonus,
insurance, deferred compensation, pension, retirement, profit-sharing,
stock option (including the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards or
the amendment of any existing stock options, stock appreciation rights,
performance awards or restricted stock awards), stock purchase or other
employee benefit plan or agreement or arrangement;
(xiii) except as set forth in section 3B(g)(xiii) OF THE
DISCLOSURE SCHEDULE, made any payment (including any dividends or other
distributions with respect to the Company Common Stock or IMP Stock) to
any Seller or any Affiliate of any Seller (other than compensation
otherwise payable in the Ordinary Course of Business to any Seller
employed by the Company) or forgiven any indebtedness due or owing from
any Seller or any Affiliate of any Seller to the Company or IMP;
(xiv) except as set forth in section 3B(g)(xiv) OF THE
DISCLOSURE SCHEDULE, reclassified, combined, split, subdivided or
redeemed or otherwise repurchased any capital stock of the Company or
IMP, or created, authorized, issued, sold, delivered, pledged or
encumbered any additional capital stock (whether authorized but
unissued or held in treasury) or other securities equivalent to or
exchangeable for capital stock, or granted or otherwise issued any
options, warrants or other rights with respect thereto;
(xv) acquired or agreed to acquire by merging or consolidating
with, or by purchasing any portion of the capital stock, partnership
interests or assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, association or
other business organization or division thereof;
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<PAGE> 28
(xvi) made any loan or advance (whether in cash or other
property), or made any investment in or capital contribution to, or
extended any credit to, any Person, except (i) short-term investments
pursuant to customary cash management policies, and (ii) advances made
in the Ordinary Course of Business;
(xvii) taken any action which if taken would adversely affect
the eligibility of the Company to be taxed pursuant to the provisions
of Subchapter S of the Code or under any comparable state or local law
for any period prior to the Closing Date;
(xviii) (A) except in the Ordinary Course of Business
liquidated Inventory or accepted product returns, (B) accelerated
receivables, (C) delayed payables, or (D) changed in any material
respect the Company's practices in connection with the payment of
payables in respect of raw materials purchases; or
(xix) committed to do any of the foregoing.
(h) UNDISCLOSED LIABILITIES. Neither the Company nor IMP has any
liability (whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated, and whether
due or to become due, including any liability for Taxes), except for (i)
liabilities set forth on the face of the Most Recent Balance Sheet (or in any
notes thereto or to the Financial Statements for the Most Recent Fiscal Year
End), (ii) liabilities under agreements, contracts, leases, licenses and other
arrangements to which either the Company or IMP or any of its respective assets
may be bound, (iii) liabilities reflected on the Disclosure Schedule, and (iv)
liabilities which have arisen in the Ordinary Course of Business since the Most
Recent Fiscal Month End. section 3B(h) OF THE DISCLOSURE SCHEDULE sets forth as
of the Most Recent Fiscal Month End a true and correct listing of the
indebtedness of the Company described in clauses (i), (ii) and (iii) of the
definition of Funded Indebtednesection IMP has no Funded Indebtedness.
(i) LEGAL COMPLIANCE. Each of the Company and IMP is in compliance with
all applicable statutes, laws, ordinances, rules, orders and regulations of
federal, state, local and foreign governments (and all agencies thereof), except
where the failure to comply would not have a Material Adverse Effect or prevent
or materially delay the consummation of the transactions contemplated hereby.
Except as set forth in section 3B(i) OF THE DISCLOSURE SCHEDULE, since December
31, 1996, neither the Company nor IMP has received any written communication
from a governmental authority that alleges that either the Company or IMP is not
in compliance with any foreign, federal, state or local laws, rules or
regulations.
(j) COMPANY AND IMP PERMITS.
(i) Except as set forth in section 3B(j) OF THE DISCLOSURE
SCHEDULE, the Company holds all permits, licenses, orders and approvals
of all Authorities necessary for the lawful conduct
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<PAGE> 29
of its business (the "COMPANY PERMITS"), except for failures to hold
such permits, licenses, variances, exemptions, orders and approvals
that would not have a Material Adverse Effect and copies of all Company
Permits have been furnished to the Purchaser. Except as set forth in
section 3B(j) OF THE DISCLOSURE SCHEDULE, the Company is in compliance
with the terms of the Company Permits and has received no variances or
exemptions with respect thereto.
(ii) IMP holds all permits, licenses, orders and approvals of
all Authorities necessary for the lawful conduct of its business (the
"IMP PERMITS"), except for failures to hold such permits, licenses,
variances, exemptions, orders and approvals that would not have a
Material Adverse Effect and copies of all IMP Permits have been
furnished to the Purchaser. IMP is in compliance with the terms of the
IMP Permits and has received no variances or exemptions with respect
thereto.
(k) TAX MATTERS.
(i) The Company has elected (with the consent of all of its
shareholders), in compliance with all applicable legal requirements, to
be taxed under Subchapter S of the Code and corresponding provisions
under any applicable state and local laws, and such elections are in
effect for the Company. No action has been taken by the Company or any
shareholder of the Company that may result in the revocation of any
such elections. Except as set forth in section 3B(k)(i) OF THE
DISCLOSURE SCHEDULE, (A) the Company has no "Subchapter C earnings and
profits" as defined in section 1362(d) of the Code and (B) the Company
has no "net unrealized built-in gain" as such term is defined in
section section 1374(d)(1) and 1374(d)(8) of the Code. The Company has
no liability, absolute or contingent, for the payment of any income
Taxes under the Code or under the laws of such states or localities
which afford tax treatment similar to that under Subchapter S of the
Code. The Company has filed all Tax Returns required to be filed by it
(taking into account any extensions of due dates). The Company has paid
all Taxes required to be paid by it (without regard to whether a Tax
Return is required), except Taxes for which an adequate reserve has
been established on the Most Recent Financial Statements.
(ii) All Income Tax Returns and all material Other Tax Returns
required to be filed with respect to the business and assets of IMP
have been duly and timely (within any applicable extension periods)
filed with the appropriate Authorities in all jurisdictions in which
such Returns are required to be filed. IMP has paid all Taxes required
to be paid by it (without regard to whether a Tax Return is required),
except Taxes for which an adequate reserve has been established on the
Most Recent Financial Statements.
(iii) No Tax Return of either the Company or IMP is under
audit or examination by any taxing Authority and, since January 1,
1988, no written notice of such an audit or examination has been
received by either the Company or IMP. Since January 1, 1988, each
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deficiency resulting from any audit or examination relating to Taxes by
any taxing authority has been paid, except for deficiencies being
contested in good faith. Since January 1, 1988, the federal income Tax
Returns of the Company have not been examined by and settled with the
Internal Revenue Service and the Tax Returns of IMP have not been
examined by and settled with the applicable Mexican Authorities.
(iv) There is no agreement or other document extending, or
having the effect of extending, the period of assessment or collection
of any Taxes for either the Company or IMP.
(v) Neither the Company nor IMP is a party to or bound by any
tax sharing agreement, tax indemnity obligation or similar agreement
with respect to Taxes (including any advance pricing agreement, closing
agreement or other agreement relating to Taxes with any taxing
Authority).
(vi) Neither the Company nor IMP will be required to include
in a taxable period ending after the Closing Date taxable income
attributable to income that accrued in a prior taxable period but was
not recognized in any prior taxable period as a result of the
installment method of accounting, the completed contract method of
accounting, the long-term contract method of accounting, the cash
method of accounting or section 481 of the Code with respect to a
change in method of accounting occurring before the Closing Date or
comparable provisions of state, local or foreign tax law.
(vii) Neither the Company nor IMP has filed a consent pursuant
to or agreed to the application of section 341(f) of the Code or any
comparable provision of foreign tax law..
(viii) Neither the Company nor IMP has, during the five-year
period ending on the Closing Date, been a personal holding company
within the meaning of section 541 of the Code or any comparable
provision of foreign tax law.
(ix) Neither the Company nor IMP has ever filed or been
included in any combined or consolidated tax return with any other
person or been a member of an Affiliated Group filing a consolidated
federal or foreign income Tax Return.
(l) CERTAIN BUSINESS RELATIONSHIPS WITH THE COMPANY AND IMP. Except as
set forth under section 3B(l) OF THE DISCLOSURE SCHEDULE and except for normal
advances to employees consistent with past practice, payment of compensation for
employment to employees consistent with past practice, and participation in
Employee Benefit Plans by employees, since January 1, 1996 neither the Company
nor IMP has purchased, acquired or leased any property or services from, or
sold, transferred or leased any property or services to, or loaned or advanced
any money to, or borrowed any money from, or entered into or been subject to any
management, consulting or similar agreement with (i)
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any officer, director or shareholder of the Company or IMP, or (ii) any of their
respective Affiliates. Except as set forth under section 3B(l) OF THE DISCLOSURE
SCHEDULE, no Affiliate of either the Company or IMP is indebted to the Company
or IMP for money borrowed or other loans or advances, and neither the Company
nor IMP is indebted to any such Affiliate for money borrowed or other loans or
advances.
(m) TITLE TO TANGIBLE ASSETS OTHER THAN REAL PROPERTY INTERESTS. Each
of the Company and IMP has good and valid title to, or a valid leasehold
interest in, all the tangible assets (other than real property or interests in
real property) used or useful in the conduct of its respective business, except
Inventory sold since the date hereof in the Ordinary Course of Business, free
and clear of any Liens other than Permitted Liens. The machinery and equipment
used regularly in the conduct of the Company's and IMP's business are in
reasonable operating condition and repair (subject to normal wear and tear), and
are suitable for the purposes for which they are presently used. Except for
interests and rights in property pursuant to any lease, license or other
agreement described in section 3B(p) OF THE DISCLOSURE SCHEDULE or pursuant to
any lease, license or other agreement not required to be described in section
3B(p) OF THE DISCLOSURE SCHEDULE and except for property supplied by any
customer or supplier in connection with the purchase or sale of products or
services from or to such customer or supplier in the Ordinary Course of
Business, there is no tangible personal property owned by any third party which
is used by the Company or IMP in the operation of its respective business
section 3B(m) OF THE DISCLOSURE SCHEDULE lists all machinery, equipment,
vehicles, furniture and other tangible personal property of any kind and
description (other than Inventory) owned or leased by the Company and IMP.
(n) REAL PROPERTY.
(i) Neither the Company nor IMP owns any real property.
section 3B(n) of the DISCLOSURE SCHEDULE sets forth a list of all real
property leased, subleased or otherwise occupied by the Company and
IMP, indicating the nature of its interest therein and setting forth a
brief description of the buildings and improvements located thereon
(collectively, the "REAL PROPERTY"). Each of the Company and IMP has
valid leasehold interests in all leases of Real Property which it
leases or purports to lease, free and clear of any Liens, other than
Permitted Liens. There are no pending condemnation, expropriation,
eminent domain or similar proceedings affecting all or any portion of
such Real Property and, to the Knowledge of the Sellers (with respect
to the Company) and L. Martin and G. Martin (with respect to IMP), no
such proceedings are contemplated.
(ii) Each of the Company and IMP enjoys peaceful and
undisturbed possession under all of such Real Property leases under
which it is operating. All of such leases are valid, subsisting and in
full force and effect, no notice of termination has been received by
either the Company or IMP with respect thereto, and there are no
existing defaults, or events which with the passage of time or the
giving of notice, or both, would constitute defaults by
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either the Company or IMP or, to the Knowledge of the Sellers (with
respect to the Company) and L. Martin and G. Martin (with respect to
IMP), by any other party thereto, except for defaults which could not
reasonably be expected to have a Material Adverse Effect.
(iii) The Real Property is in compliance with the Americans
With Disabilities Act or the comparable provision of foreign law.
(o) INTELLECTUAL PROPERTY.
(i) Section 3B(o)(i) OF THE DISCLOSURE SCHEDULE identifies
each patent, pending patent application or registered Intellectual
Property owned or used by the Company and IMP, and each material
written license agreement (excluding off-the-shelf software license
agreements) pursuant to which the Company or IMP has granted to any
third party, or received from any third party a grant of, any rights in
any of the Intellectual Property owned or used by the Company or IMP.
Each of the Company and IMP owns, or possesses adequate and enforceable
licenses or rights (free of Liens other than Permitted Liens) to use
all Intellectual Property and any other material intellectual property
rights (including, without limitation, patents, pending patent
applications, inventions, drawings, trade secrets, know-how and
confidential information) currently used by the Company and IMP, or
necessary to permit the Company and IMP to conduct its business as now
conducted.
(ii) Except as set forth on section 3B(o)(i) OF THE DISCLOSURE
SCHEDULE, with respect to each item identified in section 3B(o)(i) of
the Disclosure Schedule:
(A) each of the Company and IMP possesses all right,
title and interest, free and clear of any Lien (other than
Permitted Liens), license or other restriction;
(B) such item is not subject to any outstanding
injunction, judgment, order, decree, ruling or charge;
(C) no action, suit, proceeding, hearing,
investigation, written claim or written demand is pending or,
to the Knowledge of the Sellers (with respect to the Company)
and L. Martin and G. Martin (with respect to IMP), is
threatened which challenges the legality, validity,
enforceability, use or ownership of the item;
(D) neither the Company nor IMP, nor, to the
Knowledge of the Sellers (with respect to the Company) and L.
Martin and G. Martin (with respect to IMP), any other party to
any license agreement is in breach or default and no event has
occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification or
acceleration thereunder;
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<PAGE> 33
(E) to the Knowledge of the Sellers (with respect to
the Company) and L. Martin and G. Martin (with respect to
IMP), no party to any license agreement has repudiated any
material provision thereof;
(F) no claims are pending or, to the Knowledge of the
Sellers (with respect to the Company) and L. Martin and G.
Martin (with respect to IMP), threatened that the Company is
infringing on or otherwise violating the rights of any person
with regard to any such item; and
(G) to the Knowledge of the Sellers (with respect to
the Company) and L. Martin and G. Martin (with respect to
IMP), no person is infringing on or otherwise violating any
right of the Company or IMP with respect to such item.
(p) CONTRACTS. Section 3B(p) OF THE DISCLOSURE SCHEDULE lists the
Material Contracts to which each of the Company and IMP is a party. The Sellers
have made available to the Purchaser a correct and complete copy of each
Material Contract listed in section 3B(p) OF THE DISCLOSURE SCHEDULE. With
respect to each such agreement: (A) the agreement is legal, valid, binding,
enforceable and in full force and effect; (B) neither the Company nor, to the
Knowledge of the Sellers (with respect to the Company) and L. Martin and G.
Martin (with respect to IMP), any other party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (C) no party has repudiated any provision of the agreement.
(q) POWERS OF ATTORNEY. Except as set forth in section 3B(q) OF THE
DISCLOSURE SCHEDULE, there are no outstanding powers of attorney executed on
behalf of either the Company or IMP.
(r) INSURANCE. Section 3B(r) OF THE DISCLOSURE SCHEDULE describes each
insurance policy maintained by the Company and IMP and the Company has delivered
to the Purchaser correct and complete copies of all such policies. All of such
insurance policies are in full force and effect and, to the Knowledge of the
Sellers (with respect to the Company) and L. Martin and G. Martin (with respect
to IMP), neither the Company nor IMP is in default with respect to its
obligations under any of such insurance policies. Such policies are sufficient
for compliance with all requirements of law and Material Contracts to which
either the Company or IMP is a party. Since the respective dates of such
policies, no notice of cancellation or non-renewal with respect to any such
policy has been received by either the Company or IMP. section 3B(r) OF THE
DISCLOSURE SCHEDULE sets forth a list of all pending claims with respect to all
such policies and the loss runs for all such policies for the last three years.
(s) LITIGATION. Section 3B(s) OF THE DISCLOSURE SCHEDULE sets forth
each instance in which either the Company or IMP (i) is subject to any
outstanding injunction, judgment, order, decree or ruling or (ii) is a party or,
to the Knowledge of the Sellers (with respect to the Company) and L. Martin and
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<PAGE> 34
G. Martin (with respect to IMP), is threatened to be made a party, to any
action, suit, proceeding, hearing or investigation of, in or before any court or
quasi-judicial or administrative agency of any federal, state, local or foreign
jurisdiction or before any arbitrator.
(t) LABOR RELATIONS. Neither the Company nor IMP is and has ever been a
party to a collective bargaining agreement. Except as set forth under section
3B(t) OF THE DISCLOSURE SCHEDULE, (i) since January 1, 1996 neither the Company
nor IMP has been involved in or, to the Knowledge of the Sellers (with respect
to the Company) and L. Martin and G. Martin (with respect to IMP), threatened
with any strike, slowdown or work stoppage, (ii)since January 1, 1996 neither
the Company nor IMP has been involved in or, to the Knowledge of the Sellers
(with respect to the Company) and L. Martin and G. Martin (with respect to IMP),
threatened with any unfair labor practice charge, arbitration, suit or
administrative proceeding relating to labor matters involving its employees,
(iii) there are no actions, proceedings or claims pending or, to the Knowledge
of the Sellers (with respect to the Company) and L. Martin and G. Martin (with
respect to IMP), threatened against either the Company or IMP under any laws
relating to employment, including any provisions thereof relating to wages,
hours, collective bargaining, withholding or the payment of social security or
other Taxes and (iv) the Company has complied with the provisions of the
Immigration Reform and Control Act of 1986 with respect to all of its employees
hired after November 6, 1986 by verifying their employment eligibility and
having them complete Form I-9.
(u) EMPLOYEE BENEFITS. Section 3B(u) OF THE DISCLOSURE SCHEDULE sets
forth (a) all of the current Employee Pension Benefit Plans, Employee Welfare
Benefit Plans and all other material employee benefit, fringe benefit plans and
programs maintained or contributed to by the Company and IMP with respect to
current or former employees of the Company and IMP (the "EMPLOYEE BENEFIT
PLANS").
(i) With respect to each Employee Benefit Plan:
(A) each such Employee Benefit Plan (and each related
trust, insurance contract or fund) complies in form and, to
the Knowledge of the Sellers (with respect to the Company) and
L. Martin and G. Martin (with respect to IMP), in operation
with the applicable requirements of ERISA and the Code or the
comparable provisions of foreign law;
(B) all contributions (including all employer
contributions and employee salary reduction contributions, if
any) which are due have been paid to each such Employee
Benefit Plan which is an Employee Pension Benefit Plan, and
there are no accumulated funding deficiencies with respect to
any such Employee Pension Benefit Plan;
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<PAGE> 35
(C) each such Employee Benefit Plan which is an
Employee Pension Benefit Plan has received a favorable
determination letter from the IRS as to its qualification
under section 401(a) of the Code or the comparable provision
of foreign law;
(D) no "prohibited transaction" (as such term is
defined in section 406 of ERISA or section 4975 of the Code)
has occurred with respect to any such Employee Benefit Plan
which is an Employee Pension Benefit Plan (or its related
trust) which could subject the Company or any officer,
director or employee of the Company, to any Tax or penalty
imposed under section 4975 of the Code or liability under
section 406 of ERISA;
(E) the Company has delivered to the Purchaser
correct and complete copies of the plan documents and summary
plan descriptions, the most recent determination letter
received from the IRS, the most recent Form 5500 Annual
Report, and all related trust agreements, insurance contracts
and other funding arrangements which implement each such
Employee Benefit Plan;
(F) no such Employee Benefit Plan which is an
Employee Pension Benefit Plan has been completely or partially
terminated or has been the subject of a "reportable event" (as
defined in section 4043 of ERISA) as to which notices would be
required to be filed with the PBGC. To the Knowledge of the
Sellers (with respect to the Company) and L. Martin and G.
Martin (with respect to IMP), no proceeding by the PBGC to
terminate any such Employee Pension Benefit Plan (other than a
Multiemployer Plan) has been instituted;
(G) the Company has not incurred any liability to the
PBGC (except for required premium payments, if any), or
otherwise under Title IV of ERISA (including any withdrawal
liability) or under the Code with respect to any such Employee
Benefit Plan which is an Employee Pension Benefit Plan; and
(H) no action, suit, proceeding, hearing or
investigation with respect to the administration or the
investment of assets of any such Employee Benefit Plan (other
than routine claims for benefits) is pending or, to the
Knowledge of the Sellers (with respect to the Company) and L.
Martin and G. Martin (with respect to IMP), threatened.
(ii) The Company does not contribute to any Multiemployer Plan
or have any liability (including withdrawal liability) under any
Multiemployer Plan.
(iii) Neither the Company nor IMP has any obligation to
provide health or other welfare benefits to former, retired or
terminated employees, except as specifically required under section
4980B of the Code or comparable provision of foreign law. With respect
to all of its
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past and present employees, each of the Company and IMP has complied in
all material respects with the notice and continuation requirements of
Part 6 of Subtitle B of Title I of ERISA and of section 4980B of the
Code or comparable provision of foreign law.
(v) ENVIRONMENTAL, HEALTH AND SAFETY MATTERS. Except as disclosed in
section 3B(v) OF The DISCLOSURE SCHEDULE:
(i) Neither the Company nor IMP has disposed of or released
any substance, arranged for the disposal of any substance, knowingly
exposed any employee or other individual to any substance or condition,
or owned or operated its businesses or any property or facility so as
to give rise to any liability or corrective or remedial obligation of
either the Company or IMP under any Environmental, Health and Safety
Requirement.
(ii) Each of the Company and IMP is in compliance with all
Environmental Health and Safety Requirements, including, but not
limited to, the Emergency Planning and Community Right-to-Know Act
("EPCRA"), 42 U.S.C. section 11001 et seq., and neither the Company nor
IMP has, since December 31, 1995, received any written communication
from any Authority that alleges that either the Company or IMP is not
in such compliance.
(iii) There is no Environmental Claim of which either the
Company or IMP has received written notice or, to the Knowledge of the
Sellers (with respect to the Company) and L. Martin and G. Martin (with
respect to IMP), threatened or recently filed against either the
Company or IMP, nor, to the Knowledge of the Sellers (with respect to
the Company) and L. Martin and G. Martin (with respect to IMP), is
there any Environmental Claim against any Person whose liability for
any Environmental Claim either the Company or IMP has retained or
assumed contractually.
(iv) No underground storage tanks, friable and damaged
asbestos-containing materials, or pcb-containing equipment or fluids
are present on any of the Real Property.
(v) There are no Liens arising under any Environmental, Health
and Safety Requirement on any of the Real Property arising as a result
of any actions taken or omitted to be taken by either the Company or
IMP and, to the Knowledge of the Sellers (with respect to the Company)
and L. Martin and G. Martin (with respect to IMP), no actions have been
taken by any Authority with respect to any of the Real Property to
impose an environmental Lien with respect to the Real Property as a
result of any such actions.
(vi) No real property presently or, to the Knowledge of the
Sellers (with respect to the Company) and L. Martin and G. Martin (with
respect to IMP), heretofore owned or operated by either the Company or
IMP is currently listed on the National Priorities List or the
Comprehensive Environmental Response, Compensation and Liability
Information
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System, both promulgated under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any analogous state or foreign list.
(vii) To the Knowledge of the Sellers (with respect to the
Company) and L. Martin and G. Martin (with respect to IMP), no off-site
location at which either the Company or IMP has disposed or arranged
for the disposal of any waste is listed on the National Priorities List
or on any analogous state list.
(w) CUSTOMERS AND SUPPLIERS. section 3B(w) OF THE DISCLOSURE SCHEDULE
contains a complete and accurate list of the names and addresses of the 10
largest (by volume) customers and suppliers of each of the Company and IMP for
the fiscal years ended December 31, 1997 and December 31, 1996. Each of the
Company and IMP maintains satisfactory relations with each of such customers and
suppliers and since the Most Recent Fiscal Month End no event has occurred that
would materially adversely affect either the Company's or IMP's relations with
such customers and suppliers. Since the Most Recent Fiscal Month End, (i) no
customer which accounted for more than 5% of either the Company's or IMP's
aggregate sales revenues during the last twelve months has canceled, terminated
(or, to the Knowledge of the Sellers (with respect to the Company) and L. Martin
and G. Martin (with respect to IMP), made any threat to either the Company or
IMP to cancel or terminate), or materially decreased its usage of either the
Company's or IMP's services or products, and (ii) no supplier, or any group of
suppliers, which accounted for more than 5% of the aggregate supplies purchased
by either the Company or IMP during the last twelve months, has canceled,
terminated or, to the Knowledge of the Sellers (with respect to the Company) and
L. Martin and G. Martin (with respect to IMP), made any threat to either the
Company or IMP to cancel or otherwise terminate, or to materially decrease the
provision of services or supplies to either the Company or IMP.
(x) INVENTORY. The Inventory of the Company and IMP consists in all
material respects of items usable and saleable in the Ordinary Course of
Business in the Company's present product lines. Except as set forth in section
3B(f) OF THE DISCLOSURE SCHEDULE, the Inventory of the Company and IMP is valued
at the lower of cost (on a first-in-first-out basis) or market in accordance
with GAAP on a basis consistent with all prior periods of the Company and IMP
since the fiscal year ended December 31, 1996.
(y) ACCOUNTS RECEIVABLE. All of the Accounts Receivable of each of the
Company and IMP are properly reflected on its books and records and arose from
bona fide transactions in the Ordinary Course of Businesection The reserve for
bad debts set forth on the Most Recent Balance Sheet has been determined in
accordance with GAAP on a basis consistent with prior periods. None of such
Accounts Receivable is or will be at the Closing Date subject to any
counterclaim or set off, other than routine claims for the return of defective
or non-conforming merchandise.
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<PAGE> 38
(z) LIST OF ACCOUNTS. section 3B(z) OF THE DISCLOSURE SCHEDULE sets
forth a list of all bank and securities accounts, and all safe deposit boxes,
maintained by each of the Company and IMP and a listing of the persons
authorized to draw thereon or make withdrawals therefrom or, in the case of safe
deposit boxes, with access thereto.
(aa) PRODUCTS LIABILITY. To the Knowledge of the Sellers (with respect
to the Company) and L. Martin and G. Martin (with respect to IMP), except for
routine warranty claims for the return of defective or non-conforming
merchandise and except as set forth in section 3B(aa) OF THE DISCLOSURE
SCHEDULE, there exist no claims against either the Company or IMP for injury to
persons or property suffered by any person as a result of the sale of any
product by the Company or IMP, including, but not limited to, claims arising out
of the defective or unsafe nature of the products sold by either the Company or
IMP. section 3B(aa) OF THE DISCLOSURE SCHEDULE sets forth a true and correct
list and brief description of all product liability claims that have been filed
against the Company and IMP since January 1, 1996.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. The Purchaser
represents and warrants (subject to the exceptions set forth in the Disclosure
Schedule) to the Sellers, the Company and IMP as follows:
(a) ORGANIZATION. The Purchaser is a corporation duly organized,
validly existing, and in good standing under the laws of Alabama.
(b) AUTHORIZATION OF TRANSACTION. The Purchaser has full corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Purchaser, enforceable in accordance with its terms.
(c) NONCONTRAVENTION. Neither the execution and the delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any statute, regulation, rule, injunction, judgment, order, decree
or ruling of any government, governmental agency or court to which the Purchaser
is subject or any provision of its charter or bylaws or other organizational
document, as the case may be, or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify or cancel, or require any notice
under any agreement, contract, lease, license or instrument to which the
Purchaser is a party or by which it is bound or to which any of its assets is
subject. The Purchaser is not required give any notice to, make any filing with,
or obtain any authorization, consent or approval of any government or
governmental agency in order for it to consummate the transactions contemplated
by this Agreement.
(d) BROKERS' FEES. Except for any transaction fees payable to Richard
Vanderkaay & Associates (all of which fees will be paid at or prior to the
Closing), the Purchaser does not have any
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<PAGE> 39
liability or obligation to pay any fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
the Sellers or the Company (prior to the Closing) could become liable or
obligated.
(e) ACQUISITION OF SHARES FOR INVESTMENT. The Company Shares and the
IMP Shares to be purchased by the Purchaser pursuant to this Agreement are being
acquired for investment only and not with a view to any public distribution
thereof, and the Purchaser will not offer to sell or otherwise dispose of such
Shares so acquired by it in violation of any of the registration requirements of
the Securities Act or any comparable state laws.
5. PRE-CLOSING COVENANTS. The Parties agree as follows with respect to
the period between the execution of this Agreement and the Closing:
(a) GENERAL. Each of the Parties will use commercially reasonable
efforts to take all action and to do all things necessary, proper or advisable
in order to consummate and make effective the transactions contemplated by this
Agreement (including satisfaction, but not waiver, of the closing conditions set
forth in section 8 below).
(b) NOTICES AND CONSENTS. Each of the Parties will give any notices to,
make any filings with, and use commercially reasonable efforts to obtain any
authorizations, consents and approvals of governments and governmental agencies
in connection with consummation of the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, each of the Parties
will file any Notification and Report Forms and related material that such Party
may be required to file with the Federal Trade Commission and the Antitrust
Division of the United States Department of Justice under the Hart-Scott-Rodino
Act, will use commercially reasonable efforts to obtain a waiver from the
applicable waiting period, and will make any further filings pursuant thereto
that may be necessary, proper or advisable in connection therewith.
(c) OPERATION OF BUSINESS. Neither the Company nor IMP will engage
in any practice, take any action, or enter into any transaction of the sort
described in section 3B(g) above. In addition, each of the Company and IMP will
continue to conduct its business in the Ordinary Course of Business and will not
(i) except in the Ordinary Course of Business liquidate Inventory or accept
product returns, (ii) accelerate receivables, (iii) delay payables, or (iv)
change in any material respect either the Company's ir IMP's practices in
connection with the payment of payables in respect of raw materials purchases.
(d) PRESERVATION OF BUSINESS. Each of the Company and IMP will use
commercially reasonable efforts to maintain its business and properties,
including its present operations, physical facilities, working conditions, and
relationships with lessors, licensors, suppliers, customers and employees.
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(e) FULL ACCESS. Each of the Company and IMP will permit
representatives of the Purchaser to have full access at all reasonable times,
and in a manner so as not to interfere with the normal business operations of
the Company and IMP, to the premises, properties, personnel, books, records
(including tax records), contracts and documents of or pertaining to the Company
and IMP. The Purchaser reaffirms its obligations under the Confidentiality
Agreement.
(f) NOTICE OF DEVELOPMENTS. Each Party will promptly give notice to the
other Party(ies) of its, his or her discovery of any material adverse
development which, had such development been in existence on the date hereof,
would constitute a breach of the representations and warranties contained in
section section 3A and 3B (in the case of a Seller) or section 4 (in the case of
the Purchaser). No disclosure by any Party pursuant to this section 5(f) shall
be deemed to amend or supplement the Disclosure Schedules or to prevent or cure
any misrepresentation or breach of warranty.
(g) NO ADDITIONAL REPRESENTATIONS OR WARRANTIES. The Purchaser
acknowledges that none of the Sellers, the Company, IMP, nor any other Person
has made any representation or warranty, express or implied, as to the accuracy
or completeness of any information regarding the Company, IMP or any Seller,
except as expressly set forth in this Agreement or the Disclosure Schedule, and
the Purchaser further agrees that none of the Sellers, the Company, IMP nor any
other Person will have or be subject to any liability to the Purchaser or any
other Person resulting from the distribution to the Purchaser, or the
Purchaser's use of, any such information. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES EXPRESSLY SET FORTH IN SECTION 3A and 3B, NONE OF THE SELLERS, THE
COMPANY OR IMP MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW
OR IN EQUITY, IN RESPECT OF THE SELLERS, THE COMPANY OR IMP OR ANY OF THE
ASSETS, LIABILITIES OR OPERATIONS OF THE COMPANY OR IMP, AND THE SELLERS, THE
COMPANY AND IMP EXPRESSLY DISCLAIM ANY SUCH REPRESENTATION OR WARRANTY.
6. POST-CLOSING COVENANTS. The Parties agree as follows with respect to
the period following the Closing.
(a) GENERAL. In the event that at any time after the Closing any
further action is necessary to carry out the purposes of this Agreement, each of
the Parties will take such further action (including the execution and delivery
of such further instruments and documents) as any other Party may reasonably
request, all at the sole cost and expense of the requesting Party; PROVIDED,
HOWEVER, that the taking of any action necessary to execute or deliver to the
Purchaser any stock powers and such other instruments of transfer as may be
necessary to transfer ownership of the Shares by any Seller shall be borne by
such Seller.
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(b) Section 338(h)(10) ELECTION.
(i) The Sellers will join with the Purchaser in making an
election under section 338(h)(10) of the Code and Treasury Regulations
section 1.338(h)(10)-1(d) (and any corresponding elections under any
applicable state and local Laws)(collectively, a "section 338(h)(10)
ELECTION") with respect to the purchase and sale of the Company Shares
from the Sellers hereunder. The Sellers will pay any tax attributable
to the making of the section 338(h)(10) Election (including, without
limitation, any tax arising as the result of the recognition of any
built-in gain pursuant to the provisions of section 1374 of the Code
and any Tax arising as the result of the "recapture" of previously
deducted items) and the Sellers, jointly and severally, will indemnify
the Purchaser and the Company from and against any Losses arising out
of any failure to pay such tax.
(ii) The Sellers will be responsible for preparing and filing
all income or franchise Tax Returns of the Company and IMP relating to
Pre-Closing Tax Periods. The Purchaser will be responsible for
preparing and filing all income and franchise Tax Returns of the
Company and IMP relating to periods other than Pre-Closing Tax Periods.
After the Closing has occurred, the Purchaser will cause the Company
and IMP to provide, or cause to be provided, to the Sellers, without
charge, any information that may reasonably be requested by the Sellers
in connection with the preparation of any such Tax Returns relating to
Pre- Closing Tax Periods. The Sellers will allow the Purchaser an
opportunity to review and comment on such Tax Returns (including any
amended Returns). The Sellers will take no positions on the Tax Returns
of the Company or IMP that relate to Pre-Closing Tax Periods that would
adversely affect the Company or IMP after the Closing Date. The
Purchaser will take no positions on the Tax Returns of the Company or
IMP that relate to Post-Closing Tax Periods that would adversely affect
the Sellers after the Closing Date for any Pre-Closing Tax Periods. The
income of the Company will be apportioned to the period up to the
Closing Date and the period from and after the Closing Date in
accordance with the provisions of section 1362(e)(6)(i) of the Code by
closing the books of the Company as of the close of business on the
last calendar day immediately preceding the Closing Date.
(iii) Section 6(b)(iii) OF THE DISCLOSURE SCHEDULE sets forth
an allocation of the estimated "Modified Adjusted Deemed Sales Price",
as defined in Treasury Regulations section 1.338(h)(10)-(f), among the
assets of the Company (the "ALLOCATION SCHEDULE"). Promptly (but in no
event later than 30 days following the Purchaser's receipt of the
Closing Balance Sheet) after the Closing Date, the Sellers and the
Purchaser shall exchange completed and executed copies of IRS Form
8023-A (or other applicable form), required schedules thereto, and any
similar forms required by any state or local Tax Authority. If any
changes are required to these forms as a result of information which is
first available after the Closing Date, the Sellers and the Purchaser
will in good faith use commercially reasonable efforts to promptly
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<PAGE> 42
agree on such changes. The Sellers and the Purchaser each agree to file
all Tax Returns in accordance with the Allocation Schedule.
(c) TRANSITION. None of the Sellers, the Company or IMP will take any
action that is designed or intended to have the effect of discouraging any
lessor, licensor, customer, supplier or other business associate of the Company
or IMP from maintaining the same business relationships with the Company and IMP
after the Closing as it maintained with the Company and IMP prior to the
Closing.
(d) LITIGATION SUPPORT. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim or demand in connection with
(i) any transaction contemplated under this Agreement, or (ii) any fact,
situation, circumstance, status, condition, activity, practice, occurrence,
event, incident, action, failure to act, or transaction on or prior to the
Closing Date involving the Company or IMP, each of the Parties will cooperate
with the contesting or defending Party and its, his or her counsel in the
contest or defense, all at the sole cost and expense of the contesting or
defending Party (except in connection with any dispute among the Parties,
including any dispute relating to a Notice of Disagreement With Adjusted EBITAM
Statement), and except to the extent that the contesting or defending party is
entitled to indemnification therefor under this Agreement).
(e) NONCOMPETITION. In order to induce the Purchaser to enter into this
Agreement, each Seller and Perry Martin (severally and not jointly) expressly
covenants and agrees that for a period of five years from and after the Closing
Date, such Person will not, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation, limited liability
company or business or any other Person (other than the Purchaser), whether as
an employee, officer, director, partner, agent, security holder, consultant or
otherwise, that directly or indirectly is engaged in the Business of the Company
in all markets in which the Company and IMP currently sell their products (the
"RESTRICTED AREA"). The Sellers and Perry Martin agree that the covenant
provided for in this section 6(e) is reasonable and necessary in terms of time,
activity and territory to protect the Purchaser's interest as a buyer of the
Company Common Stock and IMP Stock and in protecting the Company's and IMP's
Trade Secrets. The Sellers and Perry Martin further acknowledge and agree that
such covenants are reasonable and necessary in terms of time, area and line of
business to protect the Purchaser's other legitimate business interests, which
include its interests in protecting the Company's and IMP's (i) valuable
confidential business information, (ii) substantial relationships with customers
throughout the Restricted Area and (iii) customer goodwill associated with the
Company's and IMP's ongoing businesection The Sellers and Perry Martin expressly
authorize the enforcement of the covenants provided for in this section 6(e) by
(A) the Purchaser and its Subsidiaries, (B) the Purchaser's permitted assigns
and (C) any successors to the Company's and IMP's businesection To the extent
that the covenant provided for in this section 6(e) may later be deemed by a
court to be too broad to be enforced with respect to its duration or with
respect to any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration
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<PAGE> 43
or scope of the provision, and to add or delete specific words or phrases to or
from the provision. The provision as modified shall then be enforced.
(f) NON-SOLICITATION. In order to induce the Purchaser to enter into
this Agreement, each Seller and Perry Martin (severally and not jointly)
expressly covenants and agrees that for a period of five years from and after
the Closing Date, such Person will not, directly or indirectly, solicit for
employment or employ (or attempt to solicit for employment or employ), for
himself, herself or itself or on behalf of any sole proprietorship, partnership,
corporation, limited liability company or business or any other Person (other
than the Purchaser), any employee of the Company or IMP or encourage any such
employee to leave his or her employment with the Company or IMP. To the extent
that the covenant provided for in this section 6(f) may later be deemed by a
court to be too broad to be enforced with respect to its duration or with
respect to any particular activity or geographic area, the court making such
determination shall have the power to reduce the duration or scope of the
provision, and to add or delete specific words or phrases to or from the
provision. The provision as modified shall then be enforced.
(g) CONFIDENTIALITY. In order to induce the Purchaser to enter into
this Agreement, each Seller and Perry Martin (severally and not jointly)
expressly covenants and agrees that from and after the Closing Date, such Person
will not, directly or indirectly, for himself, herself or itself or on behalf of
any sole proprietorship, partnership, corporation, limited liability company or
business or any other Person (other than the Purchaser) disclose, divulge,
furnish or make accessible to anyone (other than the Company, IMP or any of
their respective Affiliates or representatives) any Confidential Information or
Trade Secrets, or in any way use any Confidential Information or Trade Secrets
in the conduct of any business; PROVIDED, HOWEVER, that nothing in this section
6(g) will prohibit the disclosure of any Confidential Information or Trade
Secrets (i) which is required to be disclosed by a Seller or Perry Martin or any
such other Person in connection with any court action or any proceeding before
any Authority, (ii) in connection with the enforcement of any of the respective
rights of a Seller or Perry Martin hereunder, or (iii) in connection with the
defense by a Seller or Perry Martin, of any claim asserted against him or it
hereunder; PROVIDED, HOWEVER, that in the case of a disclosure contemplated by
clause (i), no disclosure shall be made until such Person shall give notice to
the Company of the intention to disclose such Confidential Information or Trade
Secrets so that the Company may contest the need for disclosure, and such Person
will cooperate (and will cause his or her Affiliates and their respective
representatives to cooperate) with the Purchaser in connection with any such
proceeding. Notwithstanding any provision of this Agreement which may be to the
contrary (x) the foregoing provisions restricting the use of Confidential
Information shall survive the Closing for a period of seven years, and (y) the
foregoing provisions restricting the use of Trade Secrets shall survive the
Closing for so long as permitted by the Florida Uniform Trade Secrets Act,
Chapter 688, Florida Statutes.
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<PAGE> 44
7. NO SHOP. From the date of this Agreement until the earlier of (i)
the Closing Date, or (ii) the termination of this Agreement, each of the Company
and IMP shall not, and the Sellers shall cause the Company and IMP and their
respective officers, directors, employees and other agents not to, directly or
indirectly, take any action to solicit, initiate or encourage any offer or
proposal or indication of interest in a merger, consolidation or other business
combination involving any equity interest in, or a substantial portion of the
assets of the Company or IMP, other than in connection with the transactions
contemplated by this Agreement. The Company, IMP and the Sellers shall
immediately advise the Purchaser of the terms of any written offer, proposal or
indication of interest that they, the Company or IMP receive or otherwise become
aware of.
8. CONDITIONS TO OBLIGATION TO CLOSE.
(a) CONDITIONS TO OBLIGATION OF THE PURCHASER. The obligation of the
Purchaser to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in section 3A
and section 3B above that are qualified as to their materiality shall
be true and correct and any such representations and warranties that
are not so qualified shall be true and correct in all material respects
at and as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement);
(ii) the Sellers, the Company and IMP shall have performed and
complied with all of their respective covenants hereunder in all
material respects through the Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement, and no action, suit,
claim or proceeding shall be pending before any Authority which seeks
to prohibit or enjoin the consummation of the transactions contemplated
by this Agreement;
(iv) each of the Sellers (or the Sellers' Representative
acting on their behalf) shall have delivered to the Purchaser a
certificate to the effect that the conditions specified above in
sections 8(a)(i) and (ii), as they pertain to such Seller, have
been satisfied in all respects;
(v) the Sellers shall have delivered to the Purchaser a
certificate to the effect that the conditions specified above in
sections 8(a)(i) and (ii) have been satisfied in all respects;
(vi) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
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<PAGE> 45
(vii) all of the directors and officers of the Company and IMP
designated by the Purchaser prior to the Closing shall have delivered
duly signed resignations effective at the time of the Closing (or the
Sellers, the Company or IMP shall have taken such other action as is
necessary to ensure that such persons are not directors or officers of
the Company or IMP at the time of the Closing);
(viii) Perry B. Martin shall have executed and delivered to
the Purchaser the Employment Agreement;
(ix) L. Martin shall have executed and delivered to the
Purchaser the Consulting Agreement;
(x) Nitram Partners, Ltd. shall have executed and delivered to
the Purchaser the Lease Amendment;
(xi) Sherry Mittleman and Lisa Schneiderman shall have
executed and delivered to the Purchaser the Joinder Agreement;
(xii) the Purchaser shall have completed its due diligence
review of the Company and IMP (including, without limitation, a
financial, legal, commercial and environmental review of the Company
and IMP) and the results thereof shall be satisfactory to the Purchaser
in its absolute discretion;
(xiii) there shall be no payables or receivables between the
Sellers and the Company or IMP or between Affiliates of the Sellers and
the Company or IMP, other than lease payments and intercompany payments
between the Company and IMP;
(xiv) the Company will have Net Working Capital of at least
the Net Working Capital Threshold Amount; and
(xv) the Sellers shall have corrected the building code
violations referenced in section 12(a)(v).
The Purchaser may waive any condition specified in this section 8(a) if it
executes a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE SELLERS. The obligation of the
Sellers to consummate the transactions to be performed by them in connection
with the Closing is subject to satisfaction of the following conditions:
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<PAGE> 46
(i) the representations and warranties set forth in section 4
above shall be true and correct in all material respects at and as of
the Closing Date (as though made then and as though the Closing Date
were substituted for the date of this Agreement);
(ii) the Purchaser shall have performed and complied with all
of its covenants hereunder in all material respects through the
Closing;
(iii) there shall not be any injunction, judgment, order,
decree, ruling or charge in effect preventing consummation of any of
the transactions contemplated by this Agreement, and no action, suit,
claim or proceeding shall be pending before any Authority which seeks
to prohibit or enjoin the consummation of the transactions contemplated
by this Agreement;
(iv) the Purchaser shall have delivered to the Sellers'
Representative a certificate to the effect that each of the conditions
specified above in sections 8(b)(i) and (ii) has been satisfied
in all respects;
(v) all applicable waiting periods (and any extensions
thereof) under the Hart-Scott-Rodino Act shall have expired or
otherwise been terminated;
(vi) the Purchaser shall have executed and delivered to the
Sellers' Representative the Employment Agreement;
(vii) the Purchaser shall have executed and delivered to the
Sellers' Representative the Consulting Agreement; and
(x) the Company shall have executed and delivered to the
Sellers' Representative the Lease Amendment.
The Sellers' Representative may waive any condition specified in this section
8(b) if he executes a writing so stating at or prior to the Closing.
9. REMEDIES FOR BREACHES OF THIS AGREEMENT.
(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Sellers contained in section 3A and contained in section
3B(b), (d) and (e) (collectively, THE "TRANSACTION REPRESENTATIONS AND
WARRANTIES"), the representations and warranties of the Sellers contained in
section 3B(k) (thE "TAX REPRESENTATIONS AND WARRANTIES"), the representations
and warranties of the Sellers contained in section 3B(u) (thE "EMPLOYEE BENEFIT
PLAN REPRESENTATIONS AND WARRANTIES"), the representations and warranties of the
Sellers contained in section 3B(v) (the "ENVIRONMENTAL REPRESENTATIONS AND
WARRANTIES"), the representations and warranties of the Sellers contained in
section 3B(aa) (the "PRODUCTS LIABILITY REPRESENTATIONS AND WARRANTIES") and the
representations and
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<PAGE> 47
warranties of the Purchaser contained in section 4 shall survive the Closing and
continue in full force and effect for the statute of limitations applicable
thereto. The representations and warranties of the Sellers contained in section
3B (other than the Transaction Representations and Warranties, the Tax
Representations and Warranties, the Employee Benefit Plan Representations and
Warranties, the Environmental Representations and Warranties and the Products
Liability Representations and Warranties) shall survive the Closing and continue
in full force and effect until the two year anniversary of the Closing Date. Any
claim for which any Party shall have given proper notice in accordance with the
terms of this Agreement (and the Escrow Agreement) on or prior to the expiration
of the applicable survival period shall survive until such claim is resolved
pursuant to the terms of this Agreement or the Escrow Agreement. To preserve any
claim for breach of any such representation or warranty, the Party claiming a
breach shall be obligated to notify the Party claimed to be in breach (except
that where the Party claimed to be in breach is the Company or IMP, notice shall
be given to the Sellers' Representative) in writing of any such breach, or facts
that can reasonably be expected to give rise to such breach, before termination
of the applicable survival period in respect of such representation or warranty;
otherwise, such Party's claim for breach shall be forever barred.
(b) INDEMNIFICATION.
(i) Pursuant to the terms of the Escrow Agreement and subject
to section 9(a) above and the conditions set forth in this section
9(b), subsequent to the Closing Date the Sellers shall indemnify,
defend and hold harmless the Company and IMP (as assignee of the
Purchaser pursuant to section 9(e) hereof) from, against and in respect
of any Losses which the Purchaser, the Company or IMP shall suffer,
sustain or become subject to by virtue of or which arise out of, or
result from, any breach of the covenants, representations and
warranties of the Sellers set forth in this Agreement (other than the
Transaction Representations and Warranties, the Tax Representations and
Warranties, the Employee Benefit Plan Representations and Warranties,
the Environmental Representations and Warranties and the Products
Liability Representations and Warranties); PROVIDED, HOWEVER, that: (A)
the Company's and IMP's right to indemnification with respect to such
breaches under this section 9(b)(i) shall be satisfied only by recourse
to the funds deposited and remaining in the General Indemnification
Escrow Account, and none of the Sellers shall have any personal
liability to the Company or IMP with respect to any such breach, and
(B) the Company and IMP shall not be entitled to indemnification with
respect to any Losses under this section 9(b)(i) until all such Losses
exceed, in the aggregate, $150,000 (the "DEDUCTIBLE"), in which case
the Company and IMP shall be entitled to indemnification only to the
extent such Losses exceed $150,000. Notwithstanding anything to the
contrary contained in this section 9(b)(i), any breach of the
representations and warranties of the Sellers contained in section
3B(x) shall not be subject to the Deductible.
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<PAGE> 48
(ii) Subject to section 9(a) above and the conditions set
forth in this section 9(b), subsequent to the Closing Date the Sellers
shall indemnify, defend and hold harmless the Company and IMP (as
assignee of the Purchaser pursuant to section 9(e) hereof) from,
against and in respect of any Losses which Purchaser, the Company or
IMP shall suffer, sustain or become subject to by virtue of or which
arise out of, or result from, any breach of any of the Transaction
Representations and Warranties, the Tax Representations and Warranties,
the Employee Benefit Plan Representations and Warranties, the
Environmental Representations and Warranties or the Products Liability
Representations and Warranties; PROVIDED, HOWEVER, that no Seller shall
be obligated to indemnify the Purchaser for an amount in excess of its,
his or her Company Pro Rata Share or IMP Pro Rata Share, whichever is
applicable, of any such Losses. The Company's and IMP's right to
indemnification with respect to breaches of Transaction Representations
and Warranties, Tax Representations and Warranties, Employee Benefit
Plan Representations and Warranties, Environmental Representations and
Warranties or Products Liability Representations and Warranties under
this section 9(b)(ii) shall not be subject to the Deductible and shall
be satisfied first by recourse to the funds deposited and remaining in
the General Indemnification Escrow Account; PROVIDED, HOWEVER, that to
the extent Losses for which the Purchaser is entitled to
indemnification under section 9(b)(i), together with amounts paid from
the General Indemnification Escrow Account pursuant to this section
9(b)(ii) exceed $2,450,000, the Sellers shall pay the Purchaser the
deficiency within 10 days of the Purchaser's request. In no event shall
the Company or IMP be entitled to indemnification for any Losses with
respect to the breach of any Employee Benefit Plan Representations and
Warranties and the Products Liability Representations and Warranties to
the extent that the sum of (x) all such Losses, and (y) the amount of
all disbursements made to the Company and IMP from the General
Indemnification Escrow Account exceeds, in the aggregate, $5,000,000.
In no event shall the Company or IMP be entitled to indemnification for
any Losses with respect to the breach of any Tax Representations and
Warranties or Environmental Representations and Warranties to the
extent that the sum of (x) all such Losses, (y) the amount of all
disbursements made to the Company and IMP from the General
Indemnification Escrow Account and (z) the amount of any Losses paid
for a breach of any Employee Benefit Plan Representations and
Warranties and the Products Liability Representations and Warranties,
exceeds in the aggregate, the Company Purchase Price and the IMP
Purchase Price. There shall be no limit on the amount of any Losses for
which the Company or IMP is entitled to indemnification for the breach
of any Transaction Representations and Warranties.
(iii) Subject to section 9(a) above and the conditions set
forth in this section 9(b), subsequent to the Closing Date (A) the
Purchaser shall indemnify, defend and hold harmless each Seller and his
or her estate, heirs, personal representatives or successors from,
against and in respect of any Losses which any such Person shall
suffer, sustain or become subject to by virtue of or which arise out
of, or result from, any breach by the Purchaser of its covenants,
representations and warranties set forth in this Agreement, and (B) the
Company and IMP
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<PAGE> 49
shall indemnify, defend and hold harmless each Seller and his or her
estate, heirs, personal representatives or successors from, against and
in respect of, any Losses which any such Person shall suffer, sustain
or become subject to by virtue of or which arise out of, or result
from, any breach by the Company or IMP of any of its covenants herein
which are to be performed after the Closing.
(iv) Promptly after the assertion by any third party of any
claim, demand or notice (a "THIRD PARTY CLAIM") against any Person or
Persons entitled to indemnification under this section 9(b) (the
"INDEMNIFIED PARTIES") that results or may result in the incurrence by
such Indemnified Parties of any Losses for which such Indemnified
Parties would be entitled to indemnification pursuant to this
Agreement, such Indemnified Parties shall promptly notify the parties
from whom such indemnification could be sought (the "INDEMNIFYING
PARTIES") of such Third Party Claim. In the case of claims for which
indemnification may be sought against the General Indemnification
Escrow Account, notice shall be given to the Sellers and to the
Sellers' Representative, and the Sellers and the Sellers'
Representative shall be considered the Indemnifying Parties solely for
the purpose of defending any such Third Party Claim as provided herein.
Thereupon, the Indemnifying Parties shall have the right, upon written
notice (the "DEFENSE NOTICE") to the Indemnified Parties within 30 days
after receipt by the Indemnifying Parties of notice of the Third Party
Claim (or sooner if such claim so requires) to conduct, at their own
expense, the defense against the Third Party Claim in their own names
or, if necessary, in the names of the Indemnified Parties. The Defense
Notice shall specify the counsel the Indemnifying Parties shall appoint
to defend such Third Party Claim (the "DEFENSE COUNSEL") and the
Indemnified Parties shall have the right to approve the Defense
Counsel, which approval shall not be unreasonably withheld. In the
event the Indemnified Parties and the Indemnifying Parties cannot agree
on such counsel within 10 days after the Defense Notice is given, then
the Indemnifying Parties shall propose an alternate Defense Counsel,
which shall be subject again to the Indemnified Parties' approval which
approval shall not be unreasonably withheld. Any Indemnified Party
shall have the right to employ separate counsel in any such Third Party
Claim and/or to participate in the defense thereof, but the fees and
expenses of such counsel shall not be included as part of any Losses
incurred by the Indemnified Party unless (A) the Indemnifying Parties
shall have failed to give the Defense Notice within the prescribed
period, (B) such Indemnified Party shall have received an opinion of
counsel, reasonably acceptable to the Indemnifying Parties, to the
effect that the interests of the Indemnified Party and the Indemnifying
Parties with respect to the Third Party Claim are sufficiently adverse
to prohibit the representation by the same counsel of both parties
under applicable ethical rules, or (C) the employment of such counsel
at the expense of the Indemnifying Parties has been specifically
authorized by the Indemnifying Parties. The party or parties conducting
the defense of any Third Party Claim shall keep the other parties
apprised of all significant developments and shall not enter into any
settlement, compromise or consent to judgment with respect to such
Third Party Claim
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<PAGE> 50
unless the Company and the Sellers' Representative consent, such
consent not to be unreasonably withheld.
(v) Notwithstanding any other provisions contained herein, the
costs of enforcement of the Escrow Agreement by the Purchaser, the
Company, IMP or any Seller shall not constitute Losses hereunder.
Rather, such costs and expenses shall be paid in accordance with the
terms of the Escrow Agreement.
(c) TREATMENT OF INDEMNIFICATION PAYMENTS. All indemnification payments
under this section 9 shall be deemed adjustments to the Company Purchase Price
or the IMP Purchase Price, whichever is applicable.
(d) EXCLUSIVE REMEDY. The Parties acknowledge and agree that the
foregoing indemnification provisions in this section 9 shall be the exclusive
remedy of the Purchaser, the Company, IMP and the Sellers with respect to
transactions contemplated by this Agreement. Without limiting the generality of
the foregoing, the Purchaser, the Company, IMP and the Sellers hereby waive any
statutory, equitable or common law rights or remedies relating to any
environmental, health and safety matters, including, without limitation, any
such matters arising under any Environmental, Health and Safety Requirements,
CERCLA, or any analogous state law.
(e) ASSIGNMENT BY PURCHASER. Provided that the Closing shall occur, the
Purchaser hereby assigns and transfers to the Company and IMP, effective as of
the Closing, all benefits and rights of the Purchaser pursuant to section 6 and
section 9 hereof.
(f) NO CONTRIBUTION FROM COMPANY OR IMP. Each Seller hereby waives any
rights to seek or obtain indemnification or contribution from the Company or IMP
for Losses pursuant to section 9(b) or the Escrow Agreement as a result of any
breach by the Company or IMP of any representation, warranty or covenant (other
than covenants to be performed by the Company and IMP after the Closing)
contained in this Agreement.
10. DISPUTE RESOLUTION.
(a) DISPUTE DEFINED. As used in this Agreement, "DISPUTE" shall (i)
mean any dispute or disagreement among the Parties concerning the interpretation
of this Agreement, the validity of this Agreement, any breach or alleged breach
by any party under this Agreement or any other matter relating in any way to
this Agreement, and (ii) exclude (A) any dispute or disagreement between the
Company and the Sellers concerning the determination of the Earnout, which shall
be resolved pursuant to the provisions of section 2(e)(iv) of this Agreement and
(B) any dispute or disagreement between the Company and the Sellers concerning
the determination of the Net Working Capital which shall be resolved pursuant to
the provisions of Section 2(f)(ii) of this Agreement.
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<PAGE> 51
(b) DISPUTE RESOLUTION PROCEDURES.
(i) If a Dispute arises, the Parties shall follow the
procedures specified in this section 10. The Parties shall promptly
attempt to resolve any Dispute by negotiations between themselves.
Either the Purchaser or the Sellers' Representative may give the other
Party written notice of any Dispute not resolved in the normal course
of businesection The Purchaser and the Sellers' Representative shall
meet at a mutually acceptable time and place within 15 calendar days
after delivery of such notice, and thereafter as often as they
reasonably deem necessary, to exchange relevant information and to
attempt to resolve the Dispute. If the Dispute has not been resolved by
the Parties within 30 calendar days of the disputing Party's notice, or
if the Parties fail to meet within such 15 calendar days, either the
Purchaser or the Sellers' Representative may initiate mediation as
provided in section 10(b)(ii) of this Agreement. If a negotiator
intends to be accompanied at a meeting by legal counsel, the other
negotiator shall be given at least three business days' notice of such
intention and may also be accompanied by legal counsel.
(ii) If the Dispute is not resolved by negotiations pursuant
to section 10(b)(i), the Purchaser and the Sellers' Representative
shall attempt in good faith to resolve any such Dispute by nonbinding
mediation. Either the Purchaser or the Sellers' Representative may
initiate a nonbinding mediation proceeding by a request in writing to
the other Party or Parties (the "MEDIATION REQUEST"), and all disputing
Parties will then be obligated to engage in a mediation. The proceeding
will be conducted in accordance with the then current procedures for
mediation under Chapter 44 of the Florida Statutes and Rules 1.700-730
of the Florida Rules of Civil Procedure:
(A) if the Parties have not agreed within 30 calendar
days of the Mediation Request on the selection of a mediator
willing to serve, the court, upon the request of either the
Purchaser or the Sellers' Representative, shall appoint a
certified mediator selected by rotation or by such other court
procedures as provided in Chapter 44 of the Florida Statutes
and Rules 1.700-730 of the Florida Rules of Civil Procedure;
and
(B) efforts to reach a settlement will continue until
the conclusion of the proceedings, which shall be deemed to
occur upon the earliest of the date that: (i) a written
settlement is reached, or (ii) the mediator concludes and
informs the Parties in writing that further efforts would not
be useful, or (iii) the Purchaser and the Sellers'
Representative agree in writing that an impasse has been
reached, or (iv) a period of 60 calendar days has passed since
the Mediation Request and none of the events specified in the
foregoing clauses (i) (ii) or (iii) has occurred. No party may
withdraw before the conclusion of the proceeding.
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<PAGE> 52
(iii) If a Dispute is not resolved by negotiation pursuant to
section 10(b)(i) of this Agreement or by mediation pursuant to section
10(b)(ii) of this Agreement within 100 calendar days after initiation
of the negotiation process pursuant to section 10(b)(i), such Dispute
and any other claims arising out of or relating to this Agreement may
be heard, adjudicated and determined in an action or proceeding filed
in any state or federal court specified in section 12(h).
(c) PROVISIONAL REMEDIES. At any time during the procedures specified
in sections 10(b)(i) and 10(b)(ii) of this Agreement, a Party may seek a
preliminary injunction or other provisional judicial relief if in its judgment
such action is necessary to avoid irreparable damage or to preserve the status
quo. Despite such action, the Parties will continue to participate in good faith
in the procedures specified in sections 10(b)(i) and 10(b)(ii).
(d) TOLLING STATUTE OF LIMITATIONS. All applicable statutes of
limitation and defenses based upon the passage of time shall be tolled while the
procedures specified in sections 10(b)(i) and 10(b)(ii) of this Agreement
are pending. The Parties will take such action, if any, as is required to
effectuate such tolling.
(e) PERFORMANCE TO CONTINUE. Each Party shall continue to perform its,
his or her obligations under this Agreement pending final resolution of any
Dispute.
(f) EXTENSION OF DEADLINES. All deadlines specified in this section 10
may be extended by mutual agreement among the Parties.
(g) ENFORCEMENT. The Parties regard the obligations in this section 10
to constitute an essential provision of this Agreement and one that is legally
binding on them. In case of a violation of the obligations in this section 10 by
any Party hereto, any other Party or Parties may bring an action to seek
enforcement of such obligations in any state or federal court specified in
section 12(h).
(h) COSTS. The Parties shall pay their own costs, fees, and expenses
incurred in connection with the application of the provisions of sections
10(b)(i) and 10(ii) of this Agreement. In addition, the fees and expenses of the
mediator in connection with the application of the provisions of section
10(b)(ii) of this Agreement shall be borne 50% by the Purchaser and 50% by the
Sellers (PRO RATA based on each Seller's Company Pro Rata Share).
11. ADDITIONAL AGREEMENTS. The Parties agree that any claim for payment
pursuant to sections 11(b) and 11(c) must be made by the Purchaser on or before
June 30, 1999 and to preserve any claim for payment thereunder, the Purchaser
shall be obligated to notify the Seller in writing of any claim, together with
supporting documentation, on or before June 30, 1999, otherwise, the Purchaser's
claim under sections 11(b) and 11(c) shall be forever barred. The Parties agree
that there shall be no time limit on any claim for payment pursuant to sections
11(a), 11(d) and 11(e). The Parties further agree that any payments required to
be made pursuant to sections 11(a), 11(b), 11(c), 11(d) and 11(e) shall
- 48 -
<PAGE> 53
not be subject to the Deductible and may be made from funds deposited in the
Escrow Account; PROVIDED, HOWEVER, that to the extent Losses for which the
Purchaser is entitled to indemnification under section 9(b)(i), together with
amounts paid from the Escrow Account pursuant to sections 11(a), 11(b),
11(c), 11(d) and 11(e) exceed $2,450,000, the Sellers shall pay the Purchaser
the deficiency within 30 days of the Purchaser's request (PRO RATA based on each
Seller's Company Pro Rata Share).
(a) PRODUCT RETURNS. Notwithstanding anything set forth in section
3B(aa) OF THE DISCLOSURE SCHEDULE, in the event (i) customers of the Company or
IMP return within the applicable warranty period any defective or non-conforming
merchandise sold prior to Closing, (ii) the Company or IMP is required to
provide any customers with a credit against their accounts receivable within the
applicable warranty period as a result of the receipt of defective or
non-conforming merchandise sold prior to Closing or (iii) any product liability
claims are brought with respect to merchandise sold prior to Closing which are
not covered by insurance, the Sellers shall be required to pay the Purchaser
(PRO RATA based on each Seller's Company Pro Rata Share) the amount of the
credits, the amount of the uninsured product liability claims and the sum of (A)
the difference between the original sales price of the returned merchandise and
the resale price thereof, (B) re-work costs and shipping costs, and (C) the cost
of any returned merchandise which was sold prior to Closing and which is not
resold by the Company, within 30 days of the Purchaser's request, provided that
(1) the Purchaser causes the Company to use its best efforts to resell the
returned merchandise in the Ordinary Course of Business and (2) any Dispute
regarding payment is first resolved pursuant to section 10 of this Agreement.
(b) SELLERS' GUARANTEE OF ACCOUNTS RECEIVABLE.
(i) With respect to accounts receivable on the Closing Balance
Sheet which as of the Closing are 90 days or over from the invoice date
thereof (the "90 AND OVER ACCOUNTS RECEIVABLE"), the Sellers guarantee
the collectibility of the 90 and Over Accounts Receivable in full minus
any remaining reserve for bad debts included in the Closing Balance
Sheet.
(ii) The Purchaser agrees to use efforts consistent with the
Company's past custom and practice to cause the Company to collect all
90 and Over Accounts Receivable, but shall not be obligated to resort
to litigation. Any sums payable by account debtors on account of any
accounts receivable of such account debtors shall be credited to the
earliest invoices of the Company to such account debtors, unless
specifically directed otherwise by the account debtor. Subject to the
foregoing, to the extent any 90 and Over Accounts Receivable existing
at the Closing are unpaid for a period of 60 days after the Closing,
the Purchaser shall send written notice to the Sellers' Representative
indicating the specific account debtors, the amount of the unpaid
invoices representing 90 and Over Accounts Receivable to each such
account debtor and the total of all such unpaid 90 and Over Accounts
Receivable. The Sellers shall pay the Purchaser the amount of all such
unpaid 90
- 49 -
<PAGE> 54
and Over Accounts Receivable minus any remaining reserve for bad debts
included in the Closing Balance Sheet (PRO RATA based on each Seller's
Company Pro Rata Share) within 30 days of the receipt of any notice
pursuant to this section 11(b)(ii) on the condition that the Purchaser
shall simultaneously cause the Company to assign such unpaid 90 and
Over Accounts Receivable (the "ASSIGNED RECEIVABLES") to the Sellers'
Representative. Such assignment shall include the right to sue as an
assignee of the Company. In the event that after such assignment the
Company receives any payment on the Assigned Receivables, the Purchaser
shall cause the Company to promptly remit such amount to the Sellers'
Representative. Thereafter, the Sellers' Representative, as owner of
the Assigned Receivables, may take any action the Sellers'
Representative deems necessary to collect the Assigned Receivables and
any collections shall be the property of the Sellers The Purchaser
agrees to cooperate and shall cause the Company to cooperate with the
Sellers' Representative in any action the Sellers' Representative
wishes to take to collect the Assigned Receivables consistent with the
Company's past custom and practice . In the event the Purchaser does
not want to assign any Account Receivable to the Sellers'
Representative because it does not want the Sellers' Representative to
initiate collection action thereon, the Sellers shall be relieved of
any liability under this section 11(b) with respect to such 90 and Over
Accounts Receivable.
(iii) In the event any 90 and Over Accounts Receivable is
subject to a valid dispute by the account debtor and/or the Purchaser
wishes to grant a discount on any 90 and Over Accounts Receivable, the
Purchaser shall send written notice or notices to the Sellers'
Representative indicating the specific account debtors and the amount
of the dispute or discount. The Purchaser shall consult with the
Sellers' Representative with respect to the resolution of any dispute
and/or the amount of any discount and shall not settle any such dispute
or grant any discount without the consent of the Sellers'
Representative, which consent shall not be unreasonably withheld. Where
consent is given to the settlement of any dispute and/or the granting
of any discount, the Sellers shall pay the Purchaser the difference
between the original amount of the 90 and Over Accounts Receivable and
the amount actually received by the Purchaser after settlement or
discount, with payment to be made within 30 days after the settlement
or granting of the discount. Where consent is withheld by the Sellers'
Representative, the Purchaser may either assign the 90 and Over
Accounts Receivable, or settle the dispute or grant the discount at its
own expense and the Sellers shall be relieved of any liability under
this section 11(b) with respect to such 90 and Over Accounts
Receivable.
(c) VACATION AND HOLIDAY ACCRUAL. To the extent the accrual on the
Company's Closing Balance Sheet for vacation and holidays is less than the
amount which should have properly been accrued in accordance with GAAP, the
Sellers shall pay the Purchaser the deficiency within 30 days of the Purchaser's
request (PRO RATA based on each Seller's Company Pro Rata Share).
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<PAGE> 55
(d) EPCRA FILINGS. Notwithstanding the disclosures made by the Sellers
in section 3B(v) of THE DISCLOSURE SCHEDULE, the Sellers shall be responsible
for and shall pay the Purchaser (PRO RATA based on each Seller's Company Pro
Rata Share) the full amount of all Losses resulting from any failure to comply
with EPCRA.
(e) LITIGATION. Notwithstanding the disclosures made by the Sellers in
section 3B(S) OF The DISCLOSURE SCHEDULE, the Sellers shall be responsible for
and shall pay the Purchaser (PRO RATA based on each Seller's Company Pro Rata
Share) the full amount of all Losses resulting the matters described in section
3B(s) OF THE DISCLOSURE SCHEDULE. Such litigation shall be considered to be a
"Third Party Claim" and shall be handled in accordance with the provisions of
section 9(b)(iv) of this Agreement.
12. TERMINATION.
(a) TERMINATION OF AGREEMENT. Certain of the Parties may terminate this
Agreement as provided below:
(i) the Purchaser and the Sellers' Representative may
terminate this Agreement by mutual written consent at any time prior to
the Closing;
(ii) the Purchaser may terminate this Agreement by giving
written notice to the Sellers' Representative at any time prior to the
Closing in the event the Company has within the previous 10 business
days given the Purchaser any notice pursuant to section 5(f) above;
(iii) the Purchaser may terminate this Agreement by giving
written notice to the Sellers' Representative at any time prior to the
Closing (A) in the event that the Sellers, the Company or IMP have
breached any representation, warranty or covenant contained in this
Agreement (other than the representations and warranties in section
3B(f)-(aa) above) in any material respect, the Purchaser has notified
the Sellers' Representative of the breach, and the breach has continued
without cure for a period of 30 days after the notice of breach or (B)
if the Closing shall not have occurred on or before June 30, 1999, by
reason of the failure of any condition precedent under section 8(a)
hereof (unless the failure results primarily from the Purchaser
breaching any representation, warranty or covenant contained in the
Agreement); and
(iv) the Sellers' Representative may terminate this Agreement
by giving written notice to the Purchaser at any time prior to the
Closing (A) in the event the Purchaser has breached any material
representation, warranty or covenant contained in this Agreement in any
material respect, the Sellers' Representative has notified the
Purchaser of the breach, and the breach has continued without cure for
a period of 30 days after the notice of breach or (B) if the Closing
shall not have occurred on or before June 30, 1999, by reason of the
failure of any condition precedent under section 8(b) hereof (unless
the failure results primarily from the
- 51 -
<PAGE> 56
Sellers, the Company or IMP breaching any representation, warranty or
covenant contained in this Agreement).
(v) On or before February 1, 1999, the Sellers' Representative
will notify the Purchaser by giving written notice of what is required
to correct any code violations with respect to the Real Property
subject to the Lease Amendment, the estimated time period to make such
corrections and the Sellers' willingness to make such corrections. If
the Sellers' Representative fails to give such notice, the Purchaser
shall have the right to terminate this Agreement. If such notice is
given and states that the Sellers are not willing to make such
corrections, then the Sellers may terminate this Agreement, subject to
the payment to the Purchaser of $22,500, representing one-half of the
filing fees required to be paid under the Hart-Scott-Rodino Act. If the
Sellers are willing to make such corrections and the estimated date for
completion thereof is after March 31, 1999, the Purchaser shall have
the right to terminate this Agreement.
(b) EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to section 12(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); PROVIDED, HOWEVER, that
the confidentiality provisions contained in the confidentiality agreement
between WinsLoew Furniture, Inc. and the Company, dated May 28, 1998, executed
in connection with the transaction (the "CONFIDENTIALITY AGREEMENT") shall
survive the termination of this Agreement.
13. WINSLOEW FURNITURE GUARANTY. WinsLoew Furniture, Inc., a Florida
corporation, agrees to guaranty all obligations of the Purchaser under this
Agreement.
14. MISCELLANEOUS.
(a) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or public announcement relating to the subject matter of this
Agreement prior to the Closing without the prior written approval of the other
Parties.
(b) NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof, other than the Confidentiality Agreement, which shall remain in full
force and effect.
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<PAGE> 57
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their respective successors
and permitted assigns. No Party may assign either this Agreement or any of its
rights, interests or obligations hereunder without the prior written approval of
the other Parties; PROVIDED, HOWEVER, that, unless expressly prohibited
hereunder, the Purchaser may (i) assign any or all of its rights and interests
hereunder to one or more of its Affiliates and (ii) designate one or more of its
Affiliates to perform its obligations hereunder and (iii) after the Closing is
effected, any or all of the rights and interests of Purchaser hereunder (A) may
be assigned to any purchaser of substantially all of the assets of Purchaser,
(B) may be assigned as a matter of law to the surviving entity in any merger of
the Purchaser, and (C) may be assigned as collateral security to any lender or
lenders (including any agent for any such lender or lenders) providing financing
to the Purchaser in connection with the transactions contemplated hereby, or to
any assignee or assignees of any such lender, lenders or agent (it being
understood that in any or all of the cases described in clauses (i), (ii) and
(iii) above the Purchaser nonetheless shall remain responsible for the
performance of all of its obligations hereunder).
(e) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given two business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
If to the Sellers, the Sellers' Representative or Perry Martin, or if
to the Company or IMP (prior to the Closing):
Leo Martin
Bristol Towers Apartments
2127 Brickell Avenue, Apt. 3602
Miami, Florida 33129
Facsimile: (305) 858-8252
With copies to (which shall not constitute notice to the Sellers, the
Sellers' Representative or the Company):
Stephen H. Cypen, Esq.
Cypen & Cypen
P.O. Box 402099
825 Arthur Godfrey Road
Miami Beach, Florida 33140-0099
Facsimile: (305) 535-0050
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<PAGE> 58
Donald R. Tescher, Esq.
Tescher Chaves Rubin & Forman, PA
2101 Corporate Boulevard, Suite 107
Boca Raton, Florida 33431
Facsimile: (561) 998-1642
If to the Purchaser or WinsLoew Furniture Company, Inc., or if to the
Company or IMP (after the Closing):
Bobby Tesney
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Facsimile: (205) 408-7028
Any Party may send any notice, request, demand, claim or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail or electronic mail), but no such notice, request,
demand, claim or other communication shall be deemed to have been duly given
unless and until it actually is received by the intended recipient. Any Party
may change the address to which notices, requests, demands, claims and other
communications hereunder are to be delivered by giving the other Parties notice
in the manner herein set forth.
(h) GOVERNING LAW; VENUE. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Florida or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Florida. The Parties agree
that any and all actions arising under or in respect of this Agreement shall be
litigated in any federal or state court of competent jurisdiction located in the
County of Miami-Dade, State of Florida. By execution and delivery of this
Agreement, each Party irrevocably submits to the personal and exclusive
jurisdiction of such courts for itself or himself, and in respect of its or his
property with respect to such action. Each Party agrees that venue would be
proper in any of such courts, and hereby waives any objection that any such
court is an improper or inconvenient forum for the resolution of any such
action.
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<PAGE> 59
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by the
Purchaser, the Sellers, the Company and IMP. No waiver by any Party of any
default, misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or affect
in any way any rights arising by virtue of any prior or subsequent such
occurrence.
(j) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) EXPENSES. Except as otherwise provided in this Agreement, each of
the Parties will bear his, her or its own costs and expenses (including legal
and investment advisory fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby. The Sellers agree that
neither the Company nor IMP has borne and will not bear any of the costs and
expenses of the Sellers (including any of their legal and investment advisory
fees and expenses) in connection with this Agreement or any of the transactions
contemplated hereby to the extent that any of the same shall remain unpaid at
the time of the Closing. Except as provided in section 12(a)(v), the Purchaser
shall bear all filing fees required to be paid under the Hart-Scott-Rodino Act.
(l) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
specification of any dollar amount in the representations and warranties or
otherwise in this Agreement or in the Disclosure Schedule is not intended and
shall not be deemed to be an admission or acknowledgment of the materiality of
such amounts or items, nor shall the same be used in any dispute or controversy
between the parties to determine whether any obligation, item or matter (whether
or not described herein or included in any schedule) is or is not material for
purposes of this Agreement.
(m) INCORPORATION OF DISCLOSURE SCHEDULE. The Disclosure Schedule
identified in this Agreement is incorporated herein by reference and made a part
hereof.
(n) EQUITABLE REMEDIES. Each of the Sellers and Perry B. Martin
acknowledges and agrees that the Purchaser would not have an adequate remedy at
law in the event any of the provisions of section 6(e), section 6(f) and section
6(g) of this Agreement are not performed in accordance with their specific terms
or are breached. Accordingly, each of Each of the Sellers and Perry B. Martin
agrees that the Purchaser shall be entitled to an injunction or injunctions to
prevent breaches of section 6(e), section 6(f) and section 6(g) of this
Agreement and to enforce specifically the terms and provisions thereof in any
action instituted in any court of competent jurisdiction, in addition to any
other remedies which may be available to it.
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<PAGE> 60
(o) WAIVER OF JURY TRIAL. EACH PARTY HERETO, WINSLOEW FURNITURE, INC.
AND PERRY B. MARTIN HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, TRIAL BY JURY IN ANY SUIT,
ACTION OR PROCEEDING ARISING HEREUNDER.
(p) PREVAILING PARTIES. Except as otherwise expressly provided to the
contrary in this Agreement, in the event of any litigation with regard to this
Agreement, the prevailing Party or Parties shall be entitled to receive from the
nonprevailing Party or Parties and the nonprevailing Party or Parties shall pay
all reasonable costs, fees (including reasonable trial and appellate attorneys'
fees) and expenses of the prevailing Party or Parties.
SIGNATURES APPEAR ON FOLLOWING PAGE
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<PAGE> 61
IN WITNESS WHEREOF, the Parties hereto have executed this
Agreement as of the date first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ Stephen C. Hess
-------------------------------------------
Stephen C. Hess, President
MIAMI METAL PRODUCTS, INC.
By: /s/ Leo Martin
-------------------------------------------
Leo Martin, Chairman
INDUSTRIAL MUEBLERA POMPEII de MEXICO,
S.A. de C.V.
By: /s/ Leo Martin
-------------------------------------------
Leo Martin, Chairman
SELLERS:
Leo Martin
-----------------------------------------------
Leo Martin
Gloria Martin
-----------------------------------------------
Gloria Martin
Donald R. Tescher, Trustee
-----------------------------------------------
Donald R. Tescher, Trustee and not individually
of the Leo Martin Retained Annuity Trust
Agreement I
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<PAGE> 62
Donald R. Tescher, Trustee
-----------------------------------------------
Donald R. Tescher, Trustee and not individually
of the Leo Martin Retained Annuity Trust
Agreement II
Donald R. Tescher, Trustee
-----------------------------------------------
Donald R. Tescher, Trustee and not individually
of the Leo Martin Retained Annuity Trust
Agreement III
Donald R. Tescher, Trustee
-----------------------------------------------
Donald R. Tescher, Trustee and not individually
of the Gloria Martin Retained Annuity Trust
Agreement I
Donald R. Tescher, Trustee
-----------------------------------------------
Donald R. Tescher, Trustee and not individually
of the Gloria Martin Retained Annuity Trust
Agreement II
Donald R. Tescher, Trustee
-----------------------------------------------
Donald R. Tescher, Trustee and not individually
of the Gloria Martin Retained Annuity Trust
Agreement III
SELLERS' REPRESENTATIVE:
Leo Martin
-----------------------------------------------
Leo Martin
By its execution hereof, WinsLoew Furniture,
Inc. agrees to the provisions of Sections 13 and
14 of this Agreement.
WINSLOEW FURNITURE, INC.
By: /s/ Bobby Tesney
-------------------------------------------
Bobby Tesney, President
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<PAGE> 63
By his execution hereof, Perry B. Martin agrees
to the provisions of Sections 6(e), 6(f), 6(g),
and 14 of this Agreement.
Perry B. Martin
-----------------------------------------------
Perry B. Martin
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<PAGE> 64
FIRST AMENDMENT TO
STOCK PURCHASE AGREEMENT
This First Amendment to Stock Purchase Agreement is made and entered
into as of the 1st day of July, 1999, by and among WINSTON FURNITURE COMPANY OF
ALABAMA, INC., an Alabama corporation (the "PURCHASER"), MIAMI METAL PRODUCTS,
INC., d/b/a POMPEII FURNITURE INDUSTRIES, a Florida corporation (the "COMPANY"),
INDUSTRIAL MUEBLERA POMPEII DE MEXICO, S.A. DE C.V., a Mexican corporation
("IMP") and the following selling shareholders, LEO MARTIN ("L. MARTIN"), GLORIA
MARTIN ("G. MARTIN"), DONALD R. TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE LEO
MARTIN RETAINED ANNUITY TRUST AGREEMENT I, DONALD R. TESCHER, TRUSTEE AND NOT
INDIVIDUALLY OF THE LEO MARTIN RETAINED ANNUITY TRUST AGREEMENT II, DONALD R.
TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE LEO MARTIN RETAINED ANNUITY TRUST
AGREEMENT III, DONALD R. TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE GLORIA
MARTIN RETAINED ANNUITY TRUST AGREEMENT I, DONALD R. TESCHER, TRUSTEE AND NOT
INDIVIDUALLY OF THE GLORIA MARTIN RETAINED ANNUITY TRUST AGREEMENT II, and
DONALD R. TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE GLORIA MARTIN RETAINED
ANNUITY TRUST AGREEMENT III (collectively, the "SELLERS" and individually, a
"SELLER").
PRELIMINARY STATEMENTS:
A. Purchaser, the Company, IMP and Sellers entered into a Stock
Purchase Agreement dated November 23, 1998 (the "STOCK PURCHASE AGREEMENT").
B. Purchaser, the Company, IMP and Sellers desire to amend the Stock
Purchase Agreement in accordance with the terms and provisions contained in this
First Amendment.
C. Capitalized terms not otherwise defined herein shall have the same
meaning as set forth in the Stock Purchase Agreement.
AGREEMENT:
In consideration of the premises and the mutual promises and conditions
contained herein, the parties hereto agree as follows:
1. AMENDMENT TO SECTION 2(g). The Closing Date is hereby amended to
such date as the Sellers' Representative and the Purchaser may mutually
determine, but no later than August 17, 1999.
2. AMENDMENT TO SECTION 11. The date for the Purchaser to submit a
claim for payment pursuant to ss.ss.11(b) and 11(c) of the Stock Purchase
Agreement is hereby amended to change the date from June 30, 1999 to 90 days
following the Closing Date.
3. AMENDMENT TO SECTIONS 12(a)(iii) AND (iv). The right of each of the
Purchaser and the Sellers' Representative to terminate the Stock Purchase
Agreement if the Closing shall
2
<PAGE> 65
not have occurred on or before June 30, 1999 is hereby amended to change the
date from June 30, 1999 to October 31, 1999.
4. LEASE AMENDMENT. Exhibit D attached hereto is hereby substituted for
EXHIBIT D attached to the Stock Purchase Agreement.
5. EXECUTION IN COUNTERPARTS; FAX SIGNATURES. For the convenience of
the parties hereto, this Amendment may be executed simultaneously in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument, without necessity of
production of the others. Signatures may be exchanged by facsimile transmission,
with original signatures to follow. Each party to this Amendment agrees that
he/she/it will be bound by his/her/its own facsimile signature and that
he/she/it accepts the facsimile signature of the other parties to this
Amendment.
6. RATIFICATION. The remaining provisions of the Stock Purchase
Agreement are hereby ratified and affirmed.
IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ Stephen C. Hess
-------------------------------------
Stephen C. Hess, President
MIAMI METAL PRODUCTS, INC.
By: /s/ Leo Martin - Chairman
-------------------------------------
Leo Martin, Chairman
INDUSTRIAL MUEBLERA POMPEII de
MEXICO, S.A. de C.V.
By: /s/ Leo Martin - Chairman
-------------------------------------
Leo Martin, Chairman
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SELLERS:
/s/ Leo Martin
-------------------------------------
Leo Martin
/s/ Gloria Martin
-------------------------------------
Gloria Martin
/s/ Donald R. Tescher
-------------------------------------
Donald R. Tescher, Trustee and not
individually of the Leo Martin Retained
Annuity Trust Agreement I
/s/ Donald R. Tescher
-------------------------------------
Donald R. Tescher, Trustee and not
individually of the Leo Martin Retained
Annuity Trust Agreement II
/s/ Donald R. Tescher
-------------------------------------
Donald R. Tescher, Trustee and not
individually of the Leo Martin Retained
Annuity Trust Agreement III
/s/ Donald R. Tescher
-------------------------------------
Donald R. Tescher, Trustee and not
individually of the Gloria Martin Retained
Annuity Trust Agreement I
/s/ Donald R. Tescher
-------------------------------------
Donald R. Tescher, Trustee and not
individually of the Gloria Martin Retained
Annuity Trust Agreement II
/s/ Donald R. Tescher
-------------------------------------
Donald R. Tescher, Trustee and not
individually of the Gloria Martin Retained
Annuity Trust Agreement III
4
<PAGE> 67
SECOND AMENDMENT TO
STOCK PURCHASE AGREEMENT
This Second Amendment to Stock Purchase Agreement is made and entered
into as of the 30th day of July, 1999, by and among WINSTON FURNITURE COMPANY OF
ALABAMA, INC., an Alabama corporation (the "PURCHASER"), MIAMI METAL PRODUCTS,
INC., d/b/a POMPEII FURNITURE INDUSTRIES, a Florida corporation (the "COMPANY"),
INDUSTRIAL MUEBLERA POMPEII DE MEXICO, S.A. DE C.V., a Mexican corporation
("IMP") and the following selling shareholders, LEO MARTIN ("L. MARTIN"), GLORIA
MARTIN ("G. MARTIN"), DONALD R. TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE LEO
MARTIN RETAINED ANNUITY TRUST AGREEMENT I, DONALD R. TESCHER, TRUSTEE AND NOT
INDIVIDUALLY OF THE LEO MARTIN RETAINED ANNUITY TRUST AGREEMENT II, DONALD R.
TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE LEO MARTIN RETAINED ANNUITY TRUST
AGREEMENT III, DONALD R. TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE GLORIA
MARTIN RETAINED ANNUITY TRUST AGREEMENT I, DONALD R. TESCHER, TRUSTEE AND NOT
INDIVIDUALLY OF THE GLORIA MARTIN RETAINED ANNUITY TRUST AGREEMENT II, and
DONALD R. TESCHER, TRUSTEE AND NOT INDIVIDUALLY OF THE GLORIA MARTIN RETAINED
ANNUITY TRUST AGREEMENT III (collectively, the "SELLERS" and individually, a
"SELLER").
PRELIMINARY STATEMENTS:
A. Purchaser, the Company, IMP and Sellers entered into a Stock
Purchase Agreement dated November 23, 1998, as amended by First Amendment to
Stock Purchase Agreement dated July 1, 1999 (collectively, the "STOCK PURCHASE
AGREEMENT").
B. Purchaser, the Company, IMP and Sellers desire to amend the Stock
Purchase Agreement in accordance with the terms and provisions contained in this
Second Amendment.
C. Capitalized terms not otherwise defined herein shall have the same
meaning as set forth in the Stock Purchase Agreement.
AGREEMENT:
In consideration of the premises and the mutual promises and conditions
contained herein, the parties hereto agree as follows:
7. AMENDMENT TO SECTION 1.
7.1. ADDITIONAL DEFINED TERMS. The following defined terms are
added to ss.1 of the Stock Purchase Agreement:
"ARCHITECT" has the meaning set forth in ss.2(g)(v) below.
"BUILDING IMPROVEMENTS" has the meaning set forth in ss.2(g)(i) below.
"BUILDING IMPROVEMENTS ESCROW ACCOUNT" has the meaning set forth in
ss.2(c)(ii) below.
<PAGE> 68
"DISBURSEMENT ACTUAL AMOUNT" has the meaning set forth in
ss.2(g)(v)(C) below.
"DISBURSEMENT HIGH AMOUNT" has the meaning set forth in ss.2(g)(v)(B)
below.
"DISBURSEMENT LOW AMOUNT" has the meaning set forth in ss.2(g)(v)(A)
below.
"ENVIRONMENTAL INDEMNIFICATION" has the meaning set forth in ss.9(a)
below.
"FOREIGN QUALIFICATION INDEMNIFICATION" has the meaning set forth in
ss.9(a) below.
"IRS AUDIT INDEMNIFICATION" has the meaning set forth in ss.9(a) below.
"LITIGATION INDEMNIFICATION" has the meaning set forth in ss.9(a)
below.
"NOTICE OF DISAGREEMENT WITH DISBURSEMENT REQUEST" has the meaning set
forth in ss.2(g)(v) below.
"UNRESTRICTED REPRESENTATIONS, WARRANTIES AND COVENANTS" has the
meaning set forth in ss.9(b)(ii) below.
7.2. AMENDMENT OF DEFINED TERMS. The following defined terms
are hereby amended in their entirety and restated as follows:
"ACCOUNTING FIRM" has the meaning set forth in ss.2(f)(ii) below.
"CLOSING" has the meaning set forth in ss.2(h) below.
"CLOSING DATE" has the meaning set forth in ss.2(h) below.
DELETION OF DEFINED TERMS. The following defined terms are deleted from
Section 1 of the Stock Purchase Agreement: "ADJUSTED EBITAM", "ADJUSTED EBITAM
STATEMENT", "DETERMINATION NOTICE", "EARNOUT", "EARNOUT ACTUAL AMOUNT", "EARNOUT
HIGH AMOUNT", "EARNOUT LOW AMOUNT", "FINAL ADJUSTED EBITAM DETERMINATION DATE"
and "NOTICE OF DISAGREEMENT WITH ADJUSTED EBITAM STATEMENT".
8. AMENDMENT TO SS.SS.2(b) AND (c). ss.ss.2(b) and (c) of the Stock
Purchase Agreement are hereby amended in their entirety and restated as follows:
"(b) PURCHASE PRICE.
(i) The aggregate purchase price to be paid by the
Purchaser for the all of the Company Shares (the "COMPANY
PURCHASE PRICE") shall be $17,400,000, MINUS (A) the amount of
Funded Indebtedness as of the Closing Date (after giving
effect to any reduction of such Funded Indebtedness on the
Closing Date by application of Available Cash) and MINUS (B)
any Company Purchase Price Adjustment made pursuant to ss.2(f)
below. The amount of the Company Purchase Price to be received
by each Seller shall be the Seller's Company Pro Rata Share
thereof.
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(ii) The aggregate purchase price to be paid by the
Purchaser for the all of the IMP Shares (the "IMP PURCHASE
PRICE") shall be $50,000. The amount of the IMP Purchase Price
to be received by each of L. Martin and G. Martin shall be
such Person's IMP Pro Rata Share thereof.
(c) PAYMENT OF COMPANY PURCHASE PRICE AND IMP PURCHASE PRICE.
On the Closing Date, the Purchaser shall make payment of the Company
Purchase Price and the IMP Purchase Price as follows:
(i) To the Sellers, by wire transfer of immediately
available funds, the sum of $12,400,000 [$17,400,000 MINUS (A)
the amount of Funded Indebtedness as of the Closing Date
(after giving effect to any reduction of such Funded
Indebtedness on the Closing Date by application of Available
Cash) and (B) $5,000,000 to be deposited as the Escrow Fund
pursuant to ss.2(c)(ii) below] (the "INITIAL PAYMENt"), to the
account designated in writing by the Sellers' Representative
at least two business days prior to the Closing Date.
(ii) To SunTrust Bank, Atlanta, as escrow agent (the
"ESCROW AGENT") pursuant to the terms of the Escrow Agreement,
the sum of $5,000,000 (the "ESCROW FUND"). As provided in the
Escrow Agreement, the Escrow Fund shall be divided into three
accounts as follows: (A) $50,000 thereof shall be held in an
account (the "COMPANY PURCHASE PRICE ADJUSTMENT ESCROW
ACCOUNT") to be utilized to fund the Company Purchase Price
Adjustment as described in ss.2(f) hereof, (B) $2,450,000
thereof shall be held in an account (the "GENERAL
INDEMNIFICATION ESCROW ACCOUNT") to provide indemnification to
the Purchaser as provided in ss.9(b) hereof and (C) $2,500,000
thereof (required to be deposited by L. Martin pursuant to the
provisions of ss.2(g)) shall be held in an account (the
"BUILDING IMPROVEMENTS ESCROW ACCOUNT") to provide for the
costs to make the improvements to the Real Property required
by the City of Miami to correct certain building code
violations as provided in ss.2(g) hereof.
(iii) To L. Martin and G. Martin, by wire transfer of
immediately available funds, the sum of $50,000 to the account
designated in writing by the Sellers' Representative at least
two business days prior to the Closing Date."
9. AMENDMENT OF SS.2(e). ss.2(e) of the Stock Purchase Agreement is
hereby amended in its entirety and restated as follows:
"(e) ss.2(e) is intentionally omitted from the Agreement."
10. AMENDMENT TO SS.2(f)(ii). The eighth sentence of ss.2(f)(ii) of the
Stock Purchase Agreement is hereby amended in its entirety and restated as
follows:
"At the end of such 30-day period, the Seller's Representative and the
Purchaser shall submit to an independent "Big 6" public accounting firm
(the "ACCOUNTING FIRM") for review and resolution any and all matters
which remain in dispute and which were included in any Notice of
Disagreement With Closing Balance Sheet (it being understood
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<PAGE> 70
that the Accounting Firm shall act as an arbitrator to determine, based
solely on presentations by the Purchaser and the Seller's
Representative (and not by independent review), only those matters
which remain in dispute), and the Accounting Firm shall reach a final,
binding resolution of all matters which remain in dispute, which final
resolution shall be (w) in writing, (x) furnished to the Purchaser and
the Seller's Representative as soon as practicable after the items in
dispute have been referred to the Accounting Firm, (y) made in
accordance with this Agreement, and (z) conclusive and binding upon the
Parties and not subject to collateral attack for any reason."
11. AMENDMENT TO SS.2(g). The following new provision is hereby added
to the Stock Purchase Agreement and designated as ss.2(g) and ss.ss.2(g), (h),
(i) and (j) to the Stock Purchase Agreement are hereby redesignated as
ss.ss.2(h), (i), (j) and (k).
"(g) BUILDING IMPROVEMENTS.
(i) L. Martin on behalf of Nitram Partners, Ltd.
agrees to be responsible for and to pay all costs associated
with the improvements to the Real Property required by the
City of Miami to correct certain building code violations,
currently estimated to cost $2,500,000 (the "BUILDING
IMPROVEMENTS") and, pursuant to the provisions of ss.2(c)(ii),
will deposit $2,500,000 with the Escrow Agent to be held in
the Building Improvements Escrow Account and disbursed in
accordance with the provisions of this ss.2(g); PROVIDED,
HOWEVEr, in the event the amount of the Building Improvements
set forth in the final quotations and/or construction contract
therefor exceeds $2,500,000, L. Martin agrees to deposit the
difference in the Building Improvements Escrow Account within
five business days of his receipt of the final quotations
and/or construction contract; PROVIDED, FURTHER, in the event
the amount of the Building Improvements set forth in the final
quotations and/or construction contract therefor is less than
$2,500,000, the Purchaser agrees to instruct the Escrow Agent,
jointly with L. Martin, to make a disbursement of an amount
equal to the difference between $2,500,000 and the amount of
the Building Improvements set forth in the final quotations
and/or construction contract.
(ii) L. Martin warrants that the Building
Improvements to be made and the operations of the Company
thereunder as currently conducted will be in compliance with
all applicable statutes, laws, ordinances, rules, orders and
regulations of federal, state, local and foreign governments
(and all agencies thereof), including, but not limited to, all
Environmental, Health and Safety Requirements.
(iii) The agreements and warranties of L. Martin set
forth in this ss.2(g) shall survive the Closing and continue
in full force and effect for the statute of limitations
applicable thereto.
(iv) Funds in the Building Improvements Escrow
Account shall be disbursed as follows. Within five business
days after the receipt by the Purchaser of a disbursement
request from L. Martin to disburse funds from the Building
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<PAGE> 71
Improvements Escrow Account, accompanied by the written
approval of the disbursement request by the project's
construction manager, engineer or architect certifying that
the work to be paid for has been satisfactorily completed, the
Sellers' Representative and the Purchaser shall jointly
instruct the Escrow Agent to make a disbursement of the
applicable portion of Building Improvements Escrow Account
with respect to any undisputed amounts of the disbursement
request. With respect to any items that are the subject of a
Notice of Disagreement With Disbursement Request, joint
disbursement instructions shall be given to the Escrow Agent
within three business days after the resolution thereof in
accordance with the provisions of ss.2(g)(v) below.
(v) Each disbursement request shall become final and
binding upon the Purchaser on the 5th business day following
delivery thereof unless the Purchaser gives written notice to
the Sellers' Representative of its disagreement with a
disbursement request (a "NOTICE OF DISAGREEMENT WITH
DISBURSEMENT REQUEST") prior to such date. Any Notice of
Disagreement With Disbursement Request shall specify in
reasonable detail the nature of any disagreement so asserted.
If a timely Notice of Disagreement With Disbursement Request
is received by the Sellers' Representative with respect to a
disbursement request, then such Disbursement Request (as
revised in accordance with clause (A) or (B) below), shall
become final and binding upon the Parties on the earlier of
(A) the date the Purchaser and the Sellers' Representative
resolve in writing any differences they have with respect to
any matter specified in a Notice of Disagreement With
Disbursement Request, or (B) the date any matters in dispute
are finally resolved in writing by the Architect in the manner
described below. During the 15 days immediately following the
delivery of any Notice of Disagreement With Disbursement
Request, the Purchaser and the Sellers' Representative shall
seek in good faith to resolve in writing any differences which
they may have with respect to any matter specified in such
Notice of Disagreement With Disbursement Request. At the end
of such 15-day period, the Sellers' Representative and the
Purchaser shall submit to an independent architect mutually
selected by the Sellers' Representative and the Purchaser (the
"ARCHITECT") for review and resolution any and all matters
which remain in dispute and which were included in any Notice
of Disagreement With Disbursement Request (it being understood
that the Architect shall act as an arbitrator to determine,
based solely on presentations by the Purchaser and the
Sellers' Representative (and not by independent review), only
those matters which remain in dispute), and the Architect
shall reach a final, binding resolution of all matters which
remain in dispute, which final resolution shall be (w) in
writing, (x) furnished to the Purchaser and the Sellers'
Representative as soon as practicable after the items in
dispute have been referred to the Architect, (y) made in
accordance with this Agreement, and (z) conclusive and binding
upon the Parties and not subject to collateral attack for any
reason. Each of Purchaser and L. Martin shall pay its/his own
costs and expenses incurred in connection with such
arbitration, provided that the fees and expenses of the
Architect shall be borne as follows:
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<PAGE> 72
(A) if the Architect resolves all of the remaining
objections in favor of the Purchaser, L. Martin (the amount of
the disbursement so determined is referred to herein as the
"DISBURSEMENT LOW AMOUNT") will be responsible for all of the
fees and expenses of the Architect;
(B) if the Architect resolves all of the remaining
objections in favor of L. Martin (the amount of the
disbursement so determined is referred to herein as the
"DISBURSEMENT HIGH AMOUNT"), the Purchaser will be responsible
for all of the fees and expenses of the Architect; and
(C) if the Architect resolves some of the remaining
objections in favor of the Purchaser and the rest of the
remaining objections in favor of L. Martin (the amount of the
disbursement so determined is referred to herein as the
"DISBURSEMENT ACTUAL AMOUNT"), L. Martin will be responsible
for that fraction of the fees and expenses of the Accounting
Firm equal to (i) the difference between the Disbursement High
Amount and the Disbursement Actual Amount over (ii) the
difference between the Disbursement High Amount and the
Disbursement Low Amount, and the Purchaser will be responsible
for the remainder of the fees and expenses.
12. AMENDMENT TO SS.3B(f). ss.3B(f) of the Stock Purchase Agreement is
hereby amended in its entirety and restated as follows:
"(f) FINANCIAL STATEMENTS. Set forth in SS.3B(f) OF THE
DISCLOSURE SCHEDUle are the following financial statements
(collectively the "FINANCIAL STATEMENTS"): (i) audited balance sheets
and statements of income and statements of shareholders equity and cash
flows as of and for the fiscal year ended December 31, 1998 (the "MOST
RECENT FISCAL YEAR END") for the Company; and (ii) unaudited balance
sheet and statement of income and statement of cash flows (the "MOST
RECENT FINANCIAL STATEMENTS") as of and for the five months ended May
31, 1999 (the "MOST RECENT FISCAL MONTH END") for the Company, with all
operations of IMP reflected in the Most Recent Financial Statements.
Except as set forth in SS.3B(f) OF THE DISCLOSURE SCHEDULE, the
Financial Statements (including the notes thereto) have been prepared
in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of
the Company and IMP as of such dates and the results of operations of
the Company and IMP for such periods; PROVIDED, HOWEVER, that the Most
Recent Financial Statements are subject to normal year-end adjustments
(which will not be material, individually or in the aggregate) and lack
footnotes and other presentation items."
13. AMENDMENT TO SS. 9(a). ss. 9(a) of the Stock Purchase Agreement is
hereby amended in its entirety and restated as follows:
"(a) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The following
representations and warranties of the Sellers and the Purchaser and the
following indemnification matters shall survive the Closing and
continue in full force and effect for the statute of limitations
applicable thereto:
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<PAGE> 73
(i) the representations and warranties of the Sellers
contained in ss.3A and contained in ss.3B(b), (d) and (e)
(collectively, the "TRANSACTION REPRESENTATIONS AND WARRANTIES");
(ii) the representations and warranties of the Sellers
contained in ss.3B(k) (the "TAX REPRESENTATIONS AND WARRANTIES");
(iii) the representations and warranties of the Sellers
contained in ss.3B(u) (the "EMPLOYEE BENEFIT PLAN REPRESENTATIONS AND
WARRANTIES");
(iv) the representations and warranties of the Sellers
contained in ss.3B(v) (the "ENVIRONMENTAL REPRESENTATIONS AND
WARRANTIES");
(v) the representations and warranties of the Sellers
contained in ss.3B(aa) (the "PRODUCTS LIABILITY REPRESENTATIONS AND
WARRANTIES");
(vi) the representations and warranties of the Purchaser
contained in ss.4;
(vii) (A) the failure of the Company, prior to Closing, to
comply with the reporting requirements of EPCRA and any other similar
or identical state or local reporting requirements prior to Closing and
(B) the existence, prior to Closing, of hazardous waste at the Real
Property and the disposal by the Company, prior to Closing, of
hazardous waste without a hazardous waste identification number (the
"ENVIRONMENTAL INDEMNIFICATION");
(viii) the failure of the Company to qualify as a foreign
corporation in Nevada and North Carolina, including, but not limited
to, the costs of making all requisite filings to qualify the Company
and pay Taxes in such states (the "FOREIGN QUALIFICATION
INDEMNIFICATION");
(ix) the IRS audit of the Company's tax return for the year
ended December 31, 1997 disclosed on SS.3B(i) OF THE DISCLOSURE
SCHEDUle (thE "IRS AUDIT INDEMNIFICATIOn"); and
(x) the litigation disclosed on SS.3B(s) OF THE DISCLOSURE
SCHEDUle (the "LITIGATION INDEMNIFICATION").
The remaining representations and warranties of the Sellers contained in ss.3B
(other than the Transaction Representations and Warranties, the Tax
Representations and Warranties, the Employee Benefit Plan Representations and
Warranties, the Environmental Representations and Warranties and the Products
Liability Representations and Warranties) shall survive the Closing and continue
in full force and effect until the two year anniversary of the Closing Date. Any
claim for which any Party shall have given proper notice in accordance with the
terms of this Agreement (and the Escrow Agreement) on or prior to the expiration
of the applicable survival period shall survive until such claim is resolved
pursuant to the terms of this Agreement or the Escrow Agreement. To preserve any
claim for breach of any such representation or warranty or indemnification
matter, the Party claiming a breach shall be obligated to notify the Party
claimed
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<PAGE> 74
to be in breach (except that where the Party claimed to be in breach is
the Company or IMP, notice shall be given to the Sellers'
Representative) in writing of any such breach, or facts that can
reasonably be expected to give rise to such breach, before termination
of the applicable survival period in respect of such representation or
warranty; otherwise, such Party's claim for breach shall be forever
barred."
14. AMENDMENT TO SS.SS.9(b)(i) AND (ii). ss.ss.9(b)(i) and (ii) of the
Stock Purchase Agreement are hereby amended in their entirety and restated as
follows:
"(i) Pursuant to the terms of the Escrow Agreement and subject
to ss.9(a) above and the conditions set forth in this ss.9(b),
subsequent to the Closing Date the Sellers shall indemnify, defend and
hold harmless the Company and IMP (as assignee of the Purchaser
pursuant to ss.9(e) hereof) from, against and in respect of any Losses
which the Purchaser, the Company or IMP shall suffer, sustain or become
subject to by virtue of or which arise out of, or result from, any
breach of the covenants, representations and warranties of the Sellers
set forth in this Agreement (other than the Transaction Representations
and Warranties, the Tax Representations and Warranties, the Employee
Benefit Plan Representations and Warranties, the Environmental
Representations and Warranties, the Products Liability Representations
and Warranties, the Environmental Indemnification, the Foreign
Qualification Indemnification, the IRS Audit Indemnification and the
Litigation Indemnification, all of which shall be governed by the
provisions of ss.9(b)(ii)); PROVIDED, HOWEVER, that: (A) the Company's
and IMP's right to indemnification with respect to such breaches under
this ss.9(b)(i) shall be satisfied only by recourse to the funds
deposited and remaining in the General Indemnification Escrow Account,
and none of the Sellers shall have any personal liability to the
Company or IMP with respect to any such breach, and (B) the Company and
IMP shall not be entitled to indemnification with respect to any Losses
under this ss.9(b)(i) until all such Losses exceed, in the aggregate,
$150,000 (the "DEDUCTIBLE"), in which case the Company and IMP shall be
entitled to indemnification only to the extent such Losses exceed
$150,000. Notwithstanding anything to the contrary contained in this
ss.9(b)(i), any breach of the representations and warranties of the
Sellers contained in ss.3B(x) shall not be subject to the Deductible.
(ii) Subject to ss.9(a) above and the conditions set forth in
this ss.9(b), subsequent to the Closing Date the Sellers shall
indemnify, defend and hold harmless the Company and IMP (as assignee of
the Purchaser pursuant to ss.9(e) hereof) from, against and in respect
of any Losses which Purchaser, the Company or IMP shall suffer, sustain
or become subject to by virtue of or which arise out of, or result from
the following (sometimes hereinafter collectively referred to as the
"UNRESTRICTED REPRESENTATIONS, WARRANTIES AND COVENANTS"):
(A) any breach of any of the Transaction Representations and
Warranties, the Tax Representations and Warranties, the Employee
Benefit Plan Representations and Warranties, the Environmental
Representations and Warranties or the Products Liability
Representations and Warranties; and
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(B) the Environmental Indemnification, the Foreign
Qualification Indemnification, the IRS Audit Indemnification and the
Litigation Indemnification.
PROVIDED, HOWEVER, that no Seller shall be obligated to indemnify the Purchaser
for an amount in excess of its, his or her Company Pro Rata Share or IMP Pro
Rata Share, whichever is applicable, of any Losses arising from the Unrestricted
Representations, Warranties and Covenants. The Company's and IMP's right to
indemnification with respect to breaches of the Unrestricted Representations,
Warranties and Covenants under this ss.9(b)(ii) shall not be subject to the
Deductible and shall be satisfied first by recourse to the funds deposited and
remaining in the General Indemnification Escrow Account; PROVIDED, FURTHER, that
to the extent Losses for which the Purchaser is entitled to indemnification
under ss.9(b)(i), together with amounts paid from the General Indemnification
Escrow Account pursuant to this ss.9(b)(ii) exceed $2,450,000, the Sellers shall
pay the Purchaser the deficiency within 10 days of the Purchaser's request. The
Parties agree that the following limits shall apply with respect to the Sellers
indemnification obligations under this ss.9(b)(ii):
(X) In no event shall the Company or IMP be entitled to
indemnification for any Losses with respect to the breach of any
Employee Benefit Plan Representations and Warranties and the Products
Liability Representations and Warranties and the Foreign Qualification
Indemnification to the extent that the sum of (x) all such Losses, and
(y) the amount of all disbursements made to the Company and IMP from
the General Indemnification Escrow Account exceeds, in the aggregate,
$5,000,000;
(Y) In no event shall the Company or IMP be entitled to
indemnification for any Losses with respect to the breach of any Tax
Representations and Warranties, Environmental Representations and
Warranties, the Environmental Indemnification, the IRS Audit
Indemnification and the Litigation Indemnification to the extent that
the sum of (1) all such Losses, (2) the amount of all disbursements
made to the Company and IMP from the General Indemnification Escrow
Account and (3) the amount of any Losses paid for a breach of any
Employee Benefit Plan Representations and Warranties, the Products
Liability Representations and Warranties and the Foreign Qualification
Indemnification, exceeds in the aggregate, the Company Purchase Price
and the IMP Purchase Price; and
(Z) There shall be no limit on the amount of any Losses for
which the Company or IMP is entitled to indemnification for the breach
of any Transaction Representations and Warranties."
15. AMENDMENT TO SECTION 10(a). Section 10(a) of the Stock Purchase
Agreement is hereby amended in its entirety and restated as follows:
"(a) DISPUTE DEFINED. As used in this Agreement, "DISPUTE"
shall (i) mean any dispute or disagreement among the Parties concerning
the interpretation of this Agreement, the validity of this Agreement,
any breach or alleged breach by any party under this Agreement or any
other matter relating in any way to this Agreement, and (ii) exclude
any dispute or disagreement between the Company and the Sellers
concerning the determination of the Net Working Capital which shall be
resolved pursuant to the provisions of Section 2(f)(ii) of this
Agreement."
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16. ESCROW AGREEMENT. Exhibit A attached hereto is hereby substituted
for EXHIBIT A attached to the Stock Purchase Agreement.
17. AMENDMENT TO DISCLOSURE SCHEDULES. The following Disclosure
Schedules attached hereto are hereby substituted for the Disclosure Schedules
attached to the Stock Purchase Agreement:
ss.3B(a) of the Disclosure Schedule
ss.3B(f) of the Disclosure Schedule
ss.3B(g) of the Disclosure Schedule
ss.3B(i) of the Disclosure Schedule
ss.3B(j) of the Disclosure Schedule
ss.3B(l) of the Disclosure Schedule
ss.3B(m) of the Disclosure Schedule
ss.3B(n) of the Disclosure Schedule
ss.3B(o)(i) of the Disclosure Schedule
ss.3B(p) of the Disclosure Schedule
ss.3B(r) of the Disclosure Schedule
ss.3B(s) of the Disclosure Schedule
ss.3B(u) of the Disclosure Schedule
ss.3B(v) of the Disclosure Schedule
ss.3B(z) of the Disclosure Schedule
ss.3B(aa) of the Disclosure Schedule
ss.6(b)(iii) of the Disclosure Schedule
18. EXECUTION IN COUNTERPARTS; FAX SIGNATURES. For the convenience of
the parties hereto, this Amendment may be executed simultaneously in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument, without necessity of
production of the others. Signatures may be exchanged by facsimile transmission,
with original signatures to follow. Each party to this Amendment agrees that
he/she/it will be bound by his/her/its own facsimile signature and that
he/she/it accepts the facsimile signature of the other parties to this
Amendment.
19. RATIFICATION. The remaining provisions of the Stock Purchase
Agreement are hereby ratified and affirmed.
10
<PAGE> 77
IN WITNESS WHEREOF, the parties have executed this Second Amendment as
of the date first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ Stephen C. Hess
--------------------------------
Stephen C. Hess, President
MIAMI METAL PRODUCTS, INC.
By: /s/ Leo Martin
--------------------------------
Leo Martin, Chairman
INDUSTRIAL MUEBLERA POMPEII de
MEXICO, S.A. de C.V.
By: /s/ Leo Martin
--------------------------------
Leo Martin, Chairman
11
<PAGE> 78
SELLERS:
/s/ Leo Martin
-----------------------------------------
Leo Martin
/s/ Gloria Martin
-----------------------------------------
Glora Martin
/s/ Donald R. Tescher
-----------------------------------------
Donald R. Tescher, Trustee and not
individually of the Leo Martin Retained
Annuity Trust Agreement I
/s/ Donald R. Tescher
-----------------------------------------
Donald R. Tescher, Trustee and not
individually of the Leo Martin Retained
Annuity Trust Agreement II
/s/ Donald R. Tescher
-----------------------------------------
Donald R. Tescher, Trustee and not
individually of the Leo Martin Retained
Annuity Trust Agreement III
/s/ Donald R. Tescher
-----------------------------------------
Donald R. Tescher, Trustee and not
individually of the Gloria Martin Retained
Annuity Trust Agreement I
/s/ Donald R. Tescher
-----------------------------------------
Donald R. Tescher, Trustee and not
individually of the Gloria Martin Retained
Annuity Trust Agreement II
/s/ Donald R. Tescher
-----------------------------------------
Donald R. Tescher, Trustee and not
individually of the Gloria Martin Retained
Annuity Trust Agreement III
12
<PAGE> 1
Exhibit 10.14
North Carolina )
)
County of Guilford )
LEASE AGREEMENT
This Lease Agreement made and entered into this 1st day of March, 1999,
by and between E. V. Ferrell, Jr. and Sarah T. Ferrel ("Landlord"), with offices
in Winston-Salem, North Carolina; and Pompeii Furniture Industries.
BACKGROUND STATEMENT
Landlord is the owner of a furniture showroom facility located at 307
Steele Street in the City of High Point, North Carolina, Guilford County. Tenant
desires to lease the showroom facility for a period of Three (3) Years and
Landlord desires to lease such facility to Tenant. In order to implement the
lease arrangement, the parties have entered into this Lease Agreement.
STATEMENT OF GRANT AND AGREEMENT
Landlord and Tenant agree as follows:
1. LEASE: Landlord leases and demises to Tenant, and Tenant hereby
accepts, rents and hires from Landlord, the first floor of that certain showroom
space (the "Demised Premises"), with the right to use of all entryways,
footwalks, and other common facilities furnished from time to time to the
Showroom Facility by Landlord, all subject to such reasonable and uniform rules
and regulations as may be prescribed by Landlord from time to time and agreed to
by adjoining tenants and property owners for the mutual benefit of all
concerned.
To have and To Hold Unto Tenant the Demised Premises and appurtenances
thereto upon all the terms and conditions set forth in this Lease Agreement.
2. TERM: The term of this lease shall begin March 16, 1999 and shall
end at midnight on the date thirty-six (36) months after the commencement of the
term hereof. It is understood and agreed the showroom facility is being leased
as is where is and it is the responsibility of the tenant to decorate and do
installation of fixtures and upfitting in preparation for use of the Demised
Premises as a showroom for wholesale furniture and accessories.
3. RENT: Tenant shall pay to Landlord for the use and occupancy of the
Demised Premises and appurtenances thereto monthly rental of Seven Thousand One
Hundred Fifty Dollars - - - - - - - - - - - - ($7,150.00) during the term of
this lease. All such payments are to be made to The Ferrell Companies, 854 W
Fifth Street, Winston-Salem, North Carolina 27101-2580 by check or money order,
or at such other places as Landlord may from time to time
<PAGE> 2
designate in writing in accordance with the notice provisions hereof, in advance
on the 16th day of each calendar month.
4. TAXES: Landlord covenants and agrees to pay promptly all taxes and
assessments of every kind or nature which are now or may hereafter be imposed or
assessed upon the Showroom Facility (including the Demised Premises),
specifically including real property ad valorem taxes except as otherwise
expressly provided in this lease agreement, and provided that nothing herein
shall require the payment by Landlord of any such tax or assessment which is
being contested in good faith. Landlord shall not be required to pay any taxes
or assessments of any nature imposed or assessed upon fixtures, equipment,
merchandise or other property installed in the Demised Premises or brought
thereon by Tenant, its agents, employees or other persons under its control,
but such shall be the obligation of Tenant, and Tenant agrees that it will
promptly pay all such taxes or assessments as the same become due; provided,
however, that nothing herein shall require the payment by Tenant of any such tax
or assessment which is being contested in good faith. In addition, Tenant shall
pay to Landlord promptly upon notification as additional rent the amount by
which the annual ad valorem real property taxes attributable to the Demised
Premises have increased if at all in each tax year over the first tax year
(1999) of occupancy by the Tenant. Tenant shall not be responsible for any
increase in taxes which shall not be caused by a jurisdiction-wide increase in
applicable tax rates or a jurisdiction-wide reassessment of property values.
Landlord shall annually compute and notify Tenant of the amount due hereunder,
such notification being substantiated by copies of tax bills and such other
documents as Tenant may reasonably request, and Tenant shall pay such amount as
additional rent within twenty (20) days after receipt of such notice. Landlord
agrees to use its best efforts to notify Tenant of any increase or potential
increase, in the amount of rate of ad valorem real property taxes as soon as
Landlord is made aware of same.
5. INSURANCE:
(a) Landlord will procure, maintain and pay all premiums for fire
insurance, with extended coverage, on the Showroom Facility, insuring the
Showroom Facility to its full replacement value.
(b) Subject to the availability of such insurance as set forth
hereafter, all policies of insurance procured by Landlord under this paragraph
shall include a waiver by the
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<PAGE> 3
insurer of all right of subrogation against the Tenant in connection with any
loss or damage insured against by any such policy. Neither Tenant nor its
agents, employees or guests shall be liable to Landlord for loss or damage
caused by any risk covered by such insurance, provided that policies including
such a waiver of subrogation can be obtained by Landlord. If such policy or
policies cannot be obtained or can be obtained only through payment of a premium
in addition to that normally chargeable without such a waiver, Landlord shall
notify Tenant thereof, and Tenant shall have ten (10) days after such
notification to either (i) procure such insurance in a company or companies
reasonably Satisfactory to Landlord, or (ii) to agree to pay to Landlord such
additional premium. If Tenant elects neither of the options described in the
immediately preceding sentence, then this subparagraph shall have no effect
during such time as such policies (with waiver of subrogation) shall not be
obtainable or Tenant shall refuse to pay the required additional premium. If
such policies shall at any time be unobtainable, but shall be subsequently
obtainable, Landlord shall not be liable for a failure to obtain such insurance
until a reasonable time after notification thereof by Tenant. If the release of
Tenant, as set forth in this subparagraph, shall contravene any law with respect
to exculpatory agreements, the liability of Tenant shall be deemed not released
but shall be secondary to Landlord's insurer.
(c) If, during the term of this lease, the Demised Premises is used
by Tenant for any purpose or in any manner that causes an increase in the rate
of any such insurance maintained by Landlord over the rate chargeable with
respect to use of the Demised Premises as a furniture showroom, Tenant shall pay
to Landlord, as additional rent, the total additional premium resulting
therefrom. In addition, Tenant shall pay to Landlord as additional rent the
amount by which the total premiums paid hereunder by Landlord attributable to
the Demised Premises in each calendar year after 1999 exceeds the amount of such
total premiums in 1999. Landlord shall annually compute and notify Tenant of the
amount due hereunder, and Tenant shall pay such amount as additional rent within
twenty (20) days after receipt of such notice.
(d) Tenant shall be responsible for and shall, to the extent Tenant
so elects, provide and pay premiums for all insurance of any type on the
contents, including trade fixtures, of the Demised Premises. All policies of
insurance procured by Tenant under this paragraph shall include, subject to the
terms hereof, a waiver by the insurer of all right of subrogation against
Landlord in connection with any loss or damage insured against by any such
policy.
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<PAGE> 4
Neither Landlord nor its agents shall be liable to Tenant for loss or damage
caused by any risk covered by such insurance, provided that policies including
such a waiver of subrogation can be obtained by Tenant. If such policy or
policies cannot be obtained or can be obtained only through payment of a premium
in addition to that normally chargeable without such a waiver, Tenant shall
notify Landlord thereof, and Landlord shall have ten (10) days after such
notification to either (i) procure such insurance in a company or companies
reasonably satisfactory to Tenant, or (ii) to agree to pay to Tenant such
additional premium. If Landlord elects neither of the options described in the
immediately preceding sentence, then this subparagraph shall have no effect
during such time as such policies (with waiver of subrogation) shall not be
obtainable or Landlord shall refuse to pay the required additional premium. If
such policies shall at any time be unobtainable, but shall be subsequently
obtainable, Tenant shall not be liable for a failure to obtain such insurance
until a reasonable time after notification thereof by Landlord. If the release
of Landlord as Set forth in this subparagraph shall contravene any law with
respect to exculpatory agreements, the liability of Landlord shall be deemed not
released but shall be secondary to Tenant's insurer.
6. USE OF DEMISED PREMISES. Tenant shall use the Demised Premises only
as home furnishings showroom. Landlord agrees that lease of the Showroom
Facility shall contain the same use restriction or a restriction, to use as a
wholesale or retail furniture and accessories showroom, so long as this lease is
in affect. Nothing contained herein shall prohibit retailing activities of
Tenant, such as the retail disposition of discontinued merchandise; provided,
however, that it is the intent of both parties that the Demised Premises is to
be used mainly and primarily for wholesale transactions with dealers and other
home furnishings distributors. Tenant shall, in the use and occupancy of the
Demised Premises and the placing of fixtures and alterations therein, comply
with all laws, ordinances, orders or regulations of any lawful authority having
jurisdiction over the Demised Premises, and Tenant shall not do any act or
follow any practice in bout the Demised Premises which shall constitute a
nuisance or detract from or impair the reputation of the Showroom Facility;
provided, however, that Tenant shall be permitted to make use of the Demised
Premises for entertaining of customers at social functions, so long as same does
not disturb other Tenants in the nearby facilities. If any alteration to the
Showroom Facility, or any alteration to the Demised Premises other than
alterations of any
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<PAGE> 5
fixture or partition placed therein by Tenant, shall be required to comply with
any such law, ordinance, order or regulation, Landlord shall make the same at
its sole expense. Without limiting the generality of the foregoing, Tenant shall
make such arrangements for the storage and disposition of all garbage and refuse
as may be reasonably required by Landlord and the City of High Point, North
Carolina from time to time and shall at all times keep the Demised Premises in a
neat and orderly condition and clean and free from rubbish and dirt. and shall
not cause any noxious, disturbing or offensive odors, fumes or gases, or any
smoke, dust, steam or vapors, or any loud or disturbing noise or vibrations to
originate in or be emitted from the Demised Premises. Tenant shall make
available suitable receptacles for the disposition of garbage and refuse.
7. LANDLORD'S COVENANT TO MAINTAIN. Landlord will, at its own expense,
keep and maintain in good order and repair during the full term of this lease
the exterior and principal structural portions of the building. The Landlord
will not be responsible for or required to make, and Tenant will make, any
repairs which may have been occasioned or necessitated by the negligence or
willful act: of Tenant, its agents, employees, guests, licensees or invitees.
8. TENANT'S COVENANT TO MAINTAIN. Tenant will, at its own expense, keep
and maintain in good order and repair during the full term of this lease all
parts of he Demised Premises, including without limitation the entire interior,
all plumbing, wiring and electrical heating and air conditioning systems
contained in the Demised Premises and the exterior grounds. Tenant will, at the
end of the term of this lease, deliver the Demised Premises to the Landlord in
the same condition as when received by it, excepting only normal wear and wear
and repairs required to be made by Landlord.
9. UTILITIES. During the term of this lease, Landlord shall provide
and maintain necessary mains, ducts, conduits, cables and lines in order to
bring lights, heating and air conditioning, water, electricity, sewerage service
and telephone service to the Demised Premises. All means of distribution of such
services within the Demised Premises shall be furnished by Tenant at Tenant's
expense. Tenant shall pay directly therefor as appropriate, for all such
services. Pro-rated 1/2 to Pompeii; (2/3 to Lawrence Unlimited and 1/3 to
Basil's second level)
10. DAMAGE OR DESTRUCTION OF DEMISED PREMISES). If the Demised Premises
is damaged or destroyed during the term of this lease by fire or other casualty
covered by an
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<PAGE> 6
ordinary fire insurance policy with extended coverage, Tenant shall give
written notice thereof to Landlord immediately after Tenant becomes aware of
such damage or destruction. Landlord will reconstruct or restore the Demised
Premises or repair such damage as promptly as practicable and in any event
within one hundred eighty (180) days of receipt by Landlord of such notice, and
Tenant shall meanwhile be entitled to an abatement of rental to the extent of
the loss of use suffered by it; provided, however, that if the Demised Premises
shall be damaged or destroyed by casualty to the extent of thirty percent (30%)
or more of its replacement value or if such destruction or damage is not covered
by an ordinary fire insurance policy with extended coverage, Landlord shall
thereupon have an option in its sole discretion, to terminate this lease.
Landlord shall notify Tenant in writing of its intent to repair or restore such
damage or to terminate this lease within thirty (30) days of receipt of notice
thereof from Tenant. The effective date of such termination by Landlord shall be
thirty (30) days after receipt of such notice by Tenant, or, at Tenant's option,
such shorter time as Tenant may designate in writing following receipt of such
notice. In the event Landlord elects to repair or restore, such repair or
restoration shall be accomplished as promptly as practicable, and in any event
within one hundred eighty (180) days of receipt by Landlord of notice from
Tenant of the damage. Should Landlord become aware of any damage to the Demised
Premises, Landlord shall notify Tenant as soon as possible of the existence of
such damage.
11. SIGNS, ADVERTISING AND SELLING ACTIVITIES. Tenant may install only
such signs on the Demised Premises as may be approved by Landlord, which
approval shall not be unreasonably withheld, and as such shall not damage or
impair the attractiveness of the premises; provided, however, that the care and
maintenance of such signs shall be the sole responsibility of Tenant. Tenant
shall not permit, allow or cause to be used in or about the Demised Premises any
phonographs, radios, public address systems, sound production or reproduction
devices, mechanical or moving display devices, motion picture or television
devices, excessively bright lights, changing, flashing, flickering or moving
lights or lighting devices, or Kelly similar advertising media or devices, the
effect of which shall be visible or audible from the exterior of the Demised
Premises.
12. INDEMNITY BY TENANT. Tenant covenants and agrees that it will
defend, indemnify and protect Landlord, and hold Landlord harmless from, any and
all claims of all persons arising from or out of the use
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<PAGE> 7
or occupancy of the Demised Premises by Tenant or Tenant's agents, employees,
guests, licensees or invitees. Tenant further shall procure and maintain, or
cause to be maintained, for the benefit of Landlord, public liability insurance
for the Demised Premises, with respect to any and all claims arising from or out
of the use or occupancy of tile Demised Premises by Tenant, its agents,
employees, guests, licensees or invitees, to the extent of not less than
$1,000,000.00 per occurrence and not less than $2,000,000.00 aggregate against
liability for bodily injury, including death resulting therefrom. All such
insurance shall name Landlord as an insured or additional insured, shall be in
companies approved by Landlord and shall contain an undertaking by the insurer
that such policy shall not be modified adversely to the interests of Landlord or
cancelled without at least ten (10) day written notice to Landlord. All such
policies shall be deposited with Landlord, provided that in lieu of such
policies there may be deposited with Landlord a certificate or certificates of
the respective insurers attesting the fact that the insurance required is in
force and effect. In the event of the failure of Tenant to procure or maintain
nay such insurance, Landlord shall have the right, but shall not be obligated,
to effect such procurement and maintenance of insurance on behalf of Tenant;
provided, however, that Landlord shall have no responsibility whatsoever to
Tenant or any other party to obtain partial or full insurance coverage of the
risks required to be insured hereunder, and in the event Landlord does undertake
to obtain any such insurance Landlord shall have no responsibility whatsoever to
Tenant or any other party that any such coverage will be adequate or that it
provide any maintain the insurance required to be obtained or maintained by
Tenant hereunder shall be deemed additional rent due immediately from Tenant.
13. LOSS OR DAMAGE TO PERSONAL PROPERTY OF TENANT. Any and all
personal property and trade fixtures of every kind whatsoever brought or placed
in or upon any part of the Demised Premises or the Showroom Facility by Tenant,
its agents, employees, guests, licensees or invitees, shall be so brought or
placed at the risk of Tenant, or of the person owning such personal property or
trade fixtures, and Landlord shall have no liability for any loss or any damage
thereto.
14. ALTERATIONS AND REMODELING BY TENANT. Tenant may, at its own
expense, make such alterations, improvements, additions and changes to the
Demised Premises as Tenant may deem necessary or expedient in the use, occupancy
or operation of the Demised Premises as a wholesale or retail furniture
showroom; provided, however, that Tenant shall not, without the prior written
consent of Landlord, make change or alterations which would require or entail
any structural change in the roof or exterior walls of the Showroom Facility, or
which, when completed, would, substantially diminish clip value of the Demised
Premises. Tenant shall
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<PAGE> 8
make no change or alteration of the Demised Premises which would Violate the
terms of any mortgage, or deed of trust then a lien upon the Demised Premises,
or of any policy of insurance in force with respect to the Demised Premises.
Landlord shall, upon the request of Tenant and within thirty (30) days of
receipt of such request, advise Tenant whether any proposed change or alteration
would violate any such mortgage, deed of trust or policy of insurance, or,
within fifteen (15) days of receipt of a request by tenant therefore furnish to
Tenant copies of such policy of insurance, mortgage or deed of trust. Tenant, by
entering into this lease, accepts any reasonable requirement or restriction
contained in such policies of, insurance, mortgages or deeds of trust; and
Landlord covenants that it use its best efforts to ensure that such instruments
conform as closely as possible to standard instruments used in similar furniture
showroom facilities. Any alteration, addition, change or improvement made by
Tenant shall at Landlord's option become the property of Landlord upon the
expiration or sooner termination of this lease; provided, however, that Landlord
shall have the right to require Tenant to remove such alteration, addition,
change or improvement at Tenant's cost upon termination of this lease.
15. ALTERATIONS, RENOVATIONS AND EXPANSIONS BY LANDLORD. Tenant
acknowledges that Landlord may expand or renovate that Landlord may expand or
renovate the Demised Premises during the term of this lease. Landlord shall give
Tenant at least fifteen (15) days notice of the commencement of such expansion
or renovation and shall perform, or cause to be performed, all such work in a
manner calculated to minimize any disturbance of Tenant's use Of the Demised
Premises. All such work shall be suspended during sessions of the Southern
Furniture Market, except such activity as may be necessary to correct and secure
ongoing work. Tenant agrees cooperate with Landlord to facilitate the
performance of any such work, and acknowledges that the performance of such may
cause minor inconvenience to Tenant and minor disturbances in Tenant's use of
the Demised Premises from time to time during the term of this lease.
16. FIXTURES AND PERSONAL PROPERTY. Any trade fixtures, equipment and
other personal property installed in or attached to the Demised Premises by or
at tile expense of Tenant shall remain the property of Tenant, and Tenant shall
have the right at any time, provided it is not then in default hereunder, to
remove any and all of such fixtures; provided however, that in such event Tenant
shall repair any damage caused by such installation or removal.
-8-
<PAGE> 9
17. LANDLORD'S ENTRY. Landlord shall have the right to enter upon the
Demised Premises at all reasonable times during the term of this lease for the
purpose of inspection, maintenance, repair and alteration and to show tile same
to prospective tenants or purchasers; provided, however, that in the event
Tenant shall install a burglar alarm system or other security device in the
Demised Premises Such the Landlord's routine entry into the Demised Premises
would be impractical, Tenant may so notify Landlord in writing and Landlord
shall thereupon waive the right of entry granted in this paragraph. In the event
Tenant so notifies Landlord, Tenant and Landlord shall agree upon such
procedures as shall permit Landlord to enter the Demised Premises for periodic
inspections and the performance of any and all obligations of Landlord to
Tenant.
18. NO ASSIGNMENT OR SUBLETTING. Tenant shall not assign, transfer,
mortgage, pledge, hypothecate of encumber this lease or any interest therein and
shall not sublet the Demised Premises or any part thereof or any right or
privilege appurtenant thereto or suffer any other person to occupy or use the
Demised Premises or any portion thereof without the prior written consent of
Landlord, which consent Landlord may not withhold except for good cause, and as
may be permitted under the laws of the State of North Carolina. A consent to one
assignment, subletting, occupation or use by any other person shall not release
Tenant from any of Tenant's obligations hereunder or be deemed to be a consent
to any subsequent assignment, subletting, occupation or use by another person.
Any such assignment or subletting without such written consent shall be void and
shall constitute a breach of this lease by Tenant and shall, at the option of
Landlord, exercised by written notice to Tenant, terminate this lease.
19. TRANSFER OF LANDLORD'S INTEREST. In the event of the sale,
assignment or transfer by Landlord of its interest in the Demised Premises or in
this lease (other than a collateral assignment to secure a debt of Landlord) to
a successor in interest who expressly assumes the obligations of Landlord
hereunder, Landlord shall thereupon be released or discharged from all of its
covenants and obligations hereunder, except such obligations as shall have
accrued prior to any such sale, assignment or transfer; and Tenant agrees to
look solely to such successor in interest of Landlord for performance of such
obligations. Landlord's assignment of the lease or of any or all of its rights
herein shall in no manner affect Tenant's obligations hereunder. Tenant
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<PAGE> 10
shall thereafter attorn and look to such assignee as Landlord, provided Tenant
has first received written notice of such assignment of Landlord's interest.
20. EMINENT DOMAIN. 11 the Demised Premises, or any part thereof, of
more than thirty percent (30%) of the total facility is taken under the power of
eminent domain (including any conveyance made in lieu thereof), and such taking
shall in the reasonable judgment of Tenant make the operation of Tenant's
business in the Demised Premises impracticable, then Tenant shall have the right
to terminate this lease within sixty (60) days after such taking or sixty (60)
days of receipt of written notice of such taking by Tenant, whichever is later.
If Tenant does nor so elect to terminate this lease, or if such taking shall not
render the operation of Tenant's business impracticable, Landlord, at its
option, may either terminate this lease its own expense repair and restore the
Demised Premises to a tenantable condition as promptly as practicable, and in
any event within one hundred eighty (180) days of receipt of notice from Tenant
that it will not terminate on the expiration of the 60-day period above
described, whichever is earlier. If Landlord elects to restore the Demised
Premises, the rental to be paid by Tenant hereunder shall be proportionately and
equitably reduced. Anything in this paragraph to the contrary notwithstanding,
Landlord shall not be required to pay, but may at its option choose so to for
such restoration or repair any amount in excess of the condemnation award (or
purchase price in lieu thereof received by Landlord) as a result of such taking.
Tenant shall have the further right to terminate this lease upon thirty (3) days
written notice in the event Landlord is unable to restore the Demised Premises
to a tenantable condition for such amount. Tenant hereby expressly waives all
rights to any award for damages from an eminent domain proceeding affecting the
Demised Premises except the right to receive compensation for damages for its
fixtures or personal property and the right to receive any moving or relocation
expense payments available.
21. DEFAULT BY TENANT. If (a) Tenant fails to pay any Base Rent,
additional rent or other sum of money due under this lease, and fails to cure
such default within ten (10) days after written notice to Tenant; or (b) Tenant
defaults in the performance of any other covenant of this lease and fails to
cure such default within twenty (20) days after written notice to Tenant, or if
such default cannot reasonably be cured in twenty (20) days, Tenant does not
within such twenty (20) day period commence such act Or acts necessary to cure
such default and complete such act
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<PAGE> 11
or acts promptly; or (c) Tenant becomes insolvent or is adjudicated bankrupt, or
files in any court a petition in bankruptcy or other debtor proceedings, or
files or has filed against it a petition for the appointment of a receiver or
trustee for all or substantially all of the assets of Tenant and such
appointment is not vacated or set aside within twenty (20) days from the date of
such appointment, or Tenant makes an assignment for the benefit of creditors, or
petitions for or enters into such an arrangement; or (d) Tenant abandons the
Demised Premises or any substantial part thereof, or suffers this lease to be
taken or encumbered under any legal process and such taking or encumbrance is
not dissolved within twenty (20) days, or (e) Tenant disposes of or agrees to
dispose all or substantially all of its assets , then in any such event, at the
option of Landlord and without any without any further notice or action by
Landlord, Landlord shall have the immediate right of reentry to remove all
persons and property from the Demised Premises and dispose of or store such
property as it sees fit, all without resort to legal process and without being
deemed guilty of trespass.
If Landlord should elect to reenter as provided in this paragraph 21 or
should it take possession pursuant to legal proceedings, Landlord may either
terminate this lease, or Landlord may from time to time, without terminating
this lease, make much alterations and repairs as may be necessary in order to
relet the Demised Premises, and may at its Option relet the Demised Premises for
such term and at such rentals and upon such ocher terms and conditions as
Landlord may deem advisable. No such reentry or taking possession of the Demised
Premises by Landlord shall be construed as an election to terminate this lease
unless a written notice of such intention is given by Landlord to Tenant at the
time of such reentry; but, notwithstanding any such reentry and reletting
without termination, Landlord may at any time thereafter elect to terminate
this lease for such previous breach.
If Landlord elects to terminate this lease, Landlord may recover from
Tenant damages incurred by reason of such breach, including the cost of
recovering the Demised Premises and enforcing this lease (including reasonable
attorneys' fees) and the difference in value between the base rent and other
amounts which would be payable by Tenant hereunder for the remainder of the
lease term and the reasonable rental value (net of all expenses of reletting
including the expense of repairs, alteration, upfitting and renovation) of the
Demised Premises for the remainder of the lease term. If the Landlord elects
to reenter without terminating this lease, Landlord may recover from Tenant
damages incurred by reason of such breach, including the cost of recovering the
Demised Premises and enforcing this lease (including reasonable attorneys' fees)
and the costs of repairing, altering, upfitting and renovating the Demised
Premises for the purpose of reletting the Demised Premises.
If Landlord does not terminate this lease, then unless and Until
Landlord does relet the Demised Premises, Tenant shall pay Landlord monthly, on
the tenth (10th) day of each month
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<PAGE> 12
during the period that Tenant's right of possession is terminated, a sum equal
to all base rent and other amounts due under this lease (less any amount which
Landlord could have realized had Landlord relet the Demised Premises to a
reputable, creditworthy substitute Tenant procured by Tenant and presented the
Landlord in writing, ready, willing and able to lease the entire Demised
Premises from Landlord pursuant to a lease in form identical to the form of
this lease). If and when the Demised Premises are relet and a sufficient sum is
not realized from such reletting after payment of all Landlord's expenses of
releting (including repairs, alterations, improvements, addition, decorations.
legal fees and brokerage commissions) to satisfy the payment of base rent and
all other amounts due under this lease for any months Tenant shall pay Landlord
any such deficiency monthly upon demand. Tenant agrees that Landlord may file
suit to recover any sums due to Landlord under this paragraph from time to time,
and that any such suit or recovery of any amount due Landlord shall not be any
defense to any subsequent action brought for any amount not previously reduced
to judgment in favor of Landlord. If landlord elects to terminate Tenant's right
to possession only without terminating this lease, Landlord may, at its option,
enter into the Demised Premises, remove Tenant's signs and other evidence of
tenancy, and take and hold possession thereof; provided, however, that such
entry and possession shall not terminate this lease or release Tenant, in whole
or in part, from Tenant's obligation to pay rent or from any ocher obligation of
Tenant for the remainder of the term of this lease.
22. DEFAULT BY LANDLORD. If Landlord shall continue to default in the
performance of any covenant of this lease and does not remedy such default
within thirty (30) days after written notice thereof or does not within such
thirty (30) days commence such act or acts as shall be necessary to remedy such
default and complete such act or acts promptly, then, at the option of Tenant
and without any further notice or action by Tenant, this lease shall terminate
automatically.
23. HOLDING OVER. If Tenant remains in possession of the Demised
Premises or any part thereof after the expiration of the term of this lease with
Landlord's acquiescence and without any written agreement of the parties, Tenant
shall be only a tenant at will, and there shall be no renewal of this lease or
exercise of any option by operation of law.
24. SUBORDINATION. Tenant will subject and subordinate all or any of
its rights under this Lease Agreement to any and all mortgages and deeds of
trust now existing or hereafter placed on the property (Demised Premises);
provided, however, that such mortgages or beneficiary of deed of trust shall
agree that Tenant will not be disturbed in the use or enjoyment of the Demised
Premises so long as it is not in default hereunder. Landlord represents that
such mortgages or deeds of trust shall relieve Landlord of any obligation
hereunder. Tenant agrees that this Lease Agreement shall remain in full force
and effect notwithstanding any default or
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<PAGE> 13
foreclosure under any such mortgage or deed of trust and that it will attorn to
the mortgages, trustee or beneficiary of such or mortgage or deed of trust, and
their successors or assigns, and to the purchaser or assignee under any such
foreclosure. Tenant will, upon request by Landlord, execute and deliver to
Landlord, or to any other person designated by Landlord, any instrument or
instruments required to give effect to the provisions of this paragraph.
25. WARRANTY. Landlord covenants that it has full right and authority
to lease cite Demised Premises upon the terms and conditions of this Lease
Agreement, and chat Tenant shall peacefully and quietly hold and enjoy the
Demised Premises for the full term hereof so long as Tenant does not default in
the performance of any of its covenants hereunder.
26. ESTOPPEL CERTIFICATE. Within ten (10) days after request therefor
by Landlord or any mortgages or trustee under a mortgage or deed of trust
covering the Demised Premises or any part of the property described hereto, or
if, upon any sale, assignment or other transfer of the Demised Premises by
Landlord, an estoppel certificate shall be requested from Tenant, Tenant shall
deliver in recordable form, to any proposed mortgages or ocher transferee or to
Landlord, a statement certifying any facts that are then true with respect to
the Lease Agreement, including without limitation (if such be the case) chat
this Lease Agreement is in full force and effect, that Tenant is in possession,
that Tenant has commenced the payment of rent and that there are no defenses or
offsets to the Lease Agreement claimed by Tenant.
27. NOTICES, Any and all notices, demands, requests or designations
required or permitted in or under this Lease Agreement shall be in writing and
shall be deemed to be given only when delivered personally or sent by prepaid
registered or certified mail to the parties at the following addresses:
Landlord: E V Ferrell Jr.
The Ferrell Companies
854 W Fifth Street
Winston Salem, NC 27101-2580
Tenant: Mr. Leo Martin, Chairman
Pompeii Furniture Industries
255 NW 25th Street
Miami, FL 33127
Either party may, from time to time, by notice as herein provided, designate a
different address to which notice you it shall be sent.
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<PAGE> 14
28. MECHANICS' LIENS. Tenant covenants and agrees to do all things
necessary to prevent the filing of any mechanics' or other liens against the
Demised Premises or any part thereof by reason of work, labor, services or
materials supplied or claimed to have been supplied to Tenant, or anyone holding
the Demised Premises or any part thereof, through or under Tenant. If any such
lien shall at any time be filed against Tenant's interest in the Demised
Premises, Tenant shall either cause the same to be discharged of record within
twenty (20) days after the date of filing of the same, or, if Tenant, in
Tenant's discretion and in good faith, determines that such lien should be
contested, shall furnish such security as may be necessary or required to
prevent any foreclosure proceedings against Tenant's interest in the Demised
Premises during the pendency of such contest. If Tenant shall fail to discharge
such lien within such period or fail to furnish such security, then, in addition
to any other right or remedy of Landlord resulting from Tenant's said default,
Landlord may, but shall not be obligated to, discharge the same either by paying
the amount claimed to be due or by procuring the discharge of such lien by
giving security or in such other manner as is, or may be prescribed by law.
Nothing contained herein shall imply any consent or agreement on the part of
Landlord to subject Landlord's estate to liability under any mechanics' or other
lien law.
29. FORCE MAJEURE. In the event Landlord or Tenant shall be delayed,
hindered or prevented from the performance of any act required hereunder, by
reason of governmental restrictions, scarcity of labor or materials, strikes,
fire or any other reasons beyond its control, the performance of such act shall
be excused for the period of delay, and the period for the performance of any
such act shall be extended for the period necessary to complete performance
after the end of the period of such delay.
30. NATURE AND EXTENT OF AGREEMENT. This instrument contains the
complete agreement of the parties regarding the terms and conditions of the
lease of the Demised Premises, and there are no oral or written conditions,
terms and understandings or other agreements pertaining thereto which have not
been incorporated herein. This instrument creates only the relationship of
Landlord and Tenant between the parties hereto as to the Demised Premises; and
nothing herein shall in any way be construe to impose upon either party hereto
any obligations or restrictions not herein expressly set forth.
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<PAGE> 15
31. BINDING EFFECT. This Lease Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigned.
32. GOVERNING LAW. This Lease Agreement shall be governed by and
construed according to the laws of the State of North Carolina.
33. SEVERABILITY. In the event any provision or term of this lease
shall be determined to be invalid or unenforceable with respect to any person by
any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision of term hereof or render any provision hereof
unenforceable with respect to any other person.
34. Landlord warrants that the personal property attached, affixed
and/or located within the Demised Premises is included as additional
consideration to the terms of this lease.
Landlord warrants that they have the right and authority to in crude
said personal property with the Demised Premises.
The personal property includes but is not limited to: Carpeting and
Track lighting.
35. ATTORNEY FEES: If any action in law or equity, including an action
of declaratory relied, is brought to enforce or interpret the provisions of this
Agreement, the prevailing part shall be entitled to a reasonable attorney's fee,
which may be set by the Court in the action, or in a separate action brought for
that purpose in addition to any other relief to which the prevailing party may
be entitled.
IN WITNESS WHEREOF, the parties hereto have duly executed and affixed
their respective seals to this lease on the day and year first above written:
LANDLORD:
/s/ E.V. Ferrell, Jr.
-----------------------------(SEAL)
E.V. Ferrell, Jr.
/s/ Sarah T. Ferrell
-----------------------------(SEAL)
Sarah T. Ferrell
TENANT:
POMPEII FURNITURE INDUSTRIES
By: /s/ Leo Martin
-------------------------(SEAL)
Leo Martin, Chairman
/s/ Leo Martin
-----------------------------(SEAL)
Leo Martin, Grantee
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Exhibit 10.15
EMPLOYMENT AGREEMENT
--------------------
This Agreement is made this 30th day of July, 1999, between WINSTON
FURNITURE COMPANY OF ALABAMA, INC., an Alabama corporation (the "PURCHASER"),
and PERRY B. MARTIN (the "EMPLOYEE").
PRELIMINARY STATEMENTS:
A. This Agreement is being entered into in connection with the Stock
Purchase Agreement, dated as of November 23, 1998, as amended (the "PURCHASE
AGREEMENT"), whereby the Purchaser is purchasing all of the capital stock of
MIAMI METAL PRODUCTS, INC., d/b/a POMPEII FURNITURE INDUSTRIES, a Florida
corporation (the "COMPANY") and Industrial Mueblera Pompeii de Mexico, S.A. de
C.V., a Mexican corporation ("IMP"). Capitalized terms used but not otherwise
defined herein shall have the respective meanings given such terms in the
Purchase Agreement.
B. The Employee serves as an executive officer of the Company.
C. The Employee possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
D. The Purchaser recognizes that the Employee has contributed to the
growth and success of the Company and desires to assure the Company of the
Employee's continued employment following the consummation of the transactions
contemplated by the Purchase Agreement and to compensate him therefor.
E. The Purchaser has determined that this Agreement will reinforce and
encourage the Employee's continued attention and dedication to the Company.
F. The Employee is willing to make his services available to the
Company on the terms and subject to the conditions hereinafter set forth.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. INTERPRETATION OF THIS AGREEMENT.
(a) TERMS DEFINED. As used herein, the following terms when used in this
Agreement have the meanings set forth below:
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"BASE SALARY" shall have the meaning given to it under ss.2(b) of this
Agreement.
<PAGE> 2
"CAUSE" means (i) the commission of any act by the Employee
constituting financial dishonesty against the Company (which act would be
indictable as a felony under applicable law), (ii) the conviction by the
Employee of a felony which could reasonably be expected to have a Material
Adverse Effect or which could reasonably be expected to adversely affect in a
material respect the Company's reputation with its customers, suppliers or
employees, (iii) the repeated failure by the Employee to follow the reasonable
written directives of the Management of the Company, or (iv) (A) any breach by
the Employee of ss.ss.6(e), 6(f) or 6(g) of the Purchase Agreement (as
determined by a final nonappealable order of a court of competent jurisdiction),
or (B) any breach by the Employee of any of the material terms of this Agreement
(including without limitation ss.ss.3, 4, 5, 6, 7 or 8 hereof) which is not
cured within seven calendar days after a notice referred to in the second
sentence of ss.2(a) below is provided to the Employee.
"COMPANY" has the meaning given to it in the preface above.
"COMPANY INFORMATION" means Confidential Information and Trade Secrets.
"CONFIDENTIAL INFORMATION" means confidential data and confidential
information relating to the business of the Parent, the Purchaser, and their
respective Subsidiaries and Affiliates (including the Company and IMP) (which
does not rise to the status of a Trade Secret under applicable law) which is or
has been disclosed to the Employee or of which the Employee became aware as a
consequence of or through his employment with the Company, which is not
generally known to the competitors of the Parent, the Purchaser and their
respective Subsidiaries and Affiliates (including the Company and IMP) and which
(a) derives economic value, actual or potential to the Parent, the Purchaser and
their respective Subsidiaries and Affiliates (including the Company and IMP),
from not being known to, and not being readily ascertainable by proper means by,
other persons who can obtain economic value from its disclosure or use, and (b)
is the subject of efforts that are reasonable under the circumstances to
maintain its secrecy. Confidential Information does not include any data or
information that (i) has been voluntarily disclosed to the general public by the
Parent, the Purchaser and their respective Subsidiaries or Affiliates, (ii) has
been independently developed and disclosed to the general public by others, or
(iii) otherwise enters the public domain through lawful means.
"DISABILITY" means the Employee's inability to perform his normal
duties for any 90 consecutive calendar day period or any 90 business days
(whether or not consecutive) during any 365 calendar day period.
"EMPLOYMENT PERIOD" shall have the meaning given to it in ss.2(a)
hereof.
"EMPLOYEE" shall have the meaning given to it in the first sentence of
this Agreement.
"IMP" has the meaning given to it in the preface above.
"MANAGEMENT OF THE COMPANY" means the Chief Executive Officer and the
President of the Company.
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<PAGE> 3
"MATERIAL ADVERSE EFFECT" means any change or effect that is materially
adverse to the business, financial condition or results of operations of the
Company.
"PARENT" means WinsLoew Furniture, Inc., a Florida corporation.
"PERSON" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"PURCHASE AGREEMENT" has the meaning given to it in the preface above.
"PURCHASER" shall have the meaning given to it in the first sentence of
this Agreement.
"SUBSIDIARY" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns, directly or indirectly, a majority of the
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"TERM" shall have the meaning given to it in ss.2(a) hereof.
"TRADE SECRETS" means information of the Parent, the Purchaser and
their respective Subsidiaries and Affiliates (including the Company and IMP)
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, financial data, financial plans, product or
service plans or lists of actual or potential customers or suppliers which (i)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
(b) INTERPRETATION. The words "HEREIN," "HEREOF," "HEREUNDER" and other
words of similar import refer to this Agreement as a whole, as the same from
time to time may be amended or supplemented and not any particular section,
paragraph, subparagraph or clause contained in this Agreement. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
2. EMPLOYMENT.
(a) Duration. The Purchaser agrees to employ the Employee and the
Employee accepts such employment for the period (the "EMPLOYMENT PERIOD")
beginning on the date hereof and ending upon the first to occur of (i) the third
anniversary of the date hereof (the "TERM"), (ii) the Employee's voluntary
resignation, (iii) the date on which the Employee's employment is terminated for
Cause, (iv) the date on which the Management of the Company or the Purchaser
determines, in its sole
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<PAGE> 4
discretion, that the Employee's employment is no longer in the best
interest of the Company (in which latter event, the Employee will be entitled to
severance pay as described in ss. 2(d) below) (termination pursuant to this
clause (iv) is sometimes referred to in this Agreement as "TERMINATION WITHOUT
CAUSE"), (v) the Employee's death, or (vi) the Employee's Disability. In the
event that the Purchaser shall determine to terminate the Employee's employment
for Cause, the Purchaser shall provide the Employee with a notice stating that
it has made a preliminary determination to do so and setting forth a statement
of the reason or reasons therefor. The Employee shall be afforded an opportunity
to meet with and be heard by the Purchaser within seven calendar days after
notice of such preliminary determination is provided to the Employee by the
Purchaser. During such seven calendar day period, the Employee shall be on paid
leave of absence from his duties to the Company and he will, during such time,
refrain from physically appearing at any of the premises or facilities of the
Parent, the Purchaser and their respective Subsidiaries and Affiliates. The
Purchaser shall be entitled to cause a termination for Cause for the reason
specified in such notice to become effective at any time following the
expiration of such seven day period by providing the Employee with notice to
such effect. Except in the case of death, resignation or termination for Cause,
termination will not be effective until 30 days after the Purchaser has given
written notice to the Employee of such termination. The Employee agrees to give
the Purchaser at least 90 days prior written notice of his resignation.
(b) Salary and Benefits. During the Employment Period, the Purchaser
will pay or cause the Company to pay the Employee a base salary at the rate of
$125,000 per annum ("BASE SALARY"), payable in installments consistent with the
Company's normal payroll schedule, subject to applicable withholding and other
taxes. The Base Salary of the Employee will be reviewed on an annual basis by
the Management of the Company for possible increases therein. In addition to the
Base Salary payable to Employee pursuant to this ss.2(b), the Employee will be
entitled to the following benefits during the Employment Period, unless
otherwise altered by the Management of the Company:
(i) the Employee will be entitled to participate in all medical and
hospitalization, group life insurance, and any and all other fringe benefit
plans as are presently and hereinafter provided by the Company to its
Employees; PROVIDED, HOWEVER, the Employee may elect to receive the amount
Purchaser would have paid or caused the Company to pay for such medical and
hospitalization insurance in lieu of receiving such coverages.
(ii) the Employee will be entitled to a maximum of two weeks vacation each
year with salary; PROVIDED, HOWEVER, that in no event may a vacation be
taken at a time when to do so could, in the reasonable judgment of the
Management of the Company have a Material Adverse Effect; and
(iii) the Employee will be entitled to reimbursement for reasonable business
expenses incurred by the Employee (subject to submission of reasonable
substantiation by the Employee).
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<PAGE> 5
(c) Services. During the Employment Period, the Employee will serve as
Vice President Contract Sales of the Company and will render such services of an
executive and administrative character (consistent with the types of services
generally rendered by the senior executive officers of the Parent, the Purchaser
and their respective Subsidiaries and Affiliates) to the Company as the
Management of the Company may from time to time reasonably direct. The Employee
will devote his best efforts and substantially all of his business time and
attention (except for vacation periods and reasonable periods of illness or
other incapacity) to the business of the Company. The Employee shall not,
without his consent, be required to perform his services hereunder from any
location outside of Miami-Dade county (except for reasonable travel in
connection with the business of the Company and its Affiliates).
(d) Severance Pay. In the event that the Employee's employment is
terminated by the Management of the Company or the Purchaser without Cause
pursuant to ss.2(a)(iv) above, the Purchaser will pay or will cause the Company
to pay to the Employee all amounts due to the Employee as Base Salary pursuant
to ss.2(b) above for the balance of the Term remaining after the date on which
the Employee's employment is terminated pursuant to ss.2(a)(iv) hereof, in
installments on the payment dates on which such Base Salary would have been paid
if the Employment Period had continued for the Term.
3. NONDISCLOSURE. While employed by the Purchaser and during the
periods described in the second to last sentence of this ss.3 the Employee (a)
will receive and hold all Company Information in trust and in strictest
confidence, (b) will protect the Company Information from disclosure and will in
no event knowingly take any action causing, or knowingly fail to take any action
necessary to prevent, any Company Information to lose its character as Company
Information, and (c) except as required by or reasonably related to the
Employee's duties in the course of his employment by the Purchaser, will not,
directly or indirectly, use, disseminate or otherwise disclose any Company
Information to any third party without the prior written consent of the
Purchaser, which may be withheld in the Purchaser's absolute discretion. The
provisions of this ss.3 shall survive the termination of the Employee's
employment (i) for a period of five years with respect to Confidential
Information, and (ii) with respect to Trade Secrets, for so long as any such
information qualifies as a Trade Secret under applicable law. In the event of
any inconsistency between the provisions of this ss.3 and the provisions of
ss.6(g) the Purchase Agreement, the provisions of this Agreement shall be
controlling.
4. BOOKS AND RECORDS. All books, records, reports, writings, notes,
notebooks, computer programs, sketches, drawings, blueprints, prototypes,
formulas, photographs, negatives, models, equipment, chemicals, reproductions,
proposals, flow sheets, supply contracts, customer lists and other documents
and/or things relating in any manner to the business of the Parent, the
Purchaser and their respective Subsidiaries and Affiliates (including the
Company and IMP) (including but not limited to any of the same embodying or
relating to any Confidential Information or Trade Secrets), whether prepared by
the Employee or otherwise coming into the Employee's possession, shall be the
exclusive property of the respective Person and shall not be copied, duplicated,
replicated, transformed, modified or removed from the
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<PAGE> 6
premises of the Person except pursuant to the business of the Person and shall
be returned immediately to the Person on termination of the Employee's
employment hereunder or on the Purchaser's or the Company's written request at
any time.
5. INVENTIONS AND PATENTS. The Employee agrees that all inventions,
innovations or improvements in the method of conducting the business of the
Parent, the Purchaser or any of their respective Subsidiaries and Affiliates
(including the Company and IMP) (including new contributions, improvements,
ideas and discoveries, whether patentable or not) conceived or made by him
during his employment with the Purchaser belong to the Purchaser. The Employee
will promptly disclose such inventions, innovations or improvements to the
Management of the Company and will, at the Company's expense, perform all
actions reasonably requested by the Management of the Company to establish and
confirm such ownership.
6. OTHER BUSINESSES. During the Employment Period, the Employee agrees
that he will not, except with the express written consent of the Management of
the Company (which shall not be unreasonably withheld), become engaged in,
render services for, or permit his name to be used in connection with, any
business other than the business of the Parent, the Purchaser and their
respective Subsidiaries and Affiliates (including the Company and IMP). During
such period, the Employee will also devote substantially all of his business
time and effort to the business of the Parent, the Purchaser and their
respective Subsidiaries and Affiliates (including the Company and IMP). At
Closing, the Company agrees to execute and deliver to the Employee the Consent
attached heretob as Exhibit A.
7. NONCOMPETITION. During the Employment Period and for a period of
the longer of (a) five years from and after the date of this Agreement or (b)
two years following the termination of Employee's employment for any reason,
Employee expressly covenants and agrees that he will not, directly or
indirectly, engage in or have any interest in any sole proprietorship,
partnership, corporation, limited liability company or business or any other
Person (other than the Parent, the Purchaser and their respective Subsidiaries
and Affiliates (including the Company and IMP), whether as an employee, officer,
director, partner, agent, security holder, consultant or otherwise, that
directly or indirectly is engaged in the manufacture of high-end metal-frame
furniture for residential and hospitality industries in all markets in which the
Company and IMP currently sell their products (the "RESTRICTED AREA"). The
Employee agrees that the covenant provided for in this ss.7 is reasonable and
necessary in terms of time, activity and territory to protect the Purchaser's
interest as a buyer of Business and in protecting the Trade Secrets. The
Employee further acknowledges and agrees that such covenants are reasonable and
necessary in terms of time, area and line of business to protect the Purchaser's
other legitimate business interests, which include its interests in protecting
the Company's and IMP's (i) valuable confidential business information, (ii)
substantial relationships with customers throughout the Restricted Area and
(iii) customer goodwill associated with the ongoing business of the Parent, the
Purchaser and their respective Subsidiaries and Affiliates (including the
Company and IMP). The Employee expressly authorizes the enforcement of the
covenants provided for in this ss.7 by (A) the Parent, the Purchaser and their
respective Subsidiaries and Affiliates (including the
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<PAGE> 7
Company and IMP), (B) the Purchaser's permitted assigns and (C) any successors
to the Company's business. To the extent that the covenant provided for in this
ss.7 may later be deemed by a court to be too broad to be enforced with respect
to its duration or with respect to any particular activity or geographic area,
the court making such determination shall have the power to reduce the duration
or scope of the provision, and to add or delete specific words or phrases to or
from the provision. The provision as modified shall then be enforced.
8. NON-SOLICITATION.
(a) During the Employment Period and for a period of the
longer of (a) five years from and after the date of this Agreement or (b) two
years following the termination of Employee's employment for any reason, the
Employee shall not directly or indirectly for himself or on behalf of any Person
induce or attempt to induce any customer, supplier, licensee or other Person
with whom the Parent, the Purchaser and their respective Subsidiaries and
Affiliates (including the Company and IMP) has a business relationship to cease
doing business with the Parent, the Purchaser and their respective Subsidiaries
and Affiliates (including the Company and IMP), or interfere, in any way which
could reasonably be expected to have a Material Adverse Effect, with the
relationship between any such customer, supplier, licensee or other Person and
the Parent, the Purchaser and their respective Subsidiaries and Affiliates
(including the Company and IMP).
(b) During the Employment Period and for a period of the
longer of (a) five years from and after the date of this Agreement or (b) two
years following the termination of Employee's employment for any reason, the
Employee expressly covenants and agrees that he will not, directly or
indirectly, solicit for employment or employ (or attempt to solicit for
employment or employ), for himself or on behalf of any sole proprietorship,
partnership, corporation, limited liability company or business or any other
Person (other than the Parent, the Purchaser and their respective Subsidiaries
and Affiliates (including the Company and IMP), any employee of the Parent, the
Purchaser and their respective Subsidiaries and Affiliates (including the
Company and IMP) or encourage any such employee to leave his or her employment
with the Parent, the Purchaser and their respective Subsidiaries and Affiliates
(including the Company and IMP). To the extent that the covenant provided for in
this ss.8(b) may later be deemed by a court to be too broad to be enforced with
respect to its duration or with respect to any particular activity or geographic
area, the court making such determination shall have the power to reduce the
duration or scope of the provision, and to add or delete specific words or
phrases to or from the provision. The provision as modified shall then be
enforced.
9. NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given two business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
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<PAGE> 8
If to the Employee:
Perry B. Martin
2717 Edgewater Court
Weston, Florida 33332
Facsimile: (954) 349-9119
With copies to (which shall not constitute notice to the Employee):
Stephen H. Cypen, Esq.
Cypen & Cypen
P.O. Box 402099
825 Arthur Godfrey Road
Miami Beach, Florida 33140-0099
Facsimile: (305) 535-0050
Samuel C. Ullman, Esq.
Steel Hector & Davis
200 South Biscayne Boulevard
Suite 4000
Miami, Florida 33131-2310
Facsimile: (305) 577-7001
If to the Purchaser:
Bobby Tesney
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Facsimile: (205) 408-7028
Either party hereto may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail or electronic mail), but no such notice,
request, demand, claim or other communication shall be deemed to have been duly
given unless and until it actually is received by the intended recipient. Either
party hereto may change the address to which notices, requests, demands, claims
and other communications hereunder are to be delivered by giving the other party
notice in the manner herein set forth.
10. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if 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 any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
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11. COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
12. COUNTERPARTS. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
13. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Employee and the Purchaser and
their respective successors and assigns (and, in the case of the Employee, heirs
and personal representatives), except that Employee may not assign any of his
rights or delegate any of his obligations hereunder.
14. DAMAGES. Nothing contained herein shall be construed to prevent
either party hereto from seeking and recovering from the other damages sustained
by either or both of them as a result of its or his breach of any term or
provision of this Agreement. In the event that either party hereto brings suit
for the collection of any damages resulting from, or for the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable costs,
fees (including reasonable trial and appellate attorneys' fees) and expenses of
the other party.
15. EQUITABLE REMEDIES. The Employee acknowledges and agrees that the
Purchaser would not have an adequate remedy at law in the event any of the
provisions of ss.ss.3, 4, 5, 6, 7 or 8 of this Agreement are breached.
Accordingly, the Employee agrees that the Purchaser shall be entitled to an
injunction or injunctions to prevent breaches of ss.ss.3, 4, 5, 6, 7 or 8 of
this Agreement and to enforce specifically the terms and provisions thereof in
any action instituted in any court of competent jurisdiction, in addition to any
other remedies which may be available to it.
16. CHOICE OF LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state. Each party hereby irrevocably submits to the exclusive jurisdiction of
any state or federal court sitting in the County of Miami-Dade, State of Florida
in any action or proceeding arising out of or relating to this Agreement and
hereby irrevocably agrees, on behalf of himself or itself and on behalf of such
party's successor's and assigns, that all claims in respect of such action or
proceeding may be heard and determined in any such court and irrevocably waives
any objection such person may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The parties further agree that the service of any process or
summons required by any such court upon a party's counsel in accordance with the
provisions of Section 9 hereof shall
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<PAGE> 10
constitute valid and lawful service of process against them, without the
necessity for service by any other means provided by statute or rule of court;
provided, however, that for purposes of service upon the Employee, service shall
be made of Stephen H. Cypen, Esq.
17. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
18. AMENDMENTS AND WAIVERS. No provision of this Agreement may be
amended or waived without the prior written consent of the parties hereto.
19. BUSINESS DAYS. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
20. NO THIRD PARTY BENEFICIARY. Except for the parties to this
Agreement and their respective successors and assigns, nothing expressed or
implied in this Agreement is intended, or will be construed, to confer upon or
give any person other than the parties hereto and their respective successors
and assigns any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
WINSTON FURNITURE COMPANY OF
ALABAMA, INC.
By: /s/ Stephen C. Hess
--------------------------------------
Stephen C. Hess, President
/s/ Perry B. Martin
-----------------------------------------
PERRY B. MARTIN
10
<PAGE> 11
EXHIBIT A
CONSENT
<PAGE> 1
Exhibit 10.16
CONSULTING AGREEMENT
This Agreement is made and entered into this 30th day of July, 1999,
between WINSTON FURNITURE COMPANY OF ALABAMA, INC., an Alabama corporation (the
"PURCHASER"), and LEO MARTIN (the "CONSULTANT").
PRELIMINARY STATEMENTS:
A. This Agreement is being entered into in connection with the Stock
Purchase Agreement, dated as of November 23, 1998, as amended (the "PURCHASE
AGREEMENT"), whereby the Purchaser is purchasing all of the capital stock of
MIAMI METAL PRODUCTS, INC., d/b/a POMPEII FURNITURE INDUSTRIES, a Florida
corporation (the "COMPANY") and Industrial Mueblera Pompeii de Mexico, S.A. de
C.V., a Mexican corporation ("IMP"). Capitalized terms used but not otherwise
defined herein shall have the respective meanings given such terms in the
Purchase Agreement.
B. The Consultant serves as Chairman of the Board of Directors of the
Company.
C. The Consultant possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
D. The Purchaser recognizes that the Consultant has contributed to the
growth and success of the Company and desires to assure the Company of the
Consultant's continued availability as a consultant to the Company following
the consummation of the transactions contemplated by the Purchase Agreement and
to compensate him therefor.
E. The Consultant is willing to make his services available to the
Company on the terms and subject to the conditions hereinafter set forth.
AGREEMENT:
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. INTERPRETATION OF THIS AGREEMENT.
(a) Terms Defined. As used herein, the following terms when used in
this Agreement have the meanings set forth below:
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act of 1934, as amended.
"Company" has the meaning given to it in the preface above.
"Company Information" means Confidential Information and Trade Secrets.
<PAGE> 2
"Confidential Information" means confidential data and confidential
information relating to the business of the Parent, the Purchaser, and their
respective Subsidiaries and Affiliates (including the Company and IMP) (which
does not rise to the status of a Trade Secret under applicable law) which is or
has been disclosed to the Consultant or of which the Consultant became aware as
a consequence of or through his prior employment with the Company or his
engagement hereunder, which is not generally known to the competitors of the
Parent, the Purchaser and their respective Subsidiaries and Affiliates
(including the Company and IMP) and which (a) derives economic value, actual or
potential to the Parent, the Purchaser and their respective Subsidiaries and
Affiliates (including the Company and IMP), from not being known to, and not
being readily ascertainable by proper means by, other persons who can obtain
economic value from its disclosure or use, and (b) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Confidential Information does not include any data or information that (i) has
been voluntarily disclosed to the general public by the Parent, the Purchaser
and their respective Subsidiaries or Affiliates (including the Company or IMP),
(ii) has been independently developed and disclosed to the general public by
others, or (iii) otherwise enters the public domain through lawful means.
"Consultant" shall have the meaning given to it in the first sentence
of this Agreement.
"IMP" has the meaning given to it in the preface above.
"Management of the Company" means the Chief Executive Officer and the
President of the Company.
"Parent" means WinsLoew Furniture, Inc., a Florida corporation.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization or a governmental entity (or any
department, agency or political subdivision thereof).
"Purchaser" has the meaning given to it in the first sentence of this
Agreement.
"Purchase Agreement" has the meaning given to it in the preface above.
"Subsidiary" means any corporation with respect to which a specified
Person (or a Subsidiary thereof) owns, directly or indirectly, a majority of the
common stock or has the power to vote or direct the voting of sufficient
securities to elect a majority of the directors.
"Trade Secrets" means information of the Parent, the Purchaser and
their respective Subsidiaries and Affiliates (including the Company and IMP),
including, but not limited to, technical or nontechnical data, formulas,
patterns, compilations, programs, financial data, financial plans, product or
service plans or lists of actual or potential customers or suppliers which (i)
derives economic value, actual or potential, from not being generally known to,
and not being readily ascertainable by proper means by, other persons who can
obtain economic value from its disclosure or use, and (ii) is the subject of
efforts that are reasonable under the circumstances to maintain its secrecy.
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<PAGE> 3
(b) Interpretation. The words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a whole, as the same from
time to time may be amended or supplemented and not any particular section,
paragraph, subparagraph or clause contained in this Agreement. Wherever from the
context it appears appropriate, each term stated in either the singular or
plural shall include the singular and the plural, and pronouns stated in
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
2. ENGAGEMENT OF CONSULTANT. Effective as of the date hereof, the
Purchaser hereby retains the Consultant to provide advisory and consulting
services to the Company as required by the Management of the Company, and the
Consultant hereby agrees to provide such services on the terms and conditions
set forth herein; provided, however, the Consultant shall not be required to
devote his full time and business efforts to the performance of services
hereunder.
3. TERM. The term of this Agreement and the Consultant's engagement
hereunder shall be for a period commencing on the date hereof and terminating on
the one year anniversary hereof.
4. COMPENSATION. During the term of this Agreement, the Consultant
shall receive compensation at the rate of $50,000 per annum for the services to
be rendered by him hereunder, payable in monthly installments.
5. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
5.1 REIMBURSABLE EXPENSES. During the term of the Consultant's
engagement hereunder, the Purchaser will cause the Company, upon the submission
of proper substantiation by the Consultant, to reimburse the Consultant for all
reasonable expenses actually and necessarily paid or incurred by the Consultant
at the direction of the Management of the Company in the course of and pursuant
to the performance of his duties hereunder.
5.2 WORKING FACILITIES. The Purchaser will cause the Company to furnish
the Consultant with an office (which will not be the same office as Consultant
had prior to the consummation of the transactions contemplated by the Purchase
Agreement).
6. INDEPENDENT CONTRACTOR. For all purposes of this Agreement and the
transactions contemplated hereby, the Consultant is and shall be deemed to be an
independent contractor and the Consultant shall not have the right, without the
prior written consent of the Purchaser, to enter into any agreement on behalf of
the Parent, the Purchaser and their respective Subsidiaries and Affiliates
(including the Company and IMP) or to do any other act which may subject the
Parent, the Purchaser and their respective Subsidiaries and Affiliates
(including the Company and IMP) to liability or obligate the Parent, the
Purchaser and their respective Subsidiaries and Affiliates (including the
Company and IMP) in any manner whatsoever. The Consultant shall be expressly
prohibited from doing any acts or making any statements which do or may create
3
<PAGE> 4
the impression or inference that the Consultant is an agent of the Parent, the
Purchaser or their respective Subsidiaries and Affiliates (including the
Company or IMP). Nothing in this Agreement shall be deemed or construed (i) to
create a partnership or joint venture between the Consultant and any of the
Parent, the Purchaser or their respective Subsidiaries and Affiliates
(including the Company or IMP), (ii) to cause the Consultant to be responsible
in any way for the debts, liabilities or obligations of the Parent, the
Purchaser and their respective Subsidiaries and Affiliates (including the
Company and IMP), or (iii) to constitute the Consultant as an employee, officer
or agent of any of the Parent, the Purchaser and their respective Subsidiaries
and Affiliates (including the Company and IMP).
7. CERTAIN COVENANTS.
7.1 Nondisclosure. While engaged by the Purchaser and during the
periods described in the second to last sentence of this ss.7.1 the Consultant
(a) will receive and hold all Company Information in trust and in strictest
confidence, (b) will protect the Company Information from disclosure and will in
no event knowingly take any action causing, or knowingly fail to take any action
necessary to prevent, any Company Information to lose its character as Company
Information, and (c) except as required by or reasonably related to the
Consultant's duties in the course of his engagement by the Purchaser hereunder,
will not, directly or indirectly, use, disseminate or otherwise disclose any
Company Information to any third party without the prior written consent of the
Purchaser, which may be withheld in the Purchaser's absolute discretion. The
provisions of this ss.7.1 shall survive the termination of the Consultant's
engagement (i) for a period of five years with respect to Confidential
Information, and (ii) with respect to Trade Secrets, for so long as any such
information qualifies as a Trade Secret under applicable law. In the event of
any inconsistency between the provisions of this ss.7.1 and the provisions of
ss.6(g) of the Purchase Agreement, the provisions of this Agreement shall be
controlling.
7.2 Books and Records. All books, records, reports, writings, notes,
notebooks, computer programs, sketches, drawings, blueprints, prototypes,
formulas, photographs, negatives, models, equipment, chemicals, reproductions,
proposals, flow sheets, supply contracts, customer lists and other documents
and/or things relating in any manner to the business of the Parent, the
Purchaser and their respective Subsidiaries and Affiliates (including the
Company and IMP) (including but not limited to any of the same embodying or
relating to any Company Information), whether prepared by the Consultant or
otherwise coming into the Consultant's possession, shall be the exclusive
property of the respective Person and shall not be copied, duplicated,
replicated, transformed, modified or removed from the premises of the Person
except pursuant to the business of the Person and shall be returned immediately
to the Person on termination of the Consultant's engagement hereunder or on the
Purchaser's or the Company's written request at any time.
4
<PAGE> 5
7.3 Inventions and Patents. The Consultant agrees that all inventions,
innovations or improvements in the method of conducting the business of the
Parent, the Purchaser and their respective Subsidiaries and Affiliates
(including the Company and IMP) (including new contributions, improvements,
ideas and discoveries, whether patentable or not) conceived or made by him
during his engagement by the Purchaser hereunder belong to the Purchaser. The
Consultant will promptly disclose such inventions, innovations or improvements
to the Management of the Company and will, at the Company's expense, perform all
actions reasonably requested by the Management of the Company to establish and
confirm such ownership.
8. INJUNCTION. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Consultant of any of the covenants contained
in ss.7 of this Agreement will cause irreparable harm and damage to the Parent,
the Purchaser and their respective Subsidiaries and Affiliates (including the
Company and IMP), the monetary amount of which may be virtually impossible to
ascertain. As a result, the Consultant recognizes and hereby acknowledges that
the Purchaser shall be entitled to an injunction from any court of competent
jurisdiction enjoining and restraining any violation of any or all of the
covenants contained in ss.7 of this Agreement by the Consultant or any of his
affiliates, associates, partners or agents, either directly or indirectly, and
that such right to injunction shall be cumulative and in addition to whatever
other remedies the Purchaser may possess.
9. NOTICES. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given two business days
after it is sent by registered or certified mail, return receipt requested,
postage prepaid, and addressed to the intended recipient as set forth below:
To the Company:
Bobby Tesney
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Facsimile: (205) 408-7028
To Consultant:
Leo Martin
Bristol Towers Apartments
2127 Brickell Avenue, Apt. 3602
Miami, Florida 33129
Facsimile: (305) 858-8252
5
<PAGE> 6
With a copy to (which shall not constitute notice to the Executive):
Stephen H. Cypen, Esq.
Cypen & Cypen
P.O. Box 402099
825 Arthur Godfrey Road
Miami Beach, Florida 33140-0099
Facsimile: (305) 535-0050
Either party hereto may send any notice, request, demand, claim or other
communication hereunder to the intended recipient at the address set forth
above using any other means (including personal delivery, expedited courier,
messenger service, telecopy, telex, ordinary mail or electronic mail), but no
such notice, request, demand, claim or other communication shall be deemed to
have been duly given unless and until it actually is received by the intended
recipient. Either party hereto may change the address to which notices,
requests, demands, claims and other communications hereunder are to be
delivered by giving the other party notice in the manner herein set forth.
10. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if 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 any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
11. COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the
complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof
in any way.
12. COUNTERPARTS. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
13. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Consultant and the Purchaser
and their respective successors and assigns (and, in the case of the
Consultant, heirs and personal representatives), except that the Consultant may
not assign any of his rights or delegate any of his obligations hereunder.
14. DAMAGES. Nothing contained herein shall be construed to prevent
any party hereto from seeking and recovering from the other damages sustained
by either or both of them as a result of its or his breach of any term or
provision of this Agreement. In the event that either party hereto brings suit
for the collection of any damages resulting from, or for the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable costs,
fees (including reasonable trial and appellate attorneys' fees) and expenses of
the other party.
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<PAGE> 7
15. CHOICE OF LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws principles thereof and all questions concerning the validity and
construction hereof shall be determined in accordance with the laws of said
state. Each party hereby irrevocably submits to the exclusive jurisdiction of
any state or federal court sitting in the County of Miami-Dade, State of
Florida in any action or proceeding arising out of or relating to this
Agreement and hereby irrevocably agrees, on behalf of himself or itself and on
behalf of such party's successor's and assigns, that all claims in respect of
such action or proceeding may be heard and determined in any such court and
irrevocably waives any objection such person may now or hereafter have as to
the venue of any such suit, action or proceeding brought in such a court or
that such court is an inconvenient forum. The parties further agree that the
service of any process or summons required by any such court upon a party's
counsel in accordance with the provisions of Section 8 hereof shall constitute
valid and lawful service of process against them, without the necessity for
service by any other means provided by statute or rule of court.
16. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
17. AMENDMENTS AND WAIVERS. No provision of this Agreement may be
amended or waived without the prior written consent of the parties hereto.
18. BUSINESS DAYS. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
19. NO THIRD PARTY BENEFICIARY. Except for the parties to this
Agreement and their respective successors and assigns, nothing expressed or
implied in this Agreement is intended, or will be construed, to confer upon or
give any person other than the parties hereto and their respective successors
and assigns any rights or remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
WINSTON FURNITURE COMPANY OF ALABAMA, INC.
By: /s/ Stephen C. Hess
---------------------------------------
Stephen C. Hess, President
/s/ Leo Martin
-------------------------------------------
LEO MARTIN
7
<PAGE> 1
Exhibit 10.17
EXECUTION COPY
WINSLOEW ESCROW CORP.
TRIVEST FURNITURE CORPORATION
$105,000,000
105,000 UNITS, CONSISTING OF
$105,000,000 12 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
AND WARRANTS TO PURCHASE 24,129 SHARES OF COMMON STOCK
PURCHASE AGREEMENT
August 19, 1999
BEAR, STEARNS & CO. INC.
BANCBOSTON ROBERTSON STEPHENS INC.
FIRST UNION CAPITAL MARKETS CORP.
================================================================================
<PAGE> 2
WINSLOEW ESCROW CORP.
TRIVEST FURNITURE CORPORATION
$105,000,000
105,000 UNITS, CONSISTING OF
$105,000,000 12 3/4% SERIES A SENIOR SUBORDINATED
NOTES DUE 2007
AND WARRANTS TO PURCHASE 24,129 SHARES OF COMMON STOCK
PURCHASE AGREEMENT
August 19, 1999
New York, New York
BEAR, STEARNS & CO. INC.
BANCBOSTON ROBERTSON STEPHENS INC.
FIRST UNION CAPITAL MARKETS
c/o 245 Park Avenue
New York, New York 10167
Ladies & Gentlemen:
WinsLoew Escrow Corp., a Florida corporation (the "COMPANY") and wholly
owned subsidiary of Trivest Furniture Corporation, a Florida corporation
("TFC"), proposes to issue and sell (the "OFFERING") to Bear, Stearns & Co. Inc.
("BEAR STEARNS"), BancBoston Robertson Stephens Inc. ("BANCBOSTON") and First
Union Capital Markets ("FIRST UNION") (each, an "INITIAL PURCHASER," and,
collectively, the "INITIAL PURCHASERS") 105,000 Units (the "UNITS"), consisting
of $105,000,000 in aggregate principal amount of 12 3/4% Series A Senior
Subordinated Notes due 2007 (the "SERIES A NOTES") and warrants (the "WARRANTS")
to purchase 24,129 shares of the Company's common stock, par value $0.01 (the
"COMMON STOCK"), subject to the terms and conditions set forth herein. The
Series A Notes will be issued pursuant to an indenture (the "INDENTURE"), to be
dated the Closing Date (as defined), between the Company and American Stock
Transfer & Trust Company, as trustee (the "TRUSTEE"). The Warrants will be
issued pursuant to a Warrant Agreement (the "WARRANT AGREEMENT"), to be dated
the Closing Date, between the Company and American Stock Transfer and Trust
Company, as warrant agent and security intermediary (the "WARRANT AGENT").
The Company intends to use the funds of the Offering to pay a portion
of the merger consideration required under that certain Second Amended and
Restated Agreement and Plan of Merger dated as of May 4, 1999 (the "MERGER
AGREEMENT"), between TFC and WinsLoew Furniture, Inc., a Florida corporation
("WINSLOEW"). Pursuant to the Merger Agreement, TFC will merger with and into
WinsLoew, with WinsLoew being the surviving entity. Prior to or concurrently
with the merger of TFC and WinsLoew, the Company will merge with and into TFC,
with TFC being the surviving entity. Collectively, the contemplated mergers of
the Company,
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<PAGE> 3
TFC and WinsLoew are referred to as the "MERGERS." As a result of the Mergers,
WinsLoew will assume all of the Company's obligations under this Agreement, the
Indenture, the Notes (as defined below), the Registration Rights Agreement (as
defined below) and the Warrant Agreement, as well as all other obligations of
the Company and TFC existing at the time of the Mergers. Capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Indenture.
1. Issuance of Securities. The Company proposes, upon the terms and
subject to the conditions set forth herein, to issue and sell to the Initial
Purchasers an aggregate of 105,000 Units, consisting of $105,000,000 in
principal amount of Series A Notes and Warrants to purchase 24,129 shares of
Common Stock at $0.01 per share. The Series A Notes and the Series B Notes (as
defined) issuable in exchange therefor are collectively referred to herein as
the "NOTES."
Upon original issuance thereof, and until such time as the same is no
longer required under the applicable requirements of the Securities Act of 1933,
as amended (the "ACT"), the Series A Notes (and all securities issued in
exchange therefor or in substitution thereof) and the Warrants shall bear the
following legend:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR
THE BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT
TRANSFERABLE TO ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT
(I) THE TRUSTEE MAY MAKE SUCH NOTATIONS HEREON AS MAY BE
REQUIRED PURSUANT TO SECTION 2.07 OF THE INDENTURE, (II) THIS
GLOBAL NOTE MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT
TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL NOTE
MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL NOTE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN
CONSENT OF THE COMPANY.
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT
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<PAGE> 4
PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY BAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144A, (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) TO
CERTAIN INSTITUTIONAL ACCREDITED INVESTORS WITHIN THE MEANING
OF SUBPARAGRAPH (a) (1), (2), (3) or (7) OF RULE 501 UNDER THE
SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR
SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, (d) FOLLOWING THE RELEASE OF PROCEEDS FROM THE
ESCROW ACCOUNT, OUTSIDE THE UNITED STATES TO A NON-UNITED
STATES PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT OR (e) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IN THE
COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF
THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY
OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
FOR PURPOSES OF SECTION 1273 OF THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE "CODE"), THIS SECURITY HAS ORIGINAL
ISSUE DISCOUNT. FOR PURPOSES OF SECTION 1273 OF THE CODE, THE
ISSUE PRICE IS $962.40 AND THE AMOUNT OF ORIGINAL ISSUE
DISCOUNT IS $37.60, IN EACH CASE PER $1,000 PRINCIPAL AMOUNT
OF THIS SECURITY. FOR PURPOSES OF SECTION 1275 OF THE CODE,
THE YIELD TO MATURITY COMPOUNDED SEMIANNUALLY IS 13.537%."
3
<PAGE> 5
Until the Separation Date (as defined in the Indenture), each Global
Note shall bear a legend in substantially the following form:
"UNTIL THE SEPARATION DATE (AS DEFINED), THIS NOTE HAS BEEN
ISSUED AS, AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH
THE ASSOCIATED WARRANTS TO PURCHASE COMMON STOCK OF THE
COMPANY. EACH UNIT CONSISTS OF $1,000 PRINCIPAL AMOUNT OF
NOTES AND A WARRANT TO PURCHASE 0.2298 SHARES OF COMMON STOCK,
SUBJECT TO ADJUSTMENT UNDER CERTAIN CIRCUMSTANCES. A COPY OF
THE WARRANT AGREEMENT PURSUANT TO WHICH THE WARRANTS HAVE BEEN
ISSUED IS AVAILABLE FROM THE COMPANY UPON REQUEST."
2. Offering. The Units will be offered and sold to the Initial
Purchasers pursuant to an exemption from the registration requirements under the
Act. The Company has prepared a preliminary offering memorandum, dated August 2,
1999 (the "PRELIMINARY OFFERING MEMORANDUM"), and a final offering memorandum,
dated August 19, 1999 (the "OFFERING MEMORANDUM"), relating to the Company and
its subsidiaries and the Units.
Each Initial Purchaser has advised the Company that such Initial
Purchaser will make offers (the "EXEMPT RESALES") of the Units on the terms set
forth in the Offering Memorandum, as amended or supplemented, solely to persons
whom such Initial Purchaser reasonably believes to be "qualified institutional
buyers," as defined in Rule 144A under the Act ("QIBS"). The QIBs are
collectively referred to herein as the "ELIGIBLE PURCHASERS." The Initial
Purchasers will offer the Units to the Eligible Purchasers initially at a price
equal to $975.73. Such price may be changed at any time without notice.
Holders (including subsequent transferees) of the Series A Notes will
have the registration rights set forth in the registration rights agreement
relating thereto (the "REGISTRATION RIGHTS AGREEMENT"), to be dated the Closing
Date, for so long as such Series A Notes constitute "TRANSFER RESTRICTED
SECURITIES" (as defined in the Registration Rights Agreement). Pursuant to the
Registration Rights Agreement, the Company will agree to file with the
Securities and Exchange Commission (the "COMMISSION"), under the circumstances
set forth therein, (i) a registration statement under the Act (the "EXCHANGE
OFFER REGISTRATION STATEMENT") relating to the Company's 12 3/4% Series B Senior
Subordinated Notes due 2007 (the "SERIES B NOtes") to be offered in exchange for
the Series A Notes (the "EXCHANGE OFFER") and (ii) a shelf registration
statement pursuant to Rule 415 under the Act (the "SHELF REGISTRATION STATEMENT"
and, together with the Exchange Offer Registration Statement, the "REGISTRATION
STATEMENTS") relating to the resale by certain holders of the Series A Notes,
and to use their best efforts to cause such Registration Statements to be
declared effective and to consummate the Exchange Offer.
The Warrant Agreement will provide, for the benefit of the Holders of
the Warrants, that the Company will file with the Commission, upon demand by the
holders of at least one-quarter of
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<PAGE> 6
the then outstanding Warrants and Warrant Shares, a registration statement (the
"WARRANT REGISTRATION STATEMENT") on an appropriate form under the Act covering
the issuance by the Company of the shares of Common Stock underlying such
Warrants (the "WARRANT SHARES") to Holders of Warrants upon the exercise of the
Warrants and resales of the Warrants and the Warrant Shares by the holders
thereof. Upon the occurrence of certain events, including an initial public
offering, Holders of Warrants and Warrant Shares will also have rights to be
included in certain registered equity offerings of the Company.
The net proceeds of the offering, after deducting for discounts and
commissions to the Initial Purchasers, along with additional cash to be
deposited by TFC and the Company with the Escrow Agent, will be placed in an
escrow account (the "ESCROW ACCOUNT") in accordance with an Escrow, Control and
Security Agreement dated as of the date of the Indenture, by and between the
Company and American Stock Transfer & Trust Company, as Escrow Agent and
Security Intermediary (the "ESCROW AGREEMENT") and the Company will grant a
first priority security interest in the Escrow Account to the Trustee for the
benefit of the Holders. The funds in the Escrow Account will be released on or
before September 15, 1999 either to finance TFC's acquisition of WinsLoew by
merger or to satisfy the Special Mandatory Redemption. This Agreement, the
Notes, the Indenture, the Registration Rights Agreement, the Warrants, the
Warrant Agreement and the Escrow Agreement are hereinafter referred to
collectively as the "OPERATIVE DOCUMENTS."
3. Purchase, Sale and Delivery. (a) On the basis of the
representations, warranties and covenants contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell to the
Initial Purchasers, and each Initial Purchaser agrees, severally and not
jointly, to purchase from the Company, the amount of Units set forth opposite
the name of such Initial Purchaser on Exhibit A. The purchase price for the
Units will be $948.90 per Unit.
(b) Delivery of the Units shall be made, against payment of the
purchase price therefor, at the offices of Weil, Gotshal & Manges LLP, New York,
New York or such other location as may be mutually acceptable. Such delivery and
payment shall be made at 9:30 a.m., New York City time, on August 24, 1999 or at
such other time as shall be agreed upon by the Initial Purchasers and the
Company. The time and date of such delivery and payment are herein called the
"CLOSING DATE."
(c) On the Closing Date, one or more Series A Notes in definitive
global form, registered in the name of Cede & Co., as nominee of The Depository
Trust Company ("DTC"), having an aggregate amount corresponding to the aggregate
principal amount of the Series A Notes (the "GLOBAL NOTE") and one or more
Warrants in definitive global form, registered in the name of Cede & Co., as
nominee of DTC, representing 105,000 Warrants (the "GLOBAL WARRANT" and,
together with the Global Note, the "GLOBAL SECURITIES") sold pursuant to Exempt
Resales to Eligible Purchasers shall be delivered by the Company to the Initial
Purchasers (or as the Initial Purchasers direct), against payment by the Initial
Purchasers of the purchase price therefor, by wire transfer of same day funds,
to the Escrow Account. The Global Securities shall be made available to the
Initial Purchasers for inspection not later than 9:30 a.m. on the business day
immediately preceding the Closing Date.
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<PAGE> 7
4. Agreements of the Company and the Initial Purchasers. The Company
covenants and agrees with the Initial Purchasers as follows:
(a) To advise the Initial Purchasers promptly and, if
requested by the Initial Purchasers, confirm such advice in writing,
(i) of the issuance by any state securities commission of any stop
order suspending the qualification or exemption from qualification of
any Units for offering or sale in any jurisdiction, or the initiation
of any proceeding for such purpose by any state securities commission
or other regulatory authority and (ii) of the happening of any event
that makes any statement of a material fact made in the Preliminary
Offering Memorandum or the Offering Memorandum untrue or that requires
the making of any additions to or changes in the Preliminary Offering
Memorandum or the Offering Memorandum in order to make the statements
therein, in the light of the circumstances under which they are made,
not misleading. The Company shall use its best efforts to prevent the
issuance of any stop order or order suspending the qualification or
exemption of any Units under any state securities or Blue Sky laws and,
if at any time any state securities commission or other regulatory
authority shall issue an order suspending the qualification or
exemption of any Units under any state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting
of such order at the earliest possible time.
(b) To furnish the Initial Purchasers and those persons
identified by the Initial Purchasers to the Company, without charge, as
many copies of the Preliminary Offering Memorandum and the Offering
Memorandum, and any amendments or supplements thereto, as the Initial
Purchasers may reasonably request. Subject to the representations and
warranties made by the Initial Purchasers in Section 5(b) hereof, the
Company consents to the use of the Preliminary Offering Memorandum and
the Offering Memorandum, and any amendments and supplements thereto
required pursuant hereto, by the Initial Purchasers in connection with
Exempt Resales.
(c) Not to amend or supplement the Preliminary Offering
Memorandum or the Offering Memorandum during such period as in the
opinion of counsel for the Initial Purchasers the Preliminary Offering
Memorandum or the Offering Memorandum is required by law to be
delivered in connection with Exempt Resales and in connection with
market-making activities of the Initial Purchasers for so long as any
Transfer Restricted Securities or Transfer Restricted Warrant
Securities are outstanding unless the Initial Purchasers shall
previously have been advised thereof and shall not have objected
thereto within a reasonable time after being furnished a copy thereof.
The Company shall promptly prepare, upon the Initial Purchasers'
request, any amendment or supplement to the Preliminary Offering
Memorandum or the Offering Memorandum that may be necessary or
advisable in connection with such Exempt Resales or such market making
activities.
(d) If, during the period referred to in 4(c) above, any event
shall occur as a result of which, in the judgment of the Company and
any Guarantors or in the reasonable opinion of counsel for the Company
and any Guarantors or of counsel for the Initial Purchasers, it becomes
necessary or advisable to amend or supplement the Preliminary
6
<PAGE> 8
Offering Memorandum or the Offering Memorandum in order to make the
statements therein, in the light of the circumstances when such
Offering Memorandum is delivered to an Eligible Purchaser, not
misleading, or if it is necessary or advisable to amend or supplement
the Preliminary Offering Memorandum or the Offering Memorandum to
comply with applicable law, (i) to notify the Initial Purchasers and
(ii) forthwith to prepare an appropriate amendment or supplement to
such Preliminary Offering Memorandum or the Offering Memorandum so that
the statements therein as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or
so that such Preliminary Offering Memorandum or the Offering Memorandum
will comply with applicable law.
(e) To cooperate with the Initial Purchasers and counsel for
the Initial Purchasers in connection with the qualification or
registration of the Units under the securities or Blue Sky laws of such
jurisdictions as the Initial Purchasers may reasonably request and to
continue such qualification in effect so long as required for the
Exempt Resales; provided, however, that neither the Company, nor any
future Guarantor, shall be required in connection therewith to register
or qualify as a foreign corporation where it is not now so qualified or
to take any action that would subject it to service of process in suits
or taxation, in each case, other than as to matters and transactions
relating to the Preliminary Offering Memorandum, the Offering
Memorandum or Exempt Resales, in any jurisdiction where it is not now
so subject.
(f) Whether or not the transactions contemplated by this
Agreement are consummated or this Agreement becomes effective or is
terminated, to pay and be responsible for all costs, expenses, fees and
taxes incident to the performance of the obligations of the Company
hereunder, including in connection with: (i) the preparation, printing,
filing and distribution of the Preliminary Offering Memorandum and the
Offering Memorandum (including, without limitation, financial
statements) and all amendments and supplements thereto required
pursuant hereto, (ii) the preparation (including, without limitation,
duplication costs) and delivery of the Operative Documents,
correspondence and all other documents prepared and delivered in
connection herewith and with the Exempt Resales, (iii) the issuance,
transfer and delivery of the Units to the Initial Purchasers, (iv) the
qualification or registration of the Units for offer and sale under the
securities or Blue Sky laws of the several states (including, without
limitation, the cost of printing and mailing a preliminary and final
Blue Sky Memorandum and the reasonable fees and disbursements of
counsel for the Initial Purchasers relating thereto), (v) furnishing
such copies of the Preliminary Offering Memorandum and the Offering
Memorandum, and all amendments and supplements thereto, as may be
requested for use in connection with Exempt Resales, (vi) the
preparation of certificates for the Notes and Warrants (including,
without limitation, printing and engraving thereof), (vii) the fees,
disbursements and expenses of the Company's and TFC's counsel and
accountants, (viii) all fees and expenses (including fees and expenses
of counsel) of the Company in connection with the approval of the Units
by DTC for "book-entry" transfer, (ix) rating the Notes by rating
agencies, (x) the reasonable fees and expenses of the Trustee and its
counsel, (xi) the performance by the Company and any future Guarantors
of their other obligations under
7
<PAGE> 9
this Agreement and the other Operative Documents and (xii) "roadshow"
travel and other expenses incurred by the Company in connection with
the marketing and sale of the Units. Except as otherwise specifically
provided to the contrary above, and in Sections 6, 7 and 11(d), the
Initial Purchasers shall pay all expenses incurred by them in
connection with the offering of the Units.
(g) To use the proceeds from the sale of the Units in the
manner described in the Offering Memorandum under the caption "Use of
Proceeds."
(h) Not to voluntarily claim, and to resist actively any
attempts to claim, the benefit of any usury laws against the holders of
any Units, Notes or Warrants.
(i) Not to sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act)
that would be integrated with the sale of the Units in a manner that
would require the registration under the Act of the sale to the Initial
Purchasers or the Eligible Purchasers of the Units or to take any other
action that would result in the Exempt Resales not being exempt from
registration under the Act.
(j) To use its best efforts to do and perform all things
required to be done and performed under this Agreement by it prior to
or after the Closing Date and to satisfy all conditions precedent on
its part to the delivery of the Units.
(k) For so long as any of the Units, Notes or Warrants remain
outstanding and during any period in which the Company and any
Guarantors are not subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), to make
available to any holder or beneficial owner of Transfer Restricted
Securities or Transfer Restricted Warrant Securities in connection with
any sale thereof and any prospective purchaser of such securities from
such holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act.
(l) To cause the Exchange Offer to be made in the appropriate
form to permit registered Series B Notes and any Guarantees thereof to
be offered in exchange for the Series A Notes and the Guarantees
thereof and to comply with all applicable federal and state securities
laws in connection with the Exchange Offer.
(m) To comply with all of its agreements set forth in the
Registration Rights Agreement and the Warrant Agreement and all of its
agreements set forth in the representation letters to DTC relating to
the approval of the Notes by DTC for "book-entry" transfer.
(n) To use its best efforts to effect the inclusion of the
Units, Notes and Warrants in PORTAL and to obtain approval of the
Units, Notes and Warrants by DTC for "book-entry" transfer.
(o) During a period of five years following the Closing Date,
to deliver without charge to the Initial Purchasers, as they may
reasonably request, promptly upon their
8
<PAGE> 10
becoming available, copies of (i) all reports or other publicly
available information that the Company and any future Guarantors shall
mail or otherwise make available to their securityholders and (ii) all
reports, financial statements and proxy or information statements filed
by the Company or any future Guarantor with the Commission or any
national securities exchange and such other publicly available
information concerning the Company, any future Guarantor or any of
their respective subsidiaries, including without limitation, press
releases.
(p) Prior to the Closing Date, to furnish to the Initial
Purchasers, as soon as they have been prepared in the ordinary course
by the Company, copies of any unaudited interim consolidated financial
statements relating to the Company or any unaudited financial
statements relating to Pompeii Furniture Co., Inc. for any period
subsequent to the periods covered by the financial statements appearing
in the Offering Memorandum.
(q) Not to take, directly or indirectly, any action designed
to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Units, Notes or
Warrants. Except as permitted by the Act, neither the Company nor any
future Guarantor will distribute any (i) preliminary offering
memorandum, including, without limitation, the Preliminary Offering
Memorandum, (ii) offering memorandum, including, without limitation,
the Offering Memorandum, or (iii) other offering material in connection
with the offering and sale of the Units, Notes or Warrants.
The Initial Purchasers covenant and agree with the Company to
use their best effort to do and perform all things required to be done and
performed under this Agreement by them prior to or after the Closing Date and to
satisfy all conditions precedent on their part to the delivery of the Units.
5. Representations and Warranties. (a) The Company and TFC, jointly and
severally, represent and warrant to the Initial Purchasers that:
(i) The Preliminary Offering Memorandum as of its date does
not, and the Offering Memorandum as of its date and as of the Closing
Date does not and will not, and any supplement or amendment to them
will not, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the
representations and warranties contained in this paragraph shall not
apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment
thereto) made in reliance upon and in conformity with information
relating to the Initial Purchasers furnished to the Company in writing
by the Initial Purchasers expressly for use therein. No stop order
preventing the use of the Preliminary Offering Memorandum or the
Offering Memorandum, or any amendment or supplement thereto, or any
order asserting that any of the transactions contemplated by this
Agreement are subject to the registration requirements of the Act, has
been issued.
9
<PAGE> 11
(ii) When filed, WinsLoew's annual report on Form 10-K for
the fiscal year ended December 31, 1998 (the "10-K") or quarterly
reports on Form 10-Q for the fiscal quarters ended March 31 and June
30, 1999 (the "FORMS 10-Q") included all contracts, indentures,
mortgages, loan agreements, notes, leases or other agreements or
instruments of TFC, the Company, WinsLoew or any of its subsidiaries
that were required to be described or referred to in or to be filed as
exhibits thereto in accordance with the Exchange Act and the rules and
regulations thereunder. There are no contracts, bonds, indentures,
mortgages, loan agreements, notes, deeds of trust, leases or other
agreements or instruments of WinsLoew or any of its subsidiaries that
are material to TFC, the Company, WinsLoew or any of its subsidiaries
other than those filed as exhibits to the Form 10-K or Forms 10-Q or
described in the Offering Memorandum (collectively, the "MATERIAL
AGREEMENTS").
(iii) Each of TFC, the Company, WinsLoew and its subsidiaries
has been duly incorporated and is validly existing as a corporation or
other business organization, as the case may be, in good standing under
the laws of its jurisdiction of incorporation or organization. Each of
TFC, the Company, WinsLoew and its subsidiaries is duly qualified and
has all requisite corporate power and authority to carry on its
business as it is currently being conducted and as described in the
Offering Memorandum and to own, lease and operate its properties, and
is duly qualified and is in good standing as a foreign corporation,
authorized to do business in each jurisdiction in which the nature of
its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified could not
reasonably be expected to (x) have a material adverse effect on the
properties, business, results of operations, condition (financial or
otherwise), net worth, properties, assets or prospects of TFC, the
Company or WinsLoew and its subsidiaries following the Mergers, taken
as a whole, (y) interfere with or adversely affect the issuance or
marketability of the Units or (z) in any manner draw into question the
validity of this Agreement or any other Operative Document or the
transactions described in the Offering Memorandum under the caption
"Use of Proceeds" (any of the events set forth in clauses (x), (y) or
(z), a "MATERIAL ADVERSE EFFECT"). The Company is the only subsidiary
of TFC and the Company has no subsidiaries.
(iv) The Company has no subsidiaries. WinsLoew has no
subsidiaries other than the entities listed on Exhibit C attached
hereto.
(v) All the outstanding shares of capital stock of, or other
ownership interests in, TFC, the Company and WinsLoew have been duly
and validly authorized and issued are fully paid and nonassessable, and
were not issued in violation of or subject to any preemptive or similar
rights. All of the outstanding capital stock of each subsidiary of
WinsLoew is owned, directly or indirectly, by WinsLoew, free and clear
of any security interest, mortgage, pledge, claim, lien, limitation on
voting or transferability rights or encumbrance, except for any such
security interest, claim, lien, limitation on voting rights or
encumbrance pursuant to WinsLoew's credit agreement dated as of
February 2, 1995 with Heller Financial, Inc. (the "HELLER CREDIT
AGREEMENT"); and all such securities have been duly authorized, validly
issued, and are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights.
10
<PAGE> 12
(vi) Except for the employee benefit plans of WinsLoew set
forth in the Offering Memorandum and the Merger Agreement, there are no
outstanding subscriptions, rights, warrants, calls, commitments of sale
or options to acquire, or instruments convertible into or exchangeable
for, or agreements or understandings with TFC, the Company or WinsLoew
with respect to the sale or issuance of, any shares of capital stock or
other equity interests in TFC, the Company, WinsLoew or its
subsidiaries. Except as reflected in the Registration Rights Agreement,
the Warrants and the Warrant Agreement, immediately following the
Mergers, there will be no outstanding subscriptions, rights, warrants,
calls, commitments of sale or options to acquire, or instruments
convertible into or exchangeable for, or agreements or understandings
with WinsLoew, as the surviving entity, with respect to the sale or
issuance of, any shares of capital stock or other equity interests in
WinsLoew or its subsidiaries
(vii) When the Units are issued and delivered pursuant to
this Agreement, no Unit will be of the same class (within the meaning
of Rule 144A under the Act) as securities of the Company that are
listed on a national securities exchange registered under Section 6 of
the Exchange Act or that are quoted in a United States automated
inter-dealer quotation system.
(viii) Each of TFC and the Company has all requisite corporate
or organizational power and authority necessary to enter into and
perform its obligations under this Agreement and each of the other
Operative Documents to which it is a party and to consummate the
transactions contemplated hereby and thereby, including, without
limitation, the corporate power and authority to issue, sell and
deliver the Units in accordance with and upon the terms and conditions
set forth in this Agreement, the Indenture, the Warrant Agreement, the
Registration Rights Agreement and the Offering Memorandum. WinsLoew has
all requisite corporate or organizational power and authority necessary
to enter into and perform its obligations under the Merger Agreement
and, following the Mergers, each of WinsLoew and its subsidiaries will
have all requisite corporate or organizational power and authority to
perform its obligations under this Agreement and each of the other
Operative Documents to which it is a party, including, without
limitation, the corporate power and authority to assume the obligations
under this Agreement, the Indenture, the Warrant Agreement, the
Registration Rights Agreement and the Offering Memorandum and to
execute and deliver requisite supplemental indentures and Guarantees,
as applicable.
(ix) This Agreement has been duly and validly authorized,
executed and delivered by the Company and (assuming the due execution
and delivery hereof by each of the Initial Purchasers) is a legal,
valid and binding agreement of the Company and TFC, enforceable against
each of them in accordance with its terms, except that (i) the
enforceability of the rights to indemnity and/or contribution hereunder
may be limited by federal or state securities laws or principles of
public policy, (ii) the enforceability hereof may be subject to
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies
11
<PAGE> 13
generally and (iii) the enforceability hereof may be subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Following the Mergers, this Agreement
will be the legal, valid and binding agreement of WinsLoew, enforceable
against WinsLoew in accordance with its terms, except that (i) the
enforceability of the rights to indemnity and/or contribution hereunder
may be limited by federal or state securities laws or principles of
public policy, (ii) the enforceability hereof may be subject to
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and (iii) the enforceability hereof may be
subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(x) The Indenture has been duly and validly authorized by the
Company and, when duly executed and delivered by the Company, will be
the legal, valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, except that (i) the
enforceability thereof may be subject to applicable bankruptcy,
insolvency, fraudulent conveyance or transfer, reorganization,
moratorium and similar laws affecting creditors' rights and remedies
generally and (ii) the enforceability thereof may be subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Following the Mergers, the Indenture
will be the legal, valid and binding agreement of WinsLoew and any
future Guarantors, enforceable against each of them in accordance with
its terms, except that (i) the enforceability thereof may be subject to
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and (ii) the enforceability thereof may be
subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). On the
Closing Date, the Indenture will conform in all material respects to
the requirements of the Trust Indenture Act of 1939, as amended (the
"TRUST INDENTURE ACT"), and the rules and regulations of the Commission
applicable to an indenture which is qualified thereunder. The Offering
Memorandum contains a summary of the terms of the Indenture, which is
accurate in all material respects.
(xi) The Registration Rights Agreement has been duly and
validly authorized by the Company and, when duly executed and delivered
by the Company (assuming the due execution and delivery thereof by each
of the Initial Purchasers), will be the legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, except that (i) the enforceability of the
rights to indemnity and/or contribution thereunder may be limited by
federal or state securities laws or principles of public policy, (ii)
the enforceability of the Registration Rights Agreement may be subject
to applicable bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and (iii) the enforceability
of the Registration Rights Agreement may be subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Following the Mergers, the
Registration Rights Agreement will be the legal, valid and binding
agreement of WinsLoew, enforceable against it in accordance with its
terms, except that (i) the enforceability of the rights to
12
<PAGE> 14
indemnity and/or contribution thereunder may be limited by federal or
state securities laws or principles of public policy, (ii) the
enforceability of the Registration Rights Agreement may be subject to
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and (iii) the enforceability of the Registration
Rights Agreement may be subject to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity). The Offering Memorandum contains a summary of the terms of
the Registration Rights Agreement, which is accurate in all material
respects.
(xii) The Series A Notes have been duly and validly
authorized by the Company for issuance and sale to the Initial
Purchasers pursuant to this Agreement and, when issued and
authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms hereof
and thereof, will be the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms
and entitled to the benefits of the Indenture, except that (i) the
enforceability of the Series A Notes may be subject to applicable
bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and (ii) the enforceability of the Series A
Notes may be subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
Following the Mergers and assuming the Exchange Offer has not been
consummated, the Series A Notes will be the legal, valid and binding
obligations of WinsLoew, enforceable against it in accordance with
their terms, except that (i) the enforceability hereof may be subject
to applicable bankruptcy, insolvency, fraudulent conveyance or
transfer, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and (ii) the enforceability
thereof may be subject to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity).
(xiii) Following the Mergers and assuming that the Exchange
Offer has not been consummated and that the Guarantees of the Series A
Notes have been duly and validly authorized by each of the Guarantors,
when executed and delivered in accordance with the terms of the
Indenture and when the Series A Notes have been issued and
authenticated in accordance with the terms of the Indenture and
delivered against payment therefor in accordance with the terms
thereof, the Guarantees of the Series A Notes will be the legal, valid
and binding obligations of each of the Guarantors, enforceable against
each of them in accordance with their terms and entitled to the
benefits of the Indenture, except that (i) the enforceability of the
Guarantees of the Series A Notes may be subject to applicable
bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and (ii) the enforceability of the Guarantees
may be subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). The
Offering Memorandum contains a summary of the terms of the Guarantees
of the Series A Notes, which is accurate in all material respects.
13
<PAGE> 15
(xiv) The Series B Notes have been duly and validly authorized
for issuance by the Company and, when issued and authenticated in
accordance with the terms of the Exchange Offer and the Indenture, will
be the legal, valid and binding obligations of the Company, enforceable
against it in accordance with their terms and entitled to the benefits
of the Indenture, except that (i) the enforceability of the Series B
Notes may be subject to applicable bankruptcy, insolvency, fraudulent
conveyance or transfer, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and (ii) the
enforceability of the Series B Notes may be subject to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity). Following the Mergers and assuming the
Series B Notes have been duly and validly authorized for issuance by
WinsLoew, when issued and authenticated in accordance with the terms of
the Exchange Offer and the Indenture, the Series B Notes will be the
legal, valid and binding obligations of WinsLoew, enforceable against
it in accordance with their terms and entitled to the benefits of the
Indenture, except that (i) the enforceability of the Series B Notes may
be subject to applicable bankruptcy, insolvency, fraudulent conveyance
or transfer, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and (ii) the enforceability of
the Series B Notes may be subject to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or
in equity).
(xv) Following the Mergers and assuming that the Guarantees
of the Series B Notes have been duly and validly authorized by each of
the Guarantors, when executed and delivered in accordance with the
terms of the Indenture and when the Series B Notes have been issued and
authenticated in accordance with the terms of the Exchange Offer and
the Indenture, the Guarantees of the Series B Notes will be the legal,
valid and binding obligations of each of the Guarantors, enforceable
against each of them in accordance with their terms and entitled to the
benefits of the Indenture, except that (i) the enforceability of the
Guarantees may be subject to applicable bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and
(ii) the enforceability of the Guarantees of the Series B Notes may be
subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(xvi) The Warrant Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
that (i) the enforceability thereof may be subject to applicable
bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and (ii) the enforceability thereof may be
subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). Following
the Mergers, the Warrant Agreement will be the legal, valid and binding
agreement of WinsLoew, enforceable WinsLoew in accordance with its
terms, except that (i) the enforceability thereof may be subject to
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and (ii) the enforceability thereof may be
subject to general principles
14
<PAGE> 16
of equity (regardless of whether enforcement is sought in a proceeding
at law or in equity). The Offering Memorandum contains a summary of the
terms of the Warrant Agreement, which is accurate in all material
respects.
(xvii) The Escrow Agreement has been duly and validly
authorized by the Company and, when duly executed and delivered by the
Company, will be the legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except
that (i) the enforceability thereof may be subject to applicable
bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization, moratorium and similar laws affecting creditors' rights
and remedies generally and (ii) the enforceability thereof may be
subject to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity). The
Offering Memorandum contains a summary of the terms of the Escrow
Agreement, which is accurate in all material respects.
(xviii) Each of TFC, the Company, WinsLoew and its
subsidiaries is not and, after giving effect to the Offering and the
Mergers, will not be, (A) in violation of its charter or bylaws, (B) in
default in the performance of any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which it is
a party or by which it is bound or to which any of its properties is
subject, which singly or in the aggregate, could reasonably be expected
to have a Material Adverse Effect or (C) in violation of any local,
state, federal or foreign law, statute, ordinance, rule, regulation,
requirement, judgment or court decree (including, without limitation,
environmental laws, statutes, ordinances, rules, regulations, judgments
or court decrees) applicable to it or any of its assets or properties
(whether owned or leased), which singly or in the aggregate, could
reasonably be expected to have a Material Adverse Effect. To the best
knowledge of TFC and the Company, there exists no condition that, with
notice, the passage of time or otherwise, would constitute a default
under any such document or instrument, which singly or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
(xix) None of (A) the execution, delivery or performance, as
applicable, by any of TFC, the Company, WinsLoew or its subsidiaries of
this Agreement or any of the other Operative Documents to which it is
or becomes a party, (B) the issuance, sale and assumption, as
applicable, of the Units, Notes and Warrants and the issuance of the
Guarantees and (C) consummation of the transactions described in the
Offering Memorandum under the caption "Use of Proceeds," violates,
conflicts with or constitutes a breach of any of the terms or
provisions of, or will violate, conflict with or constitute a breach of
any of the terms or provisions of, or a default under (or an event that
with notice or the lapse of time, or both, would constitute a default
under), or require consent under, or result in the imposition of a lien
or encumbrance on any properties of TFC, the Company, WinsLoew or any
of its subsidiaries, except for liens under the Escrow Agreement, or an
acceleration of any indebtedness of TFC, the Company, WinsLoew or any
of its subsidiaries pursuant to, (1) the charter or bylaws of TFC, the
Company, WinsLoew or any of its subsidiaries, (2) any bond, debenture,
note, indenture, mortgage,
15
<PAGE> 17
deed of trust or other credit agreement or instrument to which TFC, the
Company, WinsLoew or any of its subsidiaries is a party or by which any
of them or their property is or may be bound, (3) other agreement or
instrument to which TFC, the Company, WinsLoew or any of its
subsidiaries is a party or by which any of them or their property is or
may be bound that would have a Material Adverse Effect, (4) any
statute, rule or regulation applicable to TFC, the Company, WinsLoew or
any of its subsidiaries or any of their assets or properties or (5) any
judgment, order or decree of any court or governmental agency or
authority having jurisdiction over TFC, the Company, WinsLoew or any of
its subsidiaries or any of their assets or properties. No consent,
approval, authorization or order of, or filing, registration,
qualification, license or permit of or with, (A) any court or
governmental agency, body or administrative agency or (B) any other
person is required for (1) the execution, delivery and performance, as
applicable, by each of TFC, the Company, WinsLoew and the Guarantors of
this Agreement or any of the other Operative Documents to which it is a
party or (2) the issuance, sale and assumption, as applicable, of the
Units, Notes and Warrants, the issuance of the Guarantees and the
transactions contemplated hereby and thereby, except such as have been
or will be obtained and made on or prior to the Closing Date or the
date the Mergers are consummated, as applicable (or, in the case of the
Registration Rights Agreement, will be obtained and made under the Act,
the Trust Indenture Act, and state securities or Blue Sky laws and
regulations) or such as may be required by the National Association of
Securities Dealers, Inc.
(xx) There is (A) no action, suit, or proceeding or, to the
best knowledge of TFC and the Company, investigation before or by any
court, arbitrator or governmental agency, body or official, domestic or
foreign, now pending or, to the best knowledge of TFC and the Company,
threatened or contemplated to which TFC, the Company, WinsLoew or any
of its subsidiaries is or is reasonably likely to be a party or to
which the business or property of TFC, the Company, WinsLoew or any of
its subsidiaries, is or is reasonably likely to be subject, (B) no
statute, rule, regulation or order that has been enacted, adopted or
issued by any governmental agency or that has been proposed by any
governmental body and (C) no injunction, restraining order or order of
any nature by a federal or state court or foreign court of competent
jurisdiction to which TFC, the Company, WinsLoew or any of its
subsidiaries is or is reasonably likely to be subject or to which the
business, assets or property of TFC, the Company, WinsLoew or any of
its subsidiaries is or is reasonably likely to be subject, that, in the
case of clauses (A), (B) and (C) above, (1) is required to be disclosed
in the Preliminary Offering Memorandum and the Offering Memorandum and
that is not so disclosed or (2) could reasonably be expected to have a
Material Adverse Effect.
(xxi) To the best knowledge of TFC and the Company, no action
has been taken and no statute, rule, regulation or order has been
enacted, adopted or issued by any governmental agency that prevents the
issuance of the Units or prevents or suspends the use of the Offering
Memorandum; no injunction, restraining order or order of any nature by
a federal or state court of competent jurisdiction has been issued that
prevents the issuance of the Units or prevents or suspends the sale of
the Units in any jurisdiction
16
<PAGE> 18
referred to in Section 4(e) hereof; and to the best knowledge of TFC
and the Company every request of any securities authority or agency of
any jurisdiction for additional information has been complied with in
all material respects.
(xxii) There is (A) no significant unfair labor practice
complaint pending against TFC, the Company, WinsLoew or any of its
subsidiaries nor, to the best knowledge of TFC and the Company,
threatened against any of them, before the National Labor Relations
Board, any state or local labor relations board or any foreign labor
relations board, and no significant grievance or significant
arbitration proceeding arising out of or under any collective
bargaining agreement is so pending against TFC, the Company, WinsLoew
or any of its subsidiaries or, to the best knowledge of TFC and the
Company, threatened against any of them, (B) no significant strike,
labor dispute, slowdown or stoppage pending against TFC, the Company,
WinsLoew or any of its subsidiaries nor, to the best knowledge of TFC
and the Company, threatened against any of them and (C) to the best
knowledge of TFC and the Company, no union representation question
existing with respect to the employees of TFC, the Company, WinsLoew or
any of its subsidiaries. To the best knowledge of TFC and the Company,
no collective bargaining organizing activities are taking place with
respect to TFC, the Company, WinsLoew or any of its subsidiaries. None
of TFC, the Company, WinsLoew or any of its subsidiaries has violated
(A) any federal, state or local law or foreign law relating to
discrimination in hiring, promotion or pay of employees, (B) any
applicable wage or hour laws or (C) any provision of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), or the
rules and regulations thereunder, except those violations in (A), (B)
or (C) that could not reasonably be expected to have a Material Adverse
Effect.
(xxiii) None of TFC, the Company, WinsLoew or any of its
subsidiaries has violated any foreign, federal, state or local law or
regulation relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (collectively, "ENVIRONMENTAL LAWS"), which violation
could reasonably be expected to have a Material Adverse Effect.
(xxiv) To the best knowledge of TFC and the Company, there is
no alleged liability or potential liability (including, without
limitation, alleged or potential liability or investigatory costs,
cleanup costs, governmental response costs, natural resource damages,
property damages, personal injuries or penalties) of TFC, the Company,
WinsLoew or any of its subsidiaries arising out of, based on or
resulting from (A) the presence or release into the environment of any
Hazardous Material (as defined) at any location, whether or not owned
by the Company or such subsidiary, as the case may be, or (B) any
violation or alleged violation of any Environmental Law, which alleged
or potential liability is required to be disclosed in the Offering
Memorandum, other than as disclosed therein, or could reasonably be
expected to have a Material Adverse Effect. The term "HAZARDOUS
MATERIAL" means (i) any "hazardous substance" as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, (ii) any "hazardous waste" as defined by the Resource
Conservation and Recovery Act, as amended, (iii) any petroleum or
petroleum product, (iv) any
17
<PAGE> 19
polychlorinated biphenyl, and (v) any pollutant or contaminant or
hazardous, dangerous or toxic chemical, material, waste or substance
regulated under or within the meaning of any other law relating to
protection of human health or the environment or imposing liability or
standards of conduct concerning any such chemical material, waste or
substance.
(xxv) Each of TFC, the Company, WinsLoew and its subsidiaries
has such permits, licenses, franchises and authorizations of
governmental or regulatory authorities ("PERMITS"), including, without
limitation, under any applicable Environmental Laws, as are necessary
to own, lease and operate its respective properties and to conduct its
businesses, except where the failure to have such permits could not
reasonably be expected to have a Material Adverse Effect; each of TFC,
the Company, WinsLoew and its subsidiaries has fulfilled and performed
all of its material obligations with respect to such permits and no
event has occurred which allows, or after notice or lapse of time would
allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such permit;
and, except as described in the Offering Memorandum, such permits
contain no restrictions that are materially burdensome to the Company
or such subsidiary, as the case may be.
(xxvi) Each of TFC, the Company, WinsLoew and its subsidiaries
has (A) good and marketable title to all of the properties and assets
described in the Offering Memorandum as owned by it, free and clear of
all liens, charges, encumbrances and restrictions (except for Permitted
Liens and taxes not yet payable, liens under the Escrow Agreement and,
in the case of WinsLoew, liens under the Heller Agreement prior to the
completion of the Mergers), (B) peaceful and undisturbed possession
under all material leases to which any of them is a party as lessee and
each of which lease is valid and binding and no default exists
thereunder, except for defaults that could not reasonably be expected
to have a Material Adverse Effect, (C) all licenses, certificates,
permits, authorizations, approvals, franchises and other rights from,
and has made all declarations and filings with, all federal, state and
local authorities, all self-regulatory authorities and all courts and
other tribunals (each, an "AUTHORIZATION") necessary to engage in the
business conducted by any of them in the manner described in the
Offering Memorandum except as would not have a Material Adverse Effect
and (D) no reason to believe that any governmental body or agency is
considering limiting, suspending or revoking any such Authorization.
All such Authorizations are valid and in full force and effect and each
of TFC, the Company, WinsLoew and its subsidiaries is in compliance in
all material respects with the terms and conditions of all such
Authorizations and with the rules and regulations of the regulatory
authorities having jurisdiction with respect thereto, except as would
not have a Material Adverse Effect. All material leases to which TFC,
the Company, WinsLoew or any of its subsidiaries is a party are valid
and binding and no default by the Company or such subsidiary, as the
case may be, has occurred and is continuing thereunder except as would
not have a Material Adverse Effect and, to the best knowledge of TFC
and the Company, no material defaults by the landlord are existing
under any such lease, except those defaults that could not reasonably
be expected to have a Material Adverse Effect.
18
<PAGE> 20
(xxvii) Each of TFC, the Company, WinsLoew and its
subsidiaries owns, possesses or has the right to employ all patents,
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, software, systems or procedures), trademarks,
service marks and trade names, inventions, computer programs, technical
data and information (collectively, the "INTELLECTUAL PROPERTY")
presently employed by it in connection with the businesses now operated
by it or that are proposed to be operated by it, free and clear of and
without violating any right, claimed right, charge, encumbrance,
pledge, security interest, restriction or lien of any kind of any other
person (except for such right, claimed right, charge, encumbrance,
pledge, security interest, restriction or lien pursuant to the Heller
Credit Agreement and except as would not have a Material Adverse
Effect), and none of TFC, the Company, WinsLoew or any of its
subsidiaries has received any notice of infringement of or conflict
with asserted rights of others with respect to any of the foregoing.
The use of the Intellectual Property in connection with the business
and operations of TFC, the Company, WinsLoew or any of its subsidiaries
does not infringe on the rights of any person, except such
infringements as could not reasonably be expected to have a Material
Adverse Effect.
(xxviii) All material tax returns required to be filed by TFC,
the Company, WinsLoew or any of its subsidiaries in all jurisdictions
have been so filed. All taxes, including withholding taxes, penalties
and interest, assessments, fees and other charges due or claimed to be
due from such entities or that are due and payable have been paid,
other than those being contested in good faith and for which adequate
reserves have been provided or those currently payable without penalty
or interest. To the best knowledge of TFC and the Company, there are no
material proposed additional tax assessments against TFC, the Company,
WinsLoew or any of its subsidiaries, or the assets or property of TFC,
the Company, WinsLoew or any of its subsidiaries, except those tax
assessments for which adequate reserves have been established.
(xxix) WinsLoew and its subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurance
that: (A) transactions are executed in accordance with management's
general or specific authorizations; (B) transactions are recorded as
necessary to permit preparation of financial statements in conformity
with generally accepted accounting principles and to maintain
accountability for assets; (C) access to assets is permitted only in
accordance with management's general or specific authorization; and (D)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect thereto.
(xxx) WinsLoew and its subsidiaries maintains insurance
covering its properties, operations, personnel and businesses, insuring
against such losses and risks as are consistent with industry practice
to protect TFC, the Company, WinsLoew and its subsidiaries and their
respective businesses. None of TFC, the Company, WinsLoew or any of its
subsidiaries has received notice from any insurer or agent of such
insurer that substantial capital improvements or other expenditures
will have to be made in order to continue such insurance.
19
<PAGE> 21
(xxxi) Except as disclosed in the Offering Memorandum, no
relationship, direct or indirect, exists between or among TFC, the
Company, WinsLoew or any of its subsidiaries on the one hand, and the
directors, officers, stockholders, customers or suppliers of TFC, the
Company, WinsLoew or any of its subsidiaries on the other hand, which
would be required by the Act to be described in the Offering Memorandum
if the Offering Memorandum were a prospectus included in a registration
statement on Form S-1 filed with the Commission.
(xxxii) WinsLoew has (A) initiated a review and assessment of
all areas within its and each of its subsidiaries' business and
operations (including those affected by suppliers, vendors and
customers) that could be adversely affected by the "Year 2000 Problem"
(that is, the risk that computer applications used by WinsLoew or any
of its subsidiaries (or suppliers, vendors and customers) may be unable
to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), (B)
developed a plan and timeline for addressing the Year 2000 Problem on a
timely basis and (C) to date, has implemented that plan in accordance
with that timetable. Based on the foregoing, TFC and the Company
believe that all computer applications (including those of the
WinsLoew's suppliers, vendors and customers) that are material to its
or any of its subsidiaries' business and operations are reasonably
expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000
(that is, be "YEAR 2000 Compliant"), except to the extent that a
failure to do so could not reasonably be expected to have Material
Adverse Effect.
(xxxiii) None of TFC, the Company, WinsLoew or any of its
subsidiaries is, or following the Mergers will be, an "investment
company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940, as amended (the
"INVESTMENT COMPANY ACT").
(xxxiv) There are no holders of securities of TFC, the
Company, WinsLoew or any of its subsidiaries who, by reason of the
execution by the Company or the assumption of the obligations by
WinsLoew and its subsidiaries of this Agreement or any other Operative
Document to which it is or becomes a party or the consummation by TFC,
the Company, WinsLoew or any of its subsidiaries of the transactions
contemplated hereby and thereby, have the right to request or demand
that TFC, the Company, WinsLoew or any of its subsidiaries register
under the Act or analogous foreign laws and regulations securities held
by them other than pursuant to the Registration Right Agreement and the
Warrant Agreement.
(xxxv) None of TFC, the Company, WinsLoew or any of its
subsidiaries has (A) taken, directly or indirectly, any action designed
to, or that might reasonably be expected to, cause or result in
stabilization or manipulation of the price of any security of TFC, the
Company, WinsLoew or any of its subsidiaries to facilitate the sale or
resale of the Units, Notes or Warrants or (B) since the date of the
Preliminary Offering Memorandum (1) sold, bid for, purchased or paid
any person any compensation for soliciting purchases of the Units,
Notes or Warrants or (2) paid or agreed to pay to any person any
compensation
20
<PAGE> 22
for soliciting another to purchase any other securities of TFC, the
Company, WinsLoew or any of its subsidiaries.
(xxxvi) The accountants who have certified or will certify
the financial statements included or to be included as part of the
Offering Memorandum are independent accountants as required by the Act.
The historical financial statements, together with related schedules
and notes thereto, comply as to form in all material respects with the
requirements applicable to registration statements on Form S-1 under
the Act and present fairly in all material respects the financial
position and results of operations of WinsLoew and its subsidiaries at
the dates and for the periods indicated. Such financial statements have
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods
presented. The pro forma financial statements included in the Offering
Memorandum have been prepared on a basis consistent with such
historical statements of WinsLoew, except for the pro forma adjustments
specified therein, and give effect to assumptions made on a reasonable
basis and present fairly in all material respects the historical and
proposed transactions contemplated by this Agreement and the other
Operative Documents; and such pro forma financial statements comply as
to form in all material respects with the requirements applicable to
pro forma financial statements included in registration statements on
Form S-1 under the Act, except as expressly stated therein. The other
financial and statistical information and data included in the Offering
Memorandum derived from the historical and pro forma financial
statements, are accurately presented in all material respects and
prepared on a basis consistent with the financial statements,
historical and pro forma, included in the Offering Memorandum and the
books and records of WinsLoew and its subsidiaries.
(xxxvii) No registration under the Act of the Units, Series A
Notes or Warrants is required for the sale of the Units to the Initial
Purchasers as contemplated hereby or for the Exempt Resales assuming
(A) that the purchasers who buy the Units in the Exempt Resales are
Eligible Purchasers and (B) the accuracy of the Initial Purchasers'
representations regarding the absence of general solicitation in
connection with the sale of Units to the Initial Purchaser and the
Exempt Resales contained herein. No form of general solicitation or
general advertising (as defined in Regulation D under the Act) was used
by TFC, the Company, WinsLoew or any of its subsidiaries or any of
their representatives (other than the Initial Purchasers, as to which
TFC and the Company make no representation or warranty) in connection
with the offer and sale of any of the Units or in connection with
Exempt Resales, including, but not limited to, articles, notices or
other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting
whose attendees have been invited by any general solicitation or
general advertising. No securities of the same class as the Units,
Notes or Warrants have been issued and sold by TFC, the Company,
WinsLoew or any of its subsidiaries within the six-month period
immediately prior to the date hereof.
(xxxviii) The execution and delivery of this Agreement, the
other Operative Documents and the sale of the Units to be purchased by
Eligible Purchasers will not involve any prohibited transaction within
the meaning of Section 406 of ERISA or Section
21
<PAGE> 23
4975 of the Internal Revenue Code of 1986. The representation made by
TFC and the Company in the preceding sentence is made in reliance upon
and subject to the accuracy of, and compliance with, the
representations and covenants made or deemed made by Eligible
Purchasers as set forth in the Offering Memorandum under the caption
"Notice to Investors."
(xxxix) TFC and the Company believe that the statistical and
market-related data included in the Offering Memorandum is reliable and
accurate in all material respects.
(xl) Since the respective dates as of which information is
given in the Offering Memorandum, (i) there has not been any material
adverse change, or any development that is reasonably likely to result
in a material adverse change, in the capital stock or the long-term
debt, or material increase in the short-term debt, of TFC, the Company,
WinsLoew or any of its subsidiaries from that set forth in the Offering
Memorandum, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by TFC, the Company, WinsLoew or any of its
subsidiaries on any class of its capital stock and (iii) none of TFC,
the Company, WinsLoew or any of its subsidiaries shall have incurred
any liabilities or obligations, direct or contingent, that are
material, individually or in the aggregate, to TFC, the Company,
WinsLoew and its subsidiaries, taken as a whole, and that are required
to be disclosed on a balance sheet or notes thereto in accordance with
generally accepted accounting principles and are not disclosed on the
latest balance sheet or notes thereto included in the Offering
Memorandum. Since the date hereof and since the dates as of which
information is given in the Offering Memorandum, there shall not have
occurred any material adverse change, or any development that is
reasonably likely to result in a material adverse change, in the
business, prospects, financial condition or results of operation of
TFC, the Company, WinsLoew and its subsidiaries, taken as a whole.
(xli) Each of the Preliminary Offering Memorandum and the
Offering Memorandum, as of its date, and each amendment or supplement
thereto, as of its date, contains the information specified in, and
meets the requirements of, Rule 144A(d)(4) under the Act.
(xlii) Prior to the effectiveness of any Registration
Statement, the Indenture is not required to be qualified under the
Trust Indenture Act.
(xliii) None of the execution, delivery and performance of
this Agreement, the issuance and sale of the Units, the application of
the proceeds from the issuance and sale of the Units and the
consummation of the transactions contemplated thereby as set forth in
the Offering Memorandum, will violate Regulations T, U or X promulgated
by the Board of Governors of the Federal Reserve System or analogous
foreign laws and regulations.
(xliv) Neither TFC, the Company, WinsLoew nor any Guarantor
intends to, nor believes that it will, incur debts beyond its ability
to pay such debts as they mature. The present fair saleable value of
the assets of TFC, the Company, WinsLoew and each of its subsidiaries
that is required to become a Guarantor exceeds the amount that will be
required to be paid on or in respect of its existing debts and other
liabilities (including
22
<PAGE> 24
contingent liabilities) as they become absolute and matured. The assets
of TFC, the Company, WinsLoew and each of its subsidiaries that is
required to become a Guarantor do not constitute unreasonably small
capital to carry out its business as conducted or as proposed to be
conducted. Upon the issuance or assumption, as applicable, of the
Units, the present fair saleable value of the assets of TFC, the
Company, WinsLoew and each of its subsidiaries that is required to
become a Guarantor will exceed the amount that will be required to be
paid on or in respect of its existing debts and other liabilities
(including contingent liabilities) as they become absolute and matured.
Upon the issuance or assumption, as applicable, of the Units, the
assets of TFC, the Company, WinsLoew and each of its subsidiaries that
is required to become a Guarantor will not constitute unreasonably
small capital to carry out its business as now conducted, including the
capital needs of those entities, taking into account the projected
capital requirements and capital availability.
(xlv) Except pursuant to this Agreement, there are no
contracts, agreements or understandings between TFC, the Company,
WinsLoew and its subsidiaries and any other person that would give rise
to a valid claim against TFC, the Company, WinsLoew or any of its
subsidiaries or the Initial Purchasers for a brokerage commission,
finder's fee or like payment in connection with the issuance, purchase
and sale of the Units.
(xlvi) There exist no conditions that would constitute a
default (or an event which with notice or the lapse of time, or both,
would constitute a default) under any of the Operative Documents.
(xlvii) Each certificate signed by any officer of TFC or the
Company and delivered to the Initial Purchasers or counsel for the
Initial Purchasers shall be deemed to be a representation and warranty
by TFC or the Company, as the case may be, to the Initial Purchasers as
to the matters covered thereby.
Each of TFC and the Company acknowledge that the Initial Purchasers
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 8 hereof, counsel for TFC and the Company and counsel for
the Initial Purchasers, will rely upon the accuracy and truth of the foregoing
representations and hereby consent to such reliance.
(b) Each of the Initial Purchasers, severally and not jointly,
represents, warrants and covenants to TFC and the Company and agrees that:
(i) Such Initial Purchaser is a QIB, with such knowledge and
experience in financial and business matters as are necessary in order
to evaluate the merits and risks of an investment in the Units.
(ii) Such Initial Purchaser (A) is not acquiring the Units
with a view to any distribution thereof that would violate the Act or
the securities laws of any state of the United States or any other
applicable jurisdiction and (B) will be reoffering and reselling the
Units only to QIBs in reliance on the exemption from the registration
requirements of the Act provided by Rule 144A.
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<PAGE> 25
(iii) No form of general solicitation or general advertising
(within the meaning of Regulation D under the Act) has been or will be
used by such Initial Purchaser or any of its representatives in
connection with the offer and sale of any of the Units, including, but
not limited to, articles, notices or other communications published in
any newspaper, magazine, or similar medium or broadcast over television
or radio, or any seminar or meeting whose attendees have been invited
by any general solicitation or general advertising.
(iv) Such Initial Purchaser agrees that, in connection with
the Exempt Resales, it will solicit offers to buy the Units only from,
and will offer to sell the Units only to, Eligible Purchasers and will
deliver a copy of the Offering Memorandum to each purchaser of Units
from it contemporaneously with or prior to such purchase. Such Initial
Purchaser further (A) agrees that it will offer to sell the Units only
to, and will solicit offers to buy the Units only from Eligible
Purchasers that such Initial Purchaser reasonably believes are QIBs
purchasing for their own accounts or for the account of a QIB in a
transaction meeting the requirements of Rule 144A, and (B) acknowledges
and agrees that, in the case of such QIBs, that such Units will not
have been registered under the Act and may be resold, pledged or
otherwise transferred only (x)(I) to a person whom the seller
reasonably believes is a QIB purchasing for its own account or for the
account of a QIB in a transaction meeting the requirements of Rule
144A, (II) in an offshore transaction (as defined in Rule 902 under the
Act) meeting the requirements of Rule 904 under the Act, (III) to a
person whom the seller reasonably believes is an "institutional
accredited investor" within the meaning of subparagraph (a) (1), (2)),
(3) or (7) of Rule 501 under the Act that is purchasing for its own
account or for the account of such an institutional accredited investor
for investment purposes and not with a view to or for offer or sale in
connection with any distribution in violation of the Act, (IV) in a
transaction meeting the requirements of Rule 144 under the Act, or (V)
in accordance with another exemption from the registration requirements
of the Act (and based upon an opinion of counsel if the Company and the
Guarantors so request), (y) to the Company, (z) pursuant to an
effective registration statement under the Act and, in each case, in
accordance with any applicable securities laws of any state of the
United States or any other applicable jurisdiction and (C) acknowledges
that it will, and each subsequent holder is required to, notify any
purchaser of the security evidenced thereby of the resale restrictions
set forth in (B) above.
The Initial Purchasers acknowledge that the Company and the Guarantors
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Section 8 hereof, counsel for TFC and the Company and counsel for
the Initial Purchasers will rely upon the accuracy and truth of the foregoing
representations and hereby consents to such reliance.
6. Indemnification.
(a) TFC and the Company, jointly and severally, agree to
indemnify and hold harmless (i) each of the Initial Purchasers, (ii)
each person, if any, who controls such Initial Purchaser within the
meaning of Section 15 of the Act or Section 20(a) of the Exchange Act
and (iii) the respective officers, directors, partners, employees,
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<PAGE> 26
representatives and agents of each Initial Purchaser or any controlling
person to the fullest extent lawful, from and against any and all
losses, liabilities, claims, damages and expenses whatsoever (including
but not limited to reasonable attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against
any investigation or litigation, commenced or threatened, or any claim
whatsoever, and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or otherwise, insofar as such
losses, liabilities, claims, damages or expenses (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in the Preliminary
Offering Memorandum or the Offering Memorandum, or in any supplement
thereto or amendment thereof, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; provided, however, that neither TFC nor the Company will be
liable in any such case to the extent, but only to the extent, that any
such loss, liability, claim, damage or expense arises out of or is
based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made therein in reliance upon and in
conformity with information furnished to TFC and the Company in writing
by or on behalf of an Initial Purchaser expressly for use therein;
provided, further, however, that neither TFC nor the Company shall be
liable to any Initial Purchaser under the indemnity provisions of this
paragraph (a) with respect to the Preliminary Offering Memorandum to
the extent that any such loss, claim, damage or liability of such
Initial Purchaser results from the fact that such Initial Purchaser
sold Units, Notes and Warrants to a person as to whom it is established
that there was not sent or given, at or prior to the written
confirmation of such sale, a copy of the Offering Memorandum, or of the
Offering Memorandum as then amended or supplemented, in any case where
such delivery is required by the Act if the Company has previously
furnished copies thereof in sufficient quantity to such Initial
Purchaser and the loss, liability, claim, damage or expense of such
Initial Purchaser results from an untrue statement or omission of a
material fact contained in the Preliminary Offering Memorandum which
was identified at such time to such Initial Purchaser and corrected in
the Offering Memorandum or in the Offering Memorandum as then amended
or supplemented. This indemnity agreement will be in addition to any
liability which the Company and the Guarantors may otherwise have,
including under this Agreement.
(b) Each Initial Purchaser agrees, severally and not jointly,
to indemnify and hold harmless, (i) TFC and the Company, (ii) each
person, if any, who controls TFC or the Company within the meaning of
Section 15 of the Act or Section 20(a) of the Exchange Act, and (iii)
the officers, directors, partners, employees, representatives and
agents of TFC and the Company or any controlling person, against any
losses, liabilities, claims, damages and expenses whatsoever (including
but not limited to reasonable attorneys' fees and any and all expenses
whatsoever incurred in investigating, preparing or defending against
any investigation or litigation, commenced or threatened, or any claim
whatsoever and any and all amounts paid in settlement of any claim or
litigation), joint or several, to which they or any of them may become
subject under the Act, the Exchange Act or
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<PAGE> 27
otherwise, insofar as such losses, liabilities, claims, damages or
expenses (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or the Offering
Memorandum, or in any amendment thereof or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, in each case to the extent, but
only to the extent, that any such loss, liability, claim, damage or
expense arises out of or is based upon any untrue statement or alleged
untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with information furnished to TFC and
the Company in writing by or on behalf of an Initial Purchaser
expressly for use therein (and not with respect to the information
provided by any other Initial Purchaser); provided, however, that in no
case shall such Initial Purchaser be liable or responsible for any
amount in excess of the discounts and commissions received by such
Initial Purchaser. This indemnity will be in addition to any liability
which each of the Initial Purchasers may otherwise have, including
under this Agreement.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is
to be made against the indemnifying party under such subsection, notify
each party against whom indemnification is to be sought in writing of
the commencement thereof (but the failure so to notify an indemnifying
party shall not relieve it from any liability which it may have under
this Section 6 except to the extent that it has been prejudiced in any
material respect by such failure or from any liability which it may
otherwise have). In case any such action is brought against any
indemnified party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and to the extent it may elect by written notice
delivered to the indemnified party promptly after receiving the
aforesaid notice from such indemnified party, to assume the defense
thereof with counsel reasonably satisfactory to such indemnified party.
Notwithstanding the foregoing, the indemnified party or parties shall
have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless (i) the employment of such counsel
shall have been authorized in writing by the indemnifying parties in
connection with the defense of such action, (ii) the indemnifying
parties shall not have employed counsel to take charge of the defense
of such action within a reasonable time after notice of commencement of
the action, or (iii) such indemnified party or parties shall have
reasonably concluded that there may be defenses available to it or them
which are different from or additional to those available to one or all
of the indemnifying parties (in which case the indemnifying party or
parties shall not have the right to direct the defense of such action
on behalf of the indemnified party or parties), in any of which events
such fees and expenses of counsel shall be borne by the indemnifying
parties; provided, however, that the indemnifying party under
subsection (a) or (b) above shall only be liable for the legal expenses
of one counsel (in addition to any local counsel) for all indemnified
parties in each jurisdiction in which any claim or action is brought.
Anything in this subsection to the contrary notwithstanding, an
indemnifying party shall
26
<PAGE> 28
not be liable for any settlement of any claim or action effected
without its prior written consent, provided that such consent was not
unreasonably withheld.
7. Contribution. In order to provide for contribution in circumstances
in which the indemnification provided for in Section 6 is for any reason held to
be unavailable from an indemnifying party or is insufficient to hold harmless a
party indemnified thereunder, TFC and the Company, on the one hand, and the
Initial Purchasers, severally and not jointly, on the other hand, shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by such indemnification provision (including any
investigation, legal and other expenses incurred in connection with, and any
amount paid in settlement of, any action, suit or proceeding or any claims
asserted, but after deducting in the case of losses, liabilities, claims,
damages and expenses suffered by TFC or the Company, any contribution received
by TFC and the Company from persons, other than an Initial Purchaser, who may
also be liable for contribution, including persons who control TFC or the
Company within the meaning of Section 15 of the Act or Section 20(a) of the
Exchange Act) to which TFC, the Company and such Initial Purchaser may be
subject, in such proportion as is appropriate to reflect the relative benefits
received by TFC and the Company, on the one hand, and such Initial Purchaser, on
the other hand, from the offering of the Units or, if such allocation is not
permitted by applicable law or indemnification is not available as a result of
the indemnifying party not having received notice as provided in Section 6, in
such proportion as is appropriate to reflect not only the relative benefits
referred to above but also the relative fault of TFC and the Company, on the one
hand, and an Initial Purchaser, on the other hand, in connection with the
statements or omissions which resulted in such losses, liabilities, claims,
damages or expenses, as well as any other relevant equitable considerations. The
relative benefits received by TFC and the Company, on the one hand, and an
Initial Purchaser, on the other hand, shall be deemed to be in the same
proportion as (i) the total proceeds from the offering of Units (net of
discounts but before deducting expenses) received by TFC and the Company and
(ii) the discounts and commissions received by the Initial Purchasers,
respectively. The relative fault of TFC and the Company, on the one hand, and of
an Initial Purchaser, on the other hand, shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by TFC, the Company, or any of the Initial Purchasers and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. TFC, the Company and the
Initial Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 7 were determined by pro rata allocation (even if the
Initial Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take into account the equitable
considerations referred to above. Notwithstanding the provisions of this Section
7, (i) in no case shall the Initial Purchasers be required to contribute any
amount in excess of the amount by which the discounts and commissions applicable
to the Series A Notes purchased by the Initial Purchasers pursuant to this
Agreement exceeds the amount of any damages which such Initial Purchaser has
otherwise been required to pay by reason of any untrue or alleged untrue
statement or omission or alleged omission and (ii) no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 7, (A) each person,
if any, who controls an Initial Purchaser within the meaning of Section 15 of
the Act or
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<PAGE> 29
Section 20(a) of the Exchange Act and (B) the respective officers, directors,
partners, employees, representatives and agents of such Initial Purchaser or any
controlling person shall have the same rights to contribution as such Initial
Purchaser, and (A) each person, if any, who controls TFC or the Company within
the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act and
(B) the respective officers, directors, partners, employees, representatives and
agents of TFC and the Company shall have the same rights to contribution as TFC
and the Company, subject in each case to clauses (i) and (ii) of this Section 7.
Any party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against another party or parties
under this Section 7, notify such party or parties from whom contribution may be
sought, but the failure to so notify such party or parties shall not relieve the
party or parties from whom contribution may be sought from any obligation it or
they may have under this Section 7 or otherwise. No party shall be liable for
contribution with respect to any action or claim settled without its prior
written consent, provided that such written consent was not unreasonably
withheld.
The Initial Purchasers' obligations to contribute pursuant to this
Section 7 are several in proportion to the respective principal amount of the
Units purchased by each of the Initial Purchasers hereunder and not joint.
8. Conditions of Initial Purchasers' Obligations. The obligations of
the Initial Purchasers to purchase and pay for the Units, as provided herein,
shall be subject to the satisfaction of the following conditions:
(a) All of the representations and warranties of TFC and the
Company contained in this Agreement shall be true and correct on the
date hereof and on the Closing Date with the same force and effect as
if made on and as of the date hereof and the Closing Date,
respectively. TFC and the Company shall have performed or complied with
all of the agreements herein contained and required to be performed or
complied with by it at or prior to the Closing Date.
(b) The Offering Memorandum shall have been printed and copies
distributed to the Initial Purchasers not later than 10:00 a.m., New
York City time, on the day prior to the Closing Date or at such later
date and time as to which the Initial Purchasers may agree, and no stop
order suspending the qualification or exemption from qualification of
the Units in any jurisdiction referred to in Section 4(e) shall have
been issued and no proceeding for that purpose shall have been
commenced or shall be pending or threatened.
(c) No action shall have been taken and no statute, rule,
regulation or order shall have been enacted, adopted or issued by any
governmental agency which would, as of the Closing Date, prevent the
issuance of the Units; no action, suit or proceeding shall have been
commenced and be pending against or affecting or, to the best knowledge
of TFC and the Company, threatened against, TFC, the Company, WinsLoew
or any of its subsidiaries before any court or arbitrator or any
governmental body, agency or official that, if adversely determined,
could reasonably be expected to result in a Material Adverse Effect;
and no stop order shall have been issued preventing the use of the
Offering Memorandum, or any amendment or supplement thereto, or which
could reasonably be expected to have a Material Adverse Effect.
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<PAGE> 30
(d) Since the dates as of which information is given in the
Offering Memorandum, (i) there shall not have been any material adverse
change, or any development that is reasonably likely to result in a
material adverse change, in the capital stock or the long-term debt, or
material increase in the short-term debt, of TFC, the Company, WinsLoew
or any of its subsidiaries from that set forth in the Offering
Memorandum, (ii) no dividend or distribution of any kind shall have
been declared, paid or made by TFC, the Company, WinsLoew or any of its
subsidiaries on any class of its capital stock and (iii) none of TFC,
the Company, WinsLoew or any of its subsidiaries shall have incurred
any liabilities or obligations, direct or contingent, that are
material, individually or in the aggregate, to TFC, the Company,
WinsLoew and its subsidiaries, taken as a whole, and that are required
to be disclosed on a balance sheet or notes thereto in accordance with
generally accepted accounting principles and are not disclosed on the
latest balance sheet or notes thereto included in the Offering
Memorandum. Since the date hereof and since the dates as of which
information is given in the Offering Memorandum, there shall not have
occurred any material adverse change, or any development that is
reasonably likely to result in a material adverse change, in the
business, prospects, financial condition or results of operation of
TFC, the Company, WinsLoew and its subsidiaries, taken as a whole.
(e) The Initial Purchasers shall have received certificates,
dated the Closing Date, signed on behalf of TFC and the Company, in
form and substance satisfactory to the Initial Purchasers, confirming,
as of the Closing Date, the matters set forth in paragraphs (a), (b),
(c) and (d) of this Section 8 and that, as of the Closing Date, the
obligations of TFC and the Company, as the case may be, to be performed
hereunder on or prior thereto have been duly performed.
(f) The Initial Purchasers shall have received on the Closing
Date an opinion, dated the Closing Date, in form and substance
reasonably satisfactory to the Initial Purchasers and counsel for the
Initial Purchasers, of Greenberg Traurig, P.A., counsel for the Company
and the Guarantors, to the effect set forth in Exhibit B hereto.
(g) At the time this Agreement is executed and at the Closing
Date, the Initial Purchasers shall have received from Ernst & Young
LLP, independent public accountants, and Infante Lago & Company,
independent auditors of Pompeii Furniture Co. Inc., dated as of the
date of this Agreement and as of the Closing Date, customary comfort
letters addressed to the Initial Purchasers and in form and substance
satisfactory to the Initial Purchasers and counsel for the Initial
Purchasers with respect to the financial statements and certain
financial information of the Company and its subsidiaries contained in
the Offering Memorandum.
(h) The Initial Purchasers shall have received an opinion,
dated the Closing Date, in form and substance reasonably satisfactory
to the Initial Purchasers, of Weil, Gotshal & Manges LLP, counsel for
the Initial Purchasers, covering such matters as are customarily
covered in such opinions.
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<PAGE> 31
(i) Weil, Gotshal & Manges LLP shall have been furnished with
such documents, in addition to those set forth above, as they may
reasonably require for the purpose of enabling them to review or pass
upon the matters referred to in this Section 8 and in order to evidence
the accuracy, completeness or satisfaction in all material respects of
any of the representations, warranties or conditions herein contained.
(j) Prior to the Closing Date, TFC and the Company shall have
furnished to the Initial Purchasers such further information,
certificates and documents as the Initial Purchasers may reasonably
request.
(k) The Company and the Trustee shall have entered into the
Indenture and the Initial Purchasers shall have received copies of
executed counterparts thereof.
(l) The Company and the Initial Purchasers shall have entered
into the Registration Rights Agreement and each of the Initial
Purchasers shall have received copies of executed counterparts thereof.
(m) The Company and the Escrow Agent shall have entered into
the Escrow Agreement and each of the Initial Purchasers shall have
received copies of executed counterparts thereof.
(n) The Company and the Warrant Agent shall have entered into
the Warrant Agreement and each of the Initial Purchasers shall have
received copies of executed counterparts thereof.
(o) TFC, the Company or an affiliate thereof shall have
deposited at least $4,622,876 in immediately available funds into the
Escrow Account.
(p) On or after the date hereof, (i) there shall not have
occurred any downgrading, suspension or withdrawal of, nor shall any
notice have been given of any potential or intended downgrading,
suspension or withdrawal of, or of any review (or of any potential or
intended review) for a possible change that does not indicate the
direction of the possible change in, any rating of the Company or
WinsLoew or any securities of the Company or WinsLoew (including,
without limitation, the placing of any of the foregoing ratings on
credit watch with negative or developing implications or under review
with an uncertain direction) by any "nationally recognized statistical
rating organization" as such term is defined for purposes of Rule
436(g)(2) under the Act, (ii) there shall not have occurred any change,
nor shall any notice have been given of any potential or intended
change, in the outlook for any rating of the Company or WinsLoew or any
securities of the Company or WinsLoew by any such rating organization
and (iii) no such rating organization shall have given notice that it
has assigned (or is considering assigning) a lower rating to the Units
or Notes than that on which the Units and Notes were marketed.
(q) The Units shall have been approved for trading on PORTAL.
30
<PAGE> 32
(r) All opinions, certificates, letters and other documents
required by this Section 8 to be delivered by TFC and the Company will
be in compliance with the provisions hereof only if they are reasonably
satisfactory in form and substance to the Initial Purchasers. TFC and
the Company shall furnish the Initial Purchasers with such conformed
copies of such opinions, certificates, letters and other documents as
they shall reasonably request.
9. Initial Purchasers' Information. TFC and the Company acknowledge
that the statements with respect to the offering of the Units set forth in the
information in the "Plan of Distribution" stating that the Initial Purchasers
have advised the issuer (a) as to whom resales will be made and as to what
consents, approvals or authorizations, if any, required for them to offer or
sell the Units, distribute the Offering Memorandum or any other offering
material relating to the Units under the laws and regulations of any
jurisdiction where they propose to make offers or sales of the Units or
distribute the Offering Memorandum or any other offering material related to the
Units, and (b) as to market making activities in the Offering Memorandum
constitute the only information furnished to TFC and the Company in writing by
or on behalf of each of the Initial Purchasers expressly for use in the Offering
Memorandum.
10. Survival of Representations and Agreements. All representations and
warranties, covenants and agreements of the Initial Purchasers, TFC and the
Company contained in this Agreement, including the agreements contained in
Sections 4(f) and 11(d), the indemnity agreements contained in Section 6 and the
contribution agreements contained in Section 7, shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
the Initial Purchasers, any controlling person thereof, or by or on behalf of
TFC, the Company or any controlling person thereof, and shall survive delivery
of and payment for the Series A Notes to and by the Initial Purchasers. The
representations contained in Section 5 and the agreements contained in Sections
4(f), 6, 7 and 11(d) shall survive the termination of this Agreement, including
any termination pursuant to Section 11.
11. Effective Date of Agreement; Termination.
(a) This Agreement shall become effective upon execution and
delivery of a counterpart hereof by each of the parties hereto.
(b) The Initial Purchasers shall have the right to terminate
this Agreement at any time prior to the Closing Date by notice to the
Company from the Initial Purchasers, without liability (other than with
respect to Sections 6 and 7) on the Initial Purchasers' part to TFC or
the Company if, on or prior to such date, (i) TFC or the Company shall
have failed, refused or been unable to perform in any material respect
any agreement on its part to be performed hereunder, (ii) any other
condition to the obligations of the Initial Purchasers hereunder as
provided in Section 8 is not fulfilled when and as required in any
material respect, (iii) in the reasonable judgment of the Initial
Purchasers, any material adverse change shall have occurred since the
respective dates as of which information is given in the Offering
Memorandum in the financial condition, business, properties, assets,
liabilities, prospects, net worth, results of operations or cash flows
of TFC, the Company, WinsLoew and its subsidiaries, taken as a whole,
other than as set forth in the Offering Memorandum, or (iv)(A) any
domestic or international event or act or occurrence has
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<PAGE> 33
materially disrupted, or in the opinion of the Initial Purchasers will
in the immediate future materially disrupt, the market for the
Company's or WinsLoew's securities or for securities in general; or (B)
trading in securities generally on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq National Market shall have been
suspended or materially limited, or minimum or maximum prices for
trading shall have been established, or maximum ranges for prices for
securities shall have been required, on such exchange or the Nasdaq
National Market, or by such exchange or other regulatory body or
governmental authority having jurisdiction; or (C) a banking moratorium
shall have been declared by federal or state authorities, or a
moratorium in foreign exchange trading by major international banks or
persons shall have been declared; or (D) there is an outbreak or
escalation of armed hostilities involving the United States on or after
the date hereof, or if there has been a declaration by the United
States of a national emergency or war, the effect of which shall be, in
the Initial Purchasers' judgment, to make it inadvisable or
impracticable to proceed with the offering or delivery of the Units on
the terms and in the manner contemplated in the Offering Memorandum; or
(E) there shall have been such a material adverse change in general
economic, political or financial conditions or if the effect of
international conditions on the financial markets in the United States
shall be such as, in the Initial Purchasers' judgment, makes it
inadvisable or impracticable to proceed with the delivery of the Units
as contemplated hereby.
(c) Any notice of termination pursuant to this Section 11
shall be by telephone or facsimile and, in either case, confirmed in
writing by letter.
(d) If this Agreement shall be terminated pursuant to any of
the provisions hereof (otherwise than pursuant to clause (iv) of
Section 11(b), in which case each party will be responsible for its own
expenses), or if the sale of the Units provided for herein is not
consummated because any condition to the obligations of the Initial
Purchasers set forth herein is not satisfied or because of any refusal,
inability or failure on the part of TFC or the Company to perform any
agreement herein or comply with any provision hereof, TFC and the
Company shall reimburse the Initial Purchasers for all out-of-pocket
expenses (including the reasonable fees and expenses of the Initial
Purchasers' counsel), incurred by the Initial Purchasers in connection
herewith.
(e) If on the Closing Date any one or more of the Initial
Purchasers shall fail or refuse to purchase the Units which it or they
have agreed to purchase hereunder on such date and the aggregate
principal amount of the Units which such defaulting Initial Purchaser
or Initial Purchasers, as the case may be, agreed but failed or refused
to purchase is not more than one-tenth of the aggregate amount of the
Units to be purchased on such date by all Initial Purchasers, each
non-defaulting Initial Purchaser shall be obligated severally, in the
proportion which the amount of the Units set forth opposite its name in
Exhibit A bears to the aggregate amount of the Units which all the
non-defaulting Initial Purchasers, as the case may be, have agreed to
purchase, or in such other proportion as Bear Stearns may specify, to
purchase the Units which such defaulting Initial Purchaser or Initial
Purchasers, as the case may be, agreed but failed or refused to
purchase on such date; provided, however, that in no event shall the
aggregate amount of
32
<PAGE> 34
the Units which any Initial Purchaser has agreed to purchase pursuant
to Section 3 hereof be increased pursuant to this Section 11 by an
amount in excess of one-ninth of such amount of the Units without the
written consent of such Initial Purchaser. If on the Closing Date any
Initial Purchaser or Initial Purchasers shall fail or refuse to
purchase the Units and the aggregate amount of the Units with respect
to which such default occurs is more than one-tenth of the aggregate
principal amount of the Units to be purchased by all Initial Purchasers
and arrangements satisfactory to the Initial Purchasers and the Company
for purchase of such Units are not made within 48 hours after such
default, this Agreement will terminate without liability on the part of
any non-defaulting Initial Purchaser and the Company. In any such case
which does not result in termination of this Agreement, either Bear
Stearns or the Company shall have the right to postpone the Closing
Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Offering Memorandum or any other
documents or arrangements may be effected. Any action taken under this
paragraph shall not relieve any defaulting Initial Purchaser from
liability in respect of any default of any such Initial Purchaser under
this Agreement.
12. Notice. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to the Initial
Purchasers shall be mailed, delivered, telecopied and confirmed in writing or
sent by a nationally recognized overnight courier service guaranteeing delivery
on the next business day to Bear, Stearns & Co. Inc., 245 Park Avenue, New York,
New York 10167, Attention: Corporate Finance Department, telecopy number: (212)
272-3092, with a copy to Weil, Gotshal & Manges LLP, 767 Fifth Avenue, New York,
New York 10153, Attention: Jeremy Dickens, Esq., telecopy number: (212)
310-8007; and if sent to TFC and the Company, shall be mailed, delivered,
telecopied and confirmed in writing or sent by a nationally recognized overnight
courier service guaranteeing delivery on the next business day to WinsLoew
Escrow Corp. or Trivest Furniture Corporation, care of Trivest, Inc., 2665 South
Bayshore Drive, Miami, Florida, Attention: General Counsel, telecopy number
(305) 858-1629, with a copy to Greenberg Traurig P.A., 1221 Brickell Avenue,
Miami, Florida, Attention: Bruce Macdonough, telecopy number: (305) 579-0717.
13. Parties. This Agreement shall inure solely to the benefit of, and
shall be binding upon, the Initial Purchasers, TFC, the Company and the
controlling persons and agents referred to in Sections 6 and 7, and their
respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision herein contained. The
term "successors and assigns" shall not include a purchaser, in its capacity as
such, of Notes from the Initial Purchasers.
14. Construction. This Agreement shall be construed in accordance with
the internal laws of the State of New York. TIME IS OF THE ESSENCE IN THIS
AGREEMENT.
15. Captions. The captions included in this Agreement are included
solely for convenience of reference and are not to be considered a part of this
Agreement.
16. Counterparts. This Agreement may be executed in various
counterparts which together shall constitute one and the same instrument.
33
<PAGE> 35
[Signature page to follow]
34
<PAGE> 36
If the foregoing correctly sets forth the understanding among the
Initial Purchasers, the Company and the Guarantors please so indicate in the
space provided below for that purpose, whereupon this letter shall constitute a
binding agreement among us.
Very truly yours,
TRIVEST FURNITURE CORPORATION.
By: /s/ William F. Kaczynski, Jr.
---------------------------------------
Name: William F. Kaczynski, Jr.
Title: Vice President
WINSLOEW ESCROW CORP.
By: /s/ William F. Kaczynski, Jr.
---------------------------------------
Name: William F. Kaczynski, Jr.
Title: Vice President
S-1
<PAGE> 37
Accepted and agreed to as of
the date first above written:
BEAR, STEARNS & CO. INC.
By: /s/ Sean P. Crawley
--------------------------------------
Name: Sean P. Crawley
Title: Sr. Managing Director
BANCBOSTON ROBERTSON STEPHENS INC.
By: /s/ Theodore J. Davies
--------------------------------------
Name: Theodore J. Davies
Title: Director
FIRST UNION CAPITAL MARKETS
By: /s/ Douglas J. Fink
--------------------------------------
Name: Douglas J. Fink
Title: Managing Director
S-2
<PAGE> 38
EXHIBIT A
<TABLE>
<CAPTION>
Initial Purchaser Number of Units
----------------- ---------------
<S> <C>
Bear, Stearns & Co. Inc................................................... 63,000
First Union Capital Markets Corp. ........................................ 33,075
BancBoston Robertson Stephens Inc. ...................................... 8,925
-------
Total............................................................ 105,000
</TABLE>
A-1
<PAGE> 39
EXHIBIT B
Form of Opinion of Greenberg Traurig P.A.
[TO FOLLOW TO CONFORM TO REVISIONS TO REPRESENTATIONS AND
WARRANTIES IN PURCHASE AGREEMENT]
<PAGE> 40
EXHIBIT C
1. Winston Furniture Company of Alabama, Inc., an Alabama corporation
2. Loewenstein, Inc., a Florida corporation
3. Pompeii Furniture Co., Inc., a Florida corporation
4. Tropic Craft, Inc., a Florida corporation
5. Texacraft, Inc., a Texas corporation
6. Industrial Meublera Pompeii de Mexico, S.A de C.V., a Mexico corporation
<PAGE> 1
Exhibit 10.18
===============================================================================
WARRANT AGREEMENT
Dated August 24, 1999
by and between
WINSLOEW ESCROW CORP.
and
AMERICAN STOCK TRANSFER & TRUST COMPANY
===============================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 1. Certain Definitions.....................................................................1
Section 6. Appointment of Warrant Agent............................................................5
Section 3. Issuance of Warrants....................................................................5
3.1 Warrant Certificates...........................................................5
3.2 Temporary Global Warrants......................................................5
Section 4. Execution of Warrant Certificates.......................................................6
Section 5. Separation of Warrants..................................................................6
Section 6. Registration Rights.....................................................................6
6.1 Demand Registration After Public Equity Offering...............................6
6.2 Effective Registration.........................................................7
6.3 Restrictions on Sale by Holders................................................8
6.4 Underwritten Registrations.....................................................8
6.5 Expenses.......................................................................9
6.6 Priority in Demand Registration................................................9
6.7 Piggy-Back Registration........................................................9
6.8 Priority in Piggy-Back Registration...........................................10
6.9 Limitations, Conditions and Qualifications to Obligations Under Registration
Covenants.....................................................................11
6.10 Restrictions on Sale by the Company and Others................................12
6.11 Rule 144 and Rule 144A........................................................13
6.12 "Market Stand-Off" Agreement..................................................13
6.13 Registration Procedures.......................................................14
Section 7. Registration of Transfers and Exchanges................................................18
(a) Transfer and Exchange of Global Warrants......................................18
(b) Exchange of a Beneficial Interest in a Global Warrant for a Definitive
Warrant.......................................................................18
(c) Transfer and Exchange of Definitive Warrants..................................20
(d) Restrictions on Exchange or Transfer of a Definitive Warrant for a Beneficial
Interest in a Global Warrant..................................................21
(e) Restrictions on Transfer and Exchange of Global Warrants......................21
(f) Countersigning of Definitive Warrants in Absence of Depositary................21
(g) Legends.......................................................................22
</TABLE>
i
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
(h) Cancellation of Global Warrant................................................23
(i) Obligations with Respect to Transfers and Exchanges of Warrants...............23
Section 8. Terms of Warrants; Exercise of Warrants................................................24
Section 9. Payment of Taxes.......................................................................26
Section 10. Mutilated or Missing Warrant Certificates..............................................26
Section 11. Reservation of Warrant Shares..........................................................26
Section 12. Obtaining Stock Exchange Listings......................................................27
Section 13. Adjustment of Exercise Price and Number of Warrant Shares Issuable.....................27
13.1 Stock Splits, Combinations, etc...............................................27
13.2 Reclassification, Combinations, Mergers, etc..................................27
(a) Issuance of Options or Convertible Securities.................................28
(b) Dividends and Distributions...................................................29
(c) Adjustment for Sale of Common Stock Below Current Market Price................29
(d) Current Market Price..........................................................30
(e) Certain Distributions.........................................................31
(f) Consideration Received........................................................31
(g) Deferral of Certain Adjustments...............................................31
(h) Changes in Options and Convertible Securities.................................32
(i) Expiration of Options and Convertible Securities..............................32
(j) Other Adjustments.............................................................32
(k) No Adjustment Required........................................................32
Section 14. Statement on Warrants..................................................................33
Section 15. Fractional Interest....................................................................33
Section 16. Notices to Warrant Holders.............................................................33
Section 17. Merger, Consolidation or Chance of Name of Warrant Agent...............................35
Section 18. Warrant Agent..........................................................................35
Section 19. Resignation and Removal of Warrant Agent; Appointment of Successor.....................37
Section 20. Registration...........................................................................37
Section 21. Reports................................................................................37
Section 22. Rule 144A..............................................................................38
Section 23. Notices to Company and Warrant Agent...................................................38
</TABLE>
ii
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 24. Supplements and Amendments.............................................................39
Section 25. Successors.............................................................................39
Section 26. Termination............................................................................39
Section 27. Governing Law..........................................................................39
Section 28. Benefits of This Agreement.............................................................39
Section 29. Counterparts...........................................................................40
</TABLE>
iii
<PAGE> 5
WARRANT AGREEMENT dated as of August 24, 1999 (this
"AGREEMENT") between WINSLOEW ESCROW CORP., a Florida corporation (together with
any and all successors thereto, the "COMPANY"), and AMERICAN STOCK TRANSFER &
TRUST COMPANY, a New York corporation, as warrant agent (together with any and
all successors appointed in accordance with this Agreement, the "WARRANT
AGENT"). Unless otherwise noted, capitalized terms have the meanings set forth
in Section 1 below.
WHEREAS, the Company proposes to issue 105,000 common stock
warrants, as hereinafter described (the "WARRANTS"), initially exercisable to
purchase an aggregate of 24,129 shares of Common Stock, in connection with an
offering of units (the "UNITS"), each Unit consisting of $1,000 principal amount
at maturity of the Company's 12 3/4% Senior Subordinated Notes due 2007 (thE
"NOtes") and one Warrant, each such Warrant entitling thE holder thereof to
purchase initially 0.2298 shares of Common Stock.
WHEREAS, the Company desires the Warrant Agent to act on
behalf of the Company, and the Warrant Agent is willing so to act, in connection
with the issuance of Warrant Certificates and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein set forth, and for the purpose of defining the
respective rights and obligations of the Company, the Warrant Agent and the
Holders, the parties hereto agree as follows:
Section 1. Certain Definitions. (a) As used in this Agreement,
the following terms shall have the following respective meanings:
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"CONTROL" (including, with correlative meanings, the terms "CONTROLLING,"
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as used with respect to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise; provided,
however, that beneficial ownership of 10% or more of the Voting Equity Investors
(as defined in the Indenture) of a Person shall be deemed to be control.
"Board of Directors" means (1) in respect of a limited
liability company, the board of advisors of the Company; (2) in respect of a
corporation, the board of directors of the corporation, or any authorized
committee thereof; and (3) in respect of any other Person, the board or
committee of that Person serving a similar function.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means (a) in the case of a corporation,
corporate stock, (b) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (c) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (d) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cedel" means Cedel Bank, S.A.
<PAGE> 6
"Change of Control" means the occurrence of any of the
following: (a) the sale, lease, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of the Company and its
Subsidiaries taken as a whole to any "person" or "group" (as such terms are used
in Section 13(d)(3) of the Exchange Act) (whether or not otherwise in compliance
with this Indenture) other than to a Permitted Holder; (b) the adoption of a
plan relating to the liquidation or dissolution of the Company; (c) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" or "group" (as such
terms are used in Section 13(d)(3) of the Exchange Act), other than a Permitted
Holder or any underwriters in connection with an underwritten public offering,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), except that a person or group shall be deemed to
have "beneficial ownership" of all securities that the person or group has the
right to acquire, whether the right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition, directly or indirectly, of
more than 35% of the Voting Equity Interests of the Company (measured by voting
power rather than the number of shares); (d) the first day on which more than a
majority of the members of the Board of Directors of the Company are not
Continuing Directors; or (e) the Company consolidates with, or merges with or
into, any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Equity Interests of such surviving or transferee Person
immediately after giving effect to such issuance.
"Common Stock" means the common stock, par value $.01 per
share, of the Company or its successors and any other class of series of common
equity equivalent shares of the Company or its successors.
"Continuing Directors" means, as of any date of determination,
any member of the Board of Directors who (a) was a member of the Board of
Directors on the date of this Indenture or (b) was nominated for election to the
Board of Directors with the approval of a majority of the Continuing Directors
who were members of the Board of Directors at the time of such nomination or
election.
"Current Market Price" means the current price per share of
the Common Stock or the Warrant Shares, as applicable, as determined under
Section 15.6 hereof.
"Demand Registration" shall have the meaning ascribed in
Section 6.1(a).
"Drag Along Rights" shall have the meaning ascribed in Section
8.
"Drag Sale" shall have the meaning ascribed in Section 8.
"Effectiveness Date" means, with respect to any Registration
Statement, the 60th day after the filing date thereof.
2
<PAGE> 7
"Equity Interests" means Capital Stock and all warrants,
options or other rights to acquire Capital Stock (but excluding any debt
security that is convertible into, or exchangeable for, Capital Stock).
"Escrow Agreement" means that certain Escrow, Control and
Security Agreement, dated as of August 24, 1999, by and among the Company and
American Stock Transfer & Trust Company, as Trustee, Escrow Agent and Securities
Intermediary.
"Escrowed Funds" means the $99,634,229 of net proceeds from
the sale of the Units and the $4,622,876 of additional proceeds from the Company
and its affiliates deposited into escrow with the Trustee under the Escrow
Agreement.
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended (or any successor act), and the rules and regulations thereunder.
"Excluded Securities" means shares of Common Stock or other
securities convertible or exchangeable into Common Stock issued (i) pursuant to
employee stock option ownership and/or other equity incentive plans, (ii) in
connection with mergers and acquisitions with non-affiliated third parties or
(iii) as compensation to directors in lieu of cash.
"Exercisability Date" means the date that is the earliest to
occur of (i) the Separation Date, (ii) the consummation of an underwritten
public offering of Capital Stock of the Company and (iii) the date that any
class of Capital Stock of the Company is listed on a national securities
exchange or authorized for quotation on the Nasdaq National Market or is
otherwise subject to registration under the Exchange Act.
"Exercise Event" means the earliest to occur of (i) the
completion of an underwritten public offering of Capital Stock of the Company,
(ii) a class of equity securities of the Company is listed on a national
securities exchange or authorized for quotation on the Nasdaq National Market or
is otherwise subject to registration under the Exchange Act, or (iii) the
Separation Date.
"Exercise Price" means the purchase price per share of Common
Stock to be paid upon the exercise of each Warrant in accordance with the terms
hereof, which price shall initially be $.01 per share, subject to adjustment
from time to time pursuant to Section 15 hereof.
"Expiration Date" means August 15, 2007, unless extended
pursuant to Section 8 hereof.
"Holder" means a registered holder of Registrable Securities.
"Included Securities" has the meaning ascribed to such term in
Section 6.1(a) hereof.
"Indenture" means the indenture, dated as of August 24, 1999,
between the Company and American Stock Transfer & Trust Company, as trustee,
relating to the Notes.
3
<PAGE> 8
"Legal Holiday" means a Saturday, a Sunday or a day on which
banking institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If any action
is required to be taken on a date that is a Legal Holiday, such action may be
taken on the next succeeding day that is not a Legal Holiday.
"Merger Agreement" means that certain Second Amended and
Restated Agreement and Plan of Merger, dated as of May 4, 1999, between Trivest
Furniture Corporation and WinsLoew Furniture, Inc.
"Notes" means the 12 3/4 Senior Subordinated Notes due 2007,
issued pursuant to the Indenture.
"Permitted Holder" means Trivest, Inc. and any Affiliate of
Trivest, Inc.
"Person" means any natural person, company, corporation,
partnership, government, agency or instrumentality of a government, or any other
entity.
"Piggy Back Registration" shall have the meaning ascribed in
Section 6.7.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means any of (i) the Warrant Shares
and (ii) any other securities issued or issuable with respect to any Registrable
Securities by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, unless, in each case, such Warrant Shares have been
offered and sold to the Holder pursuant to an effective Registration Statement
under the Securities Act declared effective prior to the exercisability of the
Warrants and such securities may be sold to the public pursuant to Rule 144
without any restriction on the amount of securities which may be sold by such
Holder. As to any particular Registrable Securities held by a Holder, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the offering of such securities by the Holder thereof
shall have been declared effective under the Securities Act and such securities
shall have been disposed of by such Holder pursuant to such Registration
Statement, (ii) such securities may at the time of determination be sold to the
public pursuant to Rule 144 without any restriction on the amount of securities
which may be sold by such Holder or Rule 144(k) (or any similar provision then
in force, but not Rule 144A) promulgated under the Securities Act without the
lapse of any further time or the satisfaction of any condition, (iii) such
securities shall have been otherwise transferred by such Holder and new
certificates for such securities not bearing a legend restricting further
transfer shall have been delivered by the Company or its transfer agent and
subsequent disposition of such securities shall not require registration or
qualification under the Securities Act or any similar state law then in force or
(iv) such securities shall have ceased to be outstanding.
4
<PAGE> 9
"Registration Expenses" means all expenses incident to the
Company's performance of or compliance with this Agreement, including, without
limitation, all SEC and stock exchange or National Association of Securities
Dealers, Inc. registration and filing fees and expenses, fees and expenses of
compliance with securities or blue sky laws (including, without limitation,
reasonable fees and disbursements of counsel for the underwriters in connection
with blue sky qualifications of the Registrable Securities), printing expenses,
messenger, telephone and delivery expenses, fees and disbursements of counsel
for the Company and all independent certified public accountants and the fees
and disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including any underwriting discounts or commissions or
transfer taxes, if any, attributable to the sale of Registrable Securities by
Holders of such Registrable Securities). Registration Expenses shall not include
the fees and expenses of counsel for the Holders.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of August 24, 1999, by and among the Company and Bear,
Stearns & Co. Inc., First Union Capital Markets Corp. and BancBoston Robertson
Stephens Inc., as such agreement may be amended, modified or supplemented from
time to time.
"Regulation S" means Regulation S under the Securities Act, as
such rules may be from time to time amended, revised or supplemented by the
Commission.
"Requisite Securities" means a number of Registrable
Securities equal to not less than 25% of the Registrable Securities then
outstanding held in the aggregate by all Holders; provided, however, that with
respect to any action to be taken at the request of the Holders of the
Registrable Securities prior to such time as the Warrants have expired pursuant
to the terms thereof and of the Warrant Agreement, each Warrant outstanding
shall be deemed to represent that number of Registrable Securities for which
such Warrant would be then exercisable.
"Regulation S Global Warrant" means a permanent global Warrant
in substantially the form of Exhibit A hereto, appropriately completed, and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in replacement for the Regulation S Global Warrant upon
expiration of the Restricted Period.
"Restricted Period" means the one year period after the date
of issuance of the Units.
"SEC" means the Securities and Exchange Commission, or any
successor agency or body performing substantially similar functions.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Holder" means a Holder who is selling Registrable
Securities in accordance with the provisions of Section 6.1 or 6.7.
"Separation Date" means earliest to occur of (i) February 21,
1999, (ii) the occurrence of an "Event of Default" under the Notes; (iii) an
Exercise Event, (iv) the date the Exchange Offer Registration Statement or the
Shelf Registration Statement is declared effective by the Commission (as
defined) or (v) such other date as Bear, Stearns & Co. Inc. shall determine in
its sole discretion.
5
<PAGE> 10
"Shelf Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Subsidiary" means, with respect to a Person, (a) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the other Subsidiaries of that Person (or a
combination thereof) and (b) any partnership (i) the sole general partner or the
managing general partner of which is such Person or a Subsidiary of such Person
or (ii) the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Tag Along Notice" shall have the meaning ascribed in Section
7.
"Tag Along Rights" shall have the meaning ascribed in Section
7.
"Trivest, Inc." means Trivest, Inc., a Florida corporation.
"Trustee" means the trustee under the Indenture.
"Voting Equity Interest" of any Person as of any date means
the Equity Interests of such Person that is at the time entitled to vote in the
election of the Board of Directors or other governing body of such Person.
"Warrant Agent" means American Stock Transfer & Trust Company
or the successor or successors of such Warrant Agent appointed in accordance
with the terms hereof.
"Warrant Certificates" mean the registered certificates
(including without limitation, the global certificates) issued by the Company
under this Agreement representing the Warrants.
"Warrant Registration Statement" means any appropriate
registration statement of the Company filed with the SEC pursuant to the
Securities Act which covers any of the Registrable Securities pursuant to the
provisions of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Warrant Shares" means the shares of Common Stock issued or
issuable upon the exercise of the Warrants.
(b) Other terms are defined in the respective sections set
forth below.
6
<PAGE> 11
<TABLE>
<CAPTION>
Term Defined in Section
- ---- ------------------
<S> <C>
Advice.......................................................................................6.13
Blackout Period...............................................................................6.2
Convertible Securities.......................................................................15.3
Definitive Warrants...........................................................................3.1
Depository....................................................................................3.1
Distribution.................................................................................15.3
DTC..........................................................................................6.13
Effectiveness Period..........................................................................6.2
Global Warrants...............................................................................3.1
Options..................................................................................... 15.3
SEC Reports....................................................................................22
Time of Determination....................................................................... 15.6
Transfer Agent.................................................................................13
</TABLE>
Section 2. Appointment of Warrant Agent. The Company hereby
appoints the Warrant Agent to act as agent for the Company in accordance with
the instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
Section 3. Issuance of Warrants.
3.1 Warrant Certificates. The Warrants will be issued in the form
of one or more global certificates (the "GLOBAL WARRANTS"), substantially in the
form of Exhibit A (including footnotes 1, 2 and 3 thereto). The Global Warrants
shall be deposited on the Issue Date with, or with the Warrant Agent as
custodian for, The Depository Trust Company (the "DEPOSITARY") and registered in
the name of Cede & Co., as the Depositary's nominee. Each Global Warrant shall
represent such of the outstanding Warrants as shall be specified therein and
each shall provide that it shall represent the aggregate amount of outstanding
Warrants from time to time endorsed thereon and that the aggregate amount of
outstanding Warrants represented thereby may from time to time be reduced or
increased, as appropriate. Upon request, except as otherwise provided in Section
7(b)(iii) hereof, a Holder may receive from the Depositary and the Warrant Agent
Warrants in definitive form (the "DEFINITIVE WARRANTS"), substantially in the
form of Exhibit A (not including footnotes 1 and 2 thereto) as set forth in
Section 7 below.
3.2 Regulation S Global Warrant. Warrants offered and sold in
reliance on Regulation S shall be issued in the form of the Regulation S Global
Warrant, which shall be deposited on behalf of the purchasers of the Warrants
represented thereby with the Warrant Agent, at its New York office, as custodian
for the Depositary, and registered in the name of the Depositary or the nominee
of the Depositary for the accounts of designated agents holding on behalf of
Euroclear or Cedel, duly executed by the Company and authenticated by the
Trustee as hereinafter provided. The aggregate number of Warrants evidenced by
the Regulation S Global Warrant may from time to time be increased or decreased
by adjustments made on the records of the Warrant Agent and the Depositary or
its nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
3.3 Registration and Countersignature. The Warrant Agent, on
behalf of the Company, shall number and register the Warrant Certificates in a
register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written
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instructions of the Chairman of the Board, the President. a Vice President, the
Treasurer or the Controller of the Company, initially countersign, issue and
deliver Warrants entitling the Holders thereof to purchase not more than the
aggregate number of Warrant Shares referred to above in the first recital hereof
and shall countersign and deliver Warrants as otherwise provided in this
Agreement.
The Company and the Warrant Agent may deem and treat the Holder(s) of
the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice to the contrary. Prior to the Separation Date, the registered holder of a
Unit shall be deemed the registered Holder of the related Warrants for all
purposes hereunder.
Section 4. Execution of Warrant Certificates. Certificates
(the "WARRANT CERTIFICATES") evidencing Global Warrants or Definitive Warrants
to be delivered pursuant hereto shall be signed on behalf of the Company by its
Chairman of the Board, President, Chief Executive Officer, Chief Financial
Officer, a Vice President, Secretary, an Assistant Secretary, Treasurer or an
Assistant Treasurer. Each such signature upon the Warrant Certificates may be in
the form of a facsimile signature of the present or any future Chairman of the
Board, President, Chief Executive Officer, Chief Financial Officer, a Vice
President, Secretary, an Assistant Secretary, Treasurer or an Assistant
Treasurer and may be imprinted or otherwise reproduced on the Warrant
Certificates and for that purpose the Company may adopt and use the facsimile
signature of any person who shall have been Chairman of the Board, President,
Chief Executive Officer, Chief Financial Officer, a Vice President, Secretary,
an Assistant Secretary, Treasurer or an Assistant Treasurer, notwithstanding the
fact that at the time the Warrant Certificates shall be countersigned and
delivered or disposed of such person shall have ceased to hold such office.
In case any officer of the Company who shall have signed any
of the Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Agreement any
such person was not such officer.
Warrant Certificates shall be dated the date of
countersignature.
Section 5. Separation of Warrants. The Notes and Warrants
shall not be separately transferable prior to the Separation Date and shall be
automatically separated on the Separation Date.
Section 6. Registration Rights.
6.1 Demand Registration After Underwritten Public Equity Offering
Subject to the other provisions of this Section 6, commencing 180 days after an
initial underwritten public offering of the Company's Capital Stock, Holders
owning, individually or in the aggregate, not less than the Requisite Securities
may make a written request for one registration under the Securities Act of
their Registrable Securities (a "DEMAND REGISTRATION"). Within 120 days of the
receipt of
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such written request for a Demand Registration, the Company shall file with the
SEC and use its best efforts to cause to become effective under the Securities
Act a Registration Statement with respect to such Registrable Securities. Any
such request will specify the number of Registrable Securities proposed to be
sold and will also specify the intended method of disposition thereof. The
Company shall give written notice of such registration request to all other
Holders of Registrable Securities within 20 days after the receipt thereof.
Within 30 days after the date of such notice from the Company, any Holder may
request in writing that such Holder's Registrable Securities be included in such
Registration Statement and the Company shall include in such Registration
Statement the Registrable Securities of any such Holder requested to be so
included (the "INCLUDED SECURITIES"). Each such request by such other Holders
shall specify the number of Included Securities proposed to be sold and the
intended method of disposition thereof. Subject to Sections 6.2 and 6.6 hereof,
the Company shall be required to register Registrable Securities pursuant to
this Section 6.1 only once.
Subject to Section 6.6 hereof, no other securities of the
Company except (i) Registrable Securities held by any Holder, (ii) equity
securities to be offered and sold for the account of the Company and (iii) any
equity securities of the Company held by any Person having "piggy-back"
registration rights pursuant to any contractual obligation of the Company shall
be included in a Demand Registration; provided, however, that no such securities
for the account of the Company or any other Person (other than the parties to
the Stockholder Rights Agreement) shall be so included unless, in connection
with any underwritten offering, the managing underwriter or underwriters confirm
to the Holders of Registrable Securities to be included in such Demand
Registration that the inclusion of such other securities will not be likely to
affect the price at which the Registrable Securities may be sold. The inclusion
of any such securities for the account of the Company or any other Person shall
be on the same terms as that of the Registrable Securities.
6.2 Effective Registration. A Registration Statement will not be
deemed to have been effected as a Demand Registration unless it has been
declared effective by the SEC and the Company has complied in a timely manner
and in all material respects with all of its obligations under this Agreement
with respect thereto; provided, however, that if, after such Registration
Statement has become effective, the offering of Registrable Securities pursuant
to such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Registrable Securities pursuant to such Registration Statement for any
reason not attributable to any Holder participating in such registration and
such Registration Statement has not become effective within a reasonable time
period thereafter (not to exceed 45 days), such Registration Statement will be
deemed not to have been effected. The Company shall keep any Demand Registration
continuously effective under the Securities Act for the shorter of (A) an
aggregate of 180 days after the effective date thereof (such 180 day period
being referred to herein as the "EFFECTIVENESS PERIOD") or (B) such period of
time as all of the Warrant Shares included in such registration statement shall
have been sold thereunder, provided, however, that the Company may postpone the
filing period, suspend the effectiveness of any registration statement, suspend
the use of any prospectus and shall not be required to amend or supplement the
registration statement any related prospectus or any document incorporated
therein by reference (other than an effective registration statement being used
for an underwritten offering) in the event that, and for a period (a "BLACK OUT
PERIOD") not to exceed an aggregate of 45 days with respect to a Demand
Registration:
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(i) an event or circumstance occurs and is continuing as is
continuing as a result of which the registration statement, any related
prospectus or any document incorporated therein by reference as then amended or
supplemented would, in the Company's good faith judgment, contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, and
(ii) either
(A) the Company determines in its good faith judgment
that the disclosure of such an event at such time would have a material adverse
effect on the business, operations or prospects of the Company, or
(B) the disclosure otherwise relates to a material
business transaction which has not yet been publicly disclosed; provided,
further, that the Effectiveness Period shall be extended by the number of days
in any Black Out Period.
In the event of any "lock up" or "black out" period in any underwriting or
purchase agreement, the Company will so notify the holders of Warrants and
Warrant Shares.
If (i) a registration requested pursuant to this Section 6.2
is deemed not to have been effected or (ii) a Demand Registration does not
remain effective under the Securities Act in accordance with the immediately
preceding sentence, then such registration shall not count towards determining
if the Company has satisfied its obligation to effect one Demand Registration
pursuant to this Section 6.2.
6.3 Restrictions on Sale by Holders. Each Holder of Registrable
Securities whose Registrable Securities are covered by a Registration Statement
filed pursuant to this Section 6 and are to be sold thereunder agrees, if and to
the extent reasonably requested by the managing underwriter or underwriters in
an underwritten offering, not to effect any public sale or distribution of
Registrable Securities or of securities of the Company of the same class as any
securities included in such Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten offering), during the 180 day
period beginning on the closing date of each underwritten offering made pursuant
to such Registration Statement, to the extent timely notified in writing by the
Company or such managing underwriter or underwriters.
The foregoing provisions of this Section 6.3 shall not apply
to any Holder of Registrable Securities if such Holder is prevented by
applicable statute or regulation from entering into any such agreement;
provided, however, that any such Holder shall undertake, in its request to
participate in any such underwritten offering, not to effect any public sale or
distribution of any Registrable Securities commencing on the date of sale of
such Registrable Securities unless it has provided 45 days' prior written notice
of such sale or distribution to the underwriter or underwriters.
6.4 Underwritten Registrations. If any of the Registrable
Securities covered by a Demand Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Company.
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<PAGE> 15
No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Regulation M
under the Exchange Act and (b) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
6.5 Expenses. The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to Section 6.1 hereof. Each
Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
requested pursuant to this Section 6.
6.6 Priority in Demand Registration. In a registration pursuant to
Section 6.1 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders who have requested such Demand
Registration or who have sought inclusion therein that in such underwriter's or
underwriters' opinion the total number of securities which the Selling Holders
and any other Person desiring to participate in such registration intend to
include in such offering is such as to affect adversely the success of such
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration. In
such event, securities shall be registered in such registration in the following
order of priority: (i) first, the securities which have been requested to be
included in such registration by the Holders of Registrable Securities pursuant
to this Agreement, (ii) second. provided that no securities sought to be
included by the Holders of Registrable Securities have been excluded from such
registration, the securities to be offered and sold for the account of the
Company, and (iii) third, provided that no securities sought to be included by
the Company have been excluded from such registration, the securities of other
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments of the Company (pro rata based on the amount of
securities sought to be registered by such Persons).
If any securities of a Holder have been excluded from a
registration statement pursuant to the provisions of the foregoing paragraph,
then such registration shall not count towards determining whether the Company
has satisfied its obligation to effect one Demand Registration pursuant to
Section 6.1 hereof.
6.7 Piggy-Back Registration. Subject to the other provisions of
this Section 6.7 and to the provisions of Sections 6.8 and 6.9, if at any time
the Company proposes to file a Registration Statement under the Securities Act
with respect to an offering by the Company for its own account or for the
account of any of its security holders of Common Stock (other than (i) a
Registration Statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC), (ii) a Registration Statement filed in connection with an
offering of securities solely to the Company's existing security holders or any
offer of debt securities or convertible debt securities or (iii) a Demand
Registration), then the Company shall give written notice of such proposed
filing to the Holders of Registrable Securities as soon as practicable (but in
no event fewer than 5 days after the filing date or 10 days if the Company is
subject to filing reports under the Exchange Act and able
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<PAGE> 16
to use Form S-3 under the Securities Act), and such notice shall offer such
Holders the opportunity to register such number of shares of Registrable
Securities as each such Holder may request in writing not later than 20 days
prior to the anticipated effective date of the Registration Statement (or eight
days after the notice of the proposed filing if the Company is subject to filing
reports under the Exchange Act and able to use Form S-3 under the Securities
Act) after receipt of such written notice from the Company (which request shall
specify the Registrable Securities intended to be disposed of by such Selling
Holder and the intended method of distribution thereof) (a "PIGGY-BACK
REGISTRATION"). The Company shall use its best efforts to keep such Piggy-Back
Registration continuously effective under the Securities Act until at least the
earlier of (A) 90 days after the effective date thereof or (B) the consummation
of the distribution by the Holders of all of the Registrable Securities covered
thereby. The Company shall use its best efforts to cause the managing
underwriter or underwriters, if any, of such proposed offering to permit the
Registrable Securities requested to be included in a Piggy-Back Registration to
be included on the same terms and conditions as any similar securities of the
Company or any other security holder included therein and to permit the sale or
other disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 6.7 by giving written notice to
the Company of its request to withdraw at any time prior to the time it becomes
effective. The Company may withdraw a Piggy-Back Registration at any time prior
to the time it becomes effective or the Company may elect to delay the
registration; provided, however, that the Company shall give prompt written
notice thereof to participating Selling Holders. The Piggy-Back Registration
right of holders of Warrants and Warrant Shares shall not apply to any
underwritten public offering of Capital Stock of the Company that is the initial
underwritten public offering of the Capital Stock of the Company unless the
securities of other Selling Holders are to be included therein. The Company will
pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 6.7, and each Holder
of Registrable Securities shall pay all underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to a Registration Statement effected pursuant to
this Section 6.7.
No registration effected under this Section 6.7, and no
failure to effect a registration under this Section 6.7, shall relieve the
Company of its obligation to effect a registration upon the request of Holders
of Registrable Securities pursuant to Section 6.1 hereof, and no failure to
effect a registration under this Section 6.7 and to complete the sale of
securities registered thereunder in connection therewith shall relieve the
Company of any other obligation under this Agreement.
6.8 Priority in Piggy-Back Registration. In a registration
pursuant to Section 6.2 hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders requesting inclusion
in such offering that in such underwriter's or underwriters' opinion the total
number of securities which the Company, the Selling Holders and any other
Persons desiring to participate in such registration intend to include in such
offering is such as to materially and adversely affect the success of such
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration. In
such event: (x) in cases only involving the registration for sale of securities
for the Company's own account (other than pursuant to the exercise of
"piggy-back" rights herein and in other contractual commitments of the Company),
securities shall be registered in such offering in the following order of
priority: (i) first, the
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securities which the Company proposes to register, (ii) second, provided that no
securities sought to be included by the Company have been excluded from such
registration, the securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company existing
as of the date hereof (the "Investors") (pro rata based on the amount of
securities sought to be registered by such Investors); and (iii) third, provided
that no securities sought to be included by the Company or the Investors have
been excluded from such registration, the securities that have been requested to
be included in such registration by the Holders of the Registrable Securities
pursuant to this Agreement and the securities of other Persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments of
the Company (pro rata based on the amount of securities sought to be registered
by such Persons), and (y) in cases involving the registration for sale of
securities for the account of any Investors or any other Person (other than the
Holders pursuant to Section 6.1 hereof), securities shall be registered in such
offering in the following order of priority: (i) first, the securities of any
Investor shall be included pro rata based on the amount of securities sought to
be registered by such Persons, (ii) provided that no securities of such Investor
referred to in the immediately preceding clause (i) have been excluded from such
registration, the securities which have been requested to be included in such
registration by the Holders of Registrable Securities pursuant to this Agreement
pro rata based upon the aggregate amount of securities held and (iii) third,
provided that no securities of the Investors or of the Holders have been
excluded from such registrations, securities of other Persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments
(pro rata based on the amount of securities sought to be registered by such
Persons) and (iv) fifth, provided that no securities of any other Person have
been excluded from such registration, the securities which the Company proposes
to register.
If, as a result of the provisions of this Section 6.8, any
Selling Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration at any time prior to the effectiveness thereof.
6.9 Limitations, Conditions and Qualifications to Obligations
Under Registration Covenants. The obligations of the Company set forth in
Section 6 hereof are subject to each of the following limitations, conditions
and qualifications:
(i) Subject to the next sentence of this paragraph, the
Company shall be entitled to postpone, for a reasonable period of time, the
filing or effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, any Registration Statement otherwise required to be prepared, filed
and made and kept effective by it hereunder; provided, however, that the
duration of such postponement or suspension may not exceed the earlier to occur
of (A) 15 days after the cessation of the circumstances described in the next
sentence of this paragraph on which such postponement or suspension is based or
(B) 90 days after the date of the determination of the Board of Directors
referred to in the next sentence, and the duration of such postponement or
suspension shall be excluded from the calculation of the 180-day period
described in Section 6.2 hereof. Such postponement or suspension may be effected
only if the Board of Directors of the Company determines reasonably and in good
faith that the filing or effectiveness of, or sales pursuant to, such
Registration Statement would materially impede, delay or interfere with any
financing, offer or sale of securities, acquisition, corporate reorganization or
other significant transaction involving the Company or any of its Affiliates or
require disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential, which financing, offer or sale
of securities, acquisition, corporate reorganization or other
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significant transaction had been initiated at the time of the filing of such
Registration Statement; provided, however, that the Company shall not be
entitled to such postponement or suspension more than twice in any twelve-month
period. If the Company shall so postpone the filing of a Registration Statement
it shall, as promptly as possible, deliver a certificate signed by the Chief
Executive Officer of the Company to the Selling Holders as to such
determination, and the Selling Holders shall (y) have the right, in the case of
a postponement of the filing or effectiveness of a Registration Statement, upon
the affirmative vote of the Holders of not less than a majority of the
Registrable Securities to be included in such Registration Statement, to
withdraw the request for registration by giving written notice to the Company
within 10 days after receipt of such notice or (z) in the case of a suspension
of the right to make sales, receive an extension of the registration period
equal to the number of days of the suspension. Any Demand Registration as to
which the withdrawal election referred to in the preceding sentence has been
effected shall not be counted for purposes of the single Demand Registration the
Company may be required to effect pursuant to Section 6.1 hereof.
(ii) The Company shall not be required by this Agreement to
effect a Demand Registration within 90 days immediately following the effective
date of any registration statement pertaining to a firmly underwritten offering
of equity securities of the Company for its own account; provided, however, that
this clause (ii) shall not apply if the underwriter of such offering consents to
the request for such Demand Registration pursuant to Section 6.1.
(iii) The Company shall not be required by this Agreement to
effect a Demand Registration within 60 days immediately following the effective
date of any registration statement pertaining to a firmly underwritten offering
of equity securities of the Company for the account of any security holder of
the Company; provided, however, that this clause (ii) shall not apply if the
underwriter of such offering consents to the request for such Demand
Registration pursuant to Section 6.1.
(iv) The Company's obligations shall be subject to the
obligations of the Selling Holders, which the Selling Holders acknowledge, to
furnish all information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations to
permit the Company to comply with all applicable requirements of the SEC and to
obtain any acceleration of the effective date of such Registration Statement.
(v) The Company shall not be obligated to cause any special
audit to be undertaken in connection with any registration pursuant to this
Agreement unless such audit is required by the SEC or requested by the
underwriters with respect to such registration.
6.10 Restrictions on Sale by the Company and Others. The Company
will not, and the Company will not cause or permit any subsidiary of the Company
to, after the date hereof, enter into any agreement or contract that conflicts
with or limits or prohibits the full and timely exercise by the Holders of
Registrable Securities of the rights herein to request a Demand Registration or
to join in any Piggy-Back Registration subject to the other terms and provisions
hereof.
6.11 Rule 144 and Rule 144A. The Company covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder or beneficial owner of
Registrable Securities, make available such information necessary to permit
sales pursuant to Rule
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144A under the Securities Act. The Company further covenants that it will take
such further action as any Holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under
the Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC (it being expressly
understood that the foregoing shall not create any obligation on the part of the
Company to file periodic reports or other reports under the Exchange Act at any
time that it is not then required to file such reports pursuant to the Exchange
Act). Upon the request of any Holder of Registrable Securities, the Company will
in a timely manner deliver to such Holder a written statement as to whether it
has complied with such information requirements.
6.12 "Market Stand-Off" Agreement.
(a) If the Company has complied with all its obligations with
respect to a Demand Registration or a Piggy-Back Registration relating to an
underwritten public offering, all holders of Warrants and Warrant Shares, upon
request of the lead managing underwriter with respect to such underwritten
public offering, will be required to not sell or otherwise dispose of any
Warrants and Warrant Shares owned by them for a period not to exceed 180 days
from the consummation of such underwritten public offering; provided, however,
that except for the initial underwritten public offering of Capital Stock of the
Company, such requirement shall apply to Warrant Shares not sold in a Demand
Registration or Piggy-Back Registration due to a reduction pursuant to Section
6.6 or 6.8 hereof for a period not to exceed 90 days from such date of
consummation.
(b) In order to enforce the foregoing covenant, the Company
shall have the right to place restrictive legends on the certificates
representing the shares subject to this Section 6 and to impose stop transfer
instructions with respect to the Registrable Securities and such other shares of
stock of each Holder (and the shares or securities of every other Person subject
to the foregoing restriction) until the end of such period. The provisions of
this Section 6.12 shall be binding upon any transferee of any Registrable
Securities.
6.13 Registration Procedures. In connection with the obligations of
the Company with respect to any Registration Statement pursuant to Section 6
hereof, the Company shall, except as otherwise provided:
(a) Prepare and file with the SEC as soon as practicable each
such Registration Statement (but in any event on or prior to the date of filing
thereof required under this Agreement) and cause such Registration Statement to
become effective and remain effective as provided herein; provided, however,
that before filing any such Registration Statement or any Prospectus pursuant to
Section 6.1 hereof or any amendments or supplements thereto (including documents
that would be incorporated or deemed to be incorporated therein by reference,
including such documents filed under the Exchange Act that would be incorporated
therein by reference), the Company shall, upon request, afford promptly to the
Holders of the Registrable Securities covered by such Registration Statement,
their counsel and the managing underwriter or underwriters, if any, an
opportunity to review copies of all such documents proposed to be filed a
reasonable time prior to the proposed filing thereof. The Company shall not file
any Registration Statement or Prospectus pursuant to Section 6.1 or any
amendments or supplements thereto if the Holders of a majority of the
Registrable Securities covered by such Registration Statement, their counsel, or
the managing
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underwriter or underwriters, if any, shall reasonably object in writing unless
failure to file any such amendment or supplement would involve a violation of
the Securities Act or other applicable law.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the time periods
prescribed hereby; cause the related Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to it with respect to the disposition of all securities covered by
such Registration Statement as so amended or in such prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities, their
counsel and the managing underwriter or underwriters, if any, promptly (but in
any event within two (2) Business Days), and confirm such notice in writing, (i)
when a Prospectus or any prospectus supplement or post-effective amendment has
been filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation or threatening of any proceedings for that purpose,
(iii) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Securities the
representations and warranties of the Company contained in any agreement
(including any underwriting agreement) contemplated by Section 6.13(1) below, to
the knowledge of the Company, cease to be true and correct in any material
respect, (iv) of the receipt by the Company of any notification with respect to
(A) the suspension of the qualification or exemption from qualification of the
Registration Statement or any of the Registrable Securities covered thereby for
offer or sale in any jurisdiction, or (B) the initiation of any proceeding for
such purpose, (v) of the happening of any event, the existence of any condition
or information becoming known that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case of such
Registration Statement, it will conform in all material respects with the
requirements of the Securities Act and it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and that in
the case of the Prospectus, it will conform in all material respects with the
requirements of the Securities Act and it will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (vi) of the
Company's reasonable determination that a post-effective amendment to such
Registration Statement would be appropriate.
(d) Use every reasonable effort to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction, and, if any such order is issued, to
obtain the withdrawal of any such order as soon as practicable.
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(e) Subject to Sections 6.2 and 6.9 hereof, if requested by
the managing underwriter or underwriters, if any, or the Holders of a majority
of the Registrable Securities being sold in connection with an underwriting
offering (only for registrations pursuant to Section 6.1 hereof), (i) promptly
incorporate in a prospectus supplement or post-effective amendment such
information as the managing underwriter or underwriters, if any, or such Holders
reasonably request to be included therein to comply with applicable law, (ii)
make all required filings of such prospectus supplement or such post-effective
amendment as soon as practicable after the Company has received notification of
the matters to be incorporated in such prospectus supplement or post-effective
amendment, and (iii) supplement or make amendments to such Registration
Statement if required in connection therewith.
(f) Furnish to each Holder of Registrable Securities who so
requests and to counsel for the Holders of Registrable Securities and each
managing underwriter, if any, without charge, upon request, one conformed copy
of the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, and of all documents incorporated
or deemed to be incorporated therein by reference and all exhibits (including
exhibits incorporated by reference).
(g) Deliver to each Holder of Registrable Securities, their
counsel and each underwriter, if any, without charge, as many copies of each
Prospectus (including each form of prospectus) and each amendment or supplement
thereto as such Persons may reasonably request; and, subject to Sections 6.2 and
6.9 and the last paragraph of this Section 6.13, the Company hereby consents to
the use of such prospectus and each amendment or supplement thereto by each of
the Holders of Registrable Securities and the underwriter or underwriters or
agents, if any, in connection with the offering and sale of the registrable
Securities covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to
register or qualify, and cooperate with the Holders of Registrable Securities,
the underwriter or underwriters, if any, and their respective counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of, such Registrable Securities for offer and
sale under the securities or blue sky laws of such jurisdictions within the
United States as the managing underwriter or underwriters reasonably request in
writing, or, in the event of a non-underwritten offering, as the Holders of a
majority of the Registrable Securities may reasonably request; provided,
however, that where Registrable Securities are offered other than through an
underwritten offering, the Company agrees to cause its counsel to perform blue
sky investigations and file registrations and qualifications required to be
filed pursuant to this Section 6.13 (h); keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness Period
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of the securities covered thereby; provided,
however, that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it is not then so qualified, (B) take any
action that would subject it to general service of process in any such
jurisdiction where it is not then so subject or (C) become subject to taxation
in any jurisdiction where it is not then so subject.
(i) Cooperate with the Holders of Registrable Securities and
the managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive legends whatsoever
and shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and enable such Registrable Securities to be in such denominations and
registered in
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such names as the managing underwriter or underwriters, if any, or Holders may
reasonably request at least two Business Days prior to any sale of Registrable
Securities in a firm commitment underwritten public offering.
(j) Subject to Sections 6.2 and 6.9 hereof, upon the
occurrence of any event contemplated by Section 6.13(c)(v) or 6.13(c)(vi) above,
as promptly as practicable prepare a supplement or post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and,
subject to Section 6.13(a) hereof, file such with the SEC so that, as thereafter
delivered to the purchasers of Registrable Securities being sold thereunder,
such Prospectus will not contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(k) Prior to the effective date of a Registration Statement,
(i) provide the registrar for the Registrable Securities with certificates for
such securities in a form eligible for deposit with DTC and (ii) provide a CUSIP
number for such securities.
(l) In connection with any registration hereunder that may be
an underwritten offering enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriter or underwriters
in order to expedite or facilitate the registration or disposition of such
Registrable Securities in any underwritten offering to be made of the
Registrable Securities in accordance with this Agreement, and in such
connection, (i) make such representations and warranties to the underwriter or
underwriters, with respect to the business of the Company and the subsidiaries
of the Company, and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) use reasonable efforts to obtain opinions of counsel to the
Company and updates thereof, addressed to the underwriter or underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by underwriters;
(iii) use reasonable efforts to obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company (and,
if applicable, the subsidiaries of the Company) and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement, addressed to each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings and such other
matters as reasonably requested by the managing underwriter or underwriters and
as permitted by the Statement of Auditing Standards No. 72; and (iv) if an
underwriting agreement is entered into, the same shall contain customary
indemnification provisions and procedures (or such other provisions and
procedures reasonably acceptable to Holders of a majority of Registrable
Securities covered by such Registration Statement and the managing underwriter
or underwriters or agents) with respect to all parties to be indemnified
pursuant to such agreement. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(m) Make available for inspection by a representative of the
Holders of Registrable Securities being sold, any underwriter participating in
any such disposition of
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<PAGE> 23
Registrable Securities, if any, and any attorney or accountant retained by such
representative of the Holders or underwriter, at the offices where normally
kept, during reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and the subsidiaries
of the Company, and cause the officers, directors and employees of the Company
and the subsidiaries of the Company to supply all information in each case
reasonably requested by any such Person in connection with such Registration
Statement; provided, however, that all material non-public information shall be
kept confidential by such Person, except to the extent that (i) subject to
Sections 6.2 and 6.9 hereof, the disclosure of such information is necessary or
advisable to avoid or correct a misstatement or omission in the Registration
Statement or in any Prospectus; provided, however, that prior notice is given to
the Company, and the Company's legal counsel and such Holder's legal counsel
concur that disclosure is required, (ii) the release of such information is
ordered pursuant to a subpoena or other order from a court of competent
jurisdiction, (iii) disclosure of such information is necessary in connection
with any action, claim, suit or proceeding, directly or indirectly, involving or
potentially involving such Person and arising out of, based upon, relating to or
involving this Agreement or any of the transactions contemplated hereby or
arising hereunder; provided, however, that prior notice shall be provided as
soon as practicable to the Company of the potential disclosure of any
information by such Person pursuant to clauses (ii) or (iii) of this sentence to
permit the Company to obtain a protective order (or waive the provisions of this
paragraph (m)) and that such Person shall take all actions as are reasonably
necessary to protect the confidentiality of such information (if practicable) to
the extent such action is otherwise not inconsistent with, an impairment of or
in derogation of the rights and interests of the Holder or any such Person, or
(iv) such information has been made generally available to the public.
(n) Comply with all applicable rules and regulations of the
SEC and make generally available to its security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than forty-five (45) days after the end of any 12-month period (or ninety (90)
days after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to an underwriter or to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to an underwriter or to underwriters
in such an offering, commencing on the first day of the first fiscal quarter of
the Company after the effective date of the relevant Registration Statement,
which statements shall cover such 12-month periods.
(o) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each securities
exchange, if any, on which similar securities issued by the Company are then
listed.
(p) Cooperate with the Selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any restrictive
legends and registered in such names as the selling Holders may reasonably
request at least two Business Days prior to the closing of any sale of
Registrable Securities.
Each seller of Registrable Securities as to which any
registration is being effected agrees, as a condition to the registration
obligations with respect to such Holder provided herein, to furnish to the
Company such information regarding such seller and the distribution of such
Registrable Securities as the Company may, from time to time, reasonably request
in writing to comply with the Securities Act and other applicable law. The
Company may exclude from such
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<PAGE> 24
registration the Registrable Securities of any seller for so long as suchseller
fails to furnish such information within a reasonable time after receiving such
request. If the identity of a seller of Registrable Securities is to be
disclosed in the Registration Statement, such seller shall be permitted to
include all information regarding such seller as it shall reasonably request.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 6.13(c)(ii),
6.13(c)(iv), 6.13(c)(v), or 6.13(c)(vi) hereof, such Holder will forthwith
discontinue disposition of such Registrable Securities covered by the
Registration Statement or Prospectus until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 6.13(j)
hereof), or until it is advised in writing (the "ADVICE") by the Company that
the use of the applicable prospectus may be resumed, and has received copies of
any amendments or supplements thereto, and, if so directed by the Company, such
Holder will, at the Company's expense, deliver to the Company all copies, other
than permanent file copies, then in such Holder's actual possession of the
Prospectus covering such Registrable Securities current at the time of receipt
of such notice; provided, however, that nothing herein shall create any
obligation on the part of any Holder to undertake to retrieve or return any such
Prospectus not within the actual possession of such Holder. In the event the
Company shall give any such notice, the period of time for which a Registration
Statement is required hereunder to be effective shall be extended by the number
of days during such periods from and including the date of the giving of such
notice to and including the date when each seller of Registrable Securities
covered by such Registration Statement shall have received (x) the copies of the
supplemented or amended Prospectus contemplated by Section 6.13(j) hereof or (y)
the Advice.
Section 7. Tag-Along Rights. Prior to the consummation of an
underwritten public offering or the listing of the Company's Common Stock on a
national securities exchange or the authorization for quotation of such Common
Stock on the Nasdaq National Market, in the event that a Permitted Holder or
Permitted Holders propose to sell or otherwise transfer, directly or indirectly,
in a single transaction or a series of related transactions, shares of the
Company's Common Stock representing 25% or more of the aggregate number of
shares of such Common Stock owned by such Permitted Holders on the date the
transactions contemplated by the Merger Agreement are consummated (other than
(i) sales in an bona fide public offering pursuant to an effective registration
statement under the Securities Act, (ii) sales to the public pursuant to Rule
144 or any similar rule or rules then in effect, (c) transfers to the Company or
one or more of its stockholders pursuant to a right of first refusal and (d)
transfers to Affiliates of such Permitted Holders), such Permitted Holders shall
give each holder of Warrants or Warrant Shares notice (the "TAG-ALONG NOTICE")
of the number of shares of Common Stock to be transferred and the price and
other terms on which such shares of Common Stock are to be transferred. Any
Holder may elect to participate in such transfer (a "TAG-ALONG RIGHT") by giving
notice of the decision to exercise the Tag-Along Right to the selling Permitted
Holders within 10 Business Days of receipt of the Tag-Along Notice. The number
of Warrants or Warrant Shares that any Holder electing to participate in a
transfer shall be eligible to sell pursuant to the Tag-Along Right shall be that
percentage of the aggregate number of shares of Common Stock to be transferred
equal to a fraction, expressed as a percentage, the numerator of which is the
total number of shares of Common Stock held by such Holder assuming the exercise
of all Warrants held by such Holder and the denominator of which is the total
number of shares of Common Stock held by all stockholders participating in such
transfer, including the Permitted Holder or Permitted Holders and other Holders,
assuming the exercise of all Warrants held by Holders participating in the
transfer.
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Any Warrants or Warrant Shares purchased from the
Holders thereof pursuant to the exercise of Tag-Along Rights shall be paid for
at the same price per share of Common Stock and on the same terms and conditions
as such proposed transfer of Common Stock by the selling Permitted Holders. If
the securities to be purchased include securities other than Common Stock, the
price to be paid for the Warrants and Warrant Shares shall be the same price per
share or other denomination paid by the proposed purchaser for like securities
purchased from the Permitted Holders or, if like securities are not purchased
from the Permitted Holders, the fair market value of such securities as
determined by a nationally recognized investment banking firm selected by the
Company.
In the event that the proposed purchaser does not purchase
Warrants or Warrant Shares entitled to be transferred pursuant to this Section
7, then the selling Permitted Holder or Permitted Holders shall purchase such
Warrants or Warrant Shares if the transfer is consummated.
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Section 8. Drag Along Rights. Subject to the limitations set
forth below, if at any time prior to an underwritten public offering of Common
Stock of the Company, any Permitted Holder or Permitted Holders propose to sell
or otherwise transfer, including by way of merger, consolidation or otherwise,
all of the Capital Stock of the Company held by such Permitted Holder or
Permitted Holders to a Person that is not a Permitted Holder in a transaction
resulting in a Change of Control of the Company (a "DRAG SALE"), the
transferring Permitted Holder or Permitted Holders (whether directly or
indirectly through an Affiliate) shall have the right to require the Holders of
Warrants or Warrant Shares, as the case may be, to sell such Warrants or
Warrants Shares to the proposed transferee (the "DRAG-ALONG RIGHTS"). The
exercise of Drag-Along Rights are subject to the conditions that (i) the
consideration to be received by the Holders shall be the same type of
consideration received by the Permitted Holder or Permitted Holders in the Drag
Sale and, in any event, shall be cash or freely transferable marketable
securities and (b) after giving effect to such Drag Sale, the Permitted Holders
shall not own, directly or indirectly, any Capital Stock of the Company or the
surviving entity or rights to purchase such Capital Stock.
Any Warrants or Warrant Shares purchased from the
holders thereof pursuant to the exercise of such Drag-Along Rights shall be paid
for at the same price per share of Common Stock and on the same terms and
conditions as such proposed transfer of Common Stock by the Permitted Holders
pursuant to the Drag Sale. If the securities to be purchased include securities
other than Common Stock, the price to be paid for the Warrants and Warrant
Shares shall be the same price per share or other denomination paid by the
proposed purchaser in the Drag Sale for like securities purchased from the
Permitted Holders or, if like securities are not purchased from the Permitted
Holders, the fair market value of such securities as determined by a nationally
recognized investment banking firm selected by the Company.
If at any time a Permitted Holder or Permitted
Holders intend to exercise Drag-Along Rights pursuant to this Section 8, such
Permitted Holder or Permitted Holders, as the case may be, shall give written
notice thereof to the Holders at least 10 Business Days prior to the
consummation of the proposed transaction. The notice shall set out, in
reasonable detail, (i) information concerning the identity of the proposed
transferee and (ii) a description of the material terms and conditions of the
proposed Drag Sale.
Section 9. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Global Warrants. The transfer and
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Agreement and the procedures of
the Depositary therefor.
(b) Exchange of a Beneficial Interest in a Global Warrant for
a Definitive Warrant.
(i) Any Holder of a beneficial interest in a Global Warrant
may upon request exchange such beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written instructions or such other form of
instructions as is customary for the Depositary from the Depositary or its
nominee on behalf of any Person having a beneficial interest in a Global Warrant
and, in the case of a Registrable Security, the following additional information
and documents (all of which may be submitted by facsimile):
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(A) if such beneficial interest is being delivered to
the Person designated by the Depositary as being the beneficial owner, a
certification to that effect (in substantially the form of Exhibit B hereto);
(B) if such beneficial interest is being transferred
(1) to a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act or (2)
pursuant to an exemption from registration in accordance with Rule 144 under the
Securities Act (based on an opinion of counsel if the Company so requests) or
(3) pursuant to an effective registration statement under the Securities Act, a
certification to that effect (in substantially the form of Exhibit B hereto);
(C) if such beneficial interest is being transferred
to any institutional "accredited investor," within the meaning of Rule
50l(a)(l), (2), (3) or (7) under the Securities Act pursuant to a private
placement exemption from the registration requirements of the Securities Act
(based on an opinion of counsel if the Company so requests), a certification to
that effect (in substantially the form of Exhibit B hereto) and a certification
from the applicable transferee;
(D) if such beneficial interest is being transferred
pursuant to an exemption from registration in accordance with Rule 904 under the
Securities Act (and based on an opinion of counsel if the Company so requests),
a certification to that effect (in substantially the form of Exhibit B);
provided, however, that no such exchange shall be made during the Restricted
Period; or
(E) if such beneficial interest is being transferred
in reliance on another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests),
a certification to that effect (in substantially the form of Exhibit B hereto);
then the Warrant Agent shall cause, in accordance with the standing
instructions and procedures existing between the Depositary and Warrant
Agent, the number of Warrants and Warrant Shares represented by the
Global Warrant to be reduced by the number of Warrants and Warrant
Shares to be represented by the Definitive Warrants to be issued in
exchange for the interest of such Person in the Global Warrant and,
following such reduction, the Company shall execute and the Warrant
Agent shall countersign and deliver to the transferee, as the case may
be, a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section 9(b) shall be registered
in such names as the Depositary pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Warrant Agent. The
Warrant Agent shall deliver such Definitive Warrants to the Persons in whose
names such Warrants are so registered.
(iii) Notwithstanding the foregoing, a beneficial interest in
the Regulation S Global Warrant may not be exchanged for a Definitive Warrant or
transferred to a Person who takes delivery thereof in the form of a Definitive
Warrant prior to (x) the expiration of the Restricted Period and (y) the receipt
by the Warrant Agent of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act, except in the case of a transfer
pursuant to an exemption from the registration requirements of the Securities
Act other than Rule 903 or Rule 904.
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(c) Transfer and Exchange of Definitive Warrants.
When Definitive Warrants are presented to the Warrant Agent
with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number
of Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as
requested if its requirements for such transactions are met; provided,
however, that the Definitive Warrants presented or surrendered for
registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Warrant
Agent, duly executed by the Holder thereof or by his attorney, duly
authorized in writing; and
(y) in the case of Registrable Securities, such
request shall be accompanied by the following additional information
and documents, as applicable:
(iii) if such Registrable Security is being delivered to the
Warrant Agent by a Holder for registration in the name of such Holder, without
transfer, a certification from such Holder to that effect (in substantially the
form of Exhibit B hereto);
(iv) if such Registrable Security is being transferred (1)
to a "qualified institutional buyer" (as defined in Rule 144A under the
Securities Act) in accordance with Rule 144A under the Securities Act or (2)
pursuant to an exemption from registration in accordance with Rule 144 under the
Securities Act (and based on an opinion of counsel if the Company so requests)
or (3) pursuant to an effective registration statement under the Securities Act,
a certification to that effect (in substantially the form of Exhibit B hereto);
(v) if such Registrable Security is being transferred to an
institutional "accredited investor," within the meaning of Rule 501(a)(1), (2),
(3) or (7) under the Securities Act pursuant to a private placement exemption
from the registration requirements of the Securities Act (and based on an
opinion of counsel if the Company so requests), a certification to that effect
(in substantially the form of Exhibit B hereto) and a certification from the
applicable transferee:
(vi) if such Registrable Security is being transferred
pursuant to an exemption from registration in accordance with Rule 904 under the
Securities Act (and based on an opinion of counsel if the Company so requests),
a certification to that effect (in substantially the form of Exhibit B hereto);
or
(vii) if such Registrable Security is being transferred in
reliance on another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests),
a certification to that effect (in substantially the form of Exhibit B hereto).
(d) Restrictions on Exchange or Transfer of a Definitive
Warrant for a Beneficial Interest in a Global Warrant. A Definitive Warrant may
not be exchanged for a beneficial interest in a Global Warrant except upon
satisfaction of the requirements set forth below. Upon receipt by
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<PAGE> 29
the Warrant Agent of a Definitive Warrant, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Warrant Agent,
together with:
(i) if such Definitive Warrant is a Registrable Security,
certification from the Holder thereof (in substantially the form of Exhibit B
hereto) to the effect that such Definitive Warrant is being transferred by such
Holder either (A) to a "qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under the Securities Act,
(B) outside the United States to a foreign Person in a transaction meeting the
requirements of Rule 904 under the Securities Act (and based on an opinion of
counsel if the Company so requests) or (C) to an "institutional accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, pursuant to a private placement exemption from the registration
requirements of the Securities Act, who has provided a certification to that
effect (and based on an opinion of counsel if the Company so requests) and who
wishes to take delivery thereof in the form of a beneficial interest in a Global
Warrant; and
(ii) whether or not such Definitive Warrant is a Registrable
Security, written instructions directing the Warrant Agent to make, or to direct
the Depositary to make, an endorsement on the Global Warrant to reflect an
increase in the number of Warrants and Warrant Shares represented by the Global
Warrant equal to the number of Warrants and Warrant Shares represented by such
Definitive Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants and Warrant Shares represented by the Global Warrant to be increased
accordingly. If no Global Warrants are then outstanding, the Company shall issue
and the Warrant Agent shall countersign a new Global Warrant representing the
appropriate number of Warrants and Warrant Shares.
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 9), a Global Warrant may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Countersigning of Definitive Warrants in Absence of
Depositary. If at any time:
(i) the Depositary for the Global Warrants notifies the
Company that the Depositary is unwilling or unable to continue as Depositary for
the Global Warrants and a successor Depositary for the Global Warrants is not
appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of Definitive Warrants
under this Agreement,
then the Company shall execute, and the Warrant Agent, upon written instructions
signed by an officer of the Company, shall countersign and deliver Definitive
Warrants, in an aggregate number
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equal to the number of Warrants represented by the Global Warrants, in exchange
for such Global Warrants.
(g) Legends.
(i) Except for any Registrable Security sold or transferred
(including any Registrable Security represented by a Global Warrant) as
discussed in clause (ii) below, each Warrant Certificate evidencing the Global
Warrants and the Definitive Warrants (and all Warrants issued in exchange
therefor or substitution thereof) and each certificate representing the Warrant
Shares shall be substantially in the form of Exhibit A hereto and shall bear a
legend in substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY
THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) TO CERTAIN INSTITUTIONAL ACCREDITED INVESTORS
WITHIN THE MEANING OF SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF RULE 501
UNDER THE SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR
THE ACCOUNT OF SUCH AN INSTITUTIONAL ACCREDITED INVESTOR FOR INVESTMENT
PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER OR SALE IN CONNECTION WITH
ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, (d) FOLLOWING THE
RELEASE OF PROCEEDS FROM THE ESCROW ACCOUNT, OUTSIDE THE UNITED STATES
TO A NON-UNITED STATES PERSON IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 904 UNDER THE SECURITIES ACT OR (e) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT
(AND BASED ON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO
THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
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(ii) Separability Legend. Until the Separation Date, each
Warrant Certificate shall bear a legend in substantially the following form (the
"Separability Legend"):
"UNTIL THE SEPARATION DATE (AS DEFINED), THIS WARRANT HAS BEEN ISSUED
AS, AND MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE ASSOCIATED 12
3/4% SENIOR SUBORDINATED NOTES DUE 2007. EACH UNIT CONSISTS OF $1,000
PRINCIPAL AMOUNT OF NOTES AND A WARRANT TO PURCHASE 0.2298 SHARES OF
COMMON STOCK, SUBJECT TO ADJUSTMENT UNDER CERTAIN CIRCUMSTANCES. A COPY
OF THE INDENTURE PURSUANT TO WHICH THE NOTES HAVE BEEN ISSUED IS
AVAILABLE FROM THE COMPANY UPON REQUEST."
(iii) Upon any sale or transfer of a Registrable Security
(including any Registrable Security represented by a Global Warrant) pursuant to
an effective registration statement under the Securities Act, pursuant to Rule
144 under the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required:
(A) in the case of any Registrable Security that is a
Definitive Warrant, the Warrant Agent shall permit the Holder thereof to
exchange such Registrable Security for a Definitive Warrant that does not bear
the legend set forth in clause (i) above and rescind any restriction on the
transfer of such Registrable Security; and
(B) in the case of any Registrable Security
represented by a Global Warrant, such Registrable Security shall not be required
to bear the legend set forth in clause (i) above but shall continue to be
subject to the provisions of Section 7(e) hereof; provided, however, that with
respect to any request for an exchange of a Registrable Security that is
represented by a Global Warrant for a Definitive Warrant that does not bear the
legend set forth in clause (i) above, which request is made in reliance upon
Rule 144 (and based upon an opinion of counsel if the Company so requests), the
Holder thereof shall certify in writing to the Warrant Agent that such request
is being made pursuant to Rule 144 (such certification to be substantially in
the form of Exhibit B hereto).
(h) Cancellation of Global Warrant. At such time as all
beneficial interests in Global Warrants have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, all Global Warrants
shall be returned to or retained and cancelled by the Warrant Agent.
(i) Obligations with Respect to Transfers and Exchanges of
Warrants.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent is hereby authorized to countersign,
in accordance with the provisions of Section 3 and this Section 9, Definitive
Warrants and Global Warrants as required pursuant to the provisions of this
Section 9.
(ii) All Definitive Warrants and Global Warrants issued upon
any registration of transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to the same
benefits under this Agreement as the Definitive Warrants or Global Warrants
surrendered upon such registration of transfer or exchange.
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<PAGE> 32
(iii) Prior to due presentment for registration of transfer or
exchange of any Warrant, the Warrant Agent and the Company may deem and treat
the Person in whose name any Warrant is registered (the "HOLDER" of such
Warrant) as the absolute owner of such Warrant and neither the Warrant Agent,
nor the Company shall be affected by notice to the contrary.
(iv) No service charge shall be made to a Holder for any
registration, transfer or exchange.
Section 10. Terms of Warrants; Exercise of Warrants.
Subject to the terms of this Agreement, each Warrant Holder
shall have the right, which may be exercised commencing at the opening of
business on the Exercisability Date and until 5:00 p.m., New York City time, on
the Expiration Date to receive from the Company the number of fully paid and
nonassessable Warrant Shares which the Holder may at the time be entitled to
receive on exercise of such Warrants and payment of the Exercise Price then in
effect for such Warrant Shares; provided, however, that no Holder shall be
entitled to exercise such Holder's Warrants at any time, unless, at the time of
exercise, (i) a registration statement under the Securities Act relating to the
Warrant Shares has been filed with, and declared effective by, the Commission,
and no stop order suspending the effectiveness of such registration statement
has been issued by the Commission or (ii) the issuance of the Warrant Shares is
permitted pursuant to an exemption from the registration requirements of the
Securities Act. Subject to the provisions of the following paragraph of this
Section 10, each Warrant not exercised prior to 5:00 p.m., New York City time,
on the Expiration Date shall become void and all rights thereunder and all
rights in respect thereof under this Agreement shall cease as of such time. No
adjustments as to dividends will be made upon exercise of the Warrants.
The Company shall give notice not less than 90, and not more
than 120, days prior to the Expiration Date to the Holders of all then
outstanding Warrants to the effect that the Warrants will terminate and become
void as of 5:00 p.m., New York City time, on the Expiration Date. If the Company
fails to give such notice, the Warrants will not expire until 90 days after the
Company gives such notice; provided, however, in no event will Holders be
entitled to any damages or other remedy for the Company's failure to give such
notice other than any such extension.
A Warrant may be exercised upon surrender to the Company at
the principal office of the Warrant Agent of the certificate or certificates
evidencing the Warrant to be exercised with the form of election to purchase on
the reverse thereof duly completed and signed, which signature shall be
guaranteed by a bank or trust company having an office or correspondent in the
United States or a broker or dealer which is a member of a registered securities
exchange or the National Association of Securities Dealers, Inc., and upon
payment to the Warrant Agent for the account of the Company of the Exercise
Price as adjusted as herein provided for each of the Warrant Shares in respect
of which such Warrant is then exercised. Payment of the aggregate Exercise Price
shall be made by Federal wire transfer to the account designated by the Company
or by certified or official bank check, payable to the order of the Company. In
the alternative, each Holder may exercise its right to receive Warrant Shares on
a net basis, such that without the exchange of any funds, the Holder receives
that number of Warrant Shares otherwise issuable upon exercise of its Warrants
less that number of Warrant Shares having a fair market value equal to the
aggregate Exercise Price that would otherwise have been paid by the Holder for
the Warrant Shares being issued. For purposes of the foregoing sentence, "fair
market value" of the Warrant
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<PAGE> 33
Shares shall be the Current Market Price of the Warrant Shares on the date
immediately preceding the date of payment of the Exercise Price as determined by
the procedures set forth in Section 15.6. The exercise of Warrants by Holders of
beneficial interests in Global Warrants shall be effected in accordance with
this Agreement and the procedures of the Depositary therefor.
Subject to the provisions of Section 11 hereof, upon surrender
of Warrants and payment of the Exercise Price as provided above by any Holder,
the Warrant Agent shall promptly notify the Company. and the Company shall
promptly transfer to such Holder a certificate or certificates for the
appropriate number of Warrant Shares or other securities or property (including
any money) to which such Holder is entitled, registered or otherwise placed in,
or payable to the order of, such name or names as may be directed in writing by
such Holder, and shall deliver such certificate or certificates representing the
Warrant Shares and any other securities or property (including any money) to
such Holder or any other Person or Persons entitled to receive the same,
together with an amount in cash in lieu of any fraction of a share as provided
in Section 17. Any such certificate or certificates representing the Warrant
Shares shall be deemed to have been issued and any Person so designated to be
named therein shall be deemed to have become a Holder of record of such Warrant
Shares as of the date of the surrender of such Warrants and payment of the
Exercise Price.
The Warrants shall be exercisable commencing on the
Exercisability Date, at the election of the Holders thereof, either in full or
from time to time in part, and, in the event that a certificate evidencing
Warrants is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the Expiration Date, a new
certificate evidencing the remaining Warrant or Warrants will be issued, and the
Warrant Agent is hereby irrevocably authorized to countersign and to deliver the
required new Warrant Certificate or Certificates pursuant to the provisions of
this Section 10 and of Section 4 hereof, and the Company, whenever required by
the Warrant Agent, will supply the Warrant Agent with Warrant Certificates duly
executed on behalf of the Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants
shall be cancelled by the Warrant Agent. Such cancelled Warrant Certificates
shall, upon the Company's written request, then be returned by the Warrant Agent
to the Company. The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay to the Company all monies
received by the Warrant Agent for the purchase of the Warrant Shares through the
exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
Section 11. Payment of Taxes. The Company will pay all
documentary stamp taxes attributable to the initial issuance of Warrant Shares
upon the exercise of Warrants or to any separation of the Warrants from the
Notes; provided, however, that the Company shall not be required to pay any tax
or taxes which may be payable in respect of any transfer involved in the issue
of any Warrant Certificates or any certificates for Warrant Shares in a name
other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or deliver
such Warrant Certificates unless or until the
29
<PAGE> 34
Person or Persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
Section 12. Mutilated or Missing Warrant Certificates. In case
any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed,
the Company may in its discretion issue and the Warrant Agent may countersign,
in exchange and substitution for and upon cancellation of the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence reasonably
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and indemnity, if requested, also
reasonably satisfactory to them. Applicants for such substitute Warrant
Certificates shall also comply with such other reasonable regulations and pay
such other reasonable charges as the Company or the Warrant Agent may prescribe.
Section 13. Reservation of Warrant Shares. The Company will at
all times reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The transfer agent for the Common Stock (the "TRANSFER AGENT")
and every subsequent transfer agent for any shares of the Company's Capital
Stock issuable upon the exercise of any of the rights of purchase aforesaid will
be irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with the Transfer Agent and with every subsequent
transfer agent for any shares of the Company's Capital Stock issuable upon the
exercise of the rights of purchase represented by the Warrants. The Warrant
Agent is hereby irrevocably authorized to requisition from time to time from
such Transfer Agent the stock certificates required to honor outstanding
Warrants upon exercise thereof in accordance with the terms of this Agreement.
The Company will supply such Transfer Agent with duly executed certificates for
such purposes and will provide or otherwise make available any cash which may be
payable as provided in Section 17. The Company will furnish such Transfer Agent
a copy of all notices of adjustments and certificates related thereto,
transmitted to each Holder of the Warrants pursuant to Section 18 hereof. Prior
to the initial underwritten public offering of Capital Stock of the Company, the
Company may act as Transfer Agent for the Common Stock. The Warrant Agent hereby
agrees that it will not issue any stock certificates delivered hereunder other
than upon the exercise of Warrants in accordance with the terms of this
Agreement and, promptly after the issuance of any such stock certificates, to
notify the Transfer Agent of such issuance.
Before taking any action which would cause an adjustment
pursuant to Section 15 hereof that would reduce the Exercise Price below the
then par value (if any) of the Warrant Shares, the Company will take any
corporate action which may, in the opinion of its counsel (which may be counsel
employed by the Company), be necessary in order that the Company may validly and
legally issue fully paid and nonassessable Warrant Shares at the Exercise Price
as so adjusted.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants in accordance with the terms of this Agreement
(including the payment of the
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<PAGE> 35
Exercise Price) will, upon issue, be duly and validly issued, fully paid,
nonassessable, free of preemptive rights and free from all taxes, liens, charges
and security interests with respect to the issue thereof.
Section 14. Obtaining Stock Exchange Listings. The Company
will from time to time use its best efforts to take all action which may be
necessary so that the Warrant Shares, immediately upon their issuance upon the
exercise of Warrants, will be listed on the principal securities exchanges and
markets (including, without limitation, the Nasdaq National Market) within the
United States of America, if any, on which other shares of Common Stock are then
listed. Upon the listing of such Warrant Shares, the Company shall notify the
Warrant Agent in writing. The Company will obtain and keep all required permits
and records in connection with such listing.
Section 15. Adjustment of Exercise Price and Number of Warrant
Shares Issuable. The number and kind of shares issuable upon exercise of a
Warrant and the Exercise Price shall be subject to adjustment from time to time
as follows:
15.1 Stock Splits, Combinations, etc. In case the Company shall
hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (B) subdivide its outstanding shares of Common Stock, (C)
combine its outstanding shares of Common Stock into a smaller number of shares,
or (D) issue by reclassification of its shares of Common Stock any shares of
capital stock of the Company, the Exercise Price in effect and the number of
Warrant Shares issuable upon exercise of each Warrant immediately prior to such
action shall be adjusted so that the Holder of any Warrant thereafter exercised
shall be entitled to receive the number of shares of capital stock of the
Company which such Holder would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. An adjustment made
pursuant to this Section 15.1 shall become effective immediately after the
record date in the case of a dividend and shall become effective immediately
after the effective date in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this Section
15.1, the Holder of any Warrant thereafter exercised shall become entitled to
receive shares of two or more classes of capital stock of the Company, the Board
of Directors of the Company (whose determination shall be conclusive) shall
determine the allocation of the adjusted Exercise Price between or among shares
of such classes of capital stock.
15.2 Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in Section 15.1 and other than
a change in par value, or from par value to no par value, or from no par value
to par value or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Company with or into another corporation (other
than a merger or acquisition in which the Company is the continuing corporation
and which does not result in any reclassification or change of the then
outstanding shares of Common Stock or other capital stock issuable upon exercise
of the Warrants) or in case of any sale or conveyance to another corporation of
the property of the Company as an entirety or substantially as an entirety,
then, as a condition of such reclassification, change, consolidation, merger,
sale or conveyance, the Company or such a successor or purchasing corporation,
as the case may be, shall forthwith make lawful and adequate provision whereby
the Holder of each Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance
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<PAGE> 36
equivalent in value to the number of shares of Common Stock issuable upon
exercise of such Warrant immediately prior to such reclassification, change,
consolidation, merger, sale or conveyance and enter into a supplemental warrant
agreement so providing. Such provisions shall include provision for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 15. If the issuer of securities deliverable upon
exercise of Warrants under the supplemental warrant agreement is an affiliate of
the formed, surviving or transferee corporation, that issuer shall join in the
supplemental warrant agreement. The above provisions of this Section 15.2 shall
similarly apply to successive reclassifications and changes of shares of Common
Stock and to successive consolidations, mergers, sales or conveyances.
15.3 Issuance of Options or Convertible Securities. In the event
the Company shall, at any time or from time to time after the date hereof,
issue, sell, distribute or otherwise grant in any manner (including by
assumption) to all holders of the Common Stock any rights to subscribe for or to
purchase, or any warrants or options for the purchase of, Common Stock (any such
rights, warrants or options being referred to herein as "OPTIONS") or any stock
or securities convertible into or exchangeable for Common Stock (any such
convertible or exchangeable stock being referred to herein as "CONVERTIBLE
SECURITIES") or any Convertible Securities (other than upon exercise of any
Option), whether or not such Options or the rights to convert or exchange such
Convertible Securities are immediately exercisable, and the price per share at
which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the aggregate amount, if any, received or receivable by the Company as
consideration for the issuance, sale, distribution or granting of such Options
or any such Convertible Security, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
all such Options or upon conversion or exchange of all such Convertible
Securities, plus, in the case of Options to acquire Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
conversion or exchange of all such Convertible Securities, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of all such Convertible Securities or
upon the conversion or exchange of all Convertible Securities issuable upon the
exercise of all such Options) shall be less than the Current Market Price per
share of Common Stock on the record date for the issuance, sale, distribution or
granting of such Options or Convertible Securities (any such event being herein
called a "DISTRIBUTION"), then, effective upon such Distribution, (I) the
Exercise Price shall be reduced to the price (calculated to the nearest 1/1,000
of one cent) determined by multiplying the Exercise Price in effect immediately
prior to such Distribution by a fraction, the numerator of which shall be the
sum of (i) the number of shares of Common Stock outstanding (exclusive of any
treasury shares) immediately prior to such Distribution multiplied by the
Current Market Price per share of Common Stock on the date of such Distribution
plus (ii) the consideration, if any, received by the Company upon such
Distribution, and the denominator of which shall be the product of (A) the total
number of shares of Common Stock outstanding (exclusive of any treasury shares)
immediately after such Distribution multiplied by (B) the Current Market Price
per share of Common Stock on the record date for such Distribution and (II) the
number of shares of Common Stock purchasable upon the exercise of each Warrant
shall be increased to a number determined by multiplying the number of shares of
Common Stock so purchasable immediately prior to the record date for such
Distribution by a fraction, the numerator of which shall be the Exercise Price
in effect immediately prior to the adjustment required by clause (i) of this
sentence and the denominator of which shall be the Exercise Price in effect
immediately after such adjustment. For purposes of the foregoing, the total
maximum number of shares of Common Stock issuable upon exercise of all such
Options or upon conversion or exchange of all such Convertible Securities or
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<PAGE> 37
upon the conversion or exchange of the total maximum amount of the Convertible
Securities issuable upon the exercise of all such Options shall be deemed to
have been issued as of the date of such Distribution and thereafter shall be
deemed to be outstanding and the Company shall be deemed to have received as
consideration therefor such price per share, determined as provided above.
Except as provided in Sections 15.10 and 15.11 below, no additional adjustment
of the Exercise Price shall be made upon the actual exercise of such Options or
upon conversion or exchange of the Convertible Securities or upon the conversion
or exchange of the Convertible Securities issuable upon the exercise of such
Options.
15.4 Dividends and Distributions. In the event the Company shall,
at any time or from time to time after the date hereof, distribute to all the
holders of Common Stock any dividend or other distribution of cash, evidences of
its indebtedness, other securities or other properties or assets (in each case
other than (i) dividends payable in Common Stock, Options or Convertible
Securities and (ii) any cash dividend or other cash distributions from current
or retained earnings), or any options, warrants or other rights to subscribe for
or purchase any of the foregoing, then (A) the Exercise Price shall be decreased
to a price determined by multiplying the Exercise Price then in effect by a
fraction, the numerator of which shall be the Current Market Price per share of
Common Stock on the record date for such distribution less the sum of (X) the
cash portion, if any, of such distribution per share of Common Stock outstanding
(exclusive of any treasury shares) on the record date for such distribution plus
(Y) the then fair market value (as determined in good faith by the Board of
Directors of the Company) per share of Common Stock outstanding (exclusive of
any treasury shares) on the record date for such distribution of that portion,
if any, of such distribution consisting of evidences of indebtedness, other
securities, properties, assets, options, warrants or subscription or purchase
rights, and the denominator of which shall be such Current Market Price per
share of Common Stock and (B) the number of shares of Common Stock purchasable
upon the exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock so purchasable immediately
prior to the record date for such distribution by a fraction, the numerator of
which shall be the Exercise Price in effect immediately prior to the adjustment
required by clause (A) of this sentence and the denominator of which shall be
the Exercise Price in effect immediately after such adjustment. The adjustments
required by this Section 15.4 shall be made whenever any such distribution
occurs retroactive to the record date for the determination of stockholders
entitled to receive such distribution.
15.5 Adjustment for Sale of Common Stock Below Current Market
Price. If, after the date hereof, the Company sells any Common Stock or any
securities convertible into or exchangeable or exercisable for the Common Stock
(other than (i) pursuant to the exercise of the Warrants, (ii) any security
convertible into, or exchangeable or exercisable for, the Common Stock as to
which the issuance thereof has previously been the subject of any required
adjustment pursuant to this Section 15, (iii) the issuance of Common Stock upon
the conversion, exchange or exercise of convertible, exchangeable or exercisable
securities of the Company outstanding on the date of this Agreement (to the
extent in accordance with the terms of such securities as in effect on the date
of this Agreement) or (iv) Excluded Securities) at a price per share less than
the Current Market Price, the Exercise Price shall be adjusted in accordance
with the formula:
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<PAGE> 38
E5 = E x (O + N)
--------------------
(O+(N x P/M))
where:
E' = the adjusted Exercise Price;
E = the current Exercise Price;
O = the number of shares of Common Stock outstanding on the date of
sale of Common Stock at a price per share less than the Current
Market Price to which this Section 15.5 applies;
N = the number of shares of Common Stock so sold or the maximum
stated number of shares of Common Stock issuable upon the
conversion, exchange, or exercise of any such convertible,
exchangeable or exercisable securities, as the case may be;
P = the offering price per share pursuant to any such convertible,
exchangeable or exercisable securities so sold or the sale price
of the shares so sold, as the case may be; and
M = the Current Market Price as of the Time of Determination or at
the time of sale, as the case may be.
The adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive the
rights, warrants or options to which this Section 15.5 applies or upon
consummation of the sale of Common Stock, as the case may be. To the extent that
shares of Common Stock are not delivered after the expiration of such rights or
warrants, the Exercise Price shall be readjusted to the Exercise Price which
would otherwise be in effect had the adjustment made upon the issuance of such
rights or warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. In the event that such rights or
warrants are not so issued, the Exercise Price shall again be adjusted to be the
Exercise Price which would then be in effect if such date fixed for
determination of stockholders entitled to receive such rights or warrants had
not been so fixed.
No adjustment shall be made under this Section 15.5 if (I) the
application of the formula stated above in this Section 15.5 would result in a
value of E' that is lower than the value of E or (II) such adjustment would
require an increase or decrease of less than 1% to the Exercise Price; provided,
that any adjustment not made as a result of this clause (II) shall be carried
forward and included in the next adjustment required to be made hereunder.
Except as provided in Sections 15.10 and 15.11 below, no adjustment of the
Exercise Price shall be made upon the actual conversion or exchange of the
Convertible Securities.
15.6 Current Market Price. For the purpose of any computation of
Current Market Price under this Section 15 and Section 17, the Current Market
Price per share of Common Stock at any date shall be (x) for purposes of Section
17, the closing price on the business day immediately prior to the exercise of
the applicable Warrant pursuant to Section 10 and (y) in all other cases, the
average of the daily closing prices for the shorter of (i) the 20 consecutive
trading days ending on the last full trading day on the exchange or market
specified in the second succeeding sentence prior to the Time of Determination
(as defined below) and (ii) the period
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<PAGE> 39
commencing on the date next succeeding the first public announcement of the
issuance, sale, distribution or granting in question through such last full
trading day prior to the Time of Determination. The term "TIME OF DETERMINATION"
as used herein shall be the time and date of the earlier to occur of (A) the
date as of which the Current Market Price is to be computed and (B) the last
full trading day on such exchange or market before the commencement of
"ex-dividend" trading in the Common Stock relating to the event giving rise to
the adjustment required by Sections 15.1, 15.2, 15.3 or 15.4. The closing price
for any day shall be the last reported sale price regular way or, in case no
such reported sale takes place on such day, the average of the closing bid and
asked prices regular way for such day, in each case (1) on the principal
national securities exchange on which the shares of Common Stock are listed or
to which such shares are admitted to trading or (2) if the Common Stock is not
listed or admitted to trading on a national securities exchange, in the
over-the-counter market as reported by Nasdaq National Market or any comparable
system or (3) if the Common Stock is not listed on Nasdaq National Market or a
comparable system, as furnished by two members of the NASD selected from time to
time in good faith by the Board of Directors of the Company for that purpose. In
the absence of all of the foregoing, or if for any other reason the Current
Market Price per share cannot be determined pursuant to the foregoing provisions
of this Section 15.6, the Current Market Price per share shall be the fair
market value thereof as determined in good faith by the Board of Directors of
the Company.
15.7 Certain Distributions. If the Company shall pay a dividend or
make any other distribution payable in Options or Convertible Securities, then,
for purposes of Section 15.4 above, such Options or Convertible Securities shall
be deemed to have been issued or sold without consideration.
15.8 Consideration Received. If any shares of Common Stock, Options
or Convertible Securities shall be issued, sold or distributed for a
consideration other than cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed to be the then fair
market value of such consideration (as determined in good faith by the Board of
Directors of the Company). If any Options shall be issued in connection with the
issuance and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been issued
without consideration; provided, however, that if such Options have an exercise
price equal to or greater than the Current Market Price of the Common Stock on
the date of issuance of such Options, then such Options shall be deemed to have
been issued for consideration equal to such exercise price.
15.9 Deferral of Certain Adjustments. No adjustment to the Exercise
Price (including the related adjustment to the number of shares of Common Stock
purchasable upon the exercise of each Warrant) shall be required hereunder
unless such adjustment, together with other adjustments carried forward as
provided below, would result in an increase or decrease of at least one percent
of the Exercise Price; provided that any adjustments which by reason of this
Section 15.9 are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. No adjustment need be made for a change in
the par value of the Common Stock. All calculations under this Section 15 shall
be made to the nearest 1/1,000 of one cent or to the nearest 1/1000 of a share,
as the case may be.
15.10 Changes in Options and Convertible Securities. If the exercise
price provided for in any Options referred to in Section 15.5 above, the
additional consideration, if any, payable upon
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the conversion or exchange of any Convertible Securities referred to in Sections
15.3 or 15.5 above, or the rate at which any Convertible Securities referred to
in Sections 15.3 or 15.5 above are convertible into or exchangeable for Common
Stock shall change at any time (other than under or by reason of provisions
designed to protect against dilution upon an event which results in a related
adjustment pursuant to this Section 15), the Exercise Price then in effect and
the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall forthwith be readjusted (effective only with respect to any
exercise of any Warrant after such readjustment) to the Exercise Price and
number of shares of Common Stock so purchasable that would then be in effect had
the adjustment made upon the issuance, sale, distribution or granting of such
Options or Convertible Securities been made based upon such changed purchase
price, additional consideration or conversion rate, as the case may be, but only
with respect to such Options and Convertible Securities as then remain
outstanding.
15.11 Expiration of Options and Convertible Securities. If, at any
time after any adjustment to the number of shares of Common Stock purchasable
upon the exercise of each Warrant shall have been made pursuant to Sections
15.3, 15.5 or 15.10 above or this Section 15.11, any Options or Convertible
Securities shall have expired unexercised, the number of such shares so
purchasable shall, upon such expiration, be readjusted and shall thereafter be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
shares of Common Stock deemed to have been issued in connection with such
Options or Convertible Securities were the shares of Common Stock, if any,
actually issued or sold upon the exercise of such Options or Convertible
Securities and (ii) such shares of Common Stock, if any, were issued or sold for
the consideration actually received by the Company upon such exercise plus the
aggregate consideration, if any, actually received by the Company for the
issuance, sale, distribution or granting of all such Options or Convertible
Securities, whether or not exercised; provided that no such readjustment shall
have the effect of decreasing the number of such shares so purchasable by an
amount (calculated by adjusting such decrease to account for all other
adjustments made pursuant to this Section 15 following the date of the original
adjustment referred to above) in excess of the amount of the adjustment
initially made in respect of the issuance, sale, distribution or granting of
such Options or Convertible Securities.
15.12 Other Adjustments. In the event that at any time, as a result
of an adjustment made pursuant to this Section 15, the Holders shall become
entitled to receive any securities of the Company other than shares of Common
Stock, thereafter the number of such other securities so receivable upon
exercise of the Warrants and the Exercise Price applicable to such exercise
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the shares of
Common Stock contained in this Section 15.
15.13 No Adjustment Required. Without limiting any other exception
contained in this Section 15, and in addition thereto, no adjustment will be
made for:
(i) exercises or conversions of any Options or Convertible
Securities outstanding on the date hereof;
(ii) issuances of Options, Convertible Securities or Common
Stock to employees, directors or consultants of the Company or any of its
subsidiaries pursuant to a plan approved by the Board of Directors of the
Company;
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(iii) rights to purchase Common Stock pursuant to a Company
plan for reinvestment of dividends or interest;
(iv) issuances of Options, Convertible Securities or Common
Stock in bona fide public offerings or private placements pursuant to Section
4(2) of the Securities Act, Regulation D thereunder or Regulation S, involving
at least one investment bank of national reputation;
(v) issuances of Options, Convertible Securities or Common
Stock in connection with the establishment of commercial bank facilities,
capital lease obligations or other issuances of primarily debt obligations or
securities; or
(vi) issuances of Excluded Securities.
No adjustment in the Exercise Price will be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
Exercise Price, provided, however, that any adjustment which is not made will be
carried forward and taken into account in any subsequent adjustment. The
Exercise Price will in no event be less than the par value of the Common Stock;
provided, however, the foregoing minimum Exercise Price shall not be applicable
for purposes of determining adjustments to the number of shares issuable upon
exercise of a Warrant.
Section 16. Statement on Warrants. Irrespective of any
adjustment in the number or kind of shares issuable upon the exercise of the
Warrants or the Exercise Price, Warrants theretofore or thereafter issued may
continue to express the same number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
Section 17. Fractional Interest. The Company shall not be
required to issue fractional shares of Common Stock on the exercise of Warrants.
If more than one Warrant shall be presented for exercise in full at the same
time by the same Holder, the number of full shares of Common Stock which shall
be issuable upon such exercise shall be computed on the basis of the aggregate
number of shares of Common Stock acquirable on exercise of the Warrants so
presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 17, be issuable on the exercise of any Warrant (or
specified portion thereof), the Company shall direct the Transfer Agent to pay
an amount in cash calculated by it to equal the then Current Market Price per
share multiplied by such fraction computed to the nearest whole cent. The
Holders, by their acceptance of the Warrant Certificates, expressly waive any
and all rights to receive any fraction of a share of Common Stock or a stock
certificate representing a fraction of a share of Common Stock.
Section 18. Notices to Warrant Holders. Upon any adjustment of
the Exercise Price pursuant to Section 15, the Company shall promptly thereafter
(i) cause to be filed with the Warrant Agent a certificate of a firm of
independent public accountants of recognized standing selected by the Board of
Directors of the Company (who may be the regular auditors of the Company)
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each of the registered Holders of
the Warrant Certificates at his address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage
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prepaid. The Warrant Agent shall be entitled to rely on the above-referenced
accountant's certificate and shall be under no duty or responsibility with
respect to any such certificate, except to exhibit the same from time to time to
any Holder desiring an inspection thereof during reasonable business hours. The
Warrant Agent shall not at any time be under any duty or responsibility to any
Holder to determine whether any facts exist that may require any adjustment of
the number of shares of Common Stock or other stock or property issuable on
exercise of the Warrants or the Exercise Price, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment or the validity or value (or the kind or amount) of
any shares of Common Stock or other stock or property which may be issuable on
exercise of the Warrants. The Warrant Agent shall not be responsible for any
failure of the Company to make any cash payment or to issue, transfer or deliver
any shares of Common Stock or stock certificates or other common stock or
property upon the exercise of any Warrant.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for or
purchase shares of Common Stock or of any other subscription rights or warrants;
or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of consolidated
earnings or earned surplus or dividends payable in shares of Common Stock or
distributions referred to in Section 15 hereof); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is required, or
of the conveyance or transfer of the properties and assets of the Company
substantially as an entirety, or of any reclassification or change of Common
Stock issuable upon exercise of the Warrants (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) a Change of Control occurs; then the Company shall cause
to be filed with the Warrant Agent and shall cause to be given to each of the
registered Holders of the Warrant Certificates at such Holder's address
appearing on the Warrant register, at least 20 days (or 10 days in any case
specified in clauses (a) or (b) above) prior to the applicable record date
hereinafter specified, or promptly in the case of events for which there is no
record date, by first class mail, postage prepaid, a written notice stating (i)
the date as of which the holders of record of shares of Common Stock to be
entitled to receive any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender offer or
exchange offer for shares of Common Stock, or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or winding
up or Change of Control is expected to become effective or consummated, and the
date as of which it is expected that holders of record of shares of Common Stock
shall be entitled to exchange such shares for securities or other property, if
any, deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up or Change of Control. The
failure to give the notice required by this Section 18 or any defect therein
shall not affect the legality or validity of any distribution,
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right, option, warrant, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or Change of Control or the vote upon
any action. Nothing contained in this Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the Holders thereof the right
to vote or to consent or to receive notice as shareholders in respect of the
meetings of shareholders or the election of Directors of the Company or any
other matter, or any rights whatsoever as shareholders of the Company.
Section 19. Merger, Consolidation or Change of Name of Warrant
Agent. Any corporation into which the Warrant Agent may be merged or with which
it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor warrant agent under
the provisions of Section 21. Any such successor Warrant Agent shall promptly
cause notice of its succession as Warrant Agent to be mailed (by first class
mail, postage prepaid) to each Holder at such Holder's last address as shown on
the register maintained by the Warrant Agent pursuant to this Agreement. In case
at the time such successor to the Warrant Agent shall succeed to the agency
created by this Agreement, and in case at that time any of the Warrant
Certificates shall have been countersigned but not delivered, any such successor
to the Warrant Agent may adopt the countersignature of the original Warrant
Agent; and in case at that time any of the Warrant Certificates shall not have
been countersigned, any successor to the Warrant Agent may countersign such
Warrant Certificates either in the name of the predecessor Warrant Agent or in
the name of the successor to the Warrant Agent; and in all such cases such
Warrant Certificates shall have the full force and effect provided in the
Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have the
full force and effect provided in the Warrant Certificates and in this
Agreement.
Section 20. Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The Warrant
Agent assumes no responsibility with respect to the distribution of the Warrant
Certificates except as herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any failure
of the Company to comply with any of the covenants contained in this Agreement
or in the Warrant Certificates to be complied with by the Company.
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The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Holder of
any Warrant Certificate in respect of any action taken, suffered or omitted by
it hereunder in good faith and in accordance with the opinion or the advice of
such counsel.
The Warrant Agent shall incur no liability or responsibility
to the Company or to any Holder of any Warrant Certificate for any action taken
in reliance on any Warrant Certificate, certificate of shares, notice,
resolution, waiver, consent, order, certificate, or other paper, document or
instrument believed by it to be genuine and to have been signed, sent or
presented by the proper parry or parties.
The Company agrees to pay to the Warrant Agent such
compensation for all services rendered by the Warrant Agent in the execution of
this Agreement as the parties shall agree from time to time, to reimburse the
Warrant Agent for all expenses, taxes and governmental charges and other charges
of any kind and nature reasonably incurred by the Warrant Agent in the execution
of this Agreement and to indemnify the Warrant Agent and save it harmless
against any and all liabilities, including judgments, costs and counsel fees,
for anything done or omitted by the Warrant Agent in the execution of this
Agreement except as a result of its negligence or willful misconduct.
The Warrant Agent shall be under no obligation to institute
any action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more Holders of Warrant
Certificates shall furnish the Warrant Agent with security and indemnity
satisfactory to the Warrant Agent for any costs and expenses which may be
incurred, but this provision shall not affect the power of the Warrant Agent to
take such action as it may consider proper, whether with or without any such
security or indemnity. All rights of action under this Agreement or under any of
the Warrants may be enforced by the Warrant Agent without the possession of any
of the Warrant Certificates or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding instituted
by the Warrant Agent shall be brought in its name as Warrant Agent and any
recovery of judgment shall be for the ratable benefit of the Holders of the
Warrants, as their respective rights or interests may appear. No provision of
this Agreement shall require the Warrant Agent to expend or risk its own funds.
The Warrant Agent, and any stockholder, director, officer or
employee of it, may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily interested in any transaction in which the
Company may be interested, or contract with or lend money to the Company or
otherwise act as fully and freely as though it were not Warrant Agent under this
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or willful
misconduct.
The Warrant Agent shall not at any time be under any duty or
responsibility to any Holder of any Warrant Certificate to make or cause to be
made any adjustment of the Exercise Price or number of the Warrant Shares or
other securities or property deliverable as provided in
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this Agreement, or to determine whether any facts exist which may require any of
such adjustments, or with respect to the nature or extent of any such
adjustments, when made, or with respect to the method employed in making the
same. The Warrant Agent shall not be accountable with respect to the validity or
value or the kind or amount of any Warrant Shares or of any securities or
property which may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other securities
will when issued be validly issued and fully paid and nonassessable. and makes
no representation with respect thereto.
Section 21. Resignation and Removal of Warrant Agent;
Appointment of Successor. No resignation or removal of the Warrant Agent and no
appointment of a successor warrant agent shall become effective until the
acceptance of appointment by the successor warrant agent as provided herein. The
Warrant Agent may resign its duties and be discharged from all further duties
and liability hereunder (except liability arising as a result of the Warrant
Agent's own negligence or willful misconduct) after giving written notice to the
Company. The Company may remove the Warrant Agent upon written notice, and the
Warrant Agent shall thereupon in like manner be discharged from all further
duties and liabilities hereunder, except as aforesaid. The Warrant Agent shall,
at the Company's expense, cause to be mailed (by first class mail, postage
prepaid) to each Holder of a Warrant at such Holder's last address as shown on
the register of the Company maintained by the Warrant Agent a copy of said
notice of resignation or notice of removal, as the case may be. Upon such
resignation or removal, the Company shall appoint in writing a new warrant
agent. If the Company shall fail to make such appointment within a period of 30
days after it has been notified in writing of such resignation by the resigning
Warrant Agent or after such removal, then the resigning Warrant Agent or the
Holder of any Warrant may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a corporation doing business under the
laws of the United States or any state thereof, in good standing and having a
combined capital and surplus of not less than $50,000,000. The combined capital
and surplus of any such new warrant agent shall be deemed to be the combined
capital and surplus as set forth in the most recent annual report of its
condition published by such warrant agent prior to its appointment, provided
that such reports are published at least annually pursuant to law or to the
requirements of a federal or state supervising or examining authority. After
acceptance in writing of such appointment by the new warrant agent, it shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as the Warrant Agent, without any further
assurance, conveyance, act or deed; but if for any reason it shall be necessary
or expedient to execute and deliver any further assurance, conveyance, act or
deed, the same shall be done at the expense of the Company and shall be legally
and validly executed and delivered by the resigning or removed Warrant Agent.
Not later than the effective date of any such appointment, the Company shall
give notice thereof to the resigning or removed Warrant Agent. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation of the Warrant
Agent or the appointment of a new warrant agent, as the case may be.
Section 22. Reports.
(a) Whether or not required by the rules and regulations of
the Commission, so long as any Warrants are outstanding, the Company will
furnish to the holders of Warrants upon request (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms l0-Q and 10-K if the Company were required to file such
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forms and (ii) all current reports that would be required to be filed with the
Commission on Form 8-K if the Company were required to file such reports, in
each case within the time periods specified in the Commissions rules and
regulations (the information and reports in clauses (i) and (ii), collectively,
"SEC REPORTS").
(b) The Company shall provide the Warrant Agent with a
sufficient number of copies of all SEC Reports that the Warrant Agent may be
required to deliver to the Holders of the Warrants under this Section 22.
Section 23. Special Mandatory Redemption. The Company shall
redeem (and each of the Holders hereby agrees to sell) all of the Warrants if
and upon the earlier to occur of (i) five Business Days following termination of
the Merger Agreement in accordance with its terms and (ii) September 15, 1999,
if the transactions contemplated by the Merger Agreement have not been
consummated by such date at a redemption price in cash equal to $13.4633 per
Warrant. Upon consummation of the transactions contemplated by the Merger
Agreement, the provisions of this Section 23 shall be null and void.
Section 24. Notices to Company and Warrant Agent. Any notice
or demand authorized by this Agreement to be given or made by the Warrant Agent
or by the Holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
WinsLoew Escrow Corp.
160 Village Street
Birmingham, Alabama 35242
Telecopy: (205) 408-7600
Telephone: (205) 408-7028
Attention: Chief Financial Officer
with copies to:
Greenberg & Traurig, P.A.
1221 Brickell Avenue, 21st Floor
Miami, Florida 33131
Telecopy: (305) 579-0500
Telephone: (305) 579-0717
Attention: Michael W. Hein, Esq.
In case the Company shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the
Company or by the Holder(s) of any Warrant Certificate to the Warrant Agent
shall be sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
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American Stock Transfer & Trust Company
40 Wall Street, 46th Floor
New York, New York 10005
Telecopy: (718) 331-1852
Attention: Corporate Trust Trustee Administration
Section 25. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrant Certificates in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not in any way adversely affect the interests of the Holders of Warrant
Certificates. Any amendment or supplement to this Agreement that has a material
adverse effect on the interests of Holders shall require the written consent of
Holders representing a majority of the then outstanding Warrants. The consent of
each Holder of a Warrant affected shall be required for any amendment pursuant
to which the Exercise Price would be increased or the number of Warrant Shares
purchasable upon exercise of Warrants would be decreased (other than pursuant to
adjustments provided for in Section 15 hereof or amendments to Section 15 which
can be made by the written consent of Holders representing a majority of the
then outstanding Warrants). The Warrant Agent shall be entitled to receive and,
subject to Section 20, shall be fully protected in relying upon, an officers'
certificate and opinion of counsel as conclusive evidence that any such
amendment or supplement is authorized or permitted hereunder, that it is not
inconsistent herewith, and that it will be valid and binding upon the Company in
accordance with its terms.
Section 26. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
Section 27. Termination. This Agreement (other than any
party's obligations with respect to Warrants previously exercised and with
respect to indemnification under Section 20) shall terminate at 5:00 p.m., New
York City time on the Expiration Date.
Section 28. Governing Law. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE, WITHOUT GIVING EFFECT TO THE
CONFLICT OF LAWS PROVISIONS THEREOF
Section 29. Benefits of This Agreement.
(a) Nothing in this Agreement shall be construed to give to
any Person other than the Company, the Warrant Agent and the Holders of the
Warrant Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of the
Company, the Warrant Agent and the Holders of the Warrant Certificates.
(b) Prior to the exercise of the Warrants, no Holder of a
Warrant Certificate, as such, shall be entitled to any rights of a stockholder
of the Company, including, without limitation, the right to receive dividends or
subscription rights, the right to vote, to consent, to exercise any
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<PAGE> 48
preemptive right, to receive any notice of meetings of stockholders for the
election of directors of the Company or any other matter or to receive any
notice of any proceedings of the Company, except as may be specifically provided
for herein. The Holders of the Warrants are not entitled to share in the assets
of the Company in the event of the liquidation, dissolution or winding up of the
Company's affairs.
(c) All rights of action in respect of this Agreement are
vested in the Holders of the Warrants, and any Holder of any Warrant, without
the consent of the Warrant Agent or the Holder of any other Warrant, may, on
such Holder's own behalf and for such Holder's own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, or otherwise in respect of, such Holder's rights hereunder,
including the right to exercise, exchange or surrender for purchase such
Holder's Warrants in the manner provided in this Agreement.
Section 30. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
WINSLOEW ESCROW CORP.
By: /s/ William F. Kaczynski, Jr.
--------------------------------
Name: William F. Kaczynski, Jr.
-------------------------
Title: Vice President
------------------------
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By: /s/ Joseph F. Wolf
--------------------------------
Name: Joseph F. Wolf
-------------------------
Title: Vice President
------------------------
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EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
THIS GLOBAL WARRANT IS HELD BY THE DEPOSITARY (AS DEFINED IN THE WARRANT
AGREEMENT GOVERNING THIS WARRANT) OR ITS NOMINEE IN CUSTODY FOR THE BENEFIT OF
THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY PERSON UNDER ANY
CIRCUMSTANCES EXCEPT THAT (I) THE WARRANT AGENT MAY MAKE SUCH NOTATIONS HEREON
AS MAY BE REQUIRED PURSUANT TO SECTION 12 OF THE WARRANT AGREEMENT, (II) THIS
GLOBAL WARRANT MAY BE EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION
9(a) OF THE WARRANT AGREEMENT, (III) THIS GLOBAL WARRANT MAY BE DELIVERED TO THE
WARRANT AGENT FOR CANCELLATION PURSUANT TO SECTION 9(h) OF THE WARRANT AGREEMENT
AND (IV) THIS GLOBAL WARRANT MAY BE TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH
THE PRIOR WRITTEN CONSENT OF THE COMPANY.(1)
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR THE WARRANT AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.(1)
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A SUCCESSOR
THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL
SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 9 OF THE WARRANT AGREEMENT.(1)
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
- --------------------------
(1) These paragraphs are to be included only if the Warrant is in global form.
A-1
<PAGE> 51
OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c)
TO CERTAIN INSTITUTIONAL ACCREDITED INVESTORS WITHIN THE MEANING OF
SUBPARAGRAPHS (a)(1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT
IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO OR FOR OFFER
OR SALE IN CONNECTION WITH ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT,
(d) FOLLOWING THE RELEASE OF PROCEEDS FROM THE ESCROW ACCOUNT, OUTSIDE THE
UNITED STATES TO A NON-UNITED STATES PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (e) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT
(AND BASED ON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH
CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
UNTIL THE SEPARATION DATE (AS DEFINED), THIS WARRANT HAS BEEN ISSUED AS, AND
MUST BE TRANSFERRED AS, A UNIT TOGETHER WITH THE ASSOCIATED 12 3/4% SENIOR
SUBORDINATED NOTES DUE 2007. EACH UNIT CONSISTS OF $1,000 PRINCIPAL AMOUNT OF
NOTES AND A WARRANT TO PURCHASE 0.2298 SHARES OF COMMON STOCK, SUBJECT TO
ADJUSTMENT UNDER CERTAIN CIRCUMSTANCES. A COPY OF THE INDENTURE PURSUANT TO
WHICH THE NOTES HAVE BEEN ISSUED IS AVAILABLE FROM THE COMPANY UPON REQUEST.(2)
- -----------------------------
(2) This paragraph to be included only until the Separation Date, as defined in
the Warrant Agreement.
A-2
<PAGE> 52
WINSLOEW ESCROW CORP.
[CUSIP] [CINS] [ISIN) No. ________
No. ____________
WARRANTS TO PURCHASE COMMON SHARES
This certifies that Cede & Co., or its registered assigns, is
the owner of up to ________(3) Warrants, each of which initially represents the
right to purchase, after the earliest to occur (the "EXERCISABILITY DATE") of
(i) the Separation Date, (ii) the consummation of an underwritten public
offering of Capital Stock of the Company and (iii) the date that any class of
Capital Stock of WinsLoew Escrow Corp. (the "COMPANY") is listed on a national
securities exchange or authorized for quotation on the Nasdaq National Market or
is otherwise subject to registration under the Exchange Act , for 0.2298 shares
of the Common Stock, par value $.01 per share, of the Company (the "WARRANT
SHARES") at an exercise price (the "EXERCISE PRICE") of $.0l per Common Share
(subject to adjustment as provided in the Warrant Agreement referred to below),
upon surrender hereof at the office of American Stock Transfer & Trust Company,
or to its successor, as the warrant agent under the Warrant Agreement (any such
warrant agent being herein called the "WARRANT AGENT"), or such other location
contemplated by Section 24 of the Warrant Agreement, with the Subscription Form
on the reverse hereof duly executed, with signature guaranteed as therein
specified and simultaneous payment in full by Federal wire transfer to the
account designated by the Company or by certified or official bank or bank
cashier's check payable to the order of the Company. Notwithstanding the
foregoing, each Holder (as defined in the Warrant Agreement) may exercise its
right to receive Warrant Shares on a net basis, such that without the exchange
of any funds, the Holder receives that number of Warrant Shares otherwise
issuable upon exercise of its Warrants less that number of Warrant Shares having
a fair market value equal to the aggregate Exercise Price that would otherwise
have been paid by the Holder for the Warrant Shares being issued. At any time
after the Exercisability Date and on or before the Expiration Date, any
outstanding Warrants may be exercised on any Business Day; provided, however,
that a Registration Statement relating to the Warrants is, at the time of
exercise, effective and available for the exercise of Warrants or the exercise
of such Warrants is exempt from the registration requirements of the Securities
Act.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated August 24, 1999 (the "WARRANT AGREEMENT"),
between the Company and American Stock Transfer & Trust Company, as Warrant
Agent, and is subject to the Articles of Incorporation and Bylaws of the Company
and to the terms and provisions contained therein, to all of which terms and
provisions the Holder of this Warrant Certificate consents by acceptance hereof.
The terms of the Warrant Agreement are hereby incorporated herein by reference
and made a part hereof. Reference is hereby made to the Warrant Agreement for a
full description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Company and the Holders of the Warrants. The
summary of the terms of the Warrant Agreement contained in this
- ------------------------------------
(3) To evidence initially ___________ Warrants, subject to increase and decrease
in accordance with the Schedule of Exchanges related hereto maintained by the
Warrant Agent, and, in combination with the ________ Warrant number ______
identified by CUSIP No. ________, to equal 105,000 Warrants.
A-3
<PAGE> 53
Warrant Certificate is qualified in its entirety by express reference to the
Warrant Agreement. All terms used in this Warrant Certificate that are defined
in the Warrant Agreement shall have the meanings assigned to them in such
agreements.
The number of Warrant Shares purchasable upon the exercise of
each Warrant and the price per share are subject to adjustment as provided in
the Warrant Agreement. Except as stated in the Warrant Agreement, in the event
the Company merges or consolidates with, or sells all or substantially all of
its assets to, another Person, each Warrant will, upon exercise, entitle the
Holder thereof to receive the number of shares of Capital Stock or other
securities or the amount of money and other property which the Holder of the
number of Warrant Shares (or other securities or property issuable upon exercise
of a Warrant) purchasable upon the exercise of the Warrant is entitled to
receive upon completion of such merger, consolidation or sale.
As to any final fraction of a share which the same Holder of
one or more Warrant Certificates would otherwise be entitled to purchase upon
exercise thereof in the same transaction, the Company may pay the cash value
thereof determined as provided in the Warrant Agreement.
All Warrant Shares issuable by the Company upon the exercise
of Warrants shall be validly issued, fully paid and not subject to any calls for
funds, and the Company shall pay any taxes and other governmental charges that
may be imposed under the laws of the United States of America or any political
subdivision or taxing authority thereof or therein in respect of the issue or
delivery thereof upon exercise of Warrants (other than income taxes imposed on
the Holder). The Company shall not be required, however, to pay any tax or other
charge imposed in connection with any transfer involved in the issue of any
certificate for Warrant Shares (including other securities or property issuable
upon the exercise of the Warrants) or payment of cash to any Person other than
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant
and in case of such transfer or payment, the Warrant Agent and the Company shall
not be required to issue any share certificate or pay any cash until such tax or
charge has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set
forth in Section 7 of the Warrant Agreement, this Warrant Certificate and all
rights hereunder are transferable by the registered Holder hereof, in whole or
in part, on the register of the Company maintained by the Warrant Agent for such
purpose at the Warrant Agent's office in New York, New York, upon surrender of
this Warrant Certificate duly endorsed, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Warrant Agent duly
executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or such Holder's attorney duly
authorized in writing and by such other documentation required pursuant to the
Warrant Agreement and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any partial transfer, the
Company will sign and issue and the Warrant Agent will countersign and deliver
to such Holder a new Warrant Certificate or Certificates with respect to any
portion not so transferred. Each taker and Holder of this Warrant Certificate,
by taking and holding the same, consents and agrees that prior to the
registration of transfer as provided in the Warrant Agreement, the Company and
the Warrant Agent may treat the Person in whose name the Warrants are registered
as the absolute owner hereof for any purpose and as the Person entitled to
exercise the rights represented hereby, any notice to the contrary
notwithstanding. Accordingly, the Company and/or the Warrant Agent shall not,
except as ordered by a court of competent jurisdiction as required by law, be
bound to
A-4
<PAGE> 54
recognize any equitable or other claim to or interest in the Warrants on the
part of any Person other than such registered Holder, whether or not it shall
have express or other notice thereof.
This Warrant Certificate may be exchanged at the office of the
Warrant Agent maintained for such purpose in New York, New York, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the
Holder of this Warrant Certificate, as such, shall not be entitled to any rights
of a shareholder of the Company, including, without limitation, the right to
vote or to consent to any action of the shareholders, to receive any
distributions, to exercise any pre-emptive right or to receive any notice of
meetings of shareholders, and shall not be entitled to receive any notice of any
proceedings of the Company except as provided in the Warrant Agreement.
This Warrant Certificate shall be void and all rights
evidenced hereby shall cease on August 15, 2007, unless sooner terminated by the
liquidation, dissolution or winding-up of the Company or as otherwise provided
in the Warrant Agreement upon the consolidation or merger of the Company with,
or sale of the Company to, another Person or unless such date is extended as
provided in the Warrant Agreement.
This Warrant Certificate shall not be valid for any purpose
until it shall have been countersigned by the Warrant Agent.
WINSLOEW ESCROW CORP.
By:
----------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Dated:
Countersigned:
AMERICAN STOCK TRANSFER &
TRUST COMPANY, as Warrant Agent
By:
--------------------------------
Authorized Signatory
A-5
<PAGE> 55
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: American Stock Transfer & Trust Company,
as Warrant Agent
40 Wall Street, 46th floor
New York, New York 10005
Attention: Corporate Trust Administration
The undersigned irrevocably exercises _________ of the
Warrants represented by this Warrant Certificate and herewith makes payment of $
_________ (such payment being by Federal wire transfer to the account designated
by WinsLoew Escrow Corp. or by certified or official bank or bank cashier's
check payable to the order or at the direction of WinsLoew Escrow Corp.), or
each Holder may exercise its right to receive Warrant Shares on a net basis,
such that without the exchange of any funds, the Holder receives that number of
Warrant Shares otherwise issuable upon exercise of its Warrants less that number
of Warrant Shares having a fair market value equal to the aggregate Exercise
Price that would otherwise have been paid by the Holder for the Warrant Shares
being issued, all at the exercise price and on the terms and conditions
specified in this Warrant Certificate and in the Warrant Agreement and the
Warrant Registration Rights Agreement referred to herein and surrenders this
Warrant Certificate and all right, title and interest therein to and directs
that the Common Stock, par value $0.01 per share, of WinsLoew Escrow Corp.
deliverable upon the exercise of such Warrants be registered or placed in the
name and at the address specified below and delivered thereto.
Dated:
--------------
-----------------------------------------------
(Signature of Owner)
-----------------------------------------------
(Street Address)
-----------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-----------------------------------------------
A-6
<PAGE> 56
--------------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the Warrant
Agent, which requirements include
membership or participation in the
Security Transfer Agent Medallion
Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Warrant Agent in
addition to, or in substitution for,
STAMP, all in accordance with the
Securities Exchange Act of 1934, as
amended.
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
-----------------------
Name:
---------------------------------------------
Street Address:
------------------------------------
City, State and Zip Code:
--------------------------
A-7
<PAGE> 57
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration
received from the Assignee(s) named below, the undersigned registered Holder of
this Warrant Certificate hereby sells, assigns, and transfers unto the
Assignee(s) named below (including the undersigned with respect to any Warrants
constituting a part of the Warrants evidenced by this Warrant Certificate not
being assigned hereby) all of the right of the undersigned under this Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of Assignee(s):
---------------------------------------------------
Address:
------------------------------------------------------------------
No. of Warrants:
----------------------------------------------------------
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint _________________________ the
undersigned's attorney to make such transfer on the books of___________________
maintained for the purposes, with full power of substitution in the premises.
In connection with any transfer of Warrants, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
[Check One]
[ ] (a) these Warrants are being transferred in compliance with the
exemption from registration under the United States Securities
Act of 1933, as amended, provided by Rule 144A thereunder.
or
[ ] (b) these Warrants are being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Warrant
Certificate and the Warrant Agreement.
or
[ ] (c) these Warrants are being transferred pursuant to an effective
registration statement under the United States Securities Act
of 1933, as amended.
If none of the foregoing boxes is checked, the Warrant Agent
shall not be obligated to register the Warrants in the name of any Person other
than the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 9 of the Warrant Agreement shall
have been satisfied.
Dated:
---------------------
A-8
<PAGE> 58
----------------------------------------------
(Signature of Owner)
----------------------------------------------
(Street Address)
----------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
----------------------------------------------
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements
of the Warrant Agent, which requirements
include membership or participation in the
Security Transfer Agent Medallion Program
("STAMP") or such other "signature guarantee
program" as may be determined by the Warrant
Agent in addition to, or in substitution for,
STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
A-9
<PAGE> 59
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
the Warrant(s) for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the United
States Securities Act of 1933, as amended, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received such
information regarding WinsLoew Escrow Corp. as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:
--------------------
--------------------------------------------------
[NOTE: To be executed by an executive officer]
A-10
<PAGE> 60
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS(4)
The following exchanges of a part of this Global Warrant for
certificated Warrants have been made:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Date of Exchange Amount of decrease Amount of increase Number of Warrants Signature of
in Number of in Number of of this Global authorized
Warrants of this Warrants of this Warrant following signatory of
Global Warrant Global Warrant such decrease Warrant Agent
(or increase)
- -------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------------------
(4) This is to be included only if the Warrant is in global form.
A-11
<PAGE> 61
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "WARRANTS") of WINSLOEW ESCROW
CORP.
This Certificate relates to ____ Warrants held in* ___
book-entry or* certificated form by __________________________________________
(the "TRANSFEROR").
The Transferor:*
[ ] has requested the Warrant Agent by written order to
deliver, in exchange for its beneficial interest in the Global Warrant held by
the Depositary, a Warrant or Warrants in definitive, registered form of
authorized denominations and an aggregate number equal to its beneficial
interest in such Global Warrant (or the portion thereof indicated above); or
[ ] has requested the Warrant Agent by written order to
exchange or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such
Warrant, the Transferor does hereby certify that Transferor is familiar with the
Warrant Agreement relating to the above captioned Warrants and the restrictions
on transfers thereof as provided in Section 9 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "SECURITIES ACT") because:
[ ] Such Warrant is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 9(b)(i)(A) or Section
9(c)(y)(i) of the Warrant Agreement).
[ ] Such Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
accordance with Rule 144A.
[ ] Such Warrant is being transferred pursuant to an exemption
from registration in accordance with Rule 144 under the Securities Act.
[ ] Such Warrant is being transferred to an institutional
"accredited investor," within the meaning of Rule 501(a)(1), (2), (3) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act.
[ ] Such Warrant is being transferred in accordance with Rule
904 under the Securities Act.
B-1
<PAGE> 62
[ ]Such Warrant is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the
Securities Act other than Rule 144A, Rule 144 or Rule 904 under the Securities
Act. An opinion of counsel to the effect that such transfer does not require
registration under the Securities Act accompanies this Certificate.
----------------------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-------------------------------------------------
Date:
-------------
B-2
<PAGE> 1
Exhibit 10.19
================================================================================
$155,000,000
LOAN AND SECURITY AGREEMENT
Dated as of August 27, 1999
Between
WINSLOEW FURNITURE, INC.
WINSTON FURNITURE COMPANY OF ALABAMA, INC.
LOEWENSTEIN, INC.
TEXACRAFT, INC.
TROPIC CRAFT, INC.
WINSTON PROPERTIES, INC.
POMPEII FURNITURE CO., INC.
(the Borrowers)
and
THE FINANCIAL INSTITUTIONS PARTY
HERETO FROM TIME TO TIME
(the Lenders)
and
HELLER FINANCIAL, INC.
CIBC INC.
(the Co-Agents)
and
BANKBOSTON, N.A.
(the Administrative Agent)
BANCBOSTON ROBERTSON STEPHENS INC.
(the Arranger)
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE 1 DEFINITIONS
SECTION 1.1 Definitions..........................................................................................1
SECTION 1.2 General Interpretive Rules..........................................................................41
SECTION 1.3 Exhibits, Annexes and Schedules.....................................................................43
ARTICLE 2 REVOLVING CREDIT FACILITY
SECTION 2.1 Revolving Credit Loans..............................................................................44
SECTION 2.2 Borrowing...........................................................................................44
SECTION 2.3 Repayment of Revolving Credit Loans.................................................................45
SECTION 2.4 Revolving Credit Note...............................................................................45
SECTION 2.5 Extension of Revolving Credit Facility..............................................................45
ARTICLE 2A SWINGLINE FACILITY
SECTION 2A.1 Swingline Loans....................................................................................46
SECTION 2A.2 Making Swingline Loans.............................................................................46
SECTION 2A.3 Repayment of Swingline Loans.......................................................................47
SECTION 2A.4 Prepayment.........................................................................................47
SECTION 2A.5 Swingline Note.....................................................................................47
SECTION 2A.6 Settlement with Other Lenders......................................................................47
ARTICLE 3 LETTER OF CREDIT FACILITY
SECTION 3.1 Agreement to Issue..................................................................................48
SECTION 3.2 Amounts.............................................................................................48
SECTION 3.3 Conditions..........................................................................................48
SECTION 3.4 Issuance of Letters of Credit.......................................................................49
SECTION 3.5 Duties of BankBoston................................................................................49
SECTION 3.6 Payment of Reimbursement Obligations................................................................50
SECTION 3.7 Participations......................................................................................50
SECTION 3.8 Indemnification, Exoneration........................................................................52
SECTION 3.9 Supporting Letter of Credit; Cash Collateral Account................................................53
</TABLE>
- --------
(1) This Table of Contents is included for reference purposes only and does not
constitute part of the Loan and Security Agreement.
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 4 TERM LOAN FACILITIES
SECTION 4.1 Term Loans..........................................................................................55
SECTION 4.2 Manner of Borrowing Term Loans......................................................................55
SECTION 4.3 Repayment of Term Loans.............................................................................55
SECTION 4.4 Term Notes..........................................................................................56
ARTICLE 4A ACQUISITION FACILITY
SECTION 4A.1 Acquisition Loans..................................................................................57
SECTION 4A.2 Borrowing..........................................................................................57
SECTION 4A.3 Repayment of Acquisition Loans.....................................................................58
SECTION 4A.4 Acquisition Note...................................................................................58
ARTICLE 5 GENERAL LOAN PROVISIONS
SECTION 5.1 Interest............................................................................................59
SECTION 5.2 Certain Fees........................................................................................60
SECTION 5.3 Borrowing and Conversion or Continuation of Loans...................................................62
SECTION 5.4 Conversion or Continuation..........................................................................63
SECTION 5.5 Manner of Payment...................................................................................63
SECTION 5.6 General.............................................................................................63
SECTION 5.7 Loan Accounts; Statements of Account................................................................64
SECTION 5.8 Reduction of Revolving Credit Facility and Acquisition Facility; Termination of Agreement............64
SECTION 5.9 Making of Loans.....................................................................................66
SECTION 5.10 Settlement Among Lenders...........................................................................68
SECTION 5.11 Prepayments of Loans...............................................................................71
SECTION 5.12 Payments Not at End of Interest Period; Failure to Borrow..........................................74
SECTION 5.13 Assumptions Concerning Funding of Eurodollar Rate Loans............................................75
SECTION 5.14 Duration of Interest Periods; Maximum Number of Eurodollar Rate Loans; Minimum Increments..........75
SECTION 5.15 Changed Circumstances..............................................................................75
SECTION 5.16 Cash Collateral Account; Investment Accounts.......................................................78
SECTION 5.17 Borrowers' Representative..........................................................................79
SECTION 5.18 Joint and Several Liability, No Modification or Release of Obligations.............................80
SECTION 5.19 Obligations Absolute...............................................................................80
SECTION 5.20 Waiver of Suretyship Defenses......................................................................81
SECTION 5.21 Defaulting Lender's Status.........................................................................82
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 6 CONDITIONS PRECEDENT
SECTION 6.1 Conditions Precedent to Initial Loans...............................................................83
SECTION 6.2 Additional Conditions to Acquisition Loans..........................................................88
SECTION 6.3 All Loans and Letters of Credit.....................................................................90
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 7.1 Representations and Warranties......................................................................91
SECTION 7.2 Survival of Representations and Warranties, Etc....................................................102
ARTICLE 8 SECURITY INTEREST
SECTION 8.1 Security Interest..................................................................................104
SECTION 8.2 Continued Priority of Security Interest............................................................105
ARTICLE 9 COLLATERAL COVENANTS
SECTION 9.1 Verification and Notification......................................................................107
SECTION 9.2 Disputes, Returns and Adjustments..................................................................107
SECTION 9.3 Invoices...........................................................................................108
SECTION 9.4 Delivery of Instruments............................................................................108
SECTION 9.5 Sales of Inventory.................................................................................108
SECTION 9.6 Ownership and Defense of Title.....................................................................108
SECTION 9.7 Insurance..........................................................................................109
SECTION 9.8 Location of Offices and Collateral.................................................................110
SECTION 9.9 Records Relating to Collateral.....................................................................110
SECTION 9.10 Inspection........................................................................................110
SECTION 9.11 Information and Reports...........................................................................111
SECTION 9.12 Power of Attorney.................................................................................112
SECTION 9.13 Additional Real Estate and Leases.................................................................112
SECTION 9.14 Assignment of Claims Act..........................................................................113
ARTICLE 10 AFFIRMATIVE COVENANTS
SECTION 10.1 Preservation of Corporate Existence and Similar Matters...........................................114
SECTION 10.2 Compliance with Applicable Law....................................................................114
SECTION 10.3 Maintenance of Property...........................................................................114
SECTION 10.4 Conduct of Business...............................................................................114
SECTION 10.5 Insurance.........................................................................................114
SECTION 10.6 Payment of Taxes and Claims.......................................................................115
SECTION 10.7 Accounting Methods and Financial Records..........................................................115
SECTION 10.8 Use of Proceeds...................................................................................115
SECTION 10.9 Hazardous Waste and Substances; Environmental Requirements........................................116
SECTION 10.10 Year 2000........................................................................................116
SECTION 10.11 Execution of Subsidiary Guaranties; Additional Borrowers.........................................116
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C> <C>
ARTICLE 11 INFORMATION
SECTION 11.1 Financial Statements..............................................................................118
SECTION 11.2 [RESERVED]........................................................................................119
SECTION 11.3 Officer's Certificate.............................................................................119
SECTION 11.4 Copies of Other Reports...........................................................................119
SECTION 11.5 Notice of Litigation and Other Matters............................................................120
SECTION 11.6 ERISA.............................................................................................120
SECTION 11.7 Revisions or Updates to Schedules.................................................................121
ARTICLE 12 NEGATIVE COVENANTS
SECTION 12.1 Financial Ratios..................................................................................122
SECTION 12.2 Debt..............................................................................................123
SECTION 12.3 Guaranties........................................................................................123
SECTION 12.4 Investments.......................................................................................124
SECTION 12.5 Capital Expenditures..............................................................................124
SECTION 12.6 Restricted Distributions and Payments, Etc........................................................124
SECTION 12.7 Merger, Consolidation and Sale of Assets..........................................................124
SECTION 12.8 Transactions with Affiliates......................................................................125
SECTION 12.9 Liens.............................................................................................125
SECTION 12.10 Real Estate Leases...............................................................................125
SECTION 12.11 Benefit Plans....................................................................................125
SECTION 12.12 Sales and Leasebacks.............................................................................125
SECTION 12.13 Amendments of Other Agreements...................................................................125
ARTICLE 13 DEFAULT
SECTION 13.1 Events of Default.................................................................................127
SECTION 13.2 Remedies..........................................................................................130
SECTION 13.3 Application of Proceeds...........................................................................132
SECTION 13.4 Power of Attorney.................................................................................133
SECTION 13.5 Miscellaneous Provisions Concerning Remedies......................................................134
SECTION 13.6 Trademark License.................................................................................134
ARTICLE 14 ASSIGNMENTS
SECTION 14.1 Successors and Assigns; Participations............................................................136
SECTION 14.2 Representation of Lenders.........................................................................139
</TABLE>
(iv)
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<TABLE>
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ARTICLE 15 ADMINISTRATIVE AGENT
SECTION 15.1 Appointment of Administrative Agent...............................................................140
SECTION 15.2 Delegation of Duties..............................................................................140
SECTION 15.3 Exculpatory Provisions............................................................................140
SECTION 15.4 Reliance by Administrative Agent..................................................................141
SECTION 15.5 Notice of Default.................................................................................141
SECTION 15.6 Non-Reliance on Administrative Agent and Other Lenders............................................141
SECTION 15.7 Indemnification...................................................................................142
SECTION 15.8 Administrative Agent in Its Individual Capacity...................................................142
SECTION 15.9 Successor Administrative Agent....................................................................143
SECTION 15.10 Co-Agents........................................................................................144
SECTION 15.11 Documents to be Forwarded........................................................................144
ARTICLE 16 MISCELLANEOUS
SECTION 16.1 Notices...........................................................................................145
SECTION 16.2 Expenses..........................................................................................146
SECTION 16.3 Stamp and Other Taxes.............................................................................148
SECTION 16.4 Setoff............................................................................................148
SECTION 16.5 Litigation........................................................................................148
SECTION 16.6 Waiver of Rights..................................................................................149
SECTION 16.7 Consent to Advertising and Publicity..............................................................150
SECTION 16.8 Reversal of Payments..............................................................................150
SECTION 16.9 Injunctive Relief.................................................................................150
SECTION 16.10 Accounting Matters...............................................................................151
SECTION 16.11 Amendments.......................................................................................151
SECTION 16.12 Assignment.......................................................................................152
SECTION 16.13 Performance of Borrowers' Duties.................................................................153
SECTION 16.14 Indemnification..................................................................................153
SECTION 16.15 All Powers Coupled with Interest.................................................................153
SECTION 16.16 Survival.........................................................................................153
SECTION 16.17 Titles and Captions..............................................................................154
SECTION 16.18 Severability of Provisions.......................................................................154
SECTION 16.19 Governing Law....................................................................................154
SECTION 16.20 Counterparts.....................................................................................154
SECTION 16.21 Reproduction of Documents........................................................................154
SECTION 16.22 Term of Agreement................................................................................155
SECTION 16.23 Pro-Rata Participation...........................................................................155
</TABLE>
(v)
<PAGE> 7
ANNEXES, EXHIBITS AND SCHEDULES
<TABLE>
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ANNEX A COMMITMENTS
ANNEX B PRICING MATRIX
EXHIBIT A-1 FORM OF REVOLVING CREDIT NOTE
EXHIBIT A-2 FORM OF SWINGLINE NOTE
EXHIBIT B-1 FORM OF TERM NOTE A
EXHIBIT B-2 FORM OF TERM NOTE B
EXHIBIT B-3 FORM OF TERM NOTE C
EXHIBIT B-4 FORM OF ACQUISITION NOTE
EXHIBIT C FORM OF BORROWING BASE CERTIFICATE
EXHIBIT D FORM OF ASSIGNMENT AND ACCEPTANCE
EXHIBIT E-1 FORM OF CONFIRMATION OF NOTICE OF BORROWING (REVOLVING CREDIT LOAN)
EXHIBIT E-2 FORM OF CONFIRMATION OF NOTICE OF BORROWING (SWINGLINE LOAN)
EXHIBIT E-3 FORM OF CONFIRMATION OF NOTICE OF BORROWING (ACQUISITION LOAN)
EXHIBIT F FORM OF NOTICE OF CONVERSION OR CONTINUATION
EXHIBIT G FORM OF COVENANT COMPLIANCE CERTIFICATE
EXHIBIT H FORM OF SUBSIDIARIES GUARANTY
EXHIBIT I FORM OF GUARANTOR SECURITY AGREEMENT
Schedule 1.1A WinsLoew Merger Documents
Schedule 1.1B Permitted Investments
Schedule 1.1C Permitted Liens
Schedule 1.1D Trivest Investors
Schedule 6.1(c)(12) Environmental Reports
Schedule 6.1(c)(27) Sources and Uses of Funds
Schedule 7.1(a) Organization
Schedule 7.1(b) Capitalization
Schedule 7.1(c) Subsidiaries; Ownership of Stock
Schedule 7.1(e) Compliance with Laws
Schedule 7.1(g) Governmental Approvals
Schedule 7.1(h) Title to Properties
Schedule 7.1(i) Liens
Schedule 7.1(j) Indebtedness and Guaranties
Schedule 7.1(k) Litigation
Schedule 7.1(l) Tax Matters
</TABLE>
(vi)
<PAGE> 8
<TABLE>
<S> <C>
Schedule 7.1(p) ERISA
Schedule 7.1(t) Location of Offices and Receivables
Schedule 7.1(u) Location of Inventory
Schedule 7.1(v) Equipment
Schedule 7.1(w) Bank Accounts
Schedule 7.1(x) Intellectual Property
Schedule 7.1(y) Real Estate
Schedule 7.1(z) Corporate and Fictitious Names
Schedule 7.1(cc) Employee Relations
Schedule 7.1(dd) Trade Names
Schedule 10.8 Use of Proceeds
</TABLE>
(vii)
<PAGE> 9
LOAN AND SECURITY AGREEMENT
Dated as of August 27, 1999
WINSLOEW FURNITURE, INC. a Florida corporation, WINSTON FURNITURE
COMPANY OF ALABAMA, INC., an Alabama corporation, LOEWENSTEIN, INC., a Florida
corporation, TEXACRAFT, INC., a Texas corporation, TROPIC CRAFT, INC., a Florida
corporation, WINSTON PROPERTIES, INC., an Alabama corporation, POMPEII FURNITURE
CO., INC., a Florida corporation, the financial institutions party to this
Agreement from time to time (the "Lenders"), HELLER FINANCIAL, INC. and CIBC
INC. as co-agents (each a "Co-Agent" and collectively, "Co-Agents"), and
BANKBOSTON, N.A., a national banking association, as administrative agent for
the Lenders, agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1 Definitions. For the purposes of this Agreement:
"Account Debtor" means a Person who is obligated on a Receivable.
"Acquire" or "Acquisition", as applied to any Business Unit or
Investment, means the acquisition of such Business Unit or Investment by
purchase, exchange, issuance of stock or other securities, or by merger,
reorganization or any other method.
"Acquisition Facility" means the credit facility described in SECTION
4A.1 in an aggregate principal amount at any one time outstanding not to exceed
$20,000,000.
"Acquisition Facility Lender" means each Lender that has a Commitment
under the Acquisition Facility or if the Commitments are terminated, that has
outstanding Acquisition Loans.
"Acquisition Facility Termination Date" means December 31, 2001.
"Acquisition Loan" means each Loan made to the Borrowers pursuant to
SECTION 4A.1 (and all of such Loans collectively) and refers to both Eurodollar
Rate Acquisition Loans and Base Rate Acquisition Loans.
"Acquisition Note" means each Acquisition Note made by the Borrowers
payable to the order of a Lender evidencing the joint and several obligation of
the Borrowers to pay the aggregate unpaid principal amount of the Loans made to
them by such Lender under the Acquisition Facility (and any promissory note or
notes that may be issued from time to time in substitution, renewal extension,
replacement or exchange therefor whether payable to such Lender or to a
different Lender in connection with a Person becoming a Lender after the
Effective Date or otherwise) substantially in the form of EXHIBIT B-4 hereto,
with all blanks properly completed
<PAGE> 10
either as originally executed or as the same may from time to time be
supplemented, modified, amended, renewed, extended or refinanced.
"Acquisition Target" means a Person or business proposed to be Acquired
by a Borrower for consideration that includes proceeds of a Borrowing under the
Acquisition Facility.
"Administrative Agent" means BankBoston and any successor agent
appointed pursuant to SECTION 15.9 hereof.
"Administrative Agent's Office" means the office of the Administrative
Agent specified in or determined in accordance with the provisions of SECTION
16.1.
"Affected Lender" has the meaning set forth in SECTION 5.7(D).
"Affiliate" means, with respect to a Person, (a) any partner, officer,
shareholder or member (if holding more than 10% of the outstanding equity
interests of such Person), director, manager, employee or managing agent of such
Person, (b) any spouse, parents, siblings, children or grandchildren of such
Person, (c) any corporation, limited liability company, association,
partnership, trust, entity or enterprise in which such Person is a director,
officer, manager or general partner, and (d) any other Person (other than a
Subsidiary) that, (i) directly or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such given
Person, (ii) directly or indirectly beneficially owns or holds 10% or more of
any class of voting stock or partnership or membership or other voting interest
of such Person or any Subsidiary of such Person, or (iii) 10% or more of the
voting stock or partnership or membership or other voting interest of which is
directly or indirectly beneficially owned or held by such Person or a Subsidiary
of such Person. The term "control" means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
a Person, whether through ownership of voting securities or partnership or other
voting interest, by contract or otherwise. Each Subsidiary of a Lender shall be
deemed an Affiliate of such Lender.
"Agreement" means and includes this Agreement, including all Schedules,
Exhibits and other attachments hereto, and all amendments, modifications and
supplements hereto and thereto.
"Agreement Date" means the date as of which this Agreement is dated.
"Anniversary" means each anniversary of the Effective Date.
"Applicable Law" means all applicable provisions of constitutions,
statutes, rules, regulations and orders of all governmental bodies and of all
orders and decrees of all courts and arbitrators, including, without limitation,
Environmental Laws.
"Applicable Margin" means as to each Type of Loan under each Facility,
the Tier V rate per annum set forth under the appropriate caption on the pricing
matrix attached hereto as ANNEX B, subject to quarterly adjustment as follows:
From and after the delivery of the consolidated
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<PAGE> 11
quarterly financial statements of WinsLoew and its Consolidated Subsidiaries for
the Fiscal Quarter ending December 31, 1999 and the related officer's
certificate in accordance with the respective provisions of SECTIONS 11.1(B) and
11.3, such percentages will be adjusted, effective the third Business Day after
delivery of such financial statements and the equivalent financial statements
for each succeeding Fiscal Quarter, to the Tier for each Facility and Type of
Loan set forth in ANNEX B that corresponds to the Total Funded Debt to EBITDA
Ratio reflected in such financial statements and the related certificate,
PROVIDED, that if a Default or Event of Default exists at the time, no downward
adjustment in the Applicable Margin shall be effected.
"Arranger" means BancBoston Robertson Stephens Inc.
"Asset Disposition" means the disposition of any asset of a Borrower or
any of its Subsidiaries, other than sales of Inventory in the ordinary course of
business, disposition of worn-out and obsolete Equipment and Inventory, not
longer useful in the Borrowers' business, consistent with past practices of
Winston and Loewenstein.
"Assignment and Acceptance" means an assignment and acceptance in the
form attached hereto as EXHIBIT D assigning all or a portion of a Lender's
interests, rights and obligations under this Agreement pursuant to SECTION 14.1.
"Availability" means at any time (a) the Borrowing Base at such time
minus (b) the aggregate outstanding principal amount of Revolving Credit Loans
and Swingline Loans at such time.
"BankBoston" means BankBoston, N.A., a national banking association
and, following its announced merger with Fleet Financial Group, Inc., the
survivor of such combination, in its individual capacity and not as
Administrative Agent hereunder.
"Base Rate" means at any time an interest rate per annum equal to the
greater of (i) the rate of interest publicly announced from time to time by
BankBoston at its head office in Boston, Massachusetts as its "base" rate as in
effect at such time, and (ii) the Federal Funds Effective Rate plus 1/2 of 1%
per annum (rounded upward, if necessary, to the next 1/8 of 1%).
"Base Rate Acquisition Loan" means each Base Rate Loan outstanding
under the Acquisition Facility.
"Base Rate Loan" means each Borrowing of Loans bearing interest
determined with reference to the Base Rate and a specified principal amount of
such Loans outstanding.
"Base Rate Revolving Credit Loans" means each Base Rate Loan
outstanding under the Revolving Credit Facility.
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<PAGE> 12
"Base Rate Term Loan" means each Base Rate Loan outstanding under the
Term Loan A Facility, the Term Loan B Facility or the Term Loan C Facility.
"Base Rate Term Loan A" means the Base Rate Loan outstanding under the
Term Loan A Facility.
"Base Rate Term Loan B" means the Base Rate Loan outstanding under the
Term Loan B Facility.
"Base Rate Term Loan C" means the Base Rate Loan outstanding under the
Term Loan C Facility.
"Benefit Plan" means, whether established before or after the Agreement
Date and excluding any Multiemployer Plan,
(a) a "welfare plan" as defined in SECTION 3(1) of ERISA as to which
the Borrower is an "employer" as defined in SECTION 3(5) of ERISA, and
(b) an "employee pension benefit plan" as defined in SECTION 3(2) of
ERISA as to which the Borrower or (if such plan is subject to Title IV of ERISA)
any Related Company is or within the past six years has been such an "employer."
"Borrower" means each of WinsLoew, Winston, Loewenstein, Texacraft,
Tropic Craft, WPI, Pompeii and each other Person a party to this Agreement as a
"Borrower," whether as of the Effective Date or as of a later date, pursuant to
SECTION 6.2 or otherwise.
"Borrowers' Representative" means WinsLoew and each successor in such
capacity appointed pursuant to SECTION 5.17.
"Borrowing" means the borrowing of Loans under a single Facility and of
a single Type, made by all Lenders on a single date and, in the case of
Eurodollar Rate Loans, having a single Interest Period.
"Borrowing Base" means at any time an amount equal to the lesser of:
(a) the Revolving Credit Facility, minus the Letter of Credit Reserve,
and
(b) an amount equal to
(i) 85% of the face value of Eligible Receivables due and
owing at such time, plus
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<PAGE> 13
(ii) 60% of the lesser of cost determined on a FIFO (or
first-in-first-out) accounting basis and fair market value of Eligible
Inventory at such time, minus
(iii) the Letter of Credit Reserve.
"Borrowing Base Certificate" means a certificate in the form attached
hereto as EXHIBIT C or in such other form as may be acceptable to the Borrowers
and the Administrative Agent.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Boston, Massachusetts or Birmingham, Alabama are authorized to
close and, when used with respect to Eurodollar Rate Loans, means any such day
on which dealings are also carried on in the applicable interbank eurodollar
market.
"Business Unit" means the assets constituting the business or a
division or operating unit thereof of any Person.
"Capital Expenditures" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of assets (other
than assets which constitute a Business Unit or Inventory) which are not, in
accordance with GAAP, treated as expense items for such Person in the year made
or incurred or as a prepaid expense applicable to a future year or years.
"Capitalized Lease" means a lease that is required to be capitalized
for financial reporting purposes in accordance with GAAP.
"Capitalized Lease Obligation" means Indebtedness represented by
obligations under a Capitalized Lease, and the amount of such Indebtedness shall
be the capitalized amount of such obligations determined in accordance with
GAAP.
"Cash Collateral" means collateral consisting of cash or Cash
Equivalents on which the Administrative Agent, for the benefit of itself as
Administrative Agent and the Lenders, has a first priority Lien.
"Cash Collateral Account" means a special interest-bearing Deposit
Account consisting of cash maintained at the principal office of the
Administrative Agent and under the sole dominion and control of the
Administrative Agent, for its benefit and for the benefit of the Lenders,
established pursuant to the provisions of SECTION 5.16(A) for purposes set forth
therein.
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<PAGE> 14
"Cash Equivalents" means
(a) Dollars;
(b) securities issued or directly and fully guaranteed or insured by
the United States government or any agency or instrumentality thereof or any
state having maturities of not more than one year after the date of acquisition;
(c) certificates of deposit and Eurodollar time deposits with
maturities of one year or less from the date of acquisition, bankers'
acceptances with maturities not exceeding one year and overnight bank deposits,
in each case with any Lender or any domestic commercial bank or U.S. branch of a
foreign commercial bank having capital and surplus in excess of $250 million and
a Thompson Bank Watch Rating of "B" or better;
(d) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (b) and (c) above
entered into with any financial institution meeting the qualifications specified
in said clause (c); and
(e) commercial paper having the highest rating obtainable from Moody's
or S&P and in each case maturing within 270 days after the date of acquisition.
"Class" as applied to any Loans, means all Loans outstanding at the
time under the same Facility.
"Code" means the Internal Revenue Code of 1986, as amended.
"Collateral" means and includes all of each Borrower's right, title and
interest in and to each of the following, wherever located and whether now or
hereafter existing or now owned or hereafter acquired or arising:
(a) (i) all rights to the payment of money or other forms of
consideration of any kind (whether classified under the UCC as accounts,
contract rights, chattel paper, general intangibles or otherwise) including, but
not limited to, accounts receivable, letters of credit and the right to receive
payment thereunder, chattel paper, tax refunds, insurance proceeds, any rights
under contracts not yet earned by performance and not evidenced by an instrument
or chattel paper, notes, drafts, instruments, documents, acceptances and all
other debts, obligations and liabilities in whatever form from any Person, (ii)
all guaranties, security and Liens securing payment thereof, (iii) all goods,
whether now owned or hereafter acquired, and whether sold, delivered,
undelivered, in transit or returned, which may be represented by, or the sale or
lease of which may have given rise to, any such right to payment or other debt,
obligation or liability, and (iv) all proceeds of any of the foregoing (the
foregoing, collectively, "Receivables"),
(b) (i) all inventory, (ii) all goods intended for sale or lease or for
display or demonstration, (iii) all work-in-process, (iv) all raw materials and
other materials and supplies of every nature and description used or which might
be used in connection with the manufacture, packing, shipping, advertising,
selling, leasing or furnishing of goods or services or otherwise used
6
<PAGE> 15
or consumed in the conduct of business, and (v) all documents evidencing and
general intangibles relating to any of the foregoing (the foregoing,
collectively, "Inventory"),
(c) (i) all machinery, apparatus, equipment, motor vehicles, tractors,
trailers, rolling stock, fittings, fixtures and other tangible personal property
(other than Inventory) of every kind and description, (ii) all tangible personal
property (other than Inventory) and fixtures used in such Borrower's business
operations or owned by such Borrower or in which such Borrower has an interest,
and (iii) all parts, accessories and special tools and all increases and
accessions thereto and substitutions and replacements therefor, excluding,
however, any such property that is subject to a lease or Lien permitted to exist
by this Agreement, the terms of which prohibit the creation of the Security
Interest therein, for so long as such prohibition remains in effect (the
foregoing, collectively, "Equipment"),
(d) all general intangibles, choses in action and causes of action and
all other intangible personal property of every kind and nature (other than
Receivables), including, without limitation, Intellectual Property, partnership
and joint venture interests, membership interests and other interests in limited
liability companies, corporate or other business records, inventions, designs,
blueprints, plans, specifications, trade secrets, goodwill, computer software,
customer lists, registrations, licenses, franchises, tax refund claims,
reversions or any rights thereto and any other amounts payable to such Person
from any Benefit Plan, Multiemployer Plan or other employee benefit plan, rights
and claims against carriers and shippers, rights to indemnification, business
interruption insurance and proceeds thereof, property, casualty or any similar
type of insurance and any proceeds thereof, the beneficiary's interest in
proceeds of insurance covering the lives of key employees and any letter of
credit, guarantee, claims, security interest or other security for the payment
by an Account Debtor of any of the Receivables (the foregoing, collectively,
"General Intangibles"),
(e) any demand, time, savings, passbook, money market or like
depository account, and all certificates of deposit, maintained with a bank,
savings and loan association, credit union or like organization, other than an
account evidenced by a certificate of deposit that is an instrument under the
UCC (the foregoing, collectively, "Deposit Accounts"),
(f) all certificated and uncertificated securities, all security
entitlements, all securities accounts, all commodity contracts, all commodity
accounts and all other investment property (the foregoing, collectively,
"Investment Property"),
(g) (i) any investment account maintained by or on behalf of such
Borrower with the Administrative Agent or any Lender or any Affiliate of the
Administrative Agent or any Lender, (ii) any agreement governing such account,
(iii) all cash, money, notes, securities, instruments, goods, accounts,
documents, chattel paper, general intangibles and other property now or
hereafter held by the Administrative Agent or any Lender or any Affiliate of the
Administrative Agent or any Lender on behalf of such Borrower in connection with
such investment account or deposited by such Borrower or on such Borrower's
behalf to such investment account or
7
<PAGE> 16
otherwise credited thereto for such Borrower's benefit, or distributable to such
Borrower from such investment account, together with all contracts for the sale
or purchase of the foregoing, (iv) all of such Borrower's right, title and
interest with respect to the deposit, investment, allocation, disposition,
distribution or withdrawal of the foregoing, (v) all of such Borrower's right,
title and interest with respect to the making of amendments, modifications or
additions of or to the terms and conditions under which the investment account
or investments maintained therein is to be maintained by such Borrower, the
Administrative Agent, any Lender or any Affiliate of the Administrative Agent or
any Lender on such Borrower's behalf, and (vi) all of such Borrower's books,
records and receipts pertaining to or confirming any of the foregoing (the
foregoing, collectively, "Investment Accounts"),
(h) all cash or other property deposited with the Administrative Agent
or any Lender or any Affiliate of the Administrative Agent or any Lender or
which the Administrative Agent, for its benefit and for the benefit of the
Lenders, or any Lender or such Affiliate is entitled to retain or otherwise
possess as collateral pursuant to the provisions of this Agreement or any of the
Loan Documents or any agreement relating to any Letter of Credit, including,
without limitation, amounts on deposit in the Cash Collateral Account,
(i) all goods and other property, whether or not delivered, (i) the
sale or lease of which gives or purports to give rise to any Receivable,
including, but not limited to, all merchandise returned or rejected by or
repossessed from customers, or (ii) securing any Receivable, including, without
limitation, all rights as an unpaid vendor or lienor (including, without
limitation, stoppage in transit, replevin and reclamation) with respect to such
goods and other properties,
(j) all mortgages, deeds to secure debt and deeds of trust on real or
personal property, guaranties, leases, security agreements and other agreements
and property which secure or relate to any Receivable or other Collateral or are
acquired for the purpose of securing and enforcing any item thereof,
(k) all documents of title, including bills of lading and warehouse
receipts, policies and certificates of insurance, securities, chattel paper and
other documents and instruments,
(l) all files, correspondence, computer programs, tapes, disks and
related data processing software which contain information identifying or
pertaining to any of the Collateral or any Account Debtor or showing the amounts
thereof or payments thereon or otherwise necessary or helpful in the realization
thereon or the collection thereof, and
(m) any and all products and cash and non-cash proceeds of the
foregoing (including, but not limited to, any claims to any items referred to in
this definition and any claims against third parties for loss of, damage to or
destruction of any or all of the Collateral or for proceeds payable under or
unearned premiums with respect to policies of insurance) in whatever form,
including,
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<PAGE> 17
but not limited to, cash, negotiable instruments and other instruments for the
payment of money, chattel paper, security agreements and other documents.
Notwithstanding anything herein to the contrary, the Collateral shall
not include (i) any agreement with a third party existing on the Effective Date
that prohibits the grant of a Lien on (but not merely the assignment of or of
any interest in) such agreement or any Borrower's rights thereunder without the
consent of such third party or under which a consent to such grant is otherwise
required, which consent has not been obtained, except to the extent rights under
such agreement are covered by Section 9-318 of the UCC, or (ii) any license,
permit or other Governmental Approval that, under the terms and conditions of
such Governmental Approval or under Applicable Law, cannot be subjected to a
Lien in favor of the Administrative Agent without consent which consent has not
been obtained; provided, however, that the Collateral shall include all items
excluded pursuant to clauses (i) or (ii) from and after the date on which the
requisite consent is obtained.
"Commitment" means, as to each Lender, the amount set forth opposite
such Lender's name on ANNEX A hereto, representing such Lender's aggregate
obligation, upon and subject to the terms and conditions of this Agreement
(including the applicable provisions of SECTION 14.1), to make its Proportionate
Share of Loans under the Revolving Credit Facility (including to repay Swingline
Loans), the Term Loan Facilities and the Acquisition Facility and to purchase
participations in Letters of Credit or, from and after the date hereof, as set
forth in the Register representing such Lender's obligation to make its
Proportionate Share of Loans under the Revolving Credit Facility (including to
repay Swingline Loans) and the Acquisition Facility and to purchase
participations in Letters of Credit, and its corresponding interest in Term
Loans and any Acquisition Loans outstanding.
"Commitment Percentage" means, as to any Lender at the time of
determination, the percentage obtained by dividing such Lender's Commitment at
such time by the aggregate Commitments at such time.
"Consolidated Subsidiaries" means, each Borrower (other than WinsLoew)
and any other Subsidiary of WinsLoew, whose accounts are at the time in
question, in accordance with GAAP and pursuant to the written consent of the
Required Lenders consolidated with those of WinsLoew. Such consent may be
withheld in the Lenders' absolute discretion conditioned upon, inter alia, the
execution and delivery of Guaranties, security agreements, mortgages and other
documents required by the Required Lenders in their absolute discretion.
"Contaminant" means any waste, pollutant, hazardous substance, toxic
substance, hazardous waste, special waste, petroleum or petroleum-derived
substance or waste, or any constituent of any such substance or waste.
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"Copyrights" means and includes, in each case whether now existing or
hereafter arising, all of each Borrower's right, title and interest in and to
(a) all copyrights, rights and interests in copyrights, works
protectable by copyright, copyright registrations and copyright applications;
(b) all renewals of any of the foregoing;
(c) all income, royalties, damages and payments now or hereafter due
and/or payable under any of the foregoing, including, without limitation,
damages or payments for past or future infringements of any of the foregoing;
(d) the right to sue for past, present and future infringements of any
of the foregoing; and
(e) all rights corresponding to any of the foregoing throughout the
world.
"Debt" means
(a) Indebtedness for money borrowed,
(b) Indebtedness, whether or not in any such case the same was for
money borrowed,
(i) represented by notes payable, drafts accepted and
reimbursement obligations under letters of credit and similar
instruments that represent extensions of credit,
(ii) constituting obligations evidenced by bonds, debentures,
notes or similar instruments, or
(iii) upon which interest charges are customarily paid or that
was issued or assumed as full or partial payment for property (other
than trade credit that is incurred in the ordinary course of business),
(c) Indebtedness that constitutes a Capitalized Lease Obligation,
(d) obligations in respect of any mandatorily redeemable preferred
capital stock of any Borrower, and
(e) any obligation under a Guarantee of any of the foregoing.
"Default" means any of the events specified in SECTION 13.1 which with
the passage of time or giving of notice or both would constitute an Event of
Default.
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"Default Margin" means 2.0% per annum.
"Deposit Accounts" has the meaning set forth in the definition
"Collateral".
"Dollar" and "$" means freely transferable United States dollars.
"EBIT" means consolidated Net Income of WinsLoew and its Consolidated
Subsidiaries before provision for interest expense and income taxes.
"EBITDA" means EBIT before provision for depreciation and amortization
expense.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
in effect from time to time.
"ERISA Event" means (a) a "reportable event" as defined in Section
4043(c) of ERISA, but excluding any such event as to which the provision for 30
days' notice to the PBGC is waived under applicable regulations, (b) the filing
of a notice of intent to terminate a Benefit Plan subject to Title IV of ERISA
under a distress termination under Section 4041(c) of ERISA or the treatment of
an amendment to such a Benefit Plan as a termination under Section 4041(c) of
ERISA, (c) the institution of proceedings by the PBGC to terminate a Benefit
Plan subject to Title IV of ERISA or the appointment of a trustee to administer
any such Benefit Plan or an event or condition that might reasonably be expected
to constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Benefit Plan subject to Section
4042, (d) the imposition of any liability under Title IV of ERISA other than for
PBGC premiums due but not yet payable, (e) the filing of an application for a
minimum funding waiver under Section 412 of the Code, (f) a withdrawal by the
Borrower or any Related Company from a Benefit Plan subject to Section 4063 of
ERISA during a plan year in which it was a "substantial employer" as defined in
Section 4001(a)(2) of ERISA, (g) a Benefit Plan intending to qualify under
Section 401(a) of the Code losing such qualified status, (h) the failure to make
a material required contribution to a Benefit Plan, (i) the Borrower or any
Related Company being in "default" (as defined in Section 4219(c)(5) of ERISA)
with respect to payments to a Multiemployer Plan because of its complete or
partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Multiemployer Plan, or (j) the occurrence of a non-exempt prohibited transaction
within the meaning of Section 4975 of the Code or Section 406 of ERISA with
respect to any Benefit Plan.
"Effective Date" means the later of:
(a) the Agreement Date, and
(b) the first date on which all of the conditions set forth in ARTICLE
6 shall have been fulfilled.
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"Effective Interest Rate" means each rate of interest per annum on the
Revolving Credit Loans, the Swingline Loans, the Term Loans and the Acquisition
Loans in effect from time to time pursuant to the provisions of SECTIONS 5.1(A),
(B), (C) and (D).
"Eligible Assignee" means any Lender and any financial institution,
fund, insurance company, trust or other Person that has as one of its
businesses, making or investing in commercial loans.
"Eligible Inventory" means items of Inventory of a Borrower held for
sale in the ordinary course of business of such Borrower which the
Administrative Agent in its reasonable credit judgment determines to meet all of
the following requirements:
(a) such Inventory is owned by a Borrower, is subject to the Security
Interest, which is perfected as to such Inventory, and is subject to no other
Lien whatsoever other than Permitted Liens arising by operation of law;
(b) such Inventory consists of raw materials, finished goods or
work-in-process;
(c) such Inventory is in good condition and meets all standards
applicable to such goods, their use or sale imposed by any governmental agency,
or department or division thereof, having regulatory authority over such
matters;
(d) such Inventory is currently either usable or saleable, at prices
approximating at least cost, in the normal course of the relevant Borrower's
business;
(e) such Inventory is not obsolete, slow moving or repossessed or used
goods taken in trade or returned goods which when added to the aggregate value
of returned goods included in Eligible Inventory at such time would exceed
$500,000;
(f) such Inventory is located within the United States at one of the
locations listed in SCHEDULE 7.1(U) or is in transit to such a location;
(g) such Inventory was not produced in violation of the Fair Labor
Standards Act and subject to the so called "hot goods" provisions contained in
Title 29, Chapter 8, U.S.C. ss. 215(a); and
(h) such Inventory is in the possession and control of a Borrower
(including a common carrier under a bill of lading in a Borrower's name) and not
any other third party and if located in a warehouse or other facility leased by
a Borrower, the warehouseman or lessor has delivered to the Administrative Agent
a lien waiver or subordination in such form, if any, as may be requested by the
Administrative Agent.
"Eligible Receivable" means a Receivable of a Borrower that consists of
the unpaid portion of the obligation stated on the invoice issued to an Account
Debtor with respect to
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Inventory sold and shipped to or services performed for such Account Debtor in
the ordinary course of business, net of any credits or rebates owed by such
Borrower to the Account Debtor and that the Administrative Agent, in its
reasonable credit judgment determines to meet all of the following requirements:
(a) such Receivable is owned by a Borrower and represents a complete
bona fide transaction which requires no further act under any circumstances on
the part of such Borrower to make such Receivable payable by the Account Debtor;
(b) such Receivable was invoiced in accordance with the applicable
Sales Terms and is not past due more than 60 days after its original due date;
(c) such Receivable does not arise out of any transaction with any
Subsidiary, Affiliate, director, officer, agent, stockholder or employee of such
Subsidiary or Affiliate of a Borrower or with any creditor, lessor or supplier
of a Borrower;
(d) such Receivable is not owing by an Account Debtor more than 20% of
whose then-existing accounts owing to the Borrowers do not meet the requirements
set forth in CLAUSE (B) above;
(e) if the Account Debtor with respect thereto is located outside of
the United States of America, the goods which gave rise to such Receivable were
shipped after receipt by a Borrower from the Account Debtor of an irrevocable
letter of credit that has been confirmed by a financial institution that meets
the requirements set forth in Subsection (c) of the definition "Cash
Equivalents" or is otherwise acceptable to the Administrative Agent in its
reasonable credit judgment and is in form and substance acceptable to the
Administrative Agent, payable in the full face amount of the face value of the
Receivable in Dollars at a place of payment located within the United States;
(f) the Account Debtor with respect to such Receivable is not located
in a state which imposes conditions on the enforceability of Receivables with
which such Borrower has not complied;
(g) such Receivable is not subject to the Assignment of Claims Act of
1940, as amended from time to time, or any Applicable Law now or hereafter
existing similar in effect thereto, as determined in the sole discretion of the
Administrative Agent, or to any provision prohibiting its assignment or
requiring notice of or consent to such assignment, unless all such required
notices have been given and such consents received such that such Receivable has
been validly assigned to the Administrative Agent;
(h) a Borrower is not in breach of any express or implied
representation or warranty with respect to the goods the sale of which gave rise
to such Receivable;
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(i) the Account Debtor with respect to such Receivable is not insolvent
or the subject of any bankruptcy or insolvency proceedings of any kind or of any
other proceeding or action, threatened or pending, which might, in the
Administrative Agent's sole judgment, have a materially adverse effect on such
Account Debtor;
(j) the goods, the sale of which gave rise to such Receivable, were
shipped or delivered to the Account Debtor on an absolute sale basis and not on
a bill-and-hold sale basis, a consignment sale basis, a guaranteed sale basis, a
sale or return basis or on the basis of any other similar understanding, and
such goods have not been returned or rejected;
(k) such Receivable is not owing by an Account Debtor or a group of
Account Debtors who are Affiliates whose then-existing accounts owing to the
Borrowers exceed in face amount 20% of the Borrowers' total Eligible
Receivables;
(l) such Receivable is evidenced by an invoice or other documentation
that conforms to the applicable Sales Terms;
(m) such Receivable is a valid, legally enforceable obligation of the
Account Debtor with respect thereto and is not subject to any present, or
contingent (and no facts exist which are the basis for any future), offset,
deduction or counterclaim, dispute or other defense on the part of such Account
Debtor, provided only an amount equal to the amount of such offset, deduction,
counterclaim dispute or other defense shall be ineligible by reason thereof;
(n) such Receivable is not evidenced by chattel paper or an instrument
of any kind unless such chattel paper or instrument is in the possession of the
Administrative Agent;
(o) such Receivable does not arise from the performance of warranty
services or out of account service charges by a Borrower or other fees for the
time value of money; and
(p) such Receivable is subject to the Security Interest, which is
perfected as to such Receivable, and is subject to no other Lien whatsoever
other than Permitted Liens arising by operation of law and the goods giving rise
to such Receivable were not, at the time of the sale thereof, subject to any
Lien other than the Security Interest or other Permitted Liens arising by
operation of law.
"Environmental Compliance Reserve" means any reserve for the cost of
Remedial Action by a Borrower determined by the Administrative Agent from time
to time in its reasonable discretion based upon the reports delivered pursuant
to SECTION 10.9(B) and such other advice, analysis and engineering studies as it
deems appropriate.
"Environmental Laws" means all federal, state, local and foreign laws
from time to time in effect relating to pollution or protection of the
environment, including laws relating to emissions, discharges, Releases or
threatened Releases of pollutants, Contaminants, chemicals, or industrial,
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toxic or hazardous substances or wastes into the environment (including, without
limitation, ambient air, surface water, ground water, or land), or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, removal, transport, or handling of pollutants, Contaminants,
chemicals, or industrial, toxic or hazardous substances or wastes, and any and
all regulations, notices or demand letters issued, entered, promulgated or
approved thereunder; such laws and regulations include but are not limited to
the Resource Conservation and Recovery Act, 42 U.S.C. ss. 6901 et seq., as
amended; the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. ss. 9601 et seq., as amended; the Toxic Substances Control Act,
15 U.S.C. ss. 2601 et seq., as amended; the Clean Air Act, 46 U.S.C. ss. 7401 et
seq., as amended; and state and federal lien and environmental cleanup programs.
"Environmental Lien" means a Lien in favor of any governmental entity
for (a) any liability under Environmental Laws or (b) damages arising from, or
costs incurred by such governmental entity in response to, a Release or
threatened Release of Contaminant into the environment.
"Equipment" has the meaning set forth in the definition "Collateral".
"Eurodollar Rate" means, with respect to any Eurodollar Rate Loan for
the Interest Period applicable thereto, a simple per annum interest rate
determined pursuant to the following formula, rounded upwards, if necessary to
the next higher 1/16 of 1%:
Eurodollar Rate = Interbank Offered Rate
--------------------------------------
1 - Eurodollar Reserve Percentage
The Eurodollar Rate shall be adjusted automatically as of the effective date of
any change in the Eurodollar Reserve Percentage.
"Eurodollar Rate Acquisition Loan" means a Eurodollar Rate Loan
outstanding under the Acquisition Facility.
"Eurodollar Rate Loan" means any Loan (other than a Swingline Loan)
bearing interest at a rate determined with reference to the Eurodollar Rate,
including any such Loans continued as or converted into a Eurodollar Rate Loan
on the same day by the Lenders for the same Interest Period.
"Eurodollar Rate Revolving Credit Loan" means a Eurodollar Rate Loan
outstanding under the Revolving Credit Facility.
"Eurodollar Rate Term Loan" means a Eurodollar Rate Loan outstanding
under a Term Loan Facility.
"Eurodollar Rate Term Loan A" means a Eurodollar Rate Loan outstanding
under the Term Loan A Facility.
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<PAGE> 24
"Eurodollar Rate Term Loan B" means a Eurodollar Rate Loan outstanding
under the Term Loan B Facility.
"Eurodollar Rate Term Loan C" means a Eurodollar Rate Loan outstanding
under the Term Loan C Facility.
"Eurodollar Reserve Percentage" applicable to any Interest Period means
the rate (expressed as a decimal) applicable to United States commercial banks
during such Interest Period under regulations issued from time to time by the
Board of Governors of the Federal Reserve System for determining the maximum
reserve requirement (including, without limitation, any basic, supplemental,
emergency or marginal reserve requirement) of such banks with respect to
"Eurocurrency liabilities" as that term is defined under such regulations.
Without limiting the effect of the foregoing, the Eurodollar Reserve Percentage
shall include any other reserves required to be maintained by such banks by
reason of any regulatory change with respect to (i) any category of liabilities
that includes deposits by reference to which the "Interbank Offered Rate" is to
be determined as provided in the definition "Interbank Offered Rate" or (ii) any
category of extensions of credit or other assets that includes Eurodollar Rate
Loans.
"Event of Default" means any of the events specified in SECTION 13.1,
PROVIDED that any requirement for notice or lapse of time or any other condition
has been satisfied.
"Excess Cash Flow" means, for any Fiscal Year, EBITDA, minus increases
(or plus decreases) in working capital, minus cash taxes paid, minus Capital
Expenditures (other than Financed Capex), minus scheduled and any additional
actual principal repayments of Debt and payments of interest on all Debt, in
each case for such Fiscal Year, determined in accordance with GAAP on a
consolidated basis for WinsLoew and its Consolidated Subsidiaries.
"Facility" means each of the Acquisition Facility, the Revolving Credit
Facility, the Swingline Facility, and each Term Loan Facility.
"Facility Percentage" means as to any Lender at the time of
determination, the percentage obtained by dividing such Lender's Commitment with
respect to a specified Facility or Class of Loans or, if the Commitments under
such Facility have terminated, such Lender's Loans outstanding under a specified
Facility by the aggregate Commitment or Loans under the same Facility at such
time.
"Federal Funds Effective Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the weighted
average of the rates on overnight federal funds transactions with members of the
Federal Reserve system arranged by federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for such day
on such transactions
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received by BankBoston from three federal funds brokers of recognized standing
selected by BankBoston.
"Financed Capex" means Capital Expenditures funded with the proceeds of
Permitted Purchase Money Debt (excluding Loans) and those represented by
Capitalized Lease Obligations.
"Financial Officer" means the chief financial officer, Treasurer or
Controller of WinsLoew.
"Financing Statements" means any and all Uniform Commercial Code
financing statements, in form and substance satisfactory to the Administrative
Agent, executed and delivered by a Borrower or a Guarantor to the Administrative
Agent, naming the Administrative Agent, for the benefit of the Lenders, as
secured party and such Borrower or such Guarantor as debtor, in connection with
this Agreement or a Guarantor Security Agreement.
"Fiscal Quarter" means each approximately three-month accounting period
of WinsLoew ending as to the first such periods of each Fiscal Year, on the last
Friday of each March, June, and September and as to the fourth such period of
each Fiscal Year, ending on December 31.
"Fiscal Year" means the fiscal year of WinsLoew, commencing on January
1 of each calendar year and ending on December 31 of the same calendar year and
when preceded or followed by the designation of a calendar year means the fiscal
year of WinsLoew ending on December 31 of such designated calendar year.
"Fixed Charge Coverage Ratio" means, as of the last day of any Fiscal
Quarter, the result obtained by dividing (a) (i) EBITDA minus (ii) the sum of
cash income taxes paid, Capital Expenditures (other than Financed Capex and the
WPI Purchases) and Restricted Distributions other than those deducted in
computing EBITDA, in each case of WinsLoew and its Consolidated Subsidiaries
determined on a consolidated basis for the period of four consecutive Fiscal
Quarters or other specified measurement period ending on such day, by (b) the
sum of interest expense (other than deferred debt issuance costs, bond discount
or original issue discount attributable to the Senior Subordinated Notes and the
related warrants, generally included as interest expense under GAAP) plus
scheduled principal repayments of Debt (including scheduled payments of
Capitalized Lease Obligations), in each case of WinsLoew and its Consolidated
Subsidiaries determined on a consolidated basis for the same period.
"Funded Debt" means, at any time, the aggregate outstanding principal
amount of all Debt of WinsLoew and its Consolidated Subsidiaries, on a
consolidated basis, at such time.
"GAAP" means generally accepted accounting principles consistently
applied and maintained throughout the period indicated and, when used with
reference to WinsLoew, the Borrowers or any Subsidiary, consistent with the
prior financial practice of WinsLoew, as reflected in the financial statements
referred to in SECTION 7.1(N); PROVIDED, HOWEVER, that, in the event that
changes shall be mandated by the Financial Accounting Standards Board or any
similar
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<PAGE> 26
accounting authority of comparable standing, or shall be recommended by the
Borrowers' independent public accountants, such changes shall be included in
GAAP as applicable to the Borrowers only from and after such date as the
Borrowers, the Required Lenders and the Administrative Agent shall have amended
this Agreement to the extent necessary to reflect any such changes in the
financial covenants set forth in ARTICLE 12.
"General Intangibles" has the meaning set forth in the definition
"Collateral".
"Governmental Approvals" means all authorizations, consents, approvals,
licenses and exemptions of, registrations and filings with, and reports to, all
governmental bodies, whether federal, state, local or foreign national or
provincial and all agencies thereof.
"Government Acts" has the meaning set forth in SECTION 3.8(A)(II).
"Guarantor" means any Person that guarantees the Secured Obligations,
including any Subsidiary that becomes a Guarantor in accordance with SECTION 6.2
or 10.11.
"Guarantor Security Agreement" means a security agreement in
substantially the form of EXHIBIT I hereto or in such other form as may be
satisfactory to the Administrative Agent, executed by a Guarantor in favor of
the Administrative Agent.
"Guaranty", "Guaranteed" or to "Guarantee" as applied to any obligation
of another Person shall mean and include
(a) a guaranty (other than by endorsement of negotiable instruments for
collection in the ordinary course of business), directly or indirectly, in any
manner, of any part or all of such obligation of such other Person, and
(b) an agreement, direct or indirect, contingent or otherwise, and
whether or not constituting a guaranty, the practical effect of which is to
assure the payment or performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation of such other Person
whether by
(i) the purchase of securities or obligations,
(ii) the purchase, sale or lease (as lessee or lessor) of
property or the purchase or sale of services primarily for the purpose
of enabling the obligor with respect to such obligation to make any
payment or performance (or payment of damages in the event of
nonperformance) of or on account of any part or all of such obligation,
or to assure the owner of such obligation against loss,
(iii) the supplying of funds to or in any other manner
investing in the obligor with respect to such obligation,
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(iv) repayment of amounts drawn down by beneficiaries of
letters of credit, or
(v) the supplying of funds to or investing in a Person on
account of all or any part of such Person's obligation under a Guaranty
of any obligation or indemnifying or holding harmless, in any way, such
Person against any part or all of such obligation.
"Guaranty Agreement" means an agreement of Guaranty, substantially in
the form of EXHIBIT H hereto or in such other form as may be satisfactory to the
Administrative Agent, executed by a Guarantor in favor of the Administrative
Agent.
"Guaranty Collateral" means "Collateral" as such term is defined in any
Guarantor Security Agreement in effect.
"IPO" means the initial public offering of voting common stock of
WinsLoew, underwritten by a reputable securities underwriter in compliance with
Applicable Law, the net proceeds of which to WinsLoew are equal to or greater
than $15,000,000.
"Indebtedness" of any Person means, without duplication, all
Liabilities of such Person, and to the extent not otherwise included in
Liabilities, the following:
(a) all obligations for money borrowed or for the deferred purchase
price of property or services or in respect of drafts accepted or similar
instruments or reimbursement obligations under letters of credit,
(b) all obligations (including, during the noncancellable term of any
lease in the nature of a title retention agreement, all future payment
obligations under such lease discounted to their present value in accordance
with GAAP) secured by any Lien to which any property or asset owned or held by
such Person is subject, whether or not the obligation secured thereby shall have
been assumed by such Person,
(c) all obligations of other Persons which such Person has Guaranteed,
including, but not limited to, all obligations of such Person consisting of
recourse liability with respect to accounts receivable sold or otherwise
disposed of by such Person, and
(d) in the case of the Borrowers (without duplication) all Secured
Obligations and all obligations in respect of the Senior Subordinated Notes and
the Subordinated Debt.
"Initial Loans" means the Revolving Credit Loans and the Term Loans
made to the Borrowers on the Effective Date pursuant to the Initial Notice of
Borrowing.
"Initial Notice of Borrowing" means the Notice of Borrowing given by
the Borrowers pursuant to SECTION 6.1(C)(19), which shall also specify the
method of disbursement.
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"Installment Payment Date" means (i) as applied to the Term Loans the
last day of each March, June, September and December, commencing on March 31,
2000, (ii) as applied to the Acquisition Loans, the last day of each March,
June, September and December, commencing on March 31, 2002 and (iii) as applied
to any other payment hereunder, the last day of each March, June, September and
December, commencing on September 30, 1999.
"Intellectual Property" means all of the Borrowers' now owned and
hereafter arising or acquired: Patents, Copyrights and Trademarks, including,
without limitation, the Intellectual Property set forth on SCHEDULE 7.1(X)
hereto.
"Interbank Offered Rate" applicable to any Eurodollar Rate Loan for any
Interest Period means the rate of interest determined by the Administrative
Agent to be the prevailing rate per annum at which deposits in U.S. dollars are
offered to the Administrative Agent by first-class banks in the interbank
Eurodollar market in which it regularly participates at or about 10:00 a.m. two
Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Eurodollar Rate Loan to which
such Interest Period is to apply for a period of time approximately equal to
such Interest Period.
"Interest Coverage Ratio" means for any specified measurement period,
the ratio of (i) EBITDA for such period minus consolidated Capital Expenditures
(other than Financed Capex and the WPI Purchases) of WinsLoew and its
Consolidated Subsidiaries during such period to (ii) consolidated interest
expense of WinsLoew and its Consolidated Subsidiaries for such period (other
than deferred debt issuance costs, bond discount or original issue discount
attributable to the Senior Subordinated Notes and the related warrants,
generally included as interest expense under GAAP).
"Interest Payment Date" means, as to Base Rate Loans, the first day of
each calendar month commencing on September 1, 1999 and continuing thereafter
until the Secured Obligations have been irrevocably paid in full and, as to
Eurodollar Rate Loans, the last day of the applicable Interest Period and, if
such Interest Period is longer than the three months, at intervals of three
months after the first day thereof and, as to all Loans, the date such Loan is
due (whether at maturity, by reason of acceleration or otherwise).
"Interest Period" means with respect to each Eurodollar Rate Loan, the
period commencing on the date of the making or continuation of or conversion to
such Eurodollar Rate Loan and ending one, two, three or six months thereafter,
as the Borrowers may elect in the applicable Notice of Borrowing or Notice of
Conversion or Continuation; PROVIDED, that:
(i) any Interest Period that would otherwise end on a day that
is not a Business Day shall, subject to the provisions of CLAUSE (III)
below, be extended to the next succeeding Business Day unless such
Business Day falls in the next calendar month, in which case such
Interest Period shall end on the immediately preceding Business Day;
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(ii) any Interest Period that begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to CLAUSE (III) below, end on the last Business
Day of a calendar month;
(iii) any Interest Period that would otherwise end after the
Termination Date shall end on the Termination Date;
(iv) no Interest Period applicable to a Eurodollar Rate Term
Loan or Eurodollar Rate Acquisition Loan may end after the next
applicable Installment Payment Date, unless the aggregate principal
amount of Base Rate Term Loans (or Base Rate Acquisition Loans) and
Eurodollar Rate Term Loans (or Eurodollar Rate Acquisition Loans)
having Interest Periods ending prior to such applicable Installment
Payment Date is at least equal to the amount of the principal repayment
due hereunder on such Installment Payment Date; and
(v) notwithstanding CLAUSE (III) above, no Interest Period
shall have a duration of less than one month and if any applicable
Interest Period would be for a shorter period, such Interest Period
shall not be available hereunder.
"Interest Rate Protection Agreement" shall mean an interest rate swap,
cap or collar agreement or similar arrangement between any Borrower and a Lender
providing for the transfer or mitigation of interest risks either generally or
under specific contingencies.
"Inventory" has the meaning set forth in the definition "Collateral".
"Investment" means, with respect to any Person:
(a) the acquisition or ownership by such Person of any share of capital
stock, membership interest, partnership interest, evidence of Indebtedness or
other security or equity interest issued by any other Person,
(b) any loan, advance or extension of credit to, or contribution to the
capital of, any other Person, excluding advances to employees in the ordinary
course of business for business expenses,
(c) any Guaranty of the obligations of any other Person,
(d) any other investment (other than the Acquisition of a Business
Unit) in any other Person, and
(e) any commitment or option to make any of the investments listed in
CLAUSES (A) through (D) above if, in the case of an option, the consideration
therefor exceeds $100.
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"Investment Account" has the meaning set forth in the definition
"Collateral".
"Investment Property" has the meaning set forth in the definition
"Collateral".
"IRS" means the Internal Revenue Service.
"Lender" means at any time any Person party to this Agreement at such
time as a "Lender", including any such Person becoming a party hereto pursuant
to the provisions of ARTICLE 14, and "Lenders" means at any time all of the
Persons party to this Agreement at such time as "Lenders", including any such
Persons becoming parties hereto pursuant to the provisions of ARTICLE 14.
"Letter of Credit" means any Letter of Credit issued by BankBoston for
the account of a Borrower pursuant to ARTICLE 3.
"Letter of Credit Amount" means, with respect to any Letter of Credit,
the aggregate maximum amount at any time available for drawing (assuming all
conditions to drawing are satisfied) under such Letter of Credit.
"Letter of Credit Facility" means a subfacility of the Revolving Credit
Facility providing for the issuance of Letters of Credit described in ARTICLE 3
up to an aggregate amount of Letter of Credit Obligations at any one time
outstanding not to exceed the amount of $10,000,000.
"Letter of Credit Obligations" means, at any time, the sum of (a) the
Reimbursement Obligations of the Borrowers at such time, plus (b) the aggregate
Letter of Credit Amount of Letters of Credit outstanding at such time, plus (c)
the aggregate Letter of Credit Amount of Letters of Credit the issuance of which
has been authorized by the Administrative Agent and BankBoston pursuant to
SECTION 3.4(B) but that have not yet been issued, in each case as determined by
the Administrative Agent.
"Letter of Credit Reserve" means, at any time, the aggregate Letter of
Credit Obligations at such time, other than Letter of Credit Obligations that
are fully secured by Cash Collateral.
"Liabilities" of any Person means all items (except for items of
capital stock, additional paid-in capital or retained earnings, or of general
contingency or deferred tax reserves) which in accordance with GAAP would be
included in determining total liabilities as shown on the liability side of a
balance sheet of such Person as at the date as of which liabilities are to be
determined.
"Lien" as applied to the property of any Person means:
(a) any mortgage, deed to secure debt, deed of trust, lien, pledge,
charge, lease constituting a Capitalized Lease Obligation, conditional sale or
other title retention agreement, or
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other security interest, security title or encumbrance of any kind in respect of
any property of such Person, or upon the income or profits therefrom,
(b) any arrangement, express or implied, under which any property of
such Person is transferred, sequestered or otherwise identified for the purpose
of subjecting the same to the payment of Indebtedness or performance of any
other obligation in priority to the payment of the general, unsecured creditors
of such Person,
(c) any Indebtedness which is unpaid more than 30 days after the same
shall have become due and payable and which if unpaid might by law (including,
but not limited to, bankruptcy and insolvency laws), or otherwise, be given any
priority whatsoever over the claims of general unsecured creditors of such
Person,
(d) the filing of, or any agreement to give, any financing statement
under the Uniform Commercial Code or its equivalent in any jurisdiction,
excluding informational financing statements relating to property leased by
WinsLoew or any Subsidiary, and
(e) in the case of Real Estate, reservations, exceptions,
encroachments, easements, rights-of-way, covenants, conditions, restrictions,
leases and other title exceptions and encumbrances.
"Loan" means any Revolving Credit Loan, Swingline Loan, Term Loan or
Acquisition Loan, as well as all such loans collectively, as the context
requires.
"Loan Account" and "Loan Accounts" have the meanings set forth in
SECTION 5.5.
"Loan Documents" means collectively this Agreement, the Notes, the
Security Documents and each other instrument, agreement or document executed by
a Borrower, a Guarantor or any Affiliate or Subsidiary of a Borrower or a
Guarantor in connection with this Agreement whether prior to, on or after the
Effective Date and each other instrument, agreement or document referred to
herein or contemplated hereby.
"Loan Party" means each of the Borrowers and each Guarantor.
"Loan Year" means each period of 12 consecutive months commencing on
the Effective Date and on each Anniversary thereof.
"Loewenstein" means Loewenstein, Inc., a Florida corporation and a
Wholly Owned Subsidiary of WinsLoew.
"Make-Whole Amount" has the meaning set forth in SECTION 5.9(B).
"Margin Stock" means "margin stock" as defined in Section 221.1(h) of
Regulation U.
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"Materially Adverse Effect" means any act, omission, situation,
circumstance, event or undertaking which could reasonably be expected to have,
singly or in any combination with one or more other acts, omissions, situations,
circumstances, events or undertakings, a materially adverse effect upon (a) the
business, assets, properties, liabilities, condition (financial or otherwise),
results of operations or business prospects of WinsLoew and its Subsidiaries
taken as a whole, (b) the value of the whole or any material part of the
Collateral, or the enforceability or priority of the Security Interest, (c) the
respective ability of any Borrower or any of its Subsidiaries to perform any
obligations under this Agreement or any other Loan Document to which it is a
party, or (d) the legality, validity, binding effect, enforceability or
admissibility into evidence of any Loan Document or the rights or remedies of
the Administrative Agent, the Co-Agents or the Lenders under or in connection
with any Loan Document.
"Maximum Rate" has the meaning set forth in SECTION 5.1(F).
"Moody's" means Moody's Investors Service, Inc.
"Mortgages" means and includes any and all of the mortgages, deeds of
trust, deeds to secure debt, assignments and other instruments executed and
delivered by a Borrower to or for the benefit of the Administrative Agent by
which the Administrative Agent, on behalf of the Lenders, acquires a Lien on
Real Estate owned by a Borrower.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA to which a Borrower or a Related Company is required to
contribute or has contributed within the immediately preceding six years.
"Net Amount" means, with respect to any Investments made by any Person,
the gross amount of all such Investments minus the aggregate amount of all cash
received and the fair value, at the time of receipt by such Person, of all
property received as payments of principal or premiums, returns of capital,
liquidating dividends or distributions, proceeds of sale or other dispositions
with respect to such Investments.
"Net Income" or "Net Loss" means, as applied to any Person for any
accounting period, the net income or net loss, as the case may be, of such
Person for the period in question after giving effect to deduction of or
provision for all operating expenses, all taxes and reserves (including reserves
for deferred taxes) and all other proper deductions, all determined in
accordance with GAAP, provided that there shall be excluded:
(a) the net income or net loss of any Person accrued prior to the date
it becomes a Subsidiary of, or is merged into or consolidated with, the Person
whose Net Income is being determined or a Subsidiary of such Person,
(b) the net income or net loss of any Person in which the Person whose
Net Income is being determined or any Subsidiary of such Person has an ownership
interest, except, in the case
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of net income, to the extent that any such income has actually been received by
such Person or such Subsidiary in the form of cash dividends or similar
distributions,
(c) any restoration of any contingency reserve other than in the
ordinary course of such Person's business, except to the extent that provision
for such reserve was made out of income during such period,
(d) any net gains or losses on the sale or other disposition, not in
the ordinary course of business, of Investments, Business Units and other
capital assets, provided that there shall also be excluded any related charges
for taxes thereon,
(e) any net gain arising from the collection of the proceeds of any
insurance policy,
(f) any write-up of any asset, and
(g) any other extraordinary item.
"Net Outstandings" of any Lender means, at any time, the sum of (a) all
amounts paid by such Lender (other than pursuant to SECTION 15.7) to the
Administrative Agent in respect of Loans by such Lender under the Revolving
Credit Facility, minus (b) all amounts received by the Administrative Agent and
paid by the Administrative Agent to such Lender for application, pursuant to
this Agreement, to reduction of the outstanding principal balance of the Loans
of such Lender outstanding under the Revolving Credit Facility.
"Net Proceeds" means proceeds received by a Borrower or any of its
Subsidiaries in cash from any Asset Disposition (including, without limitation,
payments under notes or other debt securities received in connection with any
Asset Disposition), net of: (a) the transaction costs of such sale, lease,
transfer or other disposition; (b) any tax liability arising from such
transaction; and (c) amounts applied to repayment of Indebtedness (other than
the Secured Obligations) secured by a Lien on the asset or property disposed of.
"Note" means any of the Revolving Credit Notes, the Swingline Note, the
Term Notes and Acquisition Notes and "Notes" means more than one such Note.
"Notice of Borrowing" means a written notice, or telephonic notice
followed by a confirming written notice in the form attached hereto as EXHIBIT
E-1, E-2 or E-3, requesting a Borrowing of, respectively, (i) either a Base Rate
Revolving Credit Loan or a Eurodollar Rate Revolving Credit Loan, (ii) a
Swingline Eurodollar Rate Loan or a Base Rate Swingline Loan or (iii) on or
before the Acquisition Facility Termination Date, an Acquisition Loan, which is
given by telex or facsimile transmission in accordance with the applicable
provisions of SECTION 2.2, SECTION 2A.2 or SECTION 4A.2, as the case may be, and
which specifies (x) the amount of the requested Borrowing, (y) the date of the
requested Borrowing, and (z) if the requested Borrowing is of a Eurodollar Rate
Loan, the duration of the applicable Interest Period.
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"Notice of Conversion or Continuation" has the meaning specified in
SECTION 5.13.
"Old WinsLoew" means WinsLoew Furniture, Inc., a Florida corporation,
prior to the WinsLoew Merger.
"Operating Lease" means any lease (other than a lease constituting a
Capitalized Lease Obligation) of real or personal property.
"Overadvance" means at any time the amount by which the principal
amount of Revolving Credit Loans outstanding at such time exceeds the amount
determined pursuant to clause (b) of the definition "Borrowing Base".
"Overadvance Condition" means and is deemed to exist any time the
principal amount of Revolving Credit Loans outstanding exceeds the amount
determined pursuant to clause (b) of the definition "Borrowing Base" at such
time.
"Overadvance Loan" means a Revolving Credit Loan made at the time an
Overadvance Condition exists or which results in an Overadvance Condition.
"PBGC" means the Pension Benefit Guaranty Corporation and any successor
agency.
"Patent Security Agreement" means each Security Agreement (Patents)
made by a Borrower to the Administrative Agent.
"Patents" means and includes, in each case whether now existing or
hereafter arising, all of the Borrowers' right, title and interest in and to
(i) any and all patents and patent applications,
(ii) inventions and improvements described and claimed
therein,
(iii) reissues, divisions, continuations, renewals, extensions
and continuations-in-part thereof,
(iv) income, royalties, damages, claims and payments now or
hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past and future
infringements thereof,
(v) rights to sue for past, present and future infringements
thereof, and
(vi) all rights corresponding to any of the foregoing
throughout the world.
"Pending Loan" has the meaning specified in SECTION 5.15(B).
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"Permitted Acquisition" means an Acquisition by a Borrower of
substantially all of the capital stock or the assets of another Person, in an
arm's length transaction and in accordance with the provisions of SECTION 6.2
(without regard to whether a related Acquisition Loan is made).
"Permitted Investments" means Investments of any Borrower in:
(a) Cash Equivalents,
(b) sales of inventory on credit in the ordinary course of business,
(c) in any other Loan Party and of any Subsidiary in any Loan Party,
(d) any Subsidiary that is not a Loan Party in an aggregate amount for
all Borrowers not to exceed $500,000,
(e) shares of capital stock, evidence of Indebtedness or other security
acquired by such Borrower in consideration for or as evidence of past-due or
restructured Receivables in an aggregate face amount of such Receivables at any
time not to exceed $300,000,
(f) non-cash consideration received in connection with any Asset
Disposition otherwise permitted hereby,
(g) Guaranties permitted pursuant to SECTION 12.3,
(h) those items described on SCHEDULE 1.1B - PERMITTED INVESTMENTS,
(i) loans and advances (i) to employees of any Borrower or their
respective Subsidiaries for moving, entertainment, travel and other similar
expenses in the ordinary course of business not to exceed $250,000 in the
aggregate at any time outstanding or (ii) to such employees and to independent
sales representatives of any Borrower or its Subsidiaries secured by the pledge
of shares of WinsLoew capital stock made to finance the purchase by such
employees (or representatives) of such stock, not to exceed $1,000,000 in the
aggregate at any time outstanding, and
(j) Permitted Acquisitions.
"Permitted Liens" means:
(a) Liens securing taxes, assessments and other governmental charges or
levies (excluding any Lien imposed pursuant to any of the provisions of ERISA)
or the claims of materialmen, repairmen, mechanics, carriers, warehousemen or
landlords for labor, materials, supplies or rentals incurred in the ordinary
course of business, but in all cases only if payment shall not at the time be
required to be made in accordance with SECTION 10.6,
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(b) Liens consisting of deposits or pledges made in the ordinary course
of business in connection with, or to secure payment of, obligations under
workers' compensation, unemployment insurance or similar legislation or under
payment or performance bonds,
(c) Liens to which the priority of any Mortgage is subject as evidenced
by the related mortgagee title insurance policy accepted by the Administrative
Agent or constituting encumbrances in the nature of zoning restrictions,
condemnations, easements, and rights or restrictions of record on the use of
real property, which do not materially detract from the value of such property
or materially impair the use thereof in the business of a Borrower,
(d) Liens consisting of deposits to secure liability to insurance
carriers and the performance of bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary course of
business of a Borrower (and not in connection with incurring Debt), PROVIDED,
that in each case the obligation secured by such deposit is not overdue or is
being contested in good faith by appropriate proceedings during the pendency of
which the execution of the applicable Lien is effectively stayed and that the
aggregate amount of such deposits does not exceed at any time $500,000,
(e) Liens of or resulting from any judgment or award that would not
result in an Event of Default under SECTION 13.1(K), the time for appeal or
petition for rehearing of which shall not have expired, or in respect of which a
Borrower or the affected Subsidiary shall at any time in good faith be
prosecuting an appeal or proceeding for review and in respect of which a stay of
execution pending such appeal or proceeding for review is in effect,
(f) Purchase Money Liens securing Permitted Purchase Money Debt,
(g) short term leases of Real Estate to third parties that (i) are
subordinate to the Mortgage (if any) encumbering such Real Estate and (ii) do
not interfere with the lessor's conduct of business on such Real Estate,
(h) Liens shown on SCHEDULE 1.1C - PERMITTED LIENS,
(i) Liens of the Administrative Agent, for the benefit of the Lenders,
arising under this Agreement and the other Loan Documents, and
(j) Liens in existence immediately prior to the Effective Date that are
satisfied in full and released (or assigned to and accepted by the
Administrative Agent) on the Effective Date or promptly thereafter as a result
of the application of the proceeds of the Initial Loans or cash on hand.
"Permitted Purchase Money Debt" means Purchase Money Debt of a Borrower
incurred after the Agreement Date
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(a) which is secured by a Purchase Money Lien,
(b) the aggregate principal amount of which does not exceed an amount
equal to 100% of the lesser of
(i) the cost (including the principal amount of such Debt,
whether or not assumed) of the tangible personal property (other than
Inventory) subject to such Lien, and
(ii) the fair value of such tangible personal property (other
than Inventory) at the time of its acquisition, and
(c) which, when aggregated with the principal amount of all other such
Debt and Capitalized Lease Obligations of the Borrower at the time outstanding,
does not exceed $3,000,000.
"Person" means an individual, corporation, limited liability company,
partnership, association, trust or unincorporated organization, or a government
or any agency or political subdivision thereof.
"Pompeii" means Pompeii Furniture Co., Inc., a Florida corporation and
a Wholly Owned Subsidiary of Winston.
"Pompeii-Mexico" means Industrial Mueblera Pompeii de Mexico, S.A. de
C.V., a corporation organized under the laws of Mexico and a Wholly Owned
Subsidiary of Winston.
"Pro Forma" means the pro forma consolidated balance sheet of WinsLoew
and its Consolidated Subsidiaries as at the Effective Date, immediately after
giving effect to the transactions contemplated by this Agreement, the WinsLoew
Merger Documents, the Senior Note Indenture and the Acquisition of Pompeii.
"Projections" means the forecasted (a) consolidated balance sheets, (b)
consolidated income statements and (c) consolidated cash flow statements of
WinsLoew and its Consolidated Subsidiaries for the period beginning January 1,
1999 through December 31, 2003, prepared on a monthly basis for Fiscal Year 1999
and on an annual basis for each Fiscal Year thereafter, delivered to the
Administrative Agent and dated June 25, 1999, together with appropriate
supporting detail and a statement of underlying assumptions.
"Proportionate Share" or "Ratable Share" or "Ratable" (and with
corollary meaning, "Ratably") means, as to a Lender, such Lender's share of an
amount in Dollars or other property at the time of determination equal to (i)
such Lender's Facility Percentage in respect of a specified Facility, or (ii) if
no Facility is specified (x) the percentage obtained by dividing the sum of such
Lender's Revolving Credit and unused Acquisition Facility Commitments plus the
principal amount of Term Loans and Acquisition Loans owing to such Lender by the
sum of the total
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Revolving Credit and unused Acquisition Facility Commitments of all Lenders plus
the total principal amount of all Term Loans and Acquisition Loans then owing to
all Lenders, (y) if the Commitments are terminated, the percentage of the total
principal amount of Loans outstanding at such time obtained by dividing the
principal amount of the Loans then owing to such Lender by the total principal
amount of all Loans then owing to all Lenders, or (z) if the Commitments are
terminated and no Loans are outstanding, the percentage of the total Letter of
Credit Obligations then outstanding obtained by dividing such Lender's
participation, if any, in such Letter of Credit Obligations by the total Letter
of Credit Obligations then outstanding.
"Purchase Money Debt" means Debt created to finance the payment of all
or any part of the purchase price (not in excess of the fair market value
thereof) of any tangible personal property (other than Inventory) and incurred
at the time of or within 30 days prior to or after the acquisition of such
tangible asset.
"Purchase Money Lien" means any Lien securing Purchase Money Debt, but
only if such Lien shall at all times be confined solely to the property (other
than Inventory) the purchase price of which was financed through the incurrence
of the Purchase Money Debt secured by such Lien.
"Quoted Rate" has the meaning set forth in SECTION 2A.2.
"Real Estate" means all of the Borrowers' now or hereafter owned or
leased estates in real property, including, without limitation, all fees,
leaseholds and future interests, together with all of the Borrowers' now or
hereafter owned or leased interests in the improvements and emblements thereon,
the fixtures attached thereto and the easements appurtenant thereto, including,
without limitation the real property described on SCHEDULE 7.1(Y).
"Receivables" has the meaning set forth in the definition "Collateral".
"Register" has the meaning specified in SECTION 14.1(D).
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of August 27, 1999 to which WinsLoew and the initial purchasers of the
Senior Subordinated Notes are parties.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System (or any successor), as the same may be amended or
supplemented from time to time.
"Reimbursement Agreement" means, with respect to a Letter of Credit,
such form of application therefor and form of reimbursement agreement therefor
(whether in a single document or several documents) as BankBoston may employ in
the ordinary course of business for its own account, with such modifications
thereto as may be agreed upon by BankBoston and the relevant Borrower, provided
that such application and agreement and any modifications thereto are not
inconsistent with the terms of this Agreement.
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"Reimbursement Obligations" means the reimbursement or repayment
obligations of the relevant Borrower to BankBoston pursuant to SECTION 3.6 or
pursuant to a Reimbursement Agreement with respect to amounts that have been
drawn under Letters of Credit.
"Related Company" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Code) as any Borrower; (ii) partnership or other trade or business (whether
or not incorporated) under common control (within the meaning of Section 414(c)
of the Code) with any Borrower; or (iii) member of the same affiliated service
group (within the meaning of Section 414(m) of the Code) as any Borrower, any
corporation described in CLAUSE (I) above or any partnership, trade or business
described in CLAUSE (II) above.
"Release" means release, spill, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement of
Contaminants through or in the air, soil, surface water or groundwater.
"Remedial Action" means actions required to (i) clean up, remove, treat
or in any other way address Contaminants in the indoor or outdoor environment;
(ii) prevent the Release or threat of Release or minimize the further Release of
Contaminants so they do not migrate or endanger or threaten to endanger public
health or welfare or the indoor or outdoor environment; or (iii) perform
pre-remedial studies and investigations and post-remedial monitoring and care.
"Required Lenders" means, at any time, any combination of Lenders
whose combined Proportionate Shares at such time are greater than 51%.
"Reserves" means any Letter of Credit Reserve or Environmental
Compliance Reserve.
"Restricted Distribution" by any Person means (i) the retirement,
redemption, purchase, or other acquisition or retirement for value of any
capital stock or other equity securities (except equity securities acquired on
the conversion thereof into other equity securities of such Person) or equity
interests or partnership or membership interests issued by such Person, (ii) the
declaration or payment of any dividend or distribution in cash or property on or
with respect to any such securities (other than dividends payable solely in
shares of its capital stock), equity interests or partnership or membership
interests, excluding, however, any such dividend, distribution or payment to any
Borrower by any Subsidiary of such Borrower, (iii) any loan or advance by such
Person to, or other investment by such Person in, the holder of any of such
securities, equity interests or partnership or membership interests and any
forgiveness or cancellation of such loan or advance, and (iv) any other payment
by such Person in respect of such securities, equity interests or partnership or
membership interests.
"Restricted Payment" means (i) any redemption or prepayment or other
retirement, prior to the stated maturity thereof or prior to the due date of any
regularly scheduled installment or
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amortization payment with respect thereto, of any Debt (other than the Loans) or
of any Subordinated Debt, (ii) the payment by any Person of the principal amount
of or interest on any Indebtedness (other than trade debt) owing to an Affiliate
of such Person or to any Affiliate of any such Affiliate and (iii) the payment
of any management, consulting or similar fee by any Person to any Affiliate of
such Person.
"Revolving Credit Facility" means the credit facility providing for
Revolving Credit Loans based upon the Borrowing Base and described in SECTION
2.1 up to an aggregate principal amount at any one time outstanding not to
exceed $40,000,000 or such lesser or greater amount as shall be agreed upon from
time to time in writing by the Administrative Agent, the Lenders and the
Borrowers.
"Revolving Credit Lender" means each Lender having a Commitment under
the Revolving Credit Facility or, if the Commitments are terminated, having
outstanding Revolving Credit Loans.
"Revolving Credit Loans" means Loans made to the Borrowers pursuant to
SECTION 2.1.
"Revolving Credit Note" means each Revolving Credit Note made by the
Borrowers payable to the order of a Lender evidencing the joint and several
obligation of the Borrowers to pay the aggregate unpaid principal amount of the
Loans made to them by such Lender under the Revolving Credit Facility (and any
promissory note or notes that may be issued from time to time in substitution,
renewal, extension, replacement or exchange therefor whether payable to such
Lender or to a different Lender in connection with a Person becoming a Lender
after the Effective Date or otherwise) substantially in the form of EXHIBIT A-1
hereto, with all blanks properly completed, either as originally executed or as
the same may from time to time be supplemented, modified, amended, renewed,
extended or refinanced.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies.
"Sales Terms" means as to each Borrower, the terms and conditions on
which Inventory is sold by such Borrower in the ordinary course of its business
(including the terms and conditions of any recurring seasonal or other
promotional sales programs and other sales terms regularly offered by such
Borrower to any of its customers), as set forth in such Borrower's sales manuals
or otherwise in writing delivered to and accepted by the Administrative Agent
prior to the Agreement Date or, if applicable, prior to the date on which such
Borrower becomes a party to this Agreement as a "Borrower."
"Schedule of Inventory" means a schedule delivered by the Borrowers to
the Administrative Agent pursuant to the provisions of SECTION 9.11(B).
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"Schedule of Receivables" means a schedule delivered by the Borrowers
to the Administrative Agent pursuant to the provisions of SECTION 9.11(A).
"Secured Obligations" means, in each case whether now in existence or
hereafter arising,
(a) the principal of, and interest and premium, if any, on, the Loans,
(b) the Reimbursement Obligations and all other obligations of the
Borrowers to BankBoston, the Administrative Agent or any Lender arising in
connection with the issuance of Letters of Credit,
(c) all obligations of the Borrowers (or any of them) to any Lender or
any Affiliate of a Lender under any Interest Rate Protection Agreement, and
(d) all indebtedness, liabilities, obligations, covenants and duties of
the Borrowers to BankBoston, as the issuer of a Letter of Credit, or the
Administrative Agent, the Co-Agents or to the Lenders or to any Affiliate of the
Administrative Agent or any Lender of every kind, nature and description arising
under or in respect of this Agreement, the Notes or any of the other Loan
Documents, whether direct or indirect, absolute or contingent, due or not due,
contractual or tortious, liquidated or unliquidated, and whether or not
evidenced by any note, and whether or not for the payment of money, including
without limitation, fees required to be paid pursuant to ARTICLE 5 and expenses
required to be paid or reimbursed pursuant to SECTION 16.2.
"Security Documents" means each of the following:
(a) the Mortgages,
(b) the Financing Statements,
(c) the WinsLoew Pledge Agreement,
(d) the Winston Pledge Agreement,
(e) the Trademark Security Agreement,
(f) the Patent Security Agreement,
(g) the Guaranty Agreement,
(h) each Guarantor Security Agreement, and
(i) each other writing executed and delivered by a Borrower or any
other Person securing the Secured Obligations,
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"Security Interest" means the Liens of the Administrative Agent, for
the benefit of itself as Administrative Agent and the Lenders, on and in the
Collateral and the Real Estate effected hereby or by any of the Security
Documents or pursuant to the terms hereof or thereof.
"Senior Subordinated Notes" means up to $105,000,000 aggregate
principal amount at maturity of 12 3/4% per annum unsecured Senior Subordinated
Notes due 2007 outstanding under the Senior Note Indenture (including any
"Exchange Notes" as defined in said Indenture).
"Senior Note Indenture " means the Indenture dated as of August 24,
1999 entered into by WinsLoew Escrow Corp., a Florida corporation and prior to
its merger with and into TFC, a Wholly Owned Subsidiary of TFC, and American
Stock Transfer & Trust Company, Trustee, the obligations of the Company under
and as defined in which Indenture will be assumed by WinsLoew in the WinsLoew
Merger.
"Senior Subordinated Note Documents" means the Senior Subordinated
Notes, the Senior Note Indenture and the Registration Rights Agreement.
"Subordinated Debt" means the Senior Subordinated Notes and any other
Debt of a Borrower in an amount, and that is subordinated to the Secured
Obligations on terms and conditions, acceptable to Required Lenders.
"Subsidiary" when used to determine the relationship of a Person to
another Person, means a Person of which an aggregate of 50% or more of the stock
of any class or classes or 50% or more of other ownership interests is owned of
record or beneficially by such other Person, or by one or more Subsidiaries of
such other Person, or by such other Person and one or more Subsidiaries of such
Person, (i) if the holders of such stock, or other ownership interests, (A) are
ordinarily, in the absence of contingencies, entitled to vote for the election
of a majority of the directors (or other individuals performing similar
functions) of such Person, even though the right so to vote has been suspended
by the happening of such a contingency, or (B) are entitled, as such holders, to
vote for the election of a majority of the directors (or individuals performing
similar functions) of such Person, whether or not the right so to vote exists by
reason of the happening of a contingency, or (ii) in the case of such other
ownership interests, if such ownership interests constitute a majority voting
interest. When used without other designation of ownership, "Subsidiary" means a
Subsidiary of WinsLoew.
"Supporting Letter of Credit" has the meaning set forth in SECTION 3.9.
"Swingline Eurodollar Rate" has the meaning set forth in SECTION 2A.2.
"Swingline Facility" means an amount equal to $5,000,000.
"Swingline Lender" means BankBoston and each Lender that succeeds to
such capacity with the consent of the Administrative Agent.
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"Swingline Loan" means each advance by the Swingline Lender to the
Borrowers pursuant to SECTION 2A.1.
"Swingline Loan Maturity" means as to each Swingline Loan, the date
such Loan is due as specified by the Borrowers in the related Swingline Loan
Request, which shall be a Business Day not more than seven days after the
borrowing date of such Swingline Loan.
"Swingline Loan Request" has the meaning set forth in SECTION 2A.2.
"Swingline Note" means the Swingline Note made by the Borrowers payable
to the order of the Swingline Lender evidencing the joint and several obligation
of the Borrowers to pay the aggregate unpaid principal amount of the Swingline
Loans made to them by the Swingline Lender under the Swingline Facility (and any
promissory note that may be issued from time to time in substitution, renewal,
extension, replacement or exchange therefor) substantially in the form of
EXHIBIT A-2 hereto, with all blanks properly completed, either as originally
executed or as the same may from time to time be supplemented, modified,
amended, renewed, extended or refinanced.
"TFC" means Trivest Furniture Corporation, a Florida corporation.
"Target EBITDA" has the meaning set forth in SECTION 6.2(E).
"Term Loan" means, as the context requires, one or all of the Term Loan
A, Term Loan B, and Term Loan C, as well as the aggregate Loans outstanding
under the Term Loan Facilities and refers to both Eurodollar Rate Term Loans and
the Base Rate Term Loans.
"Term Loan A" means the aggregate Loans outstanding under the Term Loan
A Facility and refers to both Eurodollar Rate Term Loan A and the Base Rate Term
Loan A.
"Term Loan A Facility" means the credit facility described in SECTION
4.1(A) providing for Term Loan A in the principal amount of $25,000,000.
"Term Loan B" means the aggregate Loans outstanding under the Term Loan
B Facility and refers to both Eurodollar Rate Term Loan B and the Base Rate Term
Loan B.
"Term Loan B Facility" means the credit facility described in SECTION
4.1(B) providing for Term Loan B in the principal amount of $62,500,000.
"Term Loan C" means the aggregate Loans outstanding under the Term Loan
C Facility and refers to both Eurodollar Rate Term Loan C and Base Rate Term
Loan C.
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"Term Loan C Facility" means the credit facility described in SECTION
4.1(C) providing for Term Loan C in the principal amount of $7,500,000.
"Term Loan Facility" means the Term Loan A Facility, the Term Loan B
Facility or the Term Loan C Facility, and "Term Loan Facilities" means all such
facilities.
"Term Loan Lender" means each Lender holding any outstanding Term Loan
and "Term Loan A Lender," "Term Loan B Lender," and "Term Loan C Lender" each
means a Term Loan Lender under the designated Term Loan Facility.
"Term Note" means any of the Term Notes A, the Term Notes B and the
Term Notes C, and "Term Notes" means more than one such Note.
"Term Note A" means each Term Note A made by the Borrowers payable to
the order of a Lender evidencing the joint and several obligation of the
Borrowers to pay the aggregate unpaid principal amount of the Loans made to them
by such Lender under the Term Loan A Facility (and any promissory note or notes
that may be issued from time to time in substitution, renewal, extension,
replacement or exchange therefor whether payable to such Lender or to a
different Lender in connection with a Person becoming a Lender after the
Effective Date or otherwise) substantially in the form of EXHIBIT B-1 hereto,
with all blanks properly completed, either as originally executed or as the same
may from time to time be supplemented, modified, amended, renewed, extended or
refinanced.
"Term Note B" means each Term Note B made by the Borrowers payable to
the order of a Lender evidencing the joint and several obligation of the
Borrowers to pay the aggregate unpaid principal amount of the Loans made to them
by such Lender under the Term Loan B Facility (and any promissory note or notes
that may be issued from time to time in substitution, renewal, extension,
replacement or exchange therefor whether payable to such Lender or to a
different Lender in connection with a Person becoming a Lender after the
Effective Date or otherwise) substantially in the form of EXHIBIT B-2 hereto,
with all blanks properly completed, either as originally executed or as the same
may from time to time be supplemented, modified, amended, renewed, extended or
refinanced.
"Term Note C" means each Term Note C made by the Borrowers payable to
the order of a Lender evidencing the joint and several obligation of the
Borrowers to pay the aggregate unpaid principal amount of the Loans made to them
by such Lender under the Term Loan C Facility (and any promissory note or notes
that may be issued from time to time in substitution, renewal, extension,
replacement or exchange therefor whether payable to such Lender or to a
different Lender in connection with a Person becoming a Lender after the
Effective Date or otherwise) substantially in the form of EXHIBIT B-3 hereto,
with all blanks properly completed, either as originally executed or as the same
may from time to time be supplemented, modified, amended, renewed, extended or
refinanced.
"Termination Date" means December 31, 2004, or such earlier date as all
Secured Obligations shall have been irrevocably paid in full and the Revolving
Credit Facility and the
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Acquisition Facility shall have been terminated, or such later date as to which
the same may be extended pursuant to the provisions of SECTION 2.5.
"Texacraft" means Texacraft, Inc., a Texas corporation and a Wholly
Owned Subsidiary of Winston.
"Total Facilities" means the aggregate of the Revolving Credit
Facility, the Term Loan Facilities and the Acquisition Facility.
"Total Funded Debt to EBITDA Ratio" means as of the last day of a
Fiscal Quarter, the ratio of (i) the outstanding principal amount of Funded Debt
on such last day to (ii) EBITDA, for the period of four consecutive Fiscal
Quarters ended on such day. For purposes of computing the Total Funded Debt to
EBITDA Ratio, the WinsLoew Merger and the Acquisition by Winston of Pompeii and
Pompeii-Mexico (which was completed on July 30, 1999), and the related capital
contributions and borrowings shall be deemed to have occurred on the first day
of the fourth Fiscal Quarter preceding the Effective Date, and, subject to the
Administrative Agent's consent, any other subsequent Permitted Acquisition by
any Borrower and the capital contributions and the borrowings in connection with
consummation thereof shall be deemed to have occurred on the first day of the
fourth Fiscal Quarter preceding the date of such Permitted Acquisition or such
later date as the Administrative Agent and WinsLoew may agree.
"Trademark Security Agreement" means each Security Agreement
(Trademarks), dated on or about the Effective Date, made by a Borrower to the
Administrative Agent.
"Trademarks" means and includes in each case whether now existing or
hereafter arising, all of the Borrowers' right, title and interest in and to
(a) trademarks (including service marks), trade names and trade styles
and the registrations and applications for registration thereof and the goodwill
of the business symbolized by the trademarks,
(b) licenses of the foregoing, whether as licensee or licensor,
(c) renewals thereof,
(d) income, royalties, damages and payments now or hereafter due and/or
payable with respect thereto, including, without limitation, damages, claims and
payments for past and future infringements thereof,
(e) rights to sue for past, present and future infringements thereof,
including the right to settle suits involving claims and demands for royalties
owing, and
(f) all rights corresponding to any of the foregoing throughout the
world.
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"Trivest Investors" means those investors set forth on SCHEDULE 1.1D.
"Trivest Management Agreement" means the Management Agreement dated as
of a date on or about the Effective Date between WinsLoew and Trivest II, Inc.,
a Florida corporation, as the same may hereafter be amended, extended, renewed,
restated and replaced in accordance with the terms thereof and the applicable
provisions of this Agreement.
"Trivest Management Fees" means all compensation and expense
reimbursement amounts payable from time to time by WinsLoew to Trivest II, Inc.,
a Florida corporation, pursuant to the Trivest Management Agreement.
"Tropic Craft" means Tropic Craft, Inc., a Florida corporation and a
Wholly Owned Subsidiary of Winston.
"Type" when used in respect of any Loan or Borrowing, shall refer to
the rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined.
"Unfunded Vested Accrued Benefits" means with respect to any Benefit
Plan subject to Title IV of the ERISA , amount at any time by which
(a) the present value of all vested nonforfeitable benefits under such
Benefit Plan exceeds
(b) the fair market value of all Benefit Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Benefit Plan.
"Uniform Commercial Code" or "UCC" means the Uniform Commercial Code as
in effect in the relevant jurisdiction.
"WPI" means Winston Properties, Inc., an Alabama corporation and a
Wholly Owned Subsidiary of Winston.
"WPI Purchases" has the meaning set forth in SECTION 12.5.
"Wholly Owned Subsidiary" when used to determine the relationship of a
Subsidiary to a Person means a Subsidiary all of the issued and outstanding
shares (other than directors' qualifying shares) of the capital stock of which
shall at the time be owned by such Person or one or more of such Person's Wholly
Owned Subsidiaries or by such Person and one or more of such Person's Wholly
Owned Subsidiaries.
"WinsLoew" means WinsLoew Furniture, Inc., a Florida corporation and
the surviving corporation of the WinsLoew Merger.
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"WinsLoew Merger" means the merger of TFC with and into Old WinsLoew as
contemplated by the WinsLoew Merger Agreement and the other WinsLoew Merger
Documents.
"WinsLoew Merger Agreement" means the Second Amended and Restated
Agreement and Plan of Merger dated as of May 4, 1999 between TFC and Old
WinsLoew, as the same may be amended up to and through the Effective Date with
the consent of the Administrative Agent.
"WinsLoew Merger Contribution" means total equity contributions of at
least $78,000,000, including, without limitation, equity contributions up to
$12,000,000 in the form of "rollover" of shares of WinsLoew, the proceeds of
which are applied to acquire shares of Old WinsLoew, made by Persons who are
shareholders of Old WinsLoew on the Effective Date.
"WinsLoew Merger Documents" means, collectively, the WinsLoew Merger
Agreement and all other documents, agreements and certificates executed in
connection with the consummation of the transactions contemplated by the
WinsLoew Merger Agreement, including, without limitation, those listed on
SCHEDULE 1.1A - WINSLOEW MERGER DOCUMENTS attached hereto.
"WinsLoew Pledge Agreement" means the Stock Pledge Agreement in form
and substance satisfactory to the Administrative Agent executed by WinsLoew as
of the Effective Date in favor of the Administrative Agent, pursuant to which
WinsLoew pledges all of the issued and outstanding shares of the capital stock
of Loewenstein and Winston as security for the Secured Obligations.
"Winston" means Winston Furniture Company of Alabama, Inc., an Alabama
corporation and a Wholly Owned Subsidiary of WinsLoew.
"Winston Pledge Agreement" means the Stock Pledge Agreement in form and
substance satisfactory to the Administrative Agent executed by Winston as of the
Effective Date in favor of the Administrative Agent, pursuant to which Winston
pledges all of the issued and outstanding shares of the capital stock of Tropic
Craft, Texacraft, WPI and Pompeii and 65% of the issued and outstanding shares
of the capital stock of Pompeii-Mexico as security for the Secured Obligations.
"Year 2000 Compliant" means, as to any computer application used by
WinsLoew or any Subsidiary of WinsLoew, or any supplier, vendor or customer of
WinsLoew or any of its Subsidiaries, that such computer application will not be
negatively impacted by the Year 2000 Problem and that such computer application
is reasonably expected on a timely basis to be able to properly recognize and
perform date-sensitive functions for all dates prior to, on and after January 1,
2000.
"Year 2000 Problem" means the risk that computer applications used by
WinsLoew or any of its Subsidiaries, or any supplier, vendor or customer of
WinsLoew or any of its Subsidiaries
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with which WinsLoew's or such Subsidiaries' data processing systems communicate
electronically may be unable to properly recognize and perform date-sensitive
functions involving dates prior to, on or after January 1, 2000.
SECTION 1.2 General Interpretive Rules.
(a) All terms of an accounting nature not specifically defined herein
shall have the meaning ascribed thereto by GAAP.
(b) The terms accounts, chattel paper, contract rights, documents,
equipment, instruments, general intangibles and inventory, as and when used in
this Agreement or the Security Documents, shall have the meanings given those
terms in the Uniform Commercial Code.
(c) Unless otherwise specified, the words "hereof," "herein,"
"hereunder" and words of similar import, when used in this Agreement, refer to
this Agreement as a whole and not to any particular provision, section or
subsection of this Agreement.
(d) Wherever from the context it appears appropriate, each term stated
in either the singular or plural shall include the singular and plural, and
pronouns stated in the masculine, feminine or neuter gender shall include the
masculine, the feminine and the neuter. Words denoting individuals include
corporations and vice versa.
(e) References to any legislation or statute or code, or to any
provisions of any legislation or statute or code, shall include any modification
or reenactment of, or any legislative, statutory or code provision substituted
for, such legislation, statute or code or provision thereof.
(f) References to any document or agreement (including this Agreement)
shall include references to such document or agreement as amended, novated,
supplemented, modified or replaced from time to time, so long as and to the
extent that such amendment, novation, supplement, modification or replacement is
either not prohibited by the terms of this Agreement or is consented to by the
Required Lenders and the Administrative Agent or otherwise as required by any
Loan Document.
(g) Except where specifically restricted in a Loan Document, references
to any Person include its successor or permitted substitutes and assigns
permitted or not prohibited under such Loan Document.
(h) References to the time of day are to the time of day in the city in
which the Administrative Agent's Office is located.
(i) The terms "payment", "prepayment", "distribution" and similar terms
used in the definitions of "Restricted Distribution" and "Restricted Payment"
and in SECTION 12.6, shall include payment by means of the transfer of funds or
of property and, in the event of a transfer of
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property, the payment shall be deemed to be in an amount equal to the greater of
the fair market value and the book value of the property at the time of the
transfer.
(j) Titles of Articles and Sections in this Agreement are for
convenience only, do not constitute part of this Agreement and neither limit nor
amplify the provisions of this Agreement, and all references in this Agreement
to Articles, Sections, subsections, paragraphs, clauses, subclauses, Schedules,
Annexes or Exhibits shall refer to the corresponding Article, Section,
subsection, paragraph, clause or subclause of, or Schedule, Annex or Exhibit
attached to, this Agreement, unless specific reference is made to the articles,
sections or other subdivisions or divisions of, or to schedules or exhibits to,
another document or instrument.
(k) Whenever from the context it appears appropriate, the term "Loan",
including such terms as used as part of a defined term including the term
"Loan", shall mean and include a Loan made by all Lenders to the Borrowers as
well as a Lender's Proportionate Share of any Loan.
(l) All references to defined terms, unless otherwise specified herein,
shall mean such terms as defined in this Agreement.
(m) Whenever the phrase "to the knowledge of the Borrower(s)" or words
of similar import relating to the knowledge of a Borrower are used herein, such
phrase shall mean and refer to (i) the actual knowledge of the President or
chief financial officer of WinsLoew or (ii) the knowledge that such officers
would have obtained if they had engaged in good faith in the diligent
performance of their duties, including the making of such reasonable specific
inquiries as may be necessary of the appropriate persons in a good faith attempt
to ascertain the accuracy of the matter to which such phrase relates.
(n) The Security Interest, any other Lien referred to in this Agreement
or in any other Loan Document as having been created in favor of the Agent, any
agreement entered into by the Agent pursuant to this Agreement or any other Loan
Document, any payments made by or to or funds received by the Agent pursuant to
or as contemplated by this Agreement or any other Loan Document, and any other
act taken or omitted by the Agent shall, unless expressly provided otherwise,
exist, be created, be entered into, be made or received, taken or omitted, for
the benefit or account of the Agent and the Lenders.
SECTION 1.3 Exhibits, Annexes and Schedules. All Exhibits, Annexes and
Schedules attached hereto are by reference made a part hereof.
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ARTICLE 2
REVOLVING CREDIT FACILITY
SECTION 2.1 Revolving Credit Loans. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, each Revolving Credit Lender agrees, severally, but not
jointly, to make Revolving Credit Loans under the Revolving Credit Facility to
the Borrowers from time to time from the Effective Date to but not including the
Termination Date, as requested or deemed requested by the Borrowers'
Representative in accordance with the terms of SECTION 2.2, in amounts equal to
such Lender's Proportionate Share of each Revolving Credit Loan requested or
deemed requested hereunder up to an aggregate amount at any one time outstanding
equal to such Lender's Proportionate Share of the Borrowing Base; PROVIDED,
HOWEVER, that the aggregate principal amount of all outstanding Revolving Credit
Loans (after giving effect to the Loans requested) shall not exceed the
Revolving Credit Facility minus the Letter of Credit Reserve minus the aggregate
outstanding principal amount of any Swingline Loans. It is expressly understood
and agreed that the Lenders may and at present intend to use the Borrowing Base
as a maximum ceiling on Loans made to the Borrowers under the Revolving Credit
Facility; PROVIDED, HOWEVER, that it is agreed that should the aggregate
outstanding amount of such Loans exceed the ceiling so determined or any other
limitation set forth in this Agreement, such Loans shall nevertheless constitute
Secured Obligations and, as such, shall be entitled to all benefits thereof and
security therefor. The principal amount of any Loans made under the Revolving
Credit Facility which is repaid may be reborrowed by the Borrowers, subject to
the terms and conditions of this Agreement, in accordance with the terms of this
SECTION 2.1. The Administrative Agent's and each Revolving Credit Lender's books
and records reflecting the date and the amount of each Loan made under the
Revolving Credit Facility and each repayment of principal thereof shall
constitute prima facie evidence of the accuracy of the information contained
therein, subject to the provisions of SECTION 5.7.
SECTION 2.2 Borrowing. (a) Requests for Borrowings under the Revolving
Credit Facility (other than the Initial Loans which shall be the subject of the
Initial Notice of Borrowing referred to in SECTION 6.1(c)) shall be made by
delivery or deemed delivery of a Notice of Borrowing, given or deemed given, by
the Borrowers' Representative, in the manner specified in SECTION 5.3.
(b) Disbursement of Loans. The Administrative Agent shall notify the
Revolving Credit Lenders promptly (and in any event not later than the Business
Day prior to the proposed Borrowing date) of each Notice of Borrowing given or
deemed given. Not later than 1:30 p.m. on the proposed Borrowing date, each
Revolving Credit Lender will make available to the Administrative Agent, for the
account of the Borrowers, at the Administrative Agent's Office in funds
immediately available to the Administrative Agent, such Lender's Proportionate
Share of such Revolving Credit Loan. The Borrowers hereby irrevocably authorize
the Administrative
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Agent to disburse the proceeds of each Borrowing requested, or deemed to be
requested, pursuant to this SECTION 2.2 by wire transfer or other appropriate
means to such account of a Borrower as may be agreed upon by the Borrowers'
Representative and the Administrative Agent from time to time or, in the case of
the proceeds of each Borrowing deemed requested under SECTION 5.8(A), by way of
direct payment of the relevant Secured Obligation.
SECTION 2.3 Repayment of Revolving Credit Loans. The Revolving Credit
Loans will be repaid as follows:
(a) The outstanding principal amount of all the Revolving Credit Loans
is due and payable, and shall be repaid by the Borrowers in full, as their joint
and several obligation, not later than the Termination Date; and
(b) Subject to the provisions of SECTION 5.8, if at any time the
aggregate outstanding unpaid principal amount of the Revolving Credit Loans
exceeds the Borrowing Base in effect at such time minus the aggregate
outstanding principal amount of all Swingline Loans, the Borrowers shall (unless
a payment is made by the Borrowers pursuant to SECTION 2A.3 or SECTION 2A.4 that
eliminates such excess) immediately repay the Revolving Credit Loans in an
amount sufficient to reduce the aggregate unpaid principal amount of such
Revolving Credit Loans by an amount equal to such excess, together with accrued
and unpaid interest on the amount so repaid to the date of repayment.
Repayments pursuant to SECTION 2.3(B) shall be applied first to the Base Rate
Revolving Credit Loans and then to Eurodollar Rate Revolving Credit Loans.
SECTION 2.4 Revolving Credit Note. Each Revolving Credit Lender's
Revolving Credit Loans and the joint and several obligation of the Borrowers to
repay such Revolving Credit Loans shall also be evidenced by a Revolving Credit
Note payable to the order of such Lender. Each Revolving Credit Note shall be
dated the Effective Date (or later "effective date" under any Assignment and
Acceptance) and be duly and validly executed and delivered by the Borrowers.
SECTION 2.5 Extension of Revolving Credit Facility. Upon the request of
the Borrowers, the Lenders may, in their sole discretion, agree to extend the
Termination Date by an instrument in writing signed by the Administrative Agent
and all Lenders.
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ARTICLE 2A
SWINGLINE FACILITY
SECTION 2A.1 Swingline Loans. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, the Swingline Lender shall make Swingline Loans to the
Borrowers from time to time, from and after the Effective Date until the
Termination Date, as requested by the Borrowers in accordance with the terms of
SECTION 2A.2, up to an aggregate principal amount of Swingline Loans at any time
outstanding not to exceed the lesser of (i) the Swingline Facility and (ii) the
Borrowing Base MINUS the aggregate principal amount of outstanding Revolving
Credit Loans. The Swingline Loans will be deemed to be usage of the Revolving
Credit Facility for the purpose of calculating availability pursuant to SECTION
2.1, but will not reduce the Swingline Lender's obligation to lend its
Proportionate Share of the remaining unused Revolving Credit Facility.
SECTION 2A.2 Making Swingline Loans. Upon request of the Borrowers'
Representative, the Swingline Lender shall promptly notify the Borrowers'
Representative and the Administrative Agent of the quoted rate of interest
applicable on any Business Day to a proposed Swingline Loan (such rate of
interest, a "Quoted Rate") and of the rate that would be applicable to a
Eurodollar Rate Revolving Credit Loan made on the same day for an Interest
Period of one month (the "Swingline Eurodollar Rate"). Requests for Swingline
Loans shall be made not later than 4:00 p.m. on the Business Day of the proposed
Swingline Loan by delivery by telex, telegraph, telecopy or telephone of a
request therefor by Borrowers' Representative to the Administrative Agent. Each
such notice (a "Swingline Loan Request") shall specify (i) the proposed
borrowing date, (ii) the amount of Swingline Loan requested, (iii) the
applicable Quoted Rate or Eurodollar Rate, as selected by the Borrowers, and
(iv) the applicable Swingline Loan Maturity, and shall be immediately followed
by a written confirmation thereof by the Borrowers' Representative in
substantially the form of EXHIBIT E-2 hereto, PROVIDED, that if such written
confirmation differs in any material respect from the action taken by the
Administrative Agent, the records of the Administrative Agent shall control
absent manifest error. Not later than 6:00 p.m. on the date specified for any
Swingline Loan, the Swingline Lender shall make available such Swingline Loan in
immediately available funds to the Administrative Agent at the Administrative
Agent's Office. After the Administrative Agent's receipt of such funds and upon
fulfillment of the applicable conditions set forth in ARTICLE 6, the
Administrative Agent will, and the Borrowers hereby irrevocably authorize the
Administrative Agent to, disburse the proceeds of each Swingline Loan by making
such funds available to the Borrowers by wire transfer to such account of a
Borrower as the Borrowers and the Administrative Agent may agree from time to
time.
SECTION 2A.3 Repayment of Swingline Loans. The principal amount of each
Swingline Loan shall be repaid by the Borrowers in full on the applicable
Swingline Loan Maturity, together with accrued and unpaid interest thereto such
date.
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SECTION 2A.4 Prepayment. If at any time the aggregate unpaid principal
amount of Swingline Loans outstanding to the Borrowers from the Swingline Lender
exceeds the amount set forth in the first sentence of SECTION 2A.1, the
Borrowers shall pay to the Administrative Agent for the account of the Swingline
Lender on demand by the Administrative Agent, an amount equal to such excess,
together with accrued and unpaid interest on the principal amount prepaid to the
date of prepayment. Notwithstanding the foregoing, no such prepayment shall be
required if the Borrowers shall have made an appropriate prepayment in
accordance with the provisions of SECTION 2.3(B).
SECTION 2A.5 Swingline Note. The Swingline Loans made by the Swingline
Lender and the obligation of the Borrowers to repay such Loans shall be
evidenced by, and be repayable in accordance with the terms of, a single
Swingline Note, made by the Borrowers payable to the order of the Swingline
Lender. The Swingline Note shall be dated the Effective Date and be duly and
validly executed and delivered by the Borrowers.
SECTION 2A.6 Settlement with Other Lenders. All payments of principal,
interest and any other amount with respect to such Swingline Loan shall be
payable to and received by the Administrative Agent for the account of the
Swingline Lender. Upon demand by the Swingline Lender, with notice thereof to
the Administrative Agent, and notwithstanding the occurrence and continuation at
the time of such demand of any Default or Event of Default, each Revolving
Credit Lender shall make a Base Rate Revolving Credit Loan in the amount of its
Revolving Credit Facility Percentage of the outstanding Swingline Loans for the
account of the Borrowers, the proceeds of which shall be paid over to the
Swingline Lender and applied to the repayment of such Swingline Loans. Any
payments received by the Administrative Agent prior to such repayment by the
Revolving Credit Lenders which in accordance with the terms of this Agreement
are to be applied to the reduction of the outstanding principal balance of
Swingline Loans shall be paid over to the Swingline Lender and so applied.
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ARTICLE 3
LETTER OF CREDIT FACILITY
SECTION 3.1 Agreement to Issue. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, BankBoston agrees to issue for the account of any
Borrower one or more Letters of Credit in accordance with this ARTICLE 3, from
time to time during the period commencing on the Effective Date and ending on
the Termination Date.
SECTION 3.2 Amounts. BankBoston shall not have any obligation to issue
any Letter of Credit at any time:
(a) if, after giving effect to the issuance of the requested Letter of
Credit, (i) the aggregate Letter of Credit Obligations of the Borrowers would
exceed the Letter of Credit Facility then in effect or (ii) the aggregate
principal amount of the Revolving Credit Loans and Swingline Loans outstanding
would exceed the Borrowing Base (after reduction for the Letter of Credit
Reserve in respect of such Letter of Credit) or (iii) if no Revolving Credit
Loans or Swingline Loans are outstanding, the aggregate Letter of Credit
Obligations would exceed the Borrowing Base; or
(b) which has a term longer than one calendar year or an expiration
date after the last Business Day that is more than 10 days prior to the
Termination Date.
SECTION 3.3 Conditions. The obligation of BankBoston to issue any
Letter of Credit is subject to the satisfaction of (a) the applicable conditions
precedent contained in ARTICLE 6 and (b) the following additional conditions
precedent in a manner satisfactory to the Administrative Agent and BankBoston:
(i) the Borrowers, through the Borrowers' Representative,
shall have delivered to BankBoston and the Administrative Agent at such
times and in such manner as BankBoston or the Administrative Agent may
prescribe an application in form and substance satisfactory to
BankBoston and the Administrative Agent for the issuance of the Letter
of Credit, a Reimbursement Agreement and such other documents as may be
required pursuant to the terms thereof, and the form and terms of the
proposed Letter of Credit shall be satisfactory to BankBoston and the
Administrative Agent; and
(ii) as of the date of issuance, no order of any court,
arbitrator or governmental authority having jurisdiction or authority
over BankBoston shall purport by its terms to enjoin or restrain banks
generally from issuing letters of credit of the type and in the amount
of the proposed Letter of Credit, and no law, rule or regulation
applicable to
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banks generally and no request or directive (whether or not having the
force of law) from any governmental authority with jurisdiction over
banks generally shall prohibit, or request that BankBoston refrain
from, the issuance of letters of credit generally or the issuance of
such Letter of Credit.
SECTION 3.4 Issuance of Letters of Credit.
(a) Request for Issuance. A Borrower, through the Borrowers'
Representative, shall give BankBoston and the Administrative Agent written
notice of such Borrower's request for the issuance of a Letter of Credit no
later than two Business Days prior to the proposed date of issuance of the
Letter of Credit. Such notice shall be irrevocable and shall specify the
original face amount of the Letter of Credit requested, the effective date
(which date shall be a Business Day) of issuance of such requested Letter of
Credit, whether such Letter of Credit may be drawn in a single or in multiple
draws, the date on which such requested Letter of Credit is to expire (which
date shall be a Business Day earlier than the tenth day prior to the Termination
Date), the purpose for which such Letter of Credit is to be issued and the
beneficiary of the requested Letter of Credit. The Borrowers' Representative
shall attach to such notice the form of the Letter of Credit that it requests to
be issued.
(b) Responsibilities of the Administrative Agent; Issuance. The
Administrative Agent shall determine, as of the Business Day immediately
preceding the requested effective date of issuance of the Letter of Credit set
forth in the notice from the Borrower's Representative pursuant to SECTION
3.4(A), the amount of the unused Letter of Credit Facility. If (i) the form of
the Letter of Credit delivered by a Borrower to the Administrative Agent is
acceptable to BankBoston and the Administrative Agent in their sole, reasonable
discretion, (ii) the undrawn face amount of the requested Letter of Credit is
less than or equal to the unused Letter of Credit Facility and (iii) the
Administrative Agent has received a certificate from the Borrowers'
Representative stating that the applicable conditions set forth in ARTICLE 6 and
SECTION 3.3 have been satisfied, then BankBoston will cause the Letter of Credit
to be issued.
(c) Notice of Issuance. Promptly after the issuance of any Letter of
Credit, BankBoston shall give the Administrative Agent written or facsimile
notice, or telephonic notice confirmed promptly thereafter in writing, of the
issuance of such Letter of Credit, and the Administrative Agent shall give each
Lender written or facsimile notice, or telephonic notice confirmed promptly
thereafter in writing, of the issuance of such Letter of Credit.
(d) No Extension or Amendment. No Letter of Credit shall be extended or
amended unless the requirements of this SECTION 3.4 are met as though a new
Letter of Credit were being requested and issued.
SECTION 3.5 Duties of BankBoston. Any action taken or omitted to be
taken by BankBoston under or in connection with any Letter of Credit, if taken
or omitted in the absence of gross negligence or willful misconduct, shall not
result in any liability of BankBoston to any
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Lender or relieve any Lender of its obligations hereunder to BankBoston. In
determining whether to pay under any Letter of Credit, BankBoston shall have no
obligation to any Lender other than to confirm that any documents required to be
delivered under such Letter of Credit in connection with such drawing have been
presented and appear on their face to comply with the requirements of such
Letter of Credit.
SECTION 3.6 Payment of Reimbursement Obligations.
(a) Payment to Issuer. Notwithstanding any provisions to the contrary
in any Reimbursement Agreement, the Borrowers agree, jointly and severally, to
reimburse BankBoston for any drawings (whether partial or full) under each
Letter of Credit issued by BankBoston and agree to pay to BankBoston the amount
of all other Reimbursement Obligations and other amounts payable to BankBoston
under or in connection with such Letter of Credit immediately when due,
irrespective of any claim, set-off, defense or other right which any Borrower
may have at any time against BankBoston or any other Person.
(b) Recovery or Avoidance of Payments. In the event any payment by or
on behalf of the Borrowers with respect to any Letter of Credit (or any
Reimbursement Obligation relating thereto) received by BankBoston, or by the
Administrative Agent and distributed by the Administrative Agent to the Lenders
on account of their respective participations therein, is thereafter set aside,
avoided or recovered from BankBoston or the Administrative Agent in connection
with any receivership, liquidation or bankruptcy proceeding, the Lenders shall,
upon demand by the Administrative Agent, pay to the Administrative Agent, for
the account of the Administrative Agent or BankBoston, their respective
Proportionate Shares of such amount set aside, avoided or recovered together
with interest at the rate required to be paid by the Administrative Agent upon
the amount required to be repaid by it.
SECTION 3.7 Participations.
(a) Purchase of Participations. Immediately upon issuance by BankBoston
of a Letter of Credit, each Revolving Credit Lender shall be deemed to have
irrevocably and unconditionally purchased and received without recourse or
warranty, an undivided interest and participation in such Letter of Credit,
equal to such Lender's Revolving Credit Facility Percentage of the face amount
thereof (including, without limitation, all obligations of the Borrowers with
respect thereto other than amounts owing to BankBoston under SECTION 5.2(D)),
and any security therefor or guaranty pertaining thereto).
(b) Sharing of Letter of Credit Payments. In the event that BankBoston
makes a payment under any Letter of Credit and BankBoston shall not have been
repaid such amount pursuant to SECTION 3.6, then the Borrowers shall be deemed
to have requested a Base Rate Revolving Credit Loan in the amount of such
payment, and notwithstanding the occurrence or continuance of a Default or Event
of Default at the time of such payment, each Revolving Credit
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Lender shall be absolutely obligated to make its Proportionate Share of such
Revolving Credit Loan available to the Administrative Agent for disbursement as
provided in SECTION 2.2(B).
(c) Sharing of Reimbursement Obligation Payments. Whenever BankBoston
receives a payment from or on behalf of the Borrowers on account of a
Reimbursement Obligation as to which the Administrative Agent has previously
received for the account of BankBoston payment from a Lender pursuant to this
SECTION 3.7, BankBoston shall promptly pay to the Administrative Agent, for the
benefit of such Lender, such Lender's Proportionate Share of the amount of such
payment from the Borrowers in Dollars. Each such payment shall be made by
BankBoston on the Business Day on which BankBoston receives immediately
available funds from the Administrative Agent pursuant to the immediately
preceding sentence, if received prior to 11:00 a.m. on such Business Day, and
otherwise on the next succeeding Business Day.
(d) Documentation. Upon the request of any Lender, the Administrative
Agent shall furnish to such Lender copies of any Letter of Credit, Reimbursement
Agreement or application for any Letter of Credit and such other documentation
as may reasonably be requested by such Lender.
(e) Obligations Irrevocable. The obligations of each Revolving Credit
Lender to make payments to the Administrative Agent with respect to any Letter
of Credit and its participation therein pursuant to the provisions of SECTION
5.10 hereof or otherwise and the obligations of the Borrowers to make payments
to BankBoston or to the Administrative Agent, for the account of the Revolving
Credit Lenders, shall be irrevocable, shall not be subject to any qualification
or exception whatsoever and shall be made in accordance with the terms and
conditions of this Agreement (assuming, in the case of the obligations of the
Revolving Credit Lenders to make such payments, that the Letter of Credit has
been issued in accordance with SECTION 3.4), including, without limitation, any
of the following circumstances:
(i) Any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(ii) The existence of any claim, set-off, defense or other
right which any Borrower may have at any time against a beneficiary
named in a Letter of Credit or any transferee of any Letter of Credit
(or any Person for whom any such transferee may be acting), any Lender,
BankBoston or any other Person, whether in connection with this
Agreement, any Letter of Credit, the transactions contemplated herein
or any unrelated transactions (including any underlying transactions
between any Borrower or any other Person and the beneficiary named in
any Letter of Credit);
(iii) Any draft, certificate or any other document presented
under the Letter of Credit upon which payment has been made in good
faith and according to its terms
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proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any
respect;
(iv) The surrender or impairment of any Collateral or any
other security for the Secured Obligations or the performance or
observance of any of the terms of any of the Loan Documents;
(v) The occurrence of any Default or Event of Default; or
(vi) BankBoston's or the Administrative Agent's failure to
deliver the notice provided for in SECTION 3.4(C).
SECTION 3.8 Indemnification, Exoneration.
(a) Indemnification. In addition to amounts payable as elsewhere
provided in this ARTICLE 3, the Borrowers agree, jointly and severally, to
protect, indemnify, pay and save the Lenders and the Administrative Agent
harmless from and against any and all claims, demands, liabilities, damages,
losses, costs, charges and expenses (including reasonable attorneys' fees) which
any Lender or the Administrative Agent may incur or be subject to as a
consequence, directly or indirectly, of
(i) the issuance of any Letter of Credit, other than as a
result of its gross negligence or willful misconduct, as determined by
a court of competent jurisdiction, or
(ii) the failure of BankBoston to honor a drawing under any
Letter of Credit as a result of any act or omission, whether rightful
or wrongful, of any present or future de jure or de facto governmental
authority (all such acts or omissions being hereinafter referred to
collectively as "Government Acts").
(b) Assumption of Risk by the Borrower. As among the Borrowers, the
Lenders and the Administrative Agent, the Borrowers assume all risks of the acts
and omissions of, or misuse of any of the Letters of Credit by, the respective
beneficiaries of such Letters of Credit. In furtherance and not in limitation of
the foregoing, subject to the provisions of the applications for the issuance of
Letters of Credit, the Lenders and the Administrative Agent shall not be
responsible for:
(i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any Person in connection with
the application for and issuance of and presentation of drafts with
respect to any of the Letters of Credit, even if it should prove to be
in any or all respects invalid, insufficient, inaccurate, fraudulent or
forged;
(ii) the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign any
Letter of Credit or the rights or benefits thereunder or
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proceeds thereof, in whole or in part, which may prove to be invalid or
ineffective for any reason;
(iii) the failure of the beneficiary of any Letter of Credit
to comply duly with conditions required in order to draw upon such
Letter of Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise, whether or not they be in cipher;
(v) errors in interpretation of technical terms;
(vi) any loss or delay in the transmission or otherwise of any
document required in order to make a drawing under any Letter of Credit
or of the proceeds thereof;
(vii) the misapplication by the beneficiary of any Letter of
Credit of the proceeds of any drawing under such Letter of Credit; or
(viii) any consequences arising from causes beyond the control
of the Lenders or the Administrative Agent, including, without
limitation, any Government Acts.
None of the foregoing shall affect, impair or prevent the vesting of any of the
Administrative Agent's rights or powers under this SECTION 3.8.
(c) Exoneration. In furtherance and extension, and not in limitation,
of the specific provisions set forth above, any action taken or omitted by the
Administrative Agent, BankBoston or any Lender under or in connection with any
of the Letters of Credit or any related certificates, if taken or omitted in
good faith, absent gross negligence or willful misconduct, shall not result in
any liability of any Lender or the Administrative Agent to any Borrower or
relieve any Borrower of any of its obligations hereunder to any such Person.
SECTION 3.9 Supporting Letter of Credit; Cash Collateral Account. Upon
the occurrence of an Event of Default or, if, notwithstanding the provisions of
SECTION 3.2(B), any Letter of Credit is outstanding on the Termination Date,
then on or prior to the Termination Date, the Borrowers shall, promptly on
demand by the Administrative Agent, deposit with the Administrative Agent, for
the Ratable benefit of the Lenders, with respect to each Letter of Credit then
outstanding, as the Administrative Agent shall specify, either (a) a standby
letter of credit (a "Supporting Letter of Credit") in form and substance
satisfactory to the Administrative Agent, issued by an issuer satisfactory to
the Administrative Agent in its reasonable judgment in an amount equal to the
greatest amount for which such Letter of Credit may be drawn and expiring not
earlier than 10 days after the expiration date of such Letter of Credit, under
which Supporting Letter of Credit the Administrative Agent shall be entitled to
draw amounts necessary to reimburse the Administrative Agent and the Revolving
Credit Lenders for payments made by the Administrative Agent and the Revolving
Credit Lenders under such Letter of Credit or under any
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reimbursement or guaranty agreement with respect thereto, or (b) Cash Collateral
in an amount necessary to reimburse the Administrative Agent and the Revolving
Credit Lenders for payments made by the Administrative Agent and the Lenders
under such Letter of Credit or under any reimbursement or guaranty agreement
with respect thereto. Such Supporting Letter of Credit or Cash Collateral shall
be held by the Administrative Agent first, for the Ratable benefit of the
Revolving Credit Lenders, as security for, and to provide for the payment of,
the Reimbursement Obligations, and after any Reimbursement Obligations have been
paid in full, for the Ratable benefit of all Lenders; PROVIDED that, the
Administrative Agent may at any time after the Termination Date or if an Event
of Default exists, apply any or all of such Cash Collateral to the payment of
any or all of the Secured Obligations then due and payable. The Cash Collateral
shall be deposited in the Cash Collateral Account or an Investment Account and
shall be administered in accordance with the provisions of SECTION 5.16.
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ARTICLE 4
TERM LOAN FACILITIES
SECTION 4.1 Term Loans.
(a) Term Loan A. Upon the terms and subject to the conditions of,
and in reliance upon the representations and warranties made under, this
Agreement, each Term Loan A Lender agrees severally, but not jointly, to make a
Base Rate Loan to the Borrowers on the Effective Date, in a principal amount
equal to such Lender's Proportionate Share of the Term Loan A Facility.
(b) Term Loan B. Upon the terms and subject to the conditions of,
and in reliance upon the representations and warranties made under, this
Agreement, each Term Loan B Lender agrees severally, but not jointly, to make a
Base Rate Loan to the Borrowers on the Effective Date in a principal amount
equal to such Lender's Proportionate Share of the Term Loan B Facility.
(c) Term Loan C. Upon the terms and subject to the conditions of,
and in reliance upon the representations and warranties made under, this
Agreement, each Term Loan C Lender agrees severally, but not jointly, to make a
Base Rate Loan to the Borrowers on the Effective Date in a principal amount
equal to such Lender's Proportionate Share of the Term Loan C Facility.
SECTION 4.2 Manner of Borrowing Term Loans. The Borrowers, through the
Borrowers' Representative, shall give the Administrative Agent an Initial
Notice of Borrowing at least two Business Days' prior to the occurrence of the
Effective Date. Upon receipt of such notice from the Borrowers' Representative,
the Administrative Agent shall promptly notify each Term Loan Lender thereof.
Each Term Loan Lender will make a Base Rate Loan in an amount equal to its
Proportionate Share of the aggregate principal amount of the Term Loans
properly requested in the Initial Notice of Borrowing available to the
Administrative Agent, for the account of the Borrowers, at the Administrative
Agent's Office, prior to 12:00 noon on the Effective Date (assuming
satisfaction of the applicable conditions set forth in Article 6) in funds
immediately available to the Administrative Agent. On the Effective Date, upon
satisfaction of the applicable conditions set forth in ARTICLE 6, as
applicable, the Administrative Agent will disburse the Term Loans on the
Effective Date, in same day funds in accordance with the terms of the Initial
Notice of Borrowing.
SECTION 4.3 Repayment of Term Loans.
(a) Term Loan A. The principal amount of Term Loan A is due and
payable, and shall be repaid in full by the Borrowers, as their joint and
several obligation, in twenty consecutive installments on successive
Installment Payment Dates as follows: eight installments on successive
Installment Payment Dates commencing on March 31, 2000, each in the amount of
$750,000; eight installments on successive
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Installment Payment Dates commencing on March 31, 2002, each in the amount of
$1,500,000; and four installments on successive Installment Payment Dates
commencing March 31, 2004, each in the amount of $1,750,000; PROVIDED that the
payment due on December 31, 2004 shall be in the full amount of the then
outstanding and unpaid principal balance of Term Loan A.
(b) Term Loan B. The principal amount of Term Loan B is due and
payable, and shall be repaid in full by the Borrowers, as their joint and
several obligation, in twenty-six consecutive installments on successive
Installment Payment Dates as follows: twenty installments on successive
Installment Payment Dates commencing on March 31, 2000, each in the amount of
$175,000; four installments on successive Installment Payment Dates commencing
on March 31, 2005, each in the amount of $8,312,500; one installment on March
31, 2006, in the amount of $16,625,000; and one installment on June 30, 2006,
in the amount of $9,125,000; PROVIDED that the payment due on June 30, 2006
shall be in the full amount of the then outstanding and unpaid principal of
Term Loan B.
(c) Term Loan C. The principal amount of Term Loan C is due and
payable, and shall be repaid in full by the Borrowers, as their joint and
several obligation, on June 30, 2006.
SECTION 4.4 Term Notes. The Loans made by each Lender as part of Term
Loan A and the joint and several obligation of the Borrowers to repay such
Loans shall also be evidenced by a Term Note A payable to the order of such
Lender. The Loans made by each Lender as part of Term Loan B and the joint and
several obligation of the Borrowers to repay such Loans shall also be evidenced
by a Term Note B payable to the order of such Lender. The Loans made by each
Lender as part of Term Loan C and the joint and several obligation of the
Borrowers to repay such Loans shall also be evidenced by a Term Note C. Each
such Term Note A, Term Note B and Term Note C shall be dated the Effective Date
(or the later "effective date" under any Assignment and Acceptance) and be duly
and validly executed and delivered by the Borrowers.
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ARTICLE 4A
ACQUISITION FACILITY
SECTION 4A.1 Acquisition Loans. Upon the terms and subject to the
conditions of, and in reliance upon the representations and warranties made
under, this Agreement, each Acquisition Facility Lender agrees, severally, but
not jointly, to make Acquisition Loans under the Acquisition Facility to the
Borrowers from time to time from the Effective Date to and including the
Acquisition Facility Termination Date, as requested or deemed requested by the
Borrowers' Representative in accordance with the terms of SECTION 4A.2, in
amounts equal to such Lender's Proportionate Share of each Acquisition Loan
requested hereunder up to an aggregate amount at any one time outstanding equal
to such Lender's Proportionate Share of $20,000,000. The principal amount of
any Loans made under the Acquisition Facility which is repaid prior to the
Acquisition Facility Termination Date may be reborrowed by the Borrowers prior
to the Acquisition Facility Termination Date, subject to the terms and
conditions of this Agreement, in accordance with the terms of this ARTICLE 4A.
The Administrative Agent's and each Acquisition Facility Lender's books and
records reflecting the date and the amount of each Loan made under the
Acquisition Facility and each repayment of principal thereof shall constitute
prima facie evidence of the accuracy of the information contained therein,
subject to the provisions of SECTION 5.3.
SECTION 4A.2 (a) Borrowing. Requests for Borrowings under the
Acquisition Facility shall be made by delivery of a Notice of Borrowing, given
by the Borrowers' Representative, in the manner specified in SECTION 6.2.
(a) Disbursement of Loans. The Administrative Agent shall
promptly (and in any event not later than the Business Day prior to the
proposed Borrowing date) notify the Lenders of any Notice of Borrowing given in
respect of a Borrowing requested under the Acquisition Facility. Not later than
1:30 p.m. on the proposed Borrowing date, each Acquisition Facility Lender will
make available to the Administrative Agent, for the account of the Borrowers,
at the Administrative Agent's Office in funds immediately available to the
Administrative Agent, such Lender's Proportionate Share of such Acquisition
Loan. The Borrowers hereby irrevocably authorize the Administrative Agent to
disburse the proceeds of each Acquisition Loan in Dollars in immediately
available funds by wire transfer or other appropriate means to such account or
accounts as may be agreed upon by the Borrowers' Representative and the
Administrative Agent from time to time.
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SECTION 4A.3 Repayment of Acquisition Loans. Amounts borrowed under
the Acquisition Facility may be repaid and, subject to compliance with the
applicable provisions of ARTICLE 6 and this ARTICLE 4A, be reborrowed at any
time prior to the Acquisition Facility Termination Date. The aggregate
principal amount of Acquisition Loans outstanding on the Acquisition Facility
Termination Date shall be repaid in twelve consecutive installments on
successive Installment Payment Dates commencing on March 31, 2002 in such
substantially equal installments during each calendar year as will result in
20% of such outstanding principal amount being repaid in year one, 30% of such
outstanding principal amount being repaid in year two and 50% of such
outstanding principal amount being repaid in year three; PROVIDED that the
payment due on December 31, 2004 shall be in the full amount of the then unpaid
principal of Acquisition Loans. Repayments pursuant to this SECTION 4A.3 shall
be applied first to Base Rate Acquisition Loans and then to Eurodollar Rate
Acquisition Loans.
SECTION 4A.4 Acquisition Note. Each Lender's Acquisition Loans and the
joint and several obligation of the Borrowers to repay such Acquisition Loans
shall also be evidenced by an Acquisition Note payable to the order of such
Lender. Each Acquisition Note shall be dated the Effective Date (or later
"effective date" under any Assignment and Acceptance) and be duly and validly
executed and delivered by the Borrowers.
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ARTICLE 5
GENERAL LOAN PROVISIONS
SECTION 5.1 Interest.
(a) (i) Base Rate Loans. Subject to the provisions of SECTION
5.1(D), the Borrowers will pay interest on the unpaid principal amount of each
Base Rate Loan, for each day from the day such Loan is made until such Loan is
paid (whether at maturity, by reason of acceleration, or otherwise) or is
converted to a Loan of a different Type, at a rate per annum equal to the sum
of (i) the Applicable Margin and (ii) the Base Rate, payable monthly in arrears
as it accrues on each Interest Payment Date, and upon any prepayment thereof on
the amount prepaid.
(ii) Eurodollar Rate Loans. Subject to the provisions of SECTION
5.1(D), the Borrowers will pay interest on the unpaid principal amount of each
Eurodollar Rate Loan for the applicable Interest Period at a rate per annum
equal to the sum of (i) the Applicable Margin and (ii) the Eurodollar Rate,
payable on each Interest Payment Date, and upon any prepayment thereof on the
amount prepaid.
(b) Swingline Loans. Subject to the provisions of SECTION 5.1(D),
the Borrowers will pay interest on the unpaid principal amount of each
Swingline Loan for each day from the day such Loan is made, until such Loan is
paid (whether at maturity, by reason of acceleration, or otherwise), at the
Quoted Rate or the Eurodollar Swingline Rate, as selected by the Borrowers'
Representative, payable on the Swingline Loan Maturity or upon any earlier
repayment thereof.
(c) Other Secured Obligations. The Borrowers will, to the extent
permitted by Applicable Law, pay interest on the unpaid principal amount of any
Secured Obligation that is due and payable (other than the Loans in accordance
with SECTION 5.1(A), (B) or (C), as applicable), on demand, as if such Secured
Obligation were a Base Rate Revolving Credit Loan. Interest that is due and
payable shall be deemed to be a liquidated amount and obligation of the
Borrowers and shall, to the extent permitted by Applicable Law, bear interest
in accordance with this SECTION 5.1(C).
(d) Default Rate. If there shall occur and be continuing an Event
of Default, the unpaid principal amount of the Loans and other Secured
Obligations shall, at the election of the Required Lenders, no longer bear
interest in accordance with the terms of SECTION 5.1(A), 5.1(B) or 5.1(C), but
shall bear interest for each day from the date of such Event of Default until
such Event of Default shall have been cured or waived at a rate per annum equal
to the sum of (i) the Default Margin and (ii) the rate otherwise applicable to
such Loan, payable on demand. The interest rate provided for in the preceding
sentence shall, to the extent permitted by Applicable Law, apply to and accrue
on the amount of any judgment entered with respect to any Secured
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Obligation and shall continue to accrue at such rate during any proceeding
described in SECTION 13.1(G) or (H).
(e) Calculation of Interest. The interest rates provided for in
SECTIONS 5.1(A), (B), (C) and (D) shall be computed on the basis of a year of
360 days and the actual number of days elapsed. Each interest rate determined
with reference to the Base Rate shall be adjusted automatically as of the
opening of business on the effective date of each change in the Base Rate.
(f) Maximum Rate. It is not intended by the Lenders, and nothing
contained in this Agreement or the Notes shall be deemed, to establish or
require the payment of a rate of interest in excess of the maximum rate
permitted by Applicable Law (the "Maximum Rate"). If, in any month, the
Effective Interest Rate, absent such limitation, would have exceeded the
Maximum Rate, then the Effective Interest Rate for that month shall be the
Maximum Rate, and, if in future months, the Effective Interest Rate would
otherwise be less than the Maximum Rate, then the Effective Interest Rate shall
remain at the Maximum Rate until such time as the amount of interest paid
hereunder equals the amount of interest which would have been paid if the same
had not been limited by the Maximum Rate. In the event that, upon payment in
full of the Secured Obligations, the total amount of interest paid or accrued
under the terms of this Agreement is less than the total amount of interest
which would have been paid or accrued if the Effective Interest Rate had at all
times been in effect, then the Borrowers shall, to the extent permitted by
Applicable Law, pay to the Lenders an amount equal to the excess, if any, of
(i) the lesser of (A) the amount of interest which would have been charged if
the Maximum Rate had, at all times, been in effect and (B) the amount of
interest which would have accrued had the Effective Interest Rate, at all
times, been in effect and (ii) the amount of interest actually paid or accrued
under this Agreement. In the event the Lenders receive, collect or apply as
interest any sum in excess of the Maximum Rate, such excess amount shall be
applied to the reduction of the principal balance of the Secured Obligations,
and if no such principal is then outstanding, such excess or part thereof
remaining, shall be paid to the Borrowers. For the purposes of computing the
Maximum Rate, to the extent permitted by Applicable Law, all interest and
charges, discounts, amounts, premiums or fees deemed to constitute interest
under Applicable Law, shall be amortized, prorated, allocated and spread in
substantially equal parts throughout the full term of this Agreement. The
provisions of this SECTION 5.1(F) shall be deemed to be incorporated into every
Loan Document (whether or not any provision of this SECTION 5.1(F) is
specifically referred to therein).
SECTION 5.2 Certain Fees.
(a) Origination Fee. On the Effective Date, the Borrowers shall
pay to BankBoston, solely for its own account, an origination fee in accordance
with the provisions of a separate agreement between the Borrowers and
BankBoston.
(b) Administrative Agent Fee. For administration and other
services performed by the Administrative Agent in connection with its
continuing administration of this Agreement, the Borrowers shall pay to the
Administrative Agent, for its own account, and not for the account of
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the Lenders, an annual fee in accordance with the provisions of a separate
agreement between the Borrowers and the Administrative Agent.
(c) Commitment Fee. In connection with and as consideration for
the holding available for the use of the Borrowers hereunder the full amount of
the Revolving Credit Facility and, prior to the Acquisition Facility
Termination Date, the Acquisition Facility, the Borrowers will pay to the
Administrative Agent, for the Ratable benefit of the Lenders, (i) for each day
from the Effective Date until the Termination Date, a fee at a rate equal to
1/2 of 1% per annum on an amount equal to the unused portion of the Revolving
Credit Facility for such day, subject, however, to quarterly adjustment in
accordance with the pricing matrix attached hereto as ANNEX B, and (ii) for
each day from the Effective Date until the first date on which Acquisition
Loans in an aggregate principal amount greater than $10,000,000 are outstanding
(or, if earlier, the Acquisition Facility Termination Date), a fee at the rate
of 3/4 of 1% per annum and thereafter, at anytime prior to the Acquisition
Facility Termination Date, a fee at a rate equal to 1/2 of 1% per annum
subject, however, to quarterly adjustment in accordance with the pricing matrix
attached hereto as ANNEX B, on an amount equal to the unused portion of the
Acquisition Facility for such day. Such fees shall be payable quarterly in
arrears on each Installment Payment Date beginning September 30, 1999 and on
the date of any permanent reduction in the Revolving Credit Facility or the
Acquisition Facility.
(d) Letter of Credit Fees.
(i) The Borrowers agree to pay to the Administrative
Agent, for the Ratable benefit of the Lenders, Letter of Credit fees
equal to a rate per annum equal to the Applicable Margin on the
Eurodollar Rate Revolving Credit Loans based on the average daily
aggregate Letter of Credit Amount of all standby Letters of Credit
from time to time outstanding during the term of this Agreement. Such
fees shall be payable to the Administrative Agent for the Ratable
benefit of the Lenders in advance on the date of issuance of each
Letter of Credit, shall be calculated according to the anticipated
average daily Letter of Credit Amount based on the stated term of each
Letter of Credit and shall be calculated based on a year of 360 days
and the actual number of days elapsed. In the event any Letter of
Credit is canceled or terminated prior to the expiration of its stated
term, the Lenders will make appropriate adjustments in such fees based
on the actual average daily face amount of outstanding Letters of
Credit and will refund to the Borrowers the amount of any excess fee
paid pursuant to this SECTION 5.2(D).
(ii) The Borrowers agree to pay to Administrative Agent,
for the account of BankBoston, the standard fees and charges of
BankBoston for issuing, administering, amending, renewing, paying and
canceling letters of credit, as and when assessed including, without
limitation, a fronting fee at a rate equal to 1/8 of 1% per annum
based on the aggregate Letter of Credit Amount of all standby Letters
of Credit the issuance of which has been authorized by the
Administrative Agent pursuant to SECTION 3.4.
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(e) General. All fees shall be computed on the basis of a year of
360 days and the actual number of days elapsed, and shall be fully earned by
the Administrative Agent, BankBoston and the Lenders when due and payable and,
except as otherwise set forth herein or required by Applicable Law, shall not
be subject to refund or rebate. All fees are compensation for services and are
not, and shall not be deemed to be, interest or a charge for the use of money.
SECTION 5.3 Borrowing and Conversion or Continuation of Loans. (a)
When the Borrowers desire a Borrowing under the Revolving Credit Facility, the
Borrowers' Representative shall notify the Agent (which notice shall be
irrevocable) by telecopy, telex or telephone not later than 11:00 a.m. on the
date one Business Day before the day on which the requested Loan is to be made
as a Base Rate Loan, and not later than 11:00 a.m. on the date three Business
Days before the day on which the requested Loan is to be made as a Eurodollar
Rate Loan. Each such Notice of Borrowing shall specify (i) the effective date
and amount of each Loan requested, (ii) the Type of such Loan, and (iii) if
such Loan is a Eurodollar Rate Loan, the duration of the applicable Interest
Period, and shall be immediately followed by a written confirmation thereof by
the Borrowers' Representative in substantially the form of EXHIBIT E-1 hereto,
PROVIDED that if such written confirmation differs in any material respect from
the action taken by the Administrative Agent, the records of the Administrative
Agent shall control absent manifest error. Notwithstanding the foregoing, if
the Borrowers' Representative has not submitted a Swingline Loan Request for a
borrowing in an amount sufficient to satisfy such Secured Obligation, the
Borrowers' Representative shall be deemed to have given to the Administrative
Agent a Notice of Borrowing of a Base Rate Revolving Credit Loan on the
Business Day immediately preceding the day on which is due (i) any payment with
respect to a Swingline Loan pursuant to SECTION 2A.3 or 2A.4, (ii) any payment
or reimbursement with respect to a Letter of Credit pursuant to SECTION 3.6(A),
(iii) any payment of interest pursuant to SECTION 5.1, (iv) any payment of fees
pursuant to SECTIONS 5.2(A), (B) or (C), (v) any payment under SECTION 5.16, or
(vi) any payment of any other Secured Obligation, such Loan to be made on the
next succeeding Business Day in the amount of the Secured Obligation(s) due on
such next succeeding Business Day.
(b) Whenever the Borrowers desire, subject to the provisions of
SECTION 5.4, to convert an outstanding Loan into a Loan of a different Type
provided for in this Agreement or to continue an outstanding Loan for a
subsequent Interest Period, the Borrowers' Representative shall notify the
Administrative Agent (which notice shall be irrevocable) by telex, telegraph,
telecopy or telephone not later than 10:00 a.m. on the date one Business Day
before the day on which a proposed conversion of a Loan into, or a continuation
of a Loan as a Base Rate Loan, and three Business Days before the day on which
a proposed conversion of a Loan into, or continuation of a Loan as a Eurodollar
Rate Loan is to be effective (and if the Loan to be converted or continued is a
Eurodollar Rate Loan such effective date shall be the last day of the Interest
Period therefor). Each such notice (a "Notice of Conversion or Continuation")
shall (i) identify the Loan to be converted or continued, including the Type of
such Loan, the aggregate outstanding principal balance thereof and, in the case
of a Eurodollar Rate Loan, the last day of the Interest Period therefor, (ii)
specify the effective date of such conversion or continuation, (iii)
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specify the principal amount of such Loan to be converted or continued and, if
converted, the Type or Types of Loan into which conversion of such principal
amount is to be made, and (iv) in the case of any conversion into or
continuation as Eurodollar Loans, the Interest Period to be applicable to such
converted or continued Loan, and shall be immediately followed by a written
confirmation thereof by the Borrowers' Representative in substantially the from
of EXHIBIT F hereto, PROVIDED that is such written confirmation differs in any
material respect from the action taken by the Administrative Agent, the record
of the Administrative Agent shall control absent manifest error.
SECTION 5.4 Conversion or Continuation. Provided that no Default or
Event of Default shall have occurred and be continuing (but subject to the
provisions of SECTIONS 5.3 and 5.15), the Borrowers may request that all or any
part of any outstanding Loan be converted into a Loan or Loans of a different
Type or be continued as a Loan or Loans of the same Type, in the same aggregate
principal amount, on any Business Day (which, in the case of continuation of a
Eurodollar Rate Loan, shall be the last day of the Interest Period applicable
to such Loan), upon notice (which notice shall be irrevocable) given in
accordance with SECTION 5.3, PROVIDED that nothing in this ARTICLE 5 shall be
construed to permit the conversion of a Loan under one Facility into a Loan
outstanding under another Facility.
SECTION 5.5 Manner of Payment. (a) Except as otherwise expressly
provided in SECTION 9.1(B), each payment (including prepayments) by the
Borrowers on account of the principal of or interest on the Loans or of any
other amounts payable to the Lenders under this Agreement or any Note shall be
made not later than 4:30 p.m. on the date specified for payment under this
Agreement to the Administrative Agent, for the account of the Lenders, at the
Administrative Agent's Office, in Dollars, in immediately available funds and
shall be made without any setoff, counterclaim or deduction whatsoever.
(b) The Borrowers hereby irrevocably authorize each Lender and
each Affiliate of such Lender and each participant herein to charge any account
of the Borrowers maintained with such Lender or such Affiliate or participant
with such amounts as may be necessary from time to time to pay any Secured
Obligations (whether or not owed to such Lender, Affiliate or participant)
which are not paid when due.
SECTION 5.6 General. If any payment under this Agreement or any Note
shall be specified to be made on a day which is not a Business Day, it shall be
made on the next succeeding day which is a Business Day and such extension of
time shall in such case be included in computing interest, if any, in
connection with such payment.
SECTION 5.7 Loan Accounts; Statements of Account.
(a) Each Lender shall open and maintain on its books a loan
account in the Borrowers' name (each, a "Loan Account" and collectively, the
"Loan Accounts"). Each such Loan Account shall show as debits thereto each Loan
made under this Agreement by such Lender to the
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Borrowers and as credits thereto all payments received by such Lender and
applied to principal of such Loans, so that the balance of the Loan Account at
all times reflects the principal amount due such Lender from the Borrowers.
(b) The Administrative Agent shall maintain on its books a
control account for the Borrowers in which shall be recorded (i) the amount of
each disbursement made hereunder, (ii) the amount of any principal or interest
due or to become due from the Borrowers hereunder, and (iii) the amount of any
sum received by the Administrative Agent hereunder from the Borrowers and each
Lender's share therein.
(c) The entries made in the accounts pursuant to SUBSECTIONS (a)
and (B) shall be prima facie evidence, in the absence of manifest error, of the
existence and amounts of the obligations of the Borrowers therein recorded and
in case of discrepancy between such accounts, in the absence of manifest error,
the accounts maintained pursuant to SUBSECTION (B) shall be controlling.
(d) The Administrative Agent will account separately to the
Borrowers monthly with a statement of Loans, charges and payments made to and
by the Borrowers pursuant to this Agreement, and such accounts rendered by the
Administrative Agent shall be deemed final, binding and conclusive, save for
manifest error, unless the Administrative Agent is notified by the Borrowers in
writing to the contrary within 30 days of the date the account to the Borrowers
was so rendered or items reflected in such statements are modified pursuant to
the Administrative Agent's ability to reverse and reapply credits or otherwise,
in which case the Borrowers shall again have the same opportunity to examine
and object to any such modified or restated account before it is deemed final,
binding and conclusive. Such notice by the Borrowers shall be deemed an
objection to only those items specifically objected to therein. Failure of the
Administrative Agent to render such account shall in no way affect the rights
of the Administrative Agent or of the Lenders hereunder.
SECTION 5.8 Reduction of Revolving Credit Facility and Acquisition
Facility; Termination of Agreement.
(a) Reduction of Revolving Credit Facility.
(i) The Borrowers shall have the right, at any time and
from time to time, upon at least 30 days' prior irrevocable, written
notice to the Administrative Agent, to terminate or reduce permanently
all or a portion of the Revolving Credit Facility, without premium or
penalty; PROVIDED, HOWEVER, that any such partial reduction of such
facility shall be not less than $200,000 and shall not reduce the
Revolving Credit Facility below the amount of the aggregate Letter of
Credit Obligations. As of the date of termination or reduction set
forth in such notice, the Revolving Credit Facility shall be
permanently reduced to the amount stated in the Borrowers' notice for
all purposes herein, and the Borrowers shall pay the amount necessary
to reduce the amount of the outstanding
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Revolving Credit Loans to an amount not greater than the Revolving
Credit Facility as so reduced, together with accrued interest on the
amounts so prepaid.
(ii) The amount of the Revolving Credit Facility shall be
automatically reduced to zero on the Termination Date.
(iii) The Revolving Credit Facility or any portion thereof
terminated or reduced pursuant to this SECTION 5.8 may not be
reinstated.
(b) Reduction of Acquisition Facility.
(i) The Borrowers shall have the right, at any time and
from time to time, upon at least 30 days' prior irrevocable, written
notice to the Administrative Agent, to terminate or reduce permanently
all or any part of the unused Acquisition Facility, without premium or
penalty; PROVIDED, HOWEVER, that any such partial reduction shall be
not less than $200,000. As of the date of termination or reduction set
forth in such notice, the Acquisition Facility shall be permanently
reduced to the amount stated in the Borrowers' notice for all purposes
herein.
(ii) The Acquisition Facility or any portion thereof
terminated or reduced pursuant to this SECTION 5.8 may not be
reinstated.
(c) Termination of Agreement. The Borrowers shall have the right,
at any time, to terminate this Agreement upon not less than 30 Business Days'
prior written notice, which notice shall specify the effective date of such
termination. Upon receipt of such notice, the Administrative Agent shall
promptly notify each Lender thereof. On the date specified in such notice, such
termination shall be effected, PROVIDED, that the Borrowers shall, on or prior
to such date, pay to the Administrative Agent, for its account and the account
of the Lenders, in same day funds, an amount equal to all Secured Obligations
(other than with respect to Letter of Credit Obligations) outstanding on such
date, including, without limitation, all (i) accrued interest thereon, (ii) all
accrued fees provided for hereunder, and (iii) any amounts payable to the
Lender pursuant to SECTIONS 5.12, 5.15, 16.2, 16.3, 16.14 and 16.23, and, in
addition thereto, shall deliver to the Administrative Agent, in respect of each
outstanding Letter of Credit, either a Supporting Letter of Credit or Cash
Collateral as provided in SECTION 3.9. Additionally, the Borrowers shall
provide the Administrative Agent and the Lenders with indemnification in form
and substance satisfactory to the Administrative Agent with respect to such
customary matters as the Administrative Agent and the Lenders shall require.
Following a notice of termination as provided for in this SECTION 5.8(C) and
upon payment in full of the amounts specified in this SECTION 5.8(C), and
execution and delivery of any required indemnification, this Agreement shall be
terminated and the Administrative Agent, the Co-Agents, the Lenders and the
Borrowers shall have no further obligations to any other party hereto, except
for the obligations to the
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Administrative Agent and the Lenders pursuant to SECTION 16.14 hereof, which
shall survive any termination of this Agreement.
SECTION 5.9 Making of Loans.
(a) Nature of Obligations of Lenders to Make Loans. The
obligations of the Lenders under this Agreement to make the Loans are several
and are not joint or joint and several.
(b) Assumption by Administrative Agent. Notwithstanding the
occurrence or continuance of a Default or Event of Default or other failure of
any condition to the making of Loans under the Revolving Credit Facility or the
Acquisition Facility hereunder subsequent to the Initial Loans, unless the
Administrative Agent shall have received notice from a Lender in accordance
with the provisions of SECTION 5.9(C) prior to a proposed Borrowing date that
such Lender will not make available to the Administrative Agent such Lender's
Proportionate Share of the Revolving Credit Loan or the Acquisition Loan to be
borrowed on such date, the Administrative Agent may assume that such Lender
will make such Proportionate Share available to the Administrative Agent in
accordance with SECTION 2.2(A) and SECTION 4A.2(A), and the Administrative
Agent may, in reliance upon such assumption, make available to the Borrowers on
such date a corresponding amount. If and to the extent such Lender shall not
make such Proportionate Share available to the Administrative Agent, such
Lender and the Borrowers severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount (the "Make-Whole Amount"),
together with interest thereon for each day from the date such amount is made
available to the Borrowers until the date such amount is repaid to the
Administrative Agent at the Effective Interest Rate or, if lower, subject to
SECTION 5.1(F), the Maximum Rate; PROVIDED, HOWEVER, if on the Interest Payment
Date next following the date on which any Lender pays interest to the
Administrative Agent at the Effective Rate or the Maximum Rate on a Make-Whole
Amount as aforesaid, the Borrower defaults in making the interest payment due
on such Interest Payment Date, then the Administrative Agent shall reimburse
such Lender for the excess, if any, of the amount of interest so paid by such
Lender on the Make-Whole Amount over the amount of interest that such Lender
would have paid had the Lender been required to pay interest on the Make-Whole
Amount at the Federal Funds Effective Rate. If such Lender shall repay to the
Administrative Agent such corresponding amount, the amount so repaid shall
constitute such Lender's Proportionate Share of the Loan made on such Borrowing
date for purposes of this Agreement. The failure of any Lender to make its
Proportionate Share of any Loan available shall not (without regard to whether
a Borrower shall have returned the amount thereof to the Administrative Agent
in accordance with this SECTION 5.9) relieve it or any other Lender of its
obligation, if any, hereunder to make its Proportionate Share of the Loan
available on such Borrowing date, but no Lender shall be responsible for the
failure of any other Lender to make its Proportionate Share of a Loan available
on the Borrowing date.
(c) Delegation of Authority to Administrative Agent. Without
limiting the generality of SECTION 15.1, each Lender expressly authorizes the
Administrative Agent to determine on behalf of such Lender (i) any reduction or
increase of advance rates applicable to the Borrowing
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Base, so long as such advance rates do not at any time exceed the rates set
forth in the Borrowing Base definition, (ii) the creation or elimination of any
Reserves (other than the Letter of Credit Reserve) against the Revolving Credit
Facility and the Borrowing Base and (iii) whether or not Inventory or
Receivables shall be deemed to constitute Eligible Inventory or Eligible
Receivables. Such authorization may be withdrawn by the Required Lenders by
giving the Administrative Agent written notice of such withdrawal signed by the
Required Lenders; PROVIDED, HOWEVER, that unless otherwise agreed by the
Administrative Agent such withdrawal of authorization shall not become
effective until the thirtieth Business Day after receipt of such notice by the
Administrative Agent. Thereafter, the Required Lenders shall jointly instruct
the Administrative Agent in writing regarding such matters with such frequency
as the Required Lenders shall jointly determine. Unless and until the
Administrative Agent shall have received written notice from the Required
Lenders as to the existence of a Default, an Event of Default or some other
circumstance which would relieve the Lenders of their respective obligations to
make Loans hereunder, which notice shall be in writing and shall be signed by
the Required Lenders and shall expressly state that the Required Lenders do not
intend to make available to the Administrative Agent such Lenders' Ratable
Share of Loans made after the effective date of such notice, the Administrative
Agent shall be entitled to continue to make Loans to the Borrowers based upon
the assumptions described in SECTION 5.9(B) and all Lenders agree to make such
Loans. After receipt of the notice described in the preceding sentence, which
shall become effective on the third Business Day after receipt of such notice
by the Administrative Agent unless otherwise agreed by the Administrative
Agent, the Administrative Agent shall be entitled to make the assumptions
described in SECTION 5.9(B) as to any Loans as to which it has not received a
written notice to the contrary prior to 11:00 a.m. on the Business Day next
preceding the day on which the Loan is to be made. The Administrative Agent
shall not be required to make any Loan as to which it shall have received
notice by a Lender of such Lender's intention not to make its Ratable Share of
such Loan available to the Administrative Agent. Any withdrawal of
authorization under this SECTION 5.9(C) shall not affect the validity of any
Loans made prior to the effectiveness thereof.
(d) Replacement of Certain Lenders. If a Lender (the "Affected
Lender") shall have failed to fund its Proportionate Share of any Loan
requested by the Borrowers which such Lender is obligated to fund under the
terms of this Agreement and which such failure has not been cured, then, in any
such case and in addition to any other rights and remedies that the
Administrative Agent, any other Lender or the Borrowers may have against such
Affected Lender, the Borrowers or the Administrative Agent may make written
demand on such Affected Lender (with a copy to the Administrative Agent in the
case of a demand by the Borrowers and a copy to the Borrowers in the case of a
demand by the Administrative Agent) for the Affected Lender to assign, and such
Affected Lender shall assign pursuant to one or more duly executed Assignment
and Acceptances within five Business Days after the date of such demand, to one
or more Lenders willing to accept such assignment or assignments, or to one or
more Eligible Assignees designated by the Administrative Agent, and reasonably
acceptable to the Borrowers, all of such Affected Lender's rights and
obligations under this Agreement (including its Commitments and all Loans owing
to it) in accordance with ARTICLE 14. The Administrative Agent is hereby
irrevocably authorized to
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execute one or more Assignment and Acceptances as attorney-in-fact for any
Affected Lender which fails or refuses to execute and deliver the same within
five Business Days after the date of such demand. The Affected Lender shall be
entitled to receive, in cash and concurrently with execution and delivery of
each such Assignment and Acceptance, all amounts owed to the Affected Lender
hereunder or under any other Loan Document, including the aggregate outstanding
principal amount of the Loans owed to such Lender, together with accrued
interest thereon through the date of such assignment. Upon the replacement of
any Affected Lender pursuant to this SECTION 5.9(D), such Affected Lender shall
cease to have any participation in, entitlement to, or other right to share in
the Security Interest or any other Lien of the Administrative Agent in any
Collateral and such Affected Lender shall have no further liability to the
Administrative Agent, any Lender or any other Person under any of the Loan
Documents (except as provided in SECTION 15.7 and elsewhere in this Agreement
as to events or transactions which occur prior to the replacement of such
Affected Lender).
(e) Overadvances. Notwithstanding anything to the contrary
contained elsewhere in this SECTION 5.9 or this Agreement or the other Loan
Documents and whether or not a Default or Event of Default exists at the time,
unless otherwise notified by the Required Lenders in accordance with SECTION
5.9(C), the Administrative Agent may in its discretion require all Lenders to
honor requests or deemed requests by the Borrowers for Revolving Credit Loans
at a time that an Overadvance Condition exists or which would result in an
Overadvance Condition and each Lender shall be obligated to continue to make
its Proportionate Share of Revolving Credit Loans up to a maximum amount
outstanding equal to its Commitment, so long as the total amount of such
Overadvance is not known by the Administrative Agent to exceed $3,000,000. The
Borrowers shall repay any such Overadvance on the earlier of (i) demand by the
Administrative Agent or (ii) 30 days following the day on which such
Overadvance Condition first exists.
SECTION 5.10 Settlement Among Lenders.
(a) Term Loans. The Administrative Agent shall pay to each Lender
on each Interest Payment Date or Installment Payment Date, as the case may be,
its Ratable Share (or, if different, a proportionate amount based on the
principal amount of the Term Loans owing to such Lender), of all payments
received by the Administrative Agent hereunder in immediately available funds
in respect of the principal of, or interest on, the Term Loans, net of any
amounts payable by such Lender to the Administrative Agent, by wire transfer of
same day funds.
(b) Acquisition Loans. The Administrative Agent shall pay to each
Lender on each Interest Payment Date or Installment Payment Date, as the case
may be, its Ratable Share (or, if different, a proportionate amount based on
the principal amount of the Acquisition Loans owing to such Lender), of all
payments received by the Administrative Agent hereunder in immediately
available funds in respect of the principal of, or interest on, the Acquisition
Loans, net of any amounts payable by such Lender to the Administrative Agent,
by wire transfer of same day funds.
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(c) Revolving Credit Loans. The Administrative Agent shall pay to
each Lender on each Interest Payment Date its Ratable Share (or, if different,
a proportionate amount based on the principal amount of Revolving Credit Loans
owing to such Lender), of all payments received by the Administrative Agent
hereunder in immediately available funds, in respect of the principal of or
interest on, the Revolving Credit Loans, net of any amounts payable by such
Lender to the Administrative Agent, by wire transfer of same day funds.
(d) Return of Payments. If any amounts received by BankBoston in
respect of the Secured Obligations are later required to be returned or repaid
by BankBoston to the Borrowers or any other obligor or their respective
representatives or successors in interest, whether by court order, settlement
or otherwise, in excess of the BankBoston's Proportionate Share of all such
amounts required to be returned by all Lenders, each other Lender shall, upon
demand by BankBoston with notice to the Administrative Agent, pay to the
Administrative Agent for the account of BankBoston, an amount equal to the
excess of such Lender's Proportionate Share of all such amounts required to be
returned by all Lenders over the amount, if any, returned directly by such
Lender.
(e) Payments to Administrative Agent, Lenders.
(i) Payment by any Lender to the Administrative Agent
shall be made not later than 1:00 p.m. on the Business Day such
payment is due, PROVIDED that if such payment is due on demand by the
Swingline Lender, such demand is made on the paying Lender not later
than 11:30 a.m. on such Business Day. Payment by the Administrative
Agent to any Lender shall be made by wire transfer, promptly following
the Administrative Agent's receipt of funds for the account of such
Lender and in the type of funds received by the Administrative Agent,
PROVIDED that if the Administrative Agent receives such funds (A) at
or prior to 1:00 p.m., the Administrative Agent shall pay such funds
to such Lender by 2:00 p.m. on such Business Day or (B) after 1:00
p.m., the Administrative Agent shall pay such funds to such Lender
prior to 2:00 p.m. on the following Business Day. If a demand for
payment is made after the applicable time set forth above, the payment
due may be made by 2:00 p.m. on the first Business Day following the
date of such demand.
(ii) If a Lender shall, at any time, fail to make any
payment to the Administrative Agent required hereunder, the
Administrative Agent may, but shall not be required to, retain
payments that would otherwise be made to such Lender hereunder and
apply such payments to such Lender's defaulted obligations hereunder,
at such time, and in such order, as the Administrative Agent may elect
in its sole discretion.
(iii) With respect to the payment of any funds under this
SECTION 5.10(E), whether from the Administrative Agent to a Lender or
from a Lender to the Administrative Agent, the party failing to make
full payment when due pursuant to the terms hereof shall, upon demand
by the other party, pay such amount together with
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interest on such amount at the Federal Funds Effective Rate.
(f) Settlement of Other Secured Obligations. All other amounts
received by the Administrative Agent on account of, or applied by the
Administrative Agent to the payment of, any Secured Obligation owed to the
Lenders (including, without limitation, fees payable to the Lenders pursuant to
SECTIONS 5.2(C) and (D) and proceeds from the sale of, or other realization
upon, all or any part of the Collateral following an Event of Default) that are
received by the Administrative Agent on or prior to 1:00 p.m. on a Business Day
will be paid by the Administrative Agent to each Lender on the same Business
Day, and any such amounts that are received by the Administrative Agent after
1:00 p.m. will be paid by the Administrative Agent to each Lender on the
following Business Day. Unless otherwise stated herein, the Administrative
Agent shall distribute to each Lender such Lender's Proportionate Share of fees
payable to the Lenders pursuant to SECTIONS 5.2(C) and (D) and shall distribute
to each Lender such Lender's Proportionate Share (or if different, such
Lender's share based upon the amount of the Secured Obligations then owing to
each Lender) of the proceeds from the sale of, or other realization upon, all
or any part of the Collateral following an Event of Default.
(g) Allocation of Payments from Borrowers. All monies to be
applied to the Secured Obligations, whether such monies represent voluntary
payments by the Borrowers or are received pursuant to demand for payment or
realized from any disposition of Collateral, shall be allocated among the
Administrative Agent and such of the Lenders and other holders of the Secured
Obligations as are entitled thereto (and, with respect to monies allocated to
the Lenders, on a Ratable basis unless otherwise provided in this
SECTION 5.10(G)): (i) first, to the Administrative Agent to pay the amount of
expenses that have not been reimbursed to the Administrative Agent by the
Borrowers or the Lenders, together with interest accrued thereon; (ii) second,
to the Administrative Agent to pay any indemnified amount that has not been paid
to the Administrative Agent by the Borrowers or the Lenders, together with
interest accrued thereon; (iii) third, to the Administrative Agent to pay any
fees due and payable to the Administrative Agent under this Agreement; (iv)
fourth, to the Lenders for any indemnified amount that they have paid to the
Administrative Agent and for any expenses that they have reimbursed to the
Administrative Agent; (v) fifth, to the Lenders in payment of the unpaid
principal and accrued interest in respect of the Loans and any other Secured
Obligations then outstanding and held by any Lender to be shared among Lenders
on the basis of their respective Facility Percentages as to any payments made
for application to specified Facilities and otherwise a Ratable basis, or on
such other basis as may be agreed upon in writing by all of the Lenders (which
agreement or agreements may be entered into without notice to or the consent or
approval of the Borrowers), and (vi) sixth, to the holders of the other Secured
Obligations who are not Lenders on a pro rata basis. The allocations set forth
in this SECTION 5.10(G) are solely to determine the rights and priorities of the
Administrative Agent and the Lenders as among themselves and may be changed by
the Administrative Agent and the Lenders without notice or the consent of
approval of the Borrowers or any other Person. Whenever allocation is made
pursuant to this SECTION 5.10(G) to the holder
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of Secured Obligations in which another Lender acquires a participation, the
monies received by such holder shall be shared Ratably as between such holder
and such participants.
SECTION 5.11 Prepayments of Loans.
(a) Voluntary Prepayment of Term Loans and Acquisition Loans. The
Borrowers shall have the right at any time and from time to time, upon at least
two Business Days' prior written notice by the Borrowers to the Administrative
Agent, to prepay, without premium or penalty, the Term Loans and the
Acquisition Loans in whole or in part on any Business Day. Each partial
prepayment shall be in a principal amount of not less than $200,000. On the
prepayment date, the Borrowers shall pay interest on the amount prepaid,
accrued to the prepayment date. Any notice of prepayment given by the
Borrowers' Representative hereunder shall be irrevocable, and the amount to be
prepaid (including accrued interest and any amount payable pursuant to SECTION
5.12) shall be due and payable on the date designated in the notice.
(b) Mandatory Prepayments.
(i) Disposition Proceeds; Securities Issues. Unless the
Total Funded Debt to EBITDA Ratio is less than 3.0 to 1 after giving
pro forma effect to the event that would otherwise trigger a
prepayment, as if such event had occurred on the first day of the
latest period of four consecutive Fiscal Quarters ended prior to the
date of determination, the Borrowers shall prepay the Loans from time
to time as follows:
(A) Asset Dispositions. Immediately upon
receipt by the Borrowers or any Subsidiary of the Net
Proceeds of any Asset Disposition, the Borrowers shall apply
such Net Proceeds in prepayment of the Loans as provided in
SECTION 5.11(C); PROVIDED, HOWEVER, that the Borrowers shall
be required to make such prepayment only to the extent that
the Net Proceeds from Asset Dispositions during any Fiscal
Year exceed, in the aggregate, $300,000 and the Borrowers do
not expect such proceeds to be reinvested within 180 days in
productive assets of a kind then used or useable in the
business of the Borrowers and that are not subject to any
Lien other than in favor of the Administrative Agent, for the
benefit of the Lenders; and, PROVIDED FURTHER, that Net
Proceeds of the sale of the assets constituting the Southern
Wood business up to $4,000,000 shall be applied to repay the
Loans in accordance with SECTION 5.11(C) and any such Net
Proceeds in excess of $4,000,000 may be so applied or
reinvested as contemplated in this SECTION 5.11(B)(I)(A). If
the Borrowers anticipate reinvestment of Net Proceeds then
the Borrowers shall deposit such Net Proceeds with the
Administrative Agent to be held as Cash Collateral. Upon the
Borrowers' reinvestment of such proceeds as described above,
the Administrative Agent shall release its Security Interest
in such Cash Collateral in respect of the reinvested funds.
To the extent that the Borrowers fail to reinvest such
proceeds within 180 days as provided above, the Borrowers
authorize and direct the Administrative Agent to apply the
amount of
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the Cash Collateral (in excess of $300,000 in any Fiscal
Year) in respect of the unreinvested amount to the prepayment
of the Loans as provided in SECTION 5.11(C).
(B) Debt or Equity Offerings. In the event that
at any time after the Effective Date, a Borrower or any
Subsidiary issues capital stock or other equity securities or
receives any additional capital contribution in respect of
existing capital stock or other securities or issues Debt
securities or otherwise incurs Debt (in each case other than
from another Loan Party, in connection with the exercise of
stock options held by employees or independent sales
representatives, or as part of the consideration paid to any
seller of an Acquisition Target), the proceeds of which, when
added to all such proceeds received by WinsLoew and its
Subsidiaries since the Effective Date is greater than
$5,000,000 then no later than the third Business Day
following the date of receipt of such proceeds, 100% of such
proceeds, net of underwriting discounts and commissions and
other reasonable costs associated therewith shall be applied
to the prepayment of the Loans as provided in SECTION
5.11(C), provided, that if such net proceeds result from an
IPO, then only 50% thereof is required to be so applied.
(ii) Excess Cash Flow. The Borrowers shall prepay the Loans as
provided in SECTION 5.11(C) annually on or before 120 days after the end of
each Fiscal Year commencing with the Fiscal Year ending December 31, 2000, in
an amount equal to 50% of the Excess Cash Flow for the Fiscal Year most
recently ended, PROVIDED, that, if, after giving pro forma effect to the
proposed payment, the Total Funded Debt to EBITDA Ratio determined as of the
last day of such Fiscal Year is less than 3.0 to 1, then the amount of the
prepayment under this SECTION 5.11(B)(II) shall be 25% of the Excess Cash Flow
for such Fiscal Year.
(iii) Other Prepayments. The Borrowers shall prepay the Loans (and
permanently reduce the Facilities) as provided in SECTION 5.11(C) in an amount
equal to any amount that would otherwise be required to be applied to the
purchase, repayment or prepayment of any Subordinated Debt, including, without
being limited to, pursuant to Section 4.10 of the Senior Note Indenture.
(c) Application of Prepayments. Prepayments pursuant to SECTION
5.11(B) shall be applied first to the outstanding principal of the Term Loan A
and Term Loan B and, if the Acquisition Facility Termination Date has occurred,
the Acquisition Loans, on a pro rata basis and ratably as to the remaining
installments thereof to the extent of such Loans, and then to the outstanding
principal of Term Loan C, EXCEPT that Net Proceeds of (i) Asset Dispositions of
property acquired with the proceeds of Acquisition Loans, will be applied,
whether before or after the Acquisition Facility Termination Date, first to
repay the outstanding principal of the Acquisition Loans ratably as to the
remaining installments (if the Acquisition Facility Termination Date has
occurred) to the extent of such Loans and then pro rata to Term Loan A and Term
Loan B, and after such application, to the outstanding principal of Term Loan C
to the extent thereof
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and (ii) the Borrowers may direct the application of the Net Proceeds of the
disposition of the Southern Woods business to repay such Term Loans and
Acquisition Loans as it may specify, ratably as to remaining installments of
such selected Loans. Payments shall be first applied to Base Rate Loans to the
extent thereof and then to Eurodollar Rate Loans within each Facility and any
payments received which would otherwise result in prepayment of such Eurodollar
Rate Loans prior to the end of the Interest Period applicable thereto may, upon
the request of the Borrowers, in the absence of an Event of Default, be
deposited to the Cash Collateral Account or any Investment Account, with any
excess after prepayment in full of the Loans to be deposited with the
Administrative Agent to be held as Cash Collateral for the Secured Obligations
and after the Termination Date, to be applied to any of the Secured Obligations
in such manner as the Administrative Agent shall determine in its sole
discretion. Any Net Proceeds received after all Term Loans and all Acquisition
Loans have been repaid, shall be applied to repay outstanding Swingline Loans
and then to outstanding Revolving Credit Loans, but without any reduction in
Commitments.
(d) Prepayments from Acquisition Agreement Proceeds. Immediately
upon receipt by a Borrower of any amounts payable as purchase price adjustments
or in payment of claims for indemnification after the Effective Date in
connection with the Acquisition of Pompeii or any other Acquisition, but
excluding amounts applied by such Borrower to the replacement, repair or
restoration of any assets or properties of such BORROWER, or satisfying the
claims made against such Borrower in respect of which it was indemnified, or
otherwise remedying or correcting the condition that gave rise to the
adjustment or claim for indemnification or paying any fees or expenses incurred
by such Borrower to obtain such adjustment or indemnification payment, such
Borrower shall apply such amounts (net of any tax liability attributable
thereto) to the ratable prepayment of Term Loan A, Term Loan B and the
Acquisition Loans, ratably as to the remaining installments thereof, then to
the prepayment of Term Loan C or, if the applicable Acquisition was made with
proceeds of an Acquisition Loan, to the repayment of the Acquisition Loans,
ratably as to the remaining installments thereof, then to the ratable
prepayment of Term Loan A and Term Loan B, ratably as to the remaining
installments thereof, then to the prepayment of Term Loan C.
(e) Certificate. Together with each prepayment pursuant to
SECTION 5.11(B) or (D), the Borrowers shall deliver to the Administrative Agent
a certificate of a Financial Officer setting forth the amount of such
prepayment and certifying that such amount was computed in accordance with the
provisions of this Agreement, and having attached thereto the supporting
calculations, in reasonable detail.
SECTION 5.12 Payments Not at End of Interest Period; Failure to
Borrow. If for any reason any payment of principal with respect to any
Eurodollar Rate Loan is made on any day prior to the last day of the Interest
Period applicable to such Eurodollar Rate Loan or, after having given a Notice
of Borrowing with respect to any Eurodollar Rate Revolving Credit Loan or a
Notice of Conversion or Continuation with respect to any Loan to be continued
as or converted into a Eurodollar Rate Loan, such Loan is not made or is not
continued as or converted into a Eurodollar Rate Loan due to the Borrowers'
failure to borrow or to fulfill the applicable
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conditions set forth in ARTICLE 6, the Borrowers shall pay to each Lender an
amount (if a positive number) computed pursuant to the following formula:
<TABLE>
<S> <C> <C>
L = (R - T) x P x D
----------------
360
L = amount payable
R = the Eurodollar Rate applicable to the
Eurodollar Rate Loan unborrowed or prepaid
T = effective interest rate per annum at
which any readily marketable
bonds or other obligations of the United
States, selected at the Administrative
Agent's sole discretion, maturing on or
near the last day of the then applicable or
requested Interest Period for such Loan and
in approximately the same amount as such
Loan, can be purchased by such Lender on
the day of such payment of principal or
failure to borrow
P = the amount of principal paid or the
amount of the requested Loan
D = the number of days remaining in the
Interest Period as of the date
of such payment or the number of days in
the requested Interest Period
</TABLE>
The Borrowers shall pay such amount upon presentation by the Administrative
Agent of a statement setting forth the amount and the Administrative Agent's
calculation thereof pursuant hereto, which statement shall be deemed true and
correct absent manifest error.
SECTION 5.13 Assumptions Concerning Funding of Eurodollar Rate Loans.
Calculation of all amounts payable to the Lenders under this ARTICLE 5 shall be
made as though each Lender had actually funded or committed to fund its
Eurodollar Rate Loans through the purchase of an underlying deposit in an
amount equal to the amount of such Ratable share and having a maturity
comparable to the relevant Interest Period for such Eurodollar Rate Loan;
PROVIDED, HOWEVER, each Lender may fund its Eurodollar Rate Loans in any manner
it deems fit and the foregoing assumption shall be utilized only for the
calculation of amounts payable under this ARTICLE 5.
SECTION 5.14 Duration of Interest Periods; Maximum Number of
Eurodollar Rate Loans; Minimum Increments.
(a) Subject to the provisions of the definition "Interest
Period", the duration of each Interest Period applicable to a Eurodollar Rate
Loan shall be as specified in the applicable Notice of Borrowing or Notice of
Conversion or Continuation. The Borrowers may elect a subsequent Interest
Period to be applicable to any Eurodollar Rate Loan by giving a Notice of
Conversion or Continuation with respect to such Loan in accordance with SECTION
5.13.
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(b) If the Administrative Agent does not receive a notice of
election in accordance with SECTION 5.13 with respect to the continuation of a
Eurodollar Rate Loan within the applicable time limits specified in said
SECTION 5.13, or if, when such notice must be given, an Event of Default exists
or Eurodollar Rate Loans are not available, the Borrowers shall be deemed to
have elected to convert such Eurodollar Rate Loan in whole into a Base Rate
Loan on the last day of the Interest Period therefor.
(c) Notwithstanding the foregoing, the Borrowers may not select
an Interest Period that would end, but for the provisions of the definition
"Interest Period", after the Termination Date.
(d) In no event shall there be more than ten Eurodollar Rate Term
Loans, three Eurodollar Rate Acquisition Loans and four Eurodollar Rate
Revolving Credit Loans outstanding hereunder at any time. For the purpose of
this SUBSECTION (D), each Eurodollar Rate Revolving Credit Loan, each
Eurodollar Rate Acquisition Loan and each Eurodollar Rate Term Loan having a
distinct Interest Period shall be deemed to be a separate Loan hereunder.
(e) Each Eurodollar Rate Loan shall be in a minimum amount of
$1,000,000.
SECTION 5.15 Changed Circumstances.
(a) If the introduction of or any change in or in the
interpretation of (in each case, after the date hereof) any law or regulation
makes it unlawful, or any Governmental Authority asserts, after the date
hereof, that it is unlawful, for any Lender to perform its obligations
hereunder to make Eurodollar Rate Loan or to fund or maintain Eurodollar Rate
Loans hereunder, such Lender shall notify the Administrative Agent of such
event and the Administrative Agent shall notify the Borrowers of such event,
and the right of the Borrowers to select a Eurodollar Rate Loan for any
subsequent Interest Period or in connection with any subsequent conversion of
any Loan shall be suspended until the Administrative Agent shall notify the
Borrowers that the circumstances causing such suspension no longer exist, and
the Borrowers shall forthwith prepay in full all Eurodollar Rate Revolving
Credit Loans and, if on or prior to the Acquisition Facility Termination Date,
each Eurodollar Rate Acquisition Loan then outstanding and shall convert each
Eurodollar Rate Term Loan into a Base Rate Term Loan and, if after the
Acquisition Facility Termination Date, shall convert each Eurodollar Rate
Acquisition Loan into a Base Rate Acquisition Loan, and shall pay all interest
accrued thereon through the date of such prepayment or conversion, unless the
Borrowers, within three Business Days after such notice from the Administrative
Agent, request the conversion of all Eurodollar Rate Loans then outstanding
into Base Rate Loans; PROVIDED, that if the date of such repayment or proposed
conversion is not the last day of the Interest Period applicable to such
Eurodollar Rate Loan, the Borrowers shall also pay any amount due pursuant to
SECTION 5.12.
(b) If the Administrative Agent shall, at least one Business Day
before the date of any requested Loan or the effective date of any conversion
or continuation of an existing Loan to be
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made or continued as or converted into a Eurodollar Rate Loan (each such
requested Loan and Loan to be converted or continued, a "Pending Loan"), notify
the Borrowers that the Eurodollar Rate will not adequately reflect the cost to
the Lenders of making or funding such Pending Loan as a Eurodollar Rate Loan or
that the Interbank Offered Rate is not determinable from any interest rate
reporting service of recognized standing, then the right of the Borrowers to
select a Eurodollar Rate Loan for such Pending Loan, any subsequent requested
Loan or in connection with any subsequent conversion or continuation of any
Loan shall be suspended until the Administrative Agent shall notify the
Borrowers that the circumstances causing such suspension no longer exist, and
each Pending Loan and each such subsequent Loan requested to be made, continued
or converted shall be made or continued as or converted into a Base Rate Loan.
(c) If, due to either (i) the introduction of or any change
(other than any change by way of imposition or increase of reserve requirements
included in the Eurodollar Reserve Percentage) in or in the interpretation of,
in each case after the date hereof, any law or regulation (except to the extent
such introduction, change or interpretation affects taxes measured by net
income), or (ii) the compliance with any guideline or request (except to the
extent such guideline or request affects taxes measured by net income) from any
central bank or other governmental authority (whether or not having the force
of law) made after the date hereof, there shall be any increase in the cost to
any Lender of agreeing to make or making, funding or maintaining Eurodollar
Rate Loans (other than as separately provided for in SECTION 5.15(D)), then the
Borrowers shall from time to time, within 30 days after demand by such Lender
(with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender additional amounts
sufficient to compensate such Lender for such increased cost or convert the
Borrowing to which such Eurodollar Rate Loan is a part to Applicable Base Rate
Loans and pay to the Administrative Agent, for the account of such Lender, the
amount due pursuant to SECTION 5.12.
(d) If (i) the adoption of or change in, after the date hereof,
any law, rule, regulation or guideline regarding capital requirements for banks
or bank holding companies, or any change, after the date hereof, in the
interpretation or application thereof by any governmental authority charged
with the interpretation or administration thereof, or (ii) compliance by such
Lender with any guideline, request or directive, made or promulgated after the
date hereof, of any such entity regarding capital adequacy (whether or not
having the force of law), has the effect of reducing the return on a Lender's
capital as a consequence of its maintaining its Loans or commitment to make
Revolving Credit Loans hereunder to a level below that which such Lender could
have achieved but for such adoption, change or compliance (taking into
consideration such Lender's policies with respect to capital adequacy
immediately before such adoption, change or compliance and assuming the full
utilization of such Lender's capital immediately before such adoption, change
or compliance) or if any change in law, regulation, treaty or official
directive or the interpretation or application thereof by any court or by any
governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law) subjects a
Lender to any tax with respect to
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payments of principal or interest or any other amounts payable hereunder by the
Borrowers or otherwise with respect to the transactions contemplated hereby
(except for taxes on the overall net income of such Lender imposed by the
United States of America or any political subdivision thereof), in each case by
any amount deemed by such Lender to be material, then such Lender shall
promptly after its determination of such occurrence notify the Borrowers and
the Administrative Agent thereof. The Borrowers agree to pay to the
Administrative Agent, for the account of such Lender, as an additional fee from
time to time, within 30 days after demand by such Lender, such amount as such
Lender certifies to be the amount that will compensate it for such reduction.
(e) Before giving any notice pursuant to SECTION 5.15(A) or
making any demand pursuant to SECTION 5.15(C) or (D), each Lender agrees to use
its best efforts (consistent with its internal policy and legal and regulatory
restrictions) to designate a different lending office if the making of such a
designation would avoid the need for such notice or demand, or reduce the
amount of such increased cost or reduction in return and would not, in the
reasonable judgment of such Lender, be otherwise disadvantageous to such
Lender.
(f) A certificate of the Lender claiming compensation and
accompanying or constituting the "demand" as contemplated by SECTIONS 5.15(c)
and (D) shall be conclusive in the absence of manifest error. Each such
certificate shall set forth the nature of the occurrence giving rise to such
claim for compensation, the additional amount or amounts to be paid to the
Lender hereunder and the method by which such amounts were determined. In
determining such amounts, a Lender may use any reasonable averaging and
attribution methods.
(g) In no event shall a Lender claim or the Borrowers be liable
to pay any amounts pursuant to SECTION 5.15(C) or (D) attributable to periods
more than 90 days prior to the date of the first demand for such amount,
delivered in accordance with the provisions hereof.
SECTION 5.16 Cash Collateral Account; Investment Accounts.
(a) Cash Collateral Account. The Borrowers shall establish a Cash
Collateral Account in which to deposit Collateral consisting of cash or Cash
Equivalents from time to time
(i) representing payments received pursuant to SECTION
5.11 in excess of then outstanding Revolving Credit Loans or on
account of Eurodollar Rate Loans which would otherwise result in
repayment of such Loans prior to the end of the Interest Period
applicable thereto,
(ii) with respect to Letter of Credit Obligations (x) at
the request of the Administrative Agent upon the occurrence of an
Event of Default, or (y) for the purposes set forth in SECTION 5.8 in
the event of termination of this Agreement, or
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(iii) for any other purpose appropriate under this
Agreement to provide security for the Secured Obligations.
On the last day of the applicable Interest Period as to any amounts deposited
to the Cash Collateral Account pursuant to CLAUSE (I) above or if a drawing
under a Letter of Credit occurs with respect to any amounts deposited to the
Cash Collateral Account pursuant to CLAUSE (II) above, the Borrowers hereby
authorize the Administrative Agent to use the monies deposited in the Cash
Collateral Account to make payment to the payee(s) with respect to such Loan or
drawing. The Cash Collateral Account shall be in the name of the Administrative
Agent and the Administrative Agent shall have sole dominion and control over,
and sole access to, the Cash Collateral Account. Neither the Borrowers nor any
Person claiming on behalf of or through the Borrowers shall have any right to
withdraw any of the funds held in the Cash Collateral Account. The Borrowers
agree that they will not at any time (x) sell or otherwise dispose of any
interest in the Cash Collateral Account or any funds held therein or (y) create
or permit to exist any Lien upon or with respect to the Cash Collateral Account
or any funds held therein, except as provided in or contemplated by this
Agreement. The Administrative Agent shall exercise reasonable care in the
custody and preservation of any funds held in the Cash Collateral Account and
shall be deemed to have exercised such care if such funds are accorded
treatment substantially equivalent to that which the Administrative Agent
accords other funds deposited with the Administrative Agent, it being
understood that the Administrative Agent shall not have any responsibility for
taking any necessary steps to preserve rights against any parties with respect
to any funds held in the Cash Collateral Account. Subject to the right of the
Administrative Agent to withdraw funds from the Cash Collateral Account as
provided herein, the Administrative Agent will, so long as no Event of Default
shall have occurred and be continuing, from time to time invest funds on
deposit in the Cash Collateral Account, reinvest proceeds of any such
investments which may mature or be sold, and invest interest or other income
received from any such investments, in each case, in Cash Equivalents, as the
Borrowers may direct prior to the occurrence of an Event of Default and as the
Administrative Agent may select after the occurrence and during the continuance
of any Event of Default. Such proceeds, interest and income which are not so
invested or reinvested in Cash Equivalents shall be deposited and held by the
Administrative Agent in the Cash Collateral Account. The Administrative Agent
makes no representation or warranty as to, and shall not be responsible for,
the rate of return, if any, earned on any Cash Collateral. Any earnings on Cash
Collateral shall be held as additional Cash Collateral on the terms set forth
in this SECTION 5.16.
(b) Investment Accounts. The Borrowers may from time to time
establish one or more Investment Accounts with the Administrative Agent, any
Lender or any Affiliate of a Lender, for the purpose of investing solely in
cash or Cash Equivalents any Cash Collateral representing payments received
pursuant to SECTION 5.11 in excess of then outstanding Revolving Credit Loans
or on account of Eurodollar Rate Loans which would otherwise result in
repayment of such Loans prior to the end of the Interest Period applicable
thereto. The Borrowers hereby acknowledge and agree that each such Investment
Account shall constitute Collateral hereunder and shall be maintained with the
Administrative Agent, a Lender or an Affiliate of a Lender as
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security for the Secured Obligations. Notwithstanding the foregoing, until such
time as the Administrative Agent shall otherwise instruct the Lender or
Affiliate of a Lender maintaining such account, the Borrowers shall be entitled
to direct the investment of the funds deposited therein. The Borrowers agree
that they will not at any time (x) sell or otherwise dispose of any interest in
any Investment Account or any funds held therein other than by application
thereof to any Secured Obligation, or (y) create or permit to exist any Lien
upon or with respect to any Investment Account or any funds held therein,
except as provided in or contemplated by this Agreement. The Borrowers agree
that at any time, and from time to time, at the expense of the Borrowers, the
Borrowers will promptly execute and deliver all further instruments and
documents, and take all further action, that may be necessary or desirable, or
that the Administrative Agent or any Lender may request, in order to perfect
and protect any security interest in any Investment Account granted or
purported to be granted hereby or to enable the Administrative Agent, for its
benefit and the benefit of the Lenders, to exercise and enforce its rights and
remedies hereunder with respect to such Investment Account.
SECTION 5.17 Borrowers' Representative. Each other Borrower hereby
irrevocably appoints WinsLoew as its representative, and WinsLoew shall act
under this Agreement as the representative of each Borrower for all purposes,
including, without being limited to, requesting borrowings and receiving
account statements and other notices and communications to the Borrowers (or
any of them) from the Administrative Agent or any Lender. The Administrative
Agent and the Lenders may rely, and shall be fully protected in relying, on any
request for borrowing, disbursement instruction, report, information or any
other notice or communication made or given by WinsLoew, whether in its own
name, on behalf of any other Borrower or on behalf of "the Borrowers," and
neither the Administrative Agent nor any Lender shall have any obligation to
make any inquiry or request any confirmation from or on behalf of any other
Borrower as to the binding effect on it of any such request, instruction,
report, information, notice or communication, nor shall the joint and several
character of the Borrowers' liability for the Secured Obligations be affected.
The Administrative Agent and each Lender intend to maintain a single Loan
Account in the name of "WinsLoew Furniture, Inc." hereunder and each Borrower
expressly agrees to such arrangement and confirms that such arrangement shall
have no effect on the joint and several character of its liability for the
Secured Obligations.
SECTION 5.18 Joint and Several Liability, No Modification or
Release of Obligations.
(a) Joint and Several Liability. The Secured Obligations shall
constitute one joint and several direct and general obligation of all of the
Borrowers. Notwithstanding anything to the contrary contained herein, each of
the Borrowers shall be jointly and severally, with each other Borrower,
directly and unconditionally liable to the Administrative Agent and the Lenders
for all Secured Obligations and shall have the obligations of co-maker with
respect to the Revolving Credit Loans, the Revolving Credit Notes, the Term
Loans, the Term Notes, the Acquisition Loans, the Acquisition Notes and the
Secured Obligations, it being agreed that the advances to each Borrower inure
to the benefit of all Borrowers, and that the Administrative Agent and the
Lenders are relying on the joint and several liability of the Borrowers as
co-makers in extending
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the Loans hereunder. Each Borrower hereby unconditionally and irrevocably
agrees that upon default in the payment when due (whether at stated maturity,
by acceleration or otherwise) of any principal of, or interest on, any
Revolving Credit Loan, Term Loan, Acquisition Loan or other Secured Obligation
payable to the Administrative Agent or any Lender, it will forthwith pay the
same, without notice or demand.
(b) No Modification or Release of Obligations. No payment or
payments made by any of the Borrowers or any other Person or received or
collected by the Administrative Agent or any Lender from any of the Borrowers
or any other Person by virtue of any action or proceeding or any set-off or
appropriation or application at any time or from time to time in reduction of
or in payment of the Secured Obligations shall be deemed to modify, release or
otherwise affect the liability of each Borrower under this Agreement, which
shall remain liable for the Secured Obligations until the Secured Obligations
are paid in full and the Revolving Credit Facility is terminated.
SECTION 5.19 Obligations Absolute. Each Borrower agrees that the
Secured Obligations will be paid strictly in accordance with the terms of the
Loan Documents, regardless of any law, regulation or order now or hereafter in
effect in any jurisdiction affecting any of such terms or the rights of the
Administrative Agent or any Lender with respect thereto. All Secured
Obligations shall be conclusively presumed to have been created in reliance
hereon. The liabilities under this Agreement shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of any Loan Documents
or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payments of, or in
any other term of, all or any part of the Secured Obligations, or any other
amendment or waiver thereof or any consent to departure therefrom, including,
but not limited to, any increase in the Secured Obligations resulting from the
extension of additional credit to any Borrower or otherwise;
(c) any taking, exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty for all or any of the Secured Obligations;
(d) any change, restructuring or termination of the corporate
structure or existence of any Borrower; or
(e) any other circumstance (other than payment) which might
otherwise constitute a defense available to, or a discharge of, any Borrower or
a guarantor.
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Secured Obligations is rescinded
or must otherwise be returned by the
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Administrative Agent or any Lender upon the insolvency, bankruptcy or
reorganization of any Borrower or otherwise, all as though such payment had not
been made.
SECTION 5.20 Waiver of Suretyship Defenses. Each Borrower agrees that
the joint and several liability of the Borrowers provided for in SECTION 5.18
shall not be impaired or affected by any modification, supplement, extension or
amendment or any contract or agreement to which the other Borrowers may
hereafter agree (other than an agreement signed by the Administrative Agent and
the Lenders specifically releasing such liability), nor by any delay, extension
of time, renewal, compromise or other indulgence granted by the Administrative
Agent or any Lender with respect to any of the Secured Obligations, nor by any
other agreements or arrangements whatever with the other Borrowers or with
anyone else, each Borrower hereby waiving all notice of such delay, extension,
release, substitution, renewal, compromise or other indulgence, and hereby
consenting to be bound thereby as fully and effectually as if it had expressly
agreed thereto in advance. The liability of each Borrower is direct and
unconditional as to all of the Secured Obligations, and may be enforced without
requiring the Administrative Agent or any Lender first to resort to any other
right, remedy or security. Each Borrower hereby expressly waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Secured Obligations, the Revolving Credit Notes, the Term Notes, the
Acquisition Notes, this Agreement or any other Loan Document (other than as
expressly required in this Agreement or by any of the Loan Documents) and any
requirement that the Administrative Agent or any Lender protect, secure,
perfect or insure any Lien or any property subject thereto or exhaust any right
or take any action against any Borrower or any other Person or any collateral,
including any rights any Borrower may otherwise have under O.C.G.A. ss.
10-7-24.
SECTION 5.21 Defaulting Lender's Status. Notwithstanding anything
contained herein to the contrary, but in addition to provisions regarding the
failure of a Lender to perform its obligations hereunder set forth elsewhere in
this Agreement, so long as any Lender shall be in default of its obligation to
fund its Proportionate Share of any Borrowing or shall have rejected its
Commitment or shall have failed to perform its reimbursement obligations in
favor of the Administrative Agent as set forth in ARTICLE 5 hereof, then such
Lender shall not be entitled to receive any payments of principal of, or
interest on, the Loans or its share of any Commitment, Letter of Credit or
other fees payable hereunder, and for purposes of voting or consenting to
matters with respect to the Loan Documents, such Lender shall be deemed not to
be a "Lender" hereunder and such Lender's Commitment shall be deemed to be zero
($0), unless and until the earlier to occur of (a) all other Secured
Obligations have been paid in full, (b) such failure to fulfill its obligation
to fund is cured and such Lender shall have paid, as and to the extent provided
in this Agreement, to the applicable Person, such amount then owing together
with interest on the amount that such Lender failed to timely fund or (c) the
Secured Obligations under this Agreement shall have been declared or shall have
become immediately due and payable and/or the Revolving Credit Facility and the
Acquisition Facility (if applicable) have been terminated. No Commitment of any
Lender shall be increased or otherwise affected by any such failure or
rejection by any other Lender. Unless such defaulting Lender cures any such
default prior to the
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making of any payment by the Borrowers of any principal or interest hereunder,
any such payment which would, but for this subsection, be paid to such
defaulting Lender, shall (to the fullest extent permitted by Applicable Law) be
paid to the Lenders who shall not be in default under their respective
Commitments and who shall not have rejected any Commitment, for application to
the Loans or to provide cash collateral in such manner and order as shall be
determined by the Administrative Agent; PROVIDED, HOWEVER, that the
Administrative Agent may, but shall not be obligated to, effect a cure of the
defaulting Lender's failure to pay money by retaining payments that would
otherwise be made to such defaulting Lender hereunder and applying such
payments to such defaulting Lender's obligations hereunder, at such time, and
in such order as the Administrative Agent may elect in its sole discretion.
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ARTICLE 6
CONDITIONS PRECEDENT
SECTION 6.1 Conditions Precedent to Initial Loans. Notwithstanding any
other provision of this Agreement, the respective obligations of the Lenders to
make the Initial Loans are subject to the conditions precedent that (a) no
action, proceeding, investigation, regulation or legislation, shall have been
instituted, threatened or proposed before any court, governmental agency or
legislative body to enjoin, restrain or prohibit, or to obtain substantial
damages in respect of, or which are related to or arise out of, this Agreement,
or the consummation of the transactions contemplated hereby, (b) there shall
not have occurred any event or series of events or group of circumstances which
individually or in the aggregate, in the sole judgment of the Administrative
Agent or the Arranger, would have a Materially Adverse Effect (with reference
to the financial statements referred to in SECTION 7.1(N)), and (c) the
Administrative Agent shall have received on or before the Effective Date the
following, each dated as of such day, in form and substance reasonably
satisfactory to the Administrative Agent, its special counsel and the Arranger
and (except for the Notes) and, at the Administrative Agent's request, in
sufficient copies for each Lender:
(1) Agreement. This Agreement, duly executed and
delivered by the Borrower.
(2) Notes. The Notes, each dated the Effective Date and
duly executed and delivered by the Borrowers.
(3) Articles, Bylaws and Resolutions. Certified copies
of the articles or certificate of incorporation and by-laws or other
constituent documents of each Loan Party as in effect on the Effective
Date and all action, including shareholder approval, if necessary,
taken by each Loan Party and/or their respective shareholders or other
interest holders to authorize the execution, delivery and performance
of this Agreement and the other Loan Documents to which each is a
party and the Borrowings under this Agreement and the execution,
delivery and performance of the Senior Subordinated Note Documents.
(4) Incumbency Certificates. Certificates of incumbency
and specimen signatures with respect to each of the officers of each
Loan Party who is authorized to execute and deliver this Agreement or
any other Loan Document on behalf of such Loan Party or any document,
certificate or instrument to be delivered in connection with this
Agreement or the other Loan Documents and to request Borrowings under
this Agreement.
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(5) Good Standing Certificates. A certificate evidencing
the good standing of each Loan Party in the jurisdiction of its
incorporation and in each other jurisdiction in which it is qualified
as a foreign corporation to transact business.
(6) Financing Statements. The Financing Statements duly
executed and delivered by the Loan Parties.
(7) Notice of Security Interest in Deposit Accounts.
Such notices of Security Interest in Deposit Accounts as shall be
required by the Administrative Agent duly executed by the applicable
Loan Party and the applicable depositary institution where such
accounts are held.
(8) Landlord's and Warehouseman's Waivers. Waiver and
consent agreements duly executed on behalf of each landlord of real
property on which Collateral is located and each warehouseman having
possession of Collateral.
(9) Mortgages. The Mortgages duly executed and delivered
by the applicable Borrower, in proper form for recording in each
appropriate jurisdiction.
(10) Title Insurance. One or more unconditional
commitments for the issuance of mortgagee title insurance policies
with all requirements and conditions to the issuance of the final
policy deleted or marked satisfied, issued by a title insurance
company satisfactory to the Administrative Agent, each in an amount
equal to not less than the fair market value of the Real Estate
subject to the Mortgage insured thereby, insuring that such Mortgage
creates a valid first lien on, and security title to, all Real Estate
described therein, with no survey or other exceptions which the
Administrative Agent shall not have approved in writing.
(11) Real Estate Surveys. Such materials and information
concerning the Real Estate subject to a Mortgage as the Administrative
Agent may require, including, without limitation, (i) true and
accurate surveys satisfactory to the Administrative Agent of all of
the Real Estate, certified to the Administrative Agent and showing the
location of any special flood hazard areas thereon in compliance with
FEMA requirements, (ii) certificates of occupancy covering all of the
Real Estate, and (iii) owner's affidavits or indemnities acceptable to
the title insurance company as to such matters relating to the Real
Estate as the Administrative Agent or title insurance company may
request.
(12) Environmental Reports. A copy of each report listed
on SCHEDULE 6.1(C)(12).
(13) Pledge Agreements. The WinsLoew Pledge Agreement and
the Winston Pledge Agreement duly executed and delivered by WinsLoew
and Winston, respectively, together with all certificates and stock
powers, undated and in blank, constituting Pledged
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Shares (as defined therein) required to be delivered by WinsLoew and
Winston to the Administrative Agent in connection with the execution
and delivery of such agreements.
(14) Trademark Agreement. A Trademark Security Agreement
duly executed and delivered by each of Loewenstein, Pompeii, Winston
and Tropic Craft.
(15) Patent Agreement. A Patent Security Agreement duly
executed and delivered by each of Loewenstein, Pompeii and Winston.
(16) Schedule of Inventory/Receivables. A Schedule of
Inventory and a Schedule of Receivables, each prepared as of August
20, 1999 or a later date.
(17) Evidence of Insurance. Certificates or binders of
insurance relating to (i) each of the policies of insurance covering
any of the Collateral together with loss payable clauses which comply
with the terms of SECTION 9.7(B) and SECTION 10.5, (ii) each of the
policies of insurance required by the Mortgages, as modified by the
modifications, together with mortgagee clauses satisfactory to the
Administrative Agent and (iii) flood insurance with respect to any
improvements to Real Estate located in designated special flood hazard
areas.
(18) Borrowing Base Certificate. A Borrowing Base
Certificate prepared as of August 20, 1999 or a later date duly
executed and delivered by the Financial Officer.
(19) Initial Notice of Borrowing. An Initial Notice of
Borrowing from the Borrowers' Representative to the Administrative
Agent requesting the Initial Loans and specifying the method of
disbursement.
(20) Financial Statements. Copies of all the financial
statements referred to in SECTION 7.1(N) and meeting the requirements
thereof.
(21) Officer's Certificate. A certificate of the
Financial Officer, stating that, to the best of his knowledge and
based on an examination sufficient to enable him to make an informed
statement, (a) all of the representations and warranties made or
deemed to be made under this Agreement are true and correct as of the
Effective Date, both with and without giving effect to the Loans to be
made at such time and the application of the proceeds thereof, and (b)
no Default or Event of Default exists.
(22) Release of Liens. Evidence satisfactory to the
Administrative Agent of the release and termination of (or agreement
to release and terminate) all Liens other than Permitted Liens.
(23) Legal Opinion. A signed opinion of Greenberg
Traurig, P.A. counsel for the Borrowers, and such local counsel as the
Administrative Agent shall deem necessary
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or desirable, opining as to such matters in connection with this
Agreement as any Lender or its counsel may reasonably request.
(24) Other Loan Documents. Copies of each of the other
Loan Documents duly executed by the parties thereto with evidence
satisfactory to the Administrative Agent and its counsel of the due
authorization, binding effect and enforceability of each such Loan
Document on each such party and such other documents and instruments
as the Administrative Agent may reasonably request.
(25) Solvency. The Borrowers shall have delivered to the
Administrative Agent a certificate executed by the Financial Officer,
in form and substance satisfactory to the Administrative Agent,
certifying that after giving effect to the Indebtedness represented by
the Loans outstanding and to be incurred, the transactions
contemplated by this Agreement, the WinsLoew Merger Agreement and the
WinsLoew Merger Documents, and the Senior Subordinated Note Documents,
each Borrower and each of its Subsidiaries is solvent, having assets
of a fair salable value which exceeds the amount required to pay its
debts as they become absolute and matured (including contingent,
subordinated, unmatured and unliquidated liabilities), and such
Borrower and each of its Subsidiaries is able to and anticipates that
it will be able to meet its debts as they mature and has adequate
capital to conduct the business in which it is or proposes to be
engaged.
(26) Funded Debt to EBITDA. On or before the Effective
Date, the Administrative Agent shall have received evidence
satisfactory to it that the ratio of (i) Funded Debt of WinsLoew and
its Consolidated Subsidiaries (determined on a consolidated pro forma
basis giving effect to the transactions contemplated hereby to be
consummated on the Effective Date and adjusted to reflect the average
working capital of WinsLoew and its Consolidated Subsidiaries) to (ii)
pro forma EBITDA of WinsLoew and its Consolidated Subsidiaries
(determined on a consolidated basis) for the twelve month period ended
June 25, 1999, does not exceed 5.5 to 1.
(27) Capitalization. After giving effect to the
transactions contemplated by the WinsLoew Merger Documents, the Senior
Subordinated Note Documents and this Agreement, (i) the Borrowers
shall have received the funds and applied the funds as set forth in
SCHEDULE 6.1(C)(27) hereto, and (ii) except as expressly contemplated
by this Agreement, no Restricted Payments or Restricted Distributions
shall have been made or committed to be made as of the Effective Date
and the Administrative Agent shall have received a certificate from
the Financial Officer to such effect.
(28) Fees. The Borrowers shall have paid all of the fees
payable on the Effective Date provided for or referred to herein.
(29) Security Interests. The Administrative Agent shall
have received satisfactory evidence that the Administrative Agent (for
the benefit of Lenders) has a valid
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and perfected first priority security interest as of such date in all
of the Collateral, subject only to Permitted Liens.
(30) WinsLoew Merger. On the Effective Date, (i) the
Administrative Agent shall have received true and complete executed or
conformed copies of the WinsLoew Merger Documents and any amendments
thereto; (ii) the WinsLoew Merger Documents shall be in full force and
effect and no material term or condition thereof shall have been
amended, modified or waived after the execution thereof (other than
solely to extend the date by which the WinsLoew Merger is required to
occur) except with the prior written consent of the Administrative
Agent; (iii) none of the parties to any of the WinsLoew Merger
Documents shall have failed to perform any material obligation or
covenant required by such WinsLoew Merger Document to be performed or
complied with by it on or before the Effective Date; (iv) all
representations and warranties of the parties thereto contained in the
WinsLoew Merger Agreement and the other WinsLoew Merger Documents
shall be true and correct in all material respects with the same
effect as though made on and as of the Effective Date; (v) all
requisite approvals by governmental authorities and regulatory bodies
having jurisdiction over the parties to the WinsLoew Merger Agreement
in respect of the WinsLoew Merger shall have been obtained and be in
full force and effect (other than any such approvals failure to obtain
which could not reasonably be expected, in the Administrative Agent's
sole judgment, to have a Materially Adverse Effect), and no such
approvals shall impose any conditions to the consummation of the
WinsLoew Merger; (vi) the WinsLoew Merger Contribution shall have been
made (but for up to $500,000 to be contributed within 10 days after
the Effective Date) and the WinsLoew Merger shall have been
consummated in accordance with the terms and provisions of the
WinsLoew Merger Agreement and the other WinsLoew Merger Documents,
without any amendment or waiver of any material provision thereof; and
(vii) the Administrative Agent shall have received a certificate from
the Financial Officer or other evidence satisfactory to it that each
of the conditions set forth in CLAUSES (I) through (VI) above have
been satisfied. In addition, all opinion letters delivered in
connection with the WinsLoew Merger Documents and the transactions
contemplated thereby shall be addressed to the Administrative Agent,
for the benefit of the Lenders, or accompanied by a written
authorization from the firm delivering such opinion letter stating
that the Administrative Agent, for the benefit of the Lenders, may
rely on such opinion letter as though it were addressed to it.
(31) Senior Subordinated Note Transaction. On the
Effective Date, the Administrative Agent shall have received a fully
executed copy of each of the Senior Subordinated Note Documents
certified by the Financial Officer as being in the same form as the
final drafts thereof furnished to the Administrative Agent prior to
the Effective Date and approved by it. The Administrative Agent shall
also have received evidence satisfactory to it that the transactions
contemplated by the Senior Subordinated Note Documents to be
consummated on or prior to the Effective Date have been consummated
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in accordance with the terms thereof without any waiver of any
condition precedent to any party's obligations thereunder or waiver of
any material provisions thereof other than such waivers to which the
Administrative Agent has consented.
SECTION 6.2 Additional Conditions to Acquisition Loans. The
obligations of the Lenders to honor the Borrowers' request for any Acquisition
Loan after the Effective Date and on or prior to the Acquisition Facility
Termination Date is subject to Administrative Agent's receipt, at least two
Business Days prior to the date such Acquisition Loan is requested to be made,
of a Notice of Borrowing substantially in the form of EXHIBIT E-3, properly
completed, and to the satisfaction (or waiver by the Administrative Agent and
the Required Lenders) of the following conditions with respect to each
Acquisition Loan:
(a) at least 14 days prior to the closing date for a proposed
Acquisition, the Borrowers shall provide to the Administrative Agent and the
Lenders notice of such proposed Acquisition together with an information
package containing the following documents and confirmation that the other
conditions set forth in this SECTION 6.2 have been or will on the closing date
for such proposed Acquisition be satisfied:
(i) the purchase agreement and all other material
documents and agreements relating to such proposed Acquisition in
substantially final form,
(ii) all such information as may be necessary to enable
the Administrative Agent, for the benefit of the Lenders, to obtain a
first priority, perfected security interest (subject only to Permitted
Liens) in all of the assets to be acquired from or owned by the
Acquisition Target immediately upon consummation of the proposed
Acquisition, and
(iii) copies of lien search results for each jurisdiction
in which the Acquisition Target is located, in which the chief
executive office of the Acquisition Target is located, or in which the
Acquisition Target has assets;
(b) the purchase price for the Acquisition Target (including
without limitation all Indebtedness assumed by any Borrower and all obligations
associated with consulting and non-compete agreements entered into by any
Borrower), after taking into account reasonably anticipated purchase price
adjustments, is less than or equal to $25,000,000;
(c) the proposed Acquisition is an arm's length transaction
whereby a Borrower will (i) own directly or indirectly all of the equity
interest in such Acquisition Target and will control a majority of any voting
securities, or will otherwise control the governance of such Acquisition Target
or (ii) acquire a Business Unit;
(d) at the time of the proposed Acquisition, the Acquisition
Target shall be in the business of designing, manufacturing or distributing
furniture and a majority of the board of
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directors or managers or owners of a majority of the equity interests in the
Acquisition Target shall have approved the transaction;
(e) at least 14 days prior to the consummation of the proposed
Acquisition, the Borrowers shall have demonstrated, in a manner satisfactory to
the Administrative Agent in its reasonable judgment, (i) positive trailing
four-quarter pro forma net income before provision for income taxes, interest
expense, depreciation, or amortization of the Acquisition Target ("Target
EBITDA") and (ii) compliance by WinsLoew and its Consolidated Subsidiaries with
the terms and provisions of this Agreement on a pro forma basis after giving
effect to the proposed Acquisition as if it had been consummated on the first
day of the four-Fiscal Quarter period then most recently ended, PROVIDED that
any pro forma adjustments to historical Target EBITDA shall be acceptable to
the Administrative Agent in its reasonable credit judgment, EXCEPT that
contractual and adequately documented reductions in former owners' compensation
or rental expense of the Acquisition Target, which will be effective as of the
closing date of the proposed Acquisition, shall be acceptable;
(f) at least 14 days prior to the consummation of such
Acquisition, the Administrative Agent shall have received such appraisals of
assets to be acquired as the Administrative Agent in the exercise of its
reasonable credit judgment deems material and environmental site assessments,
in form and substance satisfactory to the Administrative Agent and the Lenders,
with respect to any real property is owned by the Acquisition Target or
operated by the Acquisition Target as a manufacturing facility;
(g) no Debt shall be incurred or assumed by any Borrower or the
Acquisition Target in connection with or as a result of such proposed
Acquisition unless such Debt is unsecured, the interest rate thereon does not
exceed the interest rate on the Senior Subordinated Notes, any agreements
governing such Debt contain no financial covenants, the first scheduled
principal repayment thereunder (under all circumstances) is later than June 30,
2006 (or any later date to which the Termination Date may have been extended),
and repayment thereof is subordinated, at least to the same extent as the
Senior Subordinated Notes, to the prior repayment in full in cash of the
Secured Obligations;
(h) the conditions set forth in SECTIONS 6.1(A) and (B), and
SECTIONS 6.1(C)(2), (3), (4), (5), and (6) as to Acquisition Target and the
applicable Borrower(s), and such other conditions set forth in SECTION 6.1(c)
as the Administrative Agent may determine are applicable, shall have been
satisfied on and as of the closing date of the proposed Acquisition and the
Administrative Agent shall have received such additional instruments,
certificates and other documents, including opinions of counsel, as may be
usual or customary in connection with similar acquisitions and as the
Administrative Agent may reasonably request;
(i) in the case of an Acquisition of stock or other equity
interests, the Acquisition Target shall be merged with and into a Borrower or
the Acquisition Target shall have executed and delivered the Subsidiaries
Guaranty (or an effective joinder agreement with respect thereto)
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and a Guarantor Security Agreement unless the Borrowers and the Administrative
Agent have agreed that the Acquisition Target is to become an additional
Borrower, in which case the Acquisition Target and the other Borrowers shall
have duly executed and delivered such acknowledgment or amendment to this
Agreement and such additions to or replacements of outstanding Notes as the
Administrative Agent may require evidencing the Acquisition Target's joint and
several liability for the Secured Obligations as a Borrower under this
Agreement;
(j) the Administrative Agent, for itself and on behalf of the
Lenders, shall have a first priority Lien (subject only to Permitted Liens) on
the assets of the Acquisition Target or otherwise acquired in connection with
such Acquisition (other than any such Lien as to which the Administrative Agent
determines in writing that the benefit thereof is not sufficient to justify the
cost of obtaining and perfecting such Lien); and
(k) at the time of and after giving effect to the proposed
Acquisition, no Default or Event of Default shall exist.
SECTION 6.3 All Loans and Letters of Credit. At the time of making of
each Loan, including the Initial Loans and all subsequent Loans, and the
issuance of each Letter of Credit:
(a) all of the representations and warranties made or deemed to
be made under this Agreement shall be true and correct in all material respects
at such time both with and without giving effect to the Loans to be made at
such time and the application of the proceeds thereof (except to the extent any
such representation or warranty is made exclusively with reference to an
earlier date), and
(b) the corporate actions of the Borrowers referred to in SECTION
6.1(C)(3) shall remain in full force and effect and the incumbency of officers
shall be as stated in the certificates of incumbency delivered pursuant to
SECTION 6.1(C)(4) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Administrative Agent.
Each request or deemed request for any Borrowing hereunder shall be deemed to
be a certification by the Borrowers to the Administrative Agent and the Lenders
as to the matters set forth in SECTION 6.3(A) and (B) and the Administrative
Agent may, without waiving either condition, consider the conditions specified
in SECTIONS 6.3(A) and (B) fulfilled and a representation by the Borrowers to
such effect made, if no written notice to the contrary is received by the
Administrative Agent prior to the making of the Loan then to be made.
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ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF BORROWER
SECTION 7.1 Representations and Warranties. Each Borrower represents
and warrants to the Administrative Agent and to the Lenders as follows:
(a) Organization; Power; Qualification. Such Borrower and each of
its Subsidiaries is a corporation, duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation, having the power
and authority to own its properties and to carry on its business as now being
and hereafter proposed to be conducted and is duly qualified and authorized to
do business in each jurisdiction in which the character of its properties or
the nature of its business requires such qualification or authorization except
to the extent its failure to be so qualified could not reasonably be expected
to have a Materially Adverse Effect. The jurisdictions in which each Borrower
and each of its Subsidiaries is qualified to do business as a foreign
corporation are listed on SCHEDULE 7.1(A).
(b) Capitalization; Shareholder Agreements. The outstanding
capital stock of such Borrower has been duly and validly issued and is fully
paid and nonassessable, and the number and owners of such shares of capital
stock of such Borrower are set forth on SCHEDULE 7.1(B). The issuance and sale
of such Borrower's capital stock have been registered or qualified under
applicable federal and state securities laws or are exempt therefrom. Except as
set forth on SCHEDULE 7.1(B), there are no shareholders agreements, options,
subscription agreements or other agreements or understandings to which such
Borrower is a party in effect with respect to the capital stock of such
Borrower, including, without limitation, agreements providing for special
voting requirements or arrangements for approval of corporate actions or other
matters relating to corporate governance or restrictions on share transfer or
providing for the issuance of any securities convertible into shares of the
capital stock of such Borrower, any warrants or other rights to acquire any
shares or securities convertible into such shares, or any agreement that
obligates such Borrower, either by its terms or at the election of any other
Person, to repurchase such shares under any circumstances.
(c) Subsidiaries. SCHEDULE 7.1(C) correctly sets forth the name
of each Subsidiary of such Borrower, its jurisdiction of incorporation, the
name of its immediate parent or parents, and the percentage of its issued and
outstanding securities owned by such Borrower or any other Subsidiary of such
Borrower and indicating whether such Subsidiary is a Consolidated Subsidiary.
Except as set forth on SCHEDULE 7.1(C),
(i) no Subsidiary of such Borrower has issued any
securities convertible into shares of such Subsidiary's capital stock
or any options, warrants or other rights to acquire any shares or
securities convertible into such shares,
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(ii) the outstanding stock and securities of each
Subsidiary of such Borrower are owned by such Borrower or a Wholly
Owned Subsidiary of such Borrower, or by such Borrower and one or more
of its Wholly Owned Subsidiaries, free and clear of all Liens,
warrants, options and rights of others of any kind whatsoever, and
(iii) such Borrower has no Subsidiaries.
The outstanding capital stock of each Subsidiary of such Borrower has been duly
and validly issued and is fully paid and nonassessable by the issuer, and the
number and owners of the shares of such capital stock are set forth on SCHEDULE
7.1(C).
(d) Authorization of Agreement, Notes, Loan Documents and
Borrowing. Such Borrower has the right and power, and has taken all necessary
action to authorize it, to execute, deliver and perform this Agreement and each
of the Loan Documents, to which it is a party, in accordance with their
respective terms. This Agreement and each of the Loan Documents, to which it is
a party, have been duly executed and delivered by the duly authorized officers
of such Borrower and each is, or each when executed and delivered in accordance
with this Agreement will be, a legal, valid and binding obligation of such
Borrower, enforceable in accordance with its terms.
(e) Compliance of Agreement, Notes, Loan Documents and Borrowing
with Laws, Etc. Except as set forth on SCHEDULE 7.1(E), the execution, delivery
and performance of this Agreement and each of the Loan Documents in accordance
with their respective terms and the borrowings hereunder do not and will not,
by the passage of time, the giving of notice or otherwise,
(i) require any Governmental Approval or violate any
Applicable Law relating to such Borrower or any of its Subsidiaries,
(ii) conflict with, result in a breach of or constitute a
default under the articles or certificate of incorporation, articles
of organization, by-laws, operating agreement or any shareholders'
agreement or other constituent documents of such Borrower or any of
its Subsidiaries,
(iii) conflict with, result in a breach of or constitute a
default under any material provisions of any indenture, agreement or
other instrument to which such Borrower or any of its Subsidiaries is
a party or by which such Borrower, any of its Subsidiaries or any of
such Borrower's or such Subsidiaries' property may be bound or any
material Governmental Approval relating to such Borrower or any of its
Subsidiaries, or
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(iv) result in or require the creation or imposition of
any Lien upon or with respect to any property now owned or hereafter
acquired by such Borrower other than the Security Interest.
(f) Business. The Borrowers are engaged principally in the
business of designing, manufacturing and distributing furniture.
(g) Compliance with Law; Governmental Approvals.
(i) Except as set forth in SCHEDULE 7.1(G), such
Borrower and each of its Subsidiaries
(A) has all Governmental Approvals, including
permits relating to federal, state and local Environmental
Laws, ordinances and regulations, required by any Applicable
Law for it to conduct its business, each of which is in full
force and effect, is final and not subject to review on
appeal and is not the subject of any pending or, to the
knowledge of such Borrower, threatened attack by direct or
collateral proceeding, and
(B) is in compliance with each Governmental
Approval applicable to it and in compliance with all other
Applicable Laws relating to it, including, without being
limited to, all Environmental Laws and all occupational
health and safety laws applicable to such Borrower, any of
its Subsidiaries or their respective properties,
except for instances of noncompliance which would not, singly or in
the aggregate, cause a Default or Event of Default or have a
Materially Adverse Effect and in respect of which reserves in respect
of such Borrower's or such Subsidiary's reasonably anticipated
liability have been established on the books of such Borrower or such
Subsidiary, as applicable.
(ii) Without limiting the generality of the above, except
as disclosed on a report delivered pursuant to SECTION 6.1(C)(12) or
with respect to matters which could not reasonably be expected to
have, singly or in the aggregate, a Materially Adverse Effect:
(A) the operations of such Borrower and each of
its Subsidiaries comply in all material respects with all
applicable environmental, health and safety requirements of
Applicable Law;
(B) such Borrower and each of its Subsidiaries
has obtained all environmental, health and safety permits
necessary for its operation, and all such permits are in good
standing and such Borrower and each of its Subsidiaries is in
compliance in all material respects with all terms and
conditions of such permits;
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(C) neither such Borrower nor any of its
Subsidiaries nor any of their respective present or past
property or operations are subject to any order from or
agreement with any public authority or private party
respecting (x) any environmental, health or safety
requirements of Applicable Law, (y) any Remedial Action, or
(z) any liabilities and costs arising from the Release or
threatened Release of a Contaminant into the environment;
(D) none of the operations of such Borrower or
of any of its Subsidiaries is subject to any judicial or
administrative proceeding alleging a violation of any
environmental, health or safety requirement of Applicable
Law;
(E) none of the present or past operations of
such Borrower or any of its Subsidiaries is the subject of
any investigation by any public authority evaluating whether
any Remedial Action is needed to respond to a Release or
threatened Release of a Contaminant into the environment;
(F) neither such Borrower nor any of its
Subsidiaries has filed any notice under any requirement of
Applicable Law indicating past or present treatment, storage
or disposal of a hazardous waste, as that term is defined
under 40 CFR Part 261 or any state equivalent;
(G) neither such Borrower nor any of its
Subsidiaries has filed any notice under any requirement of
Applicable Law reporting a Release of a Contaminant into the
environment;
(H) except in compliance in all material
respects with applicable Environmental Laws, during the
course of such Borrower's or any of its Subsidiaries'
ownership of or operations on the Real Estate, there has been
no (1) generation, treatment, recycling, storage or disposal
of hazardous waste, as that term is defined under 40 CFR Part
261 or any state equivalent, (2) use of underground storage
tanks or surface impoundments, (3) use of asbestos-containing
materials, or (4) use of polychlorinated biphenyls (PCBs)
used in hydraulic oils, electrical transformers or other
equipment;
(I) neither such Borrower nor any of its
Subsidiaries has entered into any negotiations or agreements
with any Person (including, without limitation, any prior
owner of any of the Real Estate or other property of such
Borrower or any of its Subsidiaries) relating to any Remedial
Action or environment-related claim;
(J) neither such Borrower nor any of its
Subsidiaries has received any notice or claim to the effect
that it is or may be liable to any Person as a result of the
Release or threatened Release of a Contaminant into the
environment;
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(K) neither such Borrower nor any of its
Subsidiaries has any material contingent liability in
connection with any Release or threatened Release of any
Contaminant into the environment;
(L) no Environmental Lien has attached to any
of the Real Estate or other property of such Borrower or of
any of its Subsidiaries;
(M) the presence and condition of all
asbestos-containing material which is on or part of the Real
Estate (excluding any raw materials used in the manufacture
of products or products themselves) do not violate in any
material respect any currently applicable requirement of
Applicable Law; and
(N) neither such Borrower nor any of its
Subsidiaries manufactures, distributes or sells, and has
never manufactured, distributed or sold, products which
contain asbestos-containing material.
(iii) Such Borrower has notified the Lenders and the
Administrative Agent of the receipt by such Borrower or by any of its
Subsidiaries of any written notice of a material violation of any
Environmental Laws and occupational health and safety laws applicable
to such Borrower, any of its Subsidiaries or any of their respective
properties.
(h) Title to Properties. Except as set forth in SCHEDULE 7.1(H),
such Borrower and each of its Subsidiaries has valid and legal title to or
leasehold interest in all material personal property, Real Estate and other
assets used in its business, including, but not limited to, those reflected on
the most recent balance sheet of such Borrower delivered pursuant to SECTION
7.1(N).
(i) Liens. Except as set forth in SCHEDULE 7.1(I), none of the
properties and assets of such Borrower or any Subsidiary of such Borrower is
subject to any Lien, except Permitted Liens. Other than the Financing
Statements, to the best knowledge of such Borrower (after due investigation) no
financing statement under the Uniform Commercial Code of any State or other
instrument evidencing a Lien which names such Borrower or any Subsidiary of
such Borrower as debtor has been filed (and has not been terminated or will not
be terminated as a result of the transactions to occur on the Effective Date)
in any state or other jurisdiction, and neither such Borrower nor any
Subsidiary of such Borrower has signed any such financing statement or other
instrument or any security agreement authorizing any secured party thereunder
to file any such financing statement or instrument, except to perfect those
Liens listed on SCHEDULE 7.1(I).
(j) Debt and Guaranties. SCHEDULE 7.1(J) is a complete and
correct listing of all (i) Debt and (ii) Guaranties of each of such Borrower
and each of its Subsidiaries. Each of such Borrower and its Subsidiaries has
performed and is in compliance with all of the terms of such Debt and
Guaranties and all instruments and agreements relating thereto, and no default
or event
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of default, or event or condition which with notice or lapse of time, or both,
would constitute such a default or event of default, exists with respect to any
such Indebtedness or Guaranty.
(k) Litigation. Except as set forth on SCHEDULE 7.1(K), there are
no actions, suits or proceedings pending (nor, to the knowledge of such
Borrower, are there any actions, suits or proceedings threatened, or any
reasonable basis therefor) against or in any other way relating to or affecting
such Borrower or such Subsidiaries or any of such Borrower's or any of its
Subsidiaries' properties in any court or before any arbitrator of any kind or
before or by any governmental body, except actions, suits or proceedings of the
character normally incident to the kind of business conducted by such Borrower
or any of its Subsidiaries which, if adversely determined, would not singly or
in the aggregate have a Materially Adverse Effect, and there are no strikes or
walkouts in progress, pending or to the Borrowers' knowledge contemplated
relating to any labor contracts to which such Borrower or any of its
Subsidiaries is a party, relating to any labor contracts being negotiated, or
otherwise.
(l) Tax Returns and Payments. Except as set forth on SCHEDULE
7.1(L), all federal, state and local as well as foreign national, provincial
and local and other tax returns of such Borrower and each of its Subsidiaries
required by Applicable Law to be filed have been duly filed, and all federal,
state and local and foreign national, provincial and local and other taxes,
assessments and other governmental charges or levies upon such Borrower and
each of its Subsidiaries and such Borrower's and any of its Subsidiaries'
property, income, profits and assets which are due and payable have been paid,
except any such nonpayment which is at the time permitted under Section 10.6.
The charges, accruals and reserves on the books of such Borrower and each of
its Subsidiaries in respect of federal, state and local and foreign national,
provincial and local taxes for all Fiscal Years and portions thereof since the
organization of such Borrower are in the judgment of such Borrower adequate,
and such Borrower knows of no reason to anticipate any additional assessments
for any of such years which, singly or in the aggregate, might have a
Materially Adverse Effect on such Borrower.
(m) Burdensome Provisions. Neither such Borrower nor any of its
Subsidiaries is a party to any indenture, agreement, lease or other instrument,
or subject to any charter or corporate restriction, Governmental Approval or
Applicable Law compliance with the terms of which could reasonably be expected
to have a Materially Adverse Effect.
(n) Financial Statements.
(i) WinsLoew has furnished to the Administrative Agent
and the Lenders copies of the audited consolidated financial
statements of WinsLoew and its Consolidated Subsidiaries as of
December 31, 1998 and of the unaudited consolidated balance sheet of
WinsLoew and its Consolidated Subsidiaries as at June 25, 1999 and the
related statements of income for the two-Fiscal Quarter period then
ended, which financial statements present fairly in all material
respects in accordance with GAAP consistently applied (except, in the
case of the interim statements, for the absence of notes and subject
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to year end audit adjustments), the financial position of the
Borrowers as at their respective dates, and the results of operations
of the Borrowers for the periods then ended.
(ii) WinsLoew has furnished to the Administrative Agent
and the Lenders copies of the Pro Forma. The Pro Forma presents
fairly, on a pro forma basis, the financial position of the Borrowers
as at the Effective Date.
(iii) WinsLoew has furnished to the Administrative Agent
and the Lenders copies of the Projections. The Projections have been
prepared by WinsLoew in light of the past operations of the business
of WinsLoew and its Consolidated Subsidiaries and represent as of the
respective dates thereof the good faith opinion of WinsLoew and its
senior management concerning the most probable course of business of
WinsLoew and its Consolidated Subsidiaries.
(iv) Except as disclosed or reflected in the financial
statements described in CLAUSES (I) and (II) above, the Borrowers do
not have any material liabilities, contingent or otherwise, and there
were no material unrealized or anticipated losses of the Borrowers.
(o) Adverse Change. Since the date of the last audited financial
statements of the Borrowers delivered to the Administrative Agent pursuant to
SECTION 7.1(N)(I), after giving effect to the transactions reflected in the Pro
Forma, no event has occurred or failed to occur which has had, or may have,
singly or in the aggregate, a Materially Adverse Effect.
(p) ERISA. Neither such Borrower nor any Related Company
maintains or contributes to any Benefit Plan other than those listed on
SCHEDULE 7.1(P). Except as set forth on SCHEDULE 7.1(P), each Benefit Plan is
in substantial compliance with ERISA and the Code, including but not limited to
those provisions thereof relating to reporting and disclosure, and neither the
Borrower nor any Related Company has received any notice asserting that a
Benefit Plan is not in compliance with ERISA. No material liability to the PBGC
or to any Multiemployer Plan has been, or is expected to be, incurred by such
Borrower or any Related Company. Except as set forth on SCHEDULE 7.1(p), each
Benefit Plan intended to qualify under Section 401(a) of the Code so qualifies
and any related trust is exempt from federal income tax under Section 501(a) of
the Code, a favorable determination letter from the IRS has been issued or
applied for with respect to each such Benefit Plan and related trust and
nothing that has occurred since the date of such determination letter that
would adversely affect such qualification or tax-exempt status. No Benefit Plan
subject to the minimum funding standards of the Code has failed to meet such
standards. Neither such Borrower nor any Related Company has transferred any
pension plan liability in a transaction that could be subject to Sections 4069
or 4212(C) of ERISA. Except as set forth on SCHEDULE 7.1(P), neither such
Borrower nor any Related Company has any liability, actual or contingent, with
respect to any Benefit Plan in accordance with its terms, and there are no
pending or threatened claims against a Benefit Plan other than claims for
benefits. No non-exempt prohibited transaction within the meaning of Section
4975 of the Code or Section 406 of
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ERISA has occurred with respect to a Benefit Plan. Except as set forth on
SCHEDULE 7.1(P), no employee or former employee of such Borrower or any Related
Company is or may become entitled to any benefit under a Benefit Plan that is a
"welfare plan" within the meaning of Section 3(1) of ERISA following such
employee's termination of employment other than continuation of group health
coverage in accordance with Section 4980B of the Code and Sections 601 through
609 of ERISA. Except as set forth on SCHEDULE 7.1(P), each such welfare plan
that is a group health plan has been operated in compliance with the provisions
of Section 4980B of the Code and Sections 601-609 of ERISA and any applicable
provisions of state law that are similar.
(q) Absence of Defaults. Neither such Borrower nor any of its
Subsidiaries is in default under its articles or certificate of incorporation
or by-laws or other constituent document and no event has occurred, which has
not been remedied, cured or waived,
(i) which constitutes a Default or an Event of Default,
or
(ii) which constitutes, or which with the passage of time
or giving of notice, or both, would constitute, a default or event of
default by such Borrower or any of its Subsidiaries under any material
agreement (other than this Agreement) or judgment, decree or order to
which such Borrower or any of its Subsidiaries is a party or by which
such Borrower, any of its Subsidiaries or any of such Borrower's or
any of its Subsidiaries' properties may be bound or which would
require such Borrower or any of its Subsidiaries to pay any Debt under
any such material agreement or judgment, decree or order prior to the
scheduled maturity date therefor, except, in the case only of any such
agreement, for alleged defaults which are being contested in good
faith by appropriate proceedings and with respect to which reserves in
respect of such Borrower's or such Subsidiary's reasonably anticipated
liability have been established on the books of such Borrower or such
Subsidiary.
(r) Accuracy and Completeness of Information.
(i) All written information, reports and other papers
and data produced by or on behalf of a Borrower and furnished to the
Administrative Agent or any Lender were, at the time the same were so
furnished, complete and correct in all material respects, to the
extent necessary to give the recipient a true and accurate knowledge
of the subject matter. No fact is known to any Borrower which has had,
or in the future reasonably could be expected to have (so far as such
Borrower can foresee), a Materially Adverse Effect, which has not been
set forth in the financial statements or disclosure delivered prior to
the Effective Date, in each case referred to in SECTION 7.1(N), or in
such written information, reports or other papers or data or otherwise
disclosed in writing to the Administrative Agent and the Lenders prior
to the Agreement Date.
(ii) No Borrower has any actual knowledge that any
document furnished or written statement made to the Administrative
Agent or any Lender by any Person other
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than a Borrower (a copy of which has been furnished to WinsLoew) in
connection with the negotiation, preparation or execution of this
Agreement or any of the Loan Documents contained any incorrect
statement of a material fact or omitted to state a material fact
necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
(s) Solvency. In each case after giving effect to the Debt
represented by the Loans outstanding and to be incurred, the transactions
contemplated by this Agreement, the Senior Note Indenture and the WinsLoew
Merger Agreement, such Borrower and each of its Subsidiaries is solvent, having
assets of a fair salable value which exceeds the amount required to pay its
debts as they become absolute and matured (including contingent, subordinated,
unmatured and unliquidated liabilities), and such Borrower and each of its
Subsidiaries is able to and anticipates that it will be able to meet its debts
as they mature and has adequate capital to conduct the business in which it is
or proposes to be engaged.
(t) Receivables.
(i) Status.
(A) Each Receivable reflected in the
computations included in any Borrowing Base Certificate meets
the criteria enumerated in CLAUSES (A) through (P) of the
definition of Eligible Receivables, except as disclosed in
such Borrowing Base Certificate or as disclosed in a timely
manner in a subsequent Borrowing Base Certificate or
otherwise in writing to the Administrative Agent.
(B) Such Borrower has no knowledge of any fact
or circumstance not disclosed to the Administrative Agent in
a Borrowing Base Certificate or otherwise in writing which
would impair the validity or collectibility of any Eligible
Receivable of $250,000 or more or of Eligible Receivables
which (regardless of the individual amount thereof) aggregate
$500,000 or more.
(ii) Chief Executive Office. The chief executive office
of such Borrower and the books and records relating to the Receivables
are located at the address or addresses set forth on SCHEDULE 7.1(T);
such Borrower has not maintained its chief executive office or books
and records relating to any Receivables at any other address at any
time during the five years immediately preceding the Agreement Date
except as disclosed on SCHEDULE 7.1(T).
(u) Inventory.
(i) Schedule of Inventory. All Inventory included in any
Schedule of Inventory or Borrowing Base Certificate delivered to the
Administrative Agent pursuant to Section 9.11 meets the criteria
enumerated in clauses (A) through (H) of the definition
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of Eligible Inventory, except as disclosed in such Schedule of
Inventory or Borrowing Base Certificate or in a subsequent Schedule of
Inventory or Borrowing Base Certificate, or as otherwise specifically
disclosed in writing to the Administrative Agent.
(ii) Condition. All Inventory is in good condition, meets
in all material respects the standards imposed by any governmental
agency, or department or division thereof, having regulatory authority
over such goods, their use or sale, and is currently either usable or
salable in the normal course of such Borrower's business, except to
the extent reserved against in the financial statements referred to in
SECTION 7.1(N) or delivered pursuant to ARTICLE 11 or as disclosed on
a Schedule of Inventory delivered to the Administrative Agent pursuant
to SECTION 9.11(B).
(iii) Location. All Inventory is located on the premises
set forth on SCHEDULE 7.1(U) or is Inventory in transit to one of such
locations, except as otherwise disclosed in writing to the
Administrative Agent and such Borrower has not, in the last year,
located such Inventory at premises other than those set forth on
SCHEDULE 7.1(U).
(v) Equipment. All Equipment is in good order and repair in all
material respects and is located on the premises set forth on SCHEDULE 7.1(V)
and has been so located at all times during the last year.
(w) Bank Accounts. SCHEDULE 7.1(W) is a complete and correct
listing of all lockbox, demand deposit and other bank accounts maintained by
such Borrower or any Subsidiary, specifying the depositary, type and number of
each such account.
(x) Intellectual Property. SCHEDULE 7.1(X) sets forth a correct
and complete list of all of the Intellectual Property. None of the Intellectual
Property is subject to any licensing agreement or similar arrangement except as
set forth on SCHEDULE 7.1(X) or as entered into in the sale or distribution of
such Borrower's Inventory in the ordinary course of business. To the best of
such Borrower's knowledge, none of the Intellectual Property infringes on or
conflicts with any other Person's property, and no other Person's property
infringes on or conflicts with the Intellectual Property. The Intellectual
Property described on SCHEDULE 7.1(X) constitute all of the property of such
type necessary to the current and anticipated future conduct of such Borrower's
business.
(y) Real Property. Such Borrower owns no Real Estate and leases
no Real Estate other than that described on SCHEDULE 7.1(Y) and other than Real
Estate acquired or leased after the Effective Date for which such Borrower has
complied with the requirements of SECTION 9.14.
(z) Corporate and Fictitious Names. Except as otherwise disclosed
on SCHEDULE 7.1(Z), during the five-year period preceding the Agreement Date,
neither such Borrower nor any
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predecessor thereof has been known as or used any corporate or fictitious name
other than the corporate name of the Borrower on the Effective Date.
(aa) Federal Reserve Regulations. Neither such Borrower nor any of
its Subsidiaries is engaged and none will engage, principally or as one of its
important activities, in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin stock" (as each of the quoted terms is
defined or used in Regulation U of the Board of Governors of the Federal
Reserve System). No part of the proceeds of any of the Loans will be used for
so purchasing or carrying margin stock or, in any event, for any purpose which
violates, or which would be inconsistent with, the provisions of Regulation T,
U or X of such Board of Governors. If requested by the Administrative Agent or
any Lender, such Borrower will furnish to the Administrative Agent and the
Lenders a statement or statements in conformity with the requirements of said
Regulation T, U or X to the foregoing effect.
(bb) Investment Company Act. Such Borrower is not an "investment
company" or a company "controlled" by an "investment company" (as each of the
quoted terms is defined or used in the Investment Company Act of 1940, as
amended).
(cc) Employee Relations. Such Borrower and each of its
Subsidiaries has an adequate work force in place and is not, except as set
forth on SCHEDULE 7.1(cc), party to any collective bargaining agreement nor has
any labor union been recognized as the representative of such Borrower's or any
of its Subsidiaries' employees, and such Borrower knows of no pending,
threatened or contemplated strikes, work stoppage or other labor disputes
involving such Borrower's or any of its Subsidiaries' employees.
(dd) Trade Names. All trade names or styles under which such
Borrower sells Inventory or Equipment or creates Receivables, or to which
instruments in payment of Receivables are made payable, are listed on SCHEDULE
7.1(DD).
(ee) Year 2000 Compliance. Such Borrower has (i) initiated a
review and assessment of all areas within such Borrower's and each of its
Subsidiaries' business and operations (including those affected by suppliers,
vendors and customers) that could be adversely affected by the Year 2000
Problem, (ii) developed a plan and timeline for addressing the Year 2000
Problem on a timely basis, and (iii) to date, implemented that plan in
accordance with that timetable. Based on the foregoing, such Borrower believes
that all of its and its Subsidiaries' material computer applications are Year
2000 Compliant, and such Borrower is not aware that any of its material
suppliers, vendors or customers is likely to be materially adversely affected
by Year 2000 Problems.
(ff) Merger Agreement. Old WinsLoew has heretofore furnished to
the Administrative Agent true, complete and correct copies of the WinsLoew
Merger Agreement (including any schedules, exhibits and annexes thereto) and
each other WinsLoew Merger Document. The WinsLoew Merger Agreement has not been
amended, supplemented or modified except as
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previously disclosed in writing to the Administrative Agent and, together with
the other WinsLoew Merger Documents copies of which have been delivered to the
Administrative Agent, constitute the complete understanding between Old
WinsLoew and TFC in respect of the Merger and the other matters and
transactions covered thereby. To such Borrower's knowledge, the WinsLoew Merger
Agreement has been duly executed and delivered by Old WinsLoew and TFC and is a
valid, legal and binding obligation of such parties. The representations and
warranties of Old WinsLoew and TFC contained in the WinsLoew Merger Agreement
are (or will be) true and correct in all material respects on the Effective
Date as if made on and as of such date, and the Administrative Agent and the
Lenders are entitled to rely on such representations and warranties with the
same force and effect as though they were incorporated in this Agreement and
made to the Administrative Agent and the Lenders directly. On and as of the
Effective Date, such Borrower knows of no reason to believe that the
representations and warranties of, and information concerning, Old WinsLoew and
TFC contained in the WinsLoew Merger Agreement are not true and correct in all
material respects.
(gg) Subordinated Indebtedness. WinsLoew has the corporate power
and authority to issue the Senior Subordinated Notes. The issuance and sale of
the Senior Subordinated Notes have been registered or qualified under
applicable federal and state securities laws or are exempt therefrom. The
Senior Subordinated Notes are the legal valid and binding obligations of
WinsLoew enforceable against WinsLoew in accordance with their terms (including
those pertaining to subordination). WinsLoew has delivered to the
Administrative Agent a complete and correct copy of all documents evidencing or
relating to the Senior Subordinated Notes including the Senior Note Documents,
and each of the representations and warranties made by WinsLoew therein is true
and correct in all material respects as of the date of such Documents. The
subordination provisions of the Senior Subordinated Notes will be enforceable
against the respective holders thereof by the holder of any Note which has not
effectively waived the benefits thereof. All of the Secured Obligations
constitute senior Debt entitled to the benefits of subordination created with
respect to the Senior Subordinated Notes.
SECTION 7.2 Survival of Representations and Warranties, Etc. All
representations and warranties set forth in this ARTICLE 7 and all statements
contained in any certificate, financial statement, or other instrument,
delivered by or on behalf of the Borrowers pursuant to or in connection with
this Agreement or any of the Loan Documents (including, but not limited to, any
such representation, warranty or statement made in or in connection with any
amendment thereto) shall constitute representations and warranties made under
this Agreement. All representations and warranties made under this Agreement
shall be made or deemed to be made at and as of the Agreement Date, at and as
of the Effective Date and at and as of the date of each Loan, except that
representations and warranties which, by their terms are applicable only to one
such date shall be deemed to be made only at and as of such date. All
representations and warranties made or deemed to be made under this Agreement
shall survive and not be waived by the execution and delivery of this
Agreement, any investigation made by or on behalf of the Lender or any
borrowing hereunder.
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ARTICLE 8
SECURITY INTEREST
SECTION 8.1 Security Interest.
(a) To secure the payment, observance and performance of the
Secured Obligations, each Borrower hereby mortgages, pledges and assigns all of
the Collateral to the Administrative Agent, for the benefit of itself as
Administrative Agent and the Lenders and Affiliates of the Lenders, and grants
to the Administrative Agent, for the benefit of itself as Administrative Agent
and the Lenders and Affiliates of the Lenders, a continuing security interest
in, and a continuing Lien upon, all of the Collateral.
(b) As additional security for all of the Secured Obligations,
each Borrower grants to the Administrative Agent, for the benefit of itself as
Administrative Agent and the Lenders and Affiliates of the Lenders, a security
interest in, and assigns to the Administrative Agent, for the benefit of itself
as Administrative Agent and the Lenders and Affiliates of the Lenders, all of
such Borrower's right, title and interest in and to, any deposits or other sums
at any time credited by or due from each Lender and each Affiliate of a Lender
to such Borrower, or credited by or due from any participant of any Lender to
the Borrower, with the same rights therein as if the deposits or other sums
were credited by or due from such Lender. Each Borrower hereby authorizes each
Lender and each Affiliate of such Lender and each participant to pay or deliver
to the Administrative Agent, for the account of the Lenders, without any
necessity on the Administrative Agent's or any Lender's part to resort to other
security or sources of reimbursement for the Secured Obligations, at any time
during the continuation of any Event of Default of the aforesaid deposits
(general or special, time or demand, provisional or final) or other sums for
application to any Secured Obligation, irrespective of whether any demand has
been made or whether such Secured Obligation is mature, and the rights given
the Administrative Agent, the Lenders, their Affiliates and participants
hereunder are cumulative with such Person's other rights and remedies,
including other rights of set-off. The Administrative Agent will promptly
notify a Borrower of its receipt of any such funds for application to the
Secured Obligations, but failure to do so will not affect the validity or
enforceability thereof. The Administrative Agent may give notice of the above
grant of a security interest in and assignment of the aforesaid deposits and
other sums, and authorization, to, and make any suitable arrangements with, any
Lender, any such Affiliate of any Lender or participant for effectuation
thereof upon the occurrence and during the continuance of an Event of Default,
and each Borrower hereby irrevocably appoints the Administrative Agent as its
attorney to collect any and all such deposits or other sums to the extent any
such payment is not made to the Administrative Agent or any Lender by such
Lender, Affiliate or participant.
SECTION 8.2 Continued Priority of Security Interest.
(a) The Security Interest granted by each Borrower shall at all
times be valid, perfected and enforceable against such Borrower and all third
parties in accordance with the terms
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of this Agreement, as security for the Secured Obligations, and the Collateral
shall not at any time be subject to any Liens that are prior to, on a parity
with or junior to the Security Interest, other than Permitted Liens.
(b) Each Borrower shall, at its sole cost and expense, take all
action that may be necessary, or that the Administrative Agent may reasonably
request, so as at all times to maintain the validity, perfection,
enforceability and rank of the Security Interest in the Collateral in
conformity with the requirements of SECTION 8.2(A), or to enable the
Administrative Agent and the Lenders to exercise or enforce their rights
hereunder (subject to Permitted Liens), including, but not limited to:
(i) paying all taxes, assessments and other claims
lawfully levied or assessed on any of the Collateral, except to the
extent that such taxes, assessments and other claims constitute
Permitted Liens,
(ii) obtaining, after the Agreement Date, landlords',
mortgagees', bailees', warehousemen's or processors' releases,
subordinations or waivers, and using all reasonable efforts to obtain
mechanics' releases, subordinations or waivers,
(iii) delivering to the Administrative Agent, for the
benefit of the Lenders, endorsed or accompanied by such instruments of
assignment as the Administrative Agent may reasonably specify, and
stamping or marking, in such manner as the Administrative Agent may
reasonably specify, any and all chattel paper, instruments, letters
and advices of guaranty and documents evidencing or forming a part of
the Collateral, and
(iv) executing and delivering financing statements,
pledges, designations, hypothecations, notices and assignments in each
case in form and substance satisfactory to the Administrative Agent in
its reasonable judgment relating to the creation, validity,
perfection, maintenance or continuation of the Security Interest under
the Uniform Commercial Code or other Applicable Law.
(c) The Administrative Agent is hereby authorized to file one or
more financing or continuation statements or amendments thereto without the
signature of or in the name of a Borrower for any purpose described in SECTION
8.2(B). The Administrative Agent will give the relevant Borrower notice of the
filing of any such statements or amendments, which notice shall specify the
locations where such statements or amendments were filed. A carbon,
photographic, xerographic or other reproduction of this Agreement or of any of
the Security Documents or of any financing statement filed in connection with
this Agreement is sufficient as a financing statement.
(d) Each Borrower shall mark its books and records as directed by
the Administrative Agent and as may be necessary or appropriate to evidence,
protect and perfect the Security Interest and shall cause its financial
statements to reflect the Security Interest.
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ARTICLE 9
COLLATERAL COVENANTS
Each Borrower covenants and agrees that such Borrower will duly and
punctually pay the principal of, and interest on, and all other amounts payable
with respect to, the Loans and all other Secured Obligations and until the
Revolving Credit Facility and Acquisition Facility have been terminated and all
the Secured Obligations have been paid in full, unless the Required Lenders
shall otherwise consent in the manner provided in SECTION 16.11:
SECTION 9.1 Verification and Notification.
(a) The Administrative Agent shall have the right at any time
when an Event of Default exists, with or without notice, (i) in the name of the
Administrative Agent, the Lenders or in the name of a Borrower, to verify the
validity, amount or any other matter relating to any Receivables by mail,
telephone, telegraph or otherwise and (ii) during customary business hours, to
review, audit and make extracts from all records and files related to any of
the Receivables.
(b) At any time when an Event of Default exists, the
Administrative Agent shall have the right, from time to time, with or without
notice, to notify the Account Debtors or other obligors under any Receivables
of the assignment of such Receivables to the Administrative Agent, for the
benefit of the Lenders, and to direct such Account Debtor or obligor to make
payment of all amounts due or to become due thereunder directly to the
Administrative Agent, and, upon such notification and at the expense of the
Borrowers, to enforce collection of any such Receivables and to adjust, settle
or compromise the amount or payment thereof, in the same manner and to the same
extent as the relevant Borrower might have done.
SECTION 9.2 Disputes, Returns and Adjustments.
(a) In the event any amounts due and owing under any Receivable
for an amount in excess of $200,000 are in dispute between the Account Debtor
and a Borrower, such Borrower shall provide the Administrative Agent with
prompt written notice thereof.
(b) Each Borrower shall notify the Administrative Agent promptly
of all returns and credits in excess of $200,000 in respect of any Receivable
(except Receivables temporarily credited in the ordinary course of business and
reissued in a corrected amount), which notice shall specify the Receivable
affected.
(c) Each Borrower may, in the ordinary course of business unless
a Default or an Event of Default has occurred and is continuing, grant any
extension of time for payment of any Receivable or compromise, compound or
settle the same for less than the full amount thereof, or release wholly or
partly any Person liable for the payment thereof, or allow any credit or
discount whatsoever therein; PROVIDED that (i) no such action results in the
reduction of more than
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$100,000 in the amount payable with respect to any Receivable or of more than
$400,000 with respect to all Receivables in any Fiscal Year (in each case,
excluding the allowance of credits or discounts generally available to Account
Debtors in the ordinary course of the relevant Borrower's business), and (ii)
the Administrative Agent is promptly notified of the amount of such adjustments
and the Receivable(s) affected thereby.
SECTION 9.3 Invoices.
(a) No Borrower will use any invoices other than invoices in the
names of the Borrowers or names used by the Borrowers and listed on SCHEDULE
7.1(DD) without giving the Administrative Agent 30 days prior notice of the
intended use of a different form of invoice together with a copy of such
different form.
(b) Upon the request of the Administrative Agent made at any time
when a Default or Event of Default exists, each Borrower shall deliver to the
Administrative Agent, at the Borrowers' expense, copies of customers' invoices
or the equivalent, original shipping and delivery receipts or other proof of
delivery, customers' statements, customer address lists, the original copy of
all documents, including, without limitation, repayment histories and present
status reports, relating to Receivables and such other documents and
information relating to the Receivables as the Administrative Agent shall
specify.
SECTION 9.4 Delivery of Instruments. In the event any Receivable is at
any time evidenced by a promissory note, trade acceptance or any other
instrument for the payment of money, the relevant Borrower will promptly upon
request of the Administrative Agent deliver such instrument to the
Administrative Agent.
SECTION 9.5 Sales of Inventory. All sales of Inventory will be made in
compliance in all material respects with all requirements of Applicable Law.
SECTION 9.6 Ownership and Defense of Title.
(a) Except for Permitted Liens, a Borrower shall at all times be
the sole owner or lessee of each and every item of Collateral and shall not
create any lien on, or sell, lease, exchange, assign, transfer, pledge,
hypothecate, grant a security interest or security title in or to or otherwise
dispose of, any of the Collateral or any interest therein, except for sales of
Inventory in the ordinary course of business, for cash or on open account or on
terms of payment ordinarily extended to its customers, sales of property that
is obsolete, worn out or no longer useful in the Borrowers' businesses, and
except for dispositions contemplated pursuant to SECTION 12.7 or that are
otherwise expressly permitted under this Agreement. The inclusion of "proceeds"
of the Collateral under the Security Interest shall not be deemed a consent by
the Administrative Agent or the Lenders to any other sale or other disposition
of any Collateral.
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(b) Each Borrower shall defend its title or leasehold interest in
and to, and the Security Interest in, the Collateral against the claims and
demands of all Persons.
SECTION 9.7 Insurance.
(a) The Borrowers shall at all times maintain insurance on the
Inventory and Equipment against loss or damage by fire, theft (excluding theft
by employees), burglary, pilferage, loss in transit and such other hazards as a
prudent Person similarly situated would maintain coverage against, in amounts
not to exceed those obtainable at commercially reasonable rates and under
policies issued by insurers acceptable to the Administrative Agent in the
exercise of its reasonable judgment. All premiums on such insurance shall be
paid by the Borrowers and copies of the policies delivered to the
Administrative Agent at its request. The Borrowers will not use or permit the
Inventory or Equipment to be used in any manner which might render inapplicable
any insurance coverage.
(b) All insurance policies required under SECTION 9.7(A) shall
name the Administrative Agent, for the benefit of the Lenders, as an additional
insured and shall contain loss payable clauses in the form submitted to the
Borrowers by the Administrative Agent, or otherwise in form and substance
satisfactory to the Administrative Agent, naming the Administrative Agent, for
the benefit of the Lenders, as loss payee, as its interests may appear, and
providing that
(i) all proceeds thereunder shall be payable to the
Administrative Agent, for the benefit of the Lenders,
(ii) no such insurance shall be affected by any act or
neglect of the insurer or owner of the property described in such
policy, and
(iii) such policy and loss payable clauses may be
cancelled, amended or terminated only upon at least 10 days' prior
written notice given to the Administrative Agent.
(c) Any proceeds of insurance referred to in this SECTION 9.7
which are paid to the Administrative Agent, for the account of the Lenders,
shall be, at the option of the Required Lenders in their sole discretion,
either (i) applied to replace the damaged or destroyed property, or (ii)
applied to the payment or prepayment of the Secured Obligations, PROVIDED that
if no Default or Event of Default exists, insurance proceeds in respect of any
loss having a value, as adjusted, not greater than $100,000 shall be released
to the applicable Borrower to be applied to the repair, restoration or
replacement of the damaged property, subject to such reasonable conditions or
controls as the Administrative Agent may specify.
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SECTION 9.8 Location of Offices and Collateral.
(a) No Borrower will change the location of its chief executive
office or the place where it keeps its books and records relating to the
Collateral or change its name, its identity or corporate structure without
giving the Administrative Agent 60 days' prior written notice thereof.
(b) All Inventory, other than Inventory in transit to any such
location, will at all times be kept by a Borrower at the locations set forth in
SCHEDULE 7.1(U), and shall not, without the prior written consent of the
Administrative Agent, be removed therefrom except pursuant to sales of
Inventory permitted under SECTION 9.7(A).
(c) If any Inventory is in the possession or control of any of a
Borrower's agents or processors, such Borrower shall notify such agents or
processors of the Security Interest (and shall promptly provide copies of any
such notice to the Administrative Agent and the Lenders) and, upon the
occurrence of an Event of Default, shall instruct them (and cause them to
acknowledge such instruction) to hold all such Inventory for the account of the
account of the Lenders, subject to the instructions of the Administrative
Agent.
(d) After the Effective Date, the Borrowers will not store or
otherwise locate any Collateral (other than Inventory) having an aggregate fair
market value of more than [$700,000] at the leased facility located at 255 N.W.
25th Street, Miami, Florida 33127, unless and until a new landlord waiver has
been executed and delivered by the lessor of such facility, in form and
substance satisfactory to the Administrative Agent.
SECTION 9.9 Records Relating to Collateral.
(a) Each Borrower will at all times
(i) keep complete and accurate records of Inventory on a
basis consistent with past practices of such Borrower so as to permit
comparison of Inventory records relating to different time periods,
itemizing and describing the kind, type and quantity of Inventory and
the Borrower's cost thereof and a current price list for such
Inventory, and
(ii) keep complete and accurate records of all other
Collateral.
(b) Each Borrower will prepare a physical listing of all
Inventory, wherever located, at least annually.
SECTION 9.10 Inspection. The Administrative Agent and each Lender (by
any of their officers, employees or agents) shall have the right, to the extent
that the exercise of such right shall be within the control of a Borrower, at
any time or times to:
(a) (i) Visit the properties of any Borrower or Subsidiary,
inspect the Collateral and the other assets of each Borrower and its
Subsidiaries and inspect and make extracts from the
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books and records of each Borrower and its Subsidiaries, and (ii) verify the
amount, quantity, value and condition of, or any other matter relating to, any
of the Collateral (other than Receivables) and in this connection to review,
audit and make extracts from all records and files related to any of the
Collateral, including but not limited to management letters prepared by
independent accountants, all during customary business hours at such premises
and after reasonable efforts to notify the Borrowers' Representative in advance
of such visit. The Lenders shall to the extent reasonably practicable
coordinate their visits and inspections with those of the Administrative Agent
so as to minimize the number of separate visits to Borrowers' premises.
(b) Discuss each Borrower's and its Subsidiaries' business,
assets, liabilities, financial condition, results of operations and business
prospects, insofar as the same are reasonably related to the rights of the
Administrative Agent or the Lenders hereunder or under any of the Loan
Documents, with each Borrower's and its Subsidiaries' principal officers and
independent accountants, and, at any time when a Default or Event of Default
exists, with any other Person (provided that the Borrowers' acknowledgment of
such right is not intended to and does not constitute a waiver or release by
the Borrowers (or any of them) of the Administrative Agent or any Lender of or
from any liability such Person may have to a Borrower arising out of improper
disclosure of confidential information).
Each Borrower will deliver to the Administrative Agent, for the benefit of the
Lenders, any instrument necessary for it to obtain records from any service
bureau maintaining records on behalf of such Borrower.
SECTION 9.11 Information and Reports.
(a) Schedule of Receivables. The Borrowers shall deliver to the
Administrative Agent on or before the Effective Date and from time to time
thereafter as requested by the Administrative Agent a Schedule of Receivables
which
(i) shall be as of the last Business Day of the
immediately preceding accounting month,
(ii) shall be reconciled to the Borrowing Base
Certificate as of such last Business Day, and
(iii) shall set forth a detailed aged trial balance of all
its then existing Receivables, specifying the names, addresses and
balance due for each Account Debtor obligated on a Receivable so
listed.
(b) Schedule of Inventory. The Borrowers shall deliver to the
Administrative Agent on or before the Effective Date and from time to time
thereafter as requested by the Administrative Agent a Schedule of Inventory as
of the last Business Day of the immediately
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preceding accounting month of the Borrowers, itemizing and describing the kind,
type and quantity of Inventory, the Borrowers' cost thereof and the location
thereof.
(c) Borrowing Base Certificate. The Borrowers shall deliver to
the Administrative Agent not later than the 15th day of each calendar month (or
at such other intervals as the Administrative Agent may reasonably specify) a
Borrowing Base Certificate prepared as of the close of the last Business Day of
the immediately preceding accounting month (or other specified date).
(d) Notice of Diminution of Value. Each Borrower shall give
prompt notice to the Administrative Agent of any matter or event which has
resulted in, or may result in, the diminution in excess of $500,000 in the
value of any of its Collateral, except for any such diminution in the value of
any Receivables or Inventory in the ordinary course of business which has been
appropriately reserved against, as reflected in financial statements previously
delivered to the Administrative Agent and the Lenders pursuant to ARTICLE 11.
(e) Additional Information. The Borrowers will also furnish to
the Administrative Agent and each Lender such other information with respect to
the Collateral as the Administrative Agent or any Lender may from time to time
reasonably request and that the Borrowers can obtain without unreasonable
expense.
SECTION 9.12 Power of Attorney. Each Borrower hereby appoints the
Administrative Agent as its attorney in fact, with the power if and when an
Event of Default exists, to endorse the name of such Borrower on any checks,
notes, acceptances, money orders, drafts or other forms of payment or security
that may come into the Administrative Agent's or any Lender's possession, and
if and when an Event of Default exists, to sign the name of such Borrower on
any invoice or bill of lading relating to any Receivable, Inventory or other
Collateral, on any drafts against customers related to letters of credit, on
schedules and assignments of Receivables furnished to the Administrative Agent
or any Lender by the Borrower, on notices of assignment, financing statements
and other public records relating to the perfection or priority of the Security
Interest, verifications of account and notices to or from customers.
SECTION 9.13 Additional Real Estate and Leases.
(a) Promptly upon a Borrower's acquisition after the Effective
Date of any fee interest or material leasehold interest in any Real Estate,
such Borrower shall deliver to the Administrative Agent, at the Administrative
Agent's request, for the benefit of itself as Administrative Agent and the
Lenders, an executed Mortgage in form and substance satisfactory to the
Administrative Agent, conveying to the Administrative Agent, for the benefit of
itself and the Lenders, a first priority Lien on such Real Estate, subject only
to such prior Liens as the Administrative Agent shall consent to in writing. If
requested by the Administrative Agent, such Borrower shall also deliver to the
Administrative Agent at the Borrowers' expense a mortgagee title insurance
policy in favor of the Administrative Agent and the Lenders insuring such
Mortgage to create and
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convey such Lien, subject only to such exceptions as are consented to by the
Administrative Agent (such consent not be unreasonably withheld) and shall
deliver to the Administrative Agent, at the Administrative Agent's request, the
other items set forth in SECTION 6.1(C) (10) through (13) with respect to such
Real Estate, all in form and substance satisfactory to the Administrative
Agent.
(b) In addition to the Borrowers' obligations pursuant to SECTION
8.2, promptly upon a Borrower's entry into any lease of Real Estate (other than
a material lease conveying an interest in Real Estate, which shall be subject
to the provisions of subsection (a) above), such Borrower shall, at the request
of the Administrative Agent, collaterally assign to the Administrative Agent,
for the benefit of itself and the Lenders, such Borrower's interest in such
lease, in form and substance satisfactory to the Administrative Agent in its
reasonable judgment.
SECTION 9.14 Assignment of Claims Act. Upon the request of the
Administrative Agent made at any time when government contracts are material to
a Borrower's business, such Borrower shall execute any documents or instruments
and shall take such steps or actions reasonably required by the Administrative
Agent so that all monies due or to become due under any contract with the
United States of America, the District of Columbia or any state, county,
municipality or other domestic or foreign governmental entity, or any
department, agency or instrumentality thereof, will be assigned to the
Administrative Agent, for the benefit of itself and the Lenders, and notice
given thereof in accordance with the requirements of the Assignment of Claims
Act of 1940, as amended, or any other laws, rules or regulations relating to
the assignment of any such contract and monies due to or to become due.
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ARTICLE 10
AFFIRMATIVE COVENANTS
Each Borrower covenants and agrees that the Borrowers will jointly and
severally, duly and punctually pay the principal of, and interest on, and all
other amounts payable with respect to, the Loans and all other Secured
Obligations in accordance with the terms of the Loan Documents and that until
the Revolving Credit Facility and the Acquisition Facility have been terminated
and all the Secured Obligations have been paid in full, unless the Required
Lenders shall otherwise consent in the manner provided for in SECTION 16.11,
each Borrower will, and will cause each of its Subsidiaries to:
SECTION 10.1 Preservation of Corporate Existence and Similar Matters.
Preserve and maintain its corporate or other legal existence, rights,
franchises, licenses and privileges in the jurisdiction of its incorporation or
organization and qualify and, except to the extent its failure to do so could
not reasonably be expected to have a Materially Adverse Effect, remain
qualified as a foreign corporation or other entity and authorized to do
business in each jurisdiction in which the character of its properties or the
nature of its business requires such qualification or authorization.
SECTION 10.2 Compliance with Applicable Law. Comply in all material
respects with Applicable Law relating to such Borrower or such Subsidiary,
except to the extent being contested in good faith by appropriate proceedings
and for which reserves in respect of such Borrower's or such Subsidiary's
reasonably anticipated liability have been appropriately established.
SECTION 10.3 Maintenance of Property. In addition to, and not in
derogation of, the requirements of Section 9.6 and of the Security Documents,
(a) protect and preserve all properties material to its business,
including Copyrights, Patents, and Trademarks, and maintain in good repair,
working order and condition in all material respects, with reasonable allowance
for wear and tear, all tangible properties, and
(b) from time to time make or cause to be made all needed and
appropriate repairs, renewals, replacements and additions to such properties
necessary for the conduct of its business, so that the business carried on in
connection therewith may be properly and advantageously conducted at all times.
SECTION 10.4 Conduct of Business. At all times carry on its business
in an appropriate manner and engage only in the business described in SECTION
7.1(F).
SECTION 10.5 Insurance. Maintain, in addition to the coverage required
by SECTION 9.7 and the Security Documents, insurance with responsible insurance
companies against such risks and in such amounts as is customarily maintained
by similar businesses or as may be required by
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Applicable Law, and from time to time (but not more often than semi-annually
and whenever an Event of Default exists) deliver to the Administrative Agent or
any Lender upon its request a detailed list of the insurance then in effect,
stating the names of the insurance companies, the amounts and rates of the
insurance, the dates of the expiration thereof and the properties and risks
covered thereby.
SECTION 10.6 Payment of Taxes and Claims. Pay or discharge when due
(a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or upon any properties belonging
to it, except that real property ad valorem taxes shall be deemed to have been
so paid or discharged if the same are paid before they become delinquent, and
(b) all lawful claims of materialmen, mechanics, carriers,
warehousemen and landlords for labor, materials, supplies and rentals which, if
unpaid, might become a Lien on any properties of such Borrower;
Except that this SECTION 10.6 shall not require the payment or
discharge of any such tax, assessment, charge, levy or claim which is being
contested in good faith by appropriate proceedings and for which reserves in
respect of reasonably anticipated liability have been appropriately
established.
SECTION 10.7 Accounting Methods and Financial Records. Maintain a
system of accounting, and keep such books, records and accounts (which shall be
true and complete), as may be required or as may be necessary to permit the
preparation of financial statements in accordance with GAAP.
SECTION 10.8 Use of Proceeds.
(a) Use the proceeds of
(i) the initial Revolving Credit Loan and the Term Loans
to pay amounts indicated on SCHEDULE 10.8 to the Persons indicated
thereon,
(ii) the Acquisition Loans to pay in part the purchase
price of the related Permitted Acquisitions, and
(iii) all Swingline Loans and all Revolving Credit Loans
made after the Effective Date only for working capital and general
business purposes; and
(b) not use any part of such proceeds to purchase or, to carry or
reduce or retire or refinance any credit incurred to purchase or carry, any
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System) or, in any event, for any purpose which would
involve a violation of such Regulation U or of Regulation T or X of such
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Board of Governors, or for any purpose prohibited by law or by the terms and
conditions of this Agreement.
SECTION 10.9 Hazardous Waste and Substances; Environmental
Requirements.
(a) In addition to, and not in derogation of, the requirements of
SECTION 10.2 and of the Security Documents, comply in all material respects
with Environmental Laws and Applicable Laws relating to occupational health and
safety (except for instances of noncompliance that are being contested in good
faith by appropriate proceedings if reserves in respect of such Borrower's or
such Subsidiary's reasonably anticipated liability therefor have been
appropriately established), promptly notify the Administrative Agent of its
receipt of any written notice of a violation of any such Environmental Laws or
other such Applicable Laws and indemnify and hold the Administrative Agent and
the Lenders harmless from all loss, cost, damage, liability, claim and expense
incurred by or imposed upon the Administrative Agent or any Lender on account
of such Borrower's failure to perform its obligations under this SECTION 10.9.
(b) Whenever a Borrower gives notice to the Administrative Agent
pursuant to this SECTION 10.9 or otherwise with respect to a matter that
reasonably could be expected to result in material liability to such Borrower
or any Subsidiary under any Environmental Law, the Borrowers shall, at the
Administrative Agent's request and the Borrowers' expense (i) cause an
independent environmental engineer acceptable to the Administrative Agent in
its reasonable judgment to conduct an assessment, including tests where
necessary, of the site where the noncompliance or alleged noncompliance with
Environmental Laws has occurred and prepare and deliver to the Administrative
Agent a report setting forth the results of such assessment, a proposed plan to
bring such Borrower (or such Subsidiary) into compliance with such
Environmental Laws (if such assessment indicates noncompliance) and an estimate
of the costs thereof, and (ii) provide to the Administrative Agent a
supplemental report of such engineer whenever the scope of the noncompliance,
or the response thereto or the estimated costs thereof, shall materially
adversely change.
SECTION 10.10 Year 2000. Promptly notify the Administrative Agent in
the event such Borrower discovers or determines that any computer application
(including those of its suppliers, vendors and customers) that is material to
its or any of its Subsidiaries' business and operations will not be Year 2000
Compliant.
SECTION 10.11 Execution of Subsidiary Guaranties; Additional
Borrowers. Upon the request of the Administrative Agent or any Lender, cause
any domestic (United States) Subsidiary which is not a Borrower and has not
entered into a Guaranty and a Guarantor Security Agreement to execute and
deliver to the Administrative Agent such joinder agreement with respect to this
Agreement or such a Guaranty and a Guarantor Security Agreement and, in either
case, appropriate Financing Statements all in form and substance satisfactory
to the Administrative Agent and the Required Lenders in their reasonable
judgment.
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ARTICLE 11
INFORMATION
Until the Revolving Credit Facility and the Acquisition Facility have
been terminated and all the Secured Obligations have been paid in full, unless
the Required Lenders shall otherwise consent in the manner set forth in SECTION
16.11, the Borrowers will furnish to the Administrative Agent and to each
Lender at its offices then designated for notices pursuant to SECTION 16.1, the
statements, reports, certificates, and other information provided for in this
ARTICLE 11. All written information, reports, statements and other papers and
data furnished to the Administrative Agent or any Lender by or at the request
of a Borrower, whether pursuant to this ARTICLE 11 or any other provision of
this Agreement or of any other Loan Document, shall be, at the time the same is
so furnished, complete and correct in all material respects to the extent
necessary to give the Administrative Agent and the Lenders true and accurate
knowledge of the subject matter. Specifically, the Borrowers will so furnish:
SECTION 11.1 Financial Statements.
(a) Audited Year-End Statements. As soon as available, but in any
event within 105 days after the end of each Fiscal Year, copies of the
consolidating and consolidated balance sheets of WinsLoew and its Consolidated
Subsidiaries as at the end of such Fiscal Year and the related consolidating
and consolidated statements of income, shareholders' equity and cash flows for
such Fiscal Year, in each case setting forth in comparative form the figures
for the previous Fiscal Year, reported on, as to such consolidated statements,
without qualification, by independent certified public accountants of
nationally recognized standing selected by WinsLoew; and
(b) Monthly Financial Statements. As soon as available after the
end of each month, but in any event within 30 days after the end of each
accounting month (or within 45 days after the end of each accounting month that
is the last month in a Fiscal Quarter), copies of the unaudited consolidating
and consolidated balance sheets of WinsLoew and its Consolidated Subsidiaries
as at the end of such month and the related unaudited consolidating and
consolidated statements of income and cash flows for WinsLoew and its
Consolidated Subsidiaries for such month, for the Fiscal Quarter then ended (if
such month is the last month of a Fiscal Quarter) and for the portion of the
Fiscal Year through such month, certified by the Financial Officer as
presenting fairly the financial condition and results of operations of WinsLoew
and its Consolidated Subsidiaries (subject to normal year-end audit
adjustments) for the applicable period(s);
all such financial statements to be complete and correct in all material
respects and prepared in accordance with GAAP (except, with respect to interim
financial statements, for the omission of notes) applied consistently
throughout the periods reflected therein.
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SECTION 11.2 [Reserved]
SECTION 11.3 Officer's Certificate. At the time that the Borrowers
furnish the financial statements pursuant to Section 11.1(b) for any accounting
month that is the last month of a Fiscal Quarter, a certificate of the
Financial Officer in the form attached hereto as Exhibit G
(a) setting forth as at the end of such Fiscal Quarter or Fiscal
Year, as the case may be, the calculations required to establish whether or not
the Borrowers were in compliance with the requirements of Sections 12.1, 12.2,
12.5, 12.10 and 12.11, as at the end of each respective period and the
calculations necessary to determine the Applicable Margin,
(b) stating that the information on the schedules to this
Agreement (other than those that refer specifically to a single date on or
prior to the Effective Date) is complete and accurate as of the date of such
certificate or, if such is not the case, attaching to such certificate updated
schedules in accordance with the provisions of Section 11.7, and
(c) stating that, based on a reasonably diligent examination, no
Default or Event of Default exists, or, if such is not the case, specifying
such Default or Event of Default and its nature, when it occurred, whether it
is continuing and the steps being taken by the Borrowers with respect to such
Default or Event of Default.
SECTION 11.4 Copies of Other Reports.
(a) Promptly upon receipt thereof, copies of all reports, if any,
submitted to a Borrower or its Board of Directors by its independent public
accountants, including, without limitation, any management report.
(b) As soon as practicable and, in any event, when made available
to the holders of the Senior Subordinated Notes, copies of all financial
statements and reports that a Borrower shall send to its shareholders generally
and of all registration statements and all regular or periodic reports which a
Borrower shall file with the Securities and Exchange Commission or any
successor commission.
(c) From time to time and as soon as reasonably practicable
following each request, such forecasts, data, certificates, reports,
statements, opinions of counsel, documents or further information regarding the
business, assets, liabilities, financial condition, results of operations or
business prospects of any Borrower or Subsidiary as the Administrative Agent or
any Lender may reasonably request and that a Borrower has or (except in the
case of legal opinions relating to the perfection or priority of the Security
Interest) without unreasonable expense can obtain. The rights of the
Administrative Agent and the Lenders under this Section 11.4 are in addition to
and not in derogation of their rights under any other provision of this
Agreement or of any other Loan Document.
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(d) If requested by the Administrative Agent or any Lender, the
Borrowers will furnish to the Administrative Agent and the Lenders statements
in conformity with the requirements of Federal Reserve Form U-1 or G-3 referred
to in Regulation U of the Board of Governors of the Federal Reserve System.
SECTION 11.5 Notice of Litigation and Other Matters. Prompt notice of:
(a) the commencement, to the extent a Borrower is aware of the
same, of all proceedings and investigations by or before any governmental or
nongovernmental body and all actions and proceedings in any court or before any
arbitrator against or in any other way relating to or affecting the Borrowers,
any of their respective Subsidiaries or any of the Borrowers' or any of their
respective Subsidiaries' properties, assets or businesses, which might, singly
or in the aggregate, result in the occurrence of a Default or an Event of
Default, or have a Materially Adverse Effect,
(b) any amendment of the articles of incorporation or by-laws or
other constituent documents of a Borrower or any of its Subsidiaries and any
change in the executive officers of WinsLoew,
(c) any change in the business, assets, liabilities, financial
condition, results of operations or business prospects of a Borrower or any of
its Subsidiaries which has had or could reasonably be expected to have, singly
or in the aggregate, a Materially Adverse Effect, and
(d) any Default or Event of Default or any event which
constitutes or which with the passage of time or giving of notice or both would
constitute a default or event of default by a Borrower or any of its
Subsidiaries under any material agreement (other than this Agreement) to which
such Borrower or any of its Subsidiaries is a party or by which such Borrower,
any of its Subsidiaries or any of such Borrower's or any of its Subsidiaries'
properties may be bound.
SECTION 11.6 ERISA. As soon as possible and in any event within 30
days after a Borrower knows, or has reason to know, that:
(a) any ERISA Event with respect to a Benefit Plan has occurred
or will occur, or
(b) the aggregate present value of the Unfunded Vested Accrued
Benefits under all Benefit Plans is equal to an amount in excess of $0, or
(c) a Borrower or any Subsidiary is in "default" (as defined in
Section 4219(c)(5) of ERISA) with respect to payments to a Multiemployer
Benefit Plan required by reason of the Borrower's or such Subsidiary's complete
or partial withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Multiemployer Plan, a certificate of the Financial Officer setting forth the
details of such event and the action which is proposed to be taken with respect
thereto,
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together with any notice or filing which may be required by the PBGC or other
agency of the United States government with respect to such event.
SECTION 11.7 Revisions or Updates to Schedules. Should any of the
information or disclosures provided on any of the Schedules originally attached
hereto become outdated or incorrect in any material respect, as part of the
quarterly officer's certificate required pursuant to Section 11.3(b), such
revisions or updates to such Schedule(s) as may be necessary or appropriate to
update or correct such Schedule(s), PROVIDED that no such revisions or updates
to any Schedule(s) shall be deemed to have amended, modified or superseded such
Schedule(s) as attached hereto immediately prior to the submission of such
revised or updated Schedule(s), or to have cured any breach of warranty or
representation resulting from the inaccuracy or incompleteness of any such
Schedule(s), unless and until the Required Lenders in their sole and absolute
discretion, shall have accepted in writing such revisions or updates to such
Schedule(s).
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ARTICLE 12
NEGATIVE COVENANTS
Until the Revolving Credit Facility and the Acquisition Facility have
been terminated and all the Secured Obligations have been paid in full, unless
the Required Lenders shall otherwise consent in the manner set forth in SECTION
16.11, the Borrowers will not directly or indirectly and, in the case of
SECTIONS 12.2 through 12.13, will not permit Subsidiaries to:
SECTION 12.1 Financial Ratios.
(a) Minimum Fixed Charge Coverage. Permit the Fixed Charge
Coverage Ratio for each period of four consecutive Fiscal Quarters ending on
and after December 31, 1999, to be less than 1.20 to 1.
(b) Consolidated Maximum Total Funded Debt to EBITDA Ratio.
Permit the Total Funded Debt to EBITDA Ratio for each period of four
consecutive Fiscal Quarters ending on and after December 31, 1999 and during a
Fiscal Year listed below to be greater than the ratio indicated below opposite
such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Total Funded Debt to EBITDA Ratio
----------- ---------------------------------
<S> <C>
1999 5.75 to 1
2000 5.50 to 1
2001 5.25 to 1
2002 4.75 to 1
2003 4.25 to 1
2004 and thereafter 4.00 to 1
</TABLE>
PROVIDED, that such Ratio for the four-quarter period ending with the first
Fiscal Quarter of Fiscal Year 2001 shall not be greater than 5.75 to 1 and for
the four-quarter period ending with the first Fiscal Quarter of Fiscal Year
2002 shall not be greater than 5.50 to 1.
(c) Minimum Interest Coverage Ratio. Permit the Interest Coverage
Ratio for each period of four consecutive Fiscal Quarters ending on and after
December 31, 1999 and during a Fiscal Year listed below to be less than the
ratio indicated below opposite such Fiscal Year:
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<TABLE>
<CAPTION>
Fiscal Year Interest Coverage Ratio
----------- -----------------------
<S> <C>
December 31, 1999 1.40 to 1
2000 1.60 to 1
2001 1.75 to 1
2002 1.95 to 1
2003 and thereafter 2.00 to 1
</TABLE>
SECTION 12.2 Debt. Create, assume, or otherwise become or remain
obligated in respect of, or permit or suffer to exist or to be created, assumed
or incurred or to be outstanding any Debt, except that this SECTION 12.2 shall
not apply to:
(a) Debt of the Loan Parties represented by the Loans and the
Notes,
(b) Debt reflected on SCHEDULE 7.1(j), excluding any such Debt
that is to be paid in full on the Effective Date,
(c) Permitted Purchase Money Debt,
(d) Subordinated Debt,
(e) Interest Rate Protection Agreements,
(f) unsecured Debt of any Loan Party owing to another Loan Party,
provided the repayment thereof is subordinated to the prior payment in full of
the Secured Obligations and such Debt is evidenced by a promissory note that is
delivered to the Administrative Agent, at it request, as Collateral;
(g) Permitted Investments; and
(h) other unsecured Debt in an aggregate amount as to WinsLoew
and its Subsidiaries outstanding at any time in an amount not to exceed
$5,000,000.
SECTION 12.3 Guaranties. Become or remain liable with respect to any
Guaranty of any obligation of any other Person, except that this SECTION 12.3
shall not apply to any Borrower's or Subsidiary's obligation to indemnify its
officers and directors to the fullest extent permitted by the corporation law
of the jurisdiction of such Person's organization.
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SECTION 12.4 Investments. Other than in connection with a Permitted
Acquisition, acquire, after the Agreement Date, any Business Unit or Investment
or, after such date, maintain any Investment other than Permitted Investments.
SECTION 12.5 Capital Expenditures. Make or incur any Capital
Expenditures (other than Financed Capex) in any Fiscal Year in an amount
greater than that set forth below opposite such Fiscal Year:
<TABLE>
<CAPTION>
Fiscal Year Amount
----------- ------
<S> <C>
1999 $2,000,000
2000 and thereafter $3,000,000
</TABLE>
, plus additional Capital Expenditures in Fiscal Years 1999 and 2000 in an
aggregate amount not greater than $4,000,000 made by WPI to purchase the
manufacturing facility leased by Texacraft on the Agreement Date and an
additional facility in Haleyville, Alabama located across the street from
Winston's existing Haleyville facility (such real property purchases, the "WPI
Purchases").
SECTION 12.6 Restricted Distributions and Payments, Etc. Declare or
make any Restricted Distribution or Restricted Payment, except that this
SECTION 12.6 shall not apply to (1) repurchases of WinsLoew Capital Stock from
former employees of WinsLoew or its Subsidiaries or independent sales
representatives in an aggregate amount not to exceed $1,000,000 in any 12-month
period, (2) provided that both immediately before and after making any such
payment no Default or Event of Default exists, regularly scheduled payments of
principal and interest on the Senior Subordinated Notes made in accordance with
the provisions (including the subordination provisions) of the Senior Note
Indenture, (3) fees paid to outside directors of WinsLoew and (4) provided that
both immediately before and after making any such payment no Default or Event
of Default exists, fees paid to Trivest II, Inc. in accordance with the
provisions of SECTION 12.8.
SECTION 12.7 Merger, Consolidation and Sale of Assets. Other than in
connection with a Permitted Acquisition, merge or consolidate with any other
Person or sell, lease or transfer or otherwise dispose of any material assets
to any Person other than sales of Inventory in the ordinary course of business,
except that this SECTION 12.7 shall not apply to (i) the sale by WinsLoew of
substantially all the assets (subject to substantially all the liabilities) of
the Southern Wood business, provided that the Net Proceeds of such Asset
Disposition are applied in accordance with the provisions of SECTION 5.11, (ii)
sales and discounting of accounts for collection in the ordinary course of the
Borrowers' business, consistent with their past practices, (iii) leases of Real
Estate entered into by a Borrower or Subsidiary as lessor that do not interfere
with such Borrower's or Subsidiary's operations, or (iv) any Asset Disposition
otherwise permitted hereunder.
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SECTION 12.8 Transactions with Affiliates. Effect any transaction with
any Affiliate on a basis less favorable to the Borrowers than would be the case
if such transaction had been effected with a Person not an Affiliate, except
that this SECTION 12.8 shall not apply to (i) (w) reimbursement of fees and
expenses of the law department of Trivest II, Inc., (x) management fees paid to
Trivest II, Inc. in an amount not greater than $350,000 per annum (subject to
annual adjustment to reflect any increase in the Consumer Price Index for all
Urban Consumers or to reflect additional Acquisitions, in each case in
accordance with the provisions of the Trivest Management Agreement), (y)
transaction fees (including reimbursement of legal fees incurred by Trivest II,
Inc. and certain of its Affiliates in connection with such transactions) in
connection with the WinsLoew Merger and the Acquisition of Pompeii and
Pompeii-Mexico which do not exceed in the aggregate $3,400,000 or (z)
transaction or "incentive" fees payable in accordance with the terms of the
Trivest Management Agreement; (ii) other payments expressly permitted pursuant
to SECTION 12.6; and (iii) any transaction between Borrowers or between a
Borrower and a Subsidiary (whether or not a Loan Party) that is in the ordinary
course of business of such Borrower and consistent with its past business
practices.
SECTION 12.9 Liens. Create, assume or permit or suffer to exist or to
be created or assumed any Lien on any of the Collateral or its other assets,
other than Permitted Liens.
SECTION 12.10 Real Estate Leases. Enter into any real property lease
(other than leases by WPI, as lessor, to WinsLoew or any Subsidiary), including
a lease relating to the Real Estate occupied by a Borrower on the Effective
Date, if the aggregate annual rental expense under all such leases entered into
since the effective date would exceed $500,000, without the prior written
consent of the Administrative Agent, on behalf of the Lenders, which consent
shall not be unreasonably withheld.
SECTION 12.11 Benefit Plans. Permit any condition to exist in
connection with any Benefit Plan which might constitute grounds for the PBGC to
institute proceedings to have such Benefit Plan terminated or a trustee
appointed to administer such Benefit Plan, or any other condition, event or
transaction with respect to any Benefit Plan which could result in the
incurrence by a Borrower of any material liability, fine or penalty.
SECTION 12.12 Sales and Leasebacks. Enter into any arrangement with
any Person providing for a Borrower's leasing from such Person any real or
personal property which has been or is to be sold or transferred, directly or
indirectly, by such Borrower to such Person.
SECTION 12.13 Amendments of Other Agreements. Amend in any way (a) the
interest rate or principal amount or schedule of payments of principal and
interest with respect to any Debt (other than the Secured Obligations) other
than to reduce the interest rate or extend the schedule of payments with
respect thereto, provided that the Debt secured by the Permitted Liens
encumbering the Real Estate located in Liberty, North Carolina shall not be
amended, or (b) the Senior Note Indenture or (other than to reduce the interest
rate or extend the Schedule of payments with respect thereto) any other
documents governing Subordinated Debt outstanding in
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a principal amount as to any obligation of more than $1,000,000 or which, when
added to other outstanding Subordinated Debt (other than the Senior
Subordinated Notes) exceeds $2,500,000 in principal amount or (c) the
compensation provisions (other than to decrease the Borrowers' obligations
thereunder) of the Trivest Management Agreement.
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ARTICLE 13
DEFAULT
SECTION 13.1 Events of Default. Each of the following shall constitute
an Event of Default, whatever the reason for such event and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment or order of any court or any order, rule or regulation of any
governmental or nongovernmental body:
(a) Default in Payment. The Borrowers shall default in any
payment of principal of or interest on any Loan or any Note when and as due
(whether at maturity, by reason of acceleration or otherwise).
(b) Other Payment Default. The Borrowers shall default in the
payment, as and when due of any Secured Obligation (other than as provided in
clause (a) above), and such default shall continue for a period of 10 days
after written notice thereof has been given to the Borrower by the
Administrative Agent.
(c) Misrepresentation. Any representation or warranty made or
deemed to be made by a Borrower under this Agreement or any Loan Document, or
any amendment hereto or thereto, shall at any time prove to have been incorrect
or misleading in any material respect when made.
(d) Default in Performance. The Borrowers shall default in the
performance or observance of any term, covenant, condition or agreement to be
performed by any Borrower, contained in
(i) ARTICLES 11 or 12, or SECTION 9.6, 9.7, 9.9, 9.10,
9.11, 10.1 (insofar as it requires the preservation of the corporate
existence of each Borrower), or 10.8, and the Administrative Agent
shall have delivered to the Borrowers written notice of such default,
or
(ii) this Agreement (other than as specifically provided
for otherwise in this SECTION 13.1) and such default shall continue
for a period of 30 days after written notice thereof has been given to
the Borrower by the Administrative Agent.
(e) Debt Cross-Default. (i) Failure of a Borrower or any of its
Subsidiaries to pay when due or within any applicable grace period any
principal or interest on any Debt (other than the Loans), or (ii) breach or
default of a Borrower or any of its Subsidiaries with respect to any Debt
(other than the Loans), if the effect of such failure to pay, default or breach
is to cause or to permit the holder or holders then to cause any Debt having an
individual principal amount in excess of $1,000,000 or having an aggregate
principal amount in excess of $2,500,000 to become or be declared due prior to
their stated maturity, whether or not such failure to pay, default or
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breach is waived by such holder or holders.
(f) Other Cross-Defaults. A Borrower or any of its Subsidiaries
shall default in the payment when due, or in the performance or observance, of
any obligation or condition of any agreement, contract or lease (other than
this Agreement, the other Loan Documents or any such agreement, contract or
lease relating to Indebtedness for money borrowed) if the existence of any such
defaults, singly or in the aggregate, could in the reasonable judgment of the
Required Lenders have a Materially Adverse Effect; PROVIDED, HOWEVER, that for
the purposes of this provision where such a default could result only in a
monetary loss, a Material Adverse Effect shall not be deemed to have occurred
unless the aggregate of such losses would exceed $2,000,000.
(g) Voluntary Bankruptcy Proceeding. A Borrower or any of its
Significant Subsidiaries shall
(i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect),
(ii) file a petition seeking to take advantage of any
other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts,
(iii) consent to or fail to contest in a timely and
appropriate manner any petition filed against it in an involuntary
case under such bankruptcy laws or other laws,
(iv) apply for or consent to, or fail to contest in a timely
and appropriate manner, the appointment of, or the taking of
possession by, a receiver, custodian, trustee, or liquidator of itself
or of a substantial part of its property, domestic or foreign,
(v) admit in writing its inability to pay its debts as
they become due,
(vi) make a general assignment for the benefit of
creditors, or
(vii) take any corporate action for the purpose of
authorizing any of the foregoing.
(h) Involuntary Bankruptcy Proceeding. A case or other proceeding
shall be commenced against a Borrower or any of its Significant Subsidiaries in
any court of competent jurisdiction seeking
(i) relief under the federal bankruptcy laws (as now or
hereafter in effect) or under any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or
adjustment of debts,
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(ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of a Borrower, any of its Significant
Subsidiaries or of all or any substantial part of the assets, domestic
or foreign, of a Borrower or any of its Significant Subsidiaries,
and such case or proceeding shall continue undismissed or unstayed for a period
of 60 consecutive calendar days, or an order granting the relief requested in
such case or proceeding against a Borrower or any of its Significant
Subsidiaries (including, but not limited to, an order for relief under such
federal bankruptcy laws) shall be entered.
(i) Loan Documents. Any event of default or "Event of Default"
under any other Loan Document shall occur.
(j) Failure of Agreements. A Borrower shall challenge the
validity and binding effect of any provision of any Loan
Document after delivery thereof hereunder or shall state in writing its
intention to make such a challenge, or this Agreement or any Security Document
after delivery thereof hereunder, shall for any reason (except to the extent
permitted by the terms hereof or thereof) cease to create a valid and perfected
first priority Lien (except for Permitted Liens) on, or security interest in,
any of the Collateral purported to be covered thereby in favor of the
Administrative Agent.
(k) Judgment. A final, unappealable judgment or order for the
payment of money in an amount that exceeds the uncontested insurance available
therefor by $100,000 or more shall be entered against a Borrower by any court
and such judgment or order shall continue undischarged or unstayed for 30 days.
(l) Attachment. A warrant or writ of attachment or execution or
similar process which exceeds $100,000 in value shall be issued against any
property of a Borrower and such warrant or process shall continue undischarged
or unstayed for 30 days.
(m) ERISA. Any ERISA Event shall occur.
(n) Qualified Audits. The independent certified public
accountants retained by the Borrowers shall refuse to deliver an opinion in
accordance with SECTION 11.1(a) with respect to the annual financial statements
of the Borrowers.
(o) Change of Control. Other than by reason of an IPO, Trivest
Investors shall cease to own, beneficially and of record, 51% of the
outstanding capital stock of WinsLoew or such ownership shall cease to vest in
it/them voting control of WinsLoew, or WinsLoew shall cease to own,
beneficially and of record, directly or indirectly, 100% of the outstanding
capital stock of each of the other Loan Parties, or such ownership shall cease
to vest in it voting control of each such Loan Party or a "Change of Control"
under and as defined in the Senior Note Indenture shall occur.
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SECTION 13.2 Remedies.
(a) Automatic Acceleration and Termination of Facilities. Upon
the occurrence of an Event of Default specified in SECTION 13.1(g) or (h), (i)
the principal of and the interest on the Loans and any Note at the time
outstanding, and all other amounts owed to the Administrative Agent or the
Lenders under this Agreement or any of the other Loan Documents and all other
Secured Obligations, shall thereupon become due and payable without
presentment, demand, protest, or other notice of any kind, all of which are
expressly waived, anything in this Agreement or any of the Loan Documents to
the contrary notwithstanding, and (ii) each Facility and the right of the
Borrowers to request Borrowings under this Agreement shall immediately
terminate.
(b) Other Remedies. If any Event of Default shall have occurred,
and during the continuance of any Event of Default, the Administrative Agent
may, and at the direction of the Required Lenders in their sole and absolute
discretion shall, do any of the following:
(i) declare the principal of and interest on the Loans
and any Note at the time outstanding, and all other amounts owed to
the Administrative Agent or the Lenders under this Agreement or any of
the other Loan Documents and all other Secured Obligations, to be
forthwith due and payable, whereupon the same shall immediately become
due and payable without presentment, demand, protest or other notice
of any kind, all of which are expressly waived, anything in this
Agreement or the Loan Documents to the contrary notwithstanding;
(ii) terminate any Facility and any other right of the
Borrowers to request Borrowings hereunder;
(iii) subject to the provisions of SECTION 9.2, notify, or
request the relevant Borrower to notify, in writing or otherwise, any
Account Debtor or obligor with respect to any one or more of the
Receivables to make payment to the Administrative Agent, for the
benefit of the Lenders, or any agent or designee of the Administrative
Agent, at such address as may be specified by the Administrative Agent
and if, notwithstanding the giving of any notice, any Account Debtor
or other such obligor shall make payments to a Borrower, such Borrower
shall hold all such payments it receives in trust for the
Administrative Agent, for the account of the Lenders, without
commingling the same with other funds or property of, or held by, such
Borrower, and shall deliver the same to the Administrative Agent or
any such agent or designee of the Administrative Agent immediately
upon receipt by such Borrower in the identical form received, together
with any necessary endorsements;
(iv) settle or adjust disputes and claims directly with
Account Debtors and other obligors on Receivables for amounts and on
terms which the Administrative Agent considers advisable and in all
such cases only the net amounts received by the Administrative Agent,
for the account of the Lenders, in payment of such amounts, after
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deductions of costs and attorneys' fees, shall constitute Collateral
and no Borrower shall have no further right to make any such
settlements or adjustments or to accept any returns of merchandise;
(v) enter upon any premises in which Inventory or
Equipment may be located and, without resistance or interference by
any Borrower, take physical possession of any or all thereof and
maintain such possession on such premises or move the same or any part
thereof to such other place or places as the Administrative Agent
shall choose, without being liable to any Borrower on account of any
loss, damage or depreciation that may occur as a result thereof, so
long as the Administrative Agent shall act reasonably and in good
faith;
(vi) require each Borrower to and each Borrower shall,
without charge to the Administrative Agent or any Lender, assemble the
Inventory and Equipment and maintain or deliver it into the possession
of the Administrative Agent or any agent or representative of the
Administrative Agent at such place or places as the Administrative
Agent may designate and as are reasonably convenient to both the
Administrative Agent and the Borrowers;
(vii) at the expense of the Borrowers, cause any of the
Inventory and Equipment to be placed in a public or field warehouse,
and the Administrative Agent shall not be liable to any Borrower on
account of any loss, damage or depreciation that may occur as a result
thereof, so long as the Administrative Agent shall act reasonably and
in good faith;
(viii) without notice, demand or other process, and without
payment of any rent or any other charge, enter any premises of any
Borrower and, without breach of the peace, until the Administrative
Agent, on behalf of the Lenders, completes the enforcement of its
rights in the Collateral, take possession of such premises or place
custodians in exclusive control thereof, remain on such premises and
use the same and any of such Borrower's Equipment, for the purpose of
(A) completing any work in process, preparing any Inventory for
disposition and disposing thereof, and (B) collecting any Receivable,
and the Administrative Agent for the benefit of the Lenders is hereby
granted a license or sublicense and all other rights as may be
necessary, appropriate or desirable to use the Intellectual Property
in connection with the foregoing (including, without limitation, the
right to utilize any logo or other distinctive symbol associated with
the Borrowers in connection with any advertising, promotion or
marketing undertaken by the Administrative Agent or any Lender, and
the rights of such Borrower under all licenses, sublicenses and
franchise agreements shall inure to the Administrative Agent for the
benefit of the Lenders (PROVIDED, HOWEVER, that any use of any
federally registered trademarks as to any goods shall be subject to
the control as to the quality of such goods of the owner of such
trademarks and the goodwill of the business symbolized thereby), and
PROVIDED FURTHER, that such grant of license, sublicense and other
rights in the
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Intellectual Property is not prohibited by any contractual
restrictions other than such as may have been entered into for the
purpose of evading this provision;
(ix) exercise any and all of its rights under any and all
of the Security Documents;
(x) apply any Collateral consisting of cash to the
payment of the Secured Obligations in any order in which the
Administrative Agent, on behalf of the Lenders, may elect or use such
cash in connection with the exercise of any of its other rights
hereunder or under any of the Security Documents; and
(xi) exercise all of the rights and remedies of a secured
party under the Uniform Commercial Code and under any other Applicable
Law, including, without limitation, the right, without notice except
as specified below and with or without taking possession thereof, to
sell the Collateral or any part thereof in one or more parcels at
public or private sale, at any location chosen by the Administrative
Agent, for cash, on credit or for future delivery, and at such price
or prices and upon such other terms as the Administrative Agent may
deem commercially reasonable. Each Borrower agrees that, to the extent
notice of sale shall be required by law, at least 10 days' notice to
the Borrowers of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification, but notice given in any other reasonable manner or at
any other reasonable time shall constitute reasonable notification.
The Administrative Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. The
Administrative Agent may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and such
sale may, without further notice, be made at the time and place to
which it was so adjourned.
SECTION 13.3 Application of Proceeds. All proceeds from each sale of,
or other realization upon, all or any part of the Collateral following an Event
of Default shall be applied or paid over as provided in Section 5.10(g).
THE BORROWERS SHALL REMAIN LIABLE JOINTLY AND SEVERALLY AND WILL PAY, ON
DEMAND, ANY DEFICIENCY REMAINING IN RESPECT OF THE SECURED OBLIGATIONS,
TOGETHER WITH INTEREST THEREON AT A RATE PER ANNUM EQUAL TO THE HIGHEST RATE
THEN PAYABLE HEREUNDER ON SUCH SECURED OBLIGATIONS, WHICH INTEREST SHALL
CONSTITUTE PART OF THE SECURED OBLIGATIONS.
SECTION 13.4 Power of Attorney. In addition to the authorizations
granted to the Administrative Agent under SECTION 9.13 or under any other
provision of this Agreement or of any other Loan Document, during the
continuance of an Event of Default, each Borrower hereby irrevocably
designates, makes, constitutes and appoints the Administrative Agent (and all
Persons designated by the Administrative Agent from time to time) as such
Borrower's true and lawful attorney, and agent in fact, and the Administrative
Agent, or any agent of the Administrative Agent, may, without notice to any
Borrower, and at such time or times as the Administrative
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Agent or any such agent in its sole discretion may determine, in the
name of a Borrower, the Administrative Agent or the Lenders,
(a) demand payment of the Receivables,
(b) enforce payment of the Receivables by legal proceedings or
otherwise,
(c) exercise all of the relevant Borrower's rights and remedies
with respect to the collection of Receivables,
(d) settle, adjust, compromise, extend or renew any or all of the
Receivables,
(e) settle, adjust or compromise any legal proceedings brought to
collect the Receivables,
(f) discharge and release the Receivables or any of them,
(g) prepare, file and sign the name of the relevant Borrower on
any proof of claim in bankruptcy or any similar document against any Account
Debtor,
(h) prepare, file and sign the name of the relevant Borrower on
any notice of Lien, assignment or satisfaction of Lien, or similar document in
connection with any of the Collateral,
(i) endorse the name of the relevant Borrower upon any chattel
paper, document, instrument, notice, freight bill, bill of lading or similar
document or agreement relating to the Receivables, the Inventory or any other
Collateral,
(j) use the stationery of any Borrower and sign the name of the
relevant Borrower to verifications of the Receivables and on any notice to the
Account Debtors,
(k) open the Borrowers' mail,
(l) notify the post office authorities to change the address for
delivery of the Borrowers' mail to an address designated by the Administrative
Agent, and
(m) use the information recorded on or contained in any data
processing equipment and computer hardware and software relating to the
Receivables, Inventory or other Collateral to which any Borrower has access.
SECTION 13.5 Miscellaneous Provisions Concerning Remedies.
(a) Rights Cumulative. The rights and remedies of the
Administrative Agent and the Lenders under this Agreement, the Notes and each
of the Loan Documents shall be cumulative and not exclusive of any rights or
remedies which it or they would otherwise have. In exercising
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such rights and remedies the Administrative Agent and the Lenders may be
selective and no failure or delay by the Administrative Agent or any Lender in
exercising any right shall operate as a waiver of it, nor shall any single or
partial exercise of any power or right preclude its other or further exercise
or the exercise of any other power or right.
(b) Waiver of Marshalling. Each Borrower hereby waives any right
to require any marshalling of assets and any similar right.
(c) Limitation of Liability. Nothing contained in this ARTICLE 13
or elsewhere in this Agreement or in any of the Loan Documents shall be
construed as requiring or obligating the Administrative Agent, any Lender or
any agent or designee of the Administrative Agent or any Lender to make any
demand, or to make any inquiry as to the nature or sufficiency of any payment
received by it, or to present or file any claim or notice or take any action,
with respect to any Receivable or any other Collateral or the monies due or to
become due thereunder or in connection therewith, or to take any steps
necessary to preserve any rights against prior parties, and the Administrative
Agent, the Lenders and their agents or designees shall have no liability to any
Borrower for actions taken pursuant to this ARTICLE 13, any other provision of
this Agreement or any of the Loan Documents so long as the Administrative Agent
or such Lender shall act in good faith and in a commercially reasonable manner.
(d) Appointment of Receiver. In any action under this ARTICLE 13,
the Administrative Agent shall be entitled during the continuance of an Event
of Default, to the fullest extent permitted by Applicable Law, to the
appointment of a receiver, without notice of any kind whatsoever, to take
possession of all or any portion of the Collateral and to exercise such power
as the court shall confer upon such receiver.
SECTION 13.6 Trademark License. Each Borrower hereby grants to the
Administrative Agent for its benefit as Administrative Agent and for the
benefit of the Lenders, the nonexclusive right and license to use the
Trademarks described in the Trademark Security Agreement for the purposes (and
subject to the restrictions) set forth in SECTION 13.2(B)(viii) and for the
purposes of enabling the Administrative Agent to realize on the Collateral and
to permit any purchaser of any portion of the Collateral through a foreclosure
sale or any other exercise of the Administrative Agent's rights and remedies
under this Agreement and the other Security Documents to use, sell or otherwise
dispose of finished goods Collateral bearing any such Trademark. Such right and
license is granted free of charge, without the requirement that any monetary
payment whatsoever be made to the relevant Borrower or any other Person by the
Lenders or the Administrative Agent or any purchaser or purchasers of the
Collateral. Each Borrower hereby represents, warrants, covenants and agrees
that it presently has, and shall continue to have, the right, without the
approval of consent of others, to grant the license set forth in this SECTION
13.6.
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ARTICLE 14
ASSIGNMENTS
SECTION 14.1 Successors and Assigns; Participations.
(a) This Agreement shall be binding upon and inure to the benefit
of the Borrowers, the Lenders, the Administrative Agent, all future holders of
the Notes, and their respective successors and assigns, except that the
Borrowers may not assign or transfer any of their rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Each Lender may assign to one or more Eligible Assignees all
or a portion of its interests, rights and obligations under this Agreement
(including, without limitation, all or a portion of the Loans at the time owing
to it and the Notes held by it); PROVIDED, HOWEVER, that (i) such Lender shall
first obtain the written consent of (x) the Administrative Agent, which consent
shall not be unreasonably withheld or delayed and (y) except in the case of an
assignment to a Lender or an Affiliate of a Lender, provided no Default or
Event of Default has occurred and is continuing, WinsLoew, which consent shall
not be unreasonably withheld or delayed, (ii) the amount of the Commitment of
the assigning Lender that is subject to each such assignment (determined as of
the date the Assignment and Acceptance with respect to such assignment is
delivered to the Administrative Agent) shall in no event be less than
$5,000,000 or less than 100% of the assigning Lender's Commitment if (x) such
assigning Lender's remaining Commitment is less than $5,000,000 or (y) such
assignment is being made at the request of the Borrowers as contemplated
herein, PROVIDED that lesser amounts may be assigned to Lenders and their
Affiliates, (iii) in the case of a partial assignment, the amount of the
Commitment that is retained by the assigning Lender and its Affiliates
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall in no event be less
than the $5,000,000, (iv) the parties to each such assignment shall execute and
deliver to the Administrative Agent, for its acceptance and recording in the
Register an Assignment and Acceptance, together with any Note or Notes subject
to such assignment, (v) such assignment shall not, without the consent of the
Borrowers, require the Borrowers to file a registration statement with the
Securities and Exchange Commission or apply to or qualify the Loans or the
Notes under the blue sky laws of any state, (vi) the representation contained
in SECTION 14.2 hereof shall be true with respect to any such proposed
assignee, and (vii) in the event the Eligible Assignee is a new Lender, the
assigning Lender shall, on the "Effective Date" as defined in the Assignment
and Acceptance, pay to the Administrative Agent solely for its own account an
assignment fee in the amount of $5,000. The assignment fee shall be fully
earned on the "Effective Date" as defined in such Assignment and Acceptance and
shall not be subject to refund or rebate. Upon such execution, delivery,
acceptance and recording, from and after the effective date specified in each
Assignment and Acceptance, which effective date, unless otherwise agreed among
all parties to such Assignment and Acceptance, shall be at least five (5)
Business Days after the execution thereof, (A) the assignee thereunder shall be
a party hereto and,
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to the extent provided in such Assignment and Acceptance, have the rights and
obligations of a Lender hereunder, and (B) the Lender assignor thereunder
shall, to the extent provided in such assignment, be released from its
obligations under this Agreement.
(c) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than the
representation and warranty that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse claim, such
Lender assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement
or any other instrument or document furnished pursuant hereto; (ii) such Lender
assignor makes no representation or warranty and assumes no responsibility with
respect to the financial condition of any Borrower or the performance or
observance by any Borrower of any of its obligations under this Agreement or
any other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in SECTION 7.1(N) and such other documents
and information as it has deemed appropriate to make its own credit analysis
and decision to enter into such Assignment and Acceptance; (iv) such assignee
will, independently and without reliance upon the Administrative Agent, such
Lender assignor or any other Lender, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (v) such
assignee confirms that it is an Eligible Assignee; (vi) such assignee appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement and the other Loan
Documents as are delegated to the Administrative Agent by the terms hereof and
thereof, together with such powers as are reasonably incidental thereto; and
(vii) such assignee agrees that it will perform in accordance with their terms
all of the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(d) The Administrative Agent shall maintain a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders and the Commitment and Proportionate
Share of, and principal amount of the Loans and owing to, each Lender from time
to time (the "Register"). The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrowers, the Administrative Agent and
the Lenders may treat each person whose name is recorded in the Register as a
Lender hereunder for all purposes of this Agreement. The Register shall be
available for inspection by the Borrowers or any Lender at any reasonable time
and from time to time upon reasonable prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed by
an assigning Lender and an Eligible Assignee together with any Note or Notes
subject to such assignment, the Administrative Agent shall, if such Assignment
and Acceptance complies with this SECTION 14.1 and has been completed and is in
the form of EXHIBIT D, (i) accept such Assignment and
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Acceptance, (ii) record the information contained therein in the Register,
(iii) give prompt notice thereof to the Lenders and the Borrowers, and (iv)
promptly deliver a copy of such Acceptance and Assignment to the Borrowers.
Within five Business Days after receipt of notice, the Borrowers shall execute
and deliver to the Administrative Agent in exchange for the surrendered Note or
Notes a new Note or Notes to the order of such Eligible Assignee in amounts
equal to the Commitment assumed by such Eligible Assignee pursuant to such
Assignment and Acceptance and a new Note or Notes to the order of the assigning
Lender in an amount equal to the Commitment retained by it hereunder. Such new
Note or Notes shall be in an aggregate principal amount equal to the aggregate
principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of the assigned Notes. Each surrendered Note or Notes
shall be cancelled and returned to the Borrowers.
(f) Each Lender may sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Commitment
hereunder and the Loans owing to it and the Notes held by it); PROVIDED,
HOWEVER, that (i) each such participation (other than to a Lender or an
Affiliate of a Lender) shall be in an amount not less than $5,000,000, (ii)
such Lender's obligations under this Agreement (including, without limitation,
its Commitment hereunder) shall remain unchanged, (iii) such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, (iv) such Lender shall remain the holder of the Notes held by
it for all purposes of this Agreement, (v) the Borrowers, the Administrative
Agent and the other Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement; PROVIDED, that such Lender may agree with any participant that such
Lender will not, without such participant's consent, agree to or approve any
waivers or amendments which would reduce the principal of or the interest rate
on any Loans, extend the term or increase the amount of the commitments of such
participant, reduce the amount of any fees to which such participant is
entitled, extend any scheduled payment date for principal or release Collateral
securing the Loans (other than Collateral disposed of pursuant to Section 9.7
hereof or otherwise in accordance with the terms of this Agreement or the
Security Documents), and (vi) any such disposition shall not, without the
consent of the Borrowers, require any Borrowers to file a registration
statement with the Securities and Exchange Commission to apply to qualify the
Loans or the Notes under the blue sky law of any state. The Lender selling a
participation to any Person that is not a Lender or an Affiliate of a Lender
shall use all reasonable efforts to give notice thereof to the Borrowers
PROVIDED that failure to give such notice shall not result in liability to such
Lender. Any purchaser of a participation in any Commitment or Loan shall be
entitled to compensation pursuant to SECTIONS 5.15(C) and (D) to the same
extent as if it were a "Lender" but not in any amount greater than that to
which the Lender from which it purchased such participation is entitled. As
used in this SECTION 14.1(F), "Affiliates" shall include any trust,
partnership, limited liability company or other entity that (x) is organized
under the laws of the United States or any state thereof, (y) is engaged in
making, purchasing or otherwise
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investing in commercial loans in the ordinary course of its business and (z) is
organized, managed or sponsored by any Lender.
(g) Any Lender may, in connection with any assignment, proposed
assignment, participation or proposed participation pursuant to this SECTION
14.1, disclose to the assignee, participant, proposed assignee or proposed
participant, any information relating to any Borrower furnished to such Lender
by or on behalf of the Borrowers, PROVIDED that, prior to any such disclosure,
each such assignee, proposed assignee, participant or proposed participant
shall agree with the Borrowers or such Lender (which in the case of an
agreement with only such Lender, the Borrowers shall be recognized as a third
party beneficiary thereof) to preserve the confidentiality of any confidential
information relating to any Borrower received from such Lender.
(h) Notwithstanding any provision of the foregoing to the
contrary, any Lender may pledge its interest in any Loan or Note to a Federal
Reserve Bank.
SECTION 14.2 Representation of Lenders. Each Lender hereby represents
that it will make each Loan hereunder as a commercial loan for its own account
in the ordinary course of its business; PROVIDED, HOWEVER, that subject to
SECTION 14.1 hereof, the disposition of the Notes or other evidence of the
Secured Obligations held by any Lender shall at all times be within its
exclusive control.
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ARTICLE 15
ADMINISTRATIVE AGENT
SECTION 15.1 Appointment of Administrative Agent. Each of the Lenders
hereby irrevocably designates and appoints BankBoston as the Administrative
Agent of such Lender under this Agreement and the other Loan Documents, and
each Lender irrevocably authorizes the Administrative Agent, as the
Administrative Agent for such Lender, to take such action on its behalf under
the provisions of this Agreement and the other Loan Documents and to exercise
such powers and perform such duties as are expressly delegated to the
Administrative Agent by the terms of this Agreement and such other Loan
Documents, together with such other powers as are reasonably incidental
thereto. Notwithstanding any provision to the contrary elsewhere in this
Agreement or the other Loan Documents, the Administrative Agent shall not have
any duties or responsibilities, except those expressly set forth herein and
therein, or any fiduciary relationship with any Lender, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or the other Loan Documents or otherwise
exist against the Administrative Agent.
SECTION 15.2 Delegation of Duties. The Administrative Agent may
execute any of its duties under this Agreement and the other Loan Documents by
or through agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.
SECTION 15.3 Exculpatory Provisions. Neither the Administrative Agent
nor any of its trustees, officers, directors, employees, agents,
attorneys-in-fact or Affiliates shall be (i) liable to any Lender (or any
Lender's participants) for any action lawfully taken or omitted to be taken by
it or such Person under or in connection with this Agreement or the other Loan
Documents (except for its or such Person's own gross negligence or willful
misconduct), or (ii) responsible in any manner to any Lender (or any Lender's
participants) for any recitals, statements, representations or warranties made
by a Borrower or any officer thereof contained in this Agreement or the other
Loan Documents or in any certificate, report, statement or other document
referred to or provided for in, or received by the Administrative Agent under
or in connection with, this Agreement or the other Loan Documents or for the
existence, value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the other Loan Documents or any Collateral or
Lien or other interest therein or for any failure of any Borrower to perform
its obligations hereunder or thereunder. The Administrative Agent shall not be
under any obligation to any Lender to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or to inspect the properties, books or records of any
Borrower.
SECTION 15.4 Reliance by Administrative Agent. The Administrative
Agent shall be entitled to rely, and shall be fully protected in relying, upon
any Note, writing, resolution, notice,
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consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex
or teletype message, statement, order or other document or conversation
believed by it to be genuine and correct and to have been signed, sent or made
by the proper Person or Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrowers), independent
accountants and other experts selected by the Administrative Agent. The
Administrative Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless such Note shall have been transferred in
accordance with SECTION 14.1. The Administrative Agent shall be fully justified
in failing or refusing to take any action under this Agreement and the other
Loan Documents unless it shall first receive such advice or concurrence of the
Required Lenders as it deems appropriate and shall be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action.
The Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under this Agreement and the Notes in accordance with a
request of the Required Lenders, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Lenders and all
future holders of the Notes.
SECTION 15.5 Notice of Default. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default hereunder unless the Administrative Agent has received notice from a
Lender or a Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". In the
event that the Administrative Agent receives such a notice, the Administrative
Agent shall promptly give notice thereof to the Lenders. The Administrative
Agent shall take such action with respect to such Default or Event of Default
as shall be reasonably directed by the Required Lenders; PROVIDED that unless
and until the Administrative Agent shall have received such directions, the
Administrative Agent may (but shall not be obligated to) continue making
Revolving Credit Loans and Acquisition Loans to the Borrowers on behalf of the
Lenders in reliance on the provisions of SECTION 5.7 and take such other
action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
SECTION 15.6 Non-Reliance on Administrative Agent and Other Lenders.
Each Lender expressly acknowledges that neither the Administrative Agent nor
any of its officers, directors, counsel, employees, agents, attorneys-in-fact
or Affiliates has made any representations or warranties to it and that no act
by the Administrative Agent hereafter taken, including any review of the
affairs of any Borrower, shall be deemed to constitute any representation or
warranty by the Administrative Agent to any Lender. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
the Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial (and other)
condition and creditworthiness of each Borrower and made its own decision to
make its Loans hereunder and enter into this Agreement. Each Lender also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such
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documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the other Loan Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, financial (and other) condition and creditworthiness of
each Borrower. Except for notices, reports and other documents expressly
required to be furnished to the Lenders by the Administrative Agent hereunder
or under the other Loan Documents, the Administrative Agent shall not have any
duty or responsibility to provide any Lender with any credit or other
information concerning the business, operations, property, financial (and
other) condition or creditworthiness of any Borrower which may come into the
possession of the Administrative Agent or any of its officers, directors,
employees, agents, attorneys-in-fact or Affiliates.
SECTION 15.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent and the Co-Agents in their capacities as such (to the
extent not reimbursed by the Borrowers and without limiting the obligation of
the Borrowers to do so), Ratably, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind whatsoever which may at any time
(including, without limitation, at any time following the payment of the Notes)
be imposed on, incurred by or asserted against the Administrative Agent and the
Co-Agents in any way relating to or arising out of this Agreement or the other
Loan Documents, or any documents contemplated by or referred to herein or
therein or the transactions contemplated hereby or thereby or any action taken
or omitted by the Administrative Agent and the Co-Agents under or in connection
with any of the foregoing; PROVIDED that no Lender shall be liable for the
payment of any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements
resulting solely from the Administrative Agent's and/or the Co-Agents' gross
negligence or willful misconduct or resulting solely from transactions or
occurrences that occur at a time after such Lender has assigned all of its
interests, rights and obligations under this Agreement pursuant to SECTION 14.1
or, in the case of a Lender to which an assignment is made hereunder pursuant
to SECTION 14.1, at a time before such assignment. The agreements in this
subsection shall survive the payment of the Notes, the Secured Obligations and
all other amounts payable hereunder and the termination of this Agreement.
SECTION 15.8 Administrative Agent in Its Individual Capacity. The
institution at the time acting as the Administrative Agent and its Affiliates
may make loans to, accept deposits from and generally engage in any kind of
business with the Borrowers and their respective Subsidiaries as if it were not
the Administrative Agent hereunder. With respect to its Commitment, the Loans
made or renewed by it and any Note issued to it and any Letter of Credit issued
by it, such institution shall have and may exercise the same rights and powers
under this Agreement and the other Loan Documents and shall be subject to the
same obligations and liabilities as and to the extent set forth herein and in
the other Loan Documents for any other Lender. The terms "Lenders" and
"Required Lenders" or any other term shall, unless the context clearly
otherwise
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indicates, include such institution in its individual capacity as a Lender or
one of the Required Lenders.
SECTION 15.9 Successor Administrative Agent.
(a) The Required Lenders may remove the Administrative Agent at
any time when BankBoston's (or any Lender's which is a successor Administrative
Agent) Proportionate Share is equal to less than 7 1/2%. The Administrative
Agent may resign as Administrative Agent upon thirty (30) days' notice to the
Lenders; PROVIDED, HOWEVER that such resignation shall not take effect until a
successor agent has been appointed. If the Administrative Agent shall be
removed or resign as Administrative Agent under this Agreement, then the
Required Lenders shall appoint from among the Lenders a successor agent for the
Lenders which successor agent shall be approved by the Borrowers, so long as no
Default or Event of Default has occurred and is continuing (which approval
shall not be unreasonably withheld), whereupon such successor agent shall
succeed to the rights, powers and duties of the Administrative Agent, and the
term "Administrative Agent" shall mean such successor agent effective upon its
appointment, and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent or any of the parties to
this Agreement or any holders of the Notes. If the Required Lenders have failed
to appoint a successor Administrative Agent within 30 days of the resignation
notice given by the Administrative Agent as provided above, then the
Administrative Agent shall be entitled to appoint a successor agent from among
the Lenders. After any Administrative Agent's removal or resignation hereunder
as Administrative Agent, it shall continue to be responsible for (in accordance
with the terms hereof), and the provisions of Section 15.7 shall inure to its
benefit as to, any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
(b) It is intended that there shall be no violation of any
Applicable Law denying or restricting the right of financial institutions to
transact business as agent in any jurisdiction. It is recognized that, in case
of litigation under any of the Loan Documents, or in case the Administrative
Agent deems that by reason of present or future laws of any jurisdiction the
Administrative Agent might be prohibited from or restricted in exercising any
of the powers, rights or remedies granted to the Administrative Agent or the
Lenders hereunder or under any of the Loan Documents or from holding title to
or a Lien upon any Collateral or from taking any other action which may be
necessary or desirable hereunder or under any of the Loan Documents, the
Administrative Agent may appoint an additional individual or institution as a
separate collateral agent or co-collateral agent which is not so prohibited
from or restricted in taking any of such actions or exercising any of such
powers, rights or remedies. If the Administrative Agent shall appoint an
additional individual or institution as a separate collateral agent or
co-collateral agent as provided above, each and every remedy, power, right,
claim, demand or cause of action intended by any of the Loan Documents to be
exercised by or vested in or conveyed to the Administrative Agent with respect
thereto shall be exercisable by and vested in such separate collateral agent or
co-collateral agent, but only to the extent necessary to enable such separate
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collateral agent or co-collateral agent to exercise such powers, rights and
remedies, and every covenant and obligation necessary to the exercise thereof
by such separate collateral agent or co-collateral agent shall run to and be
enforceable by either of them. Should any instrument from the Lenders be
required by the separate collateral agent or co-collateral agent so appointed
by Administrative Agent in order more fully and certainly to vest in and
confirm to him or it such rights, powers, duties and obligations, including
without limitation indemnification of such collateral agent or co-collateral
agent, any and all of such instruments shall, on request, be executed,
acknowledged and delivered by the Lenders. In case any separate collateral
agent or co-collateral agent, or a successor to either, shall die, become
incapable of acting, resign or be removed, all the estates, properties, rights,
powers, duties and obligations of such separate collateral agent or
co-collateral agent, so far as permitted by Applicable Law, shall vest in and
be exercised by the Administrative Agent until the appointment of a new
collateral agent or successor to such separate collateral agent or
co-collateral agent.
SECTION 15.10 Co-Agents. For avoidance of doubt, it is expressly
acknowledged and agreed by the Administrative Agent and each Lender for the
benefit of the Co-Agents that no Co-Agent, in such capacity, has any
obligations hereunder.
SECTION 15.11 Documents to be Forwarded. The Administrative Agent
shall deliver to each Lender a copy of the Borrowing Base Certificate delivered
to it pursuant to SECTION 4.11(C) promptly following its receipt thereof.
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ARTICLE 16
MISCELLANEOUS
SECTION 16.1 Notices.
(a) Method of Communication. Except as specifically provided in
this Agreement or in any of the Loan Documents, all notices and the
communications hereunder and thereunder shall be in writing or by telephone,
subsequently confirmed in writing. Notices in writing shall be delivered
personally or sent by certified or registered mail, postage pre-paid, or by
overnight courier, telex or facsimile transmission and shall be deemed received
in the case of personal delivery, when delivered, in the case of mailing, when
receipted for, in the case of overnight delivery, on the next Business Day
after delivery to the courier, and in the case of telex and facsimile
transmission, upon transmittal, provided that in the case of notices to the
Administrative Agent, notice shall be deemed to have been given only when such
notice is actually received by the Administrative Agent. A telephonic notice to
the Administrative Agent, as understood by the Administrative Agent, will be
deemed to be the controlling and proper notice in the event of a discrepancy
with or failure to receive a confirming written notice.
(b) Addresses for Notices. Notices to any party shall be sent to
it at the following addresses, or any other address of which all the other
parties are notified in writing by such first party:
<TABLE>
<S> <C>
If to the Borrower: c/o WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Attn: Chief Executive Officer
Facsimile No.: (205) 408-7028
with a copy to: Trivest, Inc.
2665 South Bayshore Drive, Suite 800
Miami, Florida 33133-5462
Attn: General Counsel
Facsimile No.: (305) 285-0102
with a copy to: Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Attn: Michael W. Hein, Esq.
Facsimile No.: (305) 579-0717
</TABLE>
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<TABLE>
<S> <C>
If to the
Administrative Agent: BankBoston, N.A.
115 Perimeter Center Place
Suite 500
Atlanta, Georgia 30346
Attn: Lauren P. Carrigan, Vice President
Facsimile No.: (770) 393-4166
with a copy to: Hunton & Williams
600 Peachtree Street, N.E., Suite 4100
Atlanta, Georgia 30308
Attn: Dana Kull, Esq.
Facsimile No.: (404) 888-4190
If to a Lender: At the address of such Lender set forth on
the signature pages hereof.
</TABLE>
(c) Administrative Agent's Office. The Administrative Agent
hereby designates its office located at 100 Federal Street, Boston,
Massachusetts 02110, or any subsequent office which shall have been specified
for such purpose by written notice to the Borrowers, as the office to which
payments due are to be made and at which Loans will be disbursed.
SECTION 16.2 Expenses. The Borrowers jointly and severally agree to
pay or reimburse on demand all costs and expenses (1) incurred by the
Administrative Agent, including, without limitation, the reasonable fees and
disbursements of counsel, in connection with:
(a) the negotiation, preparation, execution, delivery,
administration, enforcement and termination of this Agreement and each of the
other Loan Documents, whenever the same shall be executed and delivered,
including, without limitation
(i) reasonable out-of-pocket costs and expenses incurred
in connection with the administration and interpretation of this
Agreement and the other Loan Documents;
(ii) the costs and expenses of appraisals of the
Collateral;
(iii) the costs and expenses of lien and title searches
and title insurance;
(iv) the costs and expenses of environmental reports with
respect to the Real Estate; and
(v) taxes, fees and other charges for recording the
Mortgages, filing the Financing Statements and continuations and the
costs and expenses of taking other actions to perfect, protect, and
continue the Security Interests;
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(b) filing continuations with respect to Financing Statements and
the costs and expenses of taking other reasonable actions to perfect, protect,
and continue the Security Interests that the Borrowers do not take, after
demand by the Administrative Agent;
(c) the preparation, execution and delivery of any waiver,
amendment, supplement or consent by the Administrative Agent and the Lenders
relating to this Agreement or any of the Loan Documents;
(d) sums paid or incurred to pay any amount or take any action
required of the Borrowers under the Loan Documents that the Borrowers fail to
pay or take;
(e) costs of inspections and verifications of the Collateral,
including, without limitation, standard per diem fees charged by the
Administrative Agent and charges for travel, lodging, and meals for inspections
of the Collateral and of the Borrowers' operations and books and records not
more often than quarterly and at any time when an Event of Default exists;
(f) standard costs and expenses of forwarding loan proceeds and
collecting checks and other items of payment; and
(g) costs and expenses of preserving and protecting the
Collateral;
(2) incurred by the Administrative Agent or any Lender after an
Event of Default has occurred and is continuing, in connection with:
(a) consulting, after the occurrence of a Default, with one or
more Persons, including appraisers, accountants and lawyers, concerning the
value of any Collateral for the Secured Obligations or related to the nature,
scope or value of any right or remedy of the Administrative Agent or any Lender
hereunder or under any of the Loan Documents, including any review of factual
matters in connection therewith, which expenses shall include the fees and
disbursements of such Persons; and
(b) costs and expenses paid or incurred to obtain payment of the
Secured Obligations, enforce the Security Interests, sell or otherwise realize
upon the Collateral, and otherwise enforce the provisions of the Loan
Documents, or to prosecute or defend any claim in any way arising out of,
related to or connected with, this Agreement or any of the Loan Documents,
which expenses shall include the reasonable fees and disbursements of counsel
and of experts and other consultants retained by the Administrative Agent or
any Lender.
The foregoing shall not be construed to limit any other provisions of the Loan
Documents regarding costs and expenses to be paid by the Borrowers. Each
Borrower hereby authorizes the Administrative Agent and the Lenders to debit
such Borrower's Loan Account (by increasing the principal amount of the
Revolving Credit Loans) in the amount of any such costs and expenses owed by
such Borrower when due.
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SECTION 16.3 Stamp and Other Taxes. The Borrowers will pay any and all
stamp, registration, recordation and similar taxes, fees or charges and shall
indemnify the Administrative Agent and the Lenders against any and all
liabilities with respect to or resulting from any delay in the payment or
omission to pay any such taxes, fees or charges, which may be payable or
determined to be payable in connection with the execution, delivery,
performance or enforcement of this Agreement and any of the Loan Documents or
the perfection of any rights or security interest thereunder, including,
without limitation, the Security Interest.
SECTION 16.4 Setoff. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
during the continuance of any Event of Default, each Lender, any participant
with such Lender in the Loans and each Affiliate of each Lender are hereby
authorized by each Borrower at any time or from time to time, without notice to
any Borrower or to any other Person, any such notice being hereby expressly
waived, to set off and to appropriate and to apply any and all deposits
(general or special, including, but not limited to, indebtedness evidenced by
certificates of deposit, whether matured or unmatured) and any other
indebtedness at any time held or owing by any Lender or any Affiliate of any
Lender or any participant to or for the credit or the account of any Borrower
against and on account of the Secured Obligations irrespective or whether or
not
(a) the Administrative Agent or such Lender shall have made any
demand under this Agreement or any of the Loan Documents, or
(b) the Administrative Agent or such Lender shall have declared
any or all of the Secured Obligations to be due and payable as permitted by
SECTION 13.2 and although such Secured Obligations shall be contingent or
unmatured.
SECTION 16.5 Litigation. EACH BORROWER, THE ADMINISTRATIVE AGENT, EACH
CO-AGENT AND EACH LENDER HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY WAIVE
TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND OR NATURE IN ANY COURT IN
WHICH AN ACTION MAY BE COMMENCED BY OR AGAINST A BORROWER, THE ADMINISTRATIVE
AGENT, SUCH CO-AGENT OR SUCH LENDER ARISING OUT OF THIS AGREEMENT, THE
COLLATERAL OR ANY ASSIGNMENT THEREOF OR BY REASON OF ANY OTHER CAUSE OR DISPUTE
WHATSOEVER BETWEEN A BORROWER AND THE ADMINISTRATIVE AGENT, ANY CO-AGENT OR ANY
LENDER OF ANY KIND OR NATURE. EACH BORROWER, THE ADMINISTRATIVE AGENT, EACH
CO-AGENT AND EACH LENDER HEREBY AGREES THAT THE FEDERAL COURT OF THE NORTHERN
DISTRICT OF GEORGIA OR, AT THE OPTION OF THE ADMINISTRATIVE AGENT, ANY CO-AGENT
OR ANY LENDER, ANY COURT IN WHICH THE ADMINISTRATIVE AGENT, SUCH CO-AGENT OR
SUCH LENDER SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT
MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY, SHALL HAVE NONEXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR
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DISPUTES BETWEEN ANY BORROWER AND THE ADMINISTRATIVE AGENT, SUCH CO-AGENT OR
SUCH LENDER, PERTAINING DIRECTLY OR INDIRECTLY TO THIS AGREEMENT OR THE LOAN
DOCUMENTS OR TO ANY MATTER ARISING THEREFROM. EACH BORROWER EXPRESSLY SUBMITS
AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR PROCEEDING
COMMENCED IN SUCH COURTS, HEREBY WAIVING PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT, OR OTHER PROCESS OR PAPERS ISSUED THEREIN AND AGREEING THAT SERVICE
OF SUCH SUMMONS AND COMPLAINT OR OTHER PROCESS OR PAPERS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER AT THE ADDRESS OF SUCH
BORROWER SET FORTH IN SECTION 16.1. SHOULD SUCH BORROWER FAIL TO APPEAR OR
ANSWER ANY SUMMONS, COMPLAINT, PROCESS OR PAPERS SO SERVED WITHIN THIRTY (30)
DAYS AFTER THE MAILING THEREOF, IT SHALL BE DEEMED IN DEFAULT AND AN ORDER
AND/OR JUDGMENT MAY BE ENTERED AGAINST IT AS DEMANDED OR PRAYED FOR IN SUCH
SUMMONS, COMPLAINT, PROCESS OR PAPERS. THE NONEXCLUSIVE CHOICE OF FORUM SET
FORTH IN THIS SECTION SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY
JUDGMENT OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS
AGREEMENT TO ENFORCE SAME IN ANY APPROPRIATE JURISDICTION.
SECTION 16.6 Waiver of Rights. EACH BORROWER HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY WAIVES ALL RIGHTS WHICH THE BORROWER HAS UNDER
CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR UNDER ANY SIMILAR
PROVISION OF APPLICABLE LAW TO NOTICE AND TO A JUDICIAL HEARING PRIOR TO THE
ISSUANCE OF A WRIT OF POSSESSION ENTITLING THE ADMINISTRATIVE AGENT, ANY
CO-AGENT OR ANY LENDER, OR THE SUCCESSORS AND ASSIGNS OF THE ADMINISTRATIVE
AGENT, SUCH CO-AGENT OR SUCH LENDER TO POSSESSION OF THE COLLATERAL UPON EVENT
OF DEFAULT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING AND WITHOUT
LIMITING ANY OTHER RIGHT WHICH THE ADMINISTRATIVE AGENT, THE CO-AGENTS OR THE
LENDERS MAY HAVE, EACH BORROWER CONSENTS THAT IF THE ADMINISTRATIVE AGENT, ANY
CO-AGENT OR ANY LENDER FILES A PETITION FOR AN IMMEDIATE WRIT OF POSSESSION IN
COMPLIANCE WITH SECTIONS 44-14-261 AND 44-14-262 OF THE OFFICIAL CODE OF
GEORGIA OR UNDER ANY SIMILAR PROVISION OF APPLICABLE LAW, AND THIS WAIVER OR A
COPY HEREOF IS ALLEGED IN SUCH PETITION AND ATTACHED THERETO, THE COURT BEFORE
WHICH SUCH PETITION IS FILED MAY DISPENSE WITH ALL RIGHTS AND PROCEDURES HEREIN
WAIVED AND MAY ISSUE FORTHWITH AN IMMEDIATE WRIT OF POSSESSION IN ACCORDANCE
WITH CHAPTER 14 OF TITLE 44 OF THE OFFICIAL CODE OF GEORGIA OR IN ACCORDANCE
WITH ANY SIMILAR PROVISION OF APPLICABLE LAW, WITHOUT THE NECESSITY OF AN
ACCOMPANYING BOND AS OTHERWISE REQUIRED BY
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SECTION 44-14-263 OF THE OFFICIAL CODE OF GEORGIA OR BY ANY SIMILAR PROVISION
UNDER APPLICABLE LAW. EACH BORROWER HEREBY ACKNOWLEDGES THAT IT HAS READ AND
FULLY UNDERSTANDS THE TERMS OF THIS WAIVER AND THE EFFECT HEREOF.
SECTION 16.7 Consent to Advertising and Publicity. With the prior
written consent of the Borrowers, which consents shall not be unreasonably
withheld, the Administrative Agent, on behalf of the Lenders, may issue and
disseminate to the public information describing the credit accommodation
entered into pursuant to this Agreement, including the name and address of the
Borrowers, the amount, interest rate, maturity, collateral for and a general
description of the credit facilities provided hereunder and of the Borrowers'
business.
SECTION 16.8 Reversal of Payments. The Administrative Agent and each
Lender shall have the continuing and exclusive right to apply, reverse and
re-apply any and all payments to any portion of the Secured Obligations in a
manner consistent with the terms of this Agreement. To the extent a Borrower
makes a payment or payments to the Administrative Agent, for the account of the
Lenders, or any Lender receives any payment or proceeds of the Collateral for
the Borrowers' benefit, which payment(s) or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside
and/or required to be repaid to a trustee, receiver or any other party under
any bankruptcy law, state or federal law, common law or equitable cause, then,
to the extent of such payment or proceeds received, the Secured Obligations or
part thereof intended to be satisfied shall be revived and continued in full
force and effect, as if such payment or proceeds had not been received by the
Administrative Agent or such Lender.
SECTION 16.9 Injunctive Relief. Each Borrower recognizes that, in the
event the Borrowers fail to perform, observe or discharge any of its
obligations or liabilities under this Agreement, any remedy at law may prove to
be inadequate relief to the Administrative Agent and the Lenders; therefore,
each Borrower agrees that if any Event of Default shall have occurred and be
continuing, the Administrative Agent and the Lenders, if the Administrative
Agent or any Lender so requests, shall be entitled to temporary and permanent
injunctive relief without the necessity of proving actual damages.
SECTION 16.10 Accounting Matters. All financial and accounting
calculations, measurements and computations made for any purpose relating to
this Agreement, including, without limitation, all computations utilized by the
Borrowers to determine whether it is in compliance with any covenant contained
herein, shall, unless this Agreement otherwise provides or unless Required
Lenders shall otherwise consent in writing, be performed in accordance with
GAAP.
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<PAGE> 153
SECTION 16.11 Amendments.
(a) Except as set forth in SUBSECTION (B) below, any term,
covenant, agreement or condition of this Agreement or any of the other Loan
Documents may be amended or waived, and any departure therefrom may be
consented to by the Required Lenders, if, but only if, such amendment, waiver
or consent is in writing signed by the Required Lenders and, in the case of an
amendment (other than an amendment described in SECTION 16.11(D)), by the
Borrowers, provided that no such amendment, unless consented to by the
Administrative Agent, shall alter or affect the rights or responsibilities of
the Administrative Agent, and in any such event, the failure to observe,
perform or discharge any such term, covenant, agreement or condition (whether
such amendment is executed or such waiver or consent is given before or after
such failure) shall not be construed as a breach of such term, covenant,
agreement or condition or as a Default or an Event of Default. Unless otherwise
specified in such waiver or consent, a waiver or consent given hereunder shall
be effective only in the specific instance and for the specific purpose for
which given. In the event that any such waiver or amendment is requested by a
Borrower, the Administrative Agent and the Lenders may require and charge a fee
in connection therewith and consideration thereof in such amount as shall be
determined by the Administrative Agent and the Required Lenders in their
discretion.
(b) Without the prior unanimous written consent of the Lenders,
(i) no amendment, consent or waiver shall (A) increase
the amount or extend the time of the obligation of any Lender to make
Loans or (B) extend the originally scheduled time or times of payment
of the principal of any Loan or (C) alter the time or times of payment
of interest on any Loan or of any fees payable for the account of the
Lenders or (D) alter the amount of the principal of any Loan or
decrease the rate of interest thereon or (E) decrease the amount of
any commitment fee or other fee payable hereunder for the account of
the Lenders or (F) permit any subordination of the principal of or
interest on any Loan or (G) permit the subordination of the Security
Interests in any Collateral,
(ii) no Collateral having an aggregate value greater than
$1,000,000 shall be released by the Administrative Agent in any
12-month period other than in connection with a permitted Asset
Disposition or as otherwise specifically permitted in this Agreement
or the Security Documents nor shall any Collateral be released at a
time when the Administrative Agent is entitled to exercise remedies
hereunder upon Default, nor shall any Borrower or Guarantor be
released from its liability for the Secured Obligations,
(iii) except to the extent expressly provided in SECTION
5.9, the definition "Borrowing Base" shall not be amended,
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<PAGE> 154
(iv) none of the provisions of this Section 16.11, the
definitions "Lenders" or "Required Lenders", or the provisions of
Article 13 shall be amended, and
(v) neither the Administrative Agent nor any Lender
shall consent to any amendment to or waiver of the amortization,
deferral or subordination provisions of the Senior Note Indenture or
any other instrument or agreement evidencing or relating to
obligations of a Borrower that are expressly subordinate to any of the
Secured Obligations if such amendment or waiver would be adverse to
the Lenders in their capacities as Lenders hereunder;
provided, however, that anything herein to the contrary notwithstanding, the
Required Lenders shall have the right to waive any Default or Event of Default
and the consequences hereunder of such Default or Event of Default provided
only that such Default or Event of Default does not arise under Section 13.1(g)
or (h) or out of a breach of or failure to perform or observe any term,
covenant or condition of this Agreement or any other Loan Document (other than
the provisions of Article 13 of this Agreement) the amendment of which requires
the unanimous consent of the Lenders. The Required Lenders shall have the
right, with respect to any Default or Event of Default that may be waived by
them, to enter into an agreement with the Borrower or the Guarantor providing
for the forbearance from the exercise of any remedies provided hereunder or
under the other Loan Documents without thereby waiving any such Default or
Event of Default.
(c) The making of Loans hereunder by the Lenders during the
existence of a Default or Event of Default shall not be deemed to constitute a
waiver of such Default or Event of Default.
(d) Notwithstanding any provision of this Agreement or the other
Loan Documents to the contrary, no consent, written or otherwise, of any
Borrower shall be necessary or required in connection with any amendment to
Article 15 or Section 5.10, and any amendment to such provisions may be
effected solely by and among the Administrative Agent and the Lenders, provided
that no such amendment shall impose any obligation on the Borrowers.
SECTION 16.12 Assignment. All the provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that no Borrower may assign or
transfer any of its rights under this Agreement.
SECTION 16.13 Performance of Borrowers' Duties.
(a) Each Borrower's obligations under this Agreement and each of
the Loan Documents shall be performed by the Borrowers at their sole cost and
expense.
(b) If a Borrower shall fail to do any act or thing which it has
covenanted to do under this Agreement or any of the Loan Documents, the
Administrative Agent, on behalf of the Lenders, may (but shall not be obligated
to) do the same or cause it to be done either in the name
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<PAGE> 155
of the Administrative Agent or the Lenders or in the name and on behalf of the
Borrowers, and each Borrower hereby irrevocably authorizes the Administrative
Agent so to act.
SECTION 16.14 Indemnification. Each Borrower agrees, jointly and
severally, to reimburse the Administrative Agent and the Lenders for all costs
and expenses, including reasonable counsel fees and disbursements, incurred,
and to indemnify and hold the Administrative Agent and the Lenders harmless
from and against all losses suffered by, the Administrative Agent or any Lender
in connection with
(a) the exercise by the Administrative Agent or any Lender of any
right or remedy granted to it under this Agreement or any of the Loan
Documents,
(b) any claim, and the prosecution or defense thereof, arising
out of or in any way connected with this Agreement or any of the Loan
Documents, and
(c) the collection or enforcement of the Secured Obligations or
any of them,
other than such costs, expenses and liabilities arising out of the
Administrative Agent's or any Lender's gross negligence or willful misconduct.
SECTION 16.15 All Powers Coupled with Interest. All powers of attorney
and other authorizations granted to the Administrative Agent and the Lenders
and any Persons designated by the Administrative Agent or the Lenders pursuant
to any provisions of this Agreement or any of the Loan Documents shall be
deemed coupled with an interest and shall be irrevocable so long as any of the
Secured Obligations remain unpaid or unsatisfied.
SECTION 16.16 Survival. Notwithstanding any termination of this
Agreement,
(a) until all Secured Obligations have been irrevocably paid in
full or otherwise satisfied, the Administrative Agent, for the benefit of the
Lenders, shall retain its Security Interest and shall retain all rights under
this Agreement and each of the Security Documents with respect to such
Collateral as fully as though this Agreement had not been terminated,
(b) the indemnities to which the Administrative Agent and the
Lenders are entitled under the provisions of this ARTICLE 16 and any other
provision of this Agreement and the Loan Documents shall continue in full force
and effect and shall protect the Administrative Agent and the Lenders against
events arising after such termination as well as before, and
(c) in connection with the termination of this Agreement and the
release and termination of the Security Interests, the Administrative Agent, on
behalf of itself as agent and the Lenders, may require such assurances and
indemnities as it shall reasonably deem necessary or appropriate to protect the
Administrative Agent and the Lenders against loss on account of such
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release and termination, including, without limitation, with respect to credits
previously applied to the Secured Obligations that may subsequently be reversed
or revoked.
SECTION 16.17 Titles and Captions. Titles and captions of Articles,
Sections and subsections in this Agreement are for convenience only, and
neither limit nor amplify the provisions of this Agreement.
SECTION 16.18 Severability of Provisions. Any provision of this
Agreement or any Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or thereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
SECTION 16.19 Governing Law. This Agreement, the Notes and the
Security Documents (except to the extent otherwise expressly set forth therein)
shall be deemed to have been made in the State of Georgia and the validity,
construction, interpretation and enforcement hereof and thereof and the rights
of the parties hereto and thereto shall be determined under, governed by and
construed in accordance with the internal laws of the State of Georgia, without
regard to principles of conflicts of law, except that the waiver contained in
the first sentence of Section 16.5 shall be construed in accordance with and
governed by the internal laws of the jurisdiction in which any such action or
proceeding is commenced.
SECTION 16.20 Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and shall be binding upon all parties, their successors and assigns, and all of
which taken together shall constitute one and the same agreement.
SECTION 16.21 Reproduction of Documents. This Agreement, each of the
Loan Documents and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by the Administrative Agent or any Lender, and
(c) financial statements, certificates and other information previously or
hereafter furnished to the Administrative Agent or any Lender, may be
reproduced by the Administrative Agent or such Lender by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and such Person may destroy any original document so produced. Each
party hereto stipulates that, to the extent permitted by Applicable Law, any
such reproduction shall be as admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original shall be
in existence and whether or not such reproduction was made by the
Administrative Agent or such Lender in the regular course of business), and any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 16.22 Term of Agreement. This Agreement shall remain in effect
from the Agreement Date through the Termination Date and thereafter until all
Secured Obligations shall
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have been irrevocably paid and satisfied in full. No termination of this
Agreement shall affect the rights and obligations of the parties hereto arising
prior to such termination.
SECTION 16.23 Pro-Rata Participation.
(a) Each Lender agrees that if, as a result of the exercise of a
right of setoff, banker's lien or counterclaim or other similar right or the
receipt of a secured claim it receives any payment in respect of the Secured
Obligations, it shall promptly notify the Administrative Agent thereof (and the
Administrative Agent shall promptly notify the other Lenders). If, as a result
of such payment, such Lender receives a greater percentage of the Secured
Obligations owed to it under this Agreement than the percentage received by any
other Lender, such Lender shall purchase a participation (which it shall be
deemed to have purchased simultaneously upon the receipt of such payment) in
the Secured Obligations then held by such other Lenders so that all such
recoveries of principal and interest with respect to all Secured Obligations
owed to each Lender shall be pro rata on the basis of its respective amount of
the Secured Obligations owed to all Lenders, PROVIDED that if all or part of
such proportionately greater payment received by such purchasing Lender is
thereafter recovered by or on behalf of any Borrower from such Lender, such
purchase shall be rescinded and the purchase price paid for such participation
shall be returned to such Lender to the extent of such recovery, but without
interest.
(b) Each Lender which receives such a secured claim shall, to the
extent practicable, exercise its rights in respect of such secured claim in a
manner consistent with the rights of the Lenders entitled under this SECTION
16.23 to share in the benefits of any recovery on such secured claim.
(c) Each Borrower expressly consents to the foregoing
arrangements and agrees that any holder of a participation in any Secured
Obligation so purchased or otherwise acquired of which a Borrower has received
notice may exercise any and all rights of banker's lien, set-off or
counterclaim with respect to any and all monies owing by the Borrowers to such
holder as fully as if such holder were a holder of such Secured Obligation in
the amount of the participation held by such holder.
SECTION 16.24 Interest and Charges. The Borrowers, the Administrative
Agent and the Lenders hereby agree that (a) the only charge imposed by the
Lenders upon the Borrowers for the use of money in connection with the Loans is
and shall be the interest expressed herein (including but not limited to
interest calculated at the Default Rate under the circumstances provided in
this Agreement), as provided in ARTICLE 2 and in the Notes, and (b) all other
charges imposed by the Administrative Agent or the Lenders upon the Borrowers
in connection with the Loans, including without limitation any origination fee,
Administrative Agent's fee, unused facility fee and letter of credit fee, are
and shall be deemed to be charges made to compensate the Administrative Agent
or the Lenders, as the case may be, for administrative services and costs, and
other services and costs performed and incurred, and to be performed and
incurred, by them
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in connection with the credit facilities implemented pursuant to this
Agreement, and shall under no circumstances be deemed to be charges for the use
of money.
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<PAGE> 159
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized officers in several counterparts all as of
the day and year first written above.
<TABLE>
<S> <C>
[Corporate Seal] BORROWERS:
Attest: WINSLOEW FURNITURE, INC.
By: By: /s/ Vincent A. Tortorici, Jr.
--------------------------------- ---------------------------------------
Name: Name: Vincent A. Tortorici, Jr.
-------------------------- ---------------------------------
Title: Title: Vice President & Chief Financial
------------------------- Officer
---------------------------------
[Corporate Seal] WINSTON FURNITURE COMPANY OF ALABAMA, INC.
Attest:
By: By: /s/ Vincent A. Tortorici, Jr.
--------------------------------- ---------------------------------------
Name: Name: Vincent A. Tortorici, Jr.
-------------------------- ---------------------------------
Title: Title: Vice President & Chief Financial
------------------------- Officer
---------------------------------
[Corporate Seal] LOEWENSTEIN, INC.
Attest:
By: By: /s/ Vincent A. Tortorici, Jr.
--------------------------------- ---------------------------------------
Name: Name: Vincent A. Tortorici, Jr.
-------------------------- ---------------------------------
Title: Title: Vice President & Treasurer
------------------------- ---------------------------------
[Corporate Seal]
Attest: TEXACRAFT, INC.
By: By: /s/ Vincent A. Tortorici, Jr.
--------------------------------- ---------------------------------------
Name: Name: Vincent A. Tortorici, Jr.
-------------------------- ---------------------------------
Title: Title: Vice President & Treasurer
------------------------- ---------------------------------
</TABLE>
151
<PAGE> 160
<TABLE>
<S> <C>
[Corporate Seal]
TROPIC CRAFT, INC.
Attest:
By: By: /s/ Vincent A. Tortorici, Jr.
--------------------------------- ---------------------------------------
Name: Name: Vincent A. Tortorici, Jr.
-------------------------- ---------------------------------
Title: Title: Vice President & Treasurer
------------------------- ---------------------------------
[Corporate Seal]
WINSTON PROPERTIES, INC..
Attest:
By: By: /s/ Vincent A. Tortorici, Jr.
--------------------------------- ---------------------------------------
Name: Name: Vincent A. Tortorici, Jr.
-------------------------- ---------------------------------
Title: Title: Vice President & Treasurer
------------------------- ---------------------------------
[Corporate Seal]
POMPEII FURNITURE CO., INC.
Attest:
By: By: /s/ Vincent A. Tortorici, Jr.
--------------------------------- ---------------------------------------
Name: Name: Vincent A. Tortorici, Jr.
-------------------------- ---------------------------------
Title: Title: Vice President & Chief Financial
------------------------- Officer
---------------------------------
</TABLE>
152
<PAGE> 161
ADMINISTRATIVE AGENT:
BANKBOSTON, N.A.
By: /s/ Lauren P. Carrigan
------------------------------------
Name: Lauren P. Carrigan
Title: Vice President
Address: 115 Perimeter Center Place
Suite 500
Atlanta, Georgia 30346
Attn: Lauren P. Carrigan
Facsimile No.: (770) 393-4166
<PAGE> 162
CO-AGENTS:
HELLER FINANCIAL, INC.
By: /s/ Scott E. Gast
------------------------------------
Name: Scott E. Gast
Title: Assistant Vice President
Address: 500 West Monroe Street
Chicago, Illinois 60661
Attn: Scott E. Gast
Facsimile No.: (312) 441-6158
<PAGE> 163
CIBC INC.
By: /s/ Katherine Bass
------------------------------------
Name: Katherine Bass
Title: Executive Director
Address: 425 Lexington Avenue
New York, New York 10017
Attn: Katherine Bass
Facsimile No.: (212) 856-3761
<PAGE> 164
LENDERS:
BANKBOSTON, N.A.
By: /s/ Lauren P. Carrigan
------------------------------------
Name: Lauren P. Carrigan
Title: Vice President
Address: 115 Perimeter Center Place
Suite 500
Atlanta, Georgia 30346
Attn: Lauren P. Carrigan
Facsimile No.: (770) 393-4166
<PAGE> 165
HELLER FINANCIAL, INC.
By: /s/ Scott E. Gast
------------------------------------
Name: Scott E. Gast
Title: Assistant Vice President
Address: 500 West Monroe Street
Chicago, Illinois 60661
Attn: Scott E. Gast
Facsimile No.: (312) 441-6158
<PAGE> 166
CIBC INC.
By: /s/ Katherine Bass
------------------------------------
Name: Katherine Bass
Title: Executive Director
Address: 425 Lexington Avenue
New York, New York 10017
Attn: Katherine Bass
Facsimile No.: (212) 856-3761
<PAGE> 167
ANTARES CAPITAL CORP.
By: /s/ John G. Martin
------------------------------------
Name: John G. Martin
Title: Managing Director
Address: 311 S. Wacker Dr., Suite 2725
Chicago, Illinois 60606
Attn: John G. Martin
Facsimile No.: (312) 697-3998
<PAGE> 168
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ Robert M. Biringer
------------------------------------
Name: Robert M. Biringer
Title: Executive Vice President
By: /s/ Gary W. Andresen
------------------------------------
Name: Gary W. Andresen
Title: Associate
Address: Two Ravinia Dr., Suite 1680
Atlanta, Georgia 30346
Attn: Robert M. Biringer
Facsimile No.: (770) 390-1851
<PAGE> 169
GMAC BUSINESS CREDIT, LLC
By: /s/ Richard E. Peller
------------------------------------
Name: Richard E. Peller
Title: Director
Address: 630 Fifth Avenue, 30th Floor
New York, New York 10111
Attn: Richard E. Peller
Facsimile No.: (212) 489-3980
<PAGE> 170
SUNTRUST BANK, ATLANTA
By: /s/ Katherine A. Boozer
------------------------------------
Name: Katherine A. Boozer
Title: Assistant Vice President
Address: 25 Park Place, 26th Floor
Atlanta, Georgia 30303
Attn: Katherine A. Boozer
Facsimile No.: (404) 575-2693
<PAGE> 171
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Erin L. Murphy
------------------------------------
Name: Erin L. Murphy
Title: Duly Authorized Signatory
Address: 10 S. LaSalle, Suite 2700
Chicago, Illinois 60603
Attn: WinsLoew Account Manager
Facsimile No.: (312) 419-5992
With copies (other than borrowing requests) to:
201 High Ridge Road
Stamford, Connecticut 06927
Attn: Region Counsel-WinsLoew
Facsimile No.: (203) 316-7822
<PAGE> 172
BANK LEUMI LE ISRAEL BM MIAMI
By: /s/ Joseph Realini
------------------------------------
Name: Joseph Realini
Title: Vice President
Address: 800 Brickell Avenue, Suite 1400
Miami, Florida 33131
Attn: Joseph Realini
Facsimile No.: (305) 377-6544
<PAGE> 173
COMERICA BANK
By: /s/ Kristine L. Andersen
------------------------------------
Name: Kristine L. Andersen
Title: Assistant Vice President
Address: One Detroit Center
500 Woodward Avenue
Mail Code 3280
Detroit, Michigan 48226
Attn: Kristine L. Andersen
Facsimile No.: (313) 222-3330
<PAGE> 174
WACHOVIA BANK, N.A.
By: /s/ Julia F. Frick
------------------------------------
Name: Julia F. Frick
Title: Vice President
Address: 191 Peachtree Street, NE
GA-212
Atlanta, Georgia 30303
Attn: Julia F. Frick
Facsimile No.: (404) 332-6920
<PAGE> 175
ANNEX B
PRICING MATRIX
<TABLE>
<CAPTION>
BASE RATE REVOLVING EURODOLLAR RATE
CREDIT, TERM LOAN REVOLVING CREDIT,
A, AND ACQUISITION TERM LOAN A AND
TOTAL FUNDED DEBT TO FACILITIES ACQUISITION
TIER EBITDA RATIO FACILITIES
<S> <C> <C> <C>
Tier V > 5.25:1 1.00% 3.00%
=> 4.50:1 and
Tier IV <= 5.25:1 0.75% 2.75%
=> 3.75:1 and
Tier III < 4.50:1 0.50% 2.50%
=> 3.00:1 and
Tier II < 3.75:1 0.25% 2.25%
Tier I < 3.00:1 0 2.00%
</TABLE>
<TABLE>
<CAPTION>
EURODOLLAR RATE
BASE RATE TERM LOAN TERM LOAN B AND
B AND TERM LOAN C TERM LOAN C
TIER FACILITIES FACILITIES COMMITMENT FEE
<S> <C> <C> <C>
Tier V 1.50% 3.50% .50%
Tier IV 1.25% 3.25% .50%
Tier III 1.25% 3.25% .375%
Tier II 1.25% 3.25% .375%
Tier I 1.00% 3.00% .375%
</TABLE>
<PAGE> 1
Exhibit 10.20
INVESTORS' AGREEMENT
THIS INVESTORS' AGREEMENT (this "Agreement"), dated the 27th day of
August 1999, is by and among (i) Trivest Furniture Corporation, a Florida
corporation (the "Company," which term shall refer to WinsLoew Furniture, Inc.
upon the consummation of the Merger), (ii) Trivest Furniture Partners, Ltd.
(the "Institutional Investor"), (iii) Trivest Fund II Group, Ltd. (the "Lead
Trivest Investor" and, together with the Institutional Investor, the "Trivest
Investors") and (iv) Bobby Tesney, R. Craig Watts, Stephen C. Hess, Vincent A.
Tortorici, Jr. (both in his individual capacity and as the beneficiary of the
Vincent A. Tortorici, Jr. Individual Retirement Account, Account #1238SD,
Community Bank (Blountsville, Alabama), Custodian (the "Tortorici IRA"), Rick
J. Stevens, Jerry C. Camp, Earl W. Powell, Phillip T. George, M.D., Troy D.
Templeton, Brevator J. Creech, M.D. and James J. Pinto (collectively, the
"Individual Investors"). The Trivest Investors and the Individual Investors are
collectively referred to herein as the "Investors". Certain other terms are
defined in section 1.
The Investors have agreed to acquire certain securities from the
Company. In consideration of the premises and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged by the
parties hereto, and in order to induce the Investors to purchase such
securities from the Company, the parties hereby agree as follows:
1. Certain Definitions. Capitalized terms used in this Agreement
without definition have the respective meanings ascribed hereto in the
Subscription Agreement (it being agreed that, for purposes of this Agreement,
no amendment to any of such terms shall be effective without the consent of the
requisite parties to this Agreement specified in section 11). In addition, the
following terms have the following respective meanings:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
"Applicable Percentage" as applied to any holder of Restricted
Securities on any date shall mean a fraction (expressed as a percentage), the
numerator of which is the aggregate number of Restricted Securities to be
transferred by the Lead Trivest Investor and the denominator of which is the
aggregate number of Restricted Securities owned by (and/or purchasable by) the
Lead Trivest Investor; all such calculations shall be on a fully-diluted basis
and carried out to one hundredth of a share and then rounded to the nearest
share.
"Buyer" shall have the meaning specified in section 3.
"Company Common Stock" shall mean the Company's common stock, par
value $.01 per share.
"Company Registration Statement" shall have the meaning specified in
section 5.6.
"Drag Along Notice" shall have the meaning specified in section 3.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
<PAGE> 2
"Exempt Transfer" shall mean:
(a) any pro rata distribution of Restricted Securities by either
Trivest Investor to its partners (in accordance with their
respective agreements of limited partnership); provided, that
the restrictions contained in this Agreement shall continue
to be applicable to Restricted Securities after any such
transfer; provided, further, that the transferees of such
Restricted Securities have agreed in writing to be bound by
the provisions of this Agreement relating to Restricted
Securities; provided, further, that any such distribution of
Restricted Securities by the Lead Trivest Investor shall
require the consent of a majority in interest of the limited
partners of the Institutional Investor;
(b) any transfer of Restricted Securities by an Individual
Investor to or among such Individual Investor's Family Group
or by will or pursuant to applicable laws of descent and
distribution to an Individual Investor's Family Group;
provided, that the restrictions contained in this Agreement
shall continue to be applicable to Restricted Securities
after any such transfer; provided, further, that the
transferees of such Restricted Securities have agreed in
writing to be bound by the provisions of this Agreement
relating to Restricted Securities;
(c) any transfer to the public pursuant to a registration
effected in accordance with section 5 of this Agreement; or
(d) any transfer made in compliance with sections 3, 4 or 6 of
this Agreement.
"Family Group" shall mean an individual's spouse and lineal
descendants, parents, grandparents and any family limited partnership or trust
or other fiduciary relationship solely for the benefit of such individual
and/or such individual's spouse, parents, grandparents and/or lineal
descendants.
"Indemnified Person" shall have the meaning specified in section 5.
"Merger" shall mean the merger of Trivest Furniture Corporation with
and into WinsLoew Furniture, Inc., which shall be the surviving corporation.
"Notice of Sale" shall have the meaning specified in section 6.
"Notice of Transfer" shall have the meaning specified in section 4.
"Person" shall mean any individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"qualification" or "compliance" shall mean the qualification or
compliance of all Registrable Shares included in any registration pursuant to
section 5 under all applicable blue sky or other applicable securities laws.
2
<PAGE> 3
"Qualified Public Offering" shall mean a firm commitment underwritten
public offering of the Company's Common Stock underwritten by a nationally
recognized full-service investment bank pursuant to which the aggregate gross
proceeds received by the Company is at least $20,000,000 at a price per share
of not less than $10.00 (following appropriate adjustment in the event of any
stock dividends, stock split, combination or other similar recapitalization
affecting such shares).
"register", "registered" and "registration" as used in section 5 refer
to a registration effected by filing a registration statement in compliance
with the Securities Act to permit the sale and disposition of the Registrable
Shares and any amendment filed or required to be filed to permit any such
disposition.
"Registrable Shares" shall mean any shares of Company Common Stock
held by the Investors, except that, as to any particular Registrable Shares,
such securities, once issued, shall cease to be Registrable Shares when (a) a
registration statement covering such securities has been declared effective and
such securities have been disposed of pursuant to an effective registration
statement, or (b) such securities have been sold to the public without
registration in accordance with Rule 144 (or any similar provision then in
force) under the Securities Act.
"Registration Expenses" shall mean all fees, expenses and
disbursements related to any registration, qualification or compliance pursuant
to section 5, including, without limitation, all registration, filing, rating
and listing fees, blue sky fees and expenses, printing expenses, reasonable
fees and disbursements of counsel (including, without limitation, the
reasonable fees, expenses and disbursements of one counsel for the holder or
holders of the Registrable Shares), and reasonable expenses of any special
audits incidental to or required by any registration, qualification or
compliance, except that Registration Expenses shall not include any Selling
Expenses.
"Remaining Holders" shall have the meaning specified in section 3.
"Restricted Securities" shall mean all shares of Company Common Stock
and all securities convertible into or exercisable or exchangeable for Company
Common Stock.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Subscription Agreement" shall mean the Exchange and Subscription
Agreement dated the date hereof by and among the Company and each of the
Investors named therein, in the form attached hereto as Exhibit A, as amended,
modified or supplemented from time to time.
"Selling Expenses" shall mean all underwriters' discounts, selling
commissions, transfer taxes and other similar expenses (except to the extent
included in Registration Expenses) attributable to the Registrable Shares.
"Subject Securities" shall have the meaning specified in section 6.
"transfer" shall mean any issue, sale, pledge, gift, assignment or
other transfer.
3
<PAGE> 4
"Trivest Affiliates" shall mean each of the Trivest Investors and each
other Person that is controlled directly or indirectly by the Persons now or
hereafter controlling directly or indirectly the Trivest Investors.
2. General Restriction on Transfers of Restricted Securities. Any
transfer of Restricted Securities by or to any Investor which is not
consummated in accordance with this Agreement shall be void. The Investors
shall not directly or indirectly transfer (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law)
any interest in or any beneficial interest in any Restricted Securities except
pursuant to an Exempt Transfer; provided, that the Lead Trivest Investor may
not so transfer any Restricted Securities or any interest therein (except
pursuant to clause (a) of the definition of "Exempt Transfer") unless the
Institutional Investor contemporaneously transfers an Applicable Percentage of
the Restricted Securities owned by (and/or purchasable by) the Institutional
Investor at the same per share price and on the same terms and conditions,
subject to the provisions of sections 3 and 4 hereof, as applicable.
3. Drag Along Rights.
(a) If, at any time following the date hereof, the Lead
Trivest Investor shall enter into an agreement to sell, in a single transaction
or a series of transactions, any of the Restricted Securities at the time owned
by (and/or purchasable by) the Lead Trivest Investor to any Person or group of
Persons who are not Affiliates of the Company or any of the Trivest Investors
(the "Buyer") (including, without limitation, a sale of the Company by merger,
consolidation, sale of all or substantially all of its assets, sale of all of
the outstanding Company Common Stock or otherwise), then the Lead Trivest
Investor may require each holder of Restricted Securities (the "Remaining
Holders") to sell all of the Restricted Securities owned by (and/or purchasable
by) such Remaining Holders to the Buyer contemporaneously with the sale by the
Lead Trivest Investor and at the same price per share and on the same terms and
conditions as are applicable to the Restricted Securities to be sold by the
Lead Trivest Investor; provided, that if the Lead Trivest Investor is selling
less than all of Restricted Securities owned by (and/or purchasable by) it,
each Remaining Holder shall sell an Applicable Percentage of the Restricted
Securities owned by (and/or purchasable by) such Remaining Holder; provided,
further, that, notwithstanding anything to the contrary herein, the
Institutional Investor shall not be required in connection with any such
transaction to make any representation or warranty other than those relating to
the Institutional Investor's power and authority to effect such transfer
without contravention of any of its organizational documents or any agreement,
document, instrument, judgment, decree, order, law, statute, rule or regulation
applicable to it or to any of its properties and as to the Institutional
Investor's title to the Restricted Securities to be transferred by it being
free and clear of liens (other than liens created hereby or liens of general
applicability arising under applicable Securities laws); provided, further,
that, notwithstanding anything to the contrary herein, the Institutional
Investor shall be obligated to indemnify the proposed transferee or transferees
upon the same terms and conditions as are applicable to the indemnification
given by the Lead Trivest Investor in connection with such proposed transfer so
long as (i) all indemnification obligations are several, and not joint and
several, among all transferors in proportion to the consideration paid to each
transferor and (ii) the maximum obligation of the Institutional Investor shall
not exceed the net cash proceeds actually received by it as a result of such
transfer. Without limitation as to the foregoing, the Remaining Holders shall
4
<PAGE> 5
consent to and raise no objections against such a sale. If such sale is
structured as a merger or consolidation, each Remaining Holder shall waive any
dissenters rights, appraisal rights or similar rights in connection with such
merger or consolidation.
(b) If the Lead Trivest Investor wishes to exercise the right
granted pursuant to section 3(a), the Lead Trivest Investor must give written
notice to such effect to each of the Remaining Holders (a "Drag-Along Notice")
not less than 20 nor more than 60 days prior to the date upon which such sale
is scheduled to close. Each Drag-Along Notice shall (i) specify in reasonable
detail all of the terms and conditions upon which such sale is to occur
(including a description of all consideration payable in connection with the
sale) and (ii) make explicit reference to this section 3 and state that each of
the Remaining Holders is obligated to sell its Restricted Securities pursuant
to such sale. Upon request by any Remaining Holder, the Lead Trivest Investor
and the Company shall provide to each Remaining Holder copies of all
documentation relating to the proposed sale as any such holder may from time to
time reasonably request.
(c) If the Lead Trivest Investor exercises the right granted
pursuant to section 3(a), subject to the consummation of the sale of all
Restricted Securities to the Buyer and subject to compliance with the other
applicable terms of this Agreement and the Subscription Agreements, each of the
Remaining Holders shall promptly take such actions and shall promptly execute
such documents and instruments as shall be necessary and desirable to
consummate the proposed sale.
(d) At the closing of any such sale, each of the Remaining
Holders shall deliver a certificate or certificates, registered in such
holder's name, properly endorsed and with all required transfer stamps, if any,
representing the securities being sold by such holder against delivery of the
applicable consideration from the Buyer.
4. Co-Sale Rights of the Institutional Investor and Individual
Investors with Respects to Transfers by the Lead Trivest Investor.
(a) Subject to section 3, if the Lead Trivest Investor at any
time proposes to transfer any Restricted Securities (other than pursuant to any
other Exempt Transfer by the Lead Trivest Investor), then, as a condition
precedent thereto, the Lead Trivest Investor shall afford the Institutional
Investor and each Individual Investor the right to participate in such transfer
in accordance with this section 4.
(b) The Lead Trivest Investor shall give written notice to
the Institutional Investor and each Individual Investor (a "Notice of
Transfer") not less than twenty (20) nor more than sixty (60) days prior to any
proposed transfer of any such Restricted Securities. Each such Notice of
Transfer shall:
(i) specify in reasonable detail (A) the number and
type of Restricted Securities which the Lead Trivest Investor proposes
to transfer, (B) the identity of the proposed transferee or
transferees of such Restricted Securities, (C) the time within which,
the price per share at which and all other terms and conditions upon
which the Lead Trivest Investor proposes to transfer such Restricted
Securities, (including a description of all consideration payable in
connection with the transfer) and (D) the percentage of the Restricted
5
<PAGE> 6
Securities then owned by the Lead Trivest Investor which the Lead
Trivest Investor proposes to transfer to such proposed transferee or
transferees; and
(ii) make explicit reference to this section 4 and
state that the right of the Institutional Investor and each Individual
Investor to participate in such transfer under this section 4 shall
expire unless exercised within fifteen (15) days after receipt of such
Notice of Transfer.
(c) The Institutional Investor and each Individual Investor
shall have the right to transfer to the proposed transferee or transferees that
number of Restricted Securities which is equal to the Applicable Percentage of
the Restricted Securities owned by (and/or purchasable by) such Investor, at
the same price per share and on the same terms and conditions as are applicable
to the proposed transfer by the Lead Trivest Investor; provided, that,
notwithstanding anything to the contrary herein, the Institutional Investor
shall not be required in connection with any such transaction to make any
representation or warranty other than those relating to the Institutional
Investor's power and authority to effect such transfer without contravention of
any of its organizational documents or any agreement, document, instrument,
judgment, decree, order, law, statute, rule or regulation applicable to it or
to any of its properties and as to the Institutional Investor's title to the
Restricted Securities to be transferred by it being free and clear of liens
(other than liens created hereby or liens of general applicability arising
under applicable Securities laws); provided, further, that, notwithstanding
anything to the contrary herein, the Institutional Investor shall be obligated
to indemnify the proposed transferee or transferees upon the same terms and
conditions as are applicable to the indemnification given by the Lead Trivest
Investor in connection with such proposed transfer so long as (i) all
indemnification obligations are several, and not joint and several, among all
transferors in proportion to the consideration paid to each transferor and (ii)
the maximum obligation of the Institutional Investor shall not exceed the net
cash proceeds actually received by it as a result of such transfer.
(d) The Institutional Investor and each Individual Investor
must notify the Lead Trivest Investor, within fifteen (15) days after receipt
of the Notice of Transfer, if such Investor desires to accept such offer and to
transfer any of its Restricted Securities in accordance with this section 4.
The failure of any such Investor to provide such notice within such 15-day
period shall, for the purposes of this section 4, be deemed to constitute a
waiver by such Investor of its right to transfer any of its Restricted
Securities in connection with the proposed transfer described in such Notice of
Transfer. The Lead Trivest Investor shall use all commercially reasonable
efforts to obtain the agreement of the prospective transferee or transferees to
the participation of each Investor electing to participate in such proposed
transfer and shall not consummate any such proposed transfer unless each such
electing Investor is permitted to participate in accordance with the provisions
of this section 4. Neither the Institutional Investor nor any Individual
Investor shall be obligated to transfer any Restricted Securities pursuant to
this section 4. Any and all transfers of Restricted Securities by any such
Investor pursuant to this section 4 shall be made concurrently with the
transfer of Restricted Securities by the Lead Trivest Investor.
(e) Subject to the consummation of the transfer contemplated
by the Notice of Transfer and subject to compliance with the other applicable
terms of this Agreement and the Subscription Agreements, each Investor that
exercises its right granted pursuant to section 4(a) shall promptly take such
6
<PAGE> 7
actions and shall promptly execute such documents and instruments as shall be
necessary and desirable to consummate the proposed sale.
(f) At the closing of any such transfer, each Investor which
exercises the right granted pursuant to section 4(a) shall deliver a
certificate or certificates, registered in such Investor's name, properly
endorsed and with all required transfer stamps, if any, representing the
securities being sold by such Investor against delivery of the applicable
consideration by the proposed transferee.
(g) Notwithstanding anything to the contrary contained in
this section 4, no Individual Investor shall have any rights pursuant to this
section 4 to participate in any other Exempt Transfer by either Trivest
Investor.
5. Registration Rights.
5.1 Incidental Registration.
(a) If, after a Qualified Public Offering, the Company at any
time or from time to time shall determine to effect the registration,
qualification and/or compliance of any of its equity securities (otherwise than
pursuant to a registration on a form inappropriate for an underwritten public
offering or relating solely to securities to be issued in a merger, acquisition
of the stock or assets of another entity or in a similar transaction or
relating solely to securities issued or to be issued under any employee stock
option or purchase plan), then, in each such case, the Company shall:
(i) promptly give written notice of the proposed
registration, qualification and/or compliance (which shall include a
list of the jurisdictions in which the Company intends to register or
qualify such securities under the applicable blue sky or other
securities laws) to each holder of any Registrable Shares; and
(ii) use all commercially reasonable efforts to
include among the securities which it then registers or qualifies all
Registrable Shares specified by any holder thereof in a written
request or requests, made within 30 days after receipt of such written
notice from the Company; provided, however, that the Company shall not
include the Registrable Shares of the Lead Trivest Investor unless it
includes Registrable Shares of both Trivest Investors, pro rata based
upon the number of Registrable Shares owned by such holders.
(b) The obligations of the Company under this section 5.1 are
subject to the following qualifications:
(i) subject to section 5.8, the Company shall pay
all Registration Expenses related to any registration, qualification
and/or compliance requested pursuant to this section 5.1 and the
holders of the Registrable Shares shall pay their respective Selling
Expenses pro rata on the basis of the Registrable Shares so registered
and sold; and
7
<PAGE> 8
(ii) in the event that any registration pursuant to
this section 5.1 shall be, in whole or in part, an underwritten public
offering of Company Common Stock, the number of Registrable Shares to
be included in such an underwriting may be reduced (pro rata among the
requesting holders based upon the number of Registrable Shares owned
by such holders) if and to the extent that the managing underwriter
shall be of the opinion that the inclusion of some or all of the
Registrable Shares would adversely affect the marketing of the
securities to be sold by the Company therein; provided, that any such
limitation shall be imposed in such manner so as to avoid any
diminution in the number of shares the Company may register for sale
by (i) giving first priority for the shares to be registered for
issuance and sale by the Company, (ii) giving second priority for the
shares to be registered pursuant to this section 5.1 and (iii) giving
third priority for other securities requested to be in such
registration not covered by clauses (i) or (ii) above.
5.2 S-3 Registration. In addition to the rights under section
5.1, so long as the Company is then eligible to file a registration statement
on Form S-3 (or any successor form) under the Securities Act, then, upon the
written request by the holder or holders of at least 20% of the Registrable
Shares, the Company shall use all commercially reasonable efforts to effect the
registration (on such Form S-3 (or any successor form)), qualification and
compliance of all of the Registrable Shares of the holder or holders making
such request; provided, that the Company shall not be obligated to effect any
such registration unless the reasonably anticipated price to the public of the
Registrable Shares to be registered and sold pursuant thereto exceeds
$2,000,000; provided, however, that the Company shall not include the
Registrable Shares of the Lead Trivest Investor unless it includes Registrable
Shares of both Trivest Investors, pro rata based upon the number of Registrable
Shares owned by such holders. The Company shall not be obligated to effect more
than three (3) registrations pursuant to this section 5.2, nor shall it be
obligated to effect any registration requested pursuant to this section 5.2
within one hundred eighty (180) days after the effective date of any
registration in which the holders of Registrable Shares shall have been
permitted to fully participate under section 5.1. Subject to section 5.8, the
Company shall pay all Registration Expenses related to each such registration,
qualification and compliance contemplated by this section 5.2, and the holders
of the Registrable Shares shall pay their respective Selling Expenses pro rata
on the basis of the Registrable Shares so registered and sold.
5.3 Registration Procedures. In the case of each
registration, qualification and/or compliance contemplated by this section 5,
the Company shall keep the holder or holders of Registrable Shares advised in
writing as to the initiation of proceedings for such registration,
qualification and compliance and as to the completion thereof, and shall advise
each such holder, upon request, of the progress of such proceedings. In
addition, the Company shall follow procedures customarily observed by issuers
in public offerings, and accord to the holder or holders of Registrable Shares
all rights (including, without limitation, the right to perform appropriate
"due diligence") customarily accorded to selling shareholders in secondary
distributions and accord such rights to the managing underwriters if the
transaction in question is an underwritten public offering. At the expense of
the Company or of the party or parties bearing the expenses of such
registration, qualification and compliance, the Company shall (a) use all
commercially reasonable efforts to keep such registration, qualification and
compliance current and effective by such action as may be necessary or
appropriate, including, without limitation, the filing of post-effective
8
<PAGE> 9
amendments and supplements to any registration statement or prospectus, for
such period (not to exceed one hundred eighty (180) days in the case of section
5.1 and ninety (90) days in the case of section 5.2) as is necessary to permit
the sale and distribution of the Registrable Shares pursuant thereto, (b) use
all commercially reasonable efforts to take all necessary action under any
applicable blue sky or other applicable securities law to permit such sale
and/or distribution, all as reasonably requested by the holder or holders of
Registrable Shares included therein, and comply with applicable requirements of
all regulatory entities, provided, that the Company shall not be required to so
register or qualify the Registrable Shares in any jurisdiction if, solely as a
result thereof, the Company must qualify generally to do business therein,
consent to general service of process therein, or submit to liability for state
or local taxes, (c) furnish each holder of Registrable Shares included therein
such number of registration statements, prospectuses, supplements, amendments,
and offering circulars as such holder from time to tie may reasonably request,
(d) use all commercially reasonable efforts to list all Registrable Shares on
each securities exchange on which securities of the same class are then listed
and (e) use all commercially reasonable efforts to furnish (or cause to be
furnished) to the managing underwriters all undertakings, agreements,
certificates, opinions, financial statements and "comfort letters" of the sort
customarily provided to managing underwriters, if the transaction in question
is an underwritten public offering. In connection with and as a condition to
each registration hereunder, the sellers of Registrable Shares shall (a)
provide such information and execute such documents as may reasonably be
required in connection with such registration, (b) agree to sell Registrable
Shares on the basis provided in any underwriting arrangements, and (c) complete
and execute all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents reasonably required or requested under the terms
of such underwriting arrangements. In connection with each registration
pursuant to section 5.1 covering an underwritten public offering, the Company
and each seller agree to enter into a written agreement with the managing
underwriter in such form and containing such provisions as are customary in the
securities business for such an arrangement between such underwriter and
companies of the Company's size and investment stature.
5.4 Indemnification.
(a) The Company shall indemnify, defend and hold harmless
each holder of Registrable Shares included in any registration, qualification
or compliance contemplated by this section 5 and each Person, if any, who
controls each such holder within the meaning of applicable securities laws, and
their respective directors, officers, employees, agents, advisors and
Affiliates (each, an "Indemnified Person"), to the fullest extent enforceable
under applicable law against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, supplement, amendment or offering circular related to
any registration, qualification or compliance or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation (or
alleged violation) of applicable securities laws in connection with any such
registration, qualification or compliance, and shall reimburse each such
Indemnified Person for any legal or any other expenses reasonably incurred in
connection with investigating and/or defending (and/or preparing for any
investigation or defense of) any such claim, loss, damage, liability, action or
violation; provided, that the Company shall not be liable in any such case to
any such Indemnified Person if, but only to the extent that, any such claim,
loss, damage, liability, action, violation or expense arises out of or is based
upon any untrue statement or alleged untrue statement in or omission or alleged
9
<PAGE> 10
omission if so made in reliance upon and in conformity with written information
furnished to the Company by such Indemnified Person specifically for use
therein; provided, further, however, that the Company shall not be liable to an
Indemnified Person in any such case to the extent that any such loss, claim,
damage, liability or action arises out of or is based upon an untrue or alleged
untrue statement or omission or an alleged omission made in any preliminary
prospectus or final prospectus if (1) such Indemnified Person failed to send or
deliver a copy of the final prospectus or prospectus supplement with or prior
to the delivery of written confirmation of the sale of the Registrable Shares,
and (2) the final prospectus or prospectus supplement would have corrected such
untrue statement or omission.
(b) Each holder of Registrable Shares shall, if securities
held by such holder are included in a registration, qualification or compliance
contemplated pursuant to this section 5, indemnify, defend and hold harmless
the Company, each of its directors and officers and each Person, if any, who
controls the Company or such underwriter within the meaning of applicable
securities laws, and their respective directors, officers, employees, agents,
advisors and Affiliates, to the fullest extent enforceable under applicable law
against all claims, losses, damages and liabilities (or actions in respect
thereto) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, supplement, amendment or offering circular related to any such
registration, qualification or compliance, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall reimburse
the Company and such directors, officers or other Persons for any legal or any
other expenses reasonably incurred in connection with investigating or
defending (and/or preparing for any investigation or defense of') any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) was made in (or omitted from) such registration
statement, prospectus, supplement, amendment or offering circular in reliance
upon and in conformity with written information furnished to the Company by
such holder specifically for use therein; provided, that the aggregate
liability of any such holder under this section 5.4 shall be limited to the net
sales proceeds actually received by such holder as a result of the sale by it
of securities in such registration, qualification or compliance.
(c) Promptly after receipt by an indemnified party under this
section 5.4 of notice of the commencement of any action, such party shall, if a
claim in respect thereof is to be made against the indemnifying party under
this section 5.4, notify the indemnifying party in writing thereof, but the
omission so to notify the indemnifying party shall not relieve the indemnifying
party from any liability which it may have to such indemnified party except to
the extent the indemnifying party is prejudiced by such omission. In case any
such action shall be brought against any indemnified party and such indemnified
party shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel reasonably
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
part, under this section 5.4 for any legal expenses subsequently incurred by
such indemnified party in connection with the defense thereof, provided, that,
if the defendants in any such action include both the indemnified party and the
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<PAGE> 11
indemnifying party and the indemnified party shall have reasonably concluded
(based upon the advice of counsel) that there may be reasonable defenses
available to it that are different from or additional to those available to the
indemnifying party or if the interests of the indemnified party reasonably may
be deemed to conflict with the interests of the indemnifying party, then the
indemnified party shall have the right to select one separate counsel and to
assume such legal defenses and otherwise to participate in the defense of such
action, with the expenses and fees of such one separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred, it being understood, however, that the indemnifying party
shall not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel as required by the local rules of such jurisdiction) at any time for
all such indemnified parties.
(d) To provide for just and equitable, contribution to joint
liability under the Securities Act in any case in which (i) an indemnified
party makes a claim for indemnification pursuant to this section 5.4 but it is
judicially determined (by the entry of a final judgment or decree by a court of
competent jurisdiction and the expiration of time to appeal or the denial of
the last right of appeal) that such indemnification may not be enforced in such
case notwithstanding the fact that this section 5.4 provides for
indemnification in such case, or (ii) contribution under the Securities Act may
be required on the part of the Company, any selling holder of Registrable
Securities, any director or officer of the Company or any controlling person
(within the meaning of applicable securities laws) of any of the foregoing
Persons in circumstances for which indemnification is provided under this
section 5.4, then, and in each such case, the Company and such selling holder
shall contribute to the aggregate losses, claims, damages or liabilities to
which they may be subject (after contribution from others) as is appropriate to
reflect the relative fault of the Company and such holder in connection with
the statements or omissions which resulted in such losses, claims, damages or
liabilities, as well as the relative benefit received by the Company and such
holder as a result of the offering in question, it being understood that the
parties acknowledge that the overriding equitable consideration to be given
effect in connection with this provision is the ability of one party or the
other to correct the statement or omission which resulted in such losses,
claims, damages or liabilities, and that it would not be just and equitable if
contribution pursuant thereto were to be determined by pro rata allocation or
by any other method of allocation which does not take into consideration the
foregoing equitable considerations; provided, that (x) in any such case no
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation, and (y) in no event
shall any, holder of Registrable Shares be obligated to make any contribution
in excess of the amount specified in section 5.4(b).
5.5 Restrictions on Other Agreements. The Company shall not
grant any right relating to the registration, qualification or compliance of
its securities if the exercise thereof violates or is inconsistent with any of
the rights granted under this section 5, without the written consent of each
Trivest Investor, which consent may be given or withheld in the sole discretion
of such holders. The Company shall not permit any of its Subsidiaries to
effect, or to grant any right relating to, the registration of its securities.
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<PAGE> 12
5.6 Limitations on Registration Rights.
(a) Notwithstanding anything to the contrary contained in
this Agreement, the Company may delay the filing or effectiveness of a
registration statement under section 5.2 for such time as may reasonably be
required by the Company (i) to obtain such audited and unaudited financial
statements as may be required by law to be included in the registration
statement; provided, that the Company shall use all commercially reasonable
efforts to obtain such financial statements as promptly as practicable, or (ii)
if the Company's board of directors believes that the offering of Registrable
Shares pursuant thereto would have a material adverse effect upon the Company;
provided, further, however, that the Company's ability to delay such
registration shall be limited to durations of no longer than one hundred eighty
(180) days and the Company shall not delay more than once during any twelve
(12) month period.
(b) Notwithstanding anything to the contrary contained in
this Agreement, the Company may delay the filing or effectiveness of, or may
terminate or withdraw, any registration statement referred under section 5.1 at
any time for any reason whatsoever without incurring any liability to the
holders of Registrable Shares, but the Company shall be and remain obligated to
pay all Registration Expenses, if any, incurred in connection therewith.
(c) If during any period when a registration statement
covering Registrable Shares filed pursuant to section 5.2 is effective, Company
proposes to file a registration statement on Forms S-1 or S-4 (or any of their
respective successor forms), then the Company shall have the right to terminate
the effectiveness of the registration statement covering such Registrable
Shares; provided, that the Company shall, within ninety (90) days thereof,
prepare and file a registration statement (the "Company Registration
Statement") covering the Registrable Shares sought to be registered by the
Company and the Registrable Shares for which such effective registration
statement was filed. In any such event, the participating holders shall include
such Registrable Shares in or with the Company Registration Statement. If the
Company does not file a Company Registration Statement within such ninety (90)
day period, then the holders shall have one additional right to require a
registration under section 5.2.
5.7 Holdback Agreement.
(a) In addition to any other restrictions on transfer of the
Registrable Shares contained in this Agreement, if the Company shall at any
time register securities under the Securities Act (including, without
limitation, any registration relating to a Qualified Public Offering or any
registration pursuant to this section 5) for offer or sale to the public, then
none of the holders of Registrable Shares shall make any short sale of, grant
an option for the transfer of, or otherwise transfer, any Registrable Shares
(other than (i) for the public sale of those Registrable Shares included in and
sold pursuant to such registration in accordance with this section 5 or (ii) in
a private sale complying with this Agreement to transferee who agrees to the
restrictions in this section 5.7(a)) without the prior written consent of the
Company for such reasonable period (but in no event longer than 180 days
following the effective date of the related registration statement) as may be
designated in writing to the holders of Registrable Shares by the Company, or,
if the registration shall be, in whole or in part, an underwritten offering, by
the managing underwriter; provided, that, in each case (except as set forth in
the following proviso), all of the Investors are subject to the same
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<PAGE> 13
restrictions; provided, further, that, after the Company's initial public
offering, the foregoing provisions of this section 5.7(a) shall only apply to a
holder of Registrable Shares that (A) is offering Registrable Shares for sale
to the public in connection with such registration or (B) beneficially owns (as
that term is used in Rule 13d-3 promulgated under the Exchange Act) five
percent or more of the outstanding shares of Company Common Stock.
(b) In addition to the restriction contained in section
5.7(a), each holder of Registrable Shares shall execute any restrictive
agreement or "lock-up" agreement that any underwriter engaged by the Company in
connection with any underwritten public offering shall request; provided, that
(i) the restrictive or "lock-up" period thereunder is not more than one hundred
eighty (180) days after the effective date of the registration statement for
which such restrictive agreement or "lock-up" agreement is sought and (ii),
except as set forth in the following proviso, all of the Investors are subject
to the same restrictions; provided, further, that, after the Company's initial
public offering, the foregoing provisions of this section 5.7(b) shall only
apply to a holder of Registrable Shares that (A) is offering Registrable Shares
for sale to the public in the offering or (B) beneficially owns (as that term
is used in Rule 13d-3 promulgated under the Exchange Act) five percent or more
of the outstanding shares of Company Common Stock.
(c) The Company may impose stop-transfer instructions with
respect to the Registrable Shares until the end of any restrictive period
provided for pursuant to this section 5.7.
5.8 Registration Expenses and Selling Expenses. The Company
shall pay all Registration Expenses related to any registration, qualification
and/or compliance contemplated by this Agreement, except (i) to the extent that
such Registration Expenses relate to any Registrable Shares requested to be
included in any registration proceeding pursuant to section 5.1, the request of
which has been withdrawn by the holders of a majority of the Registrable Shares
requested to be so registered, or (ii) for those related exclusively to a
registration proceeding begun pursuant to section 5.2, the request of which has
been subsequently withdrawn by the holders of a majority of the Registrable
Shares requested to be registered, in either of which cases, such Registration
Expenses shall be borne by the holders of Registrable Shares requesting or
causing such withdrawal, and, in any such case, such holders shall reimburse
the Company for all Registration Expenses paid or incurred by the Company in
connection with such withdrawn registration proceeding prior to such
withdrawal.
5.9 Changes in Company Common Stock. If, and as often as,
there is any change in the Company Common Stock by way of a stock split, stock
dividend, combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the Company Common
Stock as so changed.
5.10 Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Securities and Exchange
Commission that may at any time permit the resale of the Registrable Shares
without registration, the Company will at all times after 90 days after the
first registration statement covering a public offering of securities of the
Company under the Securities Act shall have become effective or following
registration under Section 12 of the Exchange Act, use its commercially
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<PAGE> 14
reasonable efforts to: (i) make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act; (ii)
file with the Securities and Exchange Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and (iii) furnish to each holder of Registrable Shares forthwith
upon request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such holder to sell any Registrable Shares without
registration.
6. Right of First Offer.
(a) At least sixty (60) days prior to making any transfer
(other than pursuant to another Exempt Transfer), each Individual Investor
shall deliver a written notice (the "Notice of Sale") to the Company and the
other Investors. The Notice of Sale shall disclose in reasonable detail the
identity of the prospective transferees) and the terms and conditions of the
proposed transfer. The Company shall use all commercially reasonable efforts to
purchase all (but not less than all) of the Restricted Securities to be
transferred (the "Subject Securities") upon the same terms and conditions as
those set forth in the Notice of Sale within sixty (60) days after the
Company's receipt of the Notice of Sale. If, after all commercially reasonable
efforts, the Company is unable to effect such purchase during such sixty (60)
day period, then the Company shall deliver a written notice thereof to each
Investor within seventy (70) days after the Company's receipt of the Notice of
Sale. Upon receipt of such notice from the Company, the Lead Trivest Investor
and the other Individual Investors may elect to purchase all (but not less than
all) of the Subject Securities upon the same terms and conditions as those set
forth in the Notice of Sale by delivering a written notice of such election to
the Investor within sixty (60) days after their receipt of the Company's
notice. If more than one of such Investors elects to purchase all of the
offered shares, such shares shall be purchased by such Investors so electing
pro rata based upon the number of shares of Common Stock owned by each such
Investor. Each such Investor shall be given up to sixty (60) days (after it has
been determined that such Investor has such right) to consummate the purchase
and sale of Subject Securities (the "Authorization Period"). If neither any
Individual Investor nor the Lead Trivest Investor has elected to purchase all
of the Subject Securities, then the selling Investor may transfer the Subject
Securities at a price and on terms no more favorable to the transferee(s)
thereof than specified in the Notice of Sale during the sixty (60) day period
immediately following the Authorization Period. Any Subject Securities not
transferred within such sixty (60) day period shall be subject to the
provisions of this section 6(a) upon subsequent transfer.
(b) The restrictions on the transfer set forth in this
section 6 shall continue with respect to each share of Restricted Securities
until the date on which such share has been transferred in a transaction
permitted by this section 6; provided, however, that each such share shall
continue to be subject to all other provisions of this Agreement.
7. Board Observation Rights. The Company shall permit all individuals
designated by the Trivest Investors, including pursuant to Section 5.4J of the
Institutional Investor's agreement of limited partnership, to have the
following rights: (i) to attend (without voting rights, unless such party is
14
<PAGE> 15
otherwise a director) all meetings of the Company's Board of Directors; and
(ii) to receive copies of all meeting minutes and all materials distributed at
or prior to meetings or otherwise distributed to the directors of the Company,
subject to the obligation to maintain the confidentiality of the discussions
and resolutions of such meetings and all materials circulated thereat or in
connection therewith, provided, however, that such individuals shall be
permitted to share such information with the Trivest Investors, their limited
partners and their respective authorized representatives and with other holders
of Company Common Stock.
8. Stock Option Plans. The Company shall not create or adopt any
employee stock option or stock appreciation rights plan or arrangement prior to
a Qualified Public Offering; provided, however, that this section 8 shall
terminate effective upon the consummation of a Qualified Public Offering and
shall not be deemed to prohibit any such plan or arrangement from becoming
effective upon the consummation of a Qualified Public Offering; provided,
further, that nothing herein shall be deemed to prohibit the Company from (i)
issuing Company Common Stock to employees and independent sales representatives
of the Company and its subsidiaries under the 1999 WinsLoew Key Employee Equity
Plan or (ii) issuing Company Common Stock in any other transaction for fair
market value as determined by the Company's board of directors from time to
time; provided, further, that the consideration for the issuance of the Common
in both (i) and (ii) shall consist solely of cash and/or promissory notes of
the purchaser thereof.
9. Affiliated Transactions; Limitation on Fees Payable to Trivest.
(a) Subject to the provisions of Section 9(b), below, the
Company will not, and will not permit any of its subsidiaries to, engage in any
transaction (including, without limitation, the purchase, sale or exchange of
any properties and assets or the rendering of any services or the payment of
compensation) with an Affiliate of the Company or of any of its subsidiaries on
terms less favorable to the Company or any of its subsidiaries in any material
respect than would be obtainable at the time in comparable transactions with a
Person that is not such an Affiliate.
(b) The Company shall not, and shall not permit any of its
subsidiaries to, make any payment of any directors fee, management fee or
similar amount to the Lead Trivest Investor or any of its Affiliates; provided,
however, that:
(i) the Company may pay to Trivest II, Inc.
management fees, transaction fees and other amounts (including the
reimbursement of reasonable out-of-pocket expenses) required or
permitted to be paid pursuant to the Management Agreement, dated as of
the date hereof, between the Company and Trivest II, Inc. (as in
effect on the date of this Agreement), a copy of which is attached to
this Agreement as Exhibit B;
(ii) the Company or any of its subsidiaries may
reimburse Trivest II, Inc. for the allocable charges (including the
reimbursement of reasonable out-of-pocket expenses) of the Trivest
Legal Department for services actually rendered to the Company and its
subsidiaries, provided that such charges are at rates no less
favorable to the Company than rates which would be charged for similar
services rendered by persons who are not Affiliates of the Company or
the Lead Trivest Investor; and
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<PAGE> 16
(iii) the Company may pay to Trivest II, Inc., at or
promptly following the effective time of the Merger, a transaction fee
of no more than $3.0 million and may reimburse Trivest II, Inc. and
its Affiliates for (i) reasonable out-of-pocket expenses incurred by
them in connection with the Merger (including, without limitation, the
financing thereof) and (ii) allocable charges (including the
reimbursement of reasonable out-of-pocket expenses) of the Trivest
Legal Department for services actually rendered in connection with the
Merger (including, without limitation, the financing thereof and any
litigation arising in connection therewith), provided that such
charges are at rates no less favorable to the Company than rates which
would be charged for similar services rendered by persons who are not
Affiliates of the Company or the Lead Trivest Investor.
10. Termination. Notwithstanding anything to the contrary contained in
this Agreement, sections 2, 3, 4, 6, 7 and 9 of this Agreement shall terminate
after a Qualified Public Offering upon the liquidation of the Institutional
Investor in accordance with its agreement of limited partnership.
11. Notices. All communications provided for herein shall be in
writing and sent (a) by telecopy or electronic mail if the sender on the same
day sends a confirming copy of such communication by a recognized overnight
delivery service (charges prepaid), (b) by a recognized overnight delivery
service (charges prepaid), or (c) by messenger. The respective addresses of the
parties hereto for the purposes of this Agreement are set forth on the
signature pages or Exhibit C attached hereto. Any party may change its address
(or telecopy number) by notice to each of the other parties in accordance with
this section 11. Communications under this Agreement shall be deemed given only
when actually received.
12. Binding Agreement. This Agreement shall be binding on and shall
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
13. Amendments and Waivers. This Agreement may not be amended except
by a written instrument signed by the Company and each Trivest Investor;
provided, that no amendment or waiver may adversely affect an Individual
Investor in a manner different from any other Trivest Investor without the
written consent of such Individual Investor. No course of dealing between any
parties hereto and no delay by any party in exercising its rights hereunder
shall operate as a waiver of any, rights of any party. No waiver shall be
deemed to be made by any party of its rights hereunder unless the same shall be
in writing signed on behalf of such party, and each waiver, if any, shall be a
waiver only with respect to the specific instance involved and shall in no way
impair the rights or obligations of any other party in any other respect at any
other time.
14. Specific Performance. The parties hereto stipulate that the
remedies at law of any party hereto in the event of any default or threatened
default by any other party hereto in the performance of or compliance with the
terms hereof are not and shall not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance thereof, whether by an injunction against violation
thereof or otherwise.
15. Legends. No Restricted Securities held by the parties hereto may
be transferred except pursuant to a registration under applicable securities
16
<PAGE> 17
laws or pursuant to an exemption from such registration. Until the date on
which such Restricted Securities are so registered, each certificate evidencing
the same shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHER
APPLICABLE SECURITIES LAW AND MAY NOT BE TRANSFERRED IN THE
ABSENCE OF REGISTRATION THEREUNDER OR AN EXEMPTION
THEREFROM."
So long as any Restricted Securities held by the parties hereto shall be
subject to the terms of this Agreement, all certificates evidencing the same
shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS
OF THE INVESTORS' AGREEMENT DATED AUGUST 27, 1999 AMONG THE
ISSUER HEREOF AND CERTAIN OTHER PERSONS, AS AMENDED, MODIFIED
AND SUPPLEMENTED FROM TIME TO TIME. COPIES OF SUCH AGREEMENT
ARE ON FILE AT THE ISSUER'S PRINCIPAL OFFICES AND, UPON
WRITTEN REQUEST, COPIES THEREOF SHALL BE MAILED WITHOUT
CHARGE WITHIN TEN DAYS OF RECEIPT OF SUCH REQUEST TO
APPROPRIATELY INTERESTED PERSONS."
Upon receipt from any holder of any Restricted Securities by the Company of an
opinion of counsel reasonably satisfactory to it to the effect that any of the
foregoing legends are no longer required or applicable, the Company shall
reissue the certificates evidencing the applicable Restricted Securities
without such legends.
16. Governing Law: Jurisdiction; Waiver of Jury Trial. This Agreement,
including the validity hereof and the rights and obligations of the parties
hereunder, and all amendments and supplements hereof and all waivers and
consents hereunder, shall be construed in accordance with and governed by the
domestic substantive laws of the State of Florida without giving effect to any
choice of law or conflicts of law provision or rule that would cause the
application of the domestic substantive laws of any other jurisdiction. Each of
the parties hereto, to the extent that it may lawfully do so, hereby consents
to service of process, and to be sued, in the State of Florida and consents to
the jurisdiction of the courts of the State of Florida and the United States
District Court sitting in the County of Miami-Dade, as well as to the
jurisdiction of all courts to which an appeal may be taken from such courts,
for the purpose of any suit, action or other proceeding arising out of any of
its obligations hereunder or with respect to the transactions contemplated
hereby, and expressly waives any and all objections it may have as to venue in
any such courts. Each of the parties hereto further agrees that a summons and
complaint commencing an action or proceeding in any of such courts shall be
properly served and shall confer personal jurisdiction if served personally or
by certified mail to it at its address referred to in section 11 or as
otherwise provided under the laws of the State of Florida. Notwithstanding the
foregoing, each of the parties hereto agrees that nothing contained in this
section 16 shall preclude the institution of any such suit, action or other
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<PAGE> 18
proceeding in any jurisdiction other than the State of Florida. EACH OF THE
PARTIES HERETO IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY SUIT,
ACTION OR OTHER PROCEEDING INSTITUTED BY OR AGAINST IT IN RESPECT OF ITS
OBLIGATIONS HEREUNDER OR THE TRANSACTIONS CONTEMPLATED HEREBY.
17. Miscellaneous. The headings in this Agreement are for purposes of
reference only and shall not limit or otherwise affect the meaning hereof. This
Agreement embodies the entire agreement and understanding among the parties
hereto relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to the subject matter hereof. Each
covenant contained herein shall be construed (absent an express provision to
the contrary) as being independent of each other covenant contained herein, so
that compliance with any one covenant shall not (absent such an express
contrary provision) be deemed to excuse compliance with any other covenant. If
any provision in this Agreement refers to any action taken or to be taken by
any Person, or which such Person is prohibited from taking, such provision
shall be applicable, whether such action is taken directly or indirectly by
such Person. In case any provision in this Agreement shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired hereby. This Agreement
may be executed in any number of counterparts and by the parties hereto or
thereto, as the case may be, on separate counterparts but all such counterparts
shall together constitute but one and the same instrument.
[The remainder of this page is intentionally left blank.]
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<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of the date first above written.
TRIVEST FURNITURE CORPORATION
By: /s/ William F. Kaczynski, Jr.
-----------------------------------------------
William F. Kaczynski, Jr., Vice President
TRIVEST FUND II GROUP, LTD.
By: Trivest Equities, Inc.
By: /s/ William F. Kaczynski, Jr.
------------------------------------------
William F. Kaczynski, Jr., Managing Director
TRIVEST FURNITURE PARTNERS, LTD.
By: TFP, Ltd.
By: Trivest II, Inc.
By: /s/ William F. Kaczynski, Jr.
-------------------------------------------
William F. Kaczynski, Jr., Managing Director
/s/ Bobby Tesney
---------------------------------------------------
Bobby Tesney
/s/ R. Craig Watts
---------------------------------------------------
R. Craig Watts
/s/ Stephen C. Hess
---------------------------------------------------
Stephen C. Hess
/s/ Vincent A. Tortorici, Jr.
---------------------------------------------------
Vincent A. Tortorici, Jr. (individually and as
beneficial owner of the Tortorici IRA)
/s/ Rick J. Stephens
---------------------------------------------------
Rick J. Stephens
/s/ Jerry C. Camp
---------------------------------------------------
Jerry C. Camp
/s/ Earl W. Powell
---------------------------------------------------
Earl W. Powell
/s/ Phillip T. George, M.D.
---------------------------------------------------
Phillip T. George, M.D
/s/ Brevator J. Creech, M.D.
---------------------------------------------------
Brevator J. Creech, M.D.
/s/ James Pinto
---------------------------------------------------
James Pinto
/s/ Troy D. Templeton
---------------------------------------------------
Troy D. Templeton
<PAGE> 1
EXHIBIT 10.21
EXCHANGE AND SUBSCRIPTION AGREEMENT
THIS EXCHANGE AND SUBSCRIPTION AGREEMENT (this "Agreement") is made as
of August 27, 1999, by and among Trivest Furniture Corporation, a Florida
corporation (the "Company," which term shall refer to WinsLoew Furniture, Inc.,
a Florida corporation ("WinsLoew"), upon the consummation of the merger of
Trivest Furniture Corporation with and into WinsLoew), and the investors
identified on the schedule attached hereto (collectively, the "Investors," and
each individually, an "Investor").
PRELIMINARY STATEMENTS:
A. Certain of the Investors desire to exchange certain shares of
WinsLoew's common stock, $.01 par value per share ("WinsLoew Common Stock"),
held by them for shares of the Company's common stock, $.01 par value per share
("Company Common Stock"), on the terms and subject to the conditions set forth
in this Agreement.
B. Certain of the Investors desire to purchase shares of Company
Common Stock in exchange for cash in the amount of $100 per share on the terms
and subject to the conditions set forth in this Agreement.
C. The Company desires to issue the Company Common Stock to the
Investors.
D. The Company and the Investors desire to enter into this Agreement
setting forth the terms and conditions relating to the acquisition of Company
Common Stock by the Investors.
E. Contemporaneously with the execution and delivery of this
Agreement, the Company and each Investor are executing and delivering an
Investors' Agreement that will restrict the Investors' ability to transfer the
Company Common Stock acquired hereunder and create certain other rights and
obligations in respect thereof.
F. The transactions contemplated hereby are intended to qualify as a
transaction described in Section 351 of the Internal Revenue Code of 1986, as
amended.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Exchange of WinsLoew Common Stock. Each Investor whose name appears
on Schedule A hereto hereby sells, transfers, conveys, assigns and contributes
to the Company that number of shares of WinsLoew Common Stock set forth beside
such Investor's name on Schedule A hereto, free and clear of all encumbrances.
Each such Investor has heretofore delivered or shall deliver to the Company a
certificate or certificates representing the shares of WinsLoew Common Stock
transferred by such Investor to the Company hereunder, duly endorsed in blank
or accompanied by stock powers duly executed in blank, in form and substance
satisfactory to the Company to effect such transfer. In exchange for the shares
of WinsLoew Common Stock transferred to the Company hereunder, the Company
shall issue and deliver to each such Investor a certificate or certificates for
-1-
<PAGE> 2
the number of shares of Company Common Stock set forth beside such Investor's
name on Schedule A hereto, which shares shall be validly issued, fully paid and
nonassessable.
2. Purchase of Company Common Stock. Each Investor whose name appears
on Schedule B hereto hereby subscribes for and agrees to purchase, concurrently
with the execution and delivery of this Agreement by such Investor, and the
Company hereby agrees to issue and sell to such Investor, the number of shares
of Company Common Stock set forth beside such Investor's name on Schedule B
hereto, for the aggregate purchase price set forth on Schedule B (the
"Subscription Price"). Each such Investor has heretofore delivered or shall
deliver to the Company immediately available funds in an amount equal to the
Subscription Price for such shares. In exchange for payment of the Subscription
Price hereunder, the Company shall issue and deliver to each such Investor a
certificate or certificates for the number of shares of Company Common Stock
set forth beside such Investor's name on Schedule B hereto, which shares shall
be validly issued, fully paid and nonassessable.
3. Representations and Warranties.
(a) Representations and Warranties of the Company. The
Company hereby represents and warrants to the Investors as follows:
(i) Organization, Power and Authority. The Company
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Florida. The Company has full corporate power and
authority to carry on the business in which it is engaged and to own and use
the property owned and used by it.
(ii) Authorization of Transaction. The Company has
full corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of the Company, enforceable in accordance with its
terms.
(iii) Capitalization. The authorized capital stock
of the Company consists of 1,000,000 shares of Company Common Stock, none of
which are outstanding prior to the exchange, purchase and sale of the shares of
Company Common Stock provided for herein. Upon the consummation of the
transactions contemplated by Sections 1 and 2 above, the shares of Company
Common Stock acquired by each Investor pursuant to the provisions of this
Agreement will be duly authorized, validly issued, fully paid and
nonassessable.
(b) Representations and Warranties of Investors. Each
Investor, severally and not jointly, hereby represents and warrants to the
Company with respect to such Investor and its exchange or purchase of shares of
Company Common Stock as follows:
(i) Residence. If the Investor is a natural person,
the Investor a resident of, and received this Agreement and first learned of
the offer and sale of the shares of Company Common Stock contemplated hereby
in, the State set forth opposite the name of such Investor under the heading
"State" on Schedule A or Schedule B attached hereto, as the case may be. The
Investor intends that the laws of such State govern the acquisition of such
shares by the Investor. If the Investor is a limited partnership, the Investor
is organized under and governed by the laws of, and it's principal place of
-2-
<PAGE> 3
business is located in, the State set forth opposite the name of such Investor
under the heading "State" on Schedule A or Schedule B attached hereto, as the
case may be.
(ii) Capacity; Authorization; Valid and Binding
Obligation. If the Investor is a natural person, the Investor has full capacity
to execute and deliver this Agreement and to perform the Investor's obligations
hereunder. If the Investor is a limited partnership, the Investor has full
partnership or other power and authority to enter into and perform this
Agreement in accordance with its terms. This Agreement constitutes the valid
and legally binding obligation of the Investor enforceable against the Investor
in accordance with its terms.
(iii) Ownership of WinsLoew Common Stock. If the
Investor is exchanging WinsLoew Common Stock for Company Common Stock, such
Investor is the lawful owner, of record and beneficially, of the shares of
WinsLoew Common Stock owned by such Investor (which are those shares of
WinsLoew Common Stock listed beside such Investor's name on Schedule A hereto)
and has good title to such shares, free and clear of any and all encumbrances.
Such Investor has transferred and conveyed, and the Company has acquired, good
title to those shares of WinsLoew Common Stock listed beside such Investor's
name on Schedule A hereto, free and clear of any and all encumbrances.
(iv) Acquisition for Investment; Accredited Investor
Status; Sophistication. It is the present intention of the Investor that the
shares of Company Common Stock being acquired by such Investor are being
acquired for such Investor's own account for the purpose of investment and not
with a present view to or for sale in connection with any distribution thereof;
provided, however, that the disposition of the property of each Investor shall
at all times be within its control. The Investor is an "accredited investor"
within the meaning of Rule 501 of Regulation D under the Securities Act of
1933, as amended ("Rule 501"), and, if such Investor is not an individual
person, either (A) it was not organized for the specific purpose of acquiring
the shares of Company Common Stock, or (B) each person who has invested in the
Investor is an "accredited investor" within the meaning of Rule 501. The
Investor is sophisticated in financial matters and has sufficient knowledge and
experience so as to be able to evaluate the risks and merits of the Investor's
investment in the Company and is able financially to bear the risks thereof.
(v) Certain Risk Factors; Opportunity to Ask
Questions; Reliance. The Investor understands the speculative nature of and
risks involved in the proposed investment in the Company and that the
investment is suitable only for persons of adequate financial means who have no
need for liquidity in the investment in that the Investor may not be able to
liquidate the investment in the event of an emergency, transferability is
limited and, in the event of a disposition, the Investor could sustain a
complete loss of the entire investment. The Investor is familiar with and has
had an opportunity to ask questions and receive answers concerning the
financial condition and operations of the Company and its subsidiaries and has
had full access to such other information concerning the Company and its
subsidiaries as the Investor has requested. The Investor is acquiring the
shares of Company Common Stock without having been furnished any
representations or warranties of any kind whatsoever with respect to the
business and financial condition of the Company and its subsidiaries, other
than the representations contained herein.
-3-
<PAGE> 4
4. Florida Rescission Right. ANY SALE MADE PURSUANT TO FLORIDA
STATUTES SECTION 517.061 IS VOIDABLE BY THE PURCHASER WITHIN THREE DAYS AFTER
THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE ISSUER, AN
AGENT OF THE ISSUER, OR AN ESCROW AGENT.
5. Miscellaneous. If 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 any other jurisdiction, but this Agreement
will be reformed, construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision had never been contained herein.
This Agreement constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements or representations by or among
the parties, written or oral, which may have related to the subject matter
hereof in any way. This Agreement may be executed in counterparts and any
telecopied signature shall be deemed a manually executed and delivered
original. This Agreement is intended to bind and inure to the benefit of and be
enforceable by the Investors, the Company and their respective successors and
assigns and, where applicable, heirs and personal representatives. Except as
otherwise provided herein, this Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws principles. Each party hereby irrevocably submits to the exclusive
jurisdiction of any state or federal court sitting in Miami-Dade County,
Florida in any action or proceeding arising out of or relating to this
Agreement and hereby irrevocably waives any objection such person may now or
hereafter have as to the venue of any such suit, action or proceeding brought
in such a court or that such court is an inconvenient forum. No provision of
this Agreement may be amended or waived without the prior written consent of
the Company and the particular Investor whose Agreement is sought to be amended
or waived.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
TRIVEST FURNITURE CORPORATION
By: /s/ William F. Kaczynski, Jr.
-----------------------------------------
William F. Kaczynski, Jr., Vice President
INVESTORS:
TRIVEST FURNITURE PARTNERS, LTD.
By: TFP, Ltd., its General Partner
By: Trivest II, Inc., its General Partner
By: /s/ B. Jay Anderson
-----------------------------------
B. Jay Anderson, Director
Address:
c/o Trivest, Inc.
2665 South Bayshore Drive
Miami, Florida 33133
Taxpayer Identification Number: 65-0926562
TRIVEST FUND II GROUP, LTD.
By: Trivest Equities, Inc.,
its General Partner
By: /s/ B. Jay Anderson
-----------------------------------
B. Jay Anderson, Director
Address:
c/o Trivest, Inc.
2665 South Bayshore Drive
Miami, Florida 33133
Taxpayer Identification Number: 65-0930039
-5-
<PAGE> 6
/s/ EARL W. POWELL
--------------------------------------------
EARL W. POWELL
Address:
c/o Trivest, Inc.
2665 South Bayshore Drive
Miami, Florida 33133
Taxpayer Identification Number: ###-##-####
/s/ PHILLIP T. GEORGE, M.D.
--------------------------------------------
PHILLIP T. GEORGE, M.D.
Address:
c/o Trivest, Inc.
2665 South Bayshore Drive
Miami, Florida 33133
Taxpayer Identification Number: ###-##-####
/s/ TROY D. TEMPLETON
--------------------------------------------
TROY D. TEMPLETON
Address:
c/o Trivest, Inc.
2665 South Bayshore Drive
Miami, Florida 33133
Taxpayer Identification Number: ###-##-####
/s/ BREVATOR J. CREECH, M.D.
--------------------------------------------
BREVATOR J. CREECH, M.D.
Address:
101 West Chico Avenue, Suite C
Chico, California 95926
Taxpayer Identification Number: ###-##-####
-6-
<PAGE> 7
/s/ JAMES J. PINTO
--------------------------------------------
JAMES J. PINTO
Address:
c/o Resource Holdings, Ltd.
520 Madison Avenue, 40th Floor
New York, New York 10022
Taxpayer Identification Number: ###-##-####
/s/ BOBBY TESNEY
--------------------------------------------
BOBBY TESNEY
Address:
c/o WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Taxpayer Identification Number: ###-##-####
/s/ STEPHEN C. HESS
--------------------------------------------
STEPHEN C. HESS
Address:
c/o WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Taxpayer Identification Number: ###-##-####
/s/ R. CRAIG WATTS
--------------------------------------------
R. CRAIG WATTS
Address:
c/o Loewenstein Furniture Group, Inc.
1801 North Andrews Extension
Pompano Beach, Florida 33061
Taxpayer Identification Number: ###-##-####
-7-
<PAGE> 8
/s/ VINCENT A. TORTORICI
--------------------------------------------
VINCENT A. TORTORICI
Address:
c/o WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Taxpayer Identification Number: ###-##-####
/s/ RICK J. STEPHENS
--------------------------------------------
RICK J. STEPHENS
Address:
c/o WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Taxpayer Identification Number: ###-##-####
/s/ JERRY C. CAMP
--------------------------------------------
JERRY C. CAMP
Address:
c/o WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Taxpayer Identification Number: ###-##-####
-8-
<PAGE> 9
SCHEDULE A
TO EXCHANGE AND SUBSCRIPTION AGREEMENT
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
INVESTOR WINSLOEW SHARES COMPANY SHARES STATE
- -------------------------------------- --------------- -------------- ---------
<S> <C> <C> <C> <C>
1. Trivest Furniture Partners, Ltd. 117,500 40,831.2500 Florida
2. Earl W. Powell 86,331 30,000.0225 Florida
3. Phillip T. George, M.D. 28,187 9,794.9825 Florida
4. Troy D. Templeton 1,050 364.8750 Florida
5. James J. Pinto 4,798 1,667.3050 Florida
6. Brevator J. Creech, M.D. 2,399 833.6525 California
7. Bobby Tesney 33,323 11,579.7425 Alabama
8. Stephen C. Hess 10,000 3,475.0000 Alabama
9. R. Craig Watts 25,900 9,000.2500 Florida
10. Rick J. Stephens 14,978 5,204.8550 Alabama
11. Vincent A. Tortorici IRA(1) 10,072 3,500.0200 Alabama
12. Jerry C. Camp 1,762 612.2950 Alabama
TOTAL 336,300 116,864.2500
</TABLE>
- --------
(1) Vincent A. Tortorici, Jr. Individual Retirement Account, Account #1238SD,
Community Bank (Blountsville, Alabama), Custodian
<PAGE> 10
SCHEDULE B
TO EXCHANGE AND SUBSCRIPTION AGREEMENT
<TABLE>
<CAPTION>
AGGREGATE
PURCHASE NUMBER OF
INVESTOR PRICE COMPANY SHARES STATE
- -------------------------------------- --------------- -------------- ---------
<S> <C> <C> <C> <C>
1. Trivest Furniture Partners, Ltd. $33,625,000.00 336,250.0000 Florida
2. Trivest Fund II Group, Ltd. $31,164,799.25 311,647.9925 Florida
3. Vincent A. Tortorici $349,998 3,499.9800 Alabama
4. Rick J. Stephens $179,514.50 1,795.1450 Alabama
5. Jerry C. Camp $138,770.50 1,387.7050 Alabama
TOTAL $65,458,082.25 654,580.8225
</TABLE>
<PAGE> 1
Exhibit 10.22
WINSLOEW FURNITURE, INC.
1999
KEY EMPLOYEE EQUITY PLAN
1. PURPOSE.
The purpose of this Key Employee Equity Plan ("PLAN") is to encourage
ownership of common stock, $.01 par value ("COMMON STOCK") of Trivest Furniture
Corporation (the "COMPANY," which term shall refer to WinsLoew Furniture, Inc.
upon the consummation of the merger of Trivest Furniture Corporation with and
into WinsLoew Furniture, Inc.) by key employees and independent sales
representatives of the Company and its subsidiaries, thereby providing
additional incentives to such persons to improve the business and operating
results of the Company and its subsidiaries and, thus, more closely align the
interest of such key employees and independent sales representatives with those
of the shareholders of the Company.
2. TERM AND EFFECTIVE DATE.
The Plan shall commence on the effective date of the merger of Trivest
Furniture Corporation with and into WinsLoew Furniture, Inc. (the "EFFECTIVE
DATE") and shall continue through December 31, 1999 (such period hereinafter
referred to as the "TERM").
3. PARTICIPANTS.
The persons eligible to participate in the Plan ("PARTICIPANTS") shall
be those key employees and independent sales representatives of the Company and
its subsidiaries designated by the Company's Board of Directors.
4. STOCK ACQUISITION.
From time to time over the Term, the Board of Directors shall offer to
Participants the opportunity to acquire shares of Common Stock in the amount as
determined by the Board of Directors to be appropriate based on the
Participant's level of responsibility with the Company or any of its
subsidiaries. The purchase price for shares of Common Stock offered under the
Plan shall be fair market value, as determined in good faith by the Board of
Directors. Each Participant who elects to purchase Common Stock shall be
required to execute and deliver to the Company a Subscription Agreement,
substantially in the form attached hereto as EXHIBIT A, and a Shareholders'
Agreement, substantially in the form attached hereto as EXHIBIT B.
5. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Company's Board of Directors.
Subject to the provisions of the Plan, the Board of Directors shall have full
and conclusive authority to interpret the Plan; to prescribe, amend and rescind
rules and regulations relating to the Plan; and to make all other determinations
necessary or advisable for the proper administration of the Plan. The Board of
Directors' decisions shall be final and binding on all Participants. The Board
of Directors may delegate to any member of the Board of Directors or officer of
the Company the administrative authority to interpret the provisions of the
Plan.
6. SHARES RESERVED.
An aggregate of 20,000 shares of Common Stock are reserved for direct
sale to Participants under this Plan, subject to adjustment as set forth in
Section 7 hereof.
<PAGE> 2
7. CHANGES IN CAPITALIZATION; MERGER, LIQUIDATION.
The number of shares of Common Stock which may be sold directly to
Participants under this Plan may be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
subdivision or combination of shares or the payment of a stock dividend in
shares of Common Stock to holders of outstanding shares of Common Stock or any
other increase or decrease in the number of shares of Common Stock outstanding
effected without receipt of consideration by the Company. The existence of 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 Common 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.
8. RIGHT TO TERMINATE EMPLOYMENT.
Nothing in the Plan shall confer upon any Participant the right to
continue as an employee, officer or independent sales representative of the
Company or any of its subsidiaries or affect the right of the Company or any of
its subsidiaries to terminate the Participant's employment at any time.
9. NON-ALIENATION OF BENEFITS.
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.
10. TERMINATION AND AMENDMENT OF THE PLAN.
The Board of Directors of the Company at any time may amend or
terminate the Plan.
11. CHOICE OF LAW.
The laws of the State or Florida shall govern the Plan, to the extent
not preempted by federal law.
Date: August 16, 1999 TRIVEST FURNITURE CORPORATION
By: /s/ Bobby Tesney
-----------------------------------
Bobby Tesney
President and Chief Executive Officer
2
<PAGE> 3
EXHIBIT A
SUBSCRIPTION AGREEMENT
Attached Hereto
<PAGE> 4
FORM OF
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this "AGREEMENT") is made as of
August __, 1999, among Trivest Furniture Corporation, a Florida corporation (the
"COMPANY," which term shall refer to WinsLoew Furniture, Inc. upon the
consummation of the Merger), and ____________________________ (the
"SHAREHOLDER").
PRELIMINARY STATEMENTS:
A. The Shareholder desires to purchase shares (the "SHARES") of the
Company's common stock, par value $.01 per share (COMMON STOCK"), on the terms
and subject to the conditions set forth in this Agreement.
B. The Company desires to issue and sell the Shares to the Shareholder.
C. The Company and the Shareholder desire to enter into this Agreement
setting forth the terms and conditions relating to the purchase and sale of the
Shares.
D. Contemporaneously with the execution and delivery of this Agreement,
the Company and the Shareholder are executing and delivering a Shareholders'
Agreement that will restrict the Shareholder's ability to transfer the Shares
and create certain other rights and obligations in respect of the Shares.
E. Immediately following the issuance of the Shares to the Shareholder
hereunder, Trivest Furniture Corporation will merge with and into WinsLoew
Furniture, Inc., and the Shareholder, together with the other shareholders of
Trivest Furniture Corporation, will become the shareholders of WinsLoew
Furniture, Inc., which will cease to be a publicly held corporation, all as more
fully set forth in the Offering Memorandum.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. INTERPRETATION OF THIS AGREEMENT.
(a) TERMS DEFINED. As used herein, the following terms when
used in this Agreement have the meanings set forth below:
"BANKBOSTON CREDIT FACILITY" means the credit facility
provided for pursuant to that certain Loan and Security Agreement to be dated as
of the effective date of the Merger among (i) WinsLoew Furniture, Inc., Winston
Furniture Company of Alabama, Inc., Loewenstein, Inc., Texacraft, Inc., Tropic
Craft, Inc., Winston Properties, Inc. and Pompeii Furniture Co., Inc., as
Borrowers, (ii) the Lenders named therein, (iii) Heller Financial, Inc. and
Canadian Imperial Bank of Commerce, as Co-Agents, (iii) BankBoston, N.A., as
Administrative Agent, and (iv) BancBoston Robertson Stephens Inc., as Arranger,
pursuant to and as more fully described in the Offering Memorandum.
<PAGE> 5
"COMMON STOCK" shall have the meaning given to it in Clause A
of the recitals hereof.
"COMPANY" shall have the meaning given to it in the first
sentence of this Agreement.
"INVESTORS' AGREEMENT" means that certain Investors' Agreement
dated as of the date hereof among the Company and the Investors named therein.
"KEY EMPLOYEE EQUITY PLAN" means the WinsLoew 1999 Key
Employee Equity Plan under which an aggregate of 20,000 shares of Common Stock
are reserved for direct sale to employees and independent sales representatives
of WinsLoew Furniture, Inc.
"MERGER" means the merger of Trivest Furniture Corporation
with and into WinsLoew Furniture, Inc., with WinsLoew Furniture, Inc. as the
surviving corporation of the merger.
"OFFERING MEMORANDUM" means the Preliminary Offering
Memorandum dated August 2, 1999 with respect to the offering of the Senior
Subordinated Notes, which has been previously provided to the Shareholder.
"OTHER SUBSCRIPTIONS" means the subscriptions by a group of
employees and independent sales representatives of WinsLoew Furniture, Inc. or
its subsidiaries who will acquire contemporaneously herewith an aggregate of up
to 20,000 shares of Common Stock (including shares subscribed for by the
Shareholder) pursuant to the Key Employee Equity Plan and who will each enter
into a subscription agreement, substantially in the form hereof, and a
shareholders' agreement, substantially in the form of the Shareholders'
Agreement.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"SENIOR SUBORDINATED NOTES" means the Senior Subordinated
Notes of the Company in the aggregate principal amount of $115 million pursuant
to and as more fully described in the Offering Memorandum.
"SHAREHOLDER" shall have the meaning given to it in the first
sentence of this Agreement.
"SHAREHOLDERS' AGREEMENT" means that certain Shareholders'
Agreement among the Company and the Shareholder entered into contemporaneously
herewith; and "SHAREHOLDERS' AGREEMENTS" means, collectively, the shareholders'
agreements, each substantially in the form of
2
<PAGE> 6
the Shareholders' Agreement, entered into by the Company with the respective
shareholders acquiring Common Stock pursuant to the Other Subscriptions.
"SHARES" shall have the meaning given to it in Clause A of the
recitals hereof.
"SUBSCRIPTION CLOSING" shall have the meaning given to it in
ss.2(a) hereof.
"SUBSCRIPTION PRICE" shall have the meaning given to it in
ss.2(a) hereof.
"SUBSIDIARY" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns, directly or indirectly, a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
(b) INTERPRETATION. The words "HEREIN," "HEREOF," "HEREUNDER"
and other words of similar import refer to this Agreement as a whole, as the
same from time to time may be amended or supplemented and not any particular
section, paragraph, subparagraph or clause contained in this Agreement. Wherever
from the context it appears appropriate, each term stated in either the singular
or plural shall include the singular and the plural, and pronouns stated in
masculine, feminine or neuter gender shall include the masculine, feminine and
the neuter.
2. SUBSCRIPTION TO PURCHASE SHARES
(a) PURCHASE, ISSUANCE AND SALE OF STOCK. The Shareholder
hereby subscribes for and agrees to purchase and the Company hereby agrees to
issue and sell to the Shareholder __________________________________ (________)
Shares of Common Stock, for the purchase price of $100.00 per share (the
"SUBSCRIPTION PRICE"). The purchase and sale of the Shares (the "SUBSCRIPTION
CLOSING") shall occur on August 27, 1999 (or such later date on or prior to the
consummation of the Merger as the Company may notify the Shareholder), at which
time the Company shall deliver to the Shareholder a certificate representing the
Shares against the Shareholder's delivery of the Subscription Price. The
Subscription Price for the Shares shall be paid by personal check, cashier's
check or wire transfer of immediately available funds to an account designated
by the Company in writing.
(b) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
hereby represents and warrants to the Shareholder as follows:
(i) ORGANIZATION; POWER AND AUTHORITY. The Company is
a corporation duly organized, validly existing, and in good standing under the
laws of Florida. The Company has full corporate power and authority to carry on
the business in which it is engaged and to own and use the properties owned and
used by it.
(ii) AUTHORIZATION OF TRANSACTION. The Company has
full corporate power and authority to execute and deliver this Agreement and to
perform its obligations
3
<PAGE> 7
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Company, enforceable in accordance with its terms.
(iii) CAPITALIZATION. The Common Stock constitutes
the Company's only authorized class of capital stock. Upon the Shareholder's
payment of the Subscription Price, the Shares purchased by the Shareholder
pursuant to the provisions of this Agreement will be duly authorized, validly
issued, fully paid and nonassessable. Immediately following the Subscription
Closing and after giving effect to the Other Subscriptions, 780,000 shares of
Common Stock will be issued and outstanding. Except for this Agreement, the
Other Subscriptions, the Shareholders' Agreements and the Investors' Agreement,
there are no outstanding subscriptions, warrants, options or other agreements or
rights of any kind to purchase or otherwise receive or be issued, or securities
or obligations of any kind convertible into, any shares of capital stock or any
other security of the Company.
(c) REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER. The
Shareholder hereby represents and warrants to the Company as follows:
(i) STATE SECURITIES LAWS. The Shareholder received
this Agreement and first learned of the offer and sale of the Shares
contemplated hereby in the State set forth below the Shareholders' name on the
signature page hereof. The Shareholder intends that the laws of such state
govern the offering of the Shares to the Shareholder. The Shareholder is a
resident of such State.
(ii) CAPACITY. The Shareholder has full capacity to
execute and deliver this Agreement and to perform the Shareholder's obligations
hereunder.
(iii) AGREEMENT BINDING. This Agreement constitutes
the valid and legally binding obligation of the Shareholder, enforceable in
accordance with its terms.
(iv) ACQUISITION FOR INVESTMENT. The Shareholder is
acquiring the Shares for investment solely for the Shareholder's account and not
for distribution, transfer or resale to others in violation of the federal
securities laws or this Agreement.
(v) RESTRICTIONS ON TRANSFER. The Shareholder
understands that the Shareholder must bear the economic risk of the purchase of
the Shares for an indefinite period of time because, except as provided in this
Agreement, (A) the Company's sale of the Shares to the Shareholder will not be
registered under the Securities Act and applicable state securities laws in
reliance on the Shareholder's representations, (B) the Shares may not be sold,
transferred, pledged, or otherwise disposed of without an opinion of counsel for
or satisfactory to the Company that registration under the Securities Act or any
applicable state securities laws is not required, (C) the Company does not have
an obligation to register a sale of the Shares nor has it agreed to do so in the
future, (D) the exemption provided in Rule 144 under the Securities Act is not
presently available for the resale of any of the Shares and it is unlikely that
such exemption will be available at any time in the future with respect to any
proposed transfer of the Shares, and
4
<PAGE> 8
(E) the Company is not under any obligation to perfect any exemption for the
resale of any of the Shares. The Shareholder also acknowledges the Shareholder's
understanding that transfers of the Shares will be subject to the limitations
set forth in the Shareholders' Agreement.
(vi) RESTRICTIVE LEGENDS. The Shareholder understands
that the certificate evidencing the Shares will bear a restrictive legend
prohibiting the transfer thereof except in compliance with (A) applicable state
and federal securities laws (and may not be transferred of record except in
compliance therewith), and (B) the terms of the Shareholders' Agreement, as well
as any other legends required by applicable state securities laws.
(vii) OPPORTUNITY TO ASK QUESTIONS. The Shareholder
has had an opportunity to ask questions and receive answers concerning the
capitalization of the Company and the terms hereof and has had full access to
such other information concerning the Company, both prior to and following the
Merger, as the Shareholder has requested.
(viii) CERTAIN RISK FACTORS. The Shareholder
understands the speculative nature of and risks involved in the proposed
investment in the Company, and all matters relating to the structure and the
operations of the Company and its Subsidiaries, both prior to and following the
Merger, have been discussed and explained to Shareholder's satisfaction,
including but not limited to:
(A) the senior loans provided to the Company pursuant
to the BankBoston Credit Facility; and
(B) the Senior Subordinated Notes.
The Shareholder specifically acknowledges the Shareholder's understanding that:
(aa) the presence of substantial amounts of debt
creates significant risks, including that (1) although equity
investments in highly leveraged companies such as the Company
offer the opportunity for significant capital appreciation,
such investments involve the highest degree of risks and can
result in the loss of the Shareholder's entire investment, (2)
other general business risks, including the effects of a
recession, may have a more pronounced effect, (3) lending
institutions may have rights to participate in certain
decisions relating to the management of the Company, and (4)
for the Company's debt to be repaid and for the Shareholder's
equity investment in the Common Stock to have any value, the
Company must achieve significant continued growth in financial
performance;
(bb) the Subscription Price may not be indicative of
the fair market value of the Shares;
(cc) the Shareholder, as a minority shareholder, will
have no control over or influence in the management of the
Company, and that the purchase of the
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<PAGE> 9
Shares does not entitle the Shareholder to continued
employment by the Company;
(dd) the terms of the BankBoston Credit Facility, the
Senior Subordinated Notes and other documents relating to an
investment in the Company are quite complex, that all such
documents are available for inspection, that a review thereof
is recommended, and that the Shareholder should consider
obtaining counsel or other competent advisors before
purchasing the Shares;
(ee) Trivest II, Inc. (an affiliate of the
controlling shareholders of the Company) will receive from the
Company (i) an annual management fee of $350,000, subject to
cost of living increases and certain increases in respect of
business operations acquired, as well as certain fees in
connection with acquisitions and dispositions of business
operations negotiated by Trivest II, Inc. pursuant to a
Management Agreement to be entered into upon consummation of
the Merger, a copy of which has been made available to the
Shareholder, and (ii) a one-time transaction fee of $3 million
upon consummation of the Merger; and
(ff) Bear, Stearns & Co. Inc. will receive from the
Company a one-time transaction fee of $1 million upon
consummation of the Merger.
(ix) REPRESENTATIONS RELIED UPON BY SHAREHOLDER. The
Shareholder acknowledges receipt of the Offering Memorandum, which describes,
among other things, the transactions contemplated under the Merger, the issuance
of the Senior Subordinated Notes, the BankBoston Credit Facility and certain
risk factors relating to such matters. The Shareholder is acquiring the Shares
without having been furnished any representations or warranties of any kind
whatsoever with respect to the business and financial condition of the Company
and its Subsidiaries, other than the representations contained herein. The
Shareholder specifically understands that the financial projections for the
Company that have been made available for such Shareholder's review are based
upon certain key assumptions, that such assumptions are subject to uncertainties
relating to the effect that economic or other circumstances may have on future
events, and that there can be no assurance that the assumptions or data upon
which they are based are achievable.
(x) RELIANCE. The Shareholder has discussed with, and
relied upon the advice of the Shareholder's counsel with regard to, the meaning
and legal consequences of the Shareholder's representations and warranties
herein and the considerations involved in making an investment in the Company,
and the Shareholder understands that the Company is relying on the information
set forth herein.
(xi) NO LIQUIDITY. The Shareholder has adequate means
of providing for such Shareholder's current financial needs and possible
personal contingencies and has no need for liquidity in such Shareholder's
investment in the Company.
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<PAGE> 10
(xii) RISK OF LOSS. The Shareholder is able to bear
the economic risks inherent in an investment in the Company and can afford a
complete loss of such Shareholder's entire investment in the Company.
(xiii) OTHER ILLIQUID INVESTMENTS. The Shareholder's
overall commitment to investments which are not readily marketable is not
disproportionate to such Shareholder's net worth, and such Shareholder's
investment in the Company will not cause such overall commitment to be
disproportionate.
(xiv) SOPHISTICATION. The Shareholder has such
knowledge and experience in financial and business matters that such Shareholder
is capable of evaluating the merits and risks of an investment in the Company
and of making an informed investment decision.
(xv) SUITABILITY. The Shareholder's investment in the
Company (i) is suitable for the Shareholder, based on the Shareholder's
financial situation and needs, as well as the Shareholder's other securities
holdings, and (ii) does not exceed 20% of the Shareholder's net worth (excluding
the Shareholder's principal residence, furnishings therein and personal
automobiles).
(xvi) CERTAIN TAX MATTERS. The Shareholder certifies
under penalty of perjury that (i) the Taxpayer Identification Number and address
provided under the Shareholder's name on the signature page to this Agreement
are correct, (ii) the Shareholder is not subject to backup withholding either
because the Shareholder has not been notified that she is subject to backup
withholding as a result of a failure to report all interest or dividends or
because the Internal Revenue Service has notified the Shareholder that she is no
longer subject to backup withholding and (iii) the Shareholder is not a
nonresident alien, foreign partnership, foreign trust or foreign estate.
(xvii) KEY EMPLOYEE EQUITY PLAN. The Shareholder
acknowledges receipt of a copy of the Key Employee Equity Plan, pursuant to
which the Shareholder is acquiring the Shares hereunder.
(xviii) FLORIDA RESCISSION RIGHT. ANY SALE MADE
PURSUANT TO SECTION 517.061 IS VOIDABLE BY THE PURCHASER EITHER WITHIN THREE
DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE
ISSUER, AN AGENT OF THE ISSUER, OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER
THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER
OCCURS LATER.
3. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, or mailed by certified or
registered mail, return receipt requested, postage prepaid to the recipient at
the address below indicated:
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To the Company: c/o Trivest II, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Attention: General Counsel
To the Shareholder: at the address of the Shareholder
set forth on the signature page
hereto
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or mailed.
4. SEVERABILITY. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if 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 any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
5. COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
6. COUNTERPARTS. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
7. SUCCESSORS AND ASSIGNS. This Agreement is intended to bind and inure
to the benefit of and be enforceable by the Shareholder and the Company, and
their respective successors and assigns and, where applicable, heirs and
personal representatives.
8. CHOICE OF LAW. Except as otherwise provided herein, this Agreement
shall be governed and construed in accordance with the laws of the State of
Florida without regard to conflicts of laws principles thereof and all questions
concerning the validity and construction hereof shall be determined in
accordance with the laws of said state. Each party hereby irrevocably submits to
the exclusive jurisdiction of any state or federal court sitting in the County
of Miami-Dade, State of Florida in any action or proceeding arising out of or
relating to this Agreement and hereby irrevocably agrees, on behalf of itself or
herself and on behalf of such
8
<PAGE> 12
party's successor's and assigns, that all claims in respect of such action or
proceeding may be heard and determined in any such court and irrevocably waives
any objection such person may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum.
9. WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
10. REMEDIES. Each of the parties to this Agreement will be entitled to
enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
11. AMENDMENTS AND WAIVERS. No provision of this Agreement may be
amended or waived without the prior written consent of the Company and the
Shareholder.
12. BUSINESS DAYS. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
13. NO THIRD PARTY BENEFICIARY. Except for the parties to this
Agreement and their respective successors and assigns, nothing expressed or
implied in this Agreement is intended, or will be construed, to confer upon or
give any person other than the parties hereto and their respective successors
and assigns any rights or remedies under or by reason of this Agreement.
SIGNATURES APPEAR ON FOLLOWING PAGE
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<PAGE> 13
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first above written.
TRIVEST FURNITURE CORPORATION
By:
----------------------------------------
Bobby Tesney
President and Chief Executive Officer
SHAREHOLDER:
-------------------------------------------
Print Name:
--------------------------------
Address:
--------
-------------------------------------------
-------------------------------------------
-------------------------------------------
Taxpayer Identification Number:
-------------------------------
-------------------------------------------
10
<PAGE> 14
EXHIBIT B
SHAREHOLDERS' AGREEMENT
Attached Hereto
<PAGE> 15
FORM OF
SHAREHOLDERS' AGREEMENT
THIS SHAREHOLDERS' AGREEMENT is made this ____ day of August, 1999,
among Trivest Furniture Corporation, a Florida corporation (the "Company,"
which term shall refer to WinsLoew Furniture, Inc. upon consummation of the
Merger), the Lead Trivest Investor (as hereinafter defined) and
_________________ (the "Shareholder").
PRELIMINARY STATEMENTS:
A. This Agreement is being entered into in connection with the
Subscription Agreement of even date herewith, between the Company and the
Shareholder.
B. The Lead Trivest Investor and the Shareholder believe that it would
be in the best interest of the Company to make provisions governing the
purchase of the Shareholder Stock in the event of his death or disability or if
he ceases to be employed by the Company or any of its Subsidiaries for any
reason.
C. The Lead Trivest Investor and the Shareholder believe that it would
be in the best interest of the Company to place certain restrictions upon the
right of transfer of the Shareholder Stock.
D. The directors of the Company, having considered the provisions of
this Agreement, have resolved that in their opinion the restrictions upon the
transfer of the Shareholder Stock, the provisions for the redemption and/or
purchase of the Shareholder Stock, and the establishment of rights and
obligations upon the occurrence of certain events, all as hereinafter set
forth, are in the best interest of the Company and its shareholders.
AGREEMENT:
NOW THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Interpretation of this Agreement.
(a) Terms Defined. The following terms when used in this
Agreement have the meanings set forth below:
"Affiliate" (whether or not capitalized) has the meaning set
forth in Rule 12b-2 of the regulations promulgated under the Securities
Exchange Act.
"Approved Sale" shall have the meaning given to it in ss.5 of
this Agreement.
"Authorization Period" shall have the meaning given to it in
ss.3(b) of this Agreement.
"Available Shares" shall have the meaning given to it in
ss.2(d) of this Agreement.
<PAGE> 16
"Cash Purchase Price" shall have the meaning given to it in
ss.2(e) of this Agreement.
"Cause" shall have the meaning assigned to it in any written
employment agreement to between the Company (or any of its Subsidiaries) and
the Shareholder and, if there shall be no such written employment agreement,
shall mean (i) the commission of any act by the Shareholder constituting
financial dishonesty against the Company or its Subsidiaries, (ii) the
commission by the Shareholder of a felony or other crime involving moral
turpitude, (iii) the repeated failure by the Shareholder to follow the
reasonable written directives of the Company's Board, (iv) the Shareholder's
gross dereliction of duty to the Company or its Subsidiaries or (v) any breach
by the Shareholder of any of the provisions of this Agreement.
"Common Stock" means the Company's Common Stock, par value
$.01 per share.
"Company" shall have the meaning given to it in the first
sentence of this Agreement.
"Company's Board" means the Board of Directors of the
Company.
"Company Sale" means (i) the sale of all, or substantially
all, of the Company's consolidated assets in any single transaction or series
of related transactions; (ii) the sale or issuance, or series of related sales
or issuances, of Common Stock in any single transaction or series of related
transactions which results in any Person or group of affiliated Persons (other
than the holders of Common Stock as of the date of this Agreement and
affiliates of such holders) owning more than 50% of the Common Stock
outstanding at the time of such sale or issuance or such series of sales and/or
issuances; (iii) the consummation of a public sale of Common Stock pursuant to
a registration statement which has become effective under the Securities Act,
the net proceeds of which sale to the Company are at least $15 million; or (iv)
any merger or consolidation of the Company with or into another corporation
(regardless of which entity is the surviving corporation) if, after giving
effect to such merger or consolidation, the holders of the Company's voting
securities (on a fully-diluted basis) immediately prior to the merger or
consolidation own voting securities of the surviving or resulting corporation
representing less than a majority of the ordinary voting power to elect
directors of the surviving or resulting corporation (on a fully-diluted basis).
"Exempt Transfers" shall have the meaning given to it in
ss.3(a) of this Agreement.
"Family Group" means the Shareholder's spouse and descendants
(whether natural or adopted) and any trust formed and maintained solely for the
benefit of the Shareholder and/or the Shareholder's spouse and/or descendants.
"Lead Trivest Investor" means Trivest Fund II Group, Ltd. and
its successors and assigns.
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<PAGE> 17
"Management Stock Option Plan" means any stock option plan
which may be adopted by the Company for the benefit of the employees of the
Company or its Subsidiaries, as the same may from time to time be amended or
supplemented.
"Market Value" of each share of Shareholder Stock means the
fair value of a share of the Common Stock as of the Termination Date, as
determined in good faith by the Company's Board, whose determination shall be
conclusive and binding on the parties to this Agreement.
"Merger" means the merger of Trivest Furniture Corporation
with and into WinsLoew Furniture, Inc., with WinsLoew Furniture, Inc. as the
surviving corporation of the merger.
"Option Notice" shall have the meaning given to it in ss.2(d)
of this Agreement.
"Original Cost" of each share of Shareholder Stock means
$100.00 for each share of Common Stock (as proportionally adjusted for all
stock splits, stock dividends and other recapitalization affecting Common Stock
subsequent to the date of this Agreement); provided, however, that the Original
Cost for each share of Common Stock purchased by the Shareholder pursuant to
the exercise of options granted to him or her under any Management Stock Option
Plan shall be the exercise price thereof (as such term is defined in such
Management Stock Option Plan), as proportionally adjusted pursuant to the
provisions of the Management Stock Option Plan.
"Person" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Prohibited Amount" shall have the meaning given to it in
ss.2(f) of this Agreement.
"Repurchase Notice" shall have the meaning given to it in
ss.2(c) of this Agreement.
"Repurchase Note(s)" shall have the meaning given to it in
ss.2(f) of this Agreement.
"Repurchase Option" shall have the meaning given to it in
ss.2(d) of this Agreement.
"Sale Notice" shall have the meaning given to it in ss.3(a)
of this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Debt" shall have the meaning given to it in ss.2(f)
of this Agreement.
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<PAGE> 18
"Shareholder" shall have the meaning given to it in the first
sentence of this Agreement.
"Shareholder Stock" means (i) all Common Stock now owned or
hereafter acquired by the Shareholder or any member of the Shareholder's Family
Group, and (ii) all Common Stock issued with respect to the Common Stock
referred to in clause (i) above by way of stock dividend or stock split or in
connection with any combination of shares, merger, consolidation,
recapitalization or other reorganization. All shares of Shareholder Stock will
continue to be Shareholder Stock in the hands of any transferee, other than (x)
the Company, and (y) purchasers pursuant to an offering registered with the
Securities and Exchange Commission pursuant to the Securities Act or purchasers
pursuant to a public sale through a market-maker, broker or dealer under Rule
144 (or any successor rule) promulgated under the Securities Act. Shareholder
Stock under this Agreement does not include any stock which is "Shareholder
Stock" under other agreements among the Company, the Lead Trivest Investor and
employees (or independent sales representatives) of the Company or its
Subsidiaries regarding the purchase of the Company's Common Stock.
"Subsidiary" when used with respect to any Person means any
other Person, whether incorporated or unincorporated, of which (i) more than
50% of the securities or other ownership interests or (ii) securities or other
interests having by their terms ordinary voting power to elect more than 50% of
the board of directors or others performing similar functions with respect to
such corporation or other organization, is directly owned or controlled by such
Person or by any one or more of its Subsidiaries.
"Supplemental Repurchase Notice" shall have the meaning given
to it in ss.2(d) of this Agreement.
"Termination Date" shall have the meaning given to it in
ss.2(c) of this Agreement.
(b) Interpretation. The words "herein," "hereunder" and other
words of similar import refer to this Agreement as a whole, including the
exhibits and schedules hereto, as the same from time to time may be amended or
supplemented, and not any particular section, paragraph, subparagraph or clause
contained in this Agreement. Wherever from the context it appears appropriate,
each term stated in either the singular or plural shall include the singular
and the plural, and pronouns stated in masculine, feminine or neuter gender
shall include the masculine, feminine and the neuter.
2. Termination Repurchase Option.
(a) If the Shareholder's employment with the Company or any
of its Subsidiaries is terminated by the Company or any such Subsidiary for
Cause, all of the Shareholder Stock (whether held by the Shareholder, any
member of the Shareholder's Family Group or one or more transferees), shall be
subject to repurchase by the Company at the Company's option at a price per
share equal to the lower of Original Cost or Market Value and on the other
terms and conditions set forth in this ss.2.
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<PAGE> 19
(b) If the Shareholder's employment with the Company or any
of its Subsidiaries is terminated for any reason whatsoever other than Cause
(including resignation, termination without Cause, death or disability), then
the Shareholder Stock (whether held by the Shareholder, any member of the
Shareholder's Family Group or one or more transferees) shall be subject to
repurchase by the Company at the Company's option at a price per share
determined as follows:
(i) If the date on which the Shareholder's
employment terminates is on or after the date of this Agreement, but prior to
the first anniversary date of this Agreement, then all of the outstanding
shares of Shareholder Stock shall be subject to repurchase at a price per share
equal to the lower of Original Cost or Market Value.
(ii) If the date on which the Shareholder's
employment terminates is on or after the first anniversary date of this
Agreement, but prior to the second anniversary date of this Agreement,
two-thirds of the outstanding shares of Shareholder Stock shall be subject to
repurchase at a price per share equal to Original Cost and the remaining
one-third of the outstanding shares of Shareholder Stock shall be subject to
repurchase at a price per share equal to Market Value; provided, however, that
if the Market Value of such shares is less than their Original Cost, then all
of such shares shall be subject to repurchase at a price per share equal to
Market Value.
(iii) If the date on which the Shareholder's
employment terminates is on or after the second anniversary date of this
Agreement, but prior to the third anniversary date of this Agreement, one-third
of the outstanding shares of Shareholder Stock shall be subject to repurchase
at a price per share equal to Original Cost and the remaining two-thirds of the
outstanding shares of Shareholder Stock shall be subject to repurchase at a
price per share equal to Market Value; provided, however, that if the Market
Value of such shares is less than their Original Cost, then all of such shares
shall be subject to repurchase at a price per share equal to Market Value.
(iv) If the date on which the Shareholder's
employment terminates is on or after the third anniversary date of this
Agreement, then all of the outstanding shares of Shareholder Stock shall be
subject to repurchase at a price per share equal to Market Value.
If the Company elects to purchase less than all of the outstanding shares of
Shareholder Stock pursuant to this ss.2(b), the shares shall be purchased at
Original Cost prior to purchasing any shares at Market Value.
(c) The Company's Board may elect to cause the Company to
purchase all or any portion of Shareholder Stock subject to repurchase by
delivery of written notice (the "Repurchase Notice") to the holder or holders
of Shareholder Stock within 95 days after the termination of the Shareholder's
employment (the date of such termination is herein referred to as the
"Termination Date"). The Repurchase Notice shall set forth the number of shares
of Shareholder Stock to be acquired from such holder, the aggregate
consideration to be paid for such shares (if known) and the time and place for
the closing of the transaction. The number of shares to be repurchased by the
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<PAGE> 20
Company shall first be satisfied to the extent possible from the shares of
Shareholder Stock held by the Shareholder at the time of delivery of the
Repurchase Notice. If the number of shares of Shareholder Stock then held by
the Shareholder is less than the total number of shares of Shareholder Stock
the Company has elected to purchase pursuant to this ss.2, the Company shall
purchase the remaining shares elected to be purchased from the other holder(s)
of Shareholder Stock held by such other holder(s) at the time of delivery of
such Repurchase Notice (determined as nearly as practicable to the nearest
share).
(d) If for any reason the Company does not elect to purchase
all of the shares of Shareholder Stock pursuant to the repurchase option under
ss.2(a) or ss.2(b), as the case may be (the "Repurchase Option"), the Lead
Trivest Investor shall be entitled to exercise the Company's Repurchase Option
in the manner set forth in ss.2(c) for the shares of Shareholder Stock the
Company has not elected to purchase (the "Available Shares"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within 60 days after the Termination Date, the Company
shall deliver written notice (the "Option Notice") to the Lead Trivest Investor
setting forth the number of Available Shares and the price thereof (if known).
The Lead Trivest Investor may elect to purchase any number of Available Shares
by delivering written notice to the Company within 30 days after receipt of the
Option Notice from the Company. As soon as practicable, and in any event within
5 days after the expiration of the 30-day period set forth above, the Company
shall notify each holder of Shareholder Stock as to the number of shares being
purchased from such holder by the Lead Trivest Investor (the "Supplemental
Repurchase Notice"). At the time the Company delivers the Supplemental
Repurchase Notice to the holder(s) of Shareholder Stock, the Lead Trivest
Investor shall also receive written notice from the Company setting forth the
number of shares it is entitled to purchase, the aggregate purchase price (if
known) and the time and place of the closing of the transaction.
(e) The closing of the purchase transactions shall take place
on the date designated by the Company in the Repurchase Notice or Supplemental
Repurchase Notice, which date shall not be more than 30 days and not less than
10 days after the delivery of the later of either such notice to be delivered,
provided that, if the Market Value has not yet been determined, the closing
shall be delayed to a date designated by the Company, which date shall be not
more than 20 days after such determination is made. The Company and/or Lead
Trivest Investor will pay for the Shareholder Stock to be purchased pursuant to
the Repurchase Option, subject to the provisions of ss.2(f) below, by delivery
of a check or checks (or, at the election of the Company and/or Lead Trivest
Investor, by wire transfer of immediately available funds) in an amount equal
to the purchase price of the shares being repurchased. The purchasers of
Shareholder Stock under this Agreement will be entitled to receive customary
representations and warranties from the seller(s) regarding the seller(s)' good
title to, and freedom from liens, encumbrances and restrictions on the sale of
Shareholder Stock.
(f) If the Company has elected to purchase shares of
Shareholder Stock pursuant to the provisions of this Agreement and if, pursuant
to the terms of any instrument governing the rights of holders of Senior Debt,
the Company is prohibited from paying all or any portion of the Cash Purchase
Price for such shares (the "Prohibited Amount"), then the Prohibited Amount
shall be paid by delivery of a note or notes (the "Repurchase Note(s)") in the
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<PAGE> 21
aggregate principal amount equal to the Prohibited Amount. The principal amount
of the Repurchase Notes will be payable in five equal annual installments
beginning at the end of the first year following the issuance of the Repurchase
Notes and will bear interest at the rate of 9% per annum on the outstanding
principal amount. The Repurchase Notes will provide that they may be prepaid in
whole or in part without any prepayment premium, penalty or similar charge. The
payment of any principal or interest on any Repurchase Note issued by the
Company will be subordinated to the payment of all indebtedness of the Company
and its Subsidiaries for borrowed money ("Senior Debt"). The terms of the
subordination of any Repurchase Note will provide that no payments of principal
or interest on such note will be made so long as the Company is in default
under the terms of any of its agreements in respect of Senior Debt. Accrued
interest on the any Repurchase Note(s) will be payable on the dates that the
installments of principal are payable.
(g) Notwithstanding anything contained herein to the
contrary, the provisions of this ss.2 will terminate if, prior to the
Termination Date, a Company Sale is consummated.
3. Restrictions on Transfer.
(a) Transfer of Shareholder Stock. The Shareholder will not
sell, pledge or otherwise directly or indirectly transfer any interest in or
any beneficial interest in any shares of Shareholder Stock except pursuant to
the provisions of ss.ss.2 or 5 of this Agreement ("Exempt Transfers") and
except pursuant to the provisions of this ss.3. At least 60 days prior to
making any transfer other than an Exempt Transfer, the Shareholder will deliver
a written notice (the "Sale Notice") to the Company and the Lead Trivest
Investor. The Sale Notice will disclose in reasonable detail the identity of
the prospective transferee(s) and the terms and conditions of the proposed
transfer.
(b) First Refusal Rights. The Company may elect to purchase
all (but not less than all) of the shares of Shareholder Stock to be
transferred upon the same terms and conditions as those set forth in the Sale
Notice by delivering a written notice of such election to the Shareholder
within 30 days after the receipt of the Sale Notice by the Company. If the
Company has not elected to purchase all of the shares of Shareholder Stock to
be transferred, the Lead Trivest Investor may elect to purchase all (but not
less than all) of the shares of Shareholder Stock to be transferred upon the
same terms and conditions as those set forth in the Sale Notice by delivering a
written notice of such election to the Shareholder within 60 days after the
receipt of the Sale Notice by the Lead Trivest Investor. Any Person who has the
right to acquire Shareholder Stock pursuant to this ss.3(b) will be given up to
60 days (after it has been determined that such Person has such right) to
consummate the purchase and sale of Shareholder Stock (the "Authorization
Period"). If neither the Company nor the Lead Trivest Investor has elected to
purchase all of the shares of Shareholder Stock specified in the Sale Notice,
the Shareholder may transfer the shares of Shareholder Stock specified in the
Sale Notice at a price and on terms no more favorable to the transferee(s)
thereof than specified in the Sale Notice during the 60-day period immediately
following the Authorization Period. Any shares of Shareholder Stock not
transferred within such 60-day period will be subject to the provisions of this
ss.3(b) upon subsequent transfer.
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<PAGE> 22
(c) Certain Permitted Transfers. The restrictions contained
in this ss.3 will not apply with respect to transfers of Shareholder Stock (i)
pursuant to applicable laws of descent and distribution or (ii) among the
Shareholder's Family Group; provided that the restrictions contained in this
ss.3 will continue to be applicable to Shareholder Stock after any such
transfer; and provided further that the transferees of such Shareholder Stock
have agreed in writing to be bound by the provisions of this Agreement relating
to Shareholder Stock.
(d) Termination of Restrictions. The restrictions on the
transfer of Shareholder Stock set forth in this ss.3 will continue with respect
to each share of Shareholder Stock until the date on which such Shareholder
Stock has been transferred in a transaction permitted by this ss.3 (except in a
transaction contemplated by ss.3(c)); provided, however, that in any event the
restrictions on transfers set forth in this ss.3 will terminate upon a Company
Sale.
4. Additional Restrictions on Transfer. The certificates representing
Shareholder Stock will bear the following legend, as well as any other legends
required by applicable state securities laws:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN
OTHER AGREEMENTS SET FORTH IN A SHAREHOLDERS' AGREEMENT AMONG THE
COMPANY AND CERTAIN OF ITS SHAREHOLDERS, DATED AUGUST __, 1999, A
COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S
PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
5. Sale of the Company.
(a) If the holders of a majority of the Common Stock then
outstanding approve the sale of the Company to an independent third party
(including, without limitation, by merger, consolidation, sale of all or
substantially all of its assets, sale of all of the outstanding Common Stock or
otherwise) (the "Approved Sale"), the holders of Shareholder Stock will consent
to and raise no objections against the Approved Sale, and if the Approved Sale
is structured as a sale of stock, the holders of Shareholder Stock will agree
to sell all of their shares of Common Stock and rights to acquire shares of
Common Stock on the terms and conditions approved by the Company's Board and
the holders of a majority of the Common Stock then outstanding. The holders of
Shareholder Stock will take all necessary and desirable actions in connection
with the consummation of the Approved Sale of the Company. For purposes of this
ss.5, an "independent third party" is any person who, prior to such sale, does
not own in excess of 5% of the Company's Common Stock on a fully-diluted basis,
who is not controlling, controlled by or under common control with any such 5%
owner of the Company's Common Stock and who is not the spouse, ancestor or
descendant (by birth or adoption) of any such 5% owner of the Company's Common
Stock.
8
<PAGE> 23
(b) The obligations of the holders of Shareholder Stock with
respect to an Approved Sale are subject to the satisfaction of the condition
that, upon the consummation of the Approved Sale, all of the holders of Common
Stock will receive the same form and amount of consideration per share of
Common Stock, or if any holders are given an option as to the form and amount
of consideration to be received, all holders will be given the same option.
6. Notices. All notices, requests, demands, claims and other
communications hereunder will be in writing. Any notice, request, demand, claim
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set
forth below:
To the Company:
c/o Trivest II, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Attention: General Counsel
To the Shareholder:
at the address of the Shareholder set forth
on the signature page hereto
To the Lead Trivest Investor:
c/o Trivest II, Inc.
2665 South Bayshore Drive
Suite 800
Miami, Florida 33133
Attention: General Counsel
Except as provided in ss.16 below, any party may send any notice, request,
demand, claim or other communication hereunder to the intended recipient at the
address set forth above using any other means (including personal delivery,
expedited courier, messenger service, telescope, telex, ordinary mail or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any party may change the
address to which notices, requests, demands, claims and other communications
hereunder are to be delivered by giving the other parties notice in the manner
herein set forth.
7. Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
9
<PAGE> 24
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
8. Complete Agreement. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the
complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter of this
Agreement in any way.
9. Counterparts. This Agreement may be executed on separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement. Any telecopied signature shall
be deemed a manually executed and delivered original.
10. Successors and Assigns. This Agreement is intended to bind and
inure to the benefit of and be enforceable by the Shareholder, the Company and
the Lead Trivest Investor, and their respective successors and assigns (and, if
applicable, heirs and personal representatives), including subsequent holders
of Shareholder Stock.
11. Choice of Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida without regard to conflicts of
laws principles thereof and all questions concerning the validity and
construction of this Agreement shall be determined in accordance with the laws
of said state. Each party hereby irrevocably submits to the exclusive
jurisdiction of any state or federal court sitting in the County of Miami-Dade,
State of Florida in any action or proceeding arising out of or relating to this
Agreement and hereby irrevocably agrees, on behalf of itself, himself or
herself and on behalf of such party's successor's and assigns (and, if
applicable, heirs and personal representatives), that all claims in respect of
such action or proceeding may be heard and determined in any such court and
irrevocably waives any objection such person may now or hereafter have as to
the venue of any such suit, action or proceeding brought in such a court or
that such court is an inconvenient forum. Each party further agrees that such
party will not commence any such action, suit or proceeding except in such
courts and that process in any such action, suit or proceeding may be served on
any party anywhere in the world.
12. Waiver of Jury Trial. THE PARTIES HERETO HEREBY WAIVE TRIAL BY
JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO,
OR CONNECTED WITH THIS AGREEMENT, THE RELATED DOCUMENTS OR THE RELATIONSHIP
ESTABLISHED HEREUNDER.
13. Remedies. Each of the parties to this Agreement will be entitled
to enforce its, his or her rights under this Agreement specifically, to recover
damages by reason of any breach of any provision of this Agreement and to
exercise all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages may not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction for specific
performance and/or injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.
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<PAGE> 25
14. Amendments and Waivers. No provision of this Agreement may be
amended or waived without the prior written consent of the Company, the Lead
Trivest Investor and the Shareholder.
15. Business Days. Whenever the terms of this Agreement call for the
performance of a specific act on a specified date, which date falls on a
Saturday, Sunday or legal holiday, the date for the performance of such act
shall be postponed to the next succeeding regular business day following such
Saturday, Sunday or legal holiday.
16. Failure to Deliver Stock. If the Shareholder (or the Shareholder's
estate or any other representative of the Shareholder or holder of Shareholder
Stock) who has become obligated to sell shares of Shareholder Stock to the
Company hereunder shall fail to deliver such shares on the terms and in
accordance with this Agreement, the Company, in addition to all other remedies
it may have, may send to the such obligated party by registered mail, return
receipt requested, the purchase price for such shares on the terms provided for
in this Agreement. Thereupon, the Company, upon written notice to such holder,
shall cancel on its books the certificates representing the Shareholder Stock
to be sold; and thereupon, all of such obligated holder's rights in and to such
Shareholder Stock shall terminate.
17. No Third Party Beneficiary. Except for the parties to this
Agreement and their respective successors and assigns (and, if applicable,
heirs and personal representatives), nothing expressed or implied in this
Agreement is intended, or will be construed, to confer upon or give any person
other than the parties hereto and their respective successors and assigns any
rights or remedies under or by reason of this Agreement.
SIGNATURES BEGIN ON FOLLOWING PAGE
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<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first above written.
COMPANY: WINSLOEW FURNITURE, INC.
By:
---------------------------------------
Bobby Tesney
President and Chief Executive Officer
SHAREHOLDER:
-------------------------------------------
Print Name:
-------------------------------
Address:
-------------------------------------------
-------------------------------------------
-------------------------------------------
LEAD TRIVEST INVESTOR: TRIVEST FUND II GROUP, LTD.
By: Trivest Equities, Inc., General Partner
By:
------------------------------------
William F. Kaczynski, Jr.
Managing Director
12
<PAGE> 1
Exhibit 10.25
MANAGEMENT AGREEMENT
THIS MANAGEMENT AGREEMENT ("Agreement") is made and entered into as of
the 27th day of August, 1999, by and between WinsLoew Furniture, Inc., a Florida
corporation (the "COMPANY"), and Trivest II, Inc., a Florida corporation
("TRIVEST").
1. APPOINTMENT OF TRIVEST. On the terms and subject to the conditions
set forth in this Agreement, the Company appoints Trivest and Trivest accepts
appointment as the sole and exclusive manager of, and consultant to, the
Company's business, including without limitation any subsidiaries of the Company
and any other corporations hereafter formed or acquired by the Company to engage
in any business.
2. BOARD OF DIRECTORS SUPERVISION; CERTAIN ACTIONS SUBJECT TO APPROVAL
OF DISINTERESTED DIRECTORS OR BOARD OBSERVERS.
(a) The activities of Trivest to be performed under this Agreement
shall be subject to the supervision of the Board of Directors of the Company
(the "BOARD") to the extent required by applicable law or regulation and subject
to reasonable policies not inconsistent with the terms of this Agreement adopted
by the Board and in effect from time to time. Where not required by applicable
law or regulation, Trivest shall not require the prior approval of the Board to
perform its duties under this Agreement.
(b) Any determination of the amount of any increase in Base
Compensation in connection with the acquisition of an Additional Business
pursuant to clause (ii) of Section 6(b) below and any compensation arrangement
approved by the Board pursuant to clause (ii) of Section 6(c) below shall, in
order to be effective, require the affirmative approval of a majority of the
Disinterested Directors and, if Trivest Furniture Partners, Ltd., a Florida
limited partnership ("TRIVEST FURNITURE PARTNERS"), is at such time a holder of
any equity securities of the Company, a majority in interest of the holders of
limited partnership interests of Trivest Furniture Partners. For purposes of
this Agreement the term "DISINTERESTED DIRECTORS" shall mean those members of
the Board (if any) who, at the time of such approval, are neither employees of
the Company nor directors, officers or stockholders of Trivest or (subject to
the last sentence of this Section 2(b), any of its affiliates. Nothing herein
shall be deemed to prevent any individual who owns less than five percent in the
aggregate of the equity securities of any class of any issuer whose shares are
registered under '12(b) or 12(g) of the Securities Exchange Act of 1933, as
amended, and are listed or admitted for trading on any United States national
securities exchange or are quoted on the National Association of Securities
Dealers Automated Quotations System, or any similar system of automated
dissemination of quotations of securities prices in common use, from being
deemed to be a Disinterested Director so long as such individual is not a member
of any "control group" (within the meaning of the rules and regulations of the
United States Securities and Exchange Commission) of any such issuer.
<PAGE> 2
3. AUTHORITY OF TRIVEST. Subject to any limitations imposed by
applicable law or regulation, Trivest shall render management, consulting and
financial services to the Company, which services shall include advice and
assistance concerning any and all aspects of the operations, strategic and
capital planning and financing of the Company and its subsidiaries as needed
from time to time, including conducting relations on behalf of the Company with
accountants, attorneys, financial advisors and other professionals. Trivest will
also make periodic reports to the Company with respect to the services provided
hereunder. Trivest will use its best efforts to cause its employees and agents
to give the Company the benefit of their special knowledge, skill and business
expertise to the extent relevant to the Company's business and affairs. In
addition, Trivest shall render advice and expertise in connection with any
acquisitions or dispositions undertaken by the Company.
4. REIMBURSEMENT OF EXPENSES; INDEPENDENT CONTRACTOR. All obligations
or expenses incurred by Trivest in the performance of its duties under this
Agreement shall be for the account of, on behalf of, and at the expense of the
Company. Trivest shall not be obligated to make any advance to or for the
account of the Company or to pay any sums, except out of funds held in accounts
maintained by the Company nor shall Trivest be obligated to incur any liability
or obligation for the account of the Company without assurance that the
necessary funds for the discharge of such liability or obligation will be
provided. In the event the Company utilizes the services of Trivest's legal
department, then the Company shall promptly reimburse Trivest for such expenses
at prevailing rates. Trivest shall be an independent contractor, and nothing
obtained in this Agreement shall be deemed or construed (i) to create a
partnership or joint venture between the Company and Trivest, or (ii) to cause
Trivest to be responsible in any way for the debts, liabilities or obligations
of the Company or any other party, or (iii) to constitute Trivest or any of its
employees as employees, officers or agents of the Company.
5. OTHER ACTIVITIES OF TRIVEST. The Company acknowledges and agrees
that neither Trivest nor any of Trivest's employees, officers, directors,
affiliates or associates shall be required to devote full time and business
efforts to the duties of Trivest specified in this Agreement, but instead shall
devote only so much of such time and efforts as Trivest reasonably deems
necessary. The Company further acknowledges and agrees that Trivest and its
affiliates are engaged in the business of investing in, acquiring and/or
managing businesses for Trivest's own account, for the account of Trivest's
affiliates and associates and for the account of unaffiliated parties, and
understands that Trivest plans to continue to be engaged in such businesses (and
other business or investment activities) during the term of this Agreement. No
aspect or element of such activities shall be deemed to be engaged in for the
benefit of the Company or any of its subsidiaries nor to constitute a conflict
of interest.
6. COMPENSATION OF TRIVEST.
(a) BASE COMPENSATION. During the term of this Agreement, Trivest shall
receive annually with respect to the management of the business operations of
the Company and its
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<PAGE> 3
subsidiaries (including subsidiaries of subsidiaries), a base cash consulting
and management fee equal to $350,000, payable in advance in equal quarterly
installments (the "BASE COMPENSATION"). The Base Compensation shall be adjusted
annually to reflect any increase from the previous year in the Consumer Price
Index. For purposes of this Agreement, the term "CONSUMER PRICE INDEX" shall
mean the "Consumer Price Index For All Urban Consumers" base year 1982-1984 =
100 for the Southern region, published by the United States Department of Labor,
Bureau of Labor Statistics. The Company acknowledges that the determination of
the amount of the initial Base Compensation payable to Trivest hereunder is
based upon the Company's present business activities.
(b) ADDITIONAL BUSINESS OPERATIONS. In the event that any additional
business operations are acquired by the Company or its subsidiaries after the
date of this Agreement (each an "ADDITIONAL BUSINESS"), then, with respect to
each such Additional Business which has EBITA of $2,000,000 or more, the Base
Compensation shall be increased (as of the date such Additional Business is
acquired) by an amount equal to the greater of (i) $50,000 and (ii) subject to
Section 2(b), above, an amount determined in good faith by Trivest and the Board
prior to the date such Additional Business is acquired. For purposes of this
Agreement, the term "EBITA" shall mean the projected annual earnings before
income taxes, interest expense and amortization of goodwill for each Additional
Business for the fiscal year in which the acquisition of such Additional
Business occurs, as computed in accordance with generally accepted accounting
principles consistently applied with prior years (but excluding from such
computation any purchase adjustments and compensation payable to Trivest as a
result of the terms of this Agreement).
(c) ADDITIONAL INCENTIVE COMPENSATION.
(i) As additional compensation, Trivest shall be entitled to
a one-time fee (the "ADDITIONAL INCENTIVE COMPENSATION") with respect
to (A) any acquisition of a business operation by the Company or its
subsidiaries introduced or negotiated by Trivest or its affiliates, and
(B) any disposition of a business operation by the Company or its
subsidiaries negotiated by Trivest or its affiliates. The Additional
Incentive Compensation shall be paid at the closing of the acquisition
or disposition of any such business operation. The Additional Incentive
Compensation shall be a cash sum equal to the following percentages of
the purchase price (which on acquisitions or dispositions of assets
shall also include the book value of the assumed liabilities, and on
acquisitions or dispositions of stock shall also include liabilities of
the acquired entity that are required to be paid with funds provided by
the Company or any of its subsidiaries in connection with such
acquisition) for the acquisition or disposition:
PURCHASE PRICE PERCENTAGE
-------------- ----------
$1 to $10,000,000 3.00%
$10,000,001 to $50,000,000 1.25%
$50,000,001 and over 0.75%
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<PAGE> 4
By way of illustration, an acquisition or disposition with a purchase
price of $60,000,000 would generate Additional Incentive Compensation
of $875,000 (3.00% of the first $10,000,000, 1.25% of the next
$40,000,000 and 0.75% of the remaining $10,000,000). This Section
6(c)(i) shall not apply to any transaction (a "SALE OF THE COMPANY")
which is (x) the sale of all, or substantially all, of the Company's
consolidated assets in any single transaction or series of related
transactions; (y) the sale or issuance, or series of related sales or
issuances, of equity securities of the Company in any single
transaction or series of related transactions which results in any
person or group of affiliated persons (other than affiliates of
Trivest) owning (on a fully-diluted basis) more than 50% of the
Company=s securities having ordinary voting power to elect directors
outstanding at the time of such sale or issuance or such series of
sales and/or issuances; or (z) any merger or consolidation of the
Company with or into another corporation (regardless of which entity is
the surviving corporation) if, after giving effect to such merger or
consolidation, the holders of the Company's securities having ordinary
voting power to elect directors (on a fully-diluted basis) immediately
prior to the merger or consolidation own securities of the surviving or
resulting corporation representing 50% or less of the ordinary voting
power to elect directors of the surviving or resulting corporation (on
a fully-diluted basis). The amount of any fee payable to Trivest in
connection with a Sale of the Company shall be determined pursuant to
the provisions of Section 6(c)(ii) below.
(ii) In the event of any other transaction not in the
ordinary course of business, including a Sale of the Company and any
public or private debt or equity financing or unusual efforts extended
or results obtained by Trivest on behalf or for the benefit of the
Company or its subsidiaries, the Board shall in good faith negotiate
with Trivest to determine a fair compensation arrangement to compensate
Trivest for such matters.
7. TERM. Notwithstanding anything herein to the contrary, this
Agreement shall become effective only upon the consummation of the proposed
merger of Trivest Furniture Corporation with and into the Company, and shall
thereafter remain in effect for a period of 10 years unless terminated earlier
in accordance with the provisions of this Agreement.
8. EARLY TERMINATION.
(a) TERMINATION UPON BREACH. Either the Company or Trivest
may terminate this Agreement in the event of the breach of any of the material
terms or provisions of this Agreement by the other party, which breach is not
cured within 10 business days after notice of the same is given to the party
alleged to be in breach by the other party. In the event this Agreement is
terminated by Trivest because of the breach of any of the material terms or
provisions hereof by the Company, Trivest shall be entitled to recover damages
from the
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<PAGE> 5
Company and shall not be required to mitigate or reduce damages by seeking or
undertaking other management arrangements or business opportunities.
(b) TERMINATION UPON CONSUMMATION OF A SALE OF THE COMPANY.
Trivest's engagement under this Agreement may be terminated by a majority of the
Disinterested Directors (or, if Trivest Furniture Partners is then a holder of
any equity securities of the Company, by a majority in interest of the holders
of limited partnership interests of Trivest Furniture Partners) effective upon
the occurrence of a Sale of the Company. Any such termination shall be
communicated by written notice of Termination to Trivest, which notice shall be
given no sooner than 20 business days prior to and no later than five business
days after the consummation of a Sale of the Company.
9. STANDARD OF CARE. Trivest (including any person or entity acting for
or on behalf of Trivest) shall not be liable for any mistakes of fact, errors of
judgment, for losses sustained by the Company or for any acts or omissions of
any kind (including acts or omissions of Trivest), unless the Company's losses
(including expenses, costs and attorneys' fees) are finally and judicially
determined to have resulted from the gross negligence or willful misconduct of
Trivest.
10. INDEMNIFICATION OF TRIVEST. The Company hereby agrees to indemnify
and hold harmless Trivest and its present and future officers, directors,
affiliates, employees and agents ("Indemnified Parties") to the fullest extent
not prohibited by law as if any of the Indemnified Parties were an officer or
director of the Company and/or its subsidiaries. The Company further agrees to
reimburse the Indemnified Parties on a monthly basis for any cost of defending
any action or investigation (including attorneys' fees and expenses), subject to
an undertaking from such Indemnified Party to repay the Company if such party is
determined not to be entitled to such indemnity.
11. NO ASSIGNMENT. Without the consent of Trivest, the Company shall
not assign, transfer or convey any of its rights, duties or interest under this
Agreement, nor shall it delegate any of the obligations or duties required to be
kept or performed by it hereunder. Without the prior written consent of the
Company, Trivest shall not assign, transfer or convey any of its rights, duties
or interests under this Agreement, nor shall it delegate any of the obligations
or duties required to be kept or performed by it under this Agreement.
12. NOTICES. All notices, demands, consents, approvals and requests
given by either party to the other hereunder shall be in writing and shall be
personally delivered or sent by registered or certified mail, return receipt
requested, postage prepaid, to the parties at the following addresses:
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<PAGE> 6
If to the Company: WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Attention: President
If to Trivest: Trivest II, Inc.
2665 South Bayshore Drive
Eighth Floor
Miami, Florida 33133
Attention: General Counsel
Any party may at any time change its respective address by sending written
notice to the other party of the change in the manner hereinabove prescribed.
13. SEVERABILITY. If any term or provision of this Agreement or the
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or enforceable, shall not be affected thereby, and each term
and provision of this Agreement shall be valid and be enforced to the fullest
extent permitted by law.
14. NO WAIVER. The failure of the Company or Trivest to seek redress
for any violation of, or to insist upon the strict performance of, any term or
condition of this Agreement shall not prevent a subsequent act by the Company or
Trivest, which would have originally constituted a violation of this Agreement
by the Company or Trivest, from having all the force and effect of any original
violation. The failure by the Company or Trivest to insist upon the strict
performance of any one of the terms or conditions of the Agreement or to
exercise any right, remedy or elections herein contained or permitted by law
shall not constitute or be construed as a waiver or relinquishment for the
future of such term, condition, right, remedy or election, but the same shall
continue and remain in full force and effect. Except as the Company's rights of
termination are limited herein, all rights and remedies that the Company or
Trivest may have at law, in equity or otherwise upon breach of any term or
condition of this Agreement, shall be distinct, separate and cumulative rights
and remedies and no one of them, whether exercised by the Company or Trivest or
not, shall be deemed to be in exclusion of any other right or remedy of the
Company or Trivest.
15. ENTIRE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the matters herein contained and any
agreement hereafter made shall be ineffective to effect any change or
modification, in whole or in part, unless such agreement is in writing and
signed by the party against whom enforcement of the change or modification is
sought.
16. GOVERNING LAWS. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida without reference to the
laws of any other state.
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<PAGE> 7
17. NO THIRD PARTY BENEFICIARY. Except for the parties to this
Agreement and their respective successors and assigns, nothing expressed or
implied in this Agreement is intended, or will be construed, to confer upon or
give any person other than the parties hereto and their respective successors
and assigns any rights or remedies under or by reason of this Agreement;
PROVIDED, HOWEVER, that the provisions of Sections 2(b), 6(b)(ii), 6(c)(ii) and
8(b), above, to the extent that they provide rights which may be exercised by a
majority in interest of the limited partners of Trivest Furniture Partners,
shall be deemed to be for the benefit of Trivest Furniture Partners and its
partners and may be enforced by Trivest Furniture Partners or its partners.
SIGNATURES APPEAR ON FOLLOWING PAGE
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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly exercised by their authorized representatives as of the date first above
written.
WINSLOEW FURNITURE, INC.
By: /s/ Bobby Tesney
-----------------------------------------
Bobby Tesney, President
TRIVEST II, INC.
By: /s/ Earl W. Powell
-----------------------------------------
Earl W. Powell, President
-8-
<PAGE> 1
Exhibit 10.26
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
August 27, 1999 by and between WINSLOEW FURNITURE, INC., a Florida corporation
(the "Company"), and BOBBY TESNEY (the "Executive").
RECITALS
A. The Executive is currently employed as President and Chief Executive
Officer of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Company and Trivest Furniture Corporation, a Florida corporation
(the "Purchaser"), have entered into a Second Amended and Restated Agreement and
Plan of Merger, dated May 4, 1999, pursuant to which the Purchaser will merge
with and into the Company, with the Company being the surviving corporation (the
"Merger").
D. The Company recognizes that the Executive has contributed to its
growth and success, and desires to assure the Executive's employment by the
Company following the Merger and to compensate him therefor pursuant to this
Agreement.
E. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 GENERAL. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
1.2 DUTIES OF EXECUTIVE. During the term of this Agreement,
the Executive shall serve as President and Chief Executive Officer of the
Company, shall diligently perform all services as may be assigned to him by the
Company's Board of
1
<PAGE> 2
Directors or any authorized Committee of the Board of Directors (the full Board
or such Committee, as the case may be, is referred to herein as the "Board"),
and shall exercise such power and authority as may from time to time be
delegated to him by the Board. The Executive shall devote his full time and
attention to the business and affairs of the Company, render such services to
the best of his ability, and use his best efforts to promote the interests of
the Company.
2. TERM.
2.1 INITIAL TERM. The initial term of this Agreement, and the
employment of the Executive hereunder, shall be for the five-year period
commencing on the later to occur of the effective date of the Merger and the
date hereof (the "Initial Term"), unless sooner terminated in accordance with
the terms and conditions hereof, provided, however, that the Initial Term of
this Agreement shall in no event commence if the consummation of the Merger does
not occur on or before August 31, 1999.
2.2 RENEWAL TERMS. The Initial Term of this Agreement, and the
employment of the Executive hereunder, may be renewed and extended for such
period or periods as may be mutually agreed to by the Company and the Executive
in a written supplement to this Agreement signed by the Executive and the
Company ("Written Supplement"). If this Agreement is not so renewed and extended
prior to the expiration of the Initial Term, this Agreement, and the employment
of the Executive hereunder, shall automatically terminate upon the expiration of
the Initial Term.
3. COMPENSATION.
3.1 BASE SALARY. THE EXECUTIVE SHALL RECEIVE A BASE SALARY
(THE "BASE SALARY") AT THE ANNUAL RATE OF NOT LESS THAN $275,000 FOR THE PERIOD
COMMENCING ON THE DATE OF THE MERGER AND ENDING DECEMBER 31, 1999 AND AT THE
ANNUAL RATE OF NOT LESS THAN $300,000 FOR THE REMAINDER OF THE INITIAL TERM,
with such Base Salary payable in installments consistent with the Company's
normal payroll schedule, subject to applicable withholding and other taxes. The
Base Salary shall be adjusted annually to reflect, at a minimum, any increase
from the previous year in the national Consumer Price Index. The Base Salary
shall also be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time or from time
to time. The Base Salary, if so increased, shall not thereafter be decreased for
any reason. If the term of this Agreement shall be renewed and extended as
provided in Section 2.2 hereof, then during such renewal term of his employment
hereunder, the Executive shall be paid a base salary as set forth in the Written
Supplement.
3.2 INCENTIVE COMPENSATION.
(a) In addition to the Base Salary, the Executive
shall be entitled to receive annual incentive compensation ("Incentive
Compensation"), in the amount determined pursuant to this Section 3.2, for each
fiscal year ending during the term of this
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Agreement COMMENCING WITH FISCAL 2000 for which the Company has Operating
Earnings (as hereafter defined) of at least seventy-five percent (75%) of the
Target Earnings (as hereinafter defined) of the Company for such year; PROVIDED,
THAT INCENTIVE COMPENSATION BASED ON THE COMPANY'S 1999 OPERATING RESULTS SHALL
BE DETERMINED IN ACCORDANCE WITH THE EXECUTIVE'S EMPLOYMENT AGREEMENT WITH THE
COMPANY DATED NOVEMBER 4, 1994 (THE "PRIOR EMPLOYMENT AGREEMENT"). For purposes
of this Section 3.2, "Operating Earnings" shall mean the consolidated operating
earnings of the Company as determined in accordance with generally accepted
accounting principles ("GAAP"), consistently applied with the Company's past
practices, provided, however, that such Operating Earnings shall not reflect
(i.e., shall not be reduced by) any amortization of goodwill. The determination
of Operating Earnings made by the Company shall be final and binding on the
parties to this Agreement. For purposes of this Section 3.2, the "Target
Earnings" of the Company shall be as determined by the Board of Directors. The
Board of Directors shall have the right to modify, at any time and in its sole
discretion, any previously established "Target Earnings" for reasons such as,
but not limited to, any acquisition, disposition, merger, reorganization,
liquidation, dissolution or other transaction involving the Company or any of
its subsidiaries, or other extraordinary or significant events or changes in
circumstances relating to the Company or any of its subsidiaries, businesses or
operations.
(b) The amount of the Executive's Incentive
Compensation for each fiscal year shall be determined as follows:
I. If the Operating Earnings for the year do
not exceed the Target Earnings for the year, the Incentive Compensation shall be
calculated by (A) multiplying (i) ONE-HUNDRED PERCENT (100%) of the Executive's
Base Salary for the year (the "Maximum Bonus") BY (ii) the remainder of (w) the
fraction obtained by dividing the Operating Earnings by the Target Earnings,
LESS (x) 0.75, and then (B) multiplying the resulting product by three (3); or
II. If the Operating Earnings for the year
exceed the Target Earnings for the year, the Incentive Compensation shall be
calculated by (A) multiplying (i) the Maximum Bonus BY (ii) the remainder of (y)
the fraction obtained by dividing the Operating Earnings by the Target Earnings,
LESS (z) 1.0, and then (B) multiplying the resulting product by two (2), and
then adding 75% of the Maximum Bonus; provided, however, that in no event shall
the Incentive Compensation for any year exceed the Maximum Bonus.
III. For example, (A) if Operating Earnings
are 75% of the applicable Target Earnings or less, the Executive's Incentive
Compensation for that year would be zero, (B) if Operating Earnings are 90% of
the applicable Target Earnings, the Executive's Incentive Compensation for that
year would be 45% of the Maximum Bonus, (C) if Operating Earnings are 100% of
the Target Earnings, the Executive's Incentive Compensation for that year would
be 75% of the Maximum Bonus, (D) if the Operating Earnings are 110% of the
Target Earnings, the Executive's Incentive Compensation for that
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year would be 95% of the Maximum Bonus, and (E) if the Operating Earnings are
120% of the Target Earnings, the Executive's Incentive Compensation for that
year would be limited to 100% of the Maximum Bonus.
(c) For purposes of this Agreement, the amount of
Incentive Compensation payable with respect to any fiscal year (net of any tax
or other amount properly withheld therefrom) shall be paid by the Company to
Executive within one hundred twenty (120) days after the end of the fiscal year;
provided, however, that any amount paid shall be subject to increase or decrease
based upon the results of any audited financial statements with respect to such
year.
3.3 INITIAL BONUS. IN CONNECTION WITH ENTERING INTO THIS
AGREEMENT, THE COMPANY AGREES TO PAY THE EXECUTIVE WITHIN FORTY-FIVE (45) DAYS
AN INITIAL BONUS OF ______________.
4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 REIMBURSABLE EXPENSES. During the term of the Executive's
employment hereunder, the Company, upon the submission of proper substantiation
by the Executive, shall reimburse the Executive for all reasonable expenses
actually and necessarily paid or incurred by the Executive in the course of and
pursuant to the business of the Company.
4.2 OTHER BENEFITS. The Executive shall be entitled to
participate in all medical and hospitalization, group life insurance, and any
and all other plans as are presently and hereinafter provided by the Company to
its executives. The Executive shall be entitled to vacations in accordance with
the Company's prevailing policy for its executives; provided, however, that in
no event may a vacation be taken at a time when to do so could, in the
reasonable judgment of the Board, adversely affect the Company's business.
4.3 WORKING FACILITIES. The Company shall furnish the
Executive with an office, secretarial help and such other facilities and
services suitable to his position and adequate for the performance of his duties
hereunder
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. The Company shall at all times have
the right, upon written notice to the Executive, to terminate the Executive's
employment hereunder for "Cause" (as defined below in this paragraph 5.1). Upon
any termination pursuant to this Section 5.1, the Executive shall be entitled to
be paid his Base Salary to the date of termination and the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however to
the provisions of Section 4.1). For purposes of this Agreement, the term "Cause"
shall mean (i) the willful failure or refusal of the Executive to
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perform the duties or render the services assigned to him from time to time by
the Board, (ii) gross negligence or misconduct by the Executive in the
performance of his duties to the Company, (iii) the charging or indictment of
the Executive in connection with a felony, (iv) the association, directly or
indirectly, of the Executive, for his profit or financial benefit, with any
person, firm, partnership, association, entity or corporation that competes, in
any material way, with the Company, (v) the disclosing or using of any material
trade secret or confidential information of the Company at any time by the
Executive, except as required in connection with his duties to the Company, (vi)
the breach by the Executive of his fiduciary duty or duty of trust to the
Company, or (vii) any breach or unsatisfactory performance by the Executive of
any of the terms or provisions of this Agreement or any other agreement with the
Company or any of its subsidiaries (whether written or oral), which is not cured
within twenty (20) business days after the Company gives written notice of such
breach or unsatisfactory performance to the Executive.
5.2 DISABILITY. The Company shall at all times have the right,
upon written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, become unable to perform his duties hereunder
for in excess of ninety (90) days in any 12-month period. Upon any termination
pursuant to this Section 5.2, the Company shall pay to the Executive any unpaid
amounts of his Base Salary and Incentive Compensation accrued through the
effective date of termination and the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions of
Section 4.1).
5.3 DEATH. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall pay to the estate of the
deceased Executive any unpaid amounts of his Base Salary and Incentive
Compensation accrued through the date of his death and the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of the Executive's death, subject,
however to the provisions of Section 4.1).
5.4 TERMINATION WITHOUT CAUSE. At any time the Company shall
have the right to terminate the Executive's employment hereunder by written
notice to the Executive; provided, however, that, the Company shall (i) pay to
the Executive any unpaid Base Salary and Incentive Compensation accrued through
the effective date of termination specified in such notice, and (ii) pay
Executive's Base Salary in the manner set forth in Section 3.1 hereof until the
date which is six months following such effective date (the "Severance Date").
The Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1).
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6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. While employed by the Company and for a
period of one year (except that such period shall be six months if Executive's
employment is terminated pursuant to Section 5.4 hereof) following the later of
the date his employment is terminated hereunder or, if applicable, the Severance
Date, the Executive shall not, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation or business or any
other person or entity (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) that directly or
indirectly engages in competition with the Company in any state, country,
commonwealth, territory or other place in which the Company sells its products
(it being agreed that for all purposes of this Section 6, "the Company" shall
include all of its subsidiaries).
6.2 NONDISCLOSURE. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit of any other
person or persons, or misuse in any way, any trade secrets or confidential
information pertaining to the business of the Company. Any confidential
information, trade secrets or data now known or hereafter acquired by the
Executive with respect to the business of the Company (which shall include, but
not be limited to, information concerning the Company's financial condition,
prospects, customers, sources of leads, methods of doing business, and the
manner of design, manufacture, financing, marketing and distribution of the
Company's products) shall be deemed a valuable, special and unique asset of the
Company that is received by the Executive in confidence and as a fiduciary, and
Executive shall remain a fiduciary to the Company with respect to all of such
information.
6.3 NONSOLICITATION OF EMPLOYEES AND CUSTOMERS. While employed
by the Company and for a period of three years (except that the period with
respect to the prohibitions in clause (ii) hereof shall be six months if
Executive's employment is terminated pursuant to Section 5.4 hereof) following
the later of the date his employment is terminated hereunder or, if applicable,
the Severance Date, the Executive shall not, directly or indirectly, for himself
or for any other person, firm, corporation, partnership, association or other
entity, (i) attempt to employ or enter into any contractual arrangement with any
employee or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in excess of six
months, and/or (ii) call on or solicit any of the actual or targeted prospective
customers or clients of the Company, nor shall the Executive make known the
names and addresses of such customers or any information relating in any manner
to the Company's trade or business relationships with such customers.
6.4 BOOKS AND RECORDS. All books, records, and accounts
relating in any manner to the customers or clients of the Company, whether
prepared by the Executive or otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and shall be returned immediately
to the Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
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7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
the commencement of the Initial Term of this Agreement, shall supersede all
prior agreements, understandings and arrangements, both oral and written,
between the Executive and the Company (or any of its respective affiliates) with
respect to such subject matter, including the Prior Employment Agreement. Except
for the obligation to pay all accrued but unpaid salary and other compensation
due the Executive under the Prior Employment Agreement through the commencement
of the Initial Term of this Agreement (including any compensation based on the
Company's 1999 operating results, which compensation shall be determined in
accordance with the Prior Employment Agreement as if the Merger did not occur),
all such prior agreements (including the Prior Employment Agreement),
understandings and arrangements for the provision of services by the Executive
to the Company and the compensation of the Executive in any form shall
automatically terminate upon the commencement of the Initial Term of this
Agreement, and each party shall thereupon and thereby, without any further
action, release and forever discharge the other (and the other's affiliates)
from any and all liabilities and obligations of any nature arising out of or in
connection with any and all such prior agreements, understandings or
arrangements. This Agreement may not be modified in any way unless by a written
instrument signed by both the Company and the Executive.
10. NOTICES. Any notice required or permitted to be given hereunder
shall be deemed given when delivered by hand or when deposited in the United
States mail, by registered or certified mail, return receipt requested, postage
prepaid, (i) if to the Company, to the address of the Company's principal
offices in Birmingham, Alabama (with a copy to Trivest, Inc., 2665 South
Bayshore Drive, Eighth Floor, Miami, Florida 33133, Attention: Peter W. Klein,
Vice President and General Counsel), and (ii) if to the Executive, to his
address as reflected on the payroll records of the Company, or to such other
address as either party hereto may from time to time give notice of to the
other.
11. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representative, legal
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representatives, successors and, where applicable, assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation, sale
of stock, sale of assets or otherwise; provided, however that the Executive
shall not delegate his employment obligations hereunder, or any portion thereof,
to any other person.
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or for the injunction of
any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
15. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
WINSLOEW FURNITURE, INC.
By: /s/ Earl W. Powell
-----------------------------------
Earl W. Powell
Chairman of the Board
EXECUTIVE
/s/ Bobby Tesney
-----------------------------------
Bobby Tesney
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Exhibit 10.27
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
August 27, 1999 by and between WINSLOEW FURNITURE, INC., a Florida corporation
(the "Company"), and R. CRAIG WATTS (the "Executive").
RECITALS
A. The Executive is currently employed as Executive Vice President -
Seating of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Company and Trivest Furniture Corporation, a Florida corporation
(the "Purchaser"), have entered into a Second Amended and Restated Agreement and
Plan of Merger, dated May 4, 1999, pursuant to which the Purchaser will merge
with and into the Company, with the Company being the surviving corporation (the
"Merger").
D. The Company recognizes that the Executive has contributed to its
growth and success, and desires to assure the Executive's employment by the
Company following the Merger and to compensate him therefor pursuant to this
Agreement.
E. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 GENERAL. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
1.2 DUTIES OF EXECUTIVE. During the term of this Agreement,
the Executive shall serve as Executive Vice President - Seating of the Company,
shall diligently perform all services as may be assigned to him by the Company's
President and
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Chief Executive Officer and/or the Company's Board of Directors or any
authorized Committee of the Board of Directors (the full Board or such
Committee, as the case may be, is referred to herein as the "Board"), and shall
exercise such power and authority as may from time to time be delegated to him
by the Board. The Executive shall devote his full time and attention to the
business and affairs of the Company, render such services to the best of his
ability, and use his best efforts to promote the interests of the Company.
2. TERM.
2.1 INITIAL TERM. The initial term of this Agreement, and the
employment of the Executive hereunder, shall be for the five-year period
commencing on the later to occur of the effective date of the Merger and the
date hereof (the "Initial Term"), unless sooner terminated in accordance with
the terms and conditions hereof, provided, however, that the Initial Term of
this Agreement shall in no event commence if the consummation of the Merger does
not occur on or before August 31, 1999.
2.2 RENEWAL TERMS. The Initial Term of this Agreement, and the
employment of the Executive hereunder, may be renewed and extended for such
period or periods as may be mutually agreed to by the Company and the Executive
in a written supplement to this Agreement signed by the Executive and the
Company ("Written Supplement"). If this Agreement is not so renewed and extended
prior to the expiration of the Initial Term, this Agreement, and the employment
of the Executive hereunder, shall automatically terminate upon the expiration of
the Initial Term.
3. COMPENSATION.
3.1 BASE SALARY. THE EXECUTIVE SHALL RECEIVE A BASE SALARY
(THE "BASE SALARY") AT THE ANNUAL RATE OF NOT LESS THAN $195,650 FOR THE PERIOD
COMMENCING ON THE DATE OF THE MERGER AND ENDING DECEMBER 31, 1999 AND AT THE
ANNUAL RATE OF NOT LESS THAN $205,650 FOR THE REMAINDER OF THE INITIAL TERM,
with such Base Salary payable in installments consistent with the Company's
normal payroll schedule, subject to applicable withholding and other taxes. The
Base Salary shall be adjusted annually to reflect, at a minimum, any increase
from the previous year in the national Consumer Price Index. The Base Salary
shall also be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time or from time
to time. The Base Salary, if so increased, shall not thereafter be decreased for
any reason. If the term of this Agreement shall be renewed and extended as
provided in Section 2.2 hereof, then during such renewal term of his employment
hereunder, the Executive shall be paid a base salary as set forth in the Written
Supplement.
3.2 INCENTIVE COMPENSATION.
(a) In addition to the Base Salary, the Executive
shall be entitled to receive annual incentive compensation ("Incentive
Compensation"), in the amount determined pursuant to this Section 3.2, for each
fiscal year ending during the term of this
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Agreement COMMENCING WITH FISCAL 2000 for which the Company's Contract Seating
Division has Operating Earnings (as hereafter defined) of at least seventy-five
percent (75%) of the Target Earnings (as hereinafter defined) of the Company's
Contract Seating Division for such year; PROVIDED, THAT INCENTIVE COMPENSATION
BASED ON THE COMPANY'S 1999 OPERATING RESULTS SHALL BE DETERMINED IN ACCORDANCE
WITH THE EXECUTIVE'S EMPLOYMENT AGREEMENT WITH THE COMPANY DATED NOVEMBER 4,
1994 (THE "PRIOR EMPLOYMENT AGREEMENT"). For purposes of this Section 3.2,
"Operating Earnings" shall mean the consolidated operating earnings of the
Company's Contract Seating Division as determined in accordance with generally
accepted accounting principles ("GAAP"), consistently applied with the Company's
past practices, provided, however, that such Operating Earnings shall not
reflect (i.e., shall not be reduced by) any amortization of goodwill. The
determination of Operating Earnings made by the Company shall be final and
binding on the parties to this Agreement. For purposes of this Section 3.2, the
"Target Earnings" of the Company's Contract Seating Division shall be as
determined by the Board of Directors. The Board of Directors shall have the
right to modify, at any time and in its sole discretion, any previously
established "Target Earnings" for reasons such as, but not limited to, any
acquisition, disposition, merger, reorganization, liquidation, dissolution or
other transaction involving the Company or any of its subsidiaries, or other
extraordinary or significant events or changes in circumstances relating to the
Company or any of its subsidiaries, businesses or operations.
(b) The amount of the Executive's Incentive
Compensation for each fiscal year shall be determined as follows:
I. If the Operating Earnings for the year do
not exceed the Target Earnings for the year, the Incentive Compensation shall be
calculated by (A) multiplying (i) EIGHTY-FIVE PERCENT (85%) of the Executive's
Base Salary for the year (the "Maximum Bonus") BY (ii) the remainder of (w) the
fraction obtained by dividing the Operating Earnings by the Target Earnings,
LESS (x) 0.75, and then (B) multiplying the resulting product by three (3); or
II. If the Operating Earnings for the year
exceed the Target Earnings for the year, the Incentive Compensation shall be
calculated by (A) multiplying (i) the Maximum Bonus BY (ii) the remainder of (y)
the fraction obtained by dividing the Operating Earnings by the Target Earnings,
LESS (z) 1.0, and then (B) multiplying the resulting product by two (2), and
then adding 75% of the Maximum Bonus; provided, however, that in no event shall
the Incentive Compensation for any year exceed the Maximum Bonus.
III. For example, (A) if Operating Earnings
are 75% of the applicable Target Earnings or less, the Executive's Incentive
Compensation for that year would be zero, (B) if Operating Earnings are 90% of
the applicable Target Earnings, the Executive's Incentive Compensation for that
year would be 45% of the Maximum Bonus, (C) if Operating Earnings are 100% of
the Target Earnings, the Executive's Incentive Compensation for that year would
be 75% of the Maximum Bonus, (D) if the Operating
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Earnings are 110% of the Target Earnings, the Executive's Incentive Compensation
for that year would be 95% of the Maximum Bonus, and (E) if the Operating
Earnings are 120% of the Target Earnings, the Executive's Incentive Compensation
for that year would be limited to 100% of the Maximum Bonus.
(c) For purposes of this Agreement, the amount of
Incentive Compensation payable with respect to any fiscal year (net of any tax
or other amount properly withheld therefrom) shall be paid by the Company to
Executive within one hundred twenty (120) days after the end of the fiscal year;
provided, however, that any amount paid shall be subject to increase or decrease
based upon the results of any audited financial statements with respect to such
year.
3.3 INITIAL BONUS. IN CONNECTION WITH ENTERING INTO THIS
AGREEMENT, THE COMPANY AGREES TO PAY THE EXECUTIVE WITHIN FORTY-FIVE (45) DAYS
AN INITIAL BONUS OF $10,000.
4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 REIMBURSABLE EXPENSES. During the term of the Executive's
employment hereunder, the Company, upon the submission of proper substantiation
by the Executive, shall reimburse the Executive for all reasonable expenses
actually and necessarily paid or incurred by the Executive in the course of and
pursuant to the business of the Company.
4.2 OTHER BENEFITS. The Executive shall be entitled to
participate in all medical and hospitalization, group life insurance, and any
and all other plans as are presently and hereinafter provided by the Company to
its executives. The Executive shall be entitled to vacations in accordance with
the Company's prevailing policy for its executives; provided, however, that in
no event may a vacation be taken at a time when to do so could, in the
reasonable judgment of the Board, adversely affect the Company's business.
4.3 WORKING FACILITIES. The Company shall furnish the
Executive with an office, secretarial help and such other facilities and
services suitable to his position and adequate for the performance of his duties
hereunder
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. The Company shall at all times have
the right, upon written notice to the Executive, to terminate the Executive's
employment hereunder for "Cause" (as defined below in this paragraph 5.1). Upon
any termination pursuant to this Section 5.1, the Executive shall be entitled to
be paid his Base Salary to the date of termination and the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however to
the provisions of Section 4.1). For purposes of this
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Agreement, the term "Cause" shall mean (i) the willful failure or refusal of the
Executive to perform the duties or render the services assigned to him from time
to time by the Board, (ii) gross negligence or misconduct by the Executive in
the performance of his duties to the Company, (iii) the charging or indictment
of the Executive in connection with a felony, (iv) the association, directly or
indirectly, of the Executive, for his profit or financial benefit, with any
person, firm, partnership, association, entity or corporation that competes, in
any material way, with the Company, (v) the disclosing or using of any material
trade secret or confidential information of the Company at any time by the
Executive, except as required in connection with his duties to the Company, (vi)
the breach by the Executive of his fiduciary duty or duty of trust to the
Company, or (vii) any breach or unsatisfactory performance by the Executive of
any of the terms or provisions of this Agreement or any other agreement with the
Company or any of its subsidiaries (whether written or oral), which is not cured
within twenty (20) business days after the Company gives written notice of such
breach or unsatisfactory performance to the Executive.
5.2 DISABILITY. The Company shall at all times have the right,
upon written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, become unable to perform his duties hereunder
for in excess of ninety (90) days in any 12-month period. Upon any termination
pursuant to this Section 5.2, the Company shall pay to the Executive any unpaid
amounts of his Base Salary and Incentive Compensation accrued through the
effective date of termination and the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions of
Section 4.1).
5.3 DEATH. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall pay to the estate of the
deceased Executive any unpaid amounts of his Base Salary and Incentive
Compensation accrued through the date of his death and the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of the Executive's death, subject,
however to the provisions of Section 4.1).
5.4 TERMINATION WITHOUT CAUSE. At any time the Company shall
have the right to terminate the Executive's employment hereunder by written
notice to the Executive; provided, however, that, the Company shall (i) pay to
the Executive any unpaid Base Salary and Incentive Compensation accrued through
the effective date of termination specified in such notice, and (ii) pay
Executive's Base Salary in the manner set forth in Section 3.1 hereof until the
date which is six months following such effective date (the "Severance Date").
The Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1).
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6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. While employed by the Company and for a
period of one year (except that such period shall be six months if Executive's
employment is terminated pursuant to Section 5.4 hereof) following the later of
the date his employment is terminated hereunder or, if applicable, the Severance
Date, the Executive shall not, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation or business or any
other person or entity (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) that directly or
indirectly engages in competition with the Company in any state, country,
commonwealth, territory or other place in which the Company sells its products
(it being agreed that for all purposes of this Section 6, "the Company" shall
include all of its subsidiaries).
6.2 NONDISCLOSURE. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit of any other
person or persons, or misuse in any way, any trade secrets or confidential
information pertaining to the business of the Company. Any confidential
information, trade secrets or data now known or hereafter acquired by the
Executive with respect to the business of the Company (which shall include, but
not be limited to, information concerning the Company's financial condition,
prospects, customers, sources of leads, methods of doing business, and the
manner of design, manufacture, financing, marketing and distribution of the
Company's products) shall be deemed a valuable, special and unique asset of the
Company that is received by the Executive in confidence and as a fiduciary, and
Executive shall remain a fiduciary to the Company with respect to all of such
information.
6.3 NONSOLICITATION OF EMPLOYEES AND CUSTOMERS. While employed
by the Company and for a period of three years (except that the period with
respect to the prohibitions in clause (ii) hereof shall be six months if
Executive's employment is terminated pursuant to Section 5.4 hereof) following
the later of the date his employment is terminated hereunder or, if applicable,
the Severance Date, the Executive shall not, directly or indirectly, for himself
or for any other person, firm, corporation, partnership, association or other
entity, (i) attempt to employ or enter into any contractual arrangement with any
employee or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in excess of six
months, and/or (ii) call on or solicit any of the actual or targeted prospective
customers or clients of the Company, nor shall the Executive make known the
names and addresses of such customers or any information relating in any manner
to the Company's trade or business relationships with such customers.
6.4 BOOKS AND RECORDS. All books, records, and accounts
relating in any manner to the customers or clients of the Company, whether
prepared by the Executive or otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and shall be returned immediately
to the Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
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7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
the commencement of the Initial Term of this Agreement, shall supersede all
prior agreements, understandings and arrangements, both oral and written,
between the Executive and the Company (or any of its respective affiliates) with
respect to such subject matter, including the Prior Employment Agreement. Except
for the obligation to pay all accrued but unpaid salary and other compensation
due the Executive under the Prior Employment Agreement through the commencement
of the Initial Term of this Agreement (including any compensation based on the
Company's 1999 operating results, which compensation shall be determined in
accordance with the Prior Employment Agreement as if the Merger did not occur),
all such prior agreements (including the Prior Employment Agreement),
understandings and arrangements for the provision of services by the Executive
to the Company and the compensation of the Executive in any form shall
automatically terminate upon the commencement of the Initial Term of this
Agreement, and each party shall thereupon and thereby, without any further
action, release and forever discharge the other (and the other's affiliates)
from any and all liabilities and obligations of any nature arising out of or in
connection with any and all such prior agreements, understandings or
arrangements. This Agreement may not be modified in any way unless by a written
instrument signed by both the Company and the Executive.
10. NOTICES. Any notice required or permitted to be given hereunder
shall be deemed given when delivered by hand or when deposited in the United
States mail, by registered or certified mail, return receipt requested, postage
prepaid, (i) if to the Company, to the address of the Company's principal
offices in Birmingham, Alabama (with a copy to Trivest, Inc., 2665 South
Bayshore Drive, Eighth Floor, Miami, Florida 33133, Attention: Peter W. Klein,
Vice President and General Counsel), and (ii) if to the Executive, to his
address as reflected on the payroll records of the Company, or to such other
address as either party hereto may from time to time give notice of to the
other.
11. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representative, legal
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representatives, successors and, where applicable, assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation, sale
of stock, sale of assets or otherwise; provided, however that the Executive
shall not delegate his employment obligations hereunder, or any portion thereof,
to any other person.
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or for the injunction of
any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
15. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
WINSLOEW FURNITURE, INC.
By: /s/ Bobby Tesney
---------------------------------
Bobby Tesney,
President and Chief Executive Officer
EXECUTIVE
/s/ R. Craig Watts
--------------------------------
R. Craig Watts
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Exhibit 10.28
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
August 27, 1999 by and between WINSLOEW FURNITURE, INC., a Florida corporation
(the "Company"), and VINCENT A. TORTORICI, JR. (the "Executive").
RECITALS
A. The Executive is currently employed as Vice President - Finance and
Administration and Chief Financial Officer of the Company.
B. The Executive possesses intimate knowledge of the business and
affairs of the Company, its policies, methods and personnel.
C. The Company and Trivest Furniture Corporation, a Florida corporation
(the "Purchaser"), have entered into a Second Amended and Restated Agreement and
Plan of Merger, dated May 4, 1999, pursuant to which the Purchaser will merge
with and into the Company, with the Company being the surviving corporation (the
"Merger").
D. The Company recognizes that the Executive has contributed to its
growth and success, and desires to assure the Executive's employment by the
Company following the Merger and to compensate him therefor pursuant to this
Agreement.
E. The Executive is willing to make his services available to the
Company on the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. EMPLOYMENT.
1.1 GENERAL. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
1.2 DUTIES OF EXECUTIVE. During the term of this Agreement,
the Executive shall serve as Vice President and Chief Financial Officer of the
Company, shall diligently perform all services as may be assigned to him by the
Company's President and
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Chief Executive Officer and/or the Company's Board of Directors or any
authorized Committee of the Board of Directors (the full Board or such
Committee, as the case may be, is referred to herein as the "Board"), and shall
exercise such power and authority as may from time to time be delegated to him
by the Board. The Executive shall devote his full time and attention to the
business and affairs of the Company, render such services to the best of his
ability, and use his best efforts to promote the interests of the Company.
2. TERM.
2.1 INITIAL TERM. The initial term of this Agreement, and the
employment of the Executive hereunder, shall be for the five-year period
commencing on the later to occur of the effective date of the Merger and the
date hereof (the "Initial Term"), unless sooner terminated in accordance with
the terms and conditions hereof, provided, however, that the Initial Term of
this Agreement shall in no event commence if the consummation of the Merger does
not occur on or before August 31, 1999.
2.2 RENEWAL TERMS. The Initial Term of this Agreement, and the
employment of the Executive hereunder, may be renewed and extended for such
period or periods as may be mutually agreed to by the Company and the Executive
in a written supplement to this Agreement signed by the Executive and the
Company ("Written Supplement"). If this Agreement is not so renewed and extended
prior to the expiration of the Initial Term, this Agreement, and the employment
of the Executive hereunder, shall automatically terminate upon the expiration of
the Initial Term.
3. COMPENSATION.
3.1 BASE SALARY. THE EXECUTIVE SHALL RECEIVE A BASE SALARY
(THE "BASE SALARY") AT THE ANNUAL RATE OF NOT LESS THAN $162,000 FOR THE PERIOD
COMMENCING ON THE DATE OF THE MERGER AND ENDING DECEMBER 31, 1999 AND AT THE
ANNUAL RATE OF NOT LESS THAN $175,000 FOR THE REMAINDER OF THE INITIAL TERM,
with such Base Salary payable in installments consistent with the Company's
normal payroll schedule, subject to applicable withholding and other taxes. The
Base Salary shall be adjusted annually to reflect, at a minimum, any increase
from the previous year in the national Consumer Price Index. The Base Salary
shall also be reviewed, at least annually, for merit increases and may, by
action and in the discretion of the Board, be increased at any time or from time
to time. The Base Salary, if so increased, shall not thereafter be decreased for
any reason. If the term of this Agreement shall be renewed and extended as
provided in Section 2.2 hereof, then during such renewal term of his employment
hereunder, the Executive shall be paid a base salary as set forth in the Written
Supplement.
3.2 INCENTIVE COMPENSATION.
(a) In addition to the Base Salary, the Executive
shall be entitled to receive annual incentive compensation ("Incentive
Compensation"), in the amount determined pursuant to this Section 3.2, for each
fiscal year ending during the term of this
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Agreement COMMENCING WITH FISCAL 2000 for which the Company has Operating
Earnings (as hereafter defined) of at least seventy-five percent (75%) of the
Target Earnings (as hereinafter defined) of the Company for such year; PROVIDED,
THAT INCENTIVE COMPENSATION BASED ON THE COMPANY'S 1999 OPERATING RESULTS SHALL
BE DETERMINED IN ACCORDANCE WITH THE EXECUTIVE'S EMPLOYMENT AGREEMENT WITH THE
COMPANY DATED NOVEMBER 4, 1994 (THE "PRIOR EMPLOYMENT AGREEMENT"). For purposes
of this Section 3.2, "Operating Earnings" shall mean the consolidated operating
earnings of the Company as determined in accordance with generally accepted
accounting principles ("GAAP"), consistently applied with the Company's past
practices, provided, however, that such Operating Earnings shall not reflect
(i.e., shall not be reduced by) any amortization of goodwill. The determination
of Operating Earnings made by the Company shall be final and binding on the
parties to this Agreement. For purposes of this Section 3.2, the "Target
Earnings" of the Company shall be as determined by the Board of Directors. The
Board of Directors shall have the right to modify, at any time and in its sole
discretion, any previously established "Target Earnings" for reasons such as,
but not limited to, any acquisition, disposition, merger, reorganization,
liquidation, dissolution or other transaction involving the Company or any of
its subsidiaries, or other extraordinary or significant events or changes in
circumstances relating to the Company or any of its subsidiaries, businesses or
operations.
(b) The amount of the Executive's Incentive
Compensation for each fiscal year shall be determined as follows:
I. If the Operating Earnings for the year do
not exceed the Target Earnings for the year, the Incentive Compensation shall be
calculated by (A) multiplying (i) SIXTY-FIVE PERCENT (65%) of the Executive's
Base Salary for the year (the "Maximum Bonus") BY (ii) the remainder of (w) the
fraction obtained by dividing the Operating Earnings by the Target Earnings,
LESS (x) 0.75, and then (B) multiplying the resulting product by three (3); or
II. If the Operating Earnings for the year
exceed the Target Earnings for the year, the Incentive Compensation shall be
calculated by (A) multiplying (i) the Maximum Bonus BY (ii) the remainder of (y)
the fraction obtained by dividing the Operating Earnings by the Target Earnings,
LESS (z) 1.0, and then (B) multiplying the resulting product by two (2), and
then adding 75% of the Maximum Bonus; provided, however, that in no event shall
the Incentive Compensation for any year exceed the Maximum Bonus.
III. For example, (A) if Operating Earnings
are 75% of the applicable Target Earnings or less, the Executive's Incentive
Compensation for that year would be zero, (B) if Operating Earnings are 90% of
the applicable Target Earnings, the Executive's Incentive Compensation for that
year would be 45% of the Maximum Bonus, (C) if Operating Earnings are 100% of
the Target Earnings, the Executive's Incentive Compensation for that year would
be 75% of the Maximum Bonus, (D) if the Operating Earnings are 110% of the
Target Earnings, the Executive's Incentive Compensation for that
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<PAGE> 4
year would be 95% of the Maximum Bonus, and (E) if the Operating Earnings are
120% of the Target Earnings, the Executive's Incentive Compensation for that
year would be limited to 100% of the Maximum Bonus.
(c) For purposes of this Agreement, the amount of
Incentive Compensation payable with respect to any fiscal year (net of any tax
or other amount properly withheld therefrom) shall be paid by the Company to
Executive within one hundred twenty (120) days after the end of the fiscal year;
provided, however, that any amount paid shall be subject to increase or decrease
based upon the results of any audited financial statements with respect to such
year.
3.3 INITIAL BONUS. IN CONNECTION WITH ENTERING INTO THIS
AGREEMENT, THE COMPANY AGREES TO PAY THE EXECUTIVE WITHIN FORTY-FIVE (45) DAYS
AN INITIAL BONUS OF $13,950.
4. EXPENSE REIMBURSEMENT AND OTHER BENEFITS.
4.1 REIMBURSABLE EXPENSES. During the term of the Executive's
employment hereunder, the Company, upon the submission of proper substantiation
by the Executive, shall reimburse the Executive for all reasonable expenses
actually and necessarily paid or incurred by the Executive in the course of and
pursuant to the business of the Company.
4.2 OTHER BENEFITS. The Executive shall be entitled to
participate in all medical and hospitalization, group life insurance, and any
and all other plans as are presently and hereinafter provided by the Company to
its executives. The Executive shall be entitled to vacations in accordance with
the Company's prevailing policy for its executives; provided, however, that in
no event may a vacation be taken at a time when to do so could, in the
reasonable judgment of the Board, adversely affect the Company's business.
4.3 WORKING FACILITIES. The Company shall furnish the
Executive with an office, secretarial help and such other facilities and
services suitable to his position and adequate for the performance of his duties
hereunder
5. TERMINATION.
5.1 TERMINATION FOR CAUSE. The Company shall at all times have
the right, upon written notice to the Executive, to terminate the Executive's
employment hereunder for "Cause" (as defined below in this paragraph 5.1). Upon
any termination pursuant to this Section 5.1, the Executive shall be entitled to
be paid his Base Salary to the date of termination and the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however to
the provisions of Section 4.1). For purposes of this Agreement, the term "Cause"
shall mean (i) the willful failure or refusal of the Executive to
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perform the duties or render the services assigned to him from time to time by
the Board, (ii) gross negligence or misconduct by the Executive in the
performance of his duties to the Company, (iii) the charging or indictment of
the Executive in connection with a felony, (iv) the association, directly or
indirectly, of the Executive, for his profit or financial benefit, with any
person, firm, partnership, association, entity or corporation that competes, in
any material way, with the Company, (v) the disclosing or using of any material
trade secret or confidential information of the Company at any time by the
Executive, except as required in connection with his duties to the Company, (vi)
the breach by the Executive of his fiduciary duty or duty of trust to the
Company, or (vii) any breach or unsatisfactory performance by the Executive of
any of the terms or provisions of this Agreement or any other agreement with the
Company or any of its subsidiaries (whether written or oral), which is not cured
within twenty (20) business days after the Company gives written notice of such
breach or unsatisfactory performance to the Executive.
5.2 DISABILITY. The Company shall at all times have the right,
upon written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall, as the result of mental or physical
incapacity, illness or disability, become unable to perform his duties hereunder
for in excess of ninety (90) days in any 12-month period. Upon any termination
pursuant to this Section 5.2, the Company shall pay to the Executive any unpaid
amounts of his Base Salary and Incentive Compensation accrued through the
effective date of termination and the Company shall have no further liability
hereunder (other than for reimbursement for reasonable business expenses
incurred prior to the date of termination, subject, however to the provisions of
Section 4.1).
5.3 DEATH. In the event of the death of the Executive during
the term of his employment hereunder, the Company shall pay to the estate of the
deceased Executive any unpaid amounts of his Base Salary and Incentive
Compensation accrued through the date of his death and the Company shall have no
further liability hereunder (other than for reimbursement for reasonable
business expenses incurred prior to the date of the Executive's death, subject,
however to the provisions of Section 4.1).
5.4 TERMINATION WITHOUT CAUSE. At any time the Company shall
have the right to terminate the Executive's employment hereunder by written
notice to the Executive; provided, however, that, the Company shall (i) pay to
the Executive any unpaid Base Salary and Incentive Compensation accrued through
the effective date of termination specified in such notice, and (ii) pay
Executive's Base Salary in the manner set forth in Section 3.1 hereof until the
date which is six months following such effective date (the "Severance Date").
The Company shall have no further liability hereunder (other than for
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1).
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6. RESTRICTIVE COVENANTS.
6.1 NON-COMPETITION. While employed by the Company and for a
period of one year (except that such period shall be six months if Executive's
employment is terminated pursuant to Section 5.4 hereof) following the later of
the date his employment is terminated hereunder or, if applicable, the Severance
Date, the Executive shall not, directly or indirectly, engage in or have any
interest in any sole proprietorship, partnership, corporation or business or any
other person or entity (whether as an employee, officer, director, partner,
agent, security holder, creditor, consultant or otherwise) that directly or
indirectly engages in competition with the Company in any state, country,
commonwealth, territory or other place in which the Company sells its products
(it being agreed that for all purposes of this Section 6, "the Company" shall
include all of its subsidiaries).
6.2 NONDISCLOSURE. The Executive shall not divulge,
communicate, use to the detriment of the Company or for the benefit of any other
person or persons, or misuse in any way, any trade secrets or confidential
information pertaining to the business of the Company. Any confidential
information, trade secrets or data now known or hereafter acquired by the
Executive with respect to the business of the Company (which shall include, but
not be limited to, information concerning the Company's financial condition,
prospects, customers, sources of leads, methods of doing business, and the
manner of design, manufacture, financing, marketing and distribution of the
Company's products) shall be deemed a valuable, special and unique asset of the
Company that is received by the Executive in confidence and as a fiduciary, and
Executive shall remain a fiduciary to the Company with respect to all of such
information.
6.3 NONSOLICITATION OF EMPLOYEES AND CUSTOMERS. While employed
by the Company and for a period of three years (except that the period with
respect to the prohibitions in clause (ii) hereof shall be six months if
Executive's employment is terminated pursuant to Section 5.4 hereof) following
the later of the date his employment is terminated hereunder or, if applicable,
the Severance Date, the Executive shall not, directly or indirectly, for himself
or for any other person, firm, corporation, partnership, association or other
entity, (i) attempt to employ or enter into any contractual arrangement with any
employee or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in excess of six
months, and/or (ii) call on or solicit any of the actual or targeted prospective
customers or clients of the Company, nor shall the Executive make known the
names and addresses of such customers or any information relating in any manner
to the Company's trade or business relationships with such customers.
6.4 BOOKS AND RECORDS. All books, records, and accounts
relating in any manner to the customers or clients of the Company, whether
prepared by the Executive or otherwise coming into the Executive's possession,
shall be the exclusive property of the Company and shall be returned immediately
to the Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
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7. INJUNCTION. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
the commencement of the Initial Term of this Agreement, shall supersede all
prior agreements, understandings and arrangements, both oral and written,
between the Executive and the Company (or any of its respective affiliates) with
respect to such subject matter, including the Prior Employment Agreement. Except
for the obligation to pay all accrued but unpaid salary and other compensation
due the Executive under the Prior Employment Agreement through the commencement
of the Initial Term of this Agreement (including any compensation based on the
Company's 1999 operating results, which compensation shall be determined in
accordance with the Prior Employment Agreement as if the Merger did not occur),
all such prior agreements (including the Prior Employment Agreement),
understandings and arrangements for the provision of services by the Executive
to the Company and the compensation of the Executive in any form shall
automatically terminate upon the commencement of the Initial Term of this
Agreement, and each party shall thereupon and thereby, without any further
action, release and forever discharge the other (and the other's affiliates)
from any and all liabilities and obligations of any nature arising out of or in
connection with any and all such prior agreements, understandings or
arrangements. This Agreement may not be modified in any way unless by a written
instrument signed by both the Company and the Executive.
10. NOTICES. Any notice required or permitted to be given hereunder
shall be deemed given when delivered by hand or when deposited in the United
States mail, by registered or certified mail, return receipt requested, postage
prepaid, (i) if to the Company, to the address of the Company's principal
offices in Birmingham, Alabama (with a copy to Trivest, Inc., 2665 South
Bayshore Drive, Eighth Floor, Miami, Florida 33133, Attention: Peter W. Klein,
Vice President and General Counsel), and (ii) if to the Executive, to his
address as reflected on the payroll records of the Company, or to such other
address as either party hereto may from time to time give notice of to the
other.
11. BENEFITS; BINDING EFFECT. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representative, legal
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representatives, successors and, where applicable, assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation, sale
of stock, sale of assets or otherwise; provided, however that the Executive
shall not delegate his employment obligations hereunder, or any portion thereof,
to any other person.
12. SEVERABILITY. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
13. WAIVERS. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
14. DAMAGES. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or for the injunction of
any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
15. SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
16. NO THIRD PARTY BENEFICIARY. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
WINSLOEW FURNITURE, INC.
By: /s/ Bobby Tesney
------------------------------
Bobby Tesney,
President and Chief Executive Officer
EXECUTIVE
/s/ Vincent A. Tortorici, Jr.
--------------------------------------
Vincent A. Tortorici, Jr.
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Exhibit 10.29
WINSLOEW FURNITURE, INC.
160 VILLAGE STREET
BIRMINGHAM, ALABAMA 35242
August 27, 1999
Mr. Bobby Tesney
President and Chief Executive Officer
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Dear Bobby:
WinsLoew Furniture, Inc. considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, our Board of Directors (the "BOARD") recognizes
that the possibility of a change in control of the Corporation may exist and
that this possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Corporation and its stockholders. The Board
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Corporation's
management, including you, to their assigned duties without the distractions
which may arise from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation, you shall
receive the severance benefits set forth in this Agreement in the event your
employment with the Corporation is terminated under the circumstances described
below subsequent to a Change in Control (as defined below).
1. INTERPRETATION OF THIS AGREEMENT.
(a) TERMS DEFINED. As used herein, the following terms when used in
this Agreement have the meanings set forth below:
"ACCRUED BONUS" means the amount of Incentive Compensation (as
such term is defined in the Employment Agreement) that would have been payable
to you under the Employment Agreement (without regard to your termination of
employment), determined on an annualized basis based on the actual results of
operations of the Corporation and its subsidiaries
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Mr. Bobby Tesney
August 27, 1999
Page 2
for the period beginning on the first day of the fiscal year in which such
termination of employment occurs and ending on the last day of the fiscal month
preceding the date on which the Change in Control occurred, prorated from the
first day of such fiscal year based on the number of days elapsed from such date
through the Date of Termination.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"AGREEMENT" shall have the meaning given to it in the preface
above.
"APPLICABLE RATE" means a rate per annum equal to the rate
provided in Section 1274(b)(2)(B) of the Code.
"BOARD" shall have the meaning given to it in the preface
above.
"CAUSE" shall have the meaning given to it ss.4(b) below.
"CHANGE IN CONTROL" shall have the meaning given to it ss.3
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTINUING DIRECTORS" shall have the meaning given to it ss.3
below.
"CORPORATION" means WinsLoew Furniture, Inc., a Florida
corporation, and any successor to its business and/or assets as set forth in
ss.6(a) below which assumes and agrees to perform this Agreement by operation of
law, or otherwise and, as the context may require withe respect to any provision
of this Agreement other than ss.3 below, includes any direct or indirect
subsidiary of WinsLoew Furniture, Inc.
"DATE OF TERMINATION" shall have the meaning given to it
ss.4(e) below.
"DISABILITY" means the absence of the Executive from the
full-time performance of his duties with the Corporation, as a result of his
incapacity due to physical or mental illness, for 90 consecutive days in any 12
month period.
"EMPLOYMENT AGREEMENT" means the Employment Agreement, dated
as of August 27, 1999, between the Corporation and you, as the same may
hereafter be supplemented, amended or amended and restated at any time prior to
the occurrence of a Change in Control.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
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Mr. Bobby Tesney
August 27, 1999
Page 3
"GOOD REASON" shall have the meaning given to it ss.4(c)
below. "NOTICE OF TERMINATION" shall have the meaning given to it ss.4(d) below.
"PERSON" has the meaning set forth in Sections 13(d) and 14(d)
of the Exchange Act.
"RETIREMENT PLANS" means the WinsLoew Furniture, Inc. 401(k)
Plan and any supplementary executive retirement plans of the Corporation you may
be covered under, or any successor plans.
"TRIVEST" means Trivest II, Inc., a Florida corporation.
"WELFARE PLAN BENEFITS" shall have the meaning given to it
ss.5(b) below.
(b) INTERPRETATION. The words "HEREIN," "HEREUNDER" and other words of
similar import refer to this Agreement as a whole, as the same from time to time
may be amended or supplemented and not any particular section, paragraph,
subparagraph or clause contained in this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in masculine, feminine
or neuter gender shall include the masculine, feminine and the neuter.
2. TERM. This Agreement shall continue in effect through December 31,
2000; PROVIDED, HOWEVER, that beginning on January 1, 2001 and on each
subsequent January 1, the term of this Agreement shall automatically be extended
for one additional year unless, not later than October 1 of the preceding year,
we shall notify you that we do not wish to extend this Agreement; and PROVIDED,
FURTHER, that if a Change in Control occurs during the original or extended term
of this Agreement, this Agreement shall continue in effect for a period of not
less than 180 days beyond the last day of the month in which the Change in
Control occurred.
3. CHANGE IN CONTROL. NO BENEFITS WILL BE PAYABLE UNDER THIS AGREEMENT
UNLESS A CHANGE IN CONTROL OCCURS. For purposes of this Agreement, a "CHANGE IN
CONTROL" shall be deemed to have occurred if: (i) any Person (other than the
Corporation, any trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation, or any affiliate of Trivest) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing more than 50% of
the combined voting power of the Corporation's then outstanding securities
eligible to vote, or (ii) the stockholders of the Corporation approve a merger
or consolidation of the Corporation with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the
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Mr. Bobby Tesney
August 27, 1999
Page 4
voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; PROVIDED, HOWEVER, that a merger
or consolidation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person acquires more than 50% of the combined
voting power of the Corporation's then outstanding securities shall not
constitute a Change in Control, or (iii) the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets (or any transaction having a similar effect); PROVIDED,
HOWEVER, that in no event shall the sale of the Corporation's voting securities
by the Corporation or any of its stockholders in a public offering be deemed to
constitute or give rise to a Change in Control.
4. TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL.
(a) GENERAL. If any of the events described in ss.3 above constituting
a Change in Control shall occur, you will be entitled to such benefits provided
in ss.5 below which are applicable upon the subsequent termination of your
employment during the term of this Agreement. In the event your employment with
the Corporation is terminated for any reason prior to the occurrence of a Change
in Control and subsequently a Change in Control shall occur, you will not be
entitled to any benefits under this Agreement.
(b) CAUSE. Termination by the Corporation of your employment for
"CAUSE" means termination by reason of (i) your willful and continued failure to
perform your duties with the Corporation (other than any such failure resulting
from your Disability) or any such actual or anticipated failure after the
issuance of a Notice of Termination by you for Good Reason), within 20 days
after a written demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, (ii) gross
negligence or misconduct by you in the performance of your duties with the
Corporation, (iii) your being charged or indicted in connection with a felony,
(iv) your association, directly or indirectly, for your profit or financial
benefit, with any person, firm, partnership, association, entity or corporation
that competes, in any material way, with the Corporation, (v) the disclosing or
using of any material trade secret or confidential information of the Company at
any time by you, except as required in connection with your duties to the
Corporation or (vi) the breach by you of your fiduciary duty or duty of trust to
the Corporation. For purposes of this ss.4(b), no act, or failure to act, on
your part shall be deemed "willful" unless done, or omitted to be done, by you
in bad faith and without reasonable belief that your action or omission was in
or not opposed to the best interest of the Corporation. Notwithstanding the
foregoing, you will not be deemed to have been terminated for Cause unless and
until there is delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of
<PAGE> 5
Mr. Bobby Tesney
August 27, 1999
Page 5
conduct set forth above in this ss.4(b) and specifying the particulars thereof
in detail.
(c) GOOD REASON. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "GOOD REASON" means, without your
express written consent, the occurrence after a Change in Control of any of the
following circumstances unless, in the case of clauses (i), (v), (vi), (vii) or
(viii) of this ss.4(c), such circumstances are fully corrected prior to the Date
of Termination specified in the Notice of Termination given in respect thereof:
(i) the assignment to you of any duties inconsistent with the status of the
position in the Corporation that you held immediately prior to the Change in
Control or a materially adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the Change in
Control, (ii) a reduction by the Corporation in your annual base salary as in
effect on the date immediately prior to the Change in Control or as the same may
be increased from time to time thereafter, (iii) the Corporation's moving you to
be based more than 25 miles from the Corporation's offices at which you are
principally employed immediately prior to the date of the Change in Control
(except for required travel on the Corporation's business to an extent
substantially consistent with your present business travel obligations), (iv)
the failure by the Corporation to pay to you any portion of your current
compensation within seven days of the date such compensation is due, (v) the
failure by the Corporation to continue in effect any compensation or benefit
plan or perquisites in which you participate immediately prior to the Change in
Control which is material to your total compensation, including but not limited
to the Retirement Plans and the Corporation's executive automobile policy,
unless an equitable arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such plan, or the failure by the
Corporation to continue your participation therein (or in such substitute or
alternative plan) is on a basis not materially less favorable, both in terms of
the amount of benefits provided and the level of your participation relative to
other participants, than existed at the time of the Change in Control, (vi) the
failure by the Corporation to continue to provide you with benefits
substantially similar to those enjoyed by you under any of the Corporation's
life insurance, medical, dental, accident or disability plans in which you were
participating at the time of the Change in Control, the taking of any action by
the Corporation which would directly or indirectly materially reduce any of such
benefits, or the failure by the Corporation to provide you with the number of
paid vacation days to which you are entitled on the basis of your years of
service with the Corporation in accordance with the Corporation's normal
vacation policy in effect at the time of the Change in Control, (vii) the
failure of the Corporation to obtain a satisfactory agreement from any successor
to assume and agree to perform this Agreement, as contemplated in ss.6 below, or
(viii) any purported termination of your employment that is not effected
pursuant to a Notice of Termination satisfying the requirements of ss.4(d) below
(and, if applicable, the requirements of ss.4(b) above), which purported
termination shall not be effective for purposes of this Agreement. Your
continued employment will not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder.
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Mr. Bobby Tesney
August 27, 1999
Page 6
(d) NOTICE OF TERMINATION. Any purported termination of your employment
by the Corporation or by you shall be communicated by written Notice of
Termination to the other party hereto in accordance with ss.7 below. "NOTICE OF
TERMINATION" means a notice that shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated.
(e) DATE OF TERMINATION. "DATE OF TERMINATION" means (i) if your
employment is terminated pursuant to ss.ss.4(b) or 4(c) above, the date
specified in the Notice of Termination (which, in the case of a termination for
Good Reason, shall not be less than 15 nor more than 60 days from the date such
Notice of Termination is given), (ii) in the case of a termination by you for
any other reason, the date specified in the Notice of Termination (which shall
not be less than 30 days from the date such Notice of Termination is given),
(iii) if your employment is terminated by the Corporation for any other reason,
the date specified in the Notice of Termination and (iv) if your employment is
terminated by reason of your death, the date of your death; PROVIDED, HOWEVER,
that if within 15 days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard to this proviso),
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Date of Termination (other
than the Date of Termination where clause (iii) of this ss.4(e) is applicable)
shall be the date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); and PROVIDED, FURTHER, that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given and continue you as
a participant in all Retirement Plans, life insurance, medical, dental, accident
or disability plans and any similar plans in which you were participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this ss.4(e). Amounts paid under this ss.4(e) are in
addition to all other amounts due under this Agreement, and shall not be offset
against or reduce any other amounts due under this Agreement and shall not be
reduced by any compensation earned by you as the result of employment by another
employer.
5. COMPENSATION UPON TERMINATION. Following a Change in Control, you
will be entitled to the following upon termination of your employment, provided
that such termination of employment occurs during the term of this Agreement:
(a) If your employment is terminated (i) by the Corporation (1) for
Cause or (2) because of your Disability, (ii) by reason of your death or (iii)
by you other than for Good
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Mr. Bobby Tesney
August 27, 1999
Page 7
Reason, the Corporation will pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given (or
at the time of your death, as the case may be), plus all other amounts or
benefits to which you are entitled under any Retirement Plan of the Corporation
then in effect, and the Corporation shall have no further obligations to you
under this Agreement; PROVIDED, HOWEVER, that or in the event your employment is
terminated by reason of your death or as a result of your Disability, your
benefits will be determined under the Corporation's retirement, insurance and
other compensation programs then in effect in accordance with the terms of such
programs.
(b) If, at any time during the 180 day period following a Change in
Control, your employment is terminated by you for Good Reason or by the
Corporation other than for Cause or by reason of your Disability, then you will
be entitled to the following: (i) the Corporation will pay to you (1) your full
base salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, no later than the fifth day following the Date
of Termination, and (2) the amount of your Accrued Bonus (if any), at the time
specified in ss.5(c) below, (ii) in lieu of any further salary payments or bonus
payments to you for periods subsequent to the Date of Termination, the
Corporation will pay as severance pay to you, at the time specified in ss.5(c)
below, a lump sum severance payment equal to the amount of your annual salary as
in effect as of your Date of Termination (without regard to any attempted or
purported termination or reduction of such salary), (iii) your rights under the
Retirement Plans will be governed by the terms of those respective plans, (iv)
the Corporation will pay to you all legal fees and expenses incurred by you as a
result of such termination (including all such fees and expenses, if any,
reasonably incurred in contesting or disputing by arbitration or otherwise, any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement) and (v) for a period of one year after such
termination, the Corporation will arrange to provide you with benefits
substantially similar to those which you were receiving or entitled to receive
under the Corporation's life, disability, accident and group health insurance
plans or any similar plans in which you were participating immediately prior to
the Date of Termination ("WELFARE PLAN BENEFITS"), as well as under the
Corporation's executive automobile policy, at a cost to you which is no greater
than that cost to you in effect at the Date of Termination; PROVIDED, HOWEVER,
that to the extent any such Welfare Plan Benefits coverage is prohibited by any
judicial or legislative authority, the Corporation shall make alternative
arrangements to provide you with Welfare Plan Benefits, including, but not
limited to, providing you with a payment in an amount equal to your cost of
purchasing the Welfare Plan Benefits. Welfare Plan Benefits otherwise receivable
by you pursuant to clause (v) above shall be reduced to the extent comparable
benefits are actually received on your behalf during the one-year period
following your termination, and such benefits actually received by you shall be
reported to the Corporation.
(c) The payments provided for in ss.5(b)(i)(2) and ss.5(b)(ii) above
will be made not later than the fifth day following the Date of Termination;
PROVIDED, HOWEVER, that if the amounts of such payments cannot be finally
determined on or before such day, the Corporation will pay to
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Mr. Bobby Tesney
August 27, 1999
Page 8
you on such day an estimate, as determined in good faith by the Corporation, of
the minimum amount of such payments and will pay the remainder of such payments
(together with interest at the Applicable Rate) as soon as the amount thereof
can be determined but in no event later than 30 days after the Date of
Termination. In the event that the amount of the estimated payments exceeds the
amount subsequently determined to have been due, such excess shall constitute a
loan by the Corporation to you, payable on the fifth day after demand by the
Corporation (together with interest at the Applicable Rate).
(d) Except as required in ss.5(b)(v) above, you shall not be required
to mitigate the amount of any payment provided for in this ss.5 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this ss.5 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise; PROVIDED,
HOWEVER, that if during the one year period subsequent to your Date of
Termination, you directly compete with the Corporation by making use of trade
secrets or other proprietary knowledge you obtained while employed by the
Corporation in violation of the commitment to protect such proprietary or trade
secret information set forth in the Employment Agreement (determined without
regard to the termination of the Employment Agreement pursuant to ss.12 below),
all income earned as a result of such use of information shall be remitted to
the Corporation to the extent payments were made to you under this ss.5.
(e) The provisions of this ss.5 shall survive the termination of this
Agreement.
6. SUCCESSORS; BINDING AGREEMENT.
(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to (i)
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Corporation would be required to perform it if no such
succession had taken place and (ii) agree to notify you of the assumption of the
Agreement within 10 days of such assumption. Failure of the Corporation to
obtain any such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Corporation in the same amount and on the same terms to
which you would be entitled hereunder if you terminate your employment for Good
Reason following a Change in Control, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable by
you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be
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Mr. Bobby Tesney
August 27, 1999
Page 9
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
7. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be authorized by the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar of
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Florida without regard to its conflicts of law principles. All
references to sections of the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law. The obligations of the Corporation under ss.5 above shall survive the
expiration of the term of this Agreement.
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration, conducted before a panel of three arbitrators in the city of
Birmingham, Alabama or, at your option, in the city where you are principally
employed immediately prior to the date of a Change in Control, in accordance
with the rules of the American Arbitration Association then in effect; PROVIDED,
HOWEVER, that you shall be entitled to seek specific performance of your rights
under ss.4(e) during the pendency of
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Mr. Bobby Tesney
August 27, 1999
Page 10
any dispute or controversy arising under or in connection with this Agreement.
Judgment may be entered on the arbitrator's award in any court having
jurisdiction.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; PROVIDED, HOWEVER, that
the Employment Agreement shall remain in full force and effect until the
occurrence of a Change in Control, at which time the Employment Agreement shall
be deemed terminated and canceled and of no further force or effect. If this
letter sets forth our agreement on the subject matter hereof, kindly sign and
return this original letter to the Corporation which will then constitute our
agreement on this subject. The enclosed copy is for your personal records.
Sincerely,
/s/ William F. Kaczynski, Jr.
----------------------------------
William F. Kaczynski, Jr.
Vice President
ACCEPTED AND AGREED:
/s/ Bobby Tesney
- --------------------------------
BOBBY TESNEY
<PAGE> 1
Exhibit 10.30
WINSLOEW FURNITURE, INC.
160 VILLAGE STREET
BIRMINGHAM, ALABAMA 35242
August 27, 1999
Mr. Vincent A. Tortorici, Jr.
Vice President and Chief Financial Officer
WinsLoew Furniture, Inc.
160 Village Street
Birmingham, Alabama 35242
Dear Vincent:
WinsLoew Furniture, Inc. considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In this connection, our Board of Directors (the "BOARD") recognizes
that the possibility of a change in control of the Corporation may exist and
that this possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Corporation and its stockholders. The Board
has determined that appropriate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the Corporation's
management, including you, to their assigned duties without the distractions
which may arise from the possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation, you shall
receive the severance benefits set forth in this Agreement in the event your
employment with the Corporation is terminated under the circumstances described
below subsequent to a Change in Control (as defined below).
1. INTERPRETATION OF THIS AGREEMENT.
(a) TERMS DEFINED. As used herein, the following terms when used in
this Agreement have the meanings set forth below:
"ACCRUED BONUS" means the amount of Incentive Compensation (as
such term is defined in the Employment Agreement) that would have been payable
to you under the Employment Agreement (without regard to your termination of
employment), determined on an annualized basis based on the actual results of
operations of the Corporation and its subsidiaries
<PAGE> 2
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 2
for the period beginning on the first day of the fiscal year in which such
termination of employment occurs and ending on the last day of the fiscal month
preceding the date on which the Change in Control occurred, prorated from the
first day of such fiscal year based on the number of days elapsed from such date
through the Date of Termination.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Exchange Act.
"AGREEMENT" shall have the meaning given to it in the preface
above.
"APPLICABLE RATE" means a rate per annum equal to the rate
provided in Section 1274(b)(2)(B) of the Code.
"BOARD" shall have the meaning given to it in the preface
above.
"CAUSE" shall have the meaning given to it ss.4(b) below.
"CHANGE IN CONTROL" shall have the meaning given to it ss.3
below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTINUING DIRECTORS" shall have the meaning given to it ss.3
below.
"CORPORATION" means WinsLoew Furniture, Inc., a Florida
corporation, and any successor to its business and/or assets as set forth in
ss.6(a) below which assumes and agrees to perform this Agreement by operation of
law, or otherwise and, as the context may require withe respect to any provision
of this Agreement other than ss.3 below, includes any direct or indirect
subsidiary of WinsLoew Furniture, Inc.
"DATE OF TERMINATION" shall have the meaning given to it
ss.4(e) below.
"DISABILITY" means the absence of the Executive from the
full-time performance of his duties with the Corporation, as a result of his
incapacity due to physical or mental illness, for 90 consecutive days in any 12
month period.
"EMPLOYMENT AGREEMENT" means the Employment Agreement, dated
as of August 27, 1999, between the Corporation and you, as the same may
hereafter be supplemented, amended or amended and restated at any time prior to
the occurrence of a Change in Control.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
<PAGE> 3
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 3
"GOOD REASON" shall have the meaning given to it ss.4(c)
below.
"NOTICE OF TERMINATION" shall have the meaning given to it
ss.4(d) below.
"PERSON" has the meaning set forth in Sections 13(d) and 14(d)
of the Exchange Act.
"RETIREMENT PLANS" means the WinsLoew Furniture, Inc. 401(k)
Plan and any supplementary executive retirement plans of the Corporation you may
be covered under, or any successor plans.
"TRIVEST" means Trivest II, Inc., a Florida corporation.
"WELFARE PLAN BENEFITS" shall have the meaning given to it
ss.5(b) below.
(b) INTERPRETATION. The words "HEREIN," "HEREUNDER" and other words of
similar import refer to this Agreement as a whole, as the same from time to time
may be amended or supplemented and not any particular section, paragraph,
subparagraph or clause contained in this Agreement. Wherever from the context it
appears appropriate, each term stated in either the singular or plural shall
include the singular and the plural, and pronouns stated in masculine, feminine
or neuter gender shall include the masculine, feminine and the neuter.
2. TERM. This Agreement shall continue in effect through December 31,
2000; PROVIDED, HOWEVER, that beginning on January 1, 2001 and on each
subsequent January 1, the term of this Agreement shall automatically be extended
for one additional year unless, not later than October 1 of the preceding year,
we shall notify you that we do not wish to extend this Agreement; and PROVIDED,
FURTHER, that if a Change in Control occurs during the original or extended term
of this Agreement, this Agreement shall continue in effect for a period of not
less than 180 days beyond the last day of the month in which the Change in
Control occurred.
3. CHANGE IN CONTROL. NO BENEFITS WILL BE PAYABLE UNDER THIS AGREEMENT
UNLESS A CHANGE IN CONTROL OCCURS. For purposes of this Agreement, a "CHANGE IN
CONTROL" shall be deemed to have occurred if: (i) any Person (other than the
Corporation, any trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation, or any affiliate of Trivest) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Corporation representing more than 50% of
the combined voting power of the Corporation's then outstanding securities
eligible to vote, or (ii) the stockholders of the Corporation approve a merger
or consolidation of the Corporation with any other corporation, other than a
merger or consolidation which would result in the voting securities of the
Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 50% of the combined voting power of the
<PAGE> 4
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 4
voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation; PROVIDED, HOWEVER, that a merger
or consolidation effected to implement a recapitalization of the Corporation (or
similar transaction) in which no Person acquires more than 50% of the combined
voting power of the Corporation's then outstanding securities shall not
constitute a Change in Control, or (iii) the stockholders of the Corporation
approve a plan of complete liquidation of the Corporation or an agreement for
the sale or disposition by the Corporation of all or substantially all of the
Corporation's assets (or any transaction having a similar effect); PROVIDED,
HOWEVER, that in no event shall the sale of the Corporation's voting securities
by the Corporation or any of its stockholders in a public offering be deemed to
constitute or give rise to a Change in Control.
4. TERMINATION OF EMPLOYMENT FOLLOWING CHANGE IN CONTROL.
(a) GENERAL. If any of the events described in ss.3 above constituting
a Change in Control shall occur, you will be entitled to such benefits provided
in ss.5 below which are applicable upon the subsequent termination of your
employment during the term of this Agreement. In the event your employment with
the Corporation is terminated for any reason prior to the occurrence of a Change
in Control and subsequently a Change in Control shall occur, you will not be
entitled to any benefits under this Agreement.
(b) CAUSE. Termination by the Corporation of your employment for
"CAUSE" means termination by reason of (i) your willful and continued failure to
perform your duties with the Corporation (other than any such failure resulting
from your Disability) or any such actual or anticipated failure after the
issuance of a Notice of Termination by you for Good Reason), within 20 days
after a written demand for substantial performance is delivered to you by the
Board, which demand specifically identifies the manner in which the Board
believes that you have not substantially performed your duties, (ii) gross
negligence or misconduct by you in the performance of your duties with the
Corporation, (iii) your being charged or indicted in connection with a felony,
(iv) your association, directly or indirectly, for your profit or financial
benefit, with any person, firm, partnership, association, entity or corporation
that competes, in any material way, with the Corporation, (v) the disclosing or
using of any material trade secret or confidential information of the Company at
any time by you, except as required in connection with your duties to the
Corporation or (vi) the breach by you of your fiduciary duty or duty of trust to
the Corporation. For purposes of this ss.4(b), no act, or failure to act, on
your part shall be deemed "willful" unless done, or omitted to be done, by you
in bad faith and without reasonable belief that your action or omission was in
or not opposed to the best interest of the Corporation. Notwithstanding the
foregoing, you will not be deemed to have been terminated for Cause unless and
until there is delivered to you a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board (after reasonable notice to you and an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of
<PAGE> 5
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 5
conduct set forth above in this ss.4(b) and specifying the particulars thereof
in detail.
(c) GOOD REASON. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "GOOD REASON" means, without your
express written consent, the occurrence after a Change in Control of any of the
following circumstances unless, in the case of clauses (i), (v), (vi), (vii) or
(viii) of this ss.4(c), such circumstances are fully corrected prior to the Date
of Termination specified in the Notice of Termination given in respect thereof:
(i) the assignment to you of any duties inconsistent with the status of the
position in the Corporation that you held immediately prior to the Change in
Control or a materially adverse alteration in the nature or status of your
responsibilities from those in effect immediately prior to the Change in
Control, (ii) a reduction by the Corporation in your annual base salary as in
effect on the date immediately prior to the Change in Control or as the same may
be increased from time to time thereafter, (iii) the Corporation's moving you to
be based more than 25 miles from the Corporation's offices at which you are
principally employed immediately prior to the date of the Change in Control
(except for required travel on the Corporation's business to an extent
substantially consistent with your present business travel obligations), (iv)
the failure by the Corporation to pay to you any portion of your current
compensation within seven days of the date such compensation is due, (v) the
failure by the Corporation to continue in effect any compensation or benefit
plan or perquisites in which you participate immediately prior to the Change in
Control which is material to your total compensation, including but not limited
to the Retirement Plans, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan, or the
failure by the Corporation to continue your participation therein (or in such
substitute or alternative plan) is on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level of your
participation relative to other participants, than existed at the time of the
Change in Control, (vi) the failure by the Corporation to continue to provide
you with benefits substantially similar to those enjoyed by you under any of the
Corporation's life insurance, medical, dental, accident or disability plans in
which you were participating at the time of the Change in Control, the taking of
any action by the Corporation which would directly or indirectly materially
reduce any of such benefits, or the failure by the Corporation to provide you
with the number of paid vacation days to which you are entitled on the basis of
your years of service with the Corporation in accordance with the Corporation's
normal vacation policy in effect at the time of the Change in Control, (vii) the
failure of the Corporation to obtain a satisfactory agreement from any successor
to assume and agree to perform this Agreement, as contemplated in ss.6 below, or
(viii) any purported termination of your employment that is not effected
pursuant to a Notice of Termination satisfying the requirements of ss.4(d) below
(and, if applicable, the requirements of ss.4(b) above), which purported
termination shall not be effective for purposes of this Agreement. Your
continued employment will not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder.
(d) NOTICE OF TERMINATION. Any purported termination of your employment
by the
<PAGE> 6
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 6
Corporation or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with ss.7 below. "NOTICE OF TERMINATION"
means a notice that shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of your employment
under the provision so indicated.
(e) DATE OF TERMINATION. "DATE OF TERMINATION" means (i) if your
employment is terminated pursuant to ss.ss.4(b) or 4(c) above, the date
specified in the Notice of Termination (which, in the case of a termination for
Good Reason, shall not be less than 15 nor more than 60 days from the date such
Notice of Termination is given), (ii) in the case of a termination by you for
any other reason, the date specified in the Notice of Termination (which shall
not be less than 30 days from the date such Notice of Termination is given),
(iii) if your employment is terminated by the Corporation for any other reason,
the date specified in the Notice of Termination and (iv) if your employment is
terminated by reason of your death, the date of your death; PROVIDED, HOWEVER,
that if within 15 days after any Notice of Termination is given, or, if later,
prior to the Date of Termination (as determined without regard to this proviso),
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, then the Date of Termination (other
than the Date of Termination where clause (iii) of this ss.4(e) is applicable)
shall be the date on which the dispute is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); and PROVIDED, FURTHER, that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence. Notwithstanding the pendency of any such
dispute, the Corporation will continue to pay you your full compensation in
effect when the notice giving rise to the dispute was given and continue you as
a participant in all Retirement Plans, life insurance, medical, dental, accident
or disability plans and any similar plans in which you were participating when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this ss.4(e). Amounts paid under this ss.4(e) are in
addition to all other amounts due under this Agreement, and shall not be offset
against or reduce any other amounts due under this Agreement and shall not be
reduced by any compensation earned by you as the result of employment by another
employer.
5. COMPENSATION UPON TERMINATION. Following a Change in Control, you
will be entitled to the following upon termination of your employment, provided
that such termination of employment occurs during the term of this Agreement:
(a) If your employment is terminated (i) by the Corporation (1) for
Cause or (2) because of your Disability, (ii) by reason of your death or (iii)
by you other than for Good Reason, the Corporation will pay you your full base
salary through the Date of Termination at
<PAGE> 7
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 7
the rate in effect at the time Notice of Termination is given (or at the time of
your death, as the case may be), plus all other amounts or benefits to which you
are entitled under any Retirement Plan of the Corporation then in effect, and
the Corporation shall have no further obligations to you under this Agreement;
PROVIDED, HOWEVER, that or in the event your employment is terminated by reason
of your death or as a result of your Disability, your benefits will be
determined under the Corporation's retirement, insurance and other compensation
programs then in effect in accordance with the terms of such programs.
(b) If, at any time during the 180 day period following a Change in
Control, your employment is terminated by you for Good Reason or by the
Corporation other than for Cause or by reason of your Disability, then you will
be entitled to the following: (i) the Corporation will pay to you (1) your full
base salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given, no later than the fifth day following the Date
of Termination, and (2) the amount of your Accrued Bonus (if any), at the time
specified in ss.5(c) below, (ii) in lieu of any further salary payments or bonus
payments to you for periods subsequent to the Date of Termination, the
Corporation will pay as severance pay to you, at the time specified in ss.5(c)
below, a lump sum severance payment equal to the amount of your annual salary as
in effect as of your Date of Termination (without regard to any attempted or
purported termination or reduction of such salary), (iii) your rights under the
Retirement Plans will be governed by the terms of those respective plans, (iv)
the Corporation will pay to you all legal fees and expenses incurred by you as a
result of such termination (including all such fees and expenses, if any,
reasonably incurred in contesting or disputing by arbitration or otherwise, any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement) and (v) for a period of one year after such
termination, the Corporation will arrange to provide you with benefits
substantially similar to those which you were receiving or entitled to receive
under the Corporation's life, disability, accident and group health insurance
plans or any similar plans in which you were participating immediately prior to
the Date of Termination ("WELFARE PLAN BENEFITS"), at a cost to you which is no
greater than that cost to you in effect at the Date of Termination; PROVIDED,
HOWEVER, that to the extent any such Welfare Plan Benefits coverage is
prohibited by any judicial or legislative authority, the Corporation shall make
alternative arrangements to provide you with Welfare Plan Benefits, including,
but not limited to, providing you with a payment in an amount equal to your cost
of purchasing the Welfare Plan Benefits. Welfare Plan Benefits otherwise
receivable by you pursuant to clause (v) above shall be reduced to the extent
comparable benefits are actually received on your behalf during the one-year
period following your termination, and such benefits actually received by you
shall be reported to the Corporation.
(c) The payments provided for in ss.5(b)(i)(2) and ss.5(b)(ii) above
will be made not later than the fifth day following the Date of Termination;
PROVIDED, HOWEVER, that if the amounts of such payments cannot be finally
determined on or before such day, the Corporation will pay to you on such day an
estimate, as determined in good faith by the Corporation, of the minimum
<PAGE> 8
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 8
amount of such payments and will pay the remainder of such payments (together
with interest at the Applicable Rate) as soon as the amount thereof can be
determined but in no event later than 30 days after the Date of Termination. In
the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by
the Corporation to you, payable on the fifth day after demand by the Corporation
(together with interest at the Applicable Rate).
(d) Except as required in ss.5(b)(v) above, you shall not be required
to mitigate the amount of any payment provided for in this ss.5 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for in this ss.5 be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by you to the Corporation, or otherwise; PROVIDED,
HOWEVER, that if during the one year period subsequent to your Date of
Termination, you directly compete with the Corporation by making use of trade
secrets or other proprietary knowledge you obtained while employed by the
Corporation in violation of the commitment to protect such proprietary or trade
secret information set forth in the Employment Agreement (determined without
regard to the termination of the Employment Agreement pursuant to ss.12 below),
all income earned as a result of such use of information shall be remitted to
the Corporation to the extent payments were made to you under this ss.5.
(e) The provisions of this ss.5 shall survive the termination of this
Agreement.
6. SUCCESSORS; BINDING AGREEMENT.
(a) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to (i)
expressly assume and agree to perform this Agreement in the same manner and to
the same extent that the Corporation would be required to perform it if no such
succession had taken place and (ii) agree to notify you of the assumption of the
Agreement within 10 days of such assumption. Failure of the Corporation to
obtain any such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Corporation in the same amount and on the same terms to
which you would be entitled hereunder if you terminate your employment for Good
Reason following a Change in Control, except that for purposes of implementing
the foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination.
(b) This Agreement shall inure to the benefit of and be enforceable by
you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee
<PAGE> 9
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 9
or, if there is no such designee, to your estate.
7. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
8. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by you and such officer as may be authorized by the Board.
No waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar of
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Florida without regard to its conflicts of law principles. All
references to sections of the Code shall be deemed also to refer to any
successor provisions to such sections. Any payments provided for hereunder shall
be paid net of any applicable withholding required under federal, state or local
law. The obligations of the Corporation under ss.5 above shall survive the
expiration of the term of this Agreement.
9. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
10. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
11. ARBITRATION. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by binding
arbitration, conducted before a panel of three arbitrators in the city of
Birmingham, Alabama or, at your option, in the city where you are principally
employed immediately prior to the date of a Change in Control, in accordance
with the rules of the American Arbitration Association then in effect; PROVIDED,
HOWEVER, that you shall be entitled to seek specific performance of your rights
under ss.4(e) during the pendency of any dispute or controversy arising under or
in connection with this Agreement. Judgment may be
<PAGE> 10
Mr. Vincent A. Tortorici, Jr.
August 27, 1999
Page 10
entered on the arbitrator's award in any court having jurisdiction.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; PROVIDED, HOWEVER, that
the Employment Agreement shall remain in full force and effect until the
occurrence of a Change in Control, at which time the Employment Agreement shall
be deemed terminated and canceled and of no further force or effect. If this
letter sets forth our agreement on the subject matter hereof, kindly sign and
return this original letter to the Corporation which will then constitute our
agreement on this subject. The enclosed copy is for your personal records.
Sincerely,
/s/ William F. Kaczynski, Jr.
-------------------------------------
William F. Kaczynski, Jr.
Vice President
ACCEPTED AND AGREED:
/s/ Vincent A. Tortorici, Jr.
- --------------------------------
VINCENT A. TORTORICI, JR.
<PAGE> 1
EXHIBIT 12.1
WINSLOEW FURNITURE, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income from continuing operations before income
taxes and extraordinary items $29,247 $17,999 $13,377 $ 6,946 $ 8,846
Add:
Interest expense 635 2,296 3,083 3,841 2,795
------- ------- ------- ------- -------
"Earnings" as defined $29,882 $20,295 $16,460 $10,787 $11,281
======= ======= ======= ======= =======
Fixed charges
Interest expense (including amortization of
debt expense) 635 2,296 3,083 3,841 2,795
------- ------- ------- ------- -------
$ 635 $ 2,296 $ 3,083 $ 3,841 $ 2,795
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 47.1x 8.8x 5.3x 2.8x 4.0x
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 24, SEPTEMBER 25,
1999 1998
------------- -------------
<S> <C> <C>
Income from continuing operations before income
taxes and extraordinary items $24,794 $20,594
Add:
Interest expense 2,280 824
------- -------
"Earnings" as defined $27,074 $21,418
======= =======
Fixed charges
Interest expense (including amortization of
debt expense) 2,280 824
------- -------
$ 2,280 $ 824
======= =======
Ratio of earnings to fixed charges 11.8x 26.0x
</TABLE>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF WINSLOEW FURNITURE, INC.
<TABLE>
<CAPTION>
STATE OR OTHER JURISDICTION OF
NAME: INCORPORATION OR ORGANIZATION
----- -----------------------------
<S> <C>
1. Winston Furniture Company of Alabama Alabama
2. Loewenstein, Inc. Florida
3. Texacraft, Inc. Texas
4. Tropic Craft, Inc. Florida
5. Winston Properties, Inc. Alabama
6. Pompeii Furniture Co., Inc. Miami
7. Industrial Mueblera Pompeii de Mexico, S.A. de C.V. Mexico, D.F.
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated January 29, 1999, in the Registration Statement (Form
S-4) of WinsLoew Furniture, Inc. for the registration of $105,000,000 of 12.75%
Series B Senior Subordinated Notes due 2007.
/s/ ERNST & YOUNG LLP
Birmingham, Alabama
November 3, 1999
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the inclusion of our report, on the financial statements of
Miami Metal Products, Inc., d/b/a Pompeii Furniture Industries, dated July 16,
1999, and to all references to our Firm included in or made a part of Form S-4
for Winsloew Furniture, Inc.
/s/ INFANTE, LAGO & COMPANY
- ----------------------------------
INFANTE, LAGO & COMPANY
North Miami, Florida
November 5, 1999
<PAGE> 1
Exhibit 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
AMERICAN STOCK TRANSFER & TRUST COMPANY
(Exact name of trustee as specified in its charter)
New York 13-3439945
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
40 Wall Street
New York, New York 10005
(Address of trustee's (Zip Code)
principal executive offices)
WINSLOEW FURNITURE, INC.
(Exact name of obligor as specified in its character)
Florida 63-1127982
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
160 Village Street
Birmigham, Alabama 35242
(Address of principal executive offices) (Zip Code)
- --------------------------------------------------------------------------------
12 3/4 % SERIES B SENIOR SUBORDINATED NOTES DUE 2007
(Title of the Indenture Securities)
<PAGE> 2
-2-
GENERAL
1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
a. Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, Albany, New York
b. Whether it is authorized to exercise corporate trust powers.
The Trustee is authorized to exercise corporate
trust powers.
2. AFFILIATIONS WITH OBLIGOR AND UNDERWRITERS.
If the obligor or any underwriter for the obligor is an affiliate of the
trustee, describe each such affiliation.
None.
3. VOTING SECURITIES OF THE TRUSTEE.
Furnish the following information as to each class of voting securities of
the trustee:
As of
October 28, 1999
------------------
Title of Class Amount Outstanding
-------------- ------------------
Common Shares - par value $600 per share. 1,000 shares
4. TRUSTEESHIPS UNDER OTHER INDENTURES.
None.
5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
None.
<PAGE> 3
-3-
6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
None.
7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS.
None.
8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
None.
9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
None.
10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
None.
11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING
50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
None.
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
None.
13. DEFAULTS BY THE OBLIGOR.
None.
14. AFFILIATIONS WITH THE UNDERWRITERS.
None.
15. FOREIGN TRUSTEE.
Not applicable.
<PAGE> 4
-4-
16. LIST OF EXHIBITS.
T-1.1- A copy of the Organization Certificate of American Stock
Transfer & Trust Company, as amended to date including
authority to commence business and exercise trust powers was
filed in connection with the Registration Statement of Live
Entertainment, Inc., File No. 33-54654, and is incorporated
herein by reference.
T-1.4- A copy of the By-Laws of American Stock Transfer & Trust
Company, as amended to date was filed in connection with the
Registration Statement of Live Entertainment, Inc., File No.
33-54654, and is incorporated herein by reference.
T-1.6- The consent of the Trustee required by Section 312(b) of the
Trust Indenture Act of 1939. Exhibit A.
T-1.7- A copy of the latest report of condition of the Trustee
published pursuant to law or the requirements of its
supervising or examining authority. - Exhibit B.
----------
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939 the
Trustee, American Stock Transfer & Trust Company, a corporation organized
and existing under the laws of the State of New York, has duly caused this
statement of eligibility and qualification to be signed on its behalf by
the undersigned, thereunto duly authorized, all in the City of New York,
and State of New York, on the 28th day of October, 1999.
AMERICAN STOCK TRANSFER
& TRUST COMPANY
Trustee
By: /s/ H. Lemmer
-------------------------
Vice President
<PAGE> 5
EXHIBIT A
---------
Securities and Exchange Commission
Washington, DC 20549
Gentlemen:
Pursuant to the provisions of Section 321 (b) of the Trust Indenture Act of
1939, and subject to the limitations therein contained, American Stock
Transfer & Trust Company hereby consents that reports of examinations of
said corporation by Federal, State, Territorial or District authorities may
be furnished by such authorities to you upon request therefor.
Very truly yours,
AMERICAN STOCK TRANSFER
& TRUST COMPANY
By: /s/ H. Lemmer
-------------------------
Vice President
<PAGE> 6
EXHIBIT B
AMERICAN STOCK TRANSFER & TRUST COMPANY
40 WALL ST.
NEW YORK, NY 10005
CONSOLIDATED REPORT OF CONDITION AND INCOME FOR A BANK WITH DOMESTIC
OFFICES ONLY AND TOTAL ASSETS OF LESS THAN $100 MILLION REPORT AT CLOSE OF
BUSINESS ON JUNE 30, 1999
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC - BALANCE SHEET
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN THOUSANDS
---------------------------
<S> <C>
ASSETS
1. Cash and balances due from depository institutions:
a. Noninterest-bearing balances and currency and coin 2,714
b. Interest-bearing balances
2. Securities:
a. Held-to-maturity securities (from Schedule RC-B, column A)
b. Available-for-sale securities (from Schedule RC-B, column D) 2,983
3. Federal funds sold and securities purchased under agreements to resell
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C)
b. LESS: Allowance for loan and lease losses
c. LESS: Allocated transfer risk reserve
d. Loans and leases, net of unearned income, allowance, and reserve
(item 4.a minus 4.b and 4.c)
5. Trading assets
6. Premises and fixed assets (including capitalized leases) 4,135
7. Other real estate owned (from Schedule RC-M)
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M)
9. Customers' liability to this bank on acceptances outstanding
10. Intangible assets (from Schedule RC-M)
11. Other asssets (from Schedule RC-F) 8,272
12. Total assets (sum of items 1 through 11) 18,104
</TABLE>
<PAGE> 7
SCHEDULE RC - CONTINUED
<TABLE>
<CAPTION>
DOLLAR AMOUNTS IN THOUSANDS
---------------------------
LIABILITIES
<S> <C>
13. Deposits:
a. In domestic offices (sum of totals of columns A and C from Schedule
RC-E)
(1) Noninterest-bearing
(2) Interest-bearing
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(1) Noninterest-bearing
(2) Interest-bearing
14. Federal funds purchased and securities sold under agreements to repurchase
15. a. Demand notes issued to the U.S. Treasury
b. Trading liabilities
16. Other borrowed money (includes mortgage indebtedness and obligations under
capitalized leases):
a. With a remaining maturity of one year or less
b. With a remaining maturity of more than one year through three years
c. With a remaining maturity of more than three years
17. Not applicable
18. Bank's liability on acceptances executed and outstanding
19. Subordinated notes and debentures
20. Other liabilities (from Schedule RC-G) 2,479
21. Total liabilities (sum of items 13 through 20) 2,479
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus
24. Common stock 600
25. Surplus (exclude all surplus related to preferred stock) 9,289
26. a. Undivided profits and capital reserves 5,736
b. Net unrealized holding gains (losses) on available-for-sale securities
c. Accumulated net gains (losses) on cash flow hedges.
27. Cumulative foreign currency translation adjustments
28. Total equity capital (sum of items 23 through 27) 15,625
29. Total liabilities and equity capital (sum of items 21 and 28) 18,104
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CIK> 0000931814
<NAME> WINSLOEW FURNITURE INC
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-24-1999
<CASH> 1,762
<SECURITIES> 0
<RECEIVABLES> 17,720
<ALLOWANCES> 0
<INVENTORY> 13,409
<CURRENT-ASSETS> 37,191
<PP&E> 13,847
<DEPRECIATION> 0
<TOTAL-ASSETS> 297,831
<CURRENT-LIABILITIES> 23,871
<BONDS> 194,243
0
0
<COMMON> 8
<OTHER-SE> 78,798
<TOTAL-LIABILITY-AND-EQUITY> 297,831
<SALES> 120,736
<TOTAL-REVENUES> 120,736
<CGS> 72,733
<TOTAL-COSTS> 93,662
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,280
<INCOME-PRETAX> 24,794
<INCOME-TAX> 10,433
<INCOME-CONTINUING> 14,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,361
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.1
LETTER OF TRANSMITTAL
WINSLOEW FURNITURE, INC.
OFFER TO EXCHANGE ITS OUTSTANDING ORIGINAL
12 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
FOR REGISTERED 12 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
PURSUANT TO THE PROSPECTUS DATED ______________, THE EXCHANGE OFFER AND
WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON _________,
UNLESS THE OFFER IS EXTENDED. TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON THE EXPIRATION DATE.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY REGISTERED OR CERTIFIED MAIL, OVERNIGHT COURIER OR HAND DELIVERY:
40 WALL STREET
NEW YORK, NEW YORK 10005
ATTENTION: EXCHANGE DEPARTMENT
FACSIMILE TRANSMISSIONS TO CONFIRM BY TELEPHONE
(ELIGIBLE INSTITUTIONS ONLY): OR FOR INFORMATION CALL:
(718) 234-5001 (718) 921-8200
---------------------------------
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A
NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned hereby acknowledges receipt and review of the
Prospectus, dated ________, of WinsLoew Furniture, Inc., a Florida corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together describe the Company's offer (the "Exchange Offer") to exchange
its outstanding original 12 3/4% Series A Senior Subordinated Notes (the
"Original Notes"), for a like principal amount of Registered 12 3/4% Series B
Senior Subordinated Notes due 2007 (the "Registered Notes") which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
pursuant to a Registration Statement of which the Prospectus is a part.
Capitalized terms used but not defined herein shall have the same meaning given
them in the Prospectus.
This Letter of Transmittal is to be completed either if (a)
certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth under "The
Exchange Offer -- Procedures for Tendering -- Book Entry Interests" in the
Prospectus and an Agent's Message (as defined below) is not delivered.
Certificates, or book-entry confirmation of a book-entry transfer of such
Original Notes into the Exchange Agent's account at The Depository Trust Company
("DTC"), as well as this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date. Tenders by book-entry transfer may also be made by delivering an Agent's
Message in lieu of this Letter of Transmittal. The term "book-entry
confirmation" means a confirmation of a book-entry transfer of Original Notes
into the Exchange Agent's account at DTC. The term "Agent's Message" means a
message, transmitted by DTC to and received by the Exchange Agent and forming a
part of a book-entry confirmation, which states that DTC has received an express
acknowledgment from the tendering participant, which acknowledgment states that
such participant has received and agrees to be bound by this Letter of
Transmittal and that the Company may enforce this Letter of Transmittal against
such participant.
Holders (as defined below) of Original Notes whose certificates (the
"Certificates") for such Original Notes are not immediately available or who
cannot deliver their Certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date (as defined in the Prospectus)
or who cannot complete the procedures for book-entry transfer on a timely basis,
must tender their Original Notes according to the guaranteed delivery procedures
set forth in "The Exchange Offer -- Procedures for Tendering -- Guaranteed
Delivery Procedures" in the Prospectus.
DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
<PAGE> 2
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
ALL TENDERING HOLDERS COMPLETE THIS BOX:
DESCRIPTION OF ORIGINAL NOTES
<TABLE>
<CAPTION>
ORIGINAL NOTES
IF BLANK, PRINT NAME AND ADDRESS OF REGISTERED HOLDER(S) (ATTACH ADDITIONAL LIST IF NECESSARY)
- -------------------------------------------------------- -----------------------------------------------------
AGGREGATE PRINCIPAL AMOUNT
PRINCIPAL OF ORIGINAL NOTES
CERTIFICATE AMOUNT OF TENDERED (IF LESS
NUMBER(S)* ORIGINAL NOTES THAN ALL)**
---------- -------------- -----------------
<S> <C> <C> <C>
---------- -------------- -----------
---------- -------------- -----------
---------- -------------- -----------
---------- -------------- -----------
---------- -------------- -----------
---------- -------------- -----------
---------- -------------- -----------
</TABLE>
* Need not be completed by book-entry Holders.
** Original Notes may be tendered in whole or in part in multiples of $1,000.
All Original Notes held shall be deemed tendered unless a lesser number is
specified in this column. See Instructions 4.
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY)
[ ] CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING:
Name of Tendering Institution___________________________________________________
DTC Account Number ___________________ Transaction Code Number__________________
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING (SEE INSTRUCTION 1):
Name(s) of Registered Holder(s)_________________________________________________
Window Ticket Number (if any)___________________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________________
Name of Institution which Guaranteed Delivery___________________________________
If Guaranteed Delivery is to be made by Book-Entry Transfer:
Name of Tendering Institution___________________________________________________
DTC Account Number___________________ Transaction Code Number __________________
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED ORIGINAL
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH
ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE ORIGINAL NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:___________________________________________________________________________
Address:________________________________________________________________________
2
<PAGE> 3
Ladies and Gentlemen:
Subject to the terms and conditions of the Exchange Offer, the
undersigned hereby tenders to the Company for exchange the principal amount at
maturity of Original Notes indicated above. Subject to and effective upon the
acceptance for exchange of all or any portion of the Original Notes tendered
herewith in accordance with the terms and conditions of the Exchange Offer
(including, if the Exchange Offer is extended or amended, the terms and
conditions of any such extension or amendment), the undersigned hereby sells,
assigns and transfers to or upon the order of the Company all right, title and
interest in and to such Original Notes as are being tendered herewith. The
undersigned hereby irrevocably constitutes and appoints the Exchange Agent as
its agent and attorney-in-fact (with full knowledge that the Exchange Agent is
also acting as agent of the Company in connection with the Exchange Offer) with
respect to the tendered Original Notes, with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) subject only to the right of withdrawal described in the Prospectus,
to (i) deliver Certificates for Original Notes to the Company together with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of
the Registered Notes to be issued in exchange for such Original Notes, (ii)
present Certificates for such Original Notes for transfer, and to transfer the
Original Notes on the books of the Company, and (iii) receive for the account of
the Company all benefits and otherwise exercise all rights of beneficial
ownership of such Original Notes, all in accordance with the terms and
conditions of the Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Original Notes tendered hereby and that, when the same are accepted for
exchange, the Company will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances,
and that the Original Notes tendered hereby are not subject to any adverse
claims or proxies. The undersigned will, upon request, execute and deliver any
additional documents deemed by the Company or the Exchange Agent to be necessary
or desirable to complete the exchange, assignment and transfer of the Original
Notes tendered hereby, and the undersigned will comply with its obligations
under the Registration Rights Agreement. The undersigned has read and agrees to
all of the terms of the Exchange Offer.
The name(s) and address(es) of the registered Holder(s) of the Original
Notes tendered hereby should be printed above, if they are not already set forth
above, as they appear on the Certificates representing such Original Notes. The
Certificate number(s) and the Original Notes that the undersigned wishes to
tender should be indicated in the appropriate boxes above.
If any tendered Original Notes are not exchanged pursuant to the
Exchange Offer for any reason, or if Certificates are submitted for more
Original Notes than are tendered or accepted for exchange, Certificates for such
nonexchanged or nontendered Original Notes will be returned (or, in the case of
Original Notes tendered by book-entry transfer, such Original Notes will be
credited to an account maintained at DTC), without expense to the tendering
Holder, promptly following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Original Notes pursuant to
any one of the procedures described in "The Exchange Offer--Procedures for
Tendering" in the Prospectus and in the instructions attached hereto will, upon
the Company's acceptance for exchange of such tendered Original Notes,
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer. The undersigned
recognizes that, under certain circumstances set forth in the Prospectus, the
Company may not be required to accept for exchange any of the Original Notes
tendered hereby.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby directs that the Registered Notes be
issued in the name(s) of the undersigned or, in the case of a book-entry
transfer of Original Notes, that such Registered Notes be credited to the
account indicated above maintained at DTC. If applicable, substitute
Certificates representing Original Notes not exchanged or not accepted for
exchange will be issued to the undersigned or, in the case of a book-entry
transfer of Original Notes, will be credited to the account indicated above
maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please deliver Registered Notes to the undersigned at the address
shown below the undersigned's signature.
By tendering Notes and executing this Letter of Transmittal or
effecting delivery of an Agent's Message in lieu thereof, the undersigned hereby
acknowledge(s) that this Exchange Offer is being made in reliance upon
interpretations contained in no-action letters issued to third parties by the
staff of the Securities and Exchange Commission (the "SEC"), including Exxon
Capital Holdings Corporation, SEC No-Action Letter (available April 13, 1989),
Morgan Stanley & Co. Inc., SEC No-Action Letter (available June 5, 1991) (the
"Morgan Stanley
3
<PAGE> 4
Letter") and Shearman & Sterling, SEC No-Action Letter (available July 2,
1993), that the Registered Notes issued in exchange for the Original Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) a broker-dealer who purchased
Original Notes exchanged for such Registered Notes directly from the Company to
resell pursuant to Rule 144A or any other available exemption under the
Securities Act or (ii) any such holder that is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act), without compliance
with the registration and prospectus delivery provisions of the Securities Act,
provided that such Registered Notes are acquired in the ordinary course of such
holders' business and such holders are not participating in, and have no
arrangement with any person to participate in, the distribution of such
Registered Notes. The undersigned specifically represent(s) to the Company that
(i) any Registered Notes acquired in exchange for Original Notes tendered hereby
are being acquired in the ordinary course of business of the person receiving
such Registered Notes, (ii) the undersigned is not participating in, and has no
arrangement with any person to participate in, the distribution of such
Registered Notes, and (iii) neither the undersigned nor any such other person is
an "affiliate" (as defined in Rule 405 under the Securities Act) of the Company
or a Guarantor or a broker-dealer tendering Original Notes acquired directly
from the Company for its own account.
If the undersigned or the person receiving the Registered Notes is a
broker-dealer that is receiving Registered Notes in exchange for Original Notes
for its own account pursuant to the Exchange Offer, the undersigned acknowledges
that it or such other person will deliver a prospectus in connection with any
resale of such Registered Notes. The undersigned acknowledges that if the
undersigned is participating in the Exchange Offer for the purpose of
distributing the Registered Notes received in exchange for the Original Notes
(i) the undersigned cannot rely on the position of the staff of the SEC in the
Morgan Stanley Letter and similar SEC no-action letters, and, in the absence of
an exemption therefrom, must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction of such Registered Notes, in which case the registration
statement must contain the selling security holder information required by Item
507 or Item 508, as applicable, of Regulation S-K of the SEC, and (ii) a broker-
dealer that delivers such a prospectus to purchasers in connection with such
resales will be subject to certain of the civil liability provisions under the
Securities Act and will be bound by the provisions of the Registration Rights
Agreement (including certain indemnification rights and obligations).
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Original Notes tendered hereby. All
authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except as
stated in the Prospectus, this tender is irrevocable.
The undersigned, by completing the box entitled "Description of
Original Notes" above and signing this letter, will be deemed to have tendered
the Original Notes as set forth in such box.
4
<PAGE> 5
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 2, 5 AND 6)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON PAGE 11)
(NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED
BY INSTRUCTION 2)
This Letter of Transmittal must be signed by registered Holder(s)
exactly as name(s) appear(s) on Certificate(s) for the Original Notes hereby
tendered or on the register of Holders maintained by the Company, or by any
person(s) authorized to become the registered Holder(s) by endorsements and
documents transmitted herewith (including such opinions of counsel,
certifications and other information as may be required by the Company or the
Trustee for the Original Notes to comply with the restrictions on transfer
applicable to the Original Notes). If signature is by an attorney-in-fact,
executor, administrator, trustee, guardian, officer of a corporation or another
acting in a fiduciary capacity or representative capacity, please set forth the
signer's full title. See Instruction 5.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Date: ,
-------------- ----
Name(s)
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
-----------------------------------------------------------
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
Tax Identification of Social Security Number(s)
---------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED, SEE INSTRUCTIONS 2 AND 5)
- --------------------------------------------------------------------------------
(AUTHORIZED SIGNATURE)
Date: ,
------------ ----
Name of Firm
--------------------------------------------------------------------
Capacity (full title)
-----------------------------------------------------------
(PLEASE PRINT)
Address
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
5
<PAGE> 6
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if Registered Notes or Original Notes not tendered
are to be issued in the name of someone other than the registered Holder of the
Original Notes whose name(s) appear(s) above.
Issue
[ ] Original Notes not tendered to:
[ ] Registered Notes to:
Name(s)
-------------------------------------------------------------------------
Address
-------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5 AND 6)
To be completed ONLY if Registered Notes or Original Notes not tendered
are to be sent to someone other than the registered Holder of the Original Notes
whose name(s) appear(s) above, or such registered Holder(s) at an address other
than that shown above.
Mail
[ ] Original Notes not tendered to:
[ ] Registered Notes to:
Name(s)
-------------------------------------------------------------------------
Address
------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number
--------------------------------------------------
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a)
Certificates are to be forwarded herewith or (b) tenders are to be made pursuant
to the procedures for tender by book-entry transfer set forth in "The Exchange
Offer -- Procedures for Tendering -- Book Entry Interests" in the Prospectus and
an Agent's Message is not delivered. Certificates, or timely confirmation of a
book-entry transfer of such Original Notes into the Exchange Agent's account at
DTC, as well as this Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, and any
other documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to the Expiration
Date. Tenders by book-entry transfer may also be made by delivering an Agent's
Message in lieu thereof. Original Notes may be tendered in whole or in part in
integral multiples of $1,000.
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes, this Letter of Transmittal and all other required documents to the
Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete
the procedures for delivery by book-entry transfer on a timely basis, may tender
their Original Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
"The Exchange Offer -- Procedures for Tendering -- Guaranteed Delivery
Procedures" in the Prospectus. Pursuant to such procedures: (i) such tender must
be made by or through an Eligible Institution (as defined below); (ii) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Company, must be received by the
Exchange Agent on or prior to the Expiration Date; and (iii) the Certificates
(or a book-entry confirmation) representing all tendered Original Notes, in
proper form for transfer, together with a Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees and any other documents required by this Letter of Transmittal, must
be received by the Exchange Agent within three New York Stock Exchange trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in "The Exchange Offer -- Procedures for Tendering -- Guaranteed
Delivery Procedures" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or
transmitted by facsimile or mail to the Exchange Agent, and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery. For Original Notes to be properly tendered pursuant to the
guaranteed delivery procedure, the Exchange Agent must receive a Notice of
Guaranteed Delivery on or prior to the Expiration Date. As used herein and in
the Prospectus, "Eligible Institution" means a firm or other entity identified
in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution,"
including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer,
municipal securities broker or dealer or government securities broker or dealer;
(iii) a credit union; (iv) a national securities exchange, registered securities
association or clearing agency; or (v) a savings association that is a
participant in a Securities Transfer Association.
THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING
HOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE
EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN
ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering Holder, by execution of a Letter of Transmittal (or
facsimile thereof), waives any right to receive any notice of the acceptance of
such tender.
2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered
Holder (which term, for purposes of this document, shall include any
participant in DTC whose name appears on a security position listing as
the owner of the Original Notes (the "Holder")) of Original Notes
tendered herewith, unless such Holder(s)
7
<PAGE> 8
has completed either the box entitled "Special Issuance Instructions"
or the box entitled "Special Delivery Instructions" above, or
(ii) such Original Notes are tendered for the account of a
firm that is an Eligible Institution.
In all other cases, an Eligible Institution must guarantee the
signature(s) on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE. If the space provided in the box captioned
"Description of Original Notes" is inadequate, the Certificate number(s) and/or
the principal amount of Original Notes and any other required information should
be listed on a separate signed schedule which is attached to this Letter of
Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Original Notes
will be accepted only in integral multiples of $1,000. If less than all the
Original Notes evidenced by any Certificate submitted are to be tendered, fill
in the principal amount of Original Notes which are to be tendered in the box
entitled "Principal Amount of Original Notes Tendered." In such case, new
Certificate(s) for the remainder of the Original Notes that were evidenced by
your old Certificate(s) will only be sent to the Holder of the Original Notes,
promptly after the Expiration Date. All Original Notes represented by
Certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective on or prior to that time, a written, telegraphic or
facsimile transmission of such notice of withdrawal must be timely received by
the Exchange Agent at one of its addresses set forth above or in the Prospectus
on or prior to the Expiration Date. Any such notice of withdrawal must specify
the name of the person who tendered the Original Notes to be withdrawn, the
aggregate principal amount of Original Notes to be withdrawn, and (if
Certificates for Original Notes have been tendered) the name of the registered
Holder of the Original Notes as set forth on the Certificate for the Original
Notes, if different from that of the person who tendered such Original Notes. If
Certificates for the Original Notes have been delivered or otherwise identified
to the Exchange Agent, then prior to the physical release of such Certificates
for the Original Notes, the tendering Holder must submit the serial numbers
shown on the particular Certificates for the Original Notes to be withdrawn and
the signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Original Notes tendered for the account of an
Eligible Institution. If Original Notes have been tendered pursuant to the
procedures for book-entry transfer set forth in the Prospectus under "The
Exchange Offer -- Procedures for Tendering -- Book Entry Interests," the notice
of withdrawal must specify the name and number of the account at DTC to be
credited with the withdrawal of Original Notes, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written,
telegraphic, telex or facsimile transmission. Withdrawals of tenders of Original
Notes may not be rescinded. Original Notes properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer, but may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer -- Procedures
for Tendering."
All questions as to the validity, form and eligibility (including time
of receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
The Company, any affiliates or assigns of the Company, the Exchange Agent or any
other person shall not be under any duty to give any notification of any
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification. Any Original Notes which have been tendered but
which are withdrawn will be returned to the Holder thereof without cost to such
Holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS.
If this Letter of Transmittal is signed by the registered Holder(s) of the
Original Notes tendered hereby, the signature(s) must correspond exactly with
the name(s) as written on the face of the Certificate(s) without alteration,
enlargement or any change whatsoever.
If any of the Original Notes tendered hereby are owned of record by two
or more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Original Notes are registered in different name(s) on
several Certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
8
<PAGE> 9
If this Letter of Transmittal or any Certificates or bond powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, must submit proper evidence satisfactory to the Company, in its sole
discretion, of each such person's authority so to act.
When this Letter of Transmittal is signed by the registered owner(s) of
the Original Notes listed and transmitted hereby, no endorsement(s) of
Certificate(s) or separate bond power(s) are required unless Registered Notes
are to be issued in the name of a person other than the registered Holder(s).
Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an
Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Original Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
or names of the registered owner(s) appear(s) on the Certificates, and also must
be accompanied by such opinions of counsel, certifications and other information
as the Company or the Trustee for the Original Notes may require in accordance
with the restrictions on transfer applicable to the Original Notes. Signatures
on such Certificates or bond powers must be guaranteed by an Eligible
Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If Registered Notes are
to be issued in the name of a person other than the signer of this Letter of
Transmittal, or if Registered Notes are to be sent to someone other than the
signer of this Letter of Transmittal or to an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
Certificates for Original Notes not exchanged will be returned by mail or, if
tendered by book-entry transfer, by crediting the account indicated above
maintained at DTC. See Instruction 4.
7. IRREGULARITIES. The Company will determine, in its sole discretion,
all questions as to the form of documents, validity, eligibility (including time
of receipt) and acceptance for exchange of any tender of Original Notes, which
determination shall be final and binding on all parties. The Company reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance of which, or exchange for which, may, in the view
of counsel to the Company be unlawful. The Company also reserves the absolute
right, subject to applicable law, to waive any of the conditions of the Exchange
Offer set forth in the Prospectus under "The Exchange Offer -- Conditions" or
any conditions or irregularity in any tender of Original Notes of any particular
Holder whether or not similar conditions or irregularities are waived in the
case of other Holders. The Company's interpretation of the terms and conditions
of the Exchange Offer (including this Letter of Transmittal and the instructions
hereto) will be final and binding. No tender of Original Notes will be deemed to
have been validly made until all irregularities with respect to such tender have
been cured or waived. The Company, any affiliates or assigns of the Company, the
Exchange Agent, or any other person shall not be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR THE ASSISTANCE AND ADDITIONAL COPIES.
Questions and requests for assistance may be directed to the Exchange Agent at
its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent
or from your broker, dealer, commercial bank, trust company or other nominee.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under the U.S. Federal
income tax law, a Holder whose tendered Original Notes are accepted for exchange
is required to provide the Exchange Agent with such Holder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Exchange
Agent is not provided with the correct TIN, the Internal Revenue Service (the
"IRS") may subject the Holder or other payee to a $50 penalty. In addition,
payments to such Holders or other payees with respect to Original Notes
exchanged pursuant to the Exchange Offer may be subject to 31% backup
withholding.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering Holder has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in Part 3 is checked, the
Holder or other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Exchange Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Exchange Agent. The Exchange Agent will retain such amounts
withheld during the 60-day period following the date of the Substitute Form W-9.
If the Holder
9
<PAGE> 10
furnishes the Exchange Agent with its TIN within 60 days after the date of the
Substitute Form W-9, the amounts retained during the 60-day period will be
remitted to the Holder and no further amounts shall be retained or withheld from
payments made to the Holder thereafter. If, however, the Holder has not provided
the Exchange Agent with its TIN within such 60-day period, amounts withheld will
be remitted to the IRS as backup withholding. In addition, 31% of all payments
made thereafter will be withheld and remitted to the IRS until a correct TIN is
provided.
The Holder is required to give the Exchange Agent the TIN (e.g., social
security number or employer identification number) of the registered owner of
the Original Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Original Notes. If the Original Notes are registered in
more than one name or are not in the name of the actual owner, consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
Certain Holders (including, among others, corporations, financial
institutions and certain foreign persons) may not be subject to these backup
withholding and reporting requirements. Such Holders should nevertheless
complete the attached Substitute Form W-9 below, and write "exempt" on the face
thereof, to avoid possible erroneous backup withholding. A foreign person may
qualify as an exempt recipient by submitting a properly completed IRS Form W-8,
signed under penalties of perjury, attesting to that Holder's exempt status.
Please consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
Holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax.
Rather, the U.S. Federal income tax liability of a person subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to
waive satisfaction of any or all conditions enumerated in the Prospectus.
11. NO CONDITIONAL TENDERS. No alternative, conditional or contingent
tenders will be accepted. All tendering Holders of Original Notes, by execution
of this Letter of Transmittal, shall waive any right to receive notice of the
acceptance of Original Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is
obligated to give notice of any defect or irregularity with respect to any
tender of Original Notes nor shall any of them incur any liability for failure
to give any such notice.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s)
representing Original Notes have been lost, destroyed or stolen, the Holder
should promptly notify the Exchange Agent. The Holder will then be instructed as
to the steps that must be taken in order to replace the Certificate(s). This
Letter of Transmittal and related documents cannot be processed until the
procedures for replacing lost, destroyed or stolen Certificate(s) have been
followed.
13. SECURITY TRANSFER TAXES. Holders who tender their Original Notes
for exchange will not be obligated to pay any transfer taxes in connection
therewith. If, however, Registered Notes are to be delivered to, or are to be
issued in the name of, any person other than the registered Holder of the
Original Notes tendered, or if a transfer tax is imposed for any reason other
than the exchange of Original Notes in connection with the Exchange Offer, then
the amount of any such transfer tax (whether imposed on the registered Holder or
any other persons) will be payable by the tendering Holder. If satisfactory
evidence of payment of such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering Holder.
10
<PAGE> 11
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE
THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO
THE EXPIRATION DATE. TO BE COMPLETED BY
ALL TENDERING SECURITYHOLDERS
(SEE INSTRUCTION 9)
- --------------------------------------------------------------------------------
PAYOR'S NAME: AMERICAN STOCK TRANSFER AND TRUST COMPANY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SUBSTITUTE FORM W-9 PART 1 - PLEASE PROVIDE YOUR TIN ON THE LINE AT RIGHT Social Security Number
AND CERTIFY BY SIGNING AND DATING BELOW
OR
Employer Identification
Number
- ----------------------------------------------------------------------------------------------------------
DEPARTMENT OF THE PART 2 - Part 3
TREASURY, INTERNAL CERTIFICATION -- Under the Penalties of Perjury, I Check if TIN Applied For
REVENUE SERVICE certify that: (1) The number shown on this form [ ]
is my correct taxpayer identification number (or
I am waiting for a number to be issued to me),
(2) I am not subject to backup withholding
either because (i) I am exempt from backup
withholding, (ii) I have not been notified by
the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a
failure to report all interest or dividends, or
(iii) the IRS has notified me that I am no
longer subject to backup withholding, and (3)
any other information provided on this form is
true and correct.
- ----------------------------------------------------------------------------------------------------------
PAYOR'S REQUEST You must cross out item (iii) in Part (2) above if you have been notified by the
FOR TAXPAYER IRS that you are subject to backup withholding because of underreporting interest
IDENTIFICATION or dividends on your tax return and you have not been notified by the IRS that you
NUMBER ("TIN") AND are no longer subject to backup withholding.
CERTIFICATION
SIGNATURE _________________________________ DATE __________, ____
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE
FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has not been issued to me,
and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to
mail or deliver an application in the near future. I understand that if I do not provide a taxpayer
identification number by the time of payment, 31% of all payments made to me on account of the Registered
Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent and that, if
I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted
to the Internal Revenue Service as backup withholding and 31% of all reportable payments made to me
thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
SIGNATURE ______________________________________________________________________ DATE ________________, ____
</TABLE>
11
<PAGE> 1
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
OFFER TO EXCHANGE ITS OUTSTANDING ORIGINAL
12 3/4% SERIES A SENIOR SUBORDINATED NOTES DUE 2007
FOR REGISTERED 12 3/4% SERIES B SENIOR SUBORDINATED NOTES DUE 2007
PURSUANT TO THE PROSPECTUS DATED ____________
This Notice of Guaranteed Delivery, or one substantially equivalent to
this form, must be used to accept the Exchange Offer (as defined below) if (i)
certificates for the Company's 12 3/4% Series A Senior Subordinated Notes due
2007 (the "Original Notes") are not immediately available, (ii) Original Notes,
the Letter of Transmittal and all other required documents cannot be delivered
to American Stock Transfer & Trust Company (the "Exchange Agent") on or prior
to the Expiration Date or (iii) the procedures for delivery by book-entry
transfer cannot be completed on a timely basis. This Notice of Guaranteed
Delivery may be delivered by hand, overnight courier or mail, or transmitted by
facsimile transmission, to the Exchange Agent. See "The Exchange Offer
- -Procedures for Tendering -- Guaranteed Delivery Procedures" in the Prospectus.
In addition, in order to utilize the guaranteed delivery procedure to tender
Original Notes pursuant to the Exchange Offer, a completed, signed and dated
Letter of Transmittal relating to the Original Notes (or facsimile thereof)
must also be received by the Exchange Agent on or prior to the Expiration Date.
Capitalized terms not defined herein have the meanings assigned to them in the
Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
AMERICAN STOCK TRANSFER & TRUST COMPANY
BY REGISTERED OR CERTIFIED MAIL, OVERNIGHT COURIER OR HAND DELIVERY:
40 WALL STREET
NEW YORK, NEW YORK 10005
ATTENTION: EXCHANGE DEPARTMENT
FACSIMILE TRANSMISSIONS TO CONFIRM BY TELEPHONE
(ELIGIBLE INSTITUTIONS ONLY): OR FOR INFORMATION CALL:
(718) 234-5001 (718) 921-8200
---------------------------------
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS NOTICE OF GUARANTEED DELIVERY
VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS NOTICE OF GUARANTEED DELIVERY IS NOT TO BE USED TO GUARANTEE
SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE
GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to WinsLoew Furniture, Inc., a Florida
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated ___________ (as the same may be amended or
supplemented from time to time, the "Prospectus"), and the related Letter of
Transmittal (which together constitute the "Exchange Offer"), receipt of which
is hereby acknowledged, the aggregate principal amount of Original Notes set
forth below pursuant to the guaranteed delivery procedures set forth in the
Prospectus under the caption "The Exchange Offer -- Procedures for Tendering --
Guaranteed Delivery Procedures."
Aggregate Principal Amount Name(s) of Registered Holder(s):__________
Amount Tendered: $_________*
__________________________________________
Certificate No(s) (if
available): ___________________________________________________________________
_______________________________________________________________________________
$ _____________________________________________________________________________
(Total Principal Amount Represented by Original Notes Certificate(s))
If Original Notes will be tendered by book-entry transfer, provide the
following information:
DTC Account Number: ___________________________________________________________
Date: _________________________________________________________________________
______________________
* Must be in integral multiples of $1,000.
All authority herein conferred or agreed to be conferred shall survive
the death or incapacity of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
_______________________________________________________________________________
PLEASE SIGN HERE
X ______________________________ ________________________________
X ______________________________ ________________________________
Signature(s) of Owner(s) or Date
Authorized Signatory
Area Code and Telephone Number:____________________________________
Must be signed by the holder(s) of the Original Notes as their name(s)
appear(s) on certificates for Original Notes or on a security position listing,
or by person(s) authorized to become registered holder(s) by endorsement and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
set forth his or her full title below and, unless waived by the Company,
provide proper evidence satisfactory to the Company of such person's authority
to so act.
2
<PAGE> 3
Please print name(s) and address(es)
Name(s): _________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
_________________________________________________________
Capacity: _________________________________________________________
Address(es): _________________________________________________________
_________________________________________________________
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm or other entity identified in Rule 17Ad-15
under the Securities Exchange Act of 1934, as amended, as an "eligible
guarantor institution," including (as such terms are defined therein): (i) a
bank; (ii) a broker, dealer, municipal securities broker, government securities
broker or government securities dealer; (iii) a credit union; (iv) a national
securities exchange, registered securities association or clearing agency; or
(v) a savings association that is a participant in a Securities Transfer
Association (each of the foregoing being referred to as an "Eligible
Institution"), hereby guarantees to deliver to the Exchange Agent, at one of
its addresses set forth above, either the Original Notes tendered hereby in
proper form for transfer, or confirmation of the book-entry transfer of such
Original Notes to the Exchange Agent's account at The Depository Trust Company
("DTC"), pursuant to the procedures for book-entry transfer set forth in the
Prospectus, in either case together with one or more properly completed and
duly executed Letter(s) of Transmittal (or facsimile thereof) and any other
required documents within three New York Stock Exchange trading days after the
date of execution of this Notice of Guaranteed Delivery.
The undersigned acknowledges that it must deliver the Letter(s) of
Transmittal (or facsimile thereof) and the Original Notes tendered hereby to
the Exchange Agent within the time period set forth above and that failure to
do so could result in a financial loss to the undersigned.
____________________________________ ____________________________________
Name of Firm Authorized Signature
____________________________________ ____________________________________
Address Title
____________________________________ ____________________________________
Zip Code (Please Type or Print)
Area Code and Telephone No. ________________ Dated: _________________
NOTE: DO NOT SEND CERTIFICATES FOR ORIGINAL NOTES WITH THIS FORM. CERTIFICATES
FOR ORIGINAL NOTES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
3
<PAGE> 1
EXHIBIT 99.3
WINSLOEW FURNITURE, INC.
LETTER TO REGISTERED HOLDERS AND
DEPOSITORY TRUST COMPANY PARTICIPANTS
FOR
OFFER TO EXCHANGE
$105,000,000
ALL OUTSTANDING ORIGINAL 12 3/4% SERIES A
SENIOR SUBORDINATED NOTES DUE 2007
FOR
REGISTERED 12 3/4% SERIES B
SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON ______________, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
To Registered Holders and Depository Trust Company Participants:
We are enclosing herewith the material listed below relating to the
offer by WinsLoew Furniture, Inc., a Florida corporation (the "Company"), to
exchange its outstanding original 12 3/4% Series A Senior Subordinated Notes due
2007 (the "Original Notes"), for a like principal amount of its 12 3/4% Series B
Senior Subordinated Notes due 2007 (the "Registered Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
upon the terms and subject to the conditions set forth in the Company's
Prospectus, dated ______________, and the related Letter of Transmittal (which
together constitute the "Exchange Offer").
Enclosed herewith are copies of the following documents:
1. Prospectus dated ______________;
2. Letter of Transmittal (together with accompanying Substitute
Form W-9 Guidelines);
3. Notice of Guaranteed Delivery;
4. Letter which may be sent to your clients for whose account you
hold Original Notes in your name or in the name of your
nominee; and
5. Letter which may be sent from your clients to you with such
client's instruction with regard to the Exchange Offer.
We urge you to contact your clients promptly. Please note that the
Exchange Offer will expire on the Expiration Date unless extended.
The Exchange Offer is not conditioned upon any minimum number of
Original Notes being tendered.
Pursuant to the Letter of Transmittal, each holder of Original Notes
will represent to the Company that (i) the Registered Notes acquired in exchange
for Original Notes pursuant to the Exchange Offer are being acquired in the
ordinary course of business of the person receiving such Registered Notes, (ii)
the holder is not participating in, and has no arrangement with any person to
participate in, the distribution of Registered Notes received in exchange for
Original Notes within the meaning of the Securities Act, and (iii) neither the
holder nor any such other person is an "affiliate" (within the meaning of Rule
405 under the Securities Act) of the Company or a broker-dealer tendering
Original Notes acquired directly from the Company. If the holder is a
broker-dealer that will receive Registered Notes for its own account in exchange
for Original Notes, it acknowledges that it will deliver a prospectus in
connection with any resale of such Registered Notes.
The enclosed Letter to Clients contains an authorization by the
beneficial owners of the Original Notes for you to make the foregoing
representations.
<PAGE> 2
The Company will not pay any fee or commission to any broker or dealer
or to any other persons (other than the Exchange Agent) in connection with the
solicitation of tenders of Original Notes pursuant to the Exchange Offer. The
Company will pay or cause to be paid any transfer taxes payable on the transfer
of Original Notes to it, except as otherwise provided in Instruction 13 of the
enclosed Letter of Transmittal.
Additional copies of the enclosed material may be obtained from the
undersigned.
Very truly yours,
AMERICAN STOCK TRANSFER & TRUST COMPANY
<PAGE> 3
WINSLOEW FURNITURE, INC.
LETTER TO CLIENTS
FOR
OFFER TO EXCHANGE
$105,000,000
ALL OUTSTANDING ORIGINAL 12 3/4% SERIES A
SENIOR SUBORDINATED NOTES DUE 2007
FOR
REGISTERED 12 3/4% SERIES B
SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW
YORK CITY TIME, ON ______________, UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION
DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
To Our Clients:
We are enclosing herewith a Prospectus, dated ______________, of
WinsLoew Furniture, Inc., a Florida corporation (the "Company"), and a related
Letter of Transmittal (which together constitute the "Exchange Offer"), relating
to the offer by the Company to exchange its outstanding original 12 3/4% Series
A Senior Subordinated Notes due 2007 (the "Original Notes"), for a like
principal amount of registered 12 3/4% Series B Senior Subordinated Notes due
2007 (the "Registered Notes"), which have been registered under the Securities
Act of 1933, as amended (the "Securities Act"), upon the terms and subject to
the conditions set forth in the Exchange Offer.
The Exchange Offer is not conditioned upon any minimum number of
Original Notes being tendered.
We are the holder of record of Original Notes held by us for your
account. A tender of such Original Notes can be made only by us as the record
holder and pursuant to your instructions. The Letter of Transmittal is furnished
to you for your information only and cannot be used by you to tender Original
Notes held by us for your account.
We request instructions as to whether you wish to tender any or all of
the Original Notes held by us for your account pursuant to the terms and
conditions of the Exchange Offer. We also request that you confirm that we may
on your behalf make the representations and warranties contained in the Letter
of Transmittal. We are also enclosing a letter for you to execute and send to
us with such instructions and confirmation.
Very truly yours,
<PAGE> 4
WINSLOEW FURNITURE, INC.
INSTRUCTION TO REGISTERED HOLDER AND/OR DEPOSITORY
TRUST COMPANY PARTICIPANT FROM BENEFICIAL OWNER
FOR
OFFER TO EXCHANGE
$105,000,000
ALL OUTSTANDING ORIGINAL 12 3/4% SERIES A
SENIOR SUBORDINATED NOTES DUE 2007
FOR
REGISTERED 12 3/4% SERIES B
SENIOR SUBORDINATED NOTES DUE 2007
To Registered Holder and/or Participant of the Book-Entry Transfer Facility:
The undersigned hereby acknowledges receipt of the Prospectus, dated
______________, of WinsLoew Furniture, Inc., a Florida corporation (the
"Company"), and a related Letter of Transmittal (which together constitute the
"Exchange Offer"), relating to the offer by the Company to exchange its
outstanding original 12 3/4% Series A Senior Subordinated Notes due 2007 (the
"Original Notes"), for a like principal amount of its Registered 12 3/4% Series
B Senior Subordinated Notes due 2007 (the "Registered Notes"), which have been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
upon the terms and subject to the conditions set forth in the Exchange Offer.
Capitalized terms used but not defined herein have the meanings ascribed to them
in the Prospectus.
This will instruct you, the registered holder and/or Depository Trust
Company Participant, as to the action to be taken by you relating to the
Exchange Offer with respect to the Original Notes held by you for the account of
the undersigned.
The aggregate face amount of the Original Notes held by you for the
account of the undersigned is (FILL IN AMOUNT):
$________________________of 12 3/4% Series A Senior Subordinated Notes
due 2007.
With respect to the Exchange Offer, the undersigned hereby instructs
you (CHECK APPROPRIATE BOX):
[ ] To TENDER the following Original Notes held by you for the account
of the undersigned (INSERT PRINCIPAL AMOUNT OF ORIGINAL NOTES TO BE TENDERED IF
LESS THAN ALL):
$____________________________________________________________________.
[ ] NOT to TENDER any Original Notes held by you for the account of the
undersigned.
<PAGE> 5
If the undersigned instructs you to tender the Original Notes held by
you for the account of the undersigned, it is understood that you are authorized
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
beneficial owner, including but not limited to the representations, that (i) the
Registered Notes acquired in exchange for Original Notes pursuant to the
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such Registered Notes, (ii) the undersigned is not
participating in, and has no arrangement with any person to participate in, the
distribution within the meaning of the Securities Act of Registered Notes
received in exchange for Original Notes, and (iii) neither the undersigned nor
any such other person is an "affiliate" (within the meaning of Rule 405 under
the Securities Act) of the Company or a broker-dealer tendering Original Notes
acquired directly from the Company. If the undersigned is a broker-dealer that
will receive Registered Notes in exchange for Original Notes for its own
account, it acknowledges that it will deliver a prospectus in connection with
any resale of such Registered Notes.
---------------------------------------------------
SIGN HERE
---------------------------------------------------
Name of beneficial owner(s)
---------------------------------------------------
Signature(s)
---------------------------------------------------
Name(s) (please print)
---------------------------------------------------
(Address)
---------------------------------------------------
(Telephone Number)
---------------------------------------------------
(Taypayer Identification or Social Security Number)
---------------------------------------------------
Date
